I.

CONSTITUTIONAL PROVISIONS

A. Construction in favor of Labor

Moreover, it is a well-settled doctrine that if doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the latter. It is a time-
honored rule that in controversies between a laborer and his master, doubts reasonably arising
from the evidence, or in the interpretation of agreements and writing, should be resolved in the
former’s favor. The policy is to extend the doctrine to a greater number of employees who can
avail themselves 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. (Lepanto Consolidated Mining Co. vs.
Moreno Dumapis, et. al., G.R. No. 163210 August 13, 2008).

B. Protection to Labor

Art. XIII, Sec. 3: "The State shall afford full protection to labor...."

In affording full protection to labor, this Court must ensure equal work opportunities regardless of
sex, race or creed. Even as we, in every case, attempt to carefully balance the fragile relationship
between employees and employers, we are mindful of the fact that the policy of the law is to apply
the Labor Code to a greater number of employees. This would enable employees to avail of the
benefits accorded to them by law, in line with the constitutional mandate giving maximum aid and
protection to labor, promoting their welfare and reaffirming it as a primary social economic force
in furtherance of social justice and national development. (Angelina Francisco vs NLRC. G.R.
No. 170087 August 31, 2006).

The constitutional policy to provide full protection to labor is not meant to be a sword to oppress
employers. The commitment under the fundamental law is that the cause of labor does not prevent
us from sustaining the employer when the law is clearly on its side. (Estrellita G. Salazar vs
Philippine Duplicators, Inc, G.R. No. 154628 December 6, 2006).

Dismissal is the ultimate penalty that can be meted to an employee. The Constitution does not
condone wrongdoing by an employee; nevertheless, it urges a moderation of the sanction that
may be applied to him. Where a penalty less punitive would suffice, whatever missteps may have
been committed by the worker ought not to be visited with a consequence so severe such as
dismissal from employment. For the Constitution guarantees the right of the workers to “security
of tenure.” The misery and pain attendant to the loss of jobs then could be avoided if there is
acceptance of the view that under certain circumstances of the case the workers should not be
deprived of their means of livelihood. Indeed, the consistent rule is that if doubt exists between
the evidence presented by the employer and the employee, the scales of justice must be tilted in
favor of the latter. The employer must affirmatively show rationally adequate evidence that the
dismissal was for a justifiable cause. (Marival Trading Inc. vs NLRC. G.R. No. 169600 June 26,
2007).

II. ILLEGAL RECRUITMENT

A. Elements of illegal recruitment

In order to hold a person liable for illegal recruitment, the following elements must concur: (1) the
offender undertakes any of the activities within the meaning of “recruitment and placement” under
Article 13 (b) 20 of the Labor Code, or any of the prohibited practices enumerated under Article

1
34 of the Labor Code (now Section 6 of RA 8042) and (2) the offender has no valid license or
authority required by law to enable him to lawfully engage in recruitment and placement of
workers. In the case of illegal recruitment in large scale, a third element is added: that the offender
commits any of the acts of recruitment and placement against three or more persons, individually
or as a group. All three elements are present in the case at bar. (People of the Philippines v.
Melissa Chua and Clarita NG Chua. G.R. No. 187052 September 13, 2012)

Inarguably, appellant Chua engaged in recruitment when she represented to private complainants
that she could send them to Taiwan as factory workers upon submission of the required
documents and payment of the placement fee. The four private complainants positively identified
appellant as the person who promised them employment as factory workers in Taiwan for a fee
of P80, 000. The Senior Labor Employment Officer of the POEA presented a certification to the
effect that appellant Chua is not licensed by the POEA to recruit workers for overseas
employment. The prosecution witnesses were positive and categorical in their testimonies that
they personally met appellant and that the latter promised to send them abroad for employment.
Appellant cannot escape liability by conveniently limiting her participation as a cashier of Golden
Gate. The provisions of Article 13 (b) of the Labor Code and Section 6 of RA 8042 are unequivocal
that illegal recruitment may or may not be for profit. It is immaterial, therefore, whether appellant
remitted the placement fees to “the agency’s treasurer” or appropriated them. (People of the
Philippines v. Melissa Chua and Clarita NG Chua. G.R. No. 187052 September 13, 2012).

Article 38 (a) of the Labor Code, as amended, specifies that recruitment activities undertaken by
non-licensees or non-holders of authority are deemed illegal and punishable by law. When the
illegal recruitment is committed against three or more persons, individually or as a group, then it
is deemed committed in large scale and carries with it stiffer penalties as the same is deemed a
form of economic sabotage. But to prove illegal recruitment, it must be shown that the accused,
without being duly authorized by law, gave complainants the distinct impression that he had the
power or ability to send them abroad for work, such that the latter were convinced to part with
their money in order to be employed. It is important that there must at least be a promise or offer
of an employment from the person posing as a recruiter, whether locally or abroad. (People of
the Philippines vs. Teresita “Tessie” Laogo. G.R. No. 176264 January 10, 2011).

1. Simple illegal recruitment

The Supreme Court defines 4 types of illegal recruitment:

a) Simple or licensee: illegal recruitment committed by a licensee or holder of
authority against one or two persons only;
b) Non-licensee: illegal recruitment committed by any person who is neither a
licensee nor holder of authority
c) Syndicated;
d) Large scale or qualified (People vs. Sadiosa)

2. Illegal recruitment by a syndicate or committed in large scale

Accused-appellants posits that the prosecution failed to prove that there were more than
two persons involved in the alleged crime of illegal recruitment for it to be qualified as
syndicated illegal recruitment, since the trial court held only two of the accused liable for
the crime. The Supreme Court however dismissed accused-appellants’ contention. In this
case, the prosecution was able to establish that accused-appellants’ Bernadette and
Franz were not the only ones who had conspired to bring the victims to Malaysia. It was
also able to establish at the very least, through the credible testimonies of the witnesses,

2
 that (1) Jun and Macky were the escorts of the women to Malaysia; (2) a certain Tash was
their financier; (3) a certain Bunso negotiated with Macky for the price the former would
pay for the expenses incurred in transporting the victims to Malaysia; and (4) Mommy
Cindy owned the prostitution house where the victims worked. The concerted efforts of all
these persons resulted in the oppression of the victims. Clearly, it was established beyond
reasonable doubt that accused-appellant, together with at least two other persons, came
to an agreement to commit the felony and decided to commit it. The accused appellants
were convicted of the crime of illegal recruitment committed by a syndicate. (People of
the Philippines v. Nurfrashir Hashim y Saraban, et al. G.R. No. 194255 June 13,
2012).

In the case at bar, the foregoing elements are present. Appellant, in conspiracy with her
co-accused, misrepresented to have the power, influence, authority and business to obtain
overseas employment upon payment of a placement fee which was duly collected from
complainants Rogelio Legaspi, Dennis Dimaano, Evelyn Estacio, Soledad Atle and Luz
Minkay. Further, the certification issued by the Philippine Overseas Employment
Administration (POEA) and the testimony of Ann Abastra Abas, a representative of said
government agency, established that appellant and her co-accused did not possess any
authority or license to recruit workers for overseas employment. And, since there were five
(5) victims, the trial court correctly found appellant liable for illegal recruitment in large
scale. (People of the Philippines vs Beth Temporada. G.R. No. 173473 December 17,
2008).

The appellant is guilty of large-scale illegal recruitment. The essential elements of large
scale illegal recruitment are: a) the offender has no valid license or authority required by
law to enable him to lawfully engage in recruitment and placement of workers; b) the
offender undertakes any of the activities within the meaning of “recruitment and
placement” under Article 13(b) of the Labor Code, or any of the prohibited practices
enumerated under Article 34 of the said Code (now Section 6 of RA 8042); and c) the
offender committed the same against three (3) or more persons, individually or as a group,
are present in this case. The prosecution adduced proof beyond reasonable doubt that
the appellant enlisted the three (3) complainants for overseas employment without any
license to do so. (People of the Philippines v. Mariavic Espenilla y Mercado. G.R. No.
193667 February 29, 2012).

3. Liabilities

The above provisions are clear that the private employment agency shall assume joint
and solidary liability with the employer. This Court has, time and again, ruled that private
employment agencies are held jointly and severally liable with the foreign-based employer
for any violation of the recruitment agreement or contract of employment. This joint and
solidary liability imposed by law against recruitment agencies and foreign employers is
meant to assure the aggrieved worker of immediate and sufficient payment of what is due
him. This is in line with the policy of the state to protect and alleviate the plight of the
working class. (Santosa B. Datuman vs. First Cosmopolitan Manpower and
Promotion Services Inc. G.R. No. 156029 November 14, 2008).

Private employment agencies are held jointly and severally liable with the foreign-based
employer for any violation of the recruitment agreement or contract of employment. This
joint and solidary liability imposed by law against recruitment agencies and foreign
employers is meant to assure the aggrieved worker of immediate and sufficient payment

3
 of what is due him. 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.
(Becmen Service Exporter vs. Spouses Simplicio and Mila Cuaresma. G.R. Nos.
182978-79, G.R. Nos. 184298-99, April 7, 2009).

4. Theory of imputed knowledge

The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the
principal, employer Xiong, not the other way around. The knowledge of the principal-
foreign employer cannot, therefore, be imputed to its agent Sunace. There being no
substantial proof that Sunace knew of and consented to be bound under the 2-year
employment contract extension, it cannot be said to be privy thereto. As such, it and its
"owner" cannot be held solidarily liable for any of Divina’s claims arising from the 2-year
employment extension. (Sunance International Management Services, Inc. vs NLRC.
G.R. No. 161757 January 25, 2006).

III. LABOR STANDARDS

A. Hours of work

The philosophy underlying the exclusion of piece workers from the Eight-Hour Labor Law is that
said workers are paid depending upon the work they do "irrespective of the amount of time
employed" in doing said work. Such freedom as to hours of work does not obtain in the case of
the laborers herein involved, since they are assigned by the employer to work in two shifts for 12
hours each shift. Thus, it cannot be said that for all purposes these workers fall outside the law
requiring payment of compensation for work done in excess of eight hours. At least for the purpose
of recovering the full differential pay stipulated in the bargaining agreement as due to laborers
who perform 12 hours of work under the night shift, said laborers should be deemed pro tanto or
to that extent within the scope of the afore-stated law. (Red Coconut Products, Ltd. Vs CIR.
G.R. No. L-21348 June 30, 1966).

The Court reiterated that the rendition of overtime work and the submission of sufficient proof that
said work 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. Realistically speaking, a seaman, by the very nature of his job,
stays on board a ship or vessel beyond the regular eight-hour work schedule. For the employer
to give him overtime pay for the extra hours when he might be sleeping or attending to his personal
chores or even just lulling away his time would be extremely unfair and unreasonable. (Stolt-
Nielsen Marine Services (Phils.) Inc. vs. NLRC. G.R. No. 109156. July 11, 1996).

Petitioner did not submit to the secretary of labor a proposed wage rate — based on time and
motion studies and reached after consultation with the representatives from both workers' and
employers' organization — which would have applied to its piece-rate workers. Without those
submissions, the labor arbiter had the duty to use the daily minimum wage rate for non-agricultural
workers prevailing at the time of private respondent's dismissal, as prescribed by the Regional
Tripartite Wages and Productivity Boards. Put differently, petitioner did not take the initiative of
proposing an appropriate wage rate for its piece-rate workers. In the absence of such wage rate,
the labor arbiter cannot be faulted for applying the prescribed minimum wage rate in the
computation of private respondent's separation pay. In fact, it acted and ruled correctly and legally

4
in the premises. It is clear, therefore, that the applicable minimum wage for an eight-hour working
day is the basis for the computation of the separation pay of piece-rate workers like private
respondent. The computed daily wage should not be reduced on the basis of unsubstantiated
claims that her daily working hours were less than eight. Aside from its bare assertion, petitioner
presented no clear proof that private respondent's regular working day was less than eight hours.
(Pulp and Paper, Inc. vs NLRC. G.R. No. 116593 September 24, 1997).

Thus, the eight-hour work period does not include the meal break. Nowhere in the law may it be
inferred that employees must take their meals within the company premises. Employees are not
prohibited from going out of the premises as long as they return to their posts on time. Private
respondent’s act, therefore, of going home to take his dinner does not constitute abandonment.
(Philippine Airlines vs. NLRC. G.R. No. 132805 Feb. 2, 1999).

There is no dispute that petitioners were employees of private respondents although they were
paid not on the basis of time spent on the job but according to the quantity and the quality of work
produced by them. There are two categories of employees paid by results: (1) those whose time
and performance are supervised by the employer. (Here, there is an element of control and
supervision over the manner as to how the work is to be performed. A piece-rate worker belongs
to this category especially if he performs his work in the company premises.); and (2) those whose
time and performance are unsupervised. (Here, the employer’s control is over the result of the
work. Workers on pakyao and takay basis belong to this group.) Both classes of workers are paid
per unit accomplished. Piece-rate payment is generally practiced in garment factories where work
is done in the company premises, while payment on pakyao and takay basis is commonly
observed in the agricultural industry, such as in sugar plantations where the work is performed in
bulk or in volumes difficult to quantify. Petitioners belong to the first category, i.e., supervised
employees. (Avelino Lambo vs NLRC. G.R. No. 111042 October 26, 1999).

In any event, the parties stipulated:

Section 1. Regular Working Hours - A normal workday shall consist of not more than eight
(8) hours. The regular working hours for the Company shall be from 7:30 A.M. to 4:30 P.M.
The schedule of shift work shall be maintained; however, the company may change the
prevailing work time at its discretion, should such change be necessary in the operations
of the Company. All employees shall observe such rules as have been laid down by the
company for the purpose of effecting control over working hours.

It is evident from the foregoing provision that the working hours may be changed, at the discretion
of the company, should such change be necessary for its operations, and that the employees
shall observe such rules as have been laid down by the company. In the case before us, Labor
Arbiter Caday found that respondent company had to adopt a continuous 24-hour work daily
schedule by reason of the nature of its business and the demands of its clients. It was established
that the employees adhered to the said work schedule since 1988. The employees are deemed
to have waived the eight-hour schedule since they followed, without any question or complaint,
the two-shift schedule while their CBA was still in force and even prior thereto. The two-shift
schedule effectively changed the working hours stipulated in the CBA. As the employees
assented by practice to this arrangement, they cannot now be heard to claim that the overtime
boycott is justified because they were not obliged to work beyond eight hours. (Interphil
Laboratories Employees Union vs Interphil Laboratories. G.R. No. 142824. December 19,
2001)

5
With respect, however, to the award of overtime pay, the correct criterion in determining whether
or not sailors are entitled to overtime pay is not whether they were on board and cannot leave
ship beyond the regular eight working hours a day, but whether they actually rendered service in
excess of said number of hours. In the present case, the Court finds that private respondent is
not entitled to overtime pay because he failed to present any evidence to prove that he rendered
service in excess of the regular eight working hours a day. (PCL Shipping Philippine, Inc. and
U-Ming Marine Transport Corporation, vs NLRC. G.R. No. 153031, December 14, 2006).

Apropos the monetary claims, there is insufficient evidence to prove petitioners’ entitlement
thereto. As crew members, petitioners were required to stay on board the vessel by the very
nature of their duties, and it is for this reason that, in addition to their regular compensation, they
are given free living quarters and subsistence allowances when required to be on board. It could
not have been the purpose of our law to require their employers to give them overtime pay or
night shift differential, even when they are not actually working. Thus, the correct criterion in
determining whether they are entitled to overtime pay or night shift differential is not whether they
were on board and cannot leave ship beyond the regular eight working hours a day, but whether
they actually rendered service in excess of said number of hours. In this case, petitioners failed
to submit sufficient proof that overtime and night shift work were actually performed to entitle them
to the corresponding pay. (Lazaro V. Dacut, et al. vs CA, et al., G.R. No. 169434 March 28,
2008).

Hence, it being improbable that respondent rendered overtime work during the unexpired term of
his contract, the inclusion of his “guaranteed overtime” pay into his monthly salary as basis in the
computation of his salaries for the entire unexpired period of his contract has no factual or legal
basis and the same should have been disallowed. (Bahia Shipping Services, Inc. vs. Reynaldo
Chua. G.R. No. 162195 April 8, 2008).

D.O. No. 21 sanctions the waiver of overtime pay in consideration of the benefits that the
employees will derive from the adoption of a compressed workweek scheme, thus:

The compressed workweek scheme was originally conceived for establishments wishing to save
on energy costs, promote greater work efficiency and lower the rate of employee absenteeism,
among others. Workers favor the scheme considering that it would mean savings on the
increasing cost of transportation fares for at least one (1) day a week; savings on meal and snack
expenses; longer weekends, or an additional 52 off-days a year, that can be devoted to rest,
leisure, family responsibilities, studies and other personal matters, and that it will spare them for
at least another day in a week from certain inconveniences that are the normal incidents of
employment, such as commuting to and from the workplace, travel time spent, exposure to dust
and motor vehicle fumes, dressing up for work, etc. Thus, under this scheme, the generally
observed workweek of six (6) days is shortened to five (5) days but prolonging the working hours
from Monday to Friday without the employer being obliged for pay overtime premium
compensation for work performed in excess of eight (8) hours on weekdays, in exchange for the
benefits above cited that will accrue to the employees. Moreover, the adoption of a compressed
workweek scheme in the company will help temper any inconvenience that will be caused the
petitioners by their transfer to a farther workplace. (Bisig Manggawa sa Tryco, et al. vs. NLRC,
et al., G.R. No. 151309 October 15, 2008).

In the absence of any concrete proof that additional service beyond the normal working hours and
days had been rendered, overtime pay cannot be granted. Handwritten itemized computations
are self-serving, unreliable and unsubstantiated evidence to sustain the grant of salary
differentials, particularly overtime pay. Unsigned and unauthenticated as they are, there is no way

6
of verifying the truth of the handwritten entries stated therein. (AbdulJuahid R. Pigcaulan vs.
Security and Credit Investigation, Inc. G.R. No. 173648, January 16, 2011).

A claim for overtime pay will not be granted in the absence of any factual and legal basis. In this
respect, the records indicated that the labor arbiter granted Menese’s claim for holiday pay, rest
day and premium pay on the basis of payrolls. There is no such proof in support of Menese’s
claim for overtime pay other than her contention that she worked from 8:00 a.m. up to 5:00 p.m.
She presented no evidence to show that she was working during the entire one-hour meal break.
The Supreme Court thus found the NLRC’s deletion of the overtime pay award in order. (Emirate
Security and Maintenance Systems, Inc. vs. Glenda M. Menese. G.R. No. 182848 October
5, 2011).

However, the Court decided that they are not entitled to overtime and premium pays. The burden
of proving entitlement to overtime pay and premium pay for holidays and rest days rests on the
employee because these are not incurred in the normal course of business. In the present case,
the petitioners failed to adduce any evidence that would show that they actually rendered service
in excess of the regular eight working hours a day, and that they in fact worked on holidays and
rest days. (Wilgen Loon, et al. v. Power Master, Inc., et al., G.R. No. 189404, December 11,
2013).

B. Wages

The term "wages" differs from the term "salary." Wages apply to compensation for manual labor,
skilled or unskilled, paid at stated times and measured by the day, week, month or season; while
salary denotes a higher grade of employment or a superior grade of services and implies a
position or office. By contrast, the term "wages" indicates a considerable pay for a lower and less
responsible character of employment, while "salary" is suggestive of a larger and more important
service)

The distinction between salary and wage in Gaa vs CA was only for the purpose of Art. 1708 of
the Civil Code which provides that "the laborers' wage shall not be subject to execution or
attachment except for debts incurred for food, shelter, clothing, and medical attendance. (Rosario
A. Gaa vs CA G.R. No. L-44169 Dec. 3, 1985).

Every worker should, according to the Labor Code, "be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly employing less than ten (10)
workers;" this, of course, even if the worker does no work on these holidays. The regular holidays
include: "New Year's Day, Maundy Thursday, Good Friday, the ninth of April, the first of May, the
twelfth of June, the fourth of July, the thirtieth of November, the twenty-fifth of December, and the
day designated by law for holding a general election (or national referendum or plebiscite).
(Wellington Investment and Manufacturing Corp. vs. Cresenciano B. Trajano G.R. No.
114698 July 3, 1995).

The Labor Arbiter accepted hook, line and sinker the private respondent’s bare claim that the
reason the monetary benefits received by petitioner between 1981 to 1987 were less than the
minimum wage was because petitioner did not factor in the meals, lodging, electric consumption
and the water she received during the period in her computations. Granting that means and
lodging were provided and indeed constituted facilities, such facilities could not be deducted
without the employer complying first with certain legal requirements. Without satisfying these
requirements, the employer simply cannot deduct the value from the employee’s wages. First
proof must be shown that such facilities are customarily furnished by the trade. Second, the

7
provision of deductible facilities must be voluntarily accepted in writing by the employee. Finally,
facilities must be charged at fair and reasonable value. These requirements were not met in the
instance case. More significantly, the food and lodging or the electricity and water consumed by
the petitioner were not facilities but supplements. A benefit or privilege granted to an employee
for the convenience of the employer is not a facility. The criterion in making a distinction between
the two not so much lies in the king (food, lodging) but the purpose. Considering therefore, that
hotel workers are required to work different shifts and are expected to be available at various odd
hours, their ready availability is necessary matter in the operations of a small hotel, such as the
private respondent’s hotel. (Norma Mabeza vs. NLRC. G.R. No. 118506. April 18, 1997).

Second, by nature, commissions are given to employees only if the employer receives income.
Employees, as a reward, receive a percentage of the earnings of the employer, which they,
through their efforts, helped produce. Commissions are also given in the form of incentives or
encouragement so that employees will be inspired to put a little more industry into their tasks.
Commissions can also be considered as direct remunerations for services rendered. All these
different concepts of commissions are incongruent with the claim that an employee can continue
to receive them indefinitely after reaching his mandatory retirement age. (International
Broadcasting Corp. vs Reynaldo Benedicto. G.R. No. 152843, July 20, 2006).

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal.

Constructive dismissal is an involuntary resignation resulting in cessation of work resorted to
when continued employment becomes impossible, unreasonable or unlikely; when there is a
demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by
an employer becomes unbearable to an employee. In Globe Telecom, Inc. v. Florendo-Flores, we
ruled that where an employee ceases to work due to a demotion of rank or a diminution of pay,
an unreasonable situation arises which creates an adverse working environment rendering it
impossible for such employee to continue working for her employer. Hence, her severance from
the company was not of her own making and therefore amounted to an illegal termination of
employment. (Angelina Francisco, vs. National Labor Relations Commission, G.R. No.
170087, August 31, 2006).

Respecting petitioner’s claim for holiday pay, Forest Hills contends that petitioner failed to prove
that she actually worked during specific holidays. Article 94 of the Labor Code provides, however,
that
a) Every worker shall be paid his regular daily wage during regular holidays, except in retail
and service establishments regularly employing less than ten (10) workers;
b) The employer may require an employee to work on any holiday, but such employee shall
be paid a compensation equivalent to twice his regular rate.

The provision that a worker is entitled to twice his regular rate if he is required to work on a holiday
implies that the provision entitling a worker to his regular rate on holidays applies even if he does
not work. (Lilia P. Labadan vs. Forest Hills Academy. G.R. No. 172295 December 23, 2008).

The term “basic salary” of an employee for the purpose of computing the thirteenth-month pay
was interpreted to include all remuneration or earnings paid by the employer for services
rendered, but does not include allowances and monetary benefits which are not integrated as part
of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave
credits, overtime, premium, night differential and holiday pay, and cost-of-living allowances.
However, these salary-related benefits should be included as part of the basic salary in the
computation of the thirteenth-month pay if, by individual or collective agreement, company
practice or policy, the same are treated as part of the basic salary of the employees. (Central

8
Azucarera De Tarlac vs. Central Azucarera De Tarlac Labor Union-NLU. G.R. No. 188949,
July 26, 2010).

Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, mandates that
benefits given to employees cannot be taken back or reduced unilaterally by the employer
because the benefit has become part of the employment contract, written or unwritten. The rule
against diminution of benefits applies if it is shown that the grant of the benefit is based on an
express policy or has ripened into a practice over a long period of time and that the practice is
consistent and deliberate. Nevertheless, the rule will not apply if the practice is due to error in the
construction or application of a doubtful or difficult question of law. But even in cases of error, it
should be shown that the correction is done soon after discovery of the error. (Central Azucarera
De Tarlac vs. Central Azucarera De Tarlac Labor Union-NLU. G.R. No. 188949, July 26,
2010).

As correctly observed by the CA and the LA, these duties clearly pertained to "Division
Managers/Department Managers/ Supervisors," which respondent was not, as he was merely a
team supervisor. Petitioners themselves described respondent as "the superior of a call center
agent; he heads and guides a specific number of agents, who form a team." From the foregoing,
respondent is thus entitled to his claims for holiday pay, service incentive leave pay, overtime pay
and rest day pay, (Clientologic Philippines Inc. vs Benedict Castro. G.R. No. 186070 April
11, 2011).

There is diminution of benefits when the following requisites are present: (1) the grant or benefit
is founded on a policy or has ripened into a practice over a long period of time; (2) the practice is
consistent and deliberate; (3) the practice is not due to error in the construction or application of
a doubtful or difficult question of law; and (4) the diminution or discontinuance is done unilaterally
by the employer. (Ricardo E. Vergara, Jr. vs Coca-Cola Bottlers Philippines Inc. G.R. No.
176985 April 1, 2013).

C. Wage distortion

It is therefore opportune to re-state the general principles enunciated in that case, summarized
in Metro Transit Organization, Inc. vs. NLRC, et al., as follows:
a) The concept of wage distortion assumes an existing grouping or classification of
employees which establishes distinctions among such employees on some relevant or
legitimate basis. This classification is reflected in a differing wage rate for each of the
existing classes of employees.
b) Wage distortions have often been the result of government- decreed increases in
minimum wages. There are, however, other causes of wage distortions, like the merger of
two (2) companies (with differing classification of employees and different wage rates)
where the surviving company absorbs all the employees of the dissolved corporation. (In
the present Metro case, as already noted, the wage distortion arose because the effectivity
dates of wage increases given to each of the two (2) classes of employees (rank-and-file
and supervisory) had not been synchronized in their respective CBAs.).
c) Should a wage distortion exist, there is no legal requirement that, in the rectification of that
distortion by re-adjustment of the wage rates of the differing classes of employees, the
gap which had previously or historically existed be restored in precisely the same amount.
In other words, correction of a wage distortion may be done by re-establishing a
substantial or significant gap (as distinguished from the historical gap) between the wage
rates of the differing classes of employees.

9
 d) The re-establishment of a significant difference in wage rates may be the result of resort
to grievance procedures or collective bargaining negotiations. (Manilia Mandarin
Employees Union vs NLRC. G.R. No. 108556 November 19, 1996).

The term "wage distortion", under the Rules Implementing Republic Act 6727, is defined, thus:

(p) Wage Distortion means a situation where an increase in prescribed wage rates results in
the elimination or severe contradiction of intentional quantitative differences in wage or
salary rates between and among employee groups in an establishment as to effectively
obliterate the distinctions embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation.

The issue of whether or not a wage distortion exists as a consequence of the grant of a wage
increase to certain employees, we agree, is, by and large, a question of fact the determination of
which is the statutory function of the NLRC.

We find the formula suggested then by Commissioner Bonto-Perez, which has also been the
standard considered by the regional Tripartite Wages and Productivity Commission for the
correction of pay scale structures in cases of wage distortion, 15 to well be the appropriate
measure to balance the respective contentions of the parties in this instance. We also view it as
being just and equitable

Minimum Wage = % x Prescribed = Distortion

—————— Increased Adjustment

Actual Salary

(Metropolitan Bank and Trust Company Employees Union-ALU-TUCP vs NLRC G.R. No.
102636 September 10, 1993)

Even assuming that there is a decrease in the wage gap between the pay of the old employees
and the newly hired employees, to our mind said gap is not significant as to obliterate or result in
severe contraction of the intentional quantitative differences in the salary rates between the
employee group. As already stated, the classification under the wage structure is based on the
rank of an employee, not on seniority. For this reason, wage distortion does not appear to exist.
(Bankard Employees Union-Workers Alliance Trade Unions vs NLRC. G.R. No. 140689
February 17, 2004).

D. 13th month pay

It was erroneous for the CA to apply the case of Philippine Agricultural Commercial and Industrial
Workers Union. Notably in the said case, it was established that the drivers and conductors
praying for 13th- month pay were not paid purely on commission. Instead, they were receiving a
commission in addition to a fixed or guaranteed wage or salary. Thus, the Court held that bus
drivers and conductors who are paid a fixed or guaranteed minimum wage in case their
commission be less than the statutory minimum, and commissions only in case where they are
over and above the statutory minimum, are entitled to a 13th-month pay equivalent to one-twelfth
of their total earnings during the calendar year.

On the other hand, in his Complaint, respondent admitted that he was paid on commission only.
Moreover, this fact is supported by his pay slips which indicated the varying amount of

10
commissions he was receiving each trip. Thus, he was excluded from receiving the 13th-month
pay benefit. (King of Kings Transport Inc. vs Santiago O. Mamac. G.R. No. 166208, June 29,
2007).

Insofar as what constitutes “basic salary,” the foregoing discussions equally apply to the
computation of petitioner’s 13th month pay. As held in San Miguel Corporation v. Inciong:

Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is
used as the basis in the determination of his 13th-month pay. Any compensations or
remunerations which are deemed not part of the basic pay is excluded as basis in the computation
of the mandatory bonus.

Under the Rules and Regulations Implementing Presidential Decree 851, the following
compensations are deemed not part of the basic salary:
a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of
Instruction No. 174;
b) Profit sharing payments;
c) All allowances and monetary benefits which are not considered or integrated as part of
the regular basic salary of the employee at the time of the promulgation of the Decree on
December 16, 1975. (Rogelio Reyes vs NLRC. G.R. No. 160233, August 8, 2007)

The practice of petitioner in giving 13th-month pay based on the employees’ gross annual
earnings which included the basic monthly salary, premium pay for work on rest days and special
holidays, night shift differential pay and holiday pay continued for almost thirty (30) years and has
ripened into a company policy or practice which cannot be unilaterally withdrawn. The petitioner
cannot claim that the practice arose from an erroneous application of the law since no doubtful or
difficult question of law is involved in this case. The guidelines set by the law are not difficult to
decipher. (Central Azucarera De Tarlac vs. Central Azucarera De Tarlac Labor Union-NLU
G.R. No. 188949, July 26, 2010).

The argument of petitioner that the grant of the benefit was not voluntary and was due to error in
the interpretation of what is included in the basic salary deserves scant consideration. No doubtful
or difficult question of law is involved in this case. The guidelines set by the law are not difficult to
decipher. The voluntariness of the grant of the benefit was manifested by the number of years the
employer had paid the benefit to its employees. Petitioner only changed the formula in the
computation of the 13th-month pay after almost 30 years and only after the dispute between the
management and employees erupted. This act of petitioner in changing the formula at this time
cannot be sanctioned, as it indicates a badge of bad faith. (Central Azucarera De Tarlac vs.
Central Azucarera De Tarlac Labor Union-NLU. G.R. No. 188949, July 26, 2010)

E. Separation pay

However, the circumstances obtaining in this case do not warrant the reinstatement of
respondents. Antagonism caused a severe strain in the parties’ employer-employee relationship.
Thus, a more equitable disposition would be an award of separation pay equivalent to at least
one month pay, or one month pay for every year of service, whichever is higher, (with a fraction
of at least six (6) months being considered as one (1) whole year), in addition to their full
backwages, allowances and other benefits. (Grandspan Development Corporation, vs.
Ricardo Bernardo, et. al. G.R. No. 141464, September 21, 2005).

11
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. (Ha Yuan Restaurant vs National Labor Relations Commission and
Juvy Soria G.R. No. 147719 January 27, 2006).

But still, petitioners insist that since respondent already received her separation benefits, she can
no longer claim that they coerced her to retire. On this point, the Court of Appeals ruled that
employees who receive their separation pay are not barred from contesting the legality of their
dismissal from the service and their acceptance of those benefits would not amount to estoppel.
We agree. Otherwise, employees who have been forced to resign and accept their separation
pay can no longer resort to legal remedies. (Amkor Technology Philippines, Inc. vs Nory A.
Juangco. G.R. No. 166507, September 27, 2006).

Since the circumstances obtaining in this case do not warrant private respondent’s reinstatement
in the light of the antagonism generated by this litigation which must have caused a severe strain
in the parties' employer-employee relationship, an award of separation pay in lieu of
reinstatement, equivalent to one month pay for every year of service, in addition to full backwages,
allowances, and other benefits or the monetary equivalent thereof, is in order. The award of
attorney’s fees is sanctioned by law and must be upheld. (Petron Corporation vs National Labor
Relations Commission. G.R. No. 154532 October 27, 2006).

Considering, however, the supervening event that SMC’s Magnolia Division has been acquired
by another entity, it appears that private respondent’s reinstatement is no longer feasible. Instead,
he should be awarded separation pay as an alternative. Likewise, owing to petitioner’s bad faith,
it should be held liable to pay damages for causing undue injury and inconvenience to the private
respondent in its contractual hiring-firing-rehiring scheme. (San Miguel Corporation, vs. NLRC
G.R. No. 147566 December 6, 2006).

At this point, reinstatement is out of the question. Petitioner is now 71 years old and therefore well
over the statutory compulsory retirement age. For this reason, we grant her separation pay in lieu
of reinstatement. It is also for this reason that we modify the award of backwages in her favor, to
be computed from the time of her illegal dismissal on November 18, 1993 up to her compulsory
retirement age. (Alpha C. Jaculbe vs Siliman University. G.R. No. 156934 March 16, 2007).

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. (Central Pangasinan Electric
Cooperative Inc. vs NLRC. G.R. No. 163561, July 24, 2007).

The general rule is that when just causes for terminating the services of an employee under Art.
282 of the Labor Code exist, the employee is not entitled to separation pay. The apparent reason

12
behind the forfeiture of the right to termination pay is that lawbreakers should not benefit from
their illegal acts. The dismissed employee, however, is entitled to “whatever rights, benefits and
privileges [s/he] may have under the applicable individual or collective bargaining agreement with
the employer or voluntary employer policy or practice or under the Labor Code and other existing
laws. This means that the employee, despite the dismissal for a valid cause, retains the right to
receive from the employer benefits provided by law, like accrued service incentive leaves. With
respect to benefits granted by the CBA provisions and voluntary management policy or practice,
the entitlement of the dismissed employees to the benefits depends on the stipulations of the CBA
or the company rules and policies. (Toyota Motor Phils. Corp. Workers Association
(TMPCWA) vs NLRC/ G.R. Nos. 158786 &158789, G.R. Nos. 158798-99, October 19, 2007).

Petitioner’s separation pay is pegged at the amount equivalent to petitioner’s one (1) month pay,
or one-half (1/2) month pay for every year of service, whichever is higher, reckoned from his first
day of employment up to finality of this decision. Full backwages, on the other hand, should be
computed from the date of his illegal dismissal until the finality of this decision. (Bienvenido D.
Goma vs. Pamplona Plantation, Inc., G.R. No. 160905, July 4, 2008).

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. (Central Philippines Bandag Retreaders. Inc. vs. Prudencio Diasnes
G.R. No. 163607, July 14, 2008).

Since petitioner was not faultless in regard to the offenses imputed against her, we hold that the
award of separation pay only, without backwages, is proper. (Elizabeth D. Palteng vs UCPB
G.R. No. 172199, February 27, 2009).

We thus find the dismissal to be illegal. Consequently, respondent is entitled to reinstatement

without loss of seniority rights and other privileges, and to full backwages, inclusive of allowances,
and other benefits or their monetary equivalent, computed from the time of the withholding of the
employee's compensation up to the time of actual reinstatement. If reinstatement is not possible
due to the strained relations between the employer and the employee, separation pay should
instead be paid the employee equivalent to one-month salary for every year of service, computed
from the time of engagement up to the finality of this decision. (M+W Zander Philippines Inc.
and Rolf Wiltschek vs Trinidad M. Enriquez G.R. No. 169173, June 5, 2009).

Above all, the intention to sever the employer-employee relationship was not duly established by
respondents. The prior submission of a medical certificate that petitioner is fit to resume work
negates the claim of respondents that the former demanded for separation pay on account of her
failing health. Certainly, petitioner cannot demand for separation benefits on the ground of illness
while at the same time presenting a certification that she is fit to work. Respondents could have
denied petitioner’s demand at that instance and ordered her to return to work had it not been their
intention to sever petitioner from their employ. Hence, we find the allegation that petitioner
presented herself for work but was refused by respondents more credible. (Concepcion
Faeldonia vs. Tong Yak Groceries, Jayme Go and Merlita Go. G.R. No. 182499, October 2,
2009).

13
Since Dusit Hotel is explicitly mandated by the afore-quoted statutory provision to pay its
employees and management their respective shares in the service charges collected, the hotel
cannot claim that payment thereof to its 82 employees constitute substantial compliance with the
payment of ECOLA under WO No. 9. Undoubtedly, the hotel employees’ right to their shares in
the service charges collected by Dusit Hotel is distinct and separate from their right to ECOLA;
gratification by the hotel of one does not result in the satisfaction of the other. (Philippine
Hoteliers Inc., Dusit Hotel Nikko-Manila vs National Union of Workers in Hotel, Restaurant,
and Allied Industries (NUWHRAIN-APL-IUF)-Dusit Hotel Nikko Chapter. G.R. No. 181972,
August 25, 2009).

In awarding separation pay to an illegally dismissed employee, in lieu of reinstatement, the

amount to be awarded shall be equivalent to one-month salary for every year of service reckoned
from the first day of employment until the finality of the decision. Payment of separation pay is in
addition to payment of backwages. And if separation pay is awarded instead of reinstatement,
backwages shall be computed from the time of illegal termination up to the finality of the decision.
(Agricultural and Industrial Supplies Corp. et al vs. Jueber P. SiazarG.R. No. 177970 August
25, 2010).

Separation pay, on the other hand, is equivalent to one month pay for every year of service, a
fraction of six months to be considered as one whole year. Here that would begin from January
31, 1994 when petitioner Belen began his service. Technically the computation of his separation
pay would end on the day he was dismissed on August 20, 1999 when he supposedly ceased to
render service and his wages ended. But, since Belen was entitled to collect backwages until the
judgment for illegal dismissal in his favor became final, here on September 22, 2008, the
computation of his separation pay should also end on that date. (Daniel P. Javellana, Jr. vs
Albino Belen. G.R. No. 181913. Albino Belen vs. Daniel P. Javellana Jr. and Javellana Farms
Inc. G.R. No. 182158, March 5, 2010).

The basis for the payment of backwages is different from that for the award of separation pay.
Separation pay is granted where reinstatement is no longer advisable because of strained
relations between the employee and the employer. Backwages represent compensation that
should have been earned but were not collected because of the unjust dismissal. The basis for
computing backwages is usually the length of the employee’s service while that for separation
pay is the actual period when the employee was unlawfully prevented from working. (Golden Ace
Builders vs. Jose A. Talde. G.R. No. 187200 May 5, 2010).

F. Retirement pay

For the purpose of computing retirement pay, “one-half month salary” shall include all of the
following:
 15 days salary based on the latest salary rate;
 cash equivalent of 5 days of service incentive leave (or vacation leave);
 1/12 of the 13th month pay; other benefits as may be agreed upon by employer and
employee for inclusion.

But, it shall not include the following:

 cost of living allowance;
 profit-sharing payments; and
 Other monetary benefits which are not considered as part of or integrated into the regular
salary of the employees. (Rogelio Reyes vs NLRC, G.R. No. 160233. August 8, 2007).

14
Moreover, it is worthy to note that Bolso applied for benefits under PLDT’s early
retirement/redundancy program. Bolso’s counsel even wrote PLDT for the withdrawal of the
administrative complaint against Bolso and for the release of the benefits under this program.
Therefore, Bolso’s plea for reinstatement in this case conflicts with his application for early
retirement, which PLDT denied due to the then pending complaint against him. Reinstatement is
plainly irreconcilable with retirement. (Philippine Long Distance Telephone Company vs The
Late Romeo F. Bolso. G.R. No. 159701 August 17, 2007).

R.A. No. 7641, otherwise known as “The Retirement Pay Law,” only applies in a situation where
(1) There is no collective bargaining agreement or other applicable employment contract providing
for retirement benefits for an employee; or (2) there is a collective bargaining agreement or other
applicable employment contract providing for retirement benefits for an employee, but it is below
the requirements set for by law. The reason for the first situation is to prevent the absurd situation
where an employee, who is otherwise deserving, is denied retirement benefits by the nefarious
scheme of employers in not providing for retirement benefits for their employees. The reason for
the second situation is expressed in the latin maxim pacta privata juri publico derogare non
possunt. Private contracts cannot derogate from the public law. Alberto Oxales vs. United
Laboratories, Inc., G.R. No. 152991 July 21, 2008).

There are two retirement schemes at point in this case: (1) Article 287 of the Labor Code, and;
(2) the PAL-ALPAP Retirement Plan and the PAL Pilots’ Retirement Benefit Plan. The two
retirement schemes are alternative in nature such that the retired pilot can only be entitled to that
which provides for superior benefits. Comparing the benefits under the two (2) retirement
schemes, it can readily be perceived that the 22.5 days’ worth of salary for every year of service
provided under Article 287 of the Labor Code cannot match the 240% of salary or almost two and
a half worth of monthly salary per year of service provided under the PAL Pilots’ Retirement
Benefit Plan, which will be further added to the ₱125,000.00 to which the petitioner is entitled
under the PAL-ALPAP Retirement Plan. Clearly then, it is to the petitioner’s advantage that PAL’s
retirement plans were applied in the computation of his retirement benefits. (Bibiano C. Elegir
vs. Philippine Airlines, Inc. G.R. No. 181995, July 16, 2012).

As found in the Implementing Rules of the Retirement Pay Law and in jurisprudence, only in the
absence of an applicable retirement agreement shall Article 287 of the Labor Code apply. There
is a proviso however, that an employee’s retirement benefits under any agreement shall not be
less than those provided in the said article. The Rules of the Banco Filipino Retirement Fund do
not provide for benefits lower than those in the Labor Code. In fact, the bank offers a retirement
pay equivalent to one and one-half month salary for every year of service, a rate over and above
the one-half month salary threshold provided by the law. Although the Rules of the Banco Filipino
Retirement Fund do not grant a rounding off scheme, they nonetheless provide that prorated
credit shall be given for incomplete years, regardless of the fraction of months in the retiree’s
length of service. Notwithstanding the lack of a rounding-up provision, still, the higher retirement
pay, together with the prorated crediting, cannot be deemed to be less favorable than that
provided for by the law. Ultimately, the more important threshold to be considered in construing
whether the retirement agreement provides lesser benefits, compared to those provided by the
Retirement Pay Law, is that the retirement benefits in the said agreement should at least amount
to one-half of the employee’s monthly salary. (Banco Filipino Savings and Mortgage Bank vs.
Miguelito M. Lazaro/Miguelito M. Lazaro vs. Banco Filipino Savings and Mortgage Bank, et
al.G.R. No. 185346 & G.R. No. 185442 June 27, 2012)

IV. TERMINATION OF EMPLOYMENT

15
A. Employer-Employee Relationship

The issue of whether or not an employer-employee relationship existed between petitioner and
respondent is essentially a question of fact. The factors that determine the issue include who has
the power to select the employee, who pays the employee’s wages, who has the power to dismiss
the employee, and who exercises control of the methods and results by which the work of the
employee is accomplished. Although no particular form of evidence is required to prove the
existence of the relationship, and any competent and relevant evidence to prove the relationship
may be admitted, a finding that the relationship exists must nonetheless rest on substantial
evidence, which is that amount of relevant evidence that a reasonable mind might accept as
adequate to justify a conclusion. (Legend Hotel v. Realuyo G.R. No. 153511 July 18, 2012).

1. Four-Fold Test (Indicia of Employment); Economic or Economic Readity Test

a. The power of selection and engagement of the employee
b. payment of wages
c. power of dismissal
d. power to control the employees' conduct

To determine the existence of an employer-employee relationship, case law has consistently

applied the four-fold test, to wit: (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 on the means and methods by which the work is accomplished. The so-called "control
test" is the most important indicator of the presence or absence of an employer-employee
relationship. (Sycip, Gorres, Velayo & Company vs. Carol De Raedt. G.R. No. 161366; June
16, 2009).

Among these four tests however, the most important test is the element of control, which has
been defined as "one where the employer has reserved the right to control not only the work to
be achieved, but the manner and method by which such work is to be achieved. (LVN Pictures
vs LVN Musician's Guild. G.R. No. L-12582. January 28, 1961).

It should be remembered that the control test merely calls for the existence of the right to control,
and not necessarily the exercise thereof. It is not essential that the employer actually supervises
the performance of duties of the employee. It is enough that the former has a right to wield the
power. (Manila Water Company, Inc. vs. Jose J. Dalumpines. G.R. No. 175501; October 4,
2010).

Under the control test, there is an employer-employee relationship when the person for whom the
services are performed reserves the right to control not only the end achieved but also the manner
and means used to achieve that end. (Television and Production Exponents, Inc. vs. Roberto
C. Servaña. G.R. No. 167648; January 28, 2008).

It is sufficient if the task or activity, as well as the means of accomplishing it, is dictated, as in this
case where the objectives and activities were laid out, and the specific time for performing them
was fixed by the controlling party. (Coca Cola Bottlers, Inc. vs. Dr. Dean N. Climaco. G.R. No.
146881; February 5, 2007).

Under the control test, an employer-employee relationship exists where the person for whom the
services are performed reserves the right to control not only the end achieved, but also the
manner and means to be used in reaching that end. From the quoted scope of petitioner’s

16
professional services, there is no showing of a power of control over petitioner. The services to
be performed by her specified what she needed to achieve but not on how she was to go about
it. (Corazon Almirez vs. Infinite Loop Technology. G.R. 162401; January 31, 2006).

To bolster the payment of wages and control test, the existing economic conditions prevailing
between the parties, like the inclusion of the employee in the payrolls, submission of his name
with the SSS, Pag-ibig, Philhealth, otherwise known as economic test, are also applied in
determining employer-employee relationship. (Sevilla vs CA, G.R. No. 44182-3, April 15, 1988).

It should, however, be obvious that not every form of control that the hiring party reserves to
himself over the conduct of the party hired in relation to the services rendered may be accorded
the effect of establishing an employer-employee relationship between them in the legal or
technical sense of the term. A line must be drawn somewhere, if the recognized distinction
between an employee and an individual contractor is not to vanish altogether. Realistically, it
would be a rare contract of service that gives untrammelled freedom to the party hired and
eschews any intervention whatsoever in his performance of the engagement.

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. (Insular Life Assurance Co. Ltd. G.R. No. 84484 November 15, 1989).

In the present case, the power to control is missing. Pamana tasked Consulta to organize,
develop, manage, and maintain a sales division, submit a number of enrollments and revenue
attainments in accordance with company policies and guidelines, and to recruit, train and direct
her Supervising Associates and Health Consultants. However, the manner in which Consulta was
to pursue these activities was not subject to the control of Pamana. Consulta failed to show that
she had to report for work at definite hours. The amount of time she devoted to soliciting clients
was left entirely to her discretion. The means and methods of recruiting and training her sales
associates, as well as the development, management and maintenance of her sales division,
were left to her sound judgment. (Raquel P. Consulta G.R. No. 145443. March 18, 2005).

2. Kinds of Employment

a. Probationary

A probationary employee, as understood under Article 282 (now Article 281) of the
Labor Code, is one who is on trial by an employer during which the employer
determines whether or not he is qualified for permanent employment. A probationary
appointment is made to afford the employer an opportunity to observe the fitness of a
probationer while at work, and to ascertain whether he will become a proper and
efficient employee. The word "probationary", as used to describe the period of
employment, implies the purpose of the term or period, but not its length.

Being in the nature of a "trial period" the essence of a probationary period of

employment fundamentally lies in the purpose or objective sought to be attained by
both the employer and the employee during said period. The length of time is
immaterial in determining the correlative rights of both in dealing with each other during
said period. While the employer, as stated earlier, observes the fitness, propriety and

17
 efficiency of a probationer to ascertain whether he is qualified for permanent
employment, the probationer, on the other, seeks to prove to the employer, that he
has the qualifications to meet the reasonable standards for permanent employment.
(International Catholic Migration Commission vs. NLRC and Bernadette Galang.
G.R. No. 72222; January 30, 1989).

They are considered regular if they are allowed to work beyond the probationary
period. Probationary employees enjoy security of tenure in the sense that during their
probationary employment, they cannot be dismissed except for cause or when he fails
to qualify as a regular employee in accordance with reasonable standards made
known to him or her at the time of engagement. But the probationary employee’s
security of tenure is limited to the period of probation. (Woodbridge School vs. Pe
Benito. G.R. No. 160240; October 28, 2008).

A probationary employee, like a regular employee, enjoys security of tenure. The

services of an employee who has been engaged on probationary basis may be
terminated for any of the following: (1) a just or (2) an authorized cause and (3) when
he fails to qualify as a regular employee in accordance with reasonable standards
prescribed by the employer. (Mylene Carvajal vs. Luzon Development Bank G.R.
No. 186169; August 1, 2012).

Completion of probationary period does not automatically qualify a teacher to become

a permanent employee of the University. (Lacuesta vs. Ateneo De Manila
University. G.R. No. 152777; December 9, 2005).

While the probationary employee is required to be appraised of the standards against

which his performance shall be assessed, there is however no need to inform the
probationary employee that he has to follow company rules and regulations – such
requirement strains credulity. Due process in failure to qualify as regular employee
does not mean “notice and hearing." (Philippine Daily Inquirer vs. Magtibay. G.R.
No. 164532; July 24, 2007).

b. Regular

The test to determine whether employment is regular or not is the reasonable

connection between the particular activity performed by the employee in relation to the
usual business or trade of the employer. (Macarthur Malicdem and Hermenigildo
Flores vs. Marulas Industrial Corporation. G.R. No. 204406; February 26, 2014).

Also, if the employee has been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law deems the repeated and
continuing need for its performance as sufficient evidence of the necessity if not
indispensability of that activity to the business. Hence, the employment is also
considered regular, but only with respect to such activity and while such activity exists.
(De Leon vs. NLRC. G.R. No. 70705; August 21, 1989).

The practice of entering into employment contracts which would prevent the workers
from becoming regular should be struck down as contrary to public policy and morals.
(Universal Robina Corporation v. Catapang. G.R. No. 164736; October 14, 2005).

18
 Television-radio talent is not an employee. Relationship of a big-name talent and a
television-radio broadcasting company is one of an independent contracting
arrangement. ABS-CBN engaged Sonza’s services specifically to co-host the "Mel &
Jay" programs. ABS-CBN did not assign any other work to Sonza. To perform his
work, Sonza only needed his skills and talent. How Sonza delivered his lines,
appeared on television, and sounded on radio were outside ABS-CBN’s control. Sonza
did not have to render eight hours of work per day. The Agreement required Sonza to
attend only rehearsals and tapings of the shows, as well as pre- and post-production
staff meetings. ABS-CBN could not dictate the contents of Sonza’s script. (Jose Y.
Sonza vs. ABS-CBN Broadcasting Corporation. G.R. No. 138051; June 10, 2004).

But production assistants called “talents” and drivers, cameramen, editors, tele-
prompters called “off-camera talents” are actually regular employees, there being
control on the part of ABS-CBN. Their nomenclature as such “talents” or “off-camera
talents” to make it appear that they are independent contractor, cannot override the
fact that they are not actors/actresses/radio specialists but are mere clerks or utility
employees. (ABS-CBN vs. Nazareno (2006); and, Farley Fulache vs. ABS-CBN
(2010)).

c. Project Employment

The principal test used to determine whether employees are project employees is
whether or not the employees were assigned to carry out a specific project or
undertaking, the duration or scope of which was specified at the time the employees
were engaged for that project. (Goma v. Pamplona Plantation, Inc.G.R. No. 160905;
July 4, 2008).

A project employee is assigned to a project which begins and ends at determined or

determinable times. Employees who work under different project employment
contracts for several years do not automatically become regular employees; they can
remain as project employees regardless of the number of years they work. Length of
service is not a controlling factor in determining the nature of one’s employment. Their
rehiring is only a natural consequence of the fact that experienced construction
workers are preferred. In fact, employees who are members of a "work pool" from
which a company draws workers for deployment to its different projects do not become
regular employees by reason of that fact alone. The Court has consistently held that
members of a "work pool" can either be project employees or regular employees.
(Dacuital vs. L.M. Camus Engineering Corporation. G.R. No. 176748; September
1, 2010).

A project or work pool employee, who has been: (1) continuously, as opposed to
intermittently, rehired by the same employer for the same tasks or nature of tasks; and
(2) those tasks are vital, necessary and indispensable to the usual business or trade
of the employer, must be deemed a regular employee. (Maraguinot, Jr. v. NLRC.348
Phil. 580 (1998).

The length of service or the re-hiring of construction workers on a project-to-project

basis does not confer upon them regular employment status, since their re-hiring is
only a natural consequence of the fact that experienced construction workers are
preferred. Employees who are hired for carrying out a separate job, distinct from the
other undertakings of the company, the scope and duration of which has been

19
 determined and made known to the employees at the time of the employment, are
properly treated as project employees and their services may be lawfully terminated
upon the completion of a project. Should the terms of their employment fail to comply
with this standard, they cannot be considered project employees. (Hanjin Heavy
Industries vs. Ibanez. G.R. No. 170181; June 26, 2008).

However, a project or work pool employee who has been continuously rehired by the
same employer for the same tasks that are necessary to the usual business of the
employer must be deemed a regular employee (Alcatel Phils. vs Relos, G.R. No.
164315. July 3, 2009).

Failure to file termination reports, particularly on the cessation of petitioner’s

employment, was an indication that the petitioner was not a project employee but a
regular employee. (Goma vs. Pamplona Plantation, Inc. G.R. No. 160905. July 4,
2008).

In cases where the employees were hired without any mention of a specific project to
which they will be assigned, and that there were no termination reports at the end of
each alleged project, then they are regular. Moreover, the employees ceased to be
coterminous with a specific project when the employee was continuously rehired due
to the demands of the employer’s business and re-engaged for many more “projects”
without interruption. (Cocomangas Hotel Beach Resort vs. Visca. G.R. No. 167045;
August 29, 2008).

d. Seasonal

Seasonal workers who are called to work from time to time and are temporarily laid off
during off-season are not separated from service in that period, but merely considered
on leave until re-employed. (Hacienda Fatima v. National Federation of Sugarcane
Workers-Food and General Trade. G.R. No. 149440; January 28, 2003).

One-year duration on the job is pertinent in deciding whether a casual employee has
become regular or not, but it is not pertinent to a seasonal or project employee.
Passage of time does not make a seasonal worker regular or permanent. (Mercado
v. NLRC. G.R. No. 79869; September 5, 1991).

However, he may acquire a regular status if he is repeatedly engaged from season to

season performing the same tasks. (Hacienda Fatima vs NFSWFGT. G.R. 149440.
Jan. 28, 2003).

e. Casual

Any casual employee who has rendered at least one (1) year of service, whether it is
continuous or broken, shall be considered a regular employee with respect to the
activity for which he is employed, and his employment shall continue while such activity
exists.

The status of regular employment attaches to the casual employee on the day
immediately after the end of his first year of service. The law does not provide the
qualification that the employee must first be issued a regular appointment or must first

20
 be formally declared as such before he can acquire a regular status. (Aurora Land
Projects Corp. vs. NLRC. G.R. No. 114733 (1997)).

A casual employee is only casual for one year, and it is the passage of time that gives
him a regular status. (KASAMMA-CCO v. Court of Appeals. G.R. No. 159828; April
19, 2006).

f. Fixed-Term

A kind of employment, wherein workers are hired for a specific period and upon the
arrival of the date specified in the contract - the employer-employee relationship is
automatically terminated. Such a contract, which specifies that employment will last
only for a definite period, is not per se illegal or against public policy. (Brent School
vs. Zamora. G. R. No. 48494; February 5, 1990).

The Court thus laid down the criteria under which fixed-term employment could not be
said to be in circumvention of the law on security of tenure, thus:
1. The fixed period of employment was knowingly and voluntarily agreed upon 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
2. It satisfactorily appears that the employer and the employee dealt with each other
on more or less equal terms with no moral dominance exercised by the former or
the latter. (Caparoso v. Court of Appeals. G.R. No. 155505; February 15, 2007).

While this Court has upheld the legality of fixed-term employment, where from the
circumstances it is apparent that the periods have been imposed to preclude acquisition
of tenurial security by the employee, they should be struck down or disregarded as
contrary to public policy and morals. (Manila Water Company, Inc. vs. Pena. G.R. No.
158255; July 8, 2004).

3. Job Contracting

a. Pertinent Labor Code provisions (Art. 106-109)

Article 106. Contractor or subcontractor. - Whenever an employer enters into a

contract with another person for the performance of the former’s work, the employees
of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance
with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and severally
liable with his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to
employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or

prohibit the contracting-out of labor to protect the rights of workers established under
this Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations within
these types of contracting and determine who among the parties involved shall be

21
 considered the employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer

does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him.

Article 107. Indirect employer. - The provisions of the immediately preceding article
shall likewise apply to any person, partnership, association or corporation which, not
being an employer, contracts with an independent contractor for the performance of
any work, task, job or project.

Article 108. Posting of bond. - An employer or indirect employer may require the
contractor or subcontractor to furnish a bond equal to the cost of labor under contract,
on condition that the bond will answer for the wages due the employees should the
contractor or subcontractor, as the case may be, fail to pay the same.

Article 109. Solidary liability. - The provisions of existing laws to the contrary
notwithstanding, every employer or indirect employer shall be held responsible with
his contractor or subcontractor for any violation of any provision of this Code. For
purposes of determining the extent of their civil liability under this Chapter, they shall
be considered as direct employers.

The joint and several liability of the contractor and the principal is mandated by the
Labor Code to ensure compliance with its provisions, including the statutory minimum
wage. The contractor is made liable by virtue of his status as direct employer, while
the principal becomes the indirect employer of the former's employees for the purpose
of paying their wages in the event of failure of the contractor to pay them. (Alpha
Investigation and Security Agency, Inc. vs. NLRC. G.R. No. 111722; May 27,
1997).

In legitimate job contracting, no employer-employee relation exists between the

principal and the job contractor's employees. The principal is responsible to the job
contractor's employees only for the proper payment of wages. But in labor-only
contracting, an employer-employee relation is created by law between the principal
and the labor-only contractor's employees, such that the former is responsible to such
employees, as if he or she had directly employed them. (Philippine Airlines, Inc. vs.
NLRC. G.R. No. 125792; November 9, 1998).

b. Department Order No. 18-A

When is there legitimate contracting or subcontracting?

Contracting or subcontracting shall be legitimate if all the following
circumstances concur:
a) The contractor must be registered in accordance with these Rules and
carries a distinct and independent business and undertakes to perform the
job, work or service on its own responsibility, according to its own manner

22
 and method, and free from control and direction of the principal in all
matters connected with the performance of the work except as to the
results thereof;
b) The contractor has substantial capital and/or investment; and
c) The Service Agreement ensures compliance with all the rights and benefits
under Labor Laws (Sec. 4 of D.O. No. 18-A, S. 2011).

What is “substantial capital”?

“Substantial capital” refers to paid-up capital stocks/shares of at least P3,
000,000.00 in the case of corporations, partnerships and cooperatives; in the
case of single proprietorship, a net worth of at least P3, 000,000.00. What
constitutes “substantial capital” previously vary, as fixed by the court, as there
was no specific threshold provided under the law or the implementing
guidelines.
It is also important to note that the registration fee is P25, 000.00.

Rights of Contractor’s Employees:

All contractor’s employees, whether deployed or assigned as reliever, seasonal,

week-ender, temporary, or promo jobbers, shall be entitled to all the rights and
privileges as provided for in the Labor Code, as amended, to include the following:
a) Safe and healthful working conditions;
b) Labor standards such as but not limited to service incentive leave, rest days,
overtime pay, holiday pay, 13th month pay, and separation pay as may be
provided in the Service Agreement or under the Labor Code;
c) Retirement benefits under the SSS or retirement plans of the contractor, if there
is any;
d) Social security and welfare benefits;
e) Self-organization, collective bargaining and peaceful concerted activities; and
f) Security of tenure.

Security of Tenure of Contractor’s Employees:

It is understood that all contractor’s employees enjoy security of tenure regardless of

whether the contract of employment is co-terminus with the service agreement, or for
a specific job, work or service, or phase thereof (Sec. 11, D.O. 18-A, S. 2011).

Additional Terms and Conditions in the Employment Contract:

Notwithstanding any oral or written stipulations to the contrary, the contract between
the contractor and its employee shall be governed by the provisions of Articles 279
and 280 of the Labor Code, as amended. It shall include the following terms and
conditions:

a) The specific description of the job, work or service to be performed by the

employee;
b) The place of work and terms and conditions of employment, including a
statement of the wage rate applicable to the individual employee; and
c) The term or duration of employment that must be co-extensive with the Service
Agreement or with the specific phase of work for which the employee is
engaged.

23
Contents of the Service Agreement between the Principal and the Contractor

The Service Agreement shall include the following:

1. The specific description of the job, work or service being subcontracted.

2. The place of work and terms and conditions governing the contracting
arrangement, to include the agreed amount of the services to be rendered, the
standard administrative fee of not less than ten percent (10%) of the total
contract cost.
3. Provisions ensuring compliance with all the rights and benefits of the
employees under the Labor Code and these Rules on: provision for safe and
healthful working conditions; labor standards such as, service incentive leave,
rest days, overtime pay, 13th month pay and separation pay; retirement
benefits; contributions and remittance of SSS, Philhealth, Pag-Ibig Fund, and
other welfare benefits; the right to self-organization, collective bargaining and
peaceful concerted action; and the right to security of tenure.
4. A provision on the Net Financial Contracting Capacity of the contractor, which
must be equal to the total contract cost.
5. A provision on the issuance of the bond/s as defined in Section 3(m) renewable
every year.
6. The contractor or subcontractor shall directly remit monthly the employers’
share and employees’ contribution to the SSS, ECC, Philhealth and Pag-Ibig
Fund.
7. The term or duration of engagement. The Service Agreement must conform to
the DOLE Standard Computation and Standard Service Agreement, which
form part of these Rules as Annexes “A” and “B”.

Mandatory Registration and Registry of Legitimate Contractors:

Consistent with the authority of the Secretary of Labor and Employment to restrict or
prohibit the contracting out of labor to protect the rights of workers, it shall be
mandatory for all persons or entities, including cooperatives, acting as contractors, to
register with the Regional Office of the Department of Labor and Employment (DOLE)
where it principally operates.

Effect of Failure to Register by the Independent Contractor with DOLE:

A Certificate of Registration is good for 3 years. Failure to register shall give rise to
the presumption that the contractor is engaged in labor-only contracting (Section 14,
D.O. No. 18-A, Series 2011).

Appeal:

The Order of the Regional Director is appealable to the Secretary within ten (10)
working days from receipt of the copy of the Order. The appeal shall be filed with the
Regional Office which issued the cancellation Order. The Office of the Secretary shall
have thirty working days from receipt of the records of the case to resolve the appeal.
The Decision of the Secretary shall become final and executory after ten (10) days
from receipt thereof by the parties. No motion for reconsideration of the Decision shall
be entertained (Sec. 25, supra).

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New Requirements Under Department Order No. 18-A, Series 2011:

1. Declaration of the Independent Contractor’s Net Financial Contracting Capacity

(NFCC) to be incorporated in the service contract (Sec. 3 (G)):

“Current Assets Less Current Liabilities x K (Contract Duration) Equivalent, Minus

Value of All Outstanding, On-Going or Starting Projects”

Where K = 10, if contract is one year or less;

= 15, for more than one (1) year up to two (2) years;

= 20, for more than two (2) years.

2. Substantial capital of at least P3, 000,000.00 in case of corporations, partnerships,

cooperatives or single proprietorship (Sec. 13 (L)).

3. Registration fee of P25, 000.00 plus renewal fee of twenty-five thousand pesos
every three years (Sections 19 and 21).

The Negative List: What Cannot Be Validly Sub-Contracted Out (D.O. No. 18-02 as
amended by D.O. No. 18-A, Series 2011)

1. Contracting out of a job, work or service when not done in good faith and not
justified by the exigencies of the business and the same results in the termination
of regular employees and reduction of work hours or reduction or splitting of the
bargaining unit

2. Contracting out to a “Cabo.”

Under the “cabo” system, (a) the union is the independent contractor that engages
the services of its members who are seconded to the principal; (b) the charges
against the principal are made by the Union; and © the workers are paid on union
payroll without intervention of the principal.

3. Taking undue advantage of the economic situation or lack of bargaining strength

of the contractual employee, or undermining his security of tenure or basic rights,
or circumventing the provisions of regular employment, in any of the following
instances:

(a) In addition to his assigned functions, requiring the contractual employee

to perform functions which are currently being performed by the regular
employees of the principal or of the contractor or subcontractor;

(b) Requiring him to sign, as a precondition to employment or continued

employment, an antedated resignation letter; a blank payroll; a waiver of
labor standards including minimum wages and social or welfare benefits;
or a quitclaim releasing the principal, contractor or subcontractor from
any liability as to payment of future claims; and

25
 (c) Requiring him to sign a contract fixing the period of employment to a term
shorter than the term of the contract between the principal and the
contractor or subcontractor, unless the latter contract is divisible into
phases for which substantially different skills are required and this is
made known to the employee at the time of engagement.”

4. Contracting out of a job, work or service through an in-house agency;

5. Contracting out of a job, work or service directly related to the business or

operation of the principal by reason of a strike or lockout whether actual or
imminent;

6. Contracting out of a job, work or service being performed by union members when
such will interfere with, restrain or coerce employees in the exercise of their rights
to self-organization as provided in A. 248 (C), Labor Code, as amended.

New Prohibitions to the Original Negative List Provided Under D.O. 18-A Series of 2011
(Section 7):

1. Repeated hiring of employees under an employment contract of short duration or

under a service agreement of short duration with the same or different
contractors, which circumvents the Labor Code provisions on security of tenure;

2. Requiring employees under a sub-contracting arrangement to sign a contract

fixing the period of employment to a term shorter than the term of the service
agreement, except when the contract is divisible into phases xxx and this is made
known to the employee;

3. Refusal to provide a copy of the Service Agreement and employment contracts

between the contractor and employees, to the principal’s certified bargaining
agent;

Engaging or maintaining by the principal of subcontracted employees in excess

of those provided for in applicable CBA or set by the Industry Tripartite Council
(ITC).

c. Department Circular No. 01-12

Salient Provisions:

Clarifying the Applicability of D.O. No. 18-A, S. 2011 to Business Processing

Outsourcing (BPO)/Knowledge Process Outsourcing (KPO) and the Construction
Industry

Are BPOs and KPOs covered by D.O. No. 18-A?

No. DO 18-A, Series of 2011, clearly speaks of a trilateral relationship that

characterizes the covered contracting/subcontracting arrangement. Thus, vendor-
vendee relationship for entire business processes covered by the applicable
provisions of the Civil Code on Contracts is excluded.

26
 Note: DO 18-A, Series of 2011, contemplates generic or focused singular activity in
one contract between the principal and the contractor (for example: janitorial, security,
merchandising, specific production work) and does not contemplate information
technology-enabled services involving an entire business processes (for example:
business process outsourcing, knowledge process outsourcing, legal process
outsourcing, hardware and/or software support, medical transcription, animation
services, back office operations/support). These companies engaged in business
processes ("BPOs") may hire employees in accordance with applicable laws, and
maintain these employees based on business requirements, which may or may not be
for different clients of the BPOs at different periods of the employees’ employment.

Are contractors licensed by the Philippine Contractors Accreditation Board (PCAB)

required to register under D.O. 18-A? No. Licensing and the exercise of regulatory
powers over the construction industry is lodged with the PCAB and not with the DOLE
or any of its regional offices. Moreover, findings of violation/s on labor standards and
occupational health and safety standards by the contractors shall be coordinated with
the PCAB for its appropriate action, including the possible cancellation/suspension of
the contractor's license.

d. Effects of Labor-Only Contracting

The employer is deemed the direct employer and is made liable to the employees of
the contractor for a more comprehensive purpose (wages, monetary claims, and all
other benefits in the Labor Code such as SSS/Medicare/Pag-Ibig). The labor-only
contractor is deemed merely an agent. A finding that a contractor is a “labor-only”
contractor is equivalent to declaring that there is an ER-EE relationship between the
principal and the employees of the “labor-only” contractor. (San Miguel Corp. vs.
MAERC Integrated Systems. G.R. No. 144672; July 10, 2003).

e. Trilateral Relationship in Job Contracting

“Trilateral Relationship” refers to the relationship in a contracting or subcontracting

arrangement where there is a contract for a specific job, work or service between the
principal and the contractor, and a contract of employment between the contractor and
its workers. There are 3 parties involved in these arrangements: the principal who
decides to farm out a job, work or service to a contractor; the contractor who has the
capacity to independently undertake the performance of the job, work or service; and
the contractual workers engaged by the contractor to accomplish the job, work or
service (Sec. 3(m), D.O. 18-A).

Trilateral Relationship in Contracting Arrangements; Solidary Liability.

In the event of any violation of any provision of the Labor Code, including the failure
to pay wages, there exists a solidary liability on the part of the principal and the
contractor for purposes of enforcing the provisions of the Labor Code and other social
legislation, to the extent of the work performed under the employment contract.

When is the principal be deemed the direct employer of the contractor’s employee?
In cases where:
a. There is a finding by a competent authority of labor-only contracting, or
b. Commission of prohibited activities as provided in Sec. 7, D.O. 18-A; or,

27
 c. A violation of either Secs. 8 or 9, D.O. 18-A. (Sec. 5, D.O. 18-A, 2011).

When is there job contracting or subcontracting?

It is an arrangement whereby a principal agrees to put out or farm out with a
contractor or subcontractor the performance or completion of a specific job, work
or service within a definite or predetermined period, regardless of whether such
job, work or service is to be performed or completed within or outside the premises
of the principal. (IRR, Book III, VIII-A, Section 4)

Elements of a Valid Independent Contracting

a. The contractor/agency carries on an independent business; and
b. Undertakes the contract work on his account under his own
responsibility using his own manner and methods;
c. Free from the control of the principal in all matters connected with the
performance of work excepting the results thereof.
d. He has his own substantial capital in the form of;
e. Tools, equipment, machinery;
f. Work premises and other materials which are necessary in the conduct
of his business.

The preceding elements enunciated in D.O. No. 10 (now revoked) are no longer
available in D.O. No. 18-02. However, it is enough for D.O. No. 18-02 to enumerate
what it prohibits, and it does not have to itemize what it allows. (This is to avoid
any confusion created by D.O. No. 10 where the prohibitions overlapped with the
permissions) The validity of job contracting is already recognized, implicitly though,
in Article 106 par. 3 as well as in Article 1713 of the Civil Code, and in numerous
judicial rulings.

When is there labor-only contracting?

 There is labor-only contracting where the contractor or sub-contractor merely
recruits, supplies or places workers to perform a job, work or service for a
principal. For labor-only to exist, Sec. 6 of Department Order No. 18-A requires
any two of the elements to be present:
1. No Cap Direct. The contractor does not have substantial capital or
investments in the form of tools, equipment, machineries, work premises,
among others, and the employees recruited and placed are performing
activities which are usually necessary or desirable to the operation of the
company, or directly related to the main business of the principal within a
definite or predetermined period, regardless of whether such job, work or
service is to be performed or completed within or outside the premises of
the principal;
NOTE: Directly related means, the work performed by the workers are
dependent and integral steps in all aspects relating to the essential
operations of the principal. If not directly related to, then it should be
allowed as job-contracting.
2. No Control. The contractor does not exercise the right to control over the
performance of the work of the employee.

To emphasize, a finding that a job contractor is a labor-only contractor is equivalent

to declaring that there is an employer-employee relationship between the company

28
 and the employees of the labor-only contractor. This is because the labor-only
contractor is considered as a mere agent of the employer.

A mere statement in a contract with a company that laborers who are paid
according to the amount and quality of work are independent contractors does not
change their status as mere employees in contemplation of labor laws.

• Contractor vis-à-vis Employees

If the nature or character of the work passes the control test, then it is job-
contracting. Otherwise, if it fails the control test, then it is labor-only contracting.

Note: In job-contracting, the principal has no right of control over the conduct of the
employees as to the means employed to achieve an end.

B. Dismissal from employment

1. General Principles

In illegal dismissal cases, the employer is burdened to prove just cause for terminating
the employment of its employees with clear and convincing evidence. This principle is
designed to give flesh and blood to the guaranty of security of tenure granted by the
constitution to employees under the Labor Code. (Duty Free Philippines Service,
Inc. vs. Tria. G.R. No. 174809. June 27, 2012).

2. Just Causes

a. Serious Misconduct

Improper or wrong conduct; the transgression of some established and definite

rule of action, a forbidden act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error in judgment. To be serious within
the meaning and intendment of the law, the misconduct must be of such grave
and aggravated character and not merely trivial or unimportant. (Villamor Golf
Club vs. Pehid. G.R. No. 166152. October 4, 2005).

Although fighting within company premises may constitute serious misconduct

(possible ground for disciplinary actions), not every fight with in company
premises in which an employee is involved automatically warrant dismissal
from service. (Supreme Steel Pipe Corp. vs. Bardaje G.R. No. 170811; April
24, 2007).

The refusal to obey a valid transfer order constitutes willful disobedience of a

lawful order of an employer. Employees may object to, negotiate and seek
redress against employers for rules or orders that they regard as unjust or
illegal. However, until and unless these rules or orders are declared illegal or
improper by competent authority, the employees ignore or disobey them at
their peril. But transfer should not result to demotion of rank which is
tantamount to constructive dismissal. (Manila Pavilion Hotel vs. Henry
Delada. G.R. No. 189947; January 25, 2012).

29
 Halloween invitation sent out by employee for office trick-or-treating without
clearance from higher management is considered misbehavior. The
circumstances in the case were differentiated from Samson vs. NLRC where
the offensive remarks were verbally made during informal Christmas gathering.
(Punzal vs. ETSI Technologies. G.R. No. 170384-85. March 9, 2007)

Manager’s stubbornness, arrogance, hostility & uncompromising stance,

reading confidential letter not intended for her (but about her). When an
employee accepts promotion to a managerial position, or to a position requiring
full trust and confidence, she gives up some of the rigid guarantees available
to ordinary workers – infractions, which if committed by other would be
overlooked or condoned / penalties mitigated, may visited with more severe
disciplinary action life committed by managerial employee.( Sim vs. NLRC
(October 2, 2007) & Tirazona vs. CA (G.R. No. 169712; March 14, 2008)

When an employee, despite repeated warnings from the employer, obstinately

reuses to curtail a bellicose inclination such that it erodes the morale of the co-
employees, the same may be a ground for dismissal for serious misconduct.
Acts destructive of co-employee’s morale may be considered serious
misconduct. (Citibank vs NLRC. G.R. No. 159302. February 6, 2008)

The Supreme Court has taken judicial notice of scientific findings that drug
abuse can damage the mental faculties of the user. It is beyond question that
any employee under the influence of drugs cannot possibly continue doing his
duties without posing a serious threat to the lives and property of his co-
workers, and even his employer. An employee’s statements given to the police
during investigation is evidence which can be considered by the employer
against another employee, especially so if the latter did not appear in the
scheduled admin hearing to present his side. (Bughaw Jr. vs. Treasure
Island. G.R. No. 173151. March 28, 2008).

A teacher engaging in an extra-marital affair with another married person is a

serious misconduct, if not an immoral act. But a teacher falling in love with her
pupil and, subsequently, contracting a lawful marriage with him, though there
is a disparity in their ages and academic level cannot be considered as a
defiance of contemporary social mores. (Chua-Qua vs. Clave. G.R. No.
49549; August 30, 1990).

Generally, it is not a valid ground for dismissal. However, a security guard

found sleeping on the job is doubtless subject to dismissal on the ground of
serious misconduct. (PLDT vs. NLRC and Abucay. August 23, 1988).

Gross Insubordination

The refusal to obey a valid transfer order constitutes willful disobedience of a

lawful order of an employer. Employees may object to, negotiate and seek
redress against employers for rules or orders that they regard as unjust or
illegal. However, until and unless these rules or orders are declared illegal or
improper by competent authority, the employees ignore or disobey them at their
peril. But transfer should not result to demotion of rank which is tantamount to
constructive dismissal. (Manila Pavilion Hotel vs. Henry Delada (2012)

30
 Contra I.
It has been judicially affirmed as justification for an employee’s refusal to follow
an employer’s transfer order if the transfer deters the employee from exercising
his right to self-organization.

Contra II.
Lores Realty Enterprises, Inc. v. Virginia E. Pacia March 2011
Petitioner employer ordered the respondent employee to prepare checks for
payment of petitioner’s obligations. Respondent did not immediately comply
with the instruction since petitioner employer had no sufficient funds to cover
the checks. Petitioner employer dismissed respondent employee for willful
disobedience. The Court held that respondent employee was illegally
dismissed. Though there is nothing unlawful in the directive of petitioner
employer to prepare checks in payment of petitioner’s obligations, respondent
employee’s initial reluctance to prepare the checks, although seemingly
disrespectful and defiant, was for honest and well-intentioned reasons.
Protecting the petitioner employer from liability under the Bouncing Checks Law
was foremost in her mind. It was not wrongful or willful. Neither can it be
considered an obstinate defiance of company authority. The Court took into
consideration that respondent employee, despite her initial reluctance,
eventually did prepare the checks on the same day she was tasked to do it.

b. Gross and Habitual Neglect of Duties; Gross Negligence

It has been defined as the want or absence of or failure to exercise slight care
or diligence, or the entire absence of care. It evinces a thoughtless disregard
of consequences without exerting any effort to avoid them. (NBS vs. Court of
Appeals. G.R. No. 146741; February 27, 2002)

Labor adjudicatory officials and the CA must demur the award of separation
pay based on social justice when an employee’s dismissal is based on serious
misconduct or willful disobedience; gross and habitual neglect of duty; fraud or
willful breach of trust; or commission of a crime against the person of the
employer or his immediate family - grounds under Art. 282 of the Labor Code
that sanction dismissals of employees. 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. The commitment of the Court to the
cause of 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 the
liberality of the law. (Quiambao vs. Manila Electric Company. G.R. No.
171023; December 18, 2009).

An employee who was grossly negligent in the performance of his duty, though
such negligence committed was not habitual, may be dismissed especially if
the grossly negligent act resulted in substantial damage to the company. (LBC
Express vs. Mateo. G.R. No. 168215; June 9, 2009).

c. Fraud or Willful Breach of Trust (Loss of Trust and Confidence)

31
 Employees routinely charged with the care and custody of the employer's
money or property – to this class belong cashiers, auditors, property
custodians, etc., or those who, in the normal and routine exercise of their
functions, regularly handle significant amounts of money or property. (Mabeza
vs. NLRC. G.R. No. 118506. April 18, 1997).

A breach is willful if it is done intentionally, knowingly, and purposely without

justifiable excuse, as distinguished from an act done carelessly, thoughtlessly,
heedlessly, or inadvertently. (De la Cruz vs. NLRC. G.R. No. 119536;
February 17, 1997).

The act constituting the breach must be “work-related” such as would show the
employee concerned to be unfit to continue working for the employer.
(Gonzales vs. NLRC. G.R. No. 131653; March 26, 2001).

It must be substantial and founded on clearly established facts sufficient to

warrant the employee’s separation from employment. (Sulpicio Lines Inc. vs.
Gulde. G.R. No. 149930; February 22, 2002).

d. Commission of a Crime or Offense

e. Other Analogous Cases

For abandonment to constitute a valid cause for termination of employment

there must be a deliberate unjustified refusal of the employee to resume his
employment. This refusal must be clearly shown. Mere absence is not
sufficient; it must be accompanied by overt acts pointing to the fact that the
employee simply does not want to work anymore. (Jardine Davies vs. NLRC.
G.R. No. 106915; August 31, 1993).

Abandonment is negated by the immediate filing of an action for illegal

dismissal.(Del Monte Philippines vs. NLRC. G.R. No. 126688; March 5,
1998).

To constitute abandonment, there must be a clear and deliberate intent to

discontinue one’s employment without any intention of returning back. (Flores
vs. Funeraria Neustro. G.R. No. L-66890.April 15, 1988).

The employer is not guilty of unfair labor practice if it merely complies in good
faith with the request of the certified union for the dismissal of employees
expelled from the union pursuant to the union security clause in the collective
bargaining agreement. (Soriano vs. Atienza. G.R. No. 68619. March 16,
1989)

3. Authorized causes

a. Introduction of labor-saving device:

Reduction of the number of workers in a company’s factory made necessary

by the introduction of machinery in the manufacture of its products is justified.

32
 There can be no question as to the right of the manufacturer to use new labor-
saving devices with a view to effecting more economy and efficiency in its
method of production. (Philippine Sheet Metal Workers’ Union vs. CIR. G.R.
No. L-2028; April 28, 1949).

b. Redundancy:

Requirements for a valid Redundancy Program:

1. A written notice served on both the employees and DOLE at least one
month prior to the intended date of retrenchment;
2. Payment of separation pay equivalent to at least one month pay or at least
one month pay for every year of service, whichever is higher;
3. Good faith in abolishing the redundant positions;
4. Fair and reasonable criteria in ascertaining what positions are to be
declared redundant and accordingly abolished such as but not limited to:
a. Preferred status
b. Efficiency
c. Seniority
(DAP v. Court of Appeals. G.R. No. 165811; December 14, 2005).

It does not necessarily or even ordinarily refer to duplication of work. A position

is redundant if it is a superfluity. (Almodiel vs NLRC. G.R. No. 100641. June
14, 1992).

c. Retrenchment (Downsizing); Delayering

The phrase “to prevent losses” means that retrenchment or termination from
the service of some employees is authorized to be undertaken by the employer
sometime before the losses anticipated are actually sustained or realized.
Evidently, actual losses need not set in prior to retrenchment. (Cajucom VII
vs. TPI Philippines Cement Corporation. February 11, 2005).

Standards to Justify Retrenchment:

1. The losses expected should be substantial and not merely de minimis
in extent;
2. The substantial loss apprehended must be reasonably imminent. It be
reasonably necessary and likely to effectively prevent the expected
losses;
3. The employer should have taken other measures prior or parallel to
retrenchment to forestall losses;
4. The alleged losses if already realized, and the expected imminent
losses must be proved by sufficient and convincing evidence. (Oriental
Petroleum & Minerals Corp. vs. Fuentes. G.R. No. 151818. October
14, 2005)

The employer must have used fair and reasonable criteria in ascertaining who
would be dismissed and who would be retained among the employees, such
as status, efficiency, seniority, physical fitness, age and financial hardship for
certain workers. (Asian Alcohol Corp. v. NLRC. G.R. No. 131108. March 25,
1999).

33
d. Closure of business

Where closure is due to serious business losses, no separation pay is required

(North Davao Mining Corp. v. NLRC; G.R. No. 112546. March 13, 1996);

Where closure was due to an act of the government, the workers are not
entitled to separation pay (National Federation of Labor v. NLRC; G.R. No.
127718. March 2, 2000).

Article 283 includes both the complete cessation of all business operation of
an establishment and the cessation of only part of a company’s business.
(Cheniver Deco Print Technics Corp. vs. NLRC. G.R. No. 122876.
February 17, 2000).

There must be fair and reasonable criteria to be used in selecting employees

to be dismissed, on account of retrenchment, such as: (a) less preferred status
(i.e., temporary employees); (b) efficiency rating; and (c) seniority. (Asiaworld
Publishing House Inc. vs. Ople. G.R. No. 56398; July 23, 1987).

When there is need to reduce the workforce, the management has the right to
choose who to lay off, depending on the work still required to be done and the
qualities of the workers to be retained. (Almoite vs. Pacific Architects. G.R.
No. 73680; July 10, 1986).

Labor contracts being in personam in nature, are binding only between the
parties. Moreover, there is no law requiring a bona fide purchaser of assets of
an on-going concern to absorb in its employ the employees of the latter.
(Sundowner Development Corp. vs. Drilon. G.R. No. 82341. Dec. 6, 1989).

However, although the purchaser of the assets or enterprise is not legally

bound to absorb in its employ the employees of the seller of such assets or
enterprise, the parties are liable to the employees if the transaction between
the parties is colored or clothed with bad faith. The sale or disposition must be
motivated by good faith as an element of exemption from liability (Associated
Labor Unions – VIMCONTU vs. NLRC. G.R. No. 74841 December 20, 1991).

In case of mergers, where the transferee is merely an alter-ego of the different

merging firms. In such instance, the transferee has the obligation not only to
absorb the workers of the dissolved companies but also to include the length
of service earned by the absorbed employees with their former employers as
well. To rule otherwise would be manifestly less than fair, certainly, less than
just and equitable. (Filipinas Port Services, Inc. vs. NLRC. G.R. No. 97237
August 16, 1991).

e. Disease:

When his continued employment is prohibited by law or prejudicial to his health

or to the health of his co-employees. There is a certification by a competent
public health authority that the disease is of such nature or at such stage that

34
 it cannot be cured within a period of 6 months even with proper medical
treatment.

The requirement for a medical certificate cannot be dispensed with; otherwise,

it would sanction the unilateral and arbitrary determination by the employer of
the gravity or extent of the employee’s illness and thus defeat the public policy
on the protection of labor. (Manly Express vs. Payong. G.R. No. 167462. Oct.
25, 2005).

f. Other Authorized Causes:

a. Total and permanent disability of the employee;

b. Valid application of union security clause;
c. Expiration of period in term of employment;
d. Completion of project in project employment;
e. Failure in prohibition;
f. Relocation of business to a distant place;
g. Defiance of return-to-work order;
h. Commission of illegal acts in a strike;
i. Violation of contractual commitment;
j. Retirement.

4. Totality of Infractions Doctrine

Where the employee has been found to have repeatedly incurred several
suspensions or warnings on account or violations of the company rules and
regulations, the law warrants their dismissal as it is akin to “habitual delinquency”.

1. Due Process
a. Twin-notice requirement
(Villeno vs. NLRC. G.R. No. 108153; December 26, 1995).

5. Due process in termination

General Rule:

The twin requirements of notice and hearing are the essential elements of due
process in termination cases, which cannot be dispensed with without violating the
constitutional right to due process.

a. Notice

In order to intelligently prepare the employees for their explanation and defenses,
the notice should contain a detailed narration of the facts and circumstances that
will serve as the basis for the charge against the employee – a general description
of the change will not suffice. (King of Kings Transport vs. Mamac. G.R. No.
166208. June 29, 2007).

The first notice should contain a detailed narration of facts and circumstances that
will serve as basis for the charge against the employee. A general description of
the charge will not suffice. The notice should specifically mention which company

35
 rules, if any, are violated (King of Kings Transport vs. Mamac; June 2007), and
that the employer seeks dismissal for the act or omission charged against the
employee; otherwise; the notice does not comply with the rules (Magro Placement
vs. Hernandez. G.R. No. 156964. July 04, 2007).

The law does not require that an intention to terminate one’s employment should
be included in the first notice. It is enough that employees are properly apprised of
the charges brought against them so they can properly prepare their defenses; it is
only during the second notice that the intention to terminate one’s employment
should be explicitly stated (Esguerra vs. Valle Verde Country Club. G.R. No.
173012. June 13, 2012).

Every kind of assistance that management must accord to the employees to enable
them to prepare adequately for their defense. This should be construed as a period
of Five (5) Calendar Days from receipt of notice to give the employees an
opportunity to study the accusation against them, consult a union official or lawyer,
gather data and evidence, and decide on the defenses they will raise against the
complaint (King of Kings Transport; June, 2007).

Second Notice: Notice of Termination (Post-Notice), which is a written notice of

termination served upon the employee, indicating that upon due consideration of all
the circumstances, grounds have been established to justify his termination.

Note: The twin-notice rule should be complied with.

b. Hearing; meaning of opportunity to be heard

The new revolutionized doctrine of due process in termination cases: hearing or

conference not necessary.

Petitioner’s insistence on a hearing cannot be given merit. The Supreme Court ruled
that there is no need for a hearing or conference and noted: “There is a marked
difference in the standards of due process to be followed as prescribed in the Labor
Code and its implementing rules. The Labor Code, on one hand, provides that an
employer must provide the employee ample opportunity to be heard and to defend
himself with the assistance of his representative if he so desires. The Omnibus
Rules implementing the Labor Code, on the other hand, require a hearing and
conference during which the employee concerned is given the opportunity to
respond to the charge, present his evidence or rebut the evidence presented
against him … At the outset, it must be stated that the time-honored doctrine is that,
in case of conflict, the law prevails over the administrative regulations implementing
it. The authority to promulgate implementing rules proceeds from the law itself. To
be valid, a rule or regulation must conform to and be consistent with the provisions
of the enabling statute. As such, it cannot amend the law either by abridging or
expanding its scope”. (Perez vs. Philippine Telegraph and Telephone Company.
G.R. No. 152048. April 7, 2009).

The “right to counsel and the assistance of one in investigations involving

termination cases is neither indispensable nor mandatory, except when the
employee himself requests for one or that he manifests that he wants a formal

36
 hearing on the charges against him.” (Lopez vs. Alturas Group. G.R. No. 191008.
April 11, 2011).

A hearing or conference should be held during which the employee concerned, with
the assistance of counsel, if the employee so desires, is given the opportunity to
respond to the charge, present his evidence or rebut the evidence presented
against him. (Lavador vs. “J” Marketing Corporation and Soyao. G.R. No.
157757; June 28, 2005).

c. Agabon Doctrine: Belated Due Process Rule

It abandoned Serrano Ruling. Dismissal for an authorized or just cause, without

procedural due process is not an illegal dismissal which warrants back wages; the
employee is entitled only to nominal damages.

The Court interpreted Art. 279 to the effect that: termination is illegal only if it is not
for any of the justified or authorized causes provided by law. Payment of back
wages and other benefits, including reinstatement, is justified only if the employee
was unjustly dismissed.

 The Court decided to follow Wenphil that where the dismissal is for a just
cause, the lack of statutory due process should not nullify the dismissal or
render it illegal. However, the employer should indemnify the employee for the
violation of his rights. The indemnity should be stiffer than that provided in
Wenphil to discourage the abhorrent practice of “dismiss now, pay later.” The
indemnity should be in the form of nominal damages, which is adjudicated in
order that a right of plaintiff, which has been violated by the defendant, may be
vindicated.

If the dismissal is based on a just cause under Article 282 but the employer failed
to comply with the notice requirement, the sanction to be imposed upon him should
be tempered because the dismissal process was, in effect, initiated by an act
imputable to the employee. On the other hand, if the dismissal is based on an
authorized cause under Article 283 but the employer failed to comply with the notice
requirement, the sanction should be stiffer because the dismissal process was
initiated by the employer’s exercise of his management prerogative. (Jaka Food
Processing v. Pacot. G.R. No. 151378.March 28, 2005).

Factors to be taken into account in determining the amount of nominal damages in

dismissal cases:
1. The authorized cause invoked, whether it was a retrenchment or a closure or
cessation of operation of the establishment due to serious business losses or
financial reverses or otherwise;
2. The number of employees to be awarded;
3. The capacity of the employers to satisfy the awards, taken into account their
prevailing financial status as borne by the records;
4. The employer's grant of other termination benefits in favor of the employees;
5. Whether there was a bona fide attempt to comply with the notice requirements
as opposed to giving no notice at all. SC reduced the nominal damages from
P 30,000 to P 10,000. (Industrial Timber Corp. v. Agabon. G.R. No. 164518.
March 30, 2006).

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C. Reliefs for Illegal Dismissal

1. Reinstatement

Payroll reinstatement in lieu of actual reinstatement is a departure from the rule and
there must be showing of special circumstances rendering actual reinstatement
impracticable, or otherwise not conducive to attaining the purpose of the law in
providing for assumption of jurisdiction by the Secretary of Labor and Employment in a
labor dispute that affects the national interest. (Manila Diamond Hotel Employees
Union vs. Secretary. G.R. No. 140518; December 16, 2004).

a. Pending Appeal (Art. 223, Labor Code)

The reinstatement order of the Labor Arbiter is immediately executory even

pending appeal (Article 223 (3), Labor Code). In fact, it is self-executory, without
need of the complainant filing a Motion for Execution to effect the reinstatement
(Pioneer Texturizing vs. NLRC; G.R. No. 118651. October 16, 1997).

Hence, it is the obligation of the employer to immediately admit the employee back
to work or reinstate him in the payroll at his option. Otherwise, the employer will be
held liable for backwages from the date of notice of the order up to the date of
employees actual or payroll reinstatement. (International Container Terminal
Services, Inc. vs. NLRC; G.R. No. 115452. December 21, 1998)

Failure on the part of the employer to exercise the options in the alternative, the
employer must pay the employee’s salaries (Garcia vs. Philippine Airlines, Inc.
G.R. No. 164856. August 29, 2007).

Where the order of reinstatement by the labor arbiter is reversed on appeal. 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
dismissed employee during the period of appeal until reversal by the higher court.
On the other hand, if the employee has been reinstated during the appeal period
and such reinstatement order is reversed with finality, the employee is not required
to reimburse whatever salary he received for he is entitled to such, more so if he
actually rendered services during the period. (Roquero vs. Philippine Airlines,
Inc. G.R. No. 152329. April 22, 2003).

Note (Poquiz): He should not refund the salaries he received pending appeal for
the principle of social justice renders inapplicable the civil law doctrine of unjust
enrichment.

Exception:
After the Labor Arbiter’s decision is reversed by a higher tribunal, the employee
may be barred from collecting the accrued wages, if it is shown that the delay in
enforcing the reinstatement pending appeal was without fault on the part of the
employer (Garcia vs. Philippine Airlines; 2009).

2. Separation pay in lieu of reinstatement

38
 a. Doctrine of Strained Relations:

When the employer can no longer trust the employee and vice-versa, or there
were imputations of bad faith to each other, reinstatement could not effectively
serve as a remedy. This doctrine applies only to positions which require trust
and confidence. (Globe Mackay v. NLRC. G.R. No. 82511; March 3, 1992).

b. Separation Pay in lieu of Reinstatement

(a) Full Backwages

Entitlement to backwages of the illegally dismissed employee flows from

law. Even if he does not ask for it, it may be given. The failure to claim
backwages in the complaint for illegal dismissal is a mere procedural lapse
which cannot defeat a right granted under substantive law. (St. Michael’s
Institute v. Santos. G.R. No. 145280; December 4, 2001).

(a) Computation

The backwages to be awarded should not be diminished or reduced

by earning elsewhere during the period of his illegal dismissal. The
reason is that the employee while litigating the illegality of his
dismissal must still earn a living to support himself and his family.
(Bustamante vs. NLRC (March 15, 1996), and Buenviaje v. CA
(2002)).

The award of backwages is computed on the basis of a 30-day

month. (JAM Trans Co. v. Flores. G.R. No. L-68555; March 19,
1993).

When the order of the labor arbiter approving reinstatement was

reversed on appeal, the employee is not required to reimburse the
backwages or other salaries received during the pendency of the
appeal except when there is delay in the execution of the order of
reinstatement prior to the reversal and the delay or non-execution
was not due to employer’s fault. (Garcia vs. PAL. G.R. No. 164856;
January 20, 2009).

(b) Limited Backwages

D. Preventive Suspension

When an employee resigns or executes a quitclaim in favor of the employer, he is thereby

stopped from filing any money claims against the employer arising from his employment.
(Philippine National Construction Corporation vs. NLRC. G.R. No. 117240; October
2, 1997).

Not all waivers and quitclaims are invalid as against public policy. If the agreement was
voluntarily entered into and represented a reasonable settlement, it is binding on the
parties and may not later be disowned, simply because of a change of mind. (Candido
Alfaro v. Court of Appeals G.R. No. 140812; August 28, 2001).

39
E. Constructive Dismissal

Constructive Dismissal is defined as quitting because continued employment is rendered

impossible, unreasonable or unlikely, as an offer involving demotion in rank and a
diminution in pay. (Jo Cinema Corporation v. Abellana. G.R. No. 132837; June 28,
2001).

There may be constructive dismissal if an act of clear discrimination, insensibility, or

disdain by an employer becomes so unbearable on the part of the employee that it could
foreclose any choice by him except to forego his continued employment. (Hyatt Taxi
Services, Inc. v. Catinoy. G.R. No. 143204. June 26, 2001).

V. MANAGEMENT PREROGATIVE

This prerogative flows from the established rule that labor laws do not authorize the substitution
of judgment of the employer in the conduct of his business. The employer can exercise this
prerogative without fear of liability as long as it is done in good faith for the advancement of his
interests, and not for the purpose of defeating or circumventing the rights of the employees under
special laws or valid agreements. It is valid as long as it is not performed in a malicious, harsh,
oppressive, vindictive or wanton manner, or out of malice or spite. (Great Pacific Employees
Union vs. Great Pacific Life Assurance. G.R. No. 126717; February 11, 1999).

As long as the company’s exercise of the same is 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 valid agreements, the courts will uphold them (also: San Miguel
Brewery Sales Force Union (PTGWO) vs. Ople | G.R. No. L-53515; February 8, 1989). (Capitol
Medical Center, Inc. v. Meris. G.R. No. 155098; September 16, 2005)

A. Discipline

The employer has the prerogative to instill discipline in his employees and to impose
reasonable penalties, including dismissal, on erring employees pursuant to company
rules and regulations. (San Miguel Corp. vs. NLRC. G.R. No. 78277. May 12, 1989).

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. It will demoralize the rank-and-file if the undeserving, if not
undesirable, remains in the service. (Shoemart, Inc. vs. NLRC. G.R. No. 74229.
August 11, 1989).

B. Transfer of Employees

This is a privilege inherent in the employer’s right to control and manage its enterprise
effectively. (Yuco Chemical Industries vs. Ministry of Labor. G.R. No. L-75656
May 28, 1990).

It is the inherent prerogative of an employer to transfer and reassign its employees to

meet the requirements of its business. Be that as it may, the prerogative of the
management to transfer its employees must be exercised without grave abuse of
discretion. The exercise of the prerogative should not defeat an employee's right to

40
 security of tenure. The employer’s privilege to transfer its employees to different
workstations cannot be used as a subterfuge to rid itself of an undesirable worker.
(Veterans Security Agency v. Vargas. G.R. No. 159293; December 16, 2005).

An employer has the right to transfer, reduce or lay-off personnel in order to minimize
expenses and to insure the stability of the business, and even to close the business,
and this right has been consistently upheld even in the present era of multifarious
reforms in the relationship of capital and labor, provided the transfer or dismissal is not
abused but is done in good faith and is due to causes beyond control. ((Gregorio
Araneta Employees Union vs. Roldan. G.R. No. L-6846 July 20, 1955).

It is the employers’ prerogative, based on its assessment and perception of its

employees’ qualifications, aptitudes, and competence, to move them around in the
various areas of its business operations in order to ascertain where they will function
with maximum benefit to the company. When an employee’s transfer is not
unreasonable, nor inconvenient or prejudicial to him, and it does not involve a
demotion in rank or diminution of his salaries, benefits and other privileges, the
employee may not complain that it amounts to a constructive dismissal. (Philipiine
Telegraph vs. Laplana. G.R. No. 76645; July 23, 1991).

It cannot be used as a subterfuge by the employer to rid himself of an undesirable

worker. Nor when the real reason is to penalize an employee for his union activities
and thereby defeat his right to self-organization. But the transfer can be upheld when
there is no showing that it is unnecessary, inconvenient and prejudicial to the displaced
employee. (Pocketbell Phils., Inc. vs. NLRC and Arthur Alinas. G.R. No. 106843;
January 20, 1995).

C. Productivity Standard

Failure to observe prescribed standards of work; or to fulfill reasonable work

assignments due to insufficiency may constitute just cause for dismissal. Such
inefficiency is understood to mean failure to attain work goals or work quotas, either
by failing to complete the same within the allotted reasonable period, or by producing
unsatisfactory results. This management prerogative of requiring standards may be
availed of so long as they are exercised in good faith for the advancement of the
employer’s interest. (Buiser vs. Leogardo. G.R. No. L-63316 July 31, 1984).

D. Grant of Bonus

General Rule: Bonus is not demandable as a matter of right. It is a management

prerogative, given in addition to what is ordinarily received by or strictly due to the
recipient (Producers Bank v. NLRC. G.R. No. 100701. March 28, 2001).

Exceptions
1. When it was promised to be given without any conditions imposed for its
payment in which case it is deemed part of the wage;
2. When it has ripened into practice. (Marcos v. NLRC; G.R. No. 111744.
September 8, 1995):

E. Change of Working Hours

41
 The working hours may be changed, at the discretion of the company, should such
change be necessary for its operations, and that employees shall observe such
rules as have been laid down by the company. (Interphil Laboratories Union-
FFW vs. Interphil Laboratories, Inc. G.R. No. 142824. December 19, 2001).

F. Rules on Marriage between employees of competitor-employers

The failure of the employer to prove legitimate business concern in imposing the
questioned policy cannot prejudice the employee’s right to be free from arbitrary
discrimination based upon stereotypes of married persons working together in one
company… Thus, for failure of the employer to present undisputed proof of a
reasonable business necessity, we rule that the questioned policy is an invalid
exercise of management prerogative. (Star Paper Corp. vs. Simbol. G.R. No.
164774 April 12, 2006).

Prohibition of marriage or existing or future relationships between employees of

competing companies is not violative of the equal protection clause. (Duncan vs.
Glaxo Wellcome. G.R. No. 162994; September 17, 2004).

A woman worker may not be dismissed on the ground of dishonesty for having written
“single” on the space for civil status on the application sheet, contrary to the fact that
she was married. (PT&T Co. v. NLRC. G.R. No. 118978. May 23, 1997).

G. Post-employment Ban

Non-involvement Clause:

A non-involvement clause is not necessarily void for being in restraint of trade as long
as there are reasonable limitations as to time, trade, and place. It was also stated in
this case that the validity of a non-involvement clause depends upon the nature of
work of the subject employee. “Since petitioner was the Senior Assistant Vice-
President and Territorial Operations Head in charge of respondent’s Hong Kong and
ASEAN operations, she had been privy to confidential and highly sensitive marketing
strategies of respondent’s business. To allow her to engage in a rival business soon
after she leaves would make respondent’s trade secrets vulnerable especially in a
highly competitive marketing environment. In sum, we find the non-involvement clause
not contrary to public welfare and not greater than is necessary to afford a fair and
reasonable protection to respondent.” (Daisy Tiu vs. Platinum Plans. G.R. No.
163512. February 28, 2007).

VI. SOCIAL WELFARE LEGISLATION

A. Social Security Service Law (R.A. No. 8282)

The policy objective in the enactment of SSS law is the policy of the State to establish,
develop, promote and perfect a sound and viable tax-exempt social security system
suitable to the needs of the people throughout the Philippines which shall promote social
justice and provide meaningful protection to members and their beneficiaries against the
hazards of disability, sickness, maternity, old age, death, and other contingencies resulting
in loss of income or financial burden (RA 8282, Section 2). The enactment of SSS law is
a legitimate exercise of the police power. It affords protection to labor and is in full accord

42
 with the constitutional mandate on the promotion of social justice. (Roman Catholic
Archbishop of Manila vs. SSS. G.R. L-15045. January 20, 1961).

“The right of an employee to be covered by the SSS is premised on the existence of an

employer-employee relationship” (Gapayao vs. Fulo. G.R. No. 193493 June 13, 2013)

A wife who is already separated de facto from her husband cannot be said to be
"dependent for support" upon the husband, absent any showing to the contrary.
Conversely, if it is proved that the husband and wife were still living together at the time of
his death, it would be safe to presume that she was dependent on the husband for support,
unless it is shown that she is capable of providing for herself. (SSS v. Aguas. G.R. No.
165546; February 27, 2006)

Effect of Non-Remittance of Contributions by the Employer: “An employee is still entitled

to social security benefits even if his employer fails/refuses to remit the contribution to the
SSS” (Gapayao v. Fulo. G.R. No. 193493 June 13, 2013)

B. GSIS Law (R.A. No. 8291)

The compulsory retirement of government officials and employees upon their reaching the
age of 65 years is founded on public policy which aims by it to maintain efficiency in the
government service and at the same time give to the retiring public servants the
opportunity to enjoy during the remainder of their lives the recompense, inadequate
perhaps for their long service and devotion to the government, in the form of a
comparatively easier life, freed from the rigors of civil service discipline and the exacting
demands that the nature of their work and their relations with their superiors as well as the
public would impose upon them. (Beronilla v. GSIS. G.R. No. L-21723; November 26,
1970).

Retirement benefits given to government employees in effect reward them for giving the
best years of their lives to the service of their country. This is especially true with those in
government service occupying positions of leadership or positions requiring management
skills because the years they devote to government service could be spent more profitably
in lucrative appointments in the private sector. In exchange for their selfless dedication to
government service, they enjoy security of tenure and are ensured of a reasonable amount
of support after they leave the government. The basis for the provision of retirement
benefits is, therefore, service to government. (GSIS vs. CSC. G.R. No. 98395-102449;
June 19, 1995).

Thus, where the employee retires and meets the eligibility requirements, he acquires a
vested right to benefits that is protected by the due process clause. Retirees enjoy a
protected property interest whenever they acquire a right to immediate payment under
pre-existing law. Thus, a pensioner acquires a vested right to benefits that have become
due as provided under the terms of the public employees’ pension statute. No law can
deprive such person of his pension rights without due process of law, that is, without notice
and opportunity to be heard. (GSIS vs. De Leon. G.R. No. 186560; November 17, 2010).

Note (Poquiz):
Coverage of GSIS Law

Membership is compulsory for all employees:

43
 Appointee or elective
whether temporary, counsel, permanent or contractual with employer-employee
relationship
who are receiving basic pay or salary but not per diems, honoraria or allowances,
and
who have not reached the compulsory retirement age of 65 years old

Who are not covered:

The following are excluded from the compulsory membership of the GSIS
Uniformed members of the AFP and PNP
Those who are not receiving basic pay or salary (per diems, honoraria or
allowances are excluded)
members of the judiciary and constitutional commissions. (they are only covered
by life insurance)
Purely casual employees

C. Limited Portability Law (R.A. No. 7699)

2011 Bar Exam Question:

Under the Limited Portability law, funds from the GSIS and the SSS maybe transferred for
the benefit of a worker who transfers from one system to the other. For this purpose,
overlapping periods of membership shall be credited only once.

D. Employee’s Compensation – coverage and when compensable

Under the present law, in order for the employee to be entitled to sickness or death
benefits, the claimant must show: (1) that the disability or death is the result of an
occupational disease listed under Annex “A” of the ECC Rules with the conditions set
therein satisfied; or, (2) that the risk of contracting the disease is increased by the working
conditions. (Lorenzo v. GSIS. G.R. No. 188385; October 2, 2013).

Where the primary injury is shown to have arisen in the course of employment, every
natural consequence that flows from the injury likewise arises out of the employment,
unless it is the result of an independent intervening cause attributable to complainants
own negligence or misconduct. Simply stated, all the medical consequences and sequels
that flow from the primary injury are compensable. (Belarmino vs. ECC. G.R. No. 90204;
May 11, 1990).

1. Direct Premises Rule

a. General Rule: The accident of the employee should have occurred at the place
of work in order to be compensable.

b. Exceptions: (The accident is still compensable even if it occurred outside the

work premises)

(1) Proximity Rule:

When the injury is sustained when the employee is proceeding to or from
his work on the premises of the employer, the injury is compensable. (
Iloilo Dock & Engineering Co. vs. ECC. G.R. No. L-26341. Nov. 27,
1968).

44
 (2) Going to or Coming From Work
When the injury is sustained when the employee is proceeding to or from
his work on the premises of the employer, the injury is compensable.
a. The act of the employee of going to, or coming from, the work place,
must have been a continuing act, that is, he had not been diverted
therefrom by any other activity and he had not departed from his usual
route to, or from, his workplace; and,
b. An employee on a special errand must have been official and in
connection with his work.
c. Extra Premises Rule:
The company which provides the means of transportation in going to,
or coming from the place of work, is liable to the injury sustained by the
employees while on board said means of transportation. (Enao v. ECC
G.R. No. L-46046; April 5, 1985).
d. Special Errand Rule:
Injury sustained outside the company premises is compensable if his
being out is covered by an office order or a locator slip or a pass for
official business. The special errand must be official and in connection
to the employee’s work.
e. Dual Purpose Doctrine allows compensation where a special trip would
have to be made for the employer if the employee had not combined
the service for the employer with his going or coming trip even if in the
course of the trip, the employee also pursues a personal purpose.
f. Special Engagement Rule covers field trips, outings, intramurals, and
picnics when initiated and sanctioned by the employer.
g. Positional and Local Risks Doctrine:
If an employee by reason of his duties is exposed to a special or
peculiar danger from the elements, that is, one greater than that to
which other persons in the community are exposed and an unexpected
injury occurs, the injury is compensable

2. 24 Hour Duty Doctrine

“The 24-Hour Duty Doctrine” applies to both policemen and firemen. The
policemen and firemen are technically on duty 24 hours a day except when they
are on vacation leave, they may be “on-call” anytime. However, to be
compensable, the injury should be caused by an activity which is police or firemen
services in character (reasonable connection between the injury and the work or
service). (Hinoguin v. ECC. G.R. No. 84307; April 17, 1989).

The 24-hour duty doctrine should not be sweepingly applied to all acts and
circumstances causing the death of a police officer but only to those which,
although not on official line of duty, are nonetheless basically police service in
character. (GSIS vs. Court of Appeals. G.R. No. 128524; April 20, 1999).

VII. LABOR RELATIONS

A. Right to self-organization

1. Who may unionize for purposes of collective bargaining

45
 Article 212(g) of the Labor Code defines a labor organization as “any union or association
of employees which exists in whole or in part for the purpose of collective bargaining or of
dealing with employers concerning terms and conditions of employment.” Upon
compliance with all the documentary requirements, the Regional Office or Bureau shall
issue in favor of the applicant labor organization a certificate indicating that it is included
in the roster of legitimate labor organizations. Any applicant labor organization shall
acquire legal personality and shall be entitled to the rights and privileges granted by law
to legitimate labor organizations upon issuance of the certificate of registration. (Sta.
Lucia East Commercial Corporation vs. Hon. Secretary of Labor and Employment,
et al., G.R. No. 162355, August 14, 2009).

2. Bargaining unit

i. Test to determine the constituency of an appropriate bargaining unit

An appropriate bargaining unit is defined as “a group of employees of a given

employer, comprised of all or less than all of the entire body of employees, which the
collective interest of all the employees, consistent with equity to the employer, indicate
to be best suited to serve the reciprocal rights and duties of the parties under the
collective bargaining provisions of the law”. The test of grouping is community or
mutuality of interest. Certain factors, such as specific line of work, working conditions,
location of work, mode of compensation, and other relevant conditions do not affect or
impede their commonality of interest. Although they seem separate and distinct from
each other, the specific tasks of each division are actually interrelated and there exists
mutuality of interests which warrants the formation of a single bargaining unit

Although Article 245 of the Labor Code limits the ineligibility to join, form and assist
any labor organization to managerial employees, jurisprudence has extended this
prohibition to confidential employees. The positions of Human Resource Assistant and
Personnel Assistant belong to the category of confidential employees and, hence, are
excluded from the bargaining unit, considering their respective positions and job
descriptions. As Human Resource Assistant, the scope of one’s work necessarily
involves labor relations, recruitment and selection of employees, access to employees’
personal files and compensation package, and human resource management. As
regards a Personnel Assistant, one’s work includes the recording of minutes for
management during collective bargaining negotiations, assistance to management
during grievance meetings and administrative investigations, and securing legal
advice for labor issues from the petitioner’s team of lawyers, and implementation of
company programs. Therefore, in the discharge of their functions, both gain access to
vital labor relations information which outrightly disqualifies them from union
membership. (San Miguel Foods, Inc. vs. San Miguel Corp. Supervisors and
Exempt Union, G.R. No. 146206. August 1, 2011).

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,
indicated to be the best suited to serve the reciprocal rights and duties of the parties
under the collective bargaining provisions of the law.” The fundamental factors in
determining the appropriate collective bargaining unit are:

(1) the will of the employees (Globe Doctrine);

46
 (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. (Sta. Lucia East Commercial Corporation vs.
Hon. Secretary of Labor and Employment, et al., G.R. No. 162355, August 14,
2009

Under Article 245 of the Labor Code, supervisory employees are not eligible for
membership in a labor union of rank-and-file employees. The supervisory employees
are allowed to form their own union but they are not allowed to join the rank-and-file
union because of potential conflicts of interest. Further, to avoid a situation where
supervisors would merge with the rank-and-file or where the supervisors’ labor union
would represent conflicting interests, a local supervisors’ union should not be allowed
to affiliate with the national federation of unions of rank-and-file employees where that
federation actively participates in the union activity within the company. Thus, the
limitation is not confined to a case of supervisors wanting to join a rank-and-file union.
The prohibition extends to a supervisors’ local union applying for membership in a
national federation the members of which include local unions of rank-and-file
employees. (Coastal Subic Bay Terminal, Inc., vs DOLE. G.R. No. 157117,
November 20, 2006 ).

There are two classes of rank and file employees in the university that is, those who
perform academic functions such as the professors and instructors, and those whose
functions are non-academic who are the janitors, messengers, clerks etc. Thus, not
much reflection Is needed to perceive that the mutuality of interest which justifies the
formation of a single bargaining unit is lacking between the two classes of employees.
(U.P. v Ferrer-Calleja. G.R. No. 96189. July 14, 1992).

While the existence of a bargaining history is a factor that may be reckoned with in
determining the appropriate bargaining unit, the same is not decisive or conclusive.
Other factors must be considered. The test of grouping is community or mutuality of
interests. This is so because 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. (Democratic
Labor Assocation v Cebu Stevedorin Company, Inc.G.R. No. L-10321, Feb 28,
1958).

The attempt to make the security agencies appear as two separate entities, when in
reality they were but one, was a devise to defeat the law and should not be permitted.
Although respect for corporate personality is the general rule, there are exceptions. In
appropriate cases, the veil of corporate fiction may be pierced as when it is used as a
means to perpetrate a social injustice or as a vehicle to evade obligations. Petitioner
was thus correctly ordered to pay respondent’s retirement under RA 7641, computed
from January 1979 up to the time he applied for retirement in July 1997. (Enriquez
Security Services,Inc. vs. Victor A. Cabotaje G.R. No. 147993,July 21, 2006).

ii. Voluntary recognition

iii. Certification election

47
i. In an unorganized establishment

ii. In an organized establishment

The choice of their representative is the exclusive concern of the employees;

the employer cannot have any partisan interest therein; it cannot interfere with,
much less oppose, the process by filing a motion to dismiss or an appeal from
it; not even the allegation that some employees participating in a petition for
certification election are actually managerial employees will give an employer
legal personality to block the certification election. The employer’s only right in
the proceeding is to be notified or informed thereof. (Samahang Manggagawa
sa Charter Chemical Solidarity of Unions in the Philippines for
Empowerment and Reforms [SMCC-SUPER], Zacarrias Jerry Victorio –
Union President v. Charter Chemical and Coating Corporation G.R. No.
169717, March 16, 2011).

The general rule is that an employer has no standing to question the process
of certification election, since this is the sole concern of the workers. Law and
policy demand that employers take a strict, hands-off stance in certification
elections. The bargaining representative of employees should be chosen free
from any extraneous influence of management. The only exception is where
the employer itself has to file the petition pursuant to Article 258 of the Labor
Code because of a request to bargain collectively. (San Miguel Foods, Inc.
vs. San Miguel Corp. Supervisors and Exempt Union. G.R. No. 146206.
August 1, 2011).

A certification election is not a litigation but merely an investigation of a non‐

adversarial fact‐ finding character in which BLR plays a part of a disinterested
investigator seeking merely to ascertain the desire of the employees as
to the matter of their representation. (Airline Pilots Ass’n of the Philippines
v. CIR. G.R. No. L‐33705, April 15, 1977).

The bargaining deadlock-bar rule was not applied because the duly certified
exclusive bargaining agent of all rank-and-file employees did not, for more than
four (4) years, take any action to legally compel the employer to comply with
its duty to bargain collectively, hence, no CBA was executed; nor did it file any
unfair labor practice suit against the employer or initiate a strike against the
latter. Under the circumstances, a certification election may be validly held.
(Kaisahan ng Manggagawang Pilipino [KAMPIL-KATIPUNAN] vs. Trajano,
G. R. No. 75810, September 9, 1991).

This is what is strikingly different between the Kaisahan case and the case at
bench for in the latter case, there was proof that the certified bargaining agent,
respondent union, had taken an action to legally coerce the employer to comply
with its statutory duty to bargain collectively, i.e., charging the employer with
unfair labor practice and conducting a strike in protest against the employer’s
refusal to bargain. It is only just and equitable that the circumstances in this
case should be considered as similar in nature to a ‘bargaining deadlock’ when
no certification election could be held. This is also to make sure that no
floodgates will be opened for the circumvention of the law by unscrupulous
employers to prevent any certified bargaining agent from negotiating a CBA.

48
 Thus, Section 3, Rule V, Book V of the Implementing Rules should be
interpreted liberally so as to include a circumstance, e.g., where a CBA could
not be concluded due to the failure of one party to willingly perform its duty to
bargain collectively. (Capitol Medical Center Alliance of Concerned
Employees-Unified Filipino Service Workers vs. Laguesma. G. R. No.
118915, February 4, 1997).

The pendency of a petition for cancellation of union registration does not

preclude collective bargaining, and that an order to hold a certification election
is proper despite the pendency of the petition for cancellation of the union’s
registration because at the time the respondent union filed its petition, it still
had the legal personality to perform such act absent an order cancelling its
registration. The legitimacy of the legal personality of respondent cannot be
collaterally attacked in a petition for certification election proceeding but only
through a separate action instituted particularly for the purpose of assailing it.
The Implementing Rules stipulate that a labor organization shall be deemed
registered and vested with legal personality on the date of issuance of its
certificate of registration. Once a certificate of registration is issued to a union,
its legal personality cannot be subject to a collateral attack. It may be
questioned only in an independent petition for cancellation in accordance with
Section 5 of Rule V, Book V of the Implementing Rules. (Legend International
Resorts Limited v. Kilusang Manggagawa ng Legenda. G.R. No. 169754,
February 23, 2011).

iv. Run-off election

v. Re-run election

vi. Consent election

It is well‐settled that under the “double majority rule” for there to be a valid certification
election, majority of the bargaining unit must have voted and the winning union must
have garnered majority of the valid votes cast. Following the ruling that all the
probationary employees’ votes should be deemed valid votes while that of the
supervisory Ees should be excluded, it follows that the number of valid votes cast
would increase. Under Art. 256 of the LC, the union obtaining the majority of the valid
votes cast by the eligible voters shall be certified as the sole exclusive bargaining
agent of all the workers in the appropriate bargaining unit. This majority is 50% + 1.
(NUWHRAIN ‐ MPHC v. SLE. G.R. No. 181531, July 31, 2009).

vii. Affiliation and disaffiliation of the local union from the mother union

A local union may disaffiliate at any time from its mother federation, absent any
showing that the same is prohibited under its constitution or rules. Such disaffiliation,
however, does not result in it losing its legal personality. 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. In the
present case, whether the FFW went against the will of its principal (the member-

49
employees) by pursuing the case despite the signing of the MOA, is not for the Court,
nor for respondent employer to determine, but for the Union and FFW to resolve on
their own pursuant to their principal-agent relationship. Moreover, 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, but not the employer as in this case. (Cirtek Employees Labor Union-
Federation of Free workers vs. Cirtek Electronics, Inc., G.R. No. 190515. June 6,
2011).

Under the LC and the rules, the power granted to LOs to directly create a chapter or
local through chartering is given to a federation or national union only, not to a trade
union center. (SMCEU v. San Miguel Packaging Products Ees Union G.R. No.
171153, Sep. 12, 2007).

It becomes mandatory for the BLR to check if the requirements under Art. 234 of the
LC have been sedulously complied with. If its application for registration is vitiated by
falsification and serious irregularities, especially those appearing on the face of the
application and the supporting documents, a LO should be denied recognition as a
LLO. (Progressive Dev’t Corp.‐Pizza Hut v. Laguesma. G.R. No. 115077, April 18,
1997).

This happens when there is a substantial shift in allegiance on the part of the majority
of the members of the union. In such a case, however, the CBA continues to bind
the members of the new or disaffiliated and independent union up to determine the
union which shall administer the CBA may be conducted. (ANGLO‐KMU v.
Samahan ng Manggagawang Nagkakaisa sa Manila Bay Spinning Mills at J.P.
Coats G.R. No.118562, July 5, 1996).

Disaffiliation should be in accordance with the rules and procedures stated in the
constitution and by‐laws of the federation. A local union may disaffiliate with its mother
federation provided that there is no enforceable provision in the federation’s
constitution preventing disaffiliation of a local union. (Tropical Hut Ees Union v.
Tropical Hut G.R. Nos. L‐43495‐99, Jan. 20, 1990).

Disaffiliation should always carry the will of the majority. It cannot be effected by a
mere minority group of union members. The obligation to check-off federation dues is
terminated with the valid disaffiliation of the local union from the federation with which
it was previously affiliated. Once a Local Chapter disaffiliates from the federation, it
ceases to be entitled to the rights and privileges granted to a legitimate labor
organization. It cannot file a petition for certification election. (Villar vs. Inciong. 121
SCRA 444, April 20, 1983).

The Supreme Court upheld the right of local unions to separate from their mother
federation on the ground that as separate and voluntary associations, local unions do
not owe their creation and existence to the national federation to which they are
affiliated but, instead, to the will of their members. The sole essence of affiliation is to
increase, by collective action, the common bargaining power of local unions for the
effective enhancement and protection of their interests. Admittedly, there are times
when without succor and support local unions may find it hard, unaided by other
support groups, to secure justice for themselves. (Liberty Cotton Mills Workers
Union Vs. Liberty Cotton Mills, Inc. G.R. No. L-33987, September 4, 1975).

50
 i. Substitutionary doctrine

The Er cannot revoke the validly executed CB contract with their Er by the simple
expedient of changing their bargaining agent. The new agent must respect the
contract. It cannot be invoked to support the contention that a newly certified CB
agent automatically assumes all the personal undertakings of the former agent‐
like the “no strike clause” in the CBA executed by the latter. (Benguet
Consolidated Inc. v. BCI Ees and Worker’s Union‐PAFLU. G.R. No. L‐24711,
April 1968).

viii. Union dues and special assessments

ix. Requirements for validity

It shall invalidate the questioned special assessments. Substantial compliance of the

requirements is not enough in view of the fact that the special assessment will diminish
the compensation of union members. i) Agency fees. (Palacol v. Ferrer‐ Calleja G.R.
No. 85333, Feb. 26, 1990).

B. Right to collective bargaining

Jurisdictional preconditions in collective bargaining

1. Possession of the status of majority representation of the employees representative in

accordance with any of the means of selection or designation provided for the Labor
Code
2. Proof of majority representation
3. A demand to bargain under Art. 250 (a) of the LC.( Kiok Loy v. NLRC. G.R. No. L‐
54334, Jan.22, 1986)

1. Duty to bargain collectively

a. When there is absence of a CBA
b. When there is a CBA

Where there is a legitimate representation issue, there is no duty to bargain

collectively on the part of the Employer. (Lakas ng mga Manggagawang
Makabayan v. Marcelo Enterprises. G.R. No. L‐38258, Nov. 19, 1982).

There is no perfect test of good faith (GF) in bargaining. The GF or BF is an

inference to be drawn from the facts and is largely a matter for the NLRC’s
expertise. The charge of BF should be raised while the bargaining is in progress.
With the execution of the CBA, BF can no longer be imputed upon any of the
parties thereto. All provisions in the CBA are supposed to have been jointly and
voluntarily incorporated therein by the parties. This is not a case where private
respondent exhibited an indifferent attitude towards CB because the negotiations
were not the unilateral activity of petitioner union. The CBA is good enough that
private respondent exerted “reasonable effort of GF bargaining. (Samahang
Manggagawa sa Top Form Manufacturing‐United Workers of the Phils v.
NLRC. G.R. No. 113856, Sept. 7, 1998).

51
 This is no different from a bargaining representative’s perseverance to include one
that they deem of absolute necessity. Indeed, an adamant insistence on a
bargaining position to the point where the negotiations reach an impasse does not
establish bad faith. Obviously, the purpose of CB is the reaching of an agreement
resulting in a contract binding on the parties; but the failure to reach an agreement
after negotiations have continued for a reasonable period does not establish a lack
of good faith. The statutes invite and contemplate a collective bargaining contract,
but they do not compel one. The duty to bargain does not include the obligation to
reach an agreement. While the law makes it an obligation for the Er and the Ees
to bargain collectively with each other, such compulsion does not include the
commitment to precipitately accept or agree to the proposals of the other. All it
contemplates is that both parties should approach the negotiation with an open
mind and make reasonable effort to reach a common ground of agreement. (Union
of Filipro Ees v. Nestle Phils. G.R. Nos. 158930‐31, Mar. 3, 2008).

2. Collective Bargaining Agreement (CBA). (Law of the Plant)

As regular employees, petitioners fall within the coverage of the bargaining unit
and are therefore entitled to CBA benefits as a matter of law and contract. Under
the terms of the CBA, petitioners are members of the appropriate bargaining unit
because they are regular rank-and-file employees and do not belong to any of the
excluded categories. Most importantly, the labor arbiter’s decision of January 17,
2002 – affirmed all the way to the CA – ruled against the company’s submission
that they are independent contractors.

Thus, as regular rank-and-file employees, they fall within the CBA coverage. And,
under the CBA’s express terms, they are entitled to its benefits. CBA coverage is
not only a question of fact, but of law and contract. The factual issue is whether
the petitioners are regular rank-and-file employees of the company. The tribunals
below uniformly answered this question in the affirmative. From this factual finding
flows legal effects touching on the terms and conditions of the petitioners’ regular
employment. (Farley Fulache, et al. vs. ABS-CBN Broadcasting Corporation.
G.R. No. 183810, January 21, 2010).

The certification of the CBA by the BLR is not required to make such contract valid.
Once it is duly entered into and signed by the parties, a CBA becomes effective as
between the parties whether or not it has been certified by the BLR. (Liberty Flour
Mills Ee’s Association v. Liberty Flour Mills. G.R. Nos. 58768‐70, Dec. 29,
1989).

A CBA is not an ordinary contract but one impressed with public interest, only
provisions embodied in the CBA should be so interpreted and complied with.
Where a proposal raised by a contracting party does not find print in the CBA, it is
not a part thereof and the proponent has no claim whatsoever to its
implementation. (SMTFM‐UWP v. NLRC. G.R. No. 113856, Sept. 7, 1998).

A pending cancellation proceeding is not a bar to set mechanics for collective

bargaining (CB). If a certification election may still be held even if a petition for
cancellation of a union’s registration is pending, more so that the CB process may
proceed. The majority status of the union is not affected by the cancellation

52
proceedings. (Capitol Medical Center v. Trajano. G.R. No. 155690, June 30,
2005).

Although a CBA has expired, it continues to have legal effects as between the
parties until a new CBA has been entered into. (Pier & Arrastre Stevedoring
Services, Inc. Confessor. G.R. No. 110854, February 13, 1995).

a. Mandatory provisions of CBA

i. Grievance procedure

CBA is the law or contract between the parties. Article 13.1 of the CBA entered
into by and between respondent GCI and AMOSUP provides that the Company
and the Union agree that in case of dispute or conflict in the interpretation or
application of any of the provisions of this Agreement, or enforcement of
Company policies, the same shall be settled through negotiation, conciliation
or voluntary arbitration. (Dulay vs. Aboitiz Jebsen Maritime, Inc. and
General Charterers, Inc. G.R. No. 172642, June 13, 2012)

ii. Voluntary arbitration

Article 217 of the Labor Code states that unfair labor practices and termination
disputes fall within the original and exclusive jurisdiction of the Labor Arbiter.
As an exception, under Article 262 the Voluntary Arbitrator, upon agreement
of the parties, shall also hear and decide all other labor disputes including
unfair labor practices and bargaining deadlocks. For the exception to apply,
there must be agreement between the parties clearly conferring jurisdiction to
the voluntary arbitrator. Such agreement may be stipulated in a collective
bargaining agreement. However, in the absence of a collective bargaining
agreement, it is enough that there is evidence on record showing the parties
have agreed to resort to voluntary arbitration. (The University of the
Immaculate Conception, et al. vs. NLRC, et al., G.R. No. 181146, January
26, 2011).

Under voluntary arbitration, on the other hand, referral of a dispute by the

parties is made, pursuant to a voluntary arbitration clause in their collective
agreement, to an impartial third person for a final and binding resolution.
Ideally, arbitration awards are supposed to be complied with by both parties
without

delay, such that once an award has been rendered by an arbitrator, nothing is
left to be done by both parties but to comply with the same. After all, they are
presumed to have freely chosen arbitration as the mode of settlement for that
particular dispute.

Pursuant thereto, they have chosen a mutually acceptable arbitrator who shall
hear and decide their case. Above all, they have mutually agreed to be bound
by said arbitrator's decision. (Luzon Dev’t Bank v. Ass’n of Luzon Dev’t
Bank Ees G.R. No. 120319, Oct. 6, 1995).

iii. No strike-no lockout clause

53
 The “no strike‐no lockout” clause in the CBA applies only to economic strikes.
It does not apply to ULP strikes. Hence, if the strike is founded on an unfair
labor practice of the employer, a strike declared by the union cannot be
considered a violation of the no strike clause. (Master Iron Labor Union v.
NLRC. G.R. No. 92009, Feb. 17, 1993).

Note (Poquiz): A strike can be waived under this clause

b. Labor management council

c. Duration

Article 253 of the Labor Code mandates the parties to keep the status quo and to
continue in full force and effect the terms and conditions of the existing agreement
during the 60-day period prior to the expiration of the old CBA and/or until a new
agreement is reached by the parties. The law does not provide for any exception
nor qualification on which economic provisions of the existing agreement are to
retain its force and effect. Likewise, the law does not distinguish between a CBA
duly agreed upon by the parties and an imposed CBA. The provisions of the
imposed CBA continues to have full force and effect until a new CBA is entered
into by the parties. (General Milling Corporation- Independent Labor Union
[GMC-ILU] vs. General Milling Corporation G.R. Nos. 183122/183889, June
15, 2011).

While the parties may agree to extend the CBA’s original five-year term together
with all other CBA provisions, any such amendment or term in excess of five years
will not carry with it a change in the union’s exclusive collective bargaining status.
By express provision of the above-quoted Article 253-A, the exclusive bargaining
status cannot go beyond five years and the representation status is a legal matter
not for the workplace parties to agree upon. In other words, despite an agreement
for a CBA with a life of more than five years, either as an original provision or by
amendment, the bargaining union’s exclusive bargaining status is effective only for
five years and can be challenged within sixty (60) days prior to the expiration of
the CBA’s first five years.( FVC Labor Union-Philippine Transport and General
Workers Organization (FVCLU-PTGWO) Vs. Sama-samang Nagkakaisang
Manggagawa sa FVC-Solidarity of Independent and General Labor
Organization (SANAMA-FVC-SIGLO. G.R. No. 176249, November 27, 2009)

Under the principle of hold over, until a new CBA has been executed by and
between the parties, they are duty bound to keep the status quo and must continue
in full force and effect the terms and conditions of the existing agreement. The law
does not provide for any exception or qualification as to which of the economic
provisions of the existing agreement are to retain force and effect. Therefore, it
must be encompassing all the terms and condition in the said agreement. (New
Pacific Timber v. NLRC. G.R. No. 124224, Mar. 17, 2000).

The signing of the CBA does not determine whether the agreement was entered
into within the 6 month period from the date of expiration of the old CBA. In the
present case, there was already a meeting of the minds between the company and

54
 the union prior to the end of the 6 month period after the expiration of the old CBA.
Hence, such meeting of the mind is sufficient to conclude that an agreement has
been reached within the 6 month period as provided under Art. 253‐A of the LC.
(Mindanao Terminal and Brokerage Services Inc., v. Confessor. G.R. No.
111809, May 5, 1997).

The CBA arbitral awards granted 6 months from the expiration of the last CBA shall
retroact to such time agreed upon by both the Er and the union. Absent such
agreement as to retroactivity, the award shall retroact to the 1st day after the 6
month period following the expiration of the last day of the CBA should there be
one. In the absence of a CBA, the SLE’s determination of the date of retroactivity
as part of his discretionary powers over arbitral award shall control. (Manila
Electric Company v. Quisumbing. G.R. No. 127598, Feb. 22 and Aug. 1, 2000).

There is no conflict between the agreement and Art. 253‐A of the LC for the latter
has a 2‐fold purpose namely: a) to promote industrial stability and predictability
and b) to assign specific time tables wherein negotiations become a matter of right
and requirement. In so far as the first purpose, the agreement satisfies the first
purpose. As regard the second purpose, nothing in Art. 253‐A prohibits the parties
from waiving or suspending the mandatory timetables and agreeing on the
remedies to enforce the same. For under the said article, the representation limit
of the exclusive bargaining agent applies only when there is an existing CBA in full
force and effect. In this case, the parties agreed to suspend the CBA and put in
abeyance the limit on representation. (Rivera v. Espiritu. G.R. No. 135547, Jan.
23, 2002).

3. Union Security

a. Union security clauses; closed shop, union shop, maintenance of

membership shop, etc.

b. Check-off; union dues, agency fees

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. (Bank of the Philippine Islands vs. BPI Employees
Union-Davao Chapter G.R. No. 164301. October 19, 2011).

In terminating the employment of an employee by enforcing the union security

clause, the employer needs to determine and prove that:
(1) the union security clause is applicable;
(2) the union is requesting for the enforcement of the union security provision in
the CBA; and
(3) there is sufficient evidence to support the decision of the union to expel the
employee from the union. These requisites constitute just cause for terminating
an employee based on the union security provision of the CBA.( Picop
Resources Incorporated (PRI) vs. Anacleto L. Tañeca, et al., G.R. No.
160828, August 9, 2010).

55
GMC completely missed the point that the expulsion of Casio, et al. by the union
and the termination of employment of the same employees by GMC, although
related, are two separate and distinct acts. Despite a closed shop provision in the
CBA, law and jurisprudence impose upon GMC the obligation to accord Casio, et
al. substantive and procedural due process before complying with the union’s
demand to dismiss the expelled union members from service. The failure of GMC
to carry out this obligation makes it liable for illegal dismissal of Casio, et al.
(General Milling Corporation vs. Ernesto Casio, et al. and Virgilio Pino, et al.,
G.R. No. 149552, March 10, 2010).

While it is true that the withdrawal of support may be considered as a resignation

from the union, the fact remains that at the time of the union’s application for
registration, the affiants were members of the union and they comprised more than
the required 20% membership for purposes of registration as a labor union. Article
234 of the Labor Code merely requires a 20% minimum membership during the
application for union registration. It does not mandate that a union must maintain
the 20% minimum membership requirement all throughout its existence.
(Mariwasa Siam Ceramics, Inc. vs. The Secretary of the Department of Labor
and Employment, et al., G.R. No. 183317, December 21, 2009).

Article 222 (b) of the Labor Code, as amended, prohibits the payment of attorney’s
fees only when it is effected through forced contributions from the employees from
their own funds as distinguished from union funds. Hence, the general rule is that
attorney’s fees, negotiation fees, and other similar charges may only be collected
from union funds, not from the amounts that pertain to individual union members.
As an exception to the general rule, special assessments or other extraordinary
fees may be levied upon or checked off from any amount due an employee for as
long as there is proper authorization by the employee. A check-off is a process or
device whereby the employer, on agreement with the Union, recognized as the
proper bargaining representative, or on prior authorization from the employees,
deducts union dues or agency fees from the latter’s wages and remits them directly
to the Union. Its desirability in a labor organization is quite evident. The Union is
assured thereby of continuous funding. The system of check-off is primarily for the
benefit of the Union and, only indirectly, for the individual employees. These
requisites are:
(1) an authorization by a written resolution of the majority of all the union
members at the general membership meeting duly called for the
purpose;
(2) secretary’s record of the minutes of the meeting; and
(3) individual written authorization for check-off duly signed by the
employee concerned. (Eduardo J. Mariño, Jr. et al. vs. Gil Y.
Gamilla, et al.. G.R. No. 149763, July 7, 2009).

A shop steward leads to the conclusion that it is a position within the union, and
not within the company. A shop steward is appointed by the union in a shop,
department, or plant and serves as representative of the union, charged with
negotiating and adjustment of grievances of employees with the supervisor of the
employer. He is the representative of the union members in a building or other
workplace. Black’s Law Dictionary defines a shop steward as a union official
elected to represent members in a plant or particular department. His duties
include collection of dues, recruitment of new members and initial negotiations for

56
 the settlement of grievances. A judgment of reinstatement of the petitioner to the
position of union Shop Steward would have no practical legal effect since it cannot
be enforced. Based on the requirements imposed by law and the APCWU-ATI
CBA, and in the nature of things, the subsequent separation of the petitioner from
employment with respondent ATI has made his reinstatement to union Shop
Steward incapable of being enforced. (Teodoro S. Miranda, Jr. vs. Asian
Terminals, Inc. and Court of Appeals, G.R. No. 174316, June 23, 2009).

“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 as a
condition 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.

In terminating the employment of an employee by enforcing the Union Security

Clause, the employer needs only to determine and prove that:
(1) the union security clause is applicable;
(2) the union is requesting for the enforcement of the union security provision
in the CBA; and
(3) there is sufficient evidence to support the union’s decision to expel the
employee from the union or company. (Herminigildo Inguillom, et al. vs.
First Philippine Scales, Inc., et al. G.R. No. 165407, June 5, 2009

4. Unfair Labor Practice in collective bargaining

a. Bargaining in bad faith

The act of the employer in refusing to comply with the terms and conditions of a CBA
constitutes bargaining in bad faith and is considered an unfair labor practice. (Oceanic
Pharmacal Employees Union vs. Inciong. G. R. No. L-50568, Nov. 7, 1979).

b. Refusal to bargain

c. Blue sky bargaining

Whether or not the union is engaged in blue‐sky bargaining is determined by the

evidence presented by the union as to its economic demands. Thus, if the union
requires exaggerated or unreasonable economic demands, then it is guilty of ULP. In
order to be considered as unfair labor practice, there must be proof that the demands
made by the union were exaggerated or unreasonable. In the minutes of the meeting

57
 show that the union based its economic proposals on data of rank-and-file employees
and the prevailing economic benefits received by bank employees from other foreign
banks doing business in the Philippines and other branches of the bank in the Asian
region. Hence, it cannot be said that the union was guilty of ULP for blue-sky
bargaining.(Standard Chartered Bank v. Confessor. G.R. No. 114974, June 16,
2004).

d. Surface bargaining

Surface bargaining” is defined as “going through the motions of negotiating” without

any legal intent to reach an agreement. The resolution of surface bargaining
allegations never presents an easy issue. The determination of whether a party has
engaged in unlawful surface bargaining is usually a difficult one because it involves,
at bottom, a question of the intent of the party in question, and usually such intent can
only be inferred from the totality of the challenged party’s conduct both at and away
from the bargaining table. Whether an employer’s conduct demonstrates an
unwillingness to bargain in good faith or is merely hard bargaining. There can be no
surface bargaining, absent any evidence that management had done acts, both at and
away from the bargaining table, which tend to show that it did not want to reach an
agreement with the union or to settle the differences between it and the union. Here,
admittedly, the parties were not able to agree and reached a deadlock. However, it
must be emphasized that the duty to bargain “does not compel either party to agree to
a proposal or require the making of a concession.” Hence, the parties’ failure to agree
does not amount to ULP under Article 248 [g] for violation of the duty to bargain.
(Standard Chartered Bank Employees Union [NUBE] vs. Confesor. G. R. No.
114974, June 16, 2004).

e. Unfair Labor Practice (ULP)

1. Nature of ULP

Anent the charge of unfair labor practice, Article 248 (a) of the Labor Code
considers it an unfair labor practice when an employer interferes, restrains or
coerces employees in the exercise of their right to self-organization or the right to
form an association. In order to show that the employer committed unfair labor
practice under the Labor Code, substantial evidence is required to support the
claim. Substantial evidence has been defined as such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion. In the case at
bar, respondents were indeed unceremoniously dismissed from work by reason of
their intent to form and organize a union. (Park Hotel, et al. vs. Manolo Soriano,
et al. G.R. No. 171118. September 10, 2012).

Unfair labor practice refers to acts that violate the workers’ right to organize. The
prohibited acts are related to the workers’ right to self-organization and to the
observance of a CBA. Thus, an employer may be held liable for unfair labor
practice only if it can be shown that his acts interfere with his employees’ right to
self-organization. Since there is no showing that the respondent company’s
implementation of the Right-Sizing Program was motivated by ill will, bad faith or
malice, or that it was aimed at interfering with its employees’ right to self-
organization, there is no unfair labor practice to speak of in this case. (Nelson A.

58
 Culili v. Eastern Telecommunications Philippines, Inc., et al. G.R. No. 165381,
February 9, 2011).

Unfair labor practice refers to “acts that violate the workers’ right to organize.” The
prohibited acts are related to the workers’ right to self-organization and to the
observance of a CBA. Without that element, the acts, even if unfair, are not unfair
labor practices. (General Santos Coca Cola Plant Free Workers Union-Tupas
vs. COCA-COLA BOTTLERS PHILS., INC. G.R. No. 178647. Feb. 13, 2007).

2. ULP of employers

For a charge of unfair labor practice to prosper, it must be shown that respondent
CAB’s suspension of negotiation with CABEU-NFL and its act of concluding a CBA
with CABELA, another union in the bargaining unit, were motivated by ill will, “bad
faith, or fraud, or was oppressive to labor, or done in a manner contrary to morals,
good customs, or public policy…” However, the facts show that CAB believed that
CABEU-NFL was no longer the representative of the workers. It just wanted to
foster industrial peace by bowing to the wishes of the overwhelming majority of its
rank and file workers and by negotiating and concluding in good faith a CBA with
CABELA.” Such actions of CAB are nowhere tantamount to anti-unionism, the evil
sought to be punished in cases of unfair labor practices. (Central Azucarera De
Bais Employees Union-NFL, represented by its President, Pablito Saguran
vs. Central Azucarera De Bais, Inc. G.R. No. 186605, November 17, 2010).

Unfair labor practice cannot be imputed to MMC since the call of MMC for a
suspension of the CBA negotiations cannot be equated to “refusal to bargain.”
Article 252 of the Labor Code defines the phrase “duty to bargain collectively.” For
a charge of unfair labor practice to prosper, it must be shown that the employer
was motivated by ill-will, bad faith or fraud, or was oppressive to labor. The
employer must have acted in a manner contrary to morals, good customs, or public
policy causing social humiliation, wounded feelings or grave anxiety. It cannot be
said that MMC deliberately avoided the negotiation. It merely sought a suspension
and even expressed its willingness to negotiate once the mining operations
resume. There was valid reliance on the suspension of mining operations for the
suspension of the CBA negotiation. The Union failed to prove bad faith. (Manila
Mining Corp. Employees Association, et al. vs.. Manila Mining corp, et
al.,G.R. Nos. 178222-23, September 29, 2010).

We found it proper to award moral and exemplary damages to illegally dismissed

employees as their dismissal was tainted with unfair labor practice. The Court said:
Unfair labor practices violate the constitutional rights of workers and employees to
self-organization, are inimical to the legitimate interests of both labor and
management, including their right to bargain collectively and otherwise deal with
each other in an atmosphere of freedom and mutual respect; and disrupt industrial
peace and hinder the promotion of healthy and stable labor-management relations.
As the conscience of the government, it is the Court’s sworn duty to ensure that
none trifles with labor rights. (Geronimo Q. Quadra vs. Court of Appeals G.R.
No. 147593, July 31, 2006).

To constitute ULP, however, violations of the CBA must be gross. Gross violation
of the CBA, under Article 261 of the Labor Code, means flagrant and/or malicious

59
 refusal to comply with the economic provisions thereof. Evidently, the University
cannot be faulted for ULP as it in good faith merely heeded the above-said request
of Union members. (Arellano University Employees and Workers Union vs
Court of Appeals, G.R. No. 139940, September 19, 2006).

Direct evidence that an Ee was in fact intended or coerced by the statements of

threats of the Er is not necessary if there is a reasonable interference that the anti‐
union conduct of the Er does have an adverse effect on self‐organization and CB.
(The Insular Life Assurance‐NATU v. The Insular Life Co. Ltd. G.R. No.L‐
25291, Jan. 30, 1971).

A company’s refusal to make counter‐proposal, if considered in relation to the

entire bargaining process, may indicate BF and this is especially true where the
union’s request for a counter proposal is left unanswered. (Kiok Loy v. NLRC.
G.R. No. L‐54334, Jan. 22, 1986).

ALU is the certified exclusive bargaining representative after winning the

certification election. The company merely relied on the letter of disaffiliation by
BFEA’s president without proof and consequently refusing to bargain collectively
constitutes ULP. Such refusal by the company to bargain collectively with the
certified exclusive bargaining representative is a violation of its duty to collectively
bargain which constitutes ULP. (Balmar Farms v. NLRC. G.R. No.73504, Oct.
15, 1991)

(a) ULP of labor organizations

A union member may not be expelled from the union, and consequently from
his job, for personal and impetuous reasons or for causes foreign to the closed
shop agreement. (Manila Mandarin Ees Union v. NLRC. G.R. No. 76989, Sep.
29, 1987).

Labor unions are not entitled to arbitrarily exclude qualified applicants for
membership and a closed‐ shop applicants provision will not justify the employer
in discharging, or a union in insisting upon the discharge of an employee whom
the union thus refuses to admit to membership without any reasonable ground
thereof. (Salunga v. CIR. G.R. No. L‐22456, Sep. 27, 1967).

Note (Poquiz):

ULP's committed in the absence of employer-employee relationship:

(a) Agents of the employer or union who are non-employees may commit ULP
(b) In the case of yellow-dog contract, where ULP is committed by the
employer against an applicant to the job, and
(c) In case of the application of the doctrine of innocent by-stander

C. Right to peaceful concerted activities

The law does not look with favor upon strikes and lockouts because of their disturbing and
pernicious effects upon the social order and the public interests; to prevent or avert them
and to implement Sec. 6, Art. XIV of the Constitution, the law has created several

60
agencies, namely: the BLR, the DOLE, the Labor Management Advisory Board, and the
CIR. (Luzon Marine Dev’t Union v. Roldan. G.R. No. L‐2660, May 30, 1950).

Assuming that they acted in their individual capacities when they wrote the letter, they
were nonetheless protected, for they were engaged in a concerted activity, in their right of
self‐organization that includes concerted activity for mutual aid and protection. Any
interference made by the company will constitute as ULP. The joining in protests or
demands, even by a small group of Ees, if in furtherance of their interests as such is a
concerted activity protected by the Industrial Peace Act. It is not necessary that union
activity be involved or that collective bargaining be contemplated. (Republic Savings
Bank v. CIR. G.R. No. L‐20303, Oct. 31, 1967).

It shall comprise not only concerted work stoppages, but also slowdowns, mass leaves,
sitdowns, attempt to damage, destroy or sabotage plant equipment and facilities, and
similar activities. (Samahang Manggagawa sa Sulpicion Lines v. Sulpicio Lines, Inc.
G.R. No. 140992, Mar. 25, 2004).

A coercive measure resorted to by laborers to enforce their demands. The idea behind a
strike is that a company engaged in a profitable business cannot afford to have its
production or activities interrupted, much less, paralyzed. (Phil. Can Co. v. CIR. G.R. No.
L‐3021, July 13, 1950).

The concept of a slowdown is a "strike on the installment plan." It is a willful reduction in

the rate of work by concerted action of workers for the purpose of restricting the output of
the employer (Er), in relation to a labor dispute; as an activity by which workers, without a
complete stoppage of work, retard production or their performance of duties and functions
to compel management to grant their demands. Such a slowdown is generally condemned
as inherently illicit and unjustifiable, because while the employees (Ees) "continue to work
and remain at their positions and accept the wages paid to them," they at the same time
"select what part of their allotted tasks they care to perform of their own volition or refuse
openly or secretly, to the Er's damage, to do other work;" in other words, they "work on
their own terms. (Interphil Laboratories Ees Union‐FFW v. Interphil Laboratories,
Inc.G.R. No. 142824, Dec. 19, 2001).

An Ee has no inherent right to seniority. He has only such rights as may be based on a
contract, statute, or an administrative regulation relative thereto. Seniority rights which are
acquired by an Ee through long‐time employment are contractual and not constitutional.
The discharge of an Ee thereby terminating such rights would not violate the Constitution.
When the pilots tendered their respective retirement or resignation and PAL immediately
accepted them, both parties mutually terminated the contractual employment relationship
between them thereby curtailing whatever seniority rights and privileges the pilots had
earned through the years. The pilots’ mass action was not a strike because Ees who go
on strike do not quit their employment. Ordinarily, the relationship of Er and Ee continues
until one of the parties acts to sever the relationship or they mutually act to accomplish
that purpose. As they did not assume the status of strikers, their “protest
retirement/resignation” was not a concerted activity which was protected by law. (Enrique
v. Zamora. G.R. No. L‐51382, Dec. 29, 1986).

Any controversy or matter concerning terms or conditions or representation of persons in

negotiating, fixing, maintaining, changing or arranging the terms and conditions of
employment, regardless of whether or not the disputants stand in the proximate relation

61
 of Ers and Ees. (Gold City Integrated Port Services, Inc. v. NLRC. G.R. No. 103560,
July 6, 1995)

Liwayway Publication Inc. is not in anyway related to the striking union except for the fact
that it is the sub‐ lessee of a bodega in the company’s compound. The business of
Liwayway is exclusively the publication of magazines which has absolutely no relation or
connection whatsoever with the cause of the strike of the union against their company,
much less with the terms, conditions or demands of the strikers. Liwayway is merely a 3rd
person or aninnocent by‐stander. (Liwayway Pub., Inc. v. Permanent Concrete
Workers Union. G.R. No. L‐25003, Oct. 23, 1981).

The concerted efforts of the members of the union and its supporters caused a temporary
work stoppage. The allegation that there can be no work stoppage because the operation
in the division had been shut down is of no consequence. It bears stressing that the other
divisions were fully operational. (Bukluran ng Manggagawa sa Clothman Knitting
Corp. v. CA. G.R. No. 158158, Jan.17, 2005).

I. Forms of concerted activities

Article 212 of the Labor Code, as amended, defines strike as any temporary stoppage of
work by the concerted action of employees as a result of an industrial or labor dispute. A
labor dispute includes any controversy or matter concerning terms and conditions of
employment or the association or representation of persons in negotiating, fixing,
maintaining, changing or arranging the terms and conditions of employment, regardless
of whether or not the disputants stand in the proximate relation of employers and
employees. The term “strike” shall also include slowdowns, mass leaves, sitdowns,
attempts to damage, destroy or sabotage plant equipment and facilities and similar
activities. In the instant case, about 712 employees absented themselves from work in a
concerted fashion for three continuous days. Considering that these mass actions
stemmed from a bargaining deadlock and an order of assumption of jurisdiction had
already been issued by the Secretary of Labor to avert an impending strike, all the
elements of strike are evident in the Union-instigated mass actions. (Solid Bank Corp.
Ernesto U. Gamier, et al. and Solid Bank Corp., et al. vs. Solid Bank Union and its
Dismissed Officers and Members, et al. G.R. No. 159460 and G.R. No. 159461,
November 15, 2010).

II. Who may declare a strike or lockout?

NAMA-MCCH-NFL is not a legitimate labor organization, thus, the strike staged by its
leaders and members was declared illegal. (Visayas Community Medical Center
(VCMC) formerly known as Metro Cebu Commnunity Hospital (MCCH) v. Erma
Yballe, et al., G.R. No. 196156, January 15, 2014).

III. Requisites for a valid strike/lockout

Article 263 of the Labor Code, as amended by Republic Act (R.A.) No. 6715, and Rule
XXII, Book V of the Omnibus Rules Implementing the Labor Code outline the following
procedural requirements for a valid strike:
1. A notice of strike, with the required contents, should be filed with the DOLE,
specifically the Regional Branch of the NCMB, copy furnished the employer of the
union;

62
2. A cooling-off period must be observed between the filing of notice and the actual
execution of the strike thirty (30) days in case of bargaining deadlock and fifteen
(15) days in case of unfair labor practice. However, in the case of union busting
where the union’s existence is threatened, the cooling-off period need not be
observed.
xxx Xxxxxx
3. Before a strike is actually commenced, a strike vote should be taken by secret
balloting, with a 24-hour prior notice to NCMB. The decision to declare a strike
requires the secret-ballot approval of majority of the total union membership in the
bargaining unit concerned.
4. The result of the strike vote should be reported to the NCMB at least seven (7)
days before the intended strike or lockout, subject to the cooling-off period. It is
settled that these requirements are mandatory in nature and failure to comply
therewith renders the strike illegal.

The requisites for a valid strike are:

(a) a notice of strike filed with the DOLE 30 days before the intended date thereof or
15 days in case of ULP;
(b) a strike vote 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 to the DOLE of the results of the voting at least seven (7) days before the
intended strike. The requirements are mandatory and failure of a union to comply
therewith renders the strike illegal. (Hotel Enterprises of the Philippines, Inc.,
etc. vs. Samahan ng mga Manggagawa sa Hyatt-National Union of Workers
in the Hotel Restaurant, etc., G.R. No. 165756, June 5, 2009).

Article 212 of the Labor Code defines strike as any temporary stoppage of work by the
concerted action of employees as a result of an industrial or labor dispute. A valid
strike therefore presupposes the existence of a labor dispute. The strike undertaken
by respondents took the form of a sit-down strike, or more aptly termed as a
sympathetic strike, where the striking employees have no demands or grievances of
their own, but they strike for the purpose of directly or indirectly aiding others, without
direct relation to the advancement of the interest of the strikers. It is indubitable that
an illegal strike in the form of a sit-down strike occurred in petitioner’s premises, as a
show of sympathy to the two employees who were dismissed by petitioner. Apart from
the allegations in its complaint for illegal strike filed before the Labor Arbiter, petitioner
presented the affidavits and testimonies of their other employees which confirm the
participation of respondents in the illegal strike. Petitioner has sufficiently established
that respondents remained in the work premises in the guise of waiting for orders from
management to resume operations when, in fact, they were actively participating in
the illegal strike. (G & S Transport Corporation, vs Tito S. Infante, G. R. No. 160303,
September 13, 2007).

It is undisputed that the notice of strike was filed by the union without attaching the
counter-proposal of the company. This, according to petitioners and the labor arbiter,
made the ensuing strike of respondents illegal because the notice of strike of the union
was defective. The Implementing Rules use the words “as far as practicable.” In this
case, attaching the counter-proposal of the company to the notice of strike of the union
was not practicable. It was absurd to expect the union to produce the company’s
counter-proposal which it did not have. One cannot give what one does not have.

63
Indeed, compliance with the requirement was impossible because no counter-
proposal existed at the time the union filed a notice of strike. The law does not exact
compliance with the impossible. Nemo tenetur ad impossible. (Club Filipino, Inc. and
Atty. Roberto F. De Leon vs. Benjamin Bautista, et al., G.R. No. 168406, July 13,
2009).

There is no question that the May 6, 2002 strike was illegal, first, because when
Kilusang Manggagawa ng LGS, Magdala Multipurpose and Livelihood Cooperative
(KMLMS) filed the notice of strike on March 5 or 14, 2002, it had not yet acquired legal
personality and, thus, could not legally represent the eventual union and its members.
And second, similarly, when KMLMS conducted the strike-vote on April 8, 2002, there
was still no union to speak of, since KMLMS only acquired legal personality as an
independent legitimate labor organization only on April 9, 2002 or the day after it
conducted the strike-vote. Consequently, the mandatory notice of strike and the
conduct of the strike-vote report were ineffective for having been filed and conducted
before KMLMS acquired legal personality as a legitimate labor organization, violating
Art. 263(c), (d) and (f) of the Labor Code and Rule XXII, Book V of the Omnibus Rules
Implementing the Labor Code. It is, thus, clear that KMLMS did not comply with the
mandatory requirement of law and implementing rules on possession of a legal
personality as a legitimate labor organization. (Magdala Multipurpose & Livelihood,
et al. vs. KMLMS, et al.,G.R. No. 191138-39. October 19, 2011).

In fine, the legality of a strike is determined not only by compliance with its legal
formalities but also by the means by which it is carried out. (Biflex Phils. Inc. Labor
Union (NAFLU) vs Filflex Industrial & Manufacturing Corporation. G.R. No.
155679, December 19, 2006).

In the event the result of the strike/lockout ballot is filed within the cooling‐off period,
the 7‐day requirement shall be counted from the day following the expiration of the
cooling‐off period. (NSFW vs. Ovejera. G.R. No. 59743, May 31, 1982).

Ees, who have no labor dispute with their Er but who, on a day they are scheduled to
work, refuse to work and instead join a welga ng bayan commit an illegal work
stoppage. There being no showing that the two unions notified the corporations of their
intention, or that they were allowed by the corporations, to join the welga ng bayan,
their work stoppage is beyond legal protection. (BIFLEX Phils. Inc. Labor Union
(NAFLU) vs. FILFLEX Industrial and Manufacturing Corp. G.R. No. 155679, Dec.
19, 2006).

The failure of the union to serve the company a copy of the notice of strike is a clear
violation of Section 3, Rule XXII, Book V of the Rules Implementing the LC. The
Constitutional precepts of due process mandate that the other party be notified of the
adverse action of the opposing party. (Filipino Pipe and Foundry Corp. v. NLRC.
G.R. No. 115180, Nov.16, 1999).
To give DOLE an opportunity to verify whether the projected strike really carries the
imprimataur of the majority of the union members in addition to the cooling-off period
before the actual strike. (Lapunday Worker’s Union, et al. v. NLRC. G.R. Nos. 95494-
97, Sept. 7, 1995)

A no strike/lockout clause is legal, but it is applicable only to economic strikes, not ULP
strikes. As a provision in the CBA, it is a valid stipulation although the clause may be

64
 invoked by an employer (Er) only when the strike is economic in nature or one which
is conducted to force wage or other concessions from the Er that are not mandated to
be granted by the law itself. It would be inapplicable to prevent a strike which is
grounded on ULP. (Malayang Samahan ng mga Manggagawa sa Greenfield v.
Ramos. G.R. No. 113907, Feb. 28, 2000).

In cases of ULP, the notice of strike shall as far as practicable, state the acts
complained of and the efforts to resolve the dispute amicably. (Tiu v. NLRC. G.R. No.
123276, Aug. 18, 1997).

The cooling‐off period in Art. 264(c) and the 7‐day strike ban after the strike‐vote report
prescribed in Art. 264 (f) were meant to be mandatory. The law provides that “the labor
union may strike” should the dispute “remain unsettled until the lapse of the requisite
number of days from the filing of the notice”, this clearly implies that the union may not
strike before the lapse of the cooling‐off period. The cooling‐off period is for the
Ministry of Labor and Employment to exert all efforts at mediation and conciliation to
effect a voluntary settlement. The mandatory character of the 7‐day strike ban is
manifest in the provision that “in every case” the union shall furnish the MOLE with the
results of the voting “at least 7 days before the intended strike.” This period is to give
time to verify that a strike vote was actually held. (NFSW v. Ovejera. G.R. No. L‐
59743, May 31, 1982).

There is no evidence to show that a strike vote had in fact been taken before a strike
was called. Even if there was a strike vote held, the strike called by the union was
illegal because of non‐observance by the union of the mandatory 7‐ day strike ban
counted from the date the strike vote should have been reported to the DOLE. (First
City Interlink Transportation Co., Inc. v. Confessor. G.R. No. 106316, May 5,
1997).

When the workers who staged a voluntary ULP strike offered to return to work
unconditionally but the Er refused to reinstate them.( Manila Diamond Hotel vs.
Manila Diamond Hotel Ees’ Union, G.R. No. 158075, June 30, 2006).

IV. Requisites for lawful picketing

To strike is to withhold or to stop work by the concerted action of employees as a result of

an industrial or labor dispute. 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. It is a strike
activity separate and different from the actual stoppage of work. (PHIMCO Industries,
Inc. v. PHIMCO Industries Labor Association (PILA), et al, G.R. No. 170830, August
11, 2010).

The right to picket as a means of communicating the facts of a labor dispute is a phase of
the freedom of speech guaranteed by the Constitution. If peacefully carried out, it can not
be curtailed even in the absence of Er‐Ee relationship. (PAFLU v. Cloribel. G.R. No. L‐
25878, Mar. 28, 1969).

65
 While peaceful picketing is entitled to protection as an exercise of free speech, the courts
are not without power to confine or localize the sphere of communication or the
demonstration to the parties to the labor dispute, including those with related interests,
and to insulate establishments or persons with no industrial connection or having interest
totally foreign to the context of the dispute. (Liwayway Pub., Inc. v. Permanent Concrete
Workers Union. G.R. No. L‐25003, Oct. 23, 1981).

V. Assumption of jurisdiction by the DOLE Secretary or Certification of the labor

dispute to the NLRC for compulsory arbitration

The assumption of jurisdiction powers granted to the Labor Secretary under Article 263(g)
is not limited to the grounds cited in the notice of strike or lockout that may have preceded
the strike or lockout; nor is it limited to the incidents of the strike or lockout that in the
meanwhile may have taken place. As the term “assume jurisdiction” connotes, the intent
of the law is to give the Labor Secretary full authority to resolve all matters within the
dispute that gave rise to or which arose out of the strike or lockout, including cases over
which the labor arbiter has exclusive jurisdiction. (Bagong Pagkakaisa ng Manggagawa
ng Triumph International, et al. vs. Secretary of Department of Labor and
Employment, et al./Triumph International (phils.), Inc. vs. Bagong Pagkakaisa ng
Manggagawa ng Triumph International, et al., G.R. No. 167401, July 5, 2010).

Articles 263 (g) and 264 of the Labor Code have been enacted pursuant to the police
power of the State. The grant of plenary powers to the Secretary of Labor makes it
incumbent upon him to bring about soonest, a fair and just solution to the differences
between theramiemployer and the employees, so that the damage such labor dispute
might cause upon the national interest may be minimized as much as possible, if not totally
averted, by avoiding stoppage of work or any lag in the activities of the industry or the
possibility of those contingencies that might cause detriment to the national interest. In
order to effectively achieve such end, the assumption or certification order shall have the
effect of automatically enjoining the intended or impending strike or lockout. Moreover, if
one has already taken place, all striking workers shall immediately return to work, and the
employer shall immediately resume operations and readmit all workers under the same
terms and conditions prevailing before the strike or lockout. Assumption and certification
orders are executory in character and are to be strictly complied with by the parties, even
during the pendency of any petition questioning their validity. (YSS Employees Union-
Philippine Transport and General Organization vs. YSS Laboratories, Inc., G.R. No.
155125, December 4, 2009).

Automatically enjoins the intended or impending strike/lockout but if one has already taken
place, all striking or locked out Ees shall immediately return to work and the Er shall
immediately resume operations and re‐admit all workers under the same terms and
conditions prevailing before the strike or lockout. (Trans‐ Asia Shipping Lines, Inc.‐
Unlicensed Crews Ee’s Union v. CA. G.R. No. 145428, July 7, 2004).

Payroll reinstatement in lieu of actual reinstatement but there must be showing of special
circumstances rendering actual reinstatement impracticable, or otherwise not conducive
to attaining the purpose of the law in providing for assumption of jurisdiction by the SLE in
a labor dispute that affects the national interest. (Manila Diamond Hotel Ees Union v.
SLE G.R. No. 140518, Dec. 16, 2004).

66
 Mere issuance of an assumption order automatically carries with it a return‐to‐work order
although not expressly stated therein. (TSEU‐FFW v. CA. G.R. Nos. 143013‐14, Dec.18,
2000).

a. Issues that the SLE may resolve when he assumes jurisdiction over a labor
dispute

SLE may subsume pending labor cases before LAs which are involved in the dispute
and decide even issues falling under the exclusive and original jurisdiction of LAs such
as the declaration of legality or illegality of strike. (Int’l. Pharmaceuticals v. SLE G.R.
Nos. 92981‐83, Jan. 9, 1992).

Power of SLE is plenary and discretionary. (St. Luke’s Medical Center v. Torres G.R.
No. 99395, June29, 1993).

Where the return to work order is issued pending the determination of the legality of
the strike, it is not correct to say that it may be enforced only if the strike is legal and
may be disregarded if illegal. Precisely, the purpose of the return to work order is to
maintain the status quo while the determination is being made. (6. Nature of
assumption order or certification order. (Sarmiento v. Tuico. G.R. Nos. 75271‐73,
June 27, 1988).

The assumption of jurisdiction is in the nature of a police power measure. This is done
for the promotion of the common good considering that a prolonged strike or lockout
can be inimical to the national economy. The SLE acts to maintain industrial peace.
Thus, his certification for compulsory arbitration is not intended to impede the worker’s
right to strike but to obtain a speedy settlement of the dispute. (Philtread Workers
Union v. Confesor. G.R. No. 117169, Mar. 12, 1997).

Art. 263 (g) does not interfere with the workers right to strike but merely regulates it,
when in the exercise of such right national interest will be affected. The LC vests upon
the SLE the discretion to determine what industries are indispensable to national
interest. The underlying principle embodied in Art. 263 (g) on the settlement of labor
disputes is that assumption and certification orders are executor in character and are
strictly complied with by the parties even during the pendency of any petition
questioning their validity. This extraordinary authority given to the Secretary of Labor
is aimed at arriving at a peaceful and speedy solution to labor disputes, without
jeopardizing national interests. Art. 263(g) is clear and unequivocal in stating that all
striking or lock‐out Ees shall immediately return to work and the Er shall immediately
resume operations and readmit all workers under the same terms and conditions
prevailing before the strike or lockout. Records of the case would show that the strike
occurred one day before the members of the union were dismissed due to alleged
redundancy. Thus the abovementioned article directs that the Er must readmit all
workers under the same terms and conditions prevailing before the strike. (PLDT v.
Manggagawa ng Komunikasyon sa Pilipinas G.R. No. 162783, July 14, 2005).

VII. Effect of defiance of assumption or certification orders

Under Article 264 (a) of the Labor Code, as amended, a strike that is undertaken despite
the issuance by the Secretary of Labor of an assumption order and/or certification is illegal.
So is a declaration of a strike during the pendency of cases involving the same grounds

67
 for the strike. In the present case, there is no dispute that when respondents conducted
their mass actions on April 3 to 6, 2000, the proceedings before the Secretary of Labor
were still pending as both parties filed motions for reconsideration of the March 24, 2000
Order. Clearly, respondents knowingly violated the aforesaid provision by holding a strike
in the guise of mass demonstration. (Solid Bank Corp. Ernesto U. Gamier, et al. and
Solid Bank Corp., et al. vs. Solid Bank Union and its Dismissed Officers and
Members, et al. G.R. No. 159460 and G.R. No. 159461, November 15, 2010).

It shall be considered an illegal act committed in the course of the strike or lockout and
shall authorize the SLE or the NLRC, as the case may be, to enforce the same under pain
or loss of employment status or entitlement to full employment benefits from the locking‐
out Er or backwages, damages and/or other positive and/or affirmative reliefs, even to
criminal prosecution against the liable parties. (St. Scholastica’s College v. Torres. G.R.
No. 100158, June 2, 1992).

VIII. Illegal strike

The Supreme Court also cited the 6 categories of illegal strikes which are:
1. When it is contrary to a specific prohibition of law, such as strike by employees
performing governmental functions; or
2. When it violates a specific requirement of law, [such as Article 263 of the Labor
Code on the requisites of a valid strike]; or
3. When it is declared for an unlawful purpose, such as inducing the employer to
commit an unfair labor practice against non-union employees; or
4. When it employs unlawful means in the pursuit of its objective, such as a
widespread terrorism of non-strikers [for example, prohibited acts under Art.
264(e) of the Labor Code]; or
5. When it is declared in violation of an existing injunction, [such as injunction,
prohibition, or order issued by the DOLE Secretary and the NLRC under Art.
263 of the Labor Code]; or
6. When it is contrary to an existing agreement, such as a no-strike clause or
conclusive arbitration clause. (Toyota v Toyota Workers Association. G.R.
Nos. 158786 & 158789 October 19, 2007).

What is more, the strike had been attended by the widespread commission of
prohibited acts. Well-settled is the rule that even if the strike were to be declared
valid because its objective or purpose is lawful, the strike may still be declared
invalid where the means employed are illegal. [ Among such limits are the
prohibited activities under Article 264 of the Labor Code, particularly paragraph
(e), which states that no person engaged in picketing shall:
(a) commit any act of violence, coercion, or intimidation or
(b) obstruct the free ingress to or egress from the premises for lawful purposes,
or employer's
(c) obstruct public thoroughfares.

The following acts have been held to be prohibited activities: where the strikers
shouted slanderous and scurrilous words against the owners of the vessels; where
the strikers used unnecessary and obscene language or epithets to prevent other
laborers to go to work, and circulated libelous statements against the employer
which show actual malice;] where the protestors used abusive and threatening
language towards the patrons of a place of business or against co-employees,

68
going beyond the mere attempt to persuade customers to withdraw their
patronage; where the strikers formed a human cordon and blocked all the ways
and approaches to the launches and vessels of the vicinity of the workplace and
perpetrated acts of violence and coercion to prevent work from being performed;
and where the strikers shook their fists and threatened non-striking employees with
bodily harm if they persisted to proceed to the workplace.

Permissible activities of the picketing workers do not include obstruction of access

of customers. (Sukhothai Cuisine and Restaurant vs. Court of Appeals,G.R.
No. 150437 .July 17, 2006).

A strike may be regarded as invalid although the labor union has complied with the
strict requirements for staging one as provided in Article 263 of the Labor Code
when the same is held contrary to an existing agreement, such as a no strike
clause or conclusive arbitration clause. Here, the CBA between the parties
contained a “no strike, no lockout” provision that enjoined both the Union and the
Company from resorting to the use of economic weapons available to them under
the law and to instead take recourse to voluntary arbitration in settling their
disputes. No law or public policy prohibits the Union and the Company from
mutually waiving their respective right to strike and lockout, which are otherwise
available to them under the law, in favor of voluntary arbitration. (C. Alcantara &
Sons, Inc. vs. Court of Appeals / Nagkahiusang Mamumuno sa Alsons-SPFL
(NAMAAL-SPFL), et al. vs. C. Alcantara & Sons, Inc. G.R. No. 155109/G.R. No.
155135/G.R. No. 179220, September 29, 2010).

Article 264(e) of the Labor Code prohibits any person engaged in picketing from
obstructing the free ingress to and egress from the employer’s premises. Since
respondent was found in the July 17, 1998 decision of the NLRC to have prevented
the free entry into and exit of vehicles from petitioner’s compound, respondent’s
officers and employees clearly committed illegal acts in the course of the March 9,
1998 strike. The use of unlawful means in the course of a strike renders such strike
illegal. Therefore, pursuant to the principle of conclusiveness of judgment, the
March 9, 1998 strike was ipso facto illegal. The filing of a petition to declare the
strike illegal was thus unnecessary. (Jackbilt Industries, Inc. Vs. Jackbilt
Employees Workers Union-Naflu-KMU, G.R. No. 171618-19, March 13, 2009).

A strike may be considered legal where the union believed that the company
committed ULP and the circumstances warranted such belief in GF, although
subsequently such allegations of ULP are found out as not true. (Bacus v. Ople.
G.R No. L‐56856, Oct. 23, 1984).

Even if no ULP acts are committed by the Er, if the Ees believe in GF that ULP
acts exist so as to constitute a valid ground to strike, then the strike held pursuant
to such belief may be legal. Where the union believed that the Er committed ULP
and the circumstances warranted such belief in GF, the resulting strike may be
considered legal although, subsequently, such allegations of ULP were found to
be groundless. (NUWHRAIN‐Interim Junta v. NLRC. G.R. No. 125561, Mar. 6,
1998)

The petitioners were charged with conducting an illegal strike, not a mass leave,
without specifying the exact acts that the company considers as constituting an

69
illegal strike or violative of company policies. Such allegation falls short of the
requirement in King of Kings Transport, Inc. of “a detailed narration of the facts
and circumstances that will serve as basis for the charge against the employees.”
A bare mention of an “illegal strike” will not suffice. Further, while Biomedica cites
the provisions of the company policy which petitioners purportedly violated, it failed
to quote said provisions in the notice so petitioners can be adequately informed of
the nature of the charges against them and intelligently file their explanation and
defenses to said accusations.( Alex Q. Naranjo, et al. vs. Biomedica Health
Care, Inc., et al. G.R. No. 193789. September 19, 2012).

(a) Liability of Officers and Ordinary Workers

The law makes a distinction between union members and union officers. A
union member who merely participates in an illegal strike may not be
terminated from employment. It is only when he commits illegal acts during a
strike that he may be declared to have lost employment status. In contrast, a
union officer may be terminated from employment for knowingly participating
in an illegal strike or participates in the commission of illegal acts during a
strike. The law grants the employer the option of declaring a union officer who
participated in an illegal strike as having lost his employment. It possesses the
right and prerogative to terminate the union officers from service. (Visayas
Community Medical Center (VCMC) formerly known as Metro Cebu
Commnunity Hospital (MCCH) v. Erma Yballe, et al., G.R. No. 196156,
January 15, 2014).

A distinction exists between the ordinary workers’ liability for illegal strike and
that of the union officers who participated in it. The ordinary worker cannot be
terminated for merely participating in the strike. There must be proof that he
committed illegal acts during its conduct. On the other hand, a union officer can
be terminated upon mere proof that he knowingly participated in the illegal
strike. Moreover, the participating union officers have to be properly identified.
In the present case, with respect to those union officers whose identity and
participation in the strike having been properly established, the termination was
legal. (Yolito Fadriquelan, et al. vs. Monterey Foods
Corporation/Monterey Foods Corporation v. Bukluran ng mga
Manggagawa sa Monterey-ILAW, et al., G.R. No. 178409/G.R. No. 178434,
June 8, 2011)

As a general rule, when just causes for terminating the services of an employee
exist, the employee is not entitled to separation pay because lawbreakers
should not benefit from their illegal acts. The rule, however, is subject to
exceptions. Here, not only did the Court declare the strike illegal, rather, it also
found the Union officers to have knowingly participated in the illegal strike.
Worse, the Union members committed prohibited acts during the strike. Thus,
as the Court has concluded in other cases it has previously decided, such
Union officers are not entitled to the award of separation pay in the form of
financial assistance. (C. Alcantara & Sons, Inc. vs. Court of Appeals, G.R.
No. 155109/G.R. No. 155135/G.R. No. 179220. March 14, 2012).

Since the Union’s strike has been declared illegal, the Union officers can be
terminated from employment for their actions. This includes the shop stewards

70
who cannot be shielded from the coverage of Article 264 of the Labor Code
since the Union appointed them as such and placed them in positions of
leadership and power over the men in their work units. As regards the rank and
file Union members, Article 264 provides that termination from employment is
not warranted by the mere fact that a union member has taken part in an illegal
strike. It must be shown that such union member, clearly identified, performed
an illegal act or acts during the strike. The striking Union members allegedly
committed the following prohibited acts:
a. They threatened, coerced, and intimidated non-striking employees,
officers, suppliers and customers;
b. They obstructed the free ingress to and egress from the company
premises; and
c. They resisted and defied the implementation of the writ of preliminary
injunction issued against the strikers.

The mere fact that the criminal complaints against them were subsequently
dismissed does not extinguish their liability under the Labor Code. Nor does
such dismissal bar the admission of the affidavits, documents, and photos
presented to establish their identity and guilt during the hearing of the petition
to declare the strike illegal. (C. Alcantara & Sons, Inc. vs. Court of Appeals
/ Nagkahiusang Mamumuno sa Alsons-SPFL (NAMAAL-SPFL), et al. vs.
C. Alcantara & Sons, Inc. G.R. No. 155109/G.R. No. 155135/G.R. No.
179220, September 29, 2010).

No backwages will be awarded to union members as a penalty for their

participation in the illegal strike. As for the union officers, for knowingly
participating in an illegal strike, the law mandates that a union officer may be
terminated from employment and they are not entitled to any relief. (Gold City
Integrated Port Services, Inc. v. NLRC. G.R. No. 86000, Sep. 21, 1990).

Those union members who have joined an illegal strike but have not
committed any illegal act shall be reinstated but without back wages.The
responsibility for the illegal acts committed during the strike must be on an
individual and not on a collective basis. (First City Interlink Transportation
Co., Inc. v. Confesor G.R. No. 106316, May 5, 1997).

A mere finding of the illegality of a strike should not be automatically followed

by wholesale dismissal of the strikers from their employment. While it is true
that administrative agencies exercising quasi‐judicial functions are free from
the rigidities of procedure, it is equally well‐settled that avoidance of
technicalities of law or procedure in ascertaining objectively the facts in each
case should not, however, cause denial of due process. (Bacus v. Ople. G.R.
No. L‐56856, Oct. 23, 1984).

To exclude union officers, shop stewards and those with pending criminal
charges in the directive to the company to accept back the striking workers
without first determining whether they knowingly committed illegal acts would
be tantamount to dismissal without due process of law. (Telefunken
Semiconductors Ees Union‐FFW v. SLE. G.R. No. 122743 & 127215, Dec.
12, 1997).

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 (b) Waiver of illegality of strike

When an employer accedes to the peaceful settlement brokered by the NLRC

by agreeing to accept all employees who had not yet returned to work, it waives
the issue of the illegality of the strike. (Reformist Union v. NLRC. G.R. No.
120482, Jan. 27, 1997).

When management and union are in pari delicto, the contending parties must
be brought back to their respective positions before the controversy; that is,
before the strike. In this case, management’s fault arose from the fact that a
day after the union filed a petition for certification election before the DOLE, it
hit back by requiring all its employees to undergo a compulsory drug test.
Indeed, the timing of the drug test was suspicious. Moreover, management
engaged in a runaway shop when it began pulling out machines from the main
building (AER building) to the compound (AER-PSC premises) located on
another street on the pretext that the main building was undergoing renovation.
On the other hand, like management, the union and the affected workers were
also at fault for resorting to a concerted work slowdown and walking out of their
jobs in protest of their illegal suspension. It was also wrong for them to have
forced their way to the AER-PSC premises to try to bring out the boring
machines. Adding to the injury was the fact that the picketing employees
prevented the entry and exit of non-participating employees and possibly
AER’s clients to the premises. Thus, the Supreme Court affirmed the ruling of
the Court of Appeals favoring the reinstatement of all the complaining
employees, including those who tested positive for illegal drugs, without
backwages. (Automotive Engine Rebuilders, Inc. et al. v. Progresibong
Unyon ng mga Manggagawa sa AERG.R. No. 160138/G.R. No. 160192.
July 13, 2011).

IX. Injunctions

a) Requisites for labor injunctions

b) “Innocent bystander rule”

The innocent by stander must show:

1. Compliance with the grounds specified in Rule 58 of the Rules of Court, and
2. That it is entirely different from, without any connection whatsoever to, either
party to the dispute and, therefore, its interests are totally foreign to the context
thereof. (MSF Tire & Rubber v. CA, G.R. 128632, Aug. 5, 1999).

A party, by filing its 3rd party claim with the deputy sheriff, it submitted itself to the
jurisdiction of the NLRC acting through the LA. The broad powers granted to the LA
and to the NLRC by Art. 217, 218 and 224 of the LC can only be interpreted as vesting
in them jurisdiction over incidents arising from, in connection with or relating to labor
disputes, as the controversy under consideration, to the exclusion of the regular courts.
The RTC, being a co‐equal body of the NLRC, has no jurisdiction to issue any
restraining order or injunction to enjoin the execution of any decision of the latter.
(Deltaventures v. Cabato. G.R. No. 118216, Mar. 9, 2000).

72
 The concerted action taken by the members of the union in picketing the premises of
the department store, no matter how illegal, cannot be regarded as acts not arising
from a labor dispute over which the RTCs may exercise jurisdiction. (Samahang
Manggagawa ng Liberty Commercial v. Pimentel G.R. No. L‐78621, Dec. 2, 1987).

VIII. PROCEDURE AND JURISDICTION

1. Labor Arbiter

1. Jurisdiction

a. Jurisdiction of the NLRC and LA

The jurisdiction of labor arbiters, as well as of the NLRC, is limited to disputes

arising from an employer-employee relationship which can only be resolved by
reference to the Labor Code, other labor statutes, or their collective bargaining
agreement. U-Bix's complaint was one to collect sum of money based on civil laws
– on obligations and contract, not to enforce rights under the Labor Code, other
labor statutes, or the collective bargaining agreement. (U-Bix Corporation, et al.
vs. Valerie Anne H. Hollero. G.R. No. 177647, October 31, 2008)

Although Republic Act No. 8042, through its Section 10, transferred the original
and exclusive jurisdiction to hear and decide money claims involving overseas
Filipino workers from the POEA to the Labor Arbiters, the law did not remove from
the POEA the original and exclusive jurisdiction to hear and decide all disciplinary
action cases and other special cases administrative in character involving such
workers. The obvious intent of Republic Act No. 8042 was to have the POEA focus
its efforts in resolving all administrative matters affecting and involving such
workers. The NLRC had no appellate jurisdiction to review the decision of the
POEA in disciplinary cases involving overseas contract workers. (Eastern
Mediterranean Maritime Ltd., et al. vs. Estanislao Surio, et al. G.R. No.
154213, August 23, 2012).

b. Jurisdiction, intra-corporate dispute

It is a settled rule that jurisdiction over the subject matter is conferred by law. The
determination of the rights of a director and corporate officer dismissed from his
employment as well as the corresponding liability of a corporation, if any, is an
intra-corporate dispute subject to the jurisdiction of the regular courts. Thus, the
appellate court correctly ruled that it is not the NLRC but the regular courts which
have jurisdiction over the present case. (Lesli Okol v. Slimmers World
International. G.R. No. 160146, December 11, 2009).

Atty. Garcia tries to deny he is an officer of ETPI. Not being a corporate officer, he
argues that the Labor Arbiter has jurisdiction over the case. One of the corporate
officers provided for in the by-laws of ETPI is the Vice-President. It can be gathered
from Atty. Garcia’s complaint-affidavit that he was Vice President for Business
Support Services and Human Resource Departments of ETPI when his
employment was terminated effective 16 April 2000. It is therefore clear from the
by-laws and from Atty. Garcia himself that he is a corporate officer. One who is
included in the by-laws of a corporation in its roster of corporate officers is an officer

73
 of said corporation and not a mere employee. Being a corporate officer, his
removal is deemed to be an intra-corporate dispute cognizable by the SEC and
not by the Labor Arbiter. (Atty. Virgilio Garcia v. Eastern Telecommunications
Philippines, Inc. G.R No. 173115April 16, 2009).

c. Jurisdiction over interpretation or implementation of the CBA

R.A. 8042 is a special law governing overseas Filipino workers. However, there is
no specific provision thereunder which provides for jurisdiction over disputes or
unresolved grievances regarding the interpretation or implementation of a CBA.
Section 10 of R.A. 8042 simply speaks, in general, of “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.” On the other hand, Articles 217(c) and
261 of the Labor Code are very specific in stating that voluntary arbitrators have
jurisdiction over cases arising from the interpretation or implementation of
collective bargaining agreements. In the present case, the basic issue raised by
Merridy Jane in her complaint filed with the NLRC is: which provision of the subject
CBA applies insofar as death benefits due to the heirs of Nelson are concerned.
This issue clearly involves the interpretation or implementation of the said CBA.
Thus, the specific or special provisions of the Labor Code govern.

CBA is the law or contract between the parties. Article 13.1 of the CBA entered
into by and between respondent GCI and AMOSUP provides that the Company
and the Union agree that in case of dispute or conflict in the interpretation or
application of any of the provisions of this Agreement, or enforcement of Company
policies, the same shall be settled through negotiation, conciliation or voluntary
arbitration. The provisions of the CBA are in consonance with Rule VII, Section 7
of the present Omnibus Rules and Regulations Implementing the Migrant Workers
and Overseas Filipinos Act of 1995, as amended by Republic Act No. 10022, which
states that for OFWs with collective bargaining agreements, the case shall be
submitted for voluntary arbitration in accordance with Articles 261 and 262 of the
Labor Code. With respect to disputes involving claims of Filipino seafarers wherein
the parties are covered by a collective bargaining agreement, the dispute or claim
should be submitted to the jurisdiction of a voluntary arbitrator or panel of
arbitrators. It is only in the absence of a collective bargaining agreement that
parties may opt to submit the dispute to either the NLRC or to voluntary arbitration.
(Estate of Nelson R. Dulay, vs. Aboitiz Jebsen Maritime, Inc. and General
Charterers, Inc. G.R. No. 172642, June 13, 2012).

d. Jurisdiction, how acquired

The NLRC acquires jurisdiction over parties in cases before it either by summons
served on them or by their voluntary appearance before its Labor Arbiter. Here,
while the Union insists that summons were not properly served on the impleaded
Union members with respect to the Company’s amended petition that sought to
declare the strike illegal, the records show that they were so served. The Return
of Service of Summons indicated that 74 out of the 81 impleaded Union members
were served with summons. But they refused either to accept the summons or to
acknowledge receipt of the same. Such refusal cannot of course frustrate the
NLRC’s acquisition of jurisdiction over them. Besides, the affected Union members

74
 voluntarily entered their appearance in the case when they sought affirmative relief
in the course of the proceedings like an award of damages in their favor. (C.
ALCANTARA & SONS, INC. v. COURT OF APPEALS, et al.G.R. No. 155109,
G.R. No. 155135, G.R. No. 179220, September 29, 2010).

i. NLRC, LA Jurisdiction vis-à-vis DOLE jurisdiction

The Court ruled that no limitation in the law was placed upon the power of the
DOLE to determine the existence of an employer-employee relationship. No
procedure was laid down where the DOLE would only make a preliminary
finding, that the power was primarily held by the NLRC. x x x

The DOLE, in determining the existence of an employer-employee relationship,

has a ready set of guidelines to follow, the same guide the courts themselves
use. The elements to determine the existence of an employment relationship
are: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; (4) the employer’s power to control the
employee’s conduct. The use of this test is not solely limited to the NLRC. The
DOLE Secretary, or his or her representatives, can utilize the same test, even
in the course of inspection, making use of the same evidence that would have
been presented before the NLRC. x x x

If the DOLE finds that there is no employer-employee relationship, the

jurisdiction is properly with the NLRC. If a complaint is filed with the DOLE, and
it is accompanied by a claim for reinstatement, the jurisdiction is properly with
the Labor Arbiter, under Art. 217 (3) of the Labor Code, which provides that the
Labor Arbiter has original and exclusive jurisdiction over those cases involving
wages, rates of pay, hours of work, and other terms and conditions of
employment, if accompanied by a claim for reinstatement. If a complaint is filed
with the NLRC, and there is still an existing employer-employee relationship,
the jurisdiction is properly with the DOLE. The findings of the DOLE, however,
may still be questioned through a petition for certiorari under Rule 65 of the
Rules of Court. (People’s Broadcasting Service vs. The Secretary of Labor
and Employment. G.R. No. 179652, March 6, 2012).

The mere disagreement by the employer with the findings of the labor officer,
or the simple act of presenting controverting evidence, does not automatically
divest the DOLE Secretary or any of his authorized representatives such as
the regional directors, of jurisdiction to exercise their visitorial and enforcement
powers under the Labor Code.

Under prevailing jurisprudence, the so-called exception clause in Art. 128(b) of

the Labor Code has the following elements, which must all concur to divest the
regional director of jurisdiction over workers' claims:
(a) that the employer contests the findings of the labor regulations officer
and raises issues thereon;
(b) that in order to resolve such issues, there is a need to examine
evidentiary matters; and
(c) that such matters are not verifiable in the normal course of inspection.

75
 Thus, in SSK Parts Corporation v. Camas in which the employer contested the
Regional Director's finding of violations of labor standards, but such issue was
resolved by an examination of evidentiary matters which were verifiable in the
ordinary course of inspection, it was held that there was no more need to
indorse the case to the arbitration branch of the NLRC.

Thus, the key requirement for the Regional Director and the DOLE Secretary
to be divested of jurisdiction is that the evidentiary matters are not verifiable in
the course of inspection. Where the evidence presented was verifiable in the
normal course of inspection, even if presented belatedly by the employer, the
Regional Director, and later the DOLE Secretary, may still examine them; and
these officers are not divested of jurisdiction to decide the case. (Bay Haven,
Inc. et. Al. vs. Florentino Abuan, et. al. G.R. No. 160859, July 30, 2008).

ii. Reinstatement pending appeal

(a) Reinstatement, immediately executory

The spirit of the rule on reinstatement pending appeal animates the

proceedings once the Labor Arbiter issues the decision containing an order
of reinstatement. The immediacy of its execution needs no further
elaboration. Reinstatement pending appeal necessitates its immediate
execution during the pendency of the appeal, if the law is to serve its noble
purpose. At the same time, any attempt on the part of the employer to
evade or delay its execution should not be countenanced. After the labor
arbiter’s decision is reversed by a higher tribunal, the employee may be
barred from collecting the accrued wages, if it is shown that the delay in
enforcing the reinstatement pending appeal was without fault on the part of
the employer. (Juanito A. Garcia and Alberto Dumago v. PAL. G.R No.
164856, January 20, 2009).

The order of reinstatement is immediately executory. The unjustified refusal

of the employer to reinstate a 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. Unless there is a restraining
order issued, it is ministerial upon the Labor Arbiter to implement the order
of reinstatement. In the case at bar, no restraining order was granted. Thus,
it was mandatory on PAL to actually reinstate Roquero or reinstate him in
the payroll. Having failed to do so, PAL must pay Roquero the salary he is
entitled to, as if he was reinstated, from the time of the decision of the NLRC
until the finality of the decision of this Court. (Milagros Panuncillo v. CAP
Philippines, Inc.G.R No. 161305, February 9, 2007).

(b) Implementation of reinstatement order, ministerial

Case law recognizes that unless there is a restraining order, the

implementation of the order of reinstatement is ministerial and mandatory.
This injunction or suspension of claims by legislative fiat partakes of the
nature of a restraining order that constitutes a legal justification for
respondent’s non-compliance with the reinstatement order. Respondent’s
failure to exercise the alternative options of actual reinstatement and

76
 payroll reinstatement was thus justified. Such being the case, respondent’s
obligation to pay the salaries pending appeal, as the normal effect of the
non-exercise of the options, did not attach. (Juanito Garcia v. Philippine
Airlines. G.R No. 164856, January 20, 2009).

(c) When reinstatement ordered by NLRC

Art. 223 of the Labor Code provides that reinstatement is immediately

executory even pending appeal only when the Labor Arbiter himself
ordered the reinstatement. In this case, the original Decision of Labor
Arbiter Drilon did not order reinstatement. Reinstatement in this case was
actually ordered by the NLRC, affirmed by the Court of Appeals. The order
of Labor Arbiter Pura on 31 January 2005 directing reinstatement was
issued after the Court of Appeals

Decision dated 17 March 2004 which affirmed the NLRC’s order of

reinstatement. Thus, Art. 223 finds no application in the instant case.
Considering that the order for reinstatement was first decided upon appeal
to the NLRC and affirmed with finality by the Court of Appeals in CA-G.R.
SP 80369 on 17 March 2004, petitioner rightly invoked Art. 224 of the
Labor Code. As contemplated by Article 224 of the Labor Code, the
Secretary of Labor and Employment or any Regional Director, the
Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator
may, motu proprio or on motion of any interested party, issue a writ of
execution on a judgment within five (5) years from the date it becomes final
and executory. Consequently, under Rule III of the NLRC Manual on the
Execution of Judgment, it is provided that if the execution be for the
reinstatement of any person to a position, an office or an employment, such
writ shall be served by the sheriff upon the losing party or upon any other
person required by law to obey the same, and such party or person may
be punished for contempt if he disobeys such decision or order for
reinstatement (Mt. Carmel College v. Jocelyn Resuena et al. G.R No.
173076, October 10, 2007).

2. Requirements to perfect appeal to NLRC

a. Appeal, requisites to
perfect

Evident it is from the foregoing that an appeal from rulings of the Labor Arbiter to
the NLRC must be perfected within ten (10) calendar days from receipt thereof,
otherwise the same shall become final and executory. In a judgment involving a
monetary award, the appeal shall be perfected only upon (1) proof of payment of
the required appeal fee and (2) posting of a cash or surety bond issued by a
reputable bonding company and (3) filing of a memorandum of appeal. A mere
notice of appeal without complying with the other requisites mentioned shall not
stop the running of the period for perfection of appeal. (Stolt-Nielsen Marine
Services Inc. (now Stolt-Nielsen Transportation Group Inc.) vs. NLRC. G.R.
No. 147623, December 13, 2005).

b. Appeal, when there is substantial compliance

77
 There was substantial compliance with the NLRC Rules of Procedure when the
respondents PAL Maritime Corporation and Western Shipping Agencies, Pte., Ltd.
filed, albeit belatedly, the Joint Declaration Under Oath, which is required when an
employer appeals from the Labor Arbiter’s decision granting a monetary award and
posts a surety bond. Under the NLRC rules, the following requisites are required
to perfect the employer’s appeal: (1) it must be filed within the reglementary period;
(2) it must be under oath, with proof of payment of the required appeal fee and the
posting of a cash or surety bond; and (3) it must be accompanied by typewritten
or printed copies of the memorandum of appeal, stating the grounds relied upon,
the supporting arguments, the reliefs prayed for, and a statement of the date of
receipt of the appealed decision, with proof of service on the other party of said
appeal. If the employer posts a surety bond, the NLRC rules further require the
submission by the employer, his or her counsel, and the bonding company of a
joint declaration under oath attesting that the surety bond posted is genuine and
that it shall be in effect until the final disposition of the case.

In the case at bar, the respondents posted a surety bond equivalent to the
monetary award and filed the notice of appeal and the appeal memorandum within
the reglementary period. When the NLRC subsequently directed the filing of a Joint
Declaration Under Oath, the respondents immediately complied with the said
order. There was only a late submission of the Joint Declaration. Considering that
there was substantial compliance with the rules, the same may be liberally
construed. The application of technical rules may be relaxed in labor cases to
serve the demands of substantial justice. (Rolando L. Cervantes vs. PAL
Maritime Corporation and/or Western Shipping Agencies. G.R. No. 175209.
January 16, 2013)

c. Effect of failure to perfect appeal

Failure to perfect an appeal renders the decision final and executory. The right to
appeal is a statutory right and one who seeks to avail of the right must comply with
the statute or the rules. The rules, particularly the requirements for perfecting an
appeal within the reglementary period specified in the law, must be strictly followed
as they are considered indispensable interdictions against needless delays and for
the orderly discharge of judicial business. It is only in highly meritorious cases that
this Court will opt not to strictly apply the rules and thus prevent a grave injustice
from being done. The exception does not obtain here. Thus, we are in agreement
that the decision of the Labor Arbiter already became final and executory because
petitioner failed to file the appeal within 10 calendar days from receipt of the
decision. (Nationwide Security and Allied Services, Inc. vs. CA, et al. G.R. No.
155844, July 14, 2008).

d. When party does not appeal

As a rule, a party who does not appeal from the decision may not obtain any
affirmative relief from the appellate court other than what he has obtained from the
lower tribunal, if any, whose decision is brought up on appeal. Due process
prevents the grant of additional awards to parties who did not appeal. As an
exception, he may assign an error where the purpose is to maintain the judgment
on other grounds, but he cannot seek modification or reversal of the judgment or

78
 affirmative relief unless he has also appealed or filed a separate petition. (Aklan
College, Inc. v. Perpetuo Enero, et al.G.R No. 178309, January 27, 2009).

e. Rules on perfection of appeal, when strictly construed

Rules on perfection of an appeal, particularly in labor cases, must be strictly

construed because to extend the period of the appeal is to delay the case, a
circumstance which would give the employer the chance to wear out the efforts
and meager resources of the worker to the point that the latter is constrained to
give up for less than what is due him. This is to assure the workers that if they
finally prevail in the case the monetary award will be given to them upon dismissal
of the employer’s appeal. It is further meant to discourage employers from using
the appeal to delay or evade payment of their obligations to the employees. (Colby
Construction and Management Corporation v. NLRC. GR No. 170099,
November 28, 2007).

f. Rules on perfection of appeal, when may be relaxed

In any case, even if the appeal was filed one day late, the same should have been
entertained by the NLRC. Indeed, the appeal must be perfected within the statutory
or reglementary period. This is not only mandatory, but also jurisdictional. Failure
to perfect the appeal on time renders the assailed decision final and executory and
deprives the appellate court or body of the legal authority to alter the final judgment,
much less entertain the appeal. However, this Court has, time and again, ruled
that, in exceptional cases, a belated appeal may be given due course if greater
injustice will be visited upon the party should the appeal be denied. The Court has
allowed this extraordinary measure even at the expense of sacrificing order and
efficiency if only to serve the greater principles of substantial justice and equity.
(Government Service Insurance System v. NLRC, G.R No. 180045, November
17, 2010).

g. Completeness of service by registered mail

The Supreme Court also overruled the respondents’ contention that UE filed its
appeal to the NLRC beyond the required ten (10)-day period. For completeness of
service by registered mail, the reckoning period starts either from the date of actual
receipt of the mail by the addressee or after five (5) days from the date he or she
received the first notice from the postmaster. In this case, the respondents averred
that, on March 17, 2005, the postmaster gave UE’s counsel a notice to claim the
mail containing the Labor Arbiter’s decision. The respondents claimed that UE’s
counsel was deemed in receipt of the decision 5 days after the giving of the notice,
or on March 22, 2005. Thus, according to the respondents, when UE filed its
appeal to the NLRC on April 14, 2005, the 10-day reglementary period had already
lapsed. The Supreme Court, however, ruled that there must be conclusive proof
that the registry notice was received by or at least served on the addressee. In this
case, the records did not show that UE’s counsel in fact received the alleged
registry notice requiring him to claim the mail. On the other hand, UE was able to
present a registry return receipt showing that its counsel actually received a copy
of the Labor Arbiter’s decision on April 4, 2005. Reckoned from this date, the 10-
day reglementary period had not yet lapsed when UE filed its appeal to the NLRC

79
 on April 14, 2005. (University of the East, et al. v. Analiza F. Pepanio and Mariti
D. Bueno. G.R No. 193897, January 23, 2013).

h. Bond

The second paragraph of Article 223 of the Labor Code states that when a
judgment involving monetary award is appealed by the employer, the appeal may
be perfected only upon the posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the Commission in the amount equivalent to
the monetary award in the judgment. This is to assure the workers that if they finally
prevail in the case, the monetary award will be given to them upon dismissal of the
employer’s appeal, and is meant to discourage employers from using the appeal
to delay or evade payment of their obligations to the employees. However, as
provided for in Section 6, Rule VI of the New Rules of Procedure of the NLRC,
such amount of the bond may be reduced in meritorious cases, upon motion of the
appellant. The exercise of this authority is not a matter of right on the part of the
movant but lies within the sound discretion of the NLRC upon showing of
meritorious grounds. Indeed, an unreasonable and excessive amount of bond
would be oppressive and unjust, and would have the effect of depriving a party of
his right to appeal. (Ronaldo B. Casimiro, et. al. vs. Stern Real Estate Inc.
Rembrandt Hotel and/or Grace Kristin Meehan (General Manager), and Eric
Singson (Owner),G.R. No. 162233, March 10, 2006).

i. Filing of bond, jurisdictional

Paragraph 2, Article 223 of the Labor Code provides that “[i]n case of a
judgment involving a monetary award, an appeal by the employer may be
perfected only upon the posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the NLRC in the amount equivalent to the
monetary award in the judgment appealed from.” Contrary to the respondents’
claim, the issue of the appeal bond’s validity may be raised for the first time on
appeal since its proper filing is a jurisdictional requirement. The requirement
that the appeal bond should be issued by an accredited bonding company is
mandatory and jurisdictional. The rationale of requiring an appeal bond is to
discourage the employers from using an appeal to delay or evade the
employees’ just and lawful claims. It is intended to assure the workers that they
will receive the money judgment in their favor if the employer’s appeal is
dismissed. (Wilgen Loon, et al. v. Power Master, Inc., et al. G.R. No.
189404, December 11, 2013).

ii. Revocation of bond, prospective application

The respondents filed a surety bond issued by Security Pacific Assurance

Corporation (Security Pacific) on June 28, 2002. At that time, Security Pacific
was still an accredited bonding company. However, the NLRC revoked its
accreditation on February 16, 2003. This subsequent revocation should not
prejudice the respondents who relied in good faith on the then subsisting
accreditation of Security Pacific. In Del Rosario v. Philippine Journalists, Inc. it
was held that a bonding company’s revocation of authority is prospective in
application. Nonetheless, the respondents should post a new bond issued by
an accredited bonding company in compliance with paragraph 4, Section 6,

80
 Rule 6 of the NLRC Rules of Procedure, which states that “[a] cash or surety
bond shall be valid and effective from the date of deposit or posting, until the
case is finally decided, resolved or terminated or the award satisfied. (Wilgen
Loon, et al. v. Power Master, Inc., et al., G.R. No. 189404, December 11,
2013).

iii. Period of effectivity of bond

A cash or surety bond shall be valid and effective from the date of deposit or
posting, until the case is finally decided, resolved or terminated, or the award
satisfied. This condition shall be deemed incorporated in the terms and
conditions of the surety bond, and shall be binding on the appellants and the
bonding company. (Ciudad Fernandina Food Corporation Employees
Union-Associated Labor Unions v. CA. G.R. No. 166594, July 20, 2006).

iv. Bank Certification, not valid compliance with bond requirement

In the case at bar, the respondents cannot be excused from making a

substantial compliance with the bond requirement. The law does not require
outright payment of the appealed monetary award, but only the posting of a
cash or surety bond issued by a reputable bonding company duly accredited
by the NLRC or this Court, and not a mere bank certification which only states
the total amount of deposit existing in such bank as of a certain date. The cash
or surety bond will ensure that the award will be eventually paid in case the
appeal fails. A mere bank certification of the type submitted by respondents
will not. What respondents have to pay is a moderate and reasonable sum for
premiums for such bond. (Emma Cordova, et. al. v. KEYSA’S Boutique G.R.
No. 156379, September 16, 2005).

v. When bond may be reduced

All told, the bond requirement on appeals involving monetary awards has been
and may be relaxed in meritorious cases. These cases include instances in
which (1) there was substantial compliance with the Rules, (2) surrounding
facts and circumstances constitute meritorious grounds to reduce the bond, (3)
a liberal interpretation of the requirement of an appeal bond would serve the
desired objective of resolving controversies on the merits, or (4) the appellants,
at the very least, exhibited their willingness and/or good faith by posting a
partial bond during the reglementary period. (Ronaldo Nicol, et al. v. Footjoy
Industrial Corp.G.R No. 159372, July 27, 2007).

vi. What constitutes “reasonable amount”; the Mcburnie Rule

To ensure the provisions of Section 6, Rule VI of the NLRC Rules that give
parties the chance to seek a reduction of the appeal bond are effectively carried
out, without however defeating the benefits of the bond requirement in favor of
a winning litigant, all motions to reduce bond that are filed with the NLRC shall
be accompanied by the posting of a cash or surety bond equivalent to 10% of
the monetary award that is subject of the appeal, which shall provisionally be
deemed the reasonable amount of the bond in the meantime that an appellant’s
motion is pending resolution by the Commission. Only after the posting of a

81
 bond in the required percentage shall an appellant’s period to perfect an appeal
under the NLRC Rules be deemed suspended.

The percentage of the bond that is set by this guideline is merely provisional.
The NLRC retains its authority and duty to resolve the motion and determine
the final amount of bond that shall be posted by the appellant, still in
accordance with the standards of “meritorious grounds” and “reasonable
amount”.

Should the NLRC after considering the motion’s merit, determine that a greater
amount or the full amount of the bond needs to be posted by the appellant,
then the party shall comply accordingly. The appellant shall be given a period
of 10 days from notice of the NLRC order within which to perfect the appeal by
posting the required appeal bond. (Andrew Mcburnie v. Eulalio Ganzon. GR
Nos. 178034, 178117 and GR No. 186984-85, 2013).

vii. When bond is invalid

In a nutshell, the rules are explicit that the filing of a bond for the perfection of
an appeal is mandatory and jurisdictional. The requirement that employers post
a cash or surety bond to perfect their appeal is apparently intended to assure
workers that if they prevail in the case, they will receive the money judgment
in their favor upon the dismissal of the former’s appeal. It was intended to
discourage employers from using an appeal to delay, or even evade, their
obligations to satisfy their employees' just and lawful claims. However, the
whole essence of requiring the filing of bond is defeated if the bond issued
turned out to be invalid due to the surety company's expired accreditation. After
being informed of the expired accreditation of Intra Strata, respondents should
have refrained from allowing Intra Strata to transact business or to post a bond
in favor of Bacman. It is not within respondent's discretion to allow the filing of
the appeal bond issued by a bonding company with expired accreditation
regardless of its pending application for renewal of accreditation. Respondents
cannot extend Intra Strata's authority or accreditation. Neither can it validate
an invalid bond issued by a bonding company with expired accreditation, or
give a semblance of validity to it pending this Court's approval of the application
for renewal of accreditation. (Rolando E. Cawaling et al. v. Napoleon M.
Menese. AC No. 9698, November 13, 2013).

i. Verification, formal requisite and not jurisdictional

Neither the laws nor the rules require the verification of the supplemental appeal.
Furthermore, verification is a formal, not a jurisdictional, requirement. It is mainly
intended to give assurance that the matters alleged in the pleading are true and
correct and not of mere speculation. Also, a supplemental appeal is merely an
addendum to the verified memorandum on appeal that was earlier filed in the case;
hence, the requirement for verification has been substantially complied. (Wilgen
Loon, et al. v. Power Master, Inc., et al.G.R. No. 189404, December 11, 2013).

The Court has consistently held that the requirement regarding verification of a
pleading is formal, not jurisdictional. Such requirement is simply a condition
affecting the form of the pleading, non-compliance with which does not necessarily

82
 render the pleading fatally defective. Verification is simply intended to secure an
assurance that the allegations in the pleading are true and correct and not the
product of the imagination or a matter of speculation, and that the pleading is filed
in good faith. The court may order the correction of the pleading if verification is
lacking or act on the pleading although it is not verified, if the attending
circumstances are such that strict compliance with the rules may be dispensed
with in order that the ends of justice may thereby be served. (LDP Marketing Inc.
vs. Erlinda Dyolde, G.R. No. 159653, January 25, 2006).

j. Corporation’s Verification and Certification

It is clear from the NLRC Rules of Procedure that appeals must be verified and
certified against forum-shopping by the parties-in-interest themselves. The
purpose of verification is to secure an assurance that the allegations in the
pleading are true and correct and have been filed in good faith. In the case at bar,
the parties-in-interest are petitioner Salenga, as the employee, and respondent
Clark Development Corporation as the employer. A corporation can only exercise
its powers and transact its business through its board of directors and through its
officers and agents when authorized by a board resolution or its bylaws. The power
of a corporation to sue and be sued is exercised by the board of directors. The
physical acts of the corporation, like the signing of documents, can be performed
only by natural persons duly authorized for the purpose by corporate bylaws or by
a specific act of the board. Absent the requisite board resolution, neither Timbol-
Roman nor Atty. Mallari, who signed the Memorandum of Appeal and Joint
Affidavit of Declaration allegedly on behalf of respondent corporation, may be
considered as the “appellant” and “employer” referred to by the NLRC Rules of
Procedure. As such, the NLRC had no jurisdiction to entertain the appeal.
(Antonio B. Salenga, et al. vs. Court of Appeals, et al.mG.R. No. 174941,
February 1, 2012).

k. Exception to general rule regarding a corporation’s verification and

certification of non-forum shopping

Anent UE’s failure to comply with the general rule that the Board of Directors or
Board of Trustees of a corporation must authorize the person who shall sign the
verification and certification of non-forum shopping accompanying a petition, the
Supreme Court held that such authorization is not necessary when it is self-evident
that the signatory is in a position to verify the truthfulness and correctness of the
allegations in the petition. The Supreme Court declared that Dean Eleanor Javier,
who signed UE’s verification and certification, was in such a position, since she
knew the factual antecedents of the case and she actually communicated with the
respondents regarding the required postgraduate qualification. (University of the
East, et al. vs. Analiza F. Pepanio and Mariti D. Bueno G.R. No. 193897.
January 23, 2013).

B. National Labor Relations Commission (NLRC)

1. Jurisdiction

In sum, respondent contested the findings of the labor inspector during and after the
inspection and raised issues the resolution of which necessitated the examination of

83
 evidentiary matters not verifiable in the normal course of inspection. Hence, the
Regional Director was divested of jurisdiction and should have endorsed the case to
the appropriate Arbitration Branch of the NLRC. Considering, however, that an illegal
dismissal case had been filed by petitioners wherein the existence or absence of an
employer-employee relationship was also raised, the CA correctly ruled that such
endorsement was no longer necessary. (Victor Meteoro, et al. v. Creative
Creatures, Inc. G.R No. 171275, July 13, 2009).

When petitioner surety company cancelled the surety bond because Radon Security
failed to pay the premiums, it gave due notice to the latter but not to the NLRC. By its
failure to give notice to the NLRC, AFPGIC failed to acknowledge that the NLRC had
jurisdiction not only over the appealed case, but also over the appeal bond. This
oversight amounts to disrespect and contempt for a quasi-judicial agency tasked by
law with resolving labor disputes. Until the surety is formally discharged, it remains
subject to the jurisdiction of the NLRC. (AFP General Insurance Corporation vs.
Noel Molina.G.R. No. 151133, June 30, 2008).

2. Effect of NLRC reversal of Labor Arbiter’s order of reinstatement

Even if the order of reinstatement is reversed on appeal, it is obligatory on the part of

the employer to reinstate and pay the wages of the dismissed employee during the
period of the appeal until reversal by the higher court. On the other hand, if the
employee has been reinstate during the appeal period and such reinstatement order
is reversed with finality, the employee is not required to reimburse whatever salary he
received for he is entitled to such, more so if he actually rendered services during the
period. (Pfizer v. Geraldine Velasco GR No. 177467, March 9, 2011).

3. Remedies

a. Motion for Reconsideration, not Petition for Certiorari

On the issue of the propriety of entertaining the Petition for Certiorari despite the
prescribed Motion for Reconsideration with the NLRC, the SC found that the CA
committed error when it entertained the petition for certiorari and explained that
when respondent failed to file a Motion for Reconsideration of the NLRC’s 30
November 2006 Resolution within the reglementary period, the Resolution attained
finality and could no longer be modified by the Court of Appeals. Untimeliness in
filing motions or petitions is not a mere technical or procedural defect, as leniency
regarding this requirement will impinge on the right of the winning litigant to peace
of mind resulting from the laying to rest of the controversy. (AGG Trucking and/or
Alex Ang Gaeid vs. Melanio B. Yuag. G.R. No. 195033, October 12, 2011).

b. Injunction

Section 1, Rule 58 of the Rules of Court, as amended, defines a preliminary

injunction as an order granted at any stage of an action prior to the judgment or
final order requiring a party or a court, agency or a person to refrain from a
particular act or acts. Injunction is accepted as the strong arm of equity or a
transcendent remedy to be used cautiously as it affects the respective rights of the
parties, and only upon full conviction on the part of the court of its extreme

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 necessity. As an extraordinary remedy, injunction is designed to preserve or
maintain the status quo of things and is generally availed of to present actual or
threatened acts until the merits of the case can be heard. It may be resorted to
only by a litigant for the preservation or protection of his rights or interests and for
no other purpose during the pendency of the principal action. It is resorted to only
when there is a pressing necessity to avoid injurious consequences, which cannot
be remedied under any standard compensation. The resolution of an application
for a writ of preliminary injunction rests upon the existence of an emergency or of
a special recourse before the main case can be heard in due course of
proceedings. (Nagkahiusang Mamumuo sa Picop Resources Inc et al. vs
Court of Appeals. G.R. Nos. 148839-40, November 2, 2006).

c. Contempt

Under Article 218 of the Labor Code, the NLRC (and the labor arbiters) may hold
any offending party in contempt, directly or indirectly, and impose appropriate
penalties in accordance with law. The penalty for direct contempt consists of either
imprisonment or fine, the degree or amount depends on whether the contempt is
against the Commission or the labor arbiter. The Labor Code, however, requires
the labor arbiter or the Commission to deal with indirect contempt in the manner
prescribed under Rule 71 of the Rules of Court.

Rule 71 of the Rules of Court does not require the labor arbiter or the NLRC to
initiate indirect contempt proceedings before the trial court. This mode is to be
observed only when there is no law granting them contempt powers. As is clear
under Article 218(d) of the Labor Code, the labor arbiter or the Commission is
empowered or has jurisdiction to hold the offending party or parties in direct or
indirect contempt. The petitioners, therefore, have not improperly brought the
indirect contempt charges against the respondents before the NLRC. (Federico
Robosa, et al. v. NLRC, et al. GR No. 176085, February 18, 2012).

4. Certified Cases

a. Function of NLRC in Certified Cases

When sitting in compulsory arbitration certified to by the Secretary of Labor, the

NLRC is not sitting as a judicial court but as an administrative body charged with
the duty to implement the order of the Secretary. As an implementing body, its
authority did not include the power to amend the Secretary’s order. (UST v. NLRC
and UST Faculty Union. GR No. 89920, 1990).

b. Compulsory arbitration

The very nature of compulsory arbitration makes the settlement binding upon the
private respondents, for compulsory arbitration has been defined both as "the
process of settlement of labor disputes by a government agency which has the
authority to investigate and to make an award which is binding on all the parties,"
and as a mode of arbitration where the parties are "compelled to accept the
resolution of their dispute through arbitration by a third party." Clearly then, the
legality of the strike could no longer be reviewed by the Labor Arbiter, much less
by the NLRC, as this had already been resolved. It was the sole issue submitted

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 for compulsory arbitration by the private respondents, as is obvious from the
portion of their letter quoted above. The case certified by the Labor Secretary to
the NLRC was dismissed after the union and the company drew up the agreement
mentioned earlier. This conclusively disposed of the strike issue. (Reformist
Union of RB Liner, et al. v. NLRC, et al. GR No. 120482, January 27, 1997).

C. Bureau of Labor Relations – Med-Arbiters

1. Jurisdiction (original and appellate)

The BLR shall have original and exclusive authority to act, at their own initiative or
upon request of either or both parties, on all inter-union and intra-union conflicts. As
already held by the Court in La Tondena Workers Union v. Secretary of Labor, intra-
union conflicts such as examinations of accoutns are under the jurisdiction of the BLR.
However, the Rules of Procedure on Mediation-Arbitration purpose and expressly
separated or distinguished examinations of union accounts from the genus of intra-
union conflict and provided a different procedure for the resolution of the same.
Original jurisdiction over complaints for examinations of union accounts is vested on
the Regional Director and appellate jurisdiction over decisions of the former is lodged
with the BLR. This is apparent from Sections 3 and 4 of the Med-Arbitration Rules as
already mentioned. Contrast these two sections from Section 2 and Section 56 of the
same rules. Section 2 expressly vests upon Med-Arbiters original and exclusive
jurisdiction to hear and decide inter alia “all other inter-union or internal union
disputes.” Section 5 states that the decisions of the Med-Arbiter shall be appealable
to the DOLE Secretary. Without a doubt, the rules of Procedure on Mediation-
Arbitration did not amend or supplant substantive law but implemented and filled in
details of procedure left vacuous or ambiguous by the Labor Code and its
Implementing Rules. (Manolito Barles, et al. v. Hon. Benedicto Bitonio, et al. GR
No. 120270, June 16, 1999).

D. National Conciliation and Mediation Board

1. Nature of Proceedings

Arbitration is the reference of a labor dispute to an impartial third person for

determination on the basis of evidence and arguments presented by such parties who
have bound themselves to accept the decision of the arbitrator as final and binding.

Arbitration may be classified, on the basis of the obligation on which it is based, as

either compulsory or voluntary.

Compulsory arbitration is a system whereby the parties to a dispute are compelled by

the government to forego their right to strike and are compelled to accept the resolution
of their dispute through arbitration by a third party. The essence of arbitration remains
since a resolution of a dispute is arrived at by resort to a disinterested third party whose
decision is final and binding on the parties, but in compulsory arbitration, such a third
party is normally appointed by the government.

Under voluntary arbitration, on the other hand, referral of a dispute by the parties is
made, pursuant to a voluntary arbitration clause in their collective agreement, to an
impartial third person for a final and binding resolution. Ideally, arbitration awards are

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 supposed to be complied with by both parties without delay, such that once an award
has been rendered by an arbitrator, nothing is left to be done by both parties but to
comply with the same. After all, they are presumed to have freely chosen arbitration
as the mode of settlement for that particular dispute. Pursuant thereto, they have
chosen a mutually acceptable arbitrator who shall hear and decide their case. Above
all, they have mutually agreed to de bound by said arbitrator's decision. (Luzon
Development Bank v. Association of Luzon Development Bank Employees. GR
No. 120319, October 6, 1995).

E. DOLE Regional Directors

1. Jurisdiction

If a complaint is brought before the DOLE to give effect to the labor standards
provisions of the Labor Code or other labor legislation, and there is a finding by the
DOLE that there is an existing employer-employee relationship, the DOLE exercise
jurisdiction to the exclusion of the NLRC. If the DOLE finds that there is no employer-
employee relationship, the jurisdiction is properly with the NLRC. If a complaint is filed
with the DOLE, and it is accompanied by a claim for reinstatement, the jurisdiction is
properly with the Labor Arbiter, under Art. 217(3) of the Labor Code, which provides
that the Labor Arbiter has original and exclusive jurisdiction over those cases involving
wages, rates of pay, hours of work, and other terms and conditions of employment, if
accompanied by a claim for reinstatement. If a complaint is filed with the NLRC, and
there is still an existing employer-employee relationship, the jurisdiction is properly
with the DOLE. The findings of the DOLE, however, may still be questioned through a
petition for certiorari under Rule 65 of the Rules of Court. (People’s Broadcasting
Service (Bombo Radyo Phils.,Inc. v. Secretary of Labor GR No. 179652, March 6,
2012).

F. DOLE Secretary

1. Visitorial and enforcement powers

It can be assumed that the DOLE in the exercise of its visitorial and enforcement power
somehow has to make a determination of the existence of an employer-employee
relationship. Such prerogatival determination, however, cannot be coextensive with
the visitorial and enforcement power itself. Indeed, such determination is merely
preliminary, incidental and collateral to the DOLE’s primary function of enforcing labor
standards provisions. The determination of the existence of employer-employee
relationship is still primarily lodged with the NLRC. This is the meaning of the clause
“in cases where the relationship of employer-employee still exists” in Art. 128(b).

Thus, if a complaint is brought before the DOLE to give effect to the labor standards
provisions of the Labor Code or other labor legislation, and there is a finding by the
DOLE that there is an existing employer-employee relationship, the DOLE exercise
jurisdiction to the exclusion of the NLRC. If the DOLE finds that there is no employer-
employee relationship, the jurisdiction is properly with the NLRC. If a complaint is filed
with the DOLE , and it is accompanied by a claim for reinstatement, the jurisdiction is
properly with the Labor Arbiter, under Art. 217(3) of the Labor Code, which provides
that the Labor Arbiter has original and exclusive jurisdiction over those cases involving
wages, rates of pay, hours of work, and other terms and conditions of employment, if

87
 accompanied by a claim for reinstatement. If a complaint is filed with the NLRC, and
there is still an existing employer-employee relationship, the jurisdiction is purely with
the DOLE. The findings of the DOLE, however may still be questioned through a
petition for certiorari under Rule 65 of the Rules of Court. (People’s Broadcasting
(Bombo Radyo Phils) v. Secretary of Labor, et al. GR No. 179652, May 8, 2009).

The DOLE Secretary and her authorized representatives such as the DOLE-NCR
Regional Director, have jurisdiction to enforce compliance with labor standards laws
under the broad visitorial and enforcement powers conferred by Article 128 of the
Labor Code, and expanded by R.A. No. 7730. An order issued by the duly authorized
representative of the Secretary of Labor and Employment under this article may be
appealed to the latter. In case said order involves a monetary award, an appeal by the
employer may be perfected only upon the posting of a cash or surety bond issued by
a reputable bonding company duly accredited by the Secretary of Labor and
Employment and Employment in the amount equivalent to the monetary award in the
order appealed from.

The Court has held that the visitorial and enforcement powers of the Secretary,
exercised through his representatives, encompass compliance with all labor standards
laws and other labor legislation, regardless of the amount of the claims filed by
workers. This has been the rule since R.A. No. 7730 was enacted on June 2, 1994,
amending Article 128(b) of the Labor Code, to expand the visitorial and enforcement
powers of the DOLE Secretary. Under the former rule, the DOLE Secretary had
jurisdiction only in cases where the amount of the claim does not exceed P5,000.00.
(Bay Haven, Inc. v. Florentino Abuan, et al.GR No. 160859, July 30, 2008).

Pursuant to Section 1 of Republic Act 7730 [Approved on June 2, 1994] which

amended Article 128 (b) of the Labor Code, the Secretary of Labor and Employment
or his duly authorized representative, in the exercise of their visitorial and enforcement
powers, are now authorized to issue compliance orders to give effect to the labor
standards provisions of this Code and other labor legislation based on findings of labor
employment and enfocement officers or industrial safety engineers made in the course
of inspection, sans any restriction with respect to the jurisdictional amount of
P5,000.00 provided under Article 129 and Article 217 of Code. (Cirineo Bowling
Plaza v. Gerry Sensing, et al.GR No. 146572, January 14, 2005).

2. Power to suspend/effects of termination

When the Secretary of Labor ordered the UNIVERSITY to suspend the effect of the
termination of the individual respondents, the Secretary did not exceed her jurisdiction,
nor did the Secretary gravely abuse the same. It must be pointed out that one of the
substantive evils which Article 263(g) of the Labor Code seeks to curb is the
exacerbation of a labor dispute to the further detriment of the national interest. In her
Order dated March 28, 1995, the Secretary of Labor rightly held:

It is well to remind both parties herein that the main reason or rationale for the exercise
of the Secretary of Labor and Employment’s power under Article 263(g) of the Labor
Code, as amended, is the maintenance and upholding of the status quo while the
dispute is being adjudicated. Hence, the directive to the parties to refrain from
performing acts that will exacerbate the situation is intended to ensure that the dispute
does not get out of hand, thereby negating the direct intervention of this office.

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 The University’s act of suspending and terminating union members and the Union’s
act of filing another Notice of Strike after this Office has assumed jurisdiction are
certainly in conflict with the status quo ante. By any standards[,] these acts will not in
any way help in the early resolution of the labor dispute. It is clear that the actions of
both parties merely served to complicate and aggravate the already strained labor-
management relations. (University of Immaculate Concepcion, Inc. v. Secretary of
Labor, et al.GR No. 151379, January 14, 2005).

3. Assumption of jurisdiction

a. Assumption by the Secretary

More to the point, the Court has consistently ruled in a long line of cases spanning
several decades that once the SOLE assumes jurisdiction over a labor dispute,
such jurisdiction should not be interfered with by the application of the coercive
processes of a strike or lockout. Defiance of the assumption order or a return-to
work order by a striking employee, whether a union officer or a member, is an
illegal act and, therefore, a valid ground for loss of employment status.

The assumption of jurisdiction by the SOLE over labor disputes causing or likely
to cause a strike or lockout in an industry indispensable to the national interest is
in the nature of a police power measure. In this case, the SOLE sufficiently justified
the assumption order, thus:

The Hotel is engaged in the hotel and restaurant business and one of the deluxe
hotels operating in Metro Manila catering mostly to foreign tourist groups and
businessmen. It serves as venue for local and international conventions and
conferences. The Hotel provides employment to more than 700 employees as well
as conducts business with entities dependent on its continued operation. It also
provides substantial contribution to the government coffers in the form of foreign
exchange earnings and tax payments. Undoubtedly, a work stoppage thereat will
adversely affect the Hotel, its employees, the industry, and the economy as a
whole. (Manila Hotel Employees Association and its members v. Manila Hotel
Corporation. GR No. 154591, March 5, 2007).

The Secretary’s assumption of jurisdiction power necessarily includes matters

incidental to the labor dispute, that is, issues that are necessarily involved in the
dispute itself, not just to those ascribed in the Notice of Strike; or, otherwise
submitted to him for resolution. As held in the case of International
Pharmaceuticals, Inc. v. Sec. of Labor and Employment, “x x x [t]he Secretary was
explicitly granted by Article 263 (g) of the Labor Code the authority to assume
jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an
industry indispensable to the national interest, and decide the same accordingly.
Necessarily, this authority to assume jurisdiction over the said labor dispute must
include and extend to all questions and controversies arising therefrom, including
cases over which the Labor Arbiter has exclusive jurisdiction.” Accordingly, even if
not exactly on the ground upon which the Notice of Strike is based, the fact that
the issue is incidental to the resolution of the subject labor dispute or that a specific
issue had been submitted to the Secretary of the DOLE for her resolution, validly
empowers the latter to take cognizance of and resolve the same. (Skippers

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 Pacific Inc and J.P. Samartzsis Maritime Enterprises Co., S.A., vs. Jerry
Maguad and Porfero Ceudadano G.R. No. 166363,August 15, 2006).

The moment the Secretary of Labor assumes jurisdiction over a labor dispute in
an industry indispensable to national interest, such assumption shall have the
effect of automatically enjoining the intended or impending strike. It was not even
necessary for the Secretary of Labor to issue another order directing a return to
work. The mere issuance of an assumption order by the Secretary of Labor
automatically carries with it a return-to-work order, even if the directive to return to
work is not expressly stated in the assumption order. (Steel Corp. of the Phils.
vs. SCP Employees Union-National Federation of Labor Unions, G.R. No.
169829-30, April 16, 2008).

Again, we spell out what encompass the Secretary’s assumption of jurisdiction

power. The Secretary of the DOLE has been explicitly granted by Article 263(g) of
the Labor Code the authority to assume jurisdiction over a labor dispute causing
or likely to cause a strike or lockout in an industry indispensable to the national
interest, and decide the same accordingly. And, as a matter of necessity, it
includes questions incidental to the labor dispute; that is, issues that are
necessarily involved in the dispute itself, and not just to that ascribed in the Notice
of Strike or otherwise submitted to him for resolution. (UFE-DFA-KMU vs. Nestlé
Philippines, Incorporated.G.R. No. 158930-31, March 3, 2008).

4. Appellate jurisdiction

a. DOLE Secretary has appellate jurisdiction over POEA disciplinary cases

Perusal of the POEA rules and the IRR of RA 8042 show that NLRC has no
jurisdiction to review disciplinary cases decided by the POEA. Petitioners
should have appealed the adverse decision of the POEA to the Secretary of
Labor instead of to the NLRC. Consequently, the CA being correct in its
conclusions, committed no error in upholding that appellate jurisdiction was
vested in the Secretary of Labor in accordance with his power of supervision
and control under Section 38(1), Chapter 7, Title II, Book III of the Revised
Administrative Code of 1987. (Eastern Mediterranean Maritime Ltd v.
Estanislao Surio, et al.GR No. 154213, August 23, 2012).

b. No appellate jurisdiction over review of BLR in cancellation

proceedings

The Secretary of Labor and Employment has no jurisdiction to entertain the

appeal of Abbott. The appellate jurisdiction of the Secretary of Labor and
Employment is limited only to a review of cancellation proceedings decided by
the Bureau of Labor Relations in the exercise of its exclusive and original
jurisdiction. The Secretary of Labor and Employment has no jurisdiction over
decisions of the Bureau of Labor Relations rendered in the exercise of its
appellate power to review the decision of the Regional Director in a petition to
cancel the union's certificate of registration, said decisions being final and
inappealable. (Abbot Laboratories Philippines v. Abbott Laboratories
Employees Union. G.R No. 131374, 2000).

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 5. Voluntary arbitration powers

G. Grievance Machinery and Voluntary Arbitration

1. Subject matter of grievance

Art. 217(c) of the Labor Code provides that “cases arising from the interpretation or
implementation of collective bargaining agreements and those arising from the
interpretation or enfocement of company personnel policies shall be disposed of by
the Labor Arbiter by referring the same to the grievance machinery and voluntary
arbitration as may be provided in said agreements. This provision requires labor
arbiters to refer cases involving the implementation of CBAs to the grievance
machinery provided therein and to voluntary arbitration. Moreover, Art. 260 of the
Labor Code clarifies that such disputes must be referred first to the grievance
machinery and, if unresolved within seven days, they shall automatically be referred
to voluntary arbitration. Under Art. 261, violations of a CBA, except those which are
gross in character, shall no longer be treated as unfair labor practice and shall be
resolved as grievances under the CBA. Under this provision, voluntary arbitrators have
original and exclusive jurisdiction over matters which have not been resolved by the
grievance machinery. Pursuant to Articles 217 in relation to Articles 260 and 261 of
the Labor Code, the labor arbiter should have referred the matter to the grievance
machinery provided in the CBA. Because the labor arbiter did not have jurisdiction
over the subject matter, his decision was void. (Miguel Santuyo, et al. v. Remerco
Garments Manufacturing, Inc. GR. 174420, March 22, 2010).

2. Voluntary Arbitrator

a) Jurisdiction

i. Voluntary arbitration, plenary authority and jurisdiction of VA

Goya, Inc.’s contention that the Voluntary Arbitrator (VA) exceeded his power
in ruling on a matter not covered by the sole issue submitted for voluntary
arbitration is untenable. In a prior case, the Supreme Court has ruled that, 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. The VA has plenary jurisdiction
and authority to interpret the CBA and to determine the scope of his or her
own authority. Subject to judicial review, this leeway of authority and
adequate prerogative is aimed at accomplishing the rationale of the law on
voluntary arbitration – speedy labor justice.

In the case at bar, Goya, Inc. and Goya, Inc. Employees Union (Union)
submitted for voluntary arbitration the sole issue of whether or not the
company is guilty of an unfair labor practice in engaging the services of
PESO, a third-party service provider, under existing CBA, laws, and
jurisprudence. The Union claimed that the hiring of contractual workers from
PESO violated the CBA provision that prescribes only three categories of
workers in the company, namely: the probationary, the regular, and the
casual employees. Instead of hiring contractual workers, Goya, Inc. should

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 have hired probationary or casual employees, who could have become
additional Union members, pursuant to the union security clause in the CBA.
The VA ruled that while Goya, Inc. was not guilty of any unfair labor practice,
it still committed a violation of the CBA, though such violation was not gross
in character. The Supreme Court held that the VA’s ruling is interrelated and
intertwined with the sole issue submitted for arbitration. The ruling was
necessary to make a complete and final adjudication of the dispute between
the parties. (Goya Inc. v. Goya Inc. Employees Union-FFW. GR No.
170054, January 21, 2013).

In Sime Darby Pilipinas, Inc. v. Deputy Administrator Magsalin, the Supreme

Court ruled that 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. It was also held in that case that the failure of the parties to specifically
limit the issues to that which was stated allowed the arbitrator to assume
jurisdiction over the related issue. In Ludo & Luym Corporation v. Saornido,
the Supreme Court recognized that voluntary arbitrators are generally
expected to decide only those questions expressly delineated by the
submission agreement; that, nevertheless, they can assume that they have
the necessary power to make a final settlement on the related issues, since
arbitration is the final resort for the adjudication of disputes. Thus, the
Supreme Court ruled that even if the specific issue brought before the
arbitrators merely mentioned the question of “whether an employee was
discharged for just cause,” they could reasonably assume that their powers
extended beyond the determination thereof to include the power to reinstate
the employee or to grant back wages. In the same vein, if the specific issue
brought before the arbitrators referred to the date of regularization of the
employee, law and jurisprudence gave them enough leeway as well as
adequate prerogative to determine the entitlement of the employees to higher
benefits in accordance with the finding of regularization. Indeed, to require
the parties to file another action for payment of those benefits would certainly
undermine labor proceedings and contravene the constitutional mandate
providing full protection to labor and speedy labor justice. (Manila Pavilion
Hotel, etc. vs. Henry Delada. G.R. No. 189947, January 25, 2011).

Under Art. 217, it is clear that a LA has original and exclusive jurisdiction over
termination disputes. However, under Art. 261, a VA has original and
exclusive jurisdiction over grievances arising from the interpretation or
enforcement of company policies. As a general rule then, termination
disputes should be brought before the LA, except when the parties
unmistakably express that they agree to submit the same to voluntary
arbitration. (Negros Metal Corporation v. Armelo Lamayo. GR No.
186557, August 25, 2010).

b) Labor Arbiters may act as voluntary arbitrators

The Voluntary Arbitrator or panel of Voluntary Arbitrators, upon agreement

of the parties, shall also hear and decide all other labor disputes including
unfair labor practices and bargaining deadlocks. This is what the parties did
in this case. After the Board failed to resolve the bargaining deadlock

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 between parties, the union filed a petition for compulsory arbitration in the
Arbitration Branch of the NLRC. Petitioner joined the petition and the case
was submitted for decision. Although the union’s petition was for “compulsory
arbitration,” the subsequent agreement of petitioner to submit the matter for
arbitration in effect made the arbitration a voluntary one. The essence of
voluntary arbitration, after all is that it is by agreement of the parties, rather
than compulsion of law, that a matter is submitted for arbitration. It does not
matter that the person chosen as arbitrator is a labor arbiter who, under Art
217 of the Labor Code, is charged with the compulsory arbitration of certain
labor cases. There is nothing in the law that prohibits these labor arbiters
from also acting as voluntary arbitrators as long as the parties agree to have
him hear and decide their dispute. (Manila Central Line Corporation v.
Manila Central Line Free Workers Union – National Federation of Labor
GR No. 109383, June 15, 1998).

c) Remedies

Art. 262-A deleted the word “unappealable” from Art. 263. It makes the VA
award final and executory after 10 calendar days from receipt of the copy of
the award or decision by the parties. Presumably, the decision may still be
reconsidered by the va on the basis of a motion for reconsideration duly field
during that period. (Albert Teng v. Alfredo Pahagac. GR No. 169704,
November 17, 2010).

As the Voluntary Arbitrator acts in a quasi-judicial capacity, there is no reason

why the VA’s decisions involving interpretation of law should be beyond the
Supreme Court’s review. Administrative officials are presumed to act in
accordance with law, yet the Court will not hesitate to pass upon their work
where a question of law is involved or where a showing of abuse of authority
or discretion in their officials acts is properly raised in petitions for certiorari.
(Continental Marble Corporation v. NLRC, GR No. L-43825, 1988).

H. Court of Appeals

1. Rule 65, Rules of Court

Rule 65, mode of judicial review of NLRC decisions

It has long been settled in the landmark case of St. Martin Funeral Home v. National
Labor Relations Commission, that the mode for judicial review of decisions of the
NLRC is by a petition for certiorari under Rule 65 of the revised Rules of Civil
Procedure. The different modes of appeal, namely, writ of error (Rule 41), petition for
review (Rules 42 and 43), and petition for review on certiorari (Rule 45), cannot be
availed of because there is no provision on appellate review of the NLRC decisions in
the Labor Code, as amended. Although the same case recognizes that both the Court
of Appeals and the Supreme Court have original jurisdiction over such petitions, it has
chosen to impose the strict observance of the hierarchy of courts. Hence, a petition for
certiorari of a decision or resolution of the NLRC should first be filed with the Court of
Appeals; direct resort to the Supreme Court shall not be allowed unless the redress
desired cannot be obtained in the appropriate courts or where exceptional and
compelling circumstances justify an availment of a remedy within and calling for the

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 exercise by the Supreme Court of its primary jurisdiction. (Marival Trading, Inc. v.
NLRC GR No. 169600, June 26, 2007).

As correctly explained by the CA, judicial review of decisions of the NLRC via petition
for certiorari under Rule 65, as a general rule, is confined only to issues of lack or
excess of jurisdiction and grave abuse of discretion on the part of the NLRC. The CA
does not assess and weigh the sufficiency of evidence upon which the LA and the
NLRC based their conclusions. The issue is limited to the determination of whether or
not the NLRC acted without or in excess of its jurisdiction, or with grave abuse of
discretion in rendering the resolution, except if the findings of the NLRC are not
supported by substantial evidence. (Anonas Construction and Industrial Supply
Corporation, et al. vs. NLRC, et al. G.R. No. 164052, October 17, 2008).

2. Petition for Review as mode of appeal vis-à-vis Special Civil Action for Certiorari

There are, of course, settled distinctions between a petition for review as a mode of
appeal and a special civil action for certiorari, thus:
a. In appeal by certiorari, the petition is based on questions of law which the
appellant desires the appellate court to resolve. In certiorari as an original
action, the petition raises the issue as to whether the lower court acted without
or in excess of jurisdiction or with grave abuse of discretion.
b. Certiorari, as a mode of appeal, involves the review of the judgment, award or
final order on the merits. The original action for certiorari may be directed
against an interlocutory order of the court prior to appeal from the judgment or
where there is no appeal or any other plain, speedy or adequate remedy.
c. Appeal by certiorari must be made within the reglementary period for appeal.
An original action for certiorari may be filed not later than sixty (60) days from
notice of the judgment, order or resolution sought to be assailed.
d. Appeal by certiorari stays the judgment, award or order appealed from. An
original action for certiorari, unless a writ of preliminary injunction or a
temporary restraining order shall have been issued, does not stay the
challenged proceeding.
e. In appeal by certiorari, the petitioner and respondent are the original parties to
the action, and the lower court or quasi-judicial agency is not to be impleaded.
In certiorari as an original action, the parties are the aggrieved party against
the lower court or quasi-judicial agency and the prevailing parties, who thereby
respectively become the petitioner and respondents.
f. In certiorari for purposes of appeal, the prior filing of a motion for
reconsideration is not required (Sec. 1, Rule 45); while in certiorari as an
original action, a motion for reconsideration is a condition precedent (Villa-Rey
Transit vs. Bello, L-18957, April 23, 1963), subject to certain exceptions.
g. In appeal by certiorari, the appellate court is in the exercise of its appellate
jurisdiction and power of review for, while in certiorari as an original action, the
higher court exercises original jurisdiction under its power of control and
supervision over the proceedings of lower courts. (San Miguel Corporation v.
Numeriano Layoc, Jr. GR No. 149640, October 19, 2007).

3. Dates must be stated in Petition for Certiorari

There are three essential dates that must be stated in a petition for certiorari brought
under Rule 65. First, the date when notice of the judgment or final order or resolution

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 was received; second, when a motion for new trial or reconsideration was filed; and
third, when notice of the denial thereof was received. Failure of petitioner to comply
with this requirement shall be sufficient ground for the dismissal of the petition.
Substantial compliance will not suffice in a matter involving strict observance with the
Rules. (Dr. Rey C. Tambong, vs R. Jorge Development Corporation. G.R. No.
146068, August 31, 2006).

4. Effect of receipt of award pending outcome of Petition for Certiorari

The prevailing party’s receipt of the full amount of the judgment award pursuant to a
writ of execution issued by the labor arbiter does not close or terminate the case if
such receipt is qualified as without prejudice to the outcome of the petition for certiorari
pending with the Court of Appeals. (Timoteo H. Sarona vs. National Labor Relations
Commission, Royale Security Agency, et al., G.R. No. 185280, January 18, 2011).

I. Supreme Court

1. Rule 45, Rules of Court

General rule:

It is a settled rule in this jurisdiction that only questions of law are allowed in a petition
for review on certiorari. The Court’s power of review in a Rule 45 petition is limited to
resolving matters pertaining to any perceived legal errors, which the CA may have
committed in issuing the assailed decision. In reviewing the legal correctness of the
CA’s Rule 65 decision in a labor case, the Court examines the CA decision in the
context that it determined whether or not there is grave abuse of discretion in the NLRC
decision subject of its review and not on the basis of whether the NLRC decision on
the merits of the case was correct. (Universal Robina Sugar Milling Corporation v.
Ferdinand Acibo. GR No. 186439, January 15, 2014).

Exception to the general rule:

The Court’s jurisdiction in cases brought before it from the CA via Rule 45 of the Rules
of Court is generally limited to reviewing errors of law. The Court is not the proper
venue to consider a factual issue as it is not a trier of facts. This rule, however, is not
ironclad and a departure therefrom may be warranted where the findings of fact of the
CA are contrary to the findings and conclusions of the NLRC and LA, as in this case.
In this regard, there is therefore a need to review the records to determine which of
them should be preferred as more conformable to evidentiary facts. (INC
Shipmanagement, Inc. et al. v Alexander L. Moradas. GR No. 178564, January
15, 2014).

While generally, only questions of law can be raised in a petition for review on certiorari
under Rule 45 of the Rules of Court, the rule admits of certain exceptions, namely: (1)
when the findings are grounded entirely on speculations, surmises, or conjectures; (2)
when the inference made is manifestly mistaken, absurd, or impossible; (3) when there
is a grave abuse of discretion; (4) when the judgment is based on misappreciation of
facts; (5) when the findings of fact are conflicting; (6) when in making its findings, the
same are 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 are conclusions

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without citation of specific evidence on which they are based; (9) when the facts set
forth in the petition as well as in the petitioner’s main and reply briefs are not disputed
by the respondent; and (10) when the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence on record. The illegality of
petitioner’s dismissal was an issue that was squarely raised before the NLRC. When
the NLRC decision was reversed by the Court of Appeals, there was a situation where
“the findings of facts are conflicting”. The petition for review filed by the Petitioner
comes within the purview of exception (5) and by analogy, exception (7). (Mylene
Carvajal vs. Luzon Development Bank and/or Oscar Z. Ramirez. G.R. No. 186169,
August 1, 2012).

As a general rule, the Supreme Court is not a trier of facts and a petition for review on
certiorari under Rule 45 of the Rules of Court must exclusively raise questions of law.
Moreover, if factual findings of the National Labor Relations Commission and the Labor
Arbiter have been affirmed by the Court of Appeals, the Supreme Court accords them
the respect and finality they deserve. It is well-settled and oft-repeated that findings of
fact of administrative agencies and quasi-judicial bodies, which have acquired
expertise because their jurisdiction is confined to specific matters, are generally
accorded not only respect, but finality when affirmed by the Court of Appeals.
Nevertheless, the Supreme Court will not hesitate to deviate from what are clearly
procedural guidelines and disturb and strike down the findings of the Court of Appeals
and those of the labor tribunals if there is a showing that they are unsupported by the
evidence on record or there was a patent misappreciation of facts. Indeed, that the
impugned decision of the Court of Appeals is consistent with the findings of the labor
tribunals does not per se conclusively demonstrate the correctness thereof. By way of
exception to the general rule, the Supreme Court will scrutinize the facts if only to
rectify the prejudice and injustice resulting from an incorrect assessment of the
evidence presented. (Timoteo H. Sarona vs. National Labor Relations
Commission, Royale Security Agency, et al., G.R. No. 185280, January 18, 2011).

Writ of Certiorari will not issue where appeal is available

Additionally, the general rule is that a writ of certiorari will not issue where the remedy
of appeal is available to the aggrieved party. The remedies of appeal in the ordinary
course of law and that of certiorari under Rule 65 of the Revised Rules of Court are
mutually exclusive and not alternative or cumulative. Time and again this Court
reminded members of the bench and bar that the special civil action of Certiorari
cannot be used as a substitute for a lost appeal where the latter remedy is available.
Such a remedy will not be a cure for failure to timely file a Petition for Review on
Certiorari under Rule 45. Nor can it be availed of as a substitute for the lost remedy of
an ordinary appeal, especially if such loss or lapse was occasioned by one’s own
negligence or error in the choice of remedies. (Cathay Pacific Steel Corporation vs
Court of Appeals. G.R. No. 164561, August 30, 2006).

Indeed, there are instances when certiorari was granted despite the availability of
appeal such as: (a) when public welfare and the advancement of public policy dictates;
(b) when the broader interest of justice so requires; (c) when the writs issued are null
and void; or (d) when the questioned order amounts to an oppressive exercise of
judicial authority. None of these recognized exceptions, however, is present in the
case at bar. Petitioner failed to show circumstances that would justify a deviation from
the general rule and make available a petition for certiorari in lieu of taking an appeal.

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 (Iloilo La Filipina Uygongco Corporation v. CA. GR No. 170244, November 28,
2007).

J. Prescription of actions

Under Article 261 of the Labor Code, the Voluntary Arbitrator has original and
exclusive jurisdiction to decide all grievances arising from either the interpretation or
implementation of the Collective Bargaining Agreement; violations of the CBA shall no
longer be treated as an unfair labor practice but instead should be resolved as
grievance under the CBA, and the Department of Labor and Employment shall not
entertain any matter under the exclusive and original jurisdiction of the Voluntary
Arbitrator. All money claims arising from an employer-employee relation are covered
by the three-year prescriptive period mandated by Article 291 of the Labor Code, and
not by Article 1144 of the Civil code which provides for a ten-year prescriptive period
for written agreements. Thus, Article 291 of the Labor Code applies to petitioner’s
money claim, which is based on a provision of the CBA on retirement and separation
benefits and is a consequence of employer-employee relation. Moreover, voluntary
arbitrators have original and exclusive jurisdiction to hear and decide grievances
arising from the implementation of a CBA. Hence, the filing of a CBA-related complaint
before the labor arbiter or the NLRC does not interrupt the three-year prescriptive
period. (Amado de Guzma and Manila Worker’s Union and General Workers
Union v. CA. GR No. 132257, October 12, 1998).

The day the action may be brought is the day a claim starts as a legal possibility. In
the present case, January 1, 2000 was the date that respondent Pingol was not
allowed to perform his usual and regular job as a maintenance technician. He, however
only filed the complaint for constructive dismissal and monetary claims four years later
or on March 29, 2004. As correctly held by the LA, complainant's cause of action has
already prescribed.

Respondent's contention that the prescriptive period was interrupted when he made
follow-ups is also untenable. Like other causes of action, the prescriptive period for
money claims is subject to interruption, and in the absence of an equivalent Labor
Code provision for determining whether the said period may be interrupted, Art. 1155
provides that the prescription of an action is interrupted by (a) the filing of an action,
(b) written extrajudicial demand by the creditor, and (c) a written acknowledgment of
the debt by the debtor.

In this case, respondent Pingol never made any written extrajudicial demand. Neither
did petitioner make any written acknowledgment of its alleged obligation. Thus, the
claimed "follow-ups" could not have validly tolled the running of the prescriptive period.
It is worthy to note that respondent never presented any proof to substantiate his
allegation of follow-ups. (Philippine Long Distance Telephone Company v.
Roberto Pingol. GR No. 182622, September 8, 2010).

In the present case, the day came when petitioner learned of Asiakonstrukt’s deduction
from his salary of the amount of advances he had received but had, by his claim, been
settled, the same having been reflected in his payslips, hence, it is assumed that he
learned of it at the time he received his monthly paychecks. As thus correctly ruled by
both the NLRC and the appellate court, only those illegal deductions made from 1997
to 1999 when he was dismissed can be claimed, he having filed his complaint only in

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February 2000. Per his own computation and as properly adopted by the NLRC in its
assailed Resolution dated March 10, 2004, petitioner is thus entitled to reimbursement
of P88,000.00.

To properly construe Article 291 of the Labor Code, it is essential to ascertain the time
when the third element of a cause of action transpired. Stated differently, in the
computation of the three-year prescriptive period, a determination must be made as to
the period when the act constituting a violation of the workers’ right to the benefits
being claimed was committed. For if the cause of action accrued more than three (3)
years before the filing of the money claim, said cause of action has already prescribed
in accordance with Article 291. (Virgilio Anabe v. Asian Construction. GR No.
183233, December 23, 2009).

Consequently, in cases of nonpayment of allowances and other monetary benefits, if

it is established that the benefits being claimed have been withheld from the employee
for a period longer than three (3) years, the amount pertaining to the period beyond
the three-year prescriptive period is therefore barred by prescription. The amount that
can only be demanded by the aggrieved employee shall be limited to the amount of
the benefits withheld within three (3) years before the filing of the complaint.

In the case of service incentive leave, the employee may choose to either use his
leave credits or commute it to its monetary equivalent if not exhausted at the end of
the year.

Furthermore, if the employee entitled to service incentive leave does not use or
commute the same, he is entitled upon his resignation or separation from work to the
commutation of his accrued service incentive leave. Correspondingly, it can be
conscientiously deduced that the cause of action of an entitled employee to claim his
service incentive leave pay accrues from the moment the employer refuses to
remunerate its monetary equivalent if the employee did not make use of said leave
credits but instead chose to avail of its commutation. Accordingly, if the employee
wishes to accumulate his leave credits and opts for its commutation upon his
resignation or separation from employment, his cause of action to claim the whole
amount of his accumulated service incentive leave shall arise when the employer fails
to pay such amount at the time of his resignation or separation from employment.

Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive
leave, we can conclude that the three (3)-year prescriptive period commences, not at
the end of the year when the employee becomes entitled to the commutation of his
service incentive leave, but from the time when the employer refuses to pay its
monetary equivalent after demand of commutation or upon termination of the
employee’s services, as the case may be. (Auto Bus Transport System v. Antonio
Baustista, GR No. 156367, May 16, 2005).

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