IV.

JOB CONTRACTING AND LABOR ONLY CONTRACTING that the petitioner must be engaged in the delivery of items as a distinct and separate line
of business.
PHILIPPINE BANK OF COMMUNICATIONS, petitioner, vs. THE NATIONAL
LABOR RELATIONS COMMISSION, HONORABLE ARBITER TEODORICO L. Same; Same.—Succinctly put, CESI is not a parcel delivery company: as its name indicates,
DOGELIO, and RICARDO ORPIADA, respondents. it is a recruitment and placement corporation placing bodies, as it were, in different client
companies for longer or shorter periods of time. It is this factor that, to our mind,
Labor Law; A "labor only contractor" is a mere agent of the employer and the employees
distinguishes this case from American President Lines v. Clave et al, 114 SCRA 826 (1982)
of the former enjoy the status of being as if they were directly employed by the employer.—
if indeed such distinguishing away is needed.
A similar situation obtains where there is "labor only" contracting The "labor-only"
contractor—i.e. "the person or intermediary"—is considered "merely as an agent of the Same; Workers placed in a bank to work as messengers for a contract period that is not
employer." The employer is made by the statute responsible to the employees of the "labor fixed makes the said messengers acquire the status of permanent employees of the bank
only" contractor as if such employees had been directly employed by the employer. Thus, after working in the bank's premises for more than one year.—The bank urged that the
where "labor only" contracting exists in a given case, the statute itself implies or establishes letter agreement entered into with CESI was designed to enable the bank to obtain the
an employer-employee relationship between the employer (the owner of the project) and temporary services of people necessary to enable the bank to cope with peak loads, to
the employees of the "labor only" contractor, this time for a comprehensive purpose: replace temporary workers who were out on vacation or sick leave, and to handle
"employer for purposes of this Code, to prevent any violation or circumvention of any specialized work. There is, of course, nothing illegal about hiring persons to carry out "a
provision of this Code." The law in effect holds both the employer and the "labor-only" specific project or undertaking the completion or termination of which [was] determined
contractor responsible to the latter's employees for the more effective safeguarding of the at the time of the engagement of [the] employee, or where the work or service to be
employees' rights under the Labor Code. performed is seasonal in nature and the employment is for the duration of the season"
(Article 281, Labor Code). The letter agreement itself, however, merely required CESI to
Same; An undertaking by a labor supplier which does not involve performance of a specific
furnish the bank with eleven (11) messengers for "a contract period from January 19, 1976-
job, but to provide its client with a certain number of people to the bank to carry out the
." The eleven (11) messengers were thus supposed to render "temporary" services for an
work of messengers, which is directly related to a bank 's operations, makes the labor
indefinite or unstated period of time. Ricardo Orpiada himself was assigned to the bank's
supplier a mere "labor only contractor" or placement agency.—We are unable to agree with
offices from 25 June 1975 and rendered services to the bank until sometime in October
the bank and CESI on this score. The definition of "labor-only" contracting in Rule VIII,
1976, or a period of about sixteen months. Under the Labor Code, however, any employee
Book III of the Implementing Rules must be read in conjunction with the definition of job
who has rendered at least one year of service, whether such service is continuous or not,
contracting given in Section 8 of the same Rules. The undertaking given by CESI in favor
shall be considered a regular employee (Article 281, Second paragraph). Assuming,
of the bank was not the performance of a specific job—for instance, the carriage and
therefore, that Orpiada could properly be regarded as a casual (as distinguished from a
delivery of documents and parcels to the addresses thereof. There appear to be many
regular) employee of the bank, he became entitled to be regarded as a regular employee of
companies today which perform this discrete service, companies with their own personnel
the bank as soon as he had completed one year of service to the bank. Employers may not
who pick up documents and packages from the offices of a client or customer, and who
terminate the service of a regular employee except for a just cause or when authorized
deliver such materials utilizing their own delivery vans or motorcycles to the addresses.
under the Labor Code (Article 280, Labor Code). It is not difficult to see that to uphold the
In the present case, the undertaking of CESI was to provide its client—the bank—with a
contractual arrangement between the bank and CESI would in effect be to permit
certain number of persons able to carry out the work of messengers. Such undertaking of
employers to avoid the necessity of hiring regular or permanent employees and to enable
CESI was complied with when the requisite number of persons were assigned or seconded
them to keep their employees indefinitely on a temporary or casual status, thus to deny
to the petitioner bank. Orpiada utilized the premises and office equipment of the bank and
them security of tenure in their jobs. Article 106 of the Labor Code is precisely designed to
not those of CESI. Messengerial work—the delivery of documents to designated persons
prevent such a result. Philippine Bank of Communications vs. NLRC, 146 SCRA 347, No.
whether within or without the bank premises—is of course directly related to the day-to-
L-66598 December 19, 1986
day operations of the bank. Section 9(2) quoted above does not require for its applicability

1

PHILIPPINE BANK OF COMMUNICATIONS, petitioner, vs. THE NATIONAL
LABOR RELATIONS COMMISSION, HONORABLE ARBITER TEODORICO L.
DOGELIO, and RICARDO ORPIADA, respondents.
Labor Law; A "labor only contractor" is a mere agent of the employer and the employees
of the former enjoy the status of being as if they were directly employed by the employer.—
A similar situation obtains where there is "labor only" contracting The "labor-only"
contractor—i.e. "the person or intermediary"—is considered "merely as an agent of the
employer." The employer is made by the statute responsible to the employees of the "labor
only" contractor as if such employees had been directly employed by the employer. Thus,
where "labor only" contracting exists in a given case, the statute itself implies or establishes
an employer-employee relationship between the employer (the owner of the project) and
the employees of the "labor only" contractor, this time for a comprehensive purpose:
"employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code." The law in effect holds both the employer and the "labor-only"
contractor responsible to the latter's employees for the more effective safeguarding of the
employees' rights under the Labor Code.
Same; An undertaking by a labor supplier which does not involve performance of a specific
job, but to provide its client with a certain number of people to the bank to carry out the
work of messengers, which is directly related to a bank 's operations, makes the labor
supplier a mere "labor only contractor" or placement agency.—We are unable to agree with
the bank and CESI on this score. The definition of "labor-only" contracting in Rule VIII,
Book III of the Implementing Rules must be read in conjunction with the definition of job
contracting given in Section 8 of the same Rules. The undertaking given by CESI in favor
of the bank was not the performance of a specific job—for instance, the carriage and
delivery of documents and parcels to the addresses thereof. There appear to be many
companies today which perform this discrete service, companies with their own personnel
who pick up documents and packages from the offices of a client or customer, and who
deliver such materials utilizing their own delivery vans or motorcycles to the addresses.
In the present case, the undertaking of CESI was to provide its client—the bank—with a
certain number of persons able to carry out the work of messengers. Such undertaking of
CESI was complied with when the requisite number of persons were assigned or seconded
to the petitioner bank. Orpiada utilized the premises and office equipment of the bank and
not those of CESI. Messengerial work—the delivery of documents to designated persons
whether within or without the bank premises—is of course directly related to the day-to-
day operations of the bank. Section 9(2) quoted above does not require for its applicability
that the petitioner must be engaged in the delivery of items as a distinct and separate line
of business.
Same; Same.—Succinctly put, CESI is not a parcel delivery company: as its name indicates,
it is a recruitment and placement corporation placing bodies, as it were, in different client
companies for longer or shorter periods of time. It is this factor that, to our mind,
distinguishes this case from American President Lines v. Clave et al, 114 SCRA 826 (1982)
if indeed such distinguishing away is needed.
Same; Workers placed in a bank to work as messengers for a contract period that is not
fixed makes the said messengers acquire the status of permanent employees of the bank
after working in the bank's premises for more than one year.—The bank urged that the
letter agreement entered into with CESI was designed to enable the bank to obtain the
temporary services of people necessary to enable the bank to cope with peak loads, to
replace temporary workers who were out on vacation or sick leave, and to handle
specialized work. There is, of course, nothing illegal about hiring persons to carry out "a
specific project or undertaking the completion or termination of Philippine Bank of
Communications vs. NLRC which [was] determined at the time of the engagement of [the]
employee, or where the work or service to be performed is seasonal in nature and the
employment is for the duration of the season" (Article 281, Labor Code). The letter
agreement itself, however, merely required CESI to furnish the bank with eleven (11)
messengers for "a contract period from January 19, 1976-." The eleven (11) messengers were
thus supposed to render "temporary" services for an indefinite or unstated period of time.
Ricardo Orpiada himself was assigned to the bank's offices from 25 June 1975 and rendered
services to the bank until sometime in October 1976, or a period of about sixteen months.
Under the Labor Code, however, any employee who has rendered at least one year of
service, whether such service is continuous or not, shall be considered a regular employee
(Article 281, Second paragraph). Assuming, therefore, that Orpiada could properly be
regarded as a casual (as distinguished from a regular) employee of the bank, he became
entitled to be regarded as a regular employee of the bank as soon as he had completed one
year of service to the bank. Employers may not terminate the service of a regular employee
except for a just cause or when authorized under the Labor Code (Article 280, Labor Code).
It is not difficult to see that to uphold the contractual arrangement between the bank and
CESI would in effect be to permit employers to avoid the necessity of hiring regular or
permanent employees and to enable them to keep their employees indefinitely on a
temporary or casual status, thus to deny them security of tenure in their jobs. Article 106
of the Labor Code is precisely designed to prevent such a result.

2
COCA-COLA BOTTLERS, PHILS., INC., petitioner, vs. DELFIN HINGPIT, GABRIEL
FRANCISCO, JR., CECILIO PINAR, JR., ABUNDIO BALATERO, NARITO
MANLULUYO, SECERO ZAMORA, MEDARDO GABINES, ENRIQUE BANGALAO,
JULITO APAT, SOTERO PANDAN, NELSON UMALI, and the NATIONAL LABOR
RELATIONS COMMISSION, respondents.
Labor Law; Dismissals; The services of Delfin Hingpit were properly terminated on July
22, 1988, for (1) failing to qualify for the job and (2) for dishonesty.—However, Hingpit
subsequently flunked the qualifying examinations for regular employment, and was later
discovered to have misled COCA COLA by submitting a police clearance contradicted by
the records of the Fiscal’s Office of Tagbilaran City showing that he was then facing three
(3) charges of physical injuries. Upon the facts, therefore, there can be no question: first, of
the propriety of his contract of probationary employment—not only executed before Labor
officials, but also admitted by him as freely and voluntarily entered into—and second, of
the fact that he had not only failed the qualifying examinations, but had also presented a
false clearance. Hence, his services were properly terminated on July 22, 1988, for (1) failing
to qualify for the job, and (2) for dishonesty.
Same; National Labor Relations Commission; Labor Arbiters; To disagree and set aside the
findings of the Labor Arbiters, the National Labor Relations Commission should state an
acceptable cause therefor.—While it is within respondent Commission’s competence, as an
appellate agency reviewing decisions of Labor Arbiters, to disagree with and set aside the
latter’s findings, it stands to reason that it should state an acceptable cause therefor. It
would otherwise be a whimsical, capricious, oppressive, illogical, unreasonable exercise of
quasi-judicial prerogative, subject to invalidation by the extraordinary writ of certiorari.
Same; Employer-employee Relationship; The evidence satisfactorily establishes that
complainants were employees of LIPERCON.—The evidence therefore satisfactorily
establishes that complainants were employees of LIPERCON. It was LIPERCON that
terminated their services at which time, as found by the Labor Arbiter, the complainants
“signed quitclaim and release documents” in favor of LIPERCON. COCA COLA was not
privy either to that act of employment-termination or execution of “quitclaim and release
documents,” or to the earlier act of creation of the employment relationship between the
complainants and LIPERCON. COCA COLA was in no position to intervene in any
manner in the creation or termination of the relationship between complainants and
LIPERCON.
Same; Same; It was erroneous for respondent Commission to demand that COCA COLA
present proof of just cause for the termination of the services of complainants, the latter
not being its employees, but LIPERCON’s.—It was therefore erroneous for respondent
3
Commission to demand that COCA COLA present proof of just cause for the termination
of the services of complainants, the latter not being its employees, but LIPERCON’s. For
the same reason, it was erroneous for the NLRC to expect COCA COLA to present its
payrolls to show the salaries and wages of the complainants although, it must be
mentioned, COCA COLA did cause presentation of LIPERCON’s payrolls relative to its
employees, including complainants. And it was grave error for respondent Commission
to conclude that because proof of just cause for complainants’ removal from their
employment in LIPERCON was not presented by COCA COLA, said complainants had
been dismissed without just cause and due process.
ALEXANDER VINOYA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
REGENT FOOD CORPORATION AND/OR RICKY SEE (PRESIDENT), respondents.
Labor Law; Employer-Employee Relationship; Labor-only Contracting; Elements; Words
and Phrases; Labor-only contracting, a prohibited act, is an arrangement where the
contractor or subcontractor merely recruits, supplies or places workers to perform a job,
work or service for a principal.—Labor-only contracting, a prohibited act, is an
arrangement where the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal. In labor-only contracting, the
following elements are present: (a) The contractor or subcontractor does not have
substantial capital or investment to actually perform the job, work or service under its own
account and responsibility; (b) The employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly related to the main
business of the principal.
Same; Same; Same; Same; Same; Permissible job contracting or subcontracting refers to 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.—Permissible job
contracting or subcontracting refers to 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. A person is considered engaged in legitimate job contracting or
subcontracting if the following conditions concur: (a) The contractor or subcontractor
carries on a distinct and independent business and undertakes to perform the job, work or
service on its own account and under its own responsibility according to its own manner
and method, and free from the 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 or subcontractor has substantial capital or investment; and (c) The agreement
between the principal and contractor or subcontractor assures the contractual employees
entitlement to all labor and occupational safety and health standards, free exercise of the
right to self-organization, security of tenure, and social and welfare benefits.
Same; Same; Same; Factors Considered in Determining Existence of an Independent
Contractor Relationship.—From the two aforementioned decisions, it may be inferred that
it is not enough to show substantial capitalization or investment in the form of tools,
equipment, machineries and work premises, among others, to be considered as an
independent contractor. In fact, jurisprudential holdings are to the effect that in
determining the existence of an independent contractor relationship, several factors might
be considered such as, but not necessarily confined to, whether the contractor is carrying
on an independent business; the nature and extent of the work; the skill required; the term
and duration of the relationship; the right to assign the performance of specified pieces of
work; the control and supervision of the workers; the power of the employer with respect
to the hiring, firing and payment of the workers of the contractor; the control of the
premises; the duty to supply premises, too.’s, appliances, materials and labor; and the
mode, manner and terms of payment.
Same; Same; Same; Judicial Notice; Devaluation; The Court takes judicial notice of the fact
that in 1993, the economic situation in the country was not as adverse as the present, as
shown by the devaluation of our peso.—PMCI does not have substantial capitalization or
investment in the form of tools, equipment, machineries, work premises, among others, to
qualify as an independent contractor. While it has an authorized capital stock of
P1,000,000.00, only P75,000.00 is actually paid-in, which, to our mind, cannot be considered
as substantial capitalization. In the case of Neri which was promulgated in 1993, BCC had
a capital stock of P1,000,000.00 which was fully subscribed and paid-for. Moreover, when
the Neri case was decided in 1993, the rate of exchange between the dollar and the peso
was only P27.30 to $1 while presently it is at P40.390 to $1. The Court takes judicial notice
of the fact that in 1993, the economic situation in the country was not as adverse as the
present, as shown by the devaluation of our peso. With the current economic atmosphere
in the country, the paid-in capitalization of PMCI amounting to P75,000.00 cannot be
considered as substantial capital and, as such, PMCI cannot qualify as an independent
contractor.
4
Same; Same; Same; Where the undertaking of a contractor does not involve the
performance of a specific job, but rather the supply of manpower only, it clearly conducts
itself as labor-only contractor.—PMCI was not engaged to perform a specific and special
job or service, which is one of the strong indicators that an entity is an independent
contractor as explained by the Court in the cases of Neri and Fuji. As stated in the Contract
of Service, the sole undertaking of PMCI was to provide RFC with a temporary workforce
able to carry out whatever service may be required by it. Such venture was complied with
by PMCI when the required personnel were actually assigned to RFC. Apart from that, no
other particular job, work or service was required from PMCI. Obviously, with such an
arrangement, PMCI merely acted as a recruitment agency for RFC. Since the undertaking
of PMCI did not involve the performance of a specific job, but rather the supply of
manpower only, PMCI clearly conducted itself as labor-only contractor.
Same; Same; Same; Control Test; ‘Tour-fold Test” to Ascertain Whether a Firm is the True
Employer of a Worker.—Even if we use the “four-fold test” to ascertain whether RFC is
the true employer of petitioner the same result would be achieved. In determining the
existence of employer-employee relationship the following elements of the “four-fold test”
are generally considered, namely: (1) the selection and engagement of the employee or the
power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power to
control the employee. Of these four, the “control test” is the most important. A careful
study of the evidence at hand shows that RFC possesses the earmarks of being the
employer of petitioner.
Same; Same; Same; Evidence; If only documentary evidence would be required to
demonstrate the existence of an employer-employee relationship, no scheming employer
would ever be brought before the bar of justice.—It should be pointed out that no
particular form of proof is required to prove the existence of an employer-employee
relationship. Any competent and relevant evidence may show the relationship. If only
documentary evidence would be required to demonstrate that relationship, no scheming
employer would ever be brought before the bar of justice. In the case at bar, petitioner
presented the identification card issued to him on 26 May 1990 by RFC as proof that it was
the latter who engaged his services. To our mind, the ID card is enough proof that
petitioner was previously hired by RFC prior to his transfer as agency worker to PMCI.
Same; Same; Same; Same; Judicial Notice; The Court takes judicial notice of the practice of
employers who, in order to evade the liabilities under the Labor Code, do not issue pay
slips directly to their employees.—The Court takes judicial notice of the practice of
employers who, in order to evade the liabilities under the Labor Code, do not issue
payslips directly to their employees. Under the current practice, a third person, usually the
purported contractor (service or manpower placement agency), assumes the act of paying
the wage. For this reason, the lowly worker is unable to show proof that it was directly
DANILO B. TABAS, EDUARDO A. BONDOC, RAMON M. BRIONES, EDUARDO R.
paid by the true employer. Nevertheless, for the workers, it is enough that they actually
ERISPE, JOEL MADRIAGA, ARTHUR M. ESPINO, AMARO BONA, FERDINAND
receive their pay, oblivious of the need for payslips, unaware of its legal implications.
CRUZ, FEDERICO A BELITA, ROBERTO P. ISLES, ELMER ARMADA, EDUARDO
Applying this principle to the case at bar, even though the wages were coursed through
UDOG, PETER TIANSING, MIGUELITA QUIAMBOA, NOMER MATAGA, VIOLY
PMCI, we note that the funds actually came from the pockets of RFC. Thus, in the end,
ESTEBAN and LYDIA ORTEGA, petitioners, vs. CALIFORNIA MANUFACTURING
RFC is still the one who paid the wages of petitioner albeit indirectly.
COMPANY, INC., LILY-VICTORIA A. AZARCON, NATIONAL LABOR RELATIONS
Same; Same; Same; Control Test; The power of control refers to the authority of the COMMISSION, and HON. EMERSON C. TUMANON, respondents.
employer to control the employee not only with regard to the result of work to be done but
Labor Law; Labor Relations; Employer-Employee Relationship; The existence of an
also to the means and methods by which the work is to be accomplished.—The fourth and
employer-employee relation cannot be made the subject of an agreement.—The existence
most important requirement in ascertaining the presence of employer-employee
of an employer-employee relation is a question of law and being such, it cannot be made
relationship is the power of control. The power of control refers to the authority of the
the subject of agreement. Hence, the fact that the manpower supply agreement between
employer to control the employee not only with regard to the result of work to be done but
Livi and California had specifically designated the former as the petitioners’ employer and
also to the means and methods by which the work is to be accomplished. It should be borne
had absolved the latter from any liability as an employer, will not erase either party’s
in mind, that the “control test” calls merely for the existence of the right to control the
obligations as an employer, if an employer-employee relation otherwise exists between the
manner of doing the work, and not necessarily to the actual exercise of the right. In the
workers and either firm. At any rate, since the agreement was between Livi and California,
case at bar, we need not belabor ourselves in discussing whether the power of control
they alone are bound by it, and the petitioners cannot be made to suffer from its adverse
exists. RFC already admitted that it exercised control and supervision over petitioner. RFC,
consequences.
however, raises the defense that the power of control was jointly exercised with PMCI. The
Labor Arbiter, on the other hand, found that petitioner was under the direct control and Same; Same; Same; “Labor Only” Contracting; The “labor only” contractor is considered
supervision of the personnel of RFC and not PMCI. We are inclined to believe the findings merely an agent of the employer, liability therefore must be shouldered by either one or
of the Labor Arbiter which is supported not only by the admission of RFC but also by the shared by both.—On the other hand, we have likewise held, based on Article 106 of the
evidence on record. Besides, to our mind, the admission of RFC that it exercised control Labor Code. xxx that notwithstanding the absence of a direct employeremployee
and supervision over petitioner, the same being a declaration against interest, is sufficient relationship between the employer in whose favor work had been contracted out by a
enough to prove that the power of control truly exists. “labor-only” contractor, and the employees, the former has the responsibility, together
with the “labor-only” contractor for any valid labor claims, by operation of law. The
Same; Dismissals; Due Process; Not only must the dismissal be for a valid or authorized
reason, so we held, is that the “labor-only” contractor is considered “merely an agent of
cause, the rudimentary requirements of due process—notice and hearing—must, likewise,
the employer, and liability must be shouldered by either one or shared by both.
be observed before an employee may be dismissed, otherwise the termination would, in
the eyes of the law, be illegal.—Since petitioner, due to his length of service, already Same; Same; Same; Casual Employees; A temporary or casual employee becomes regular
attained the status of a regular employee, he is entitled to the security of tenure provided after service of one year, unless he has been contracted for a specific project.—The fact that
under the labor laws. Hence, he may only be validly terminated from service upon the petitioners have been hired on a “temporary or seasonal” basis merely is no argument
compliance with the legal requisites for dismissal. Under the Labor Code, the requirements either. As we held in Philippine Bank of Communications v. NLRC, a temporary or casual
for the lawful dismissal of an employee are twofold, the substantive and the procedural employee, under Article 281 of the Labor Code, becomes regular after service of one year,
aspects. Not only must the dismissal be for a valid or authorized cause, the rudimentary unless he has been contracted for a specific project. And we cannot say that merchandising
requirements of due process—notice and hearing—must, likewise, be observed before an is a specific project for the obvious reason that it is an activity related to the day-to-day
employee may be dismissed. Without the concurrence of the two, the termination would, operations of California.
in the eyes of the law, be illegal.
5

ESCARIO VS NLRC
Labor Law; Contracts of Employment; There is labor-only contracting when the contractor
or sub-contractor merely recruits, supplies or places workers to perform a job, work or
service for a principal; Elements of labor-only contract.—There is labor-only contracting
when the contractor or subcontractor merely recruits, supplies or places workers to
perform a job, work or service for a principal. In labor-only contracting, the following
elements are present: (a) 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 (b) The workers recruited and placed by such person are
performing activities which are directly related to the principal business of the employer.
Same; Same; Where there is a Permissible Job Contracting; Conditions of Permissible Job
Contracting.—There is permissible job contracting when a principal agrees to put out or
farm out with a contractor or a subcontractor the performance or completion of a specific
job, work or service within a definite or predetermined period, regardless of whether such
job or work or service is to be performed or completed within or outside the premises of
the principal. In this arrangement, the following conditions must concur: (a) The contractor
carries on a distinct and independent business and undertakes the contract work on his
account under his own responsibility according to his own manner and method, free from
the control and direction of his employer or principal in all matters connected with the
performance of his work except as to the results thereof; and (b) The contractor has
substantial capital or investment in the form of tools, equipment, machineries (sic), work
premises, and other materials which are necessary in the conduct of his business.
Same; Same; In order to be considered an independent contractor it is not enough to show
substantial capitalization or investment in the form of tools, equipment, machinery and
work premises; Factors to be considered in determining an independent contractor.—In
the recent case of Alexander Vinoya vs. NLRC, et al., this Court ruled that in order to be
considered an independent contractor it is not enough to show substantial capitalization
or investment in the form of tools, equipment, machinery and work premises. In addition,
the following factors need be considered: (a) whether the contractor is carrying on an
independent business; (b) the nature and extent of the work; (c) the skill required; (d) the
term and duration of the relationship; (e) the right to assign the performance of specified
pieces of work; (f) the control and supervision of the workers; (g) the power of the
employer with respect to the hiring, firing and payment of workers of the contractor; (h)
6
the control of the premises; (i) the duty to supply premises, tools, appliances, materials,
and labor; and (j) the mode, manner and terms of payment.
Notes.—A wife, by affixing her signature to a Deed of Sale on the space provided for
witnesses, is deemed to have given her implied consent to the contract of sale—a wife’s
consent to the husband’s disposition of conjugal property does not always have to be
explicit or set forth in any particular document so long as it is shown by acts of the wife
that such consent or approval was indeed given. (Pelayo vs. Perez, 459 SCRA 475 [2005])
Where the redemption is made under a property regime governed by the conjugal
partnership of gains, Article 109 of the Family Code provides that property acquired by
right of redemption is the exclusive property of the spouses redeeming the property.
(Villegas vs. Lingan, 526 SCRA 63 [2007])
——o0o——
PAL VS LIGAN
Labor Law; Labor-Only Contracting; Legitimate contracting and labor-only contracting are
defined in Department Order (D.O.) No. 18-02, series of 2002 (Rules Implementing Articles
106 to 109 of the Labor Code, as amended).—Legitimate contracting and labor-only
contracting are defined in Department Order (D.O.) No. 18-02, Series of 2002 (Rules
Implementing Articles 106 to 109 of the Labor Code, as amended) as follows: Section 3.
Trilateral relationship in contracting arrangements. In legitimate contracting, there exists
a trilateral relationship under which there is a contract for a specific job, work or service
between the principal and the contractor or subcontractor, and a contract of employment
between the contractor or subcontractor and its workers. Hence, there are three parties
involved in these arrangements, the principal which decides to farm out a job or service to
a contractor or subcontractor, the contractor or subcontractor which has the capacity to
independently undertake the performance of the job, work or service, and the contractual
workers engaged by the contractor or subcontractor to accomplish the job, work or service.
(Emphasis and italics supplied) Section 5. Prohibition against labor-only contracting.—
Labor-only contracting is hereby declared prohibited. For this purpose, labor-only
contracting shall refer to an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal, and
any of the following elements are [sic] present: (i) The contractor or subcontractor does not
have substantial capital or investment which relates to the job, work or service to be
performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of
the principal; OR (ii) The contractor does not exercise the right to control over the
performance of the work of the contractual employee. (Emphasis, italics and capitalization
supplied)
Same; Same; For labor-only contracting to exist, Section 5 of D.O. No. 18-02 requires any
two of the elements to be present.—For labor-only contracting to exist, Section 5 of D.O.
No. 18-02 which requires any of two elements to be present is, for convenience, re-quoted:
(i) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied
or placed by such contractor or subcontractor are performing activities which are directly
related to the main business of the principal, OR (ii) The contractor does not exercise the
right to control over the performance of the work of the contractual employee. (Emphasis
and CAPITALIZATION supplied) Even if only one of the two elements is present then,
there is labor-only contracting.
Same; Same; One who claims to be an independent contractor has to prove that he
contracted to do the work according to his own methods and without being subject to the
employer’s control except only as to the results.—One who claims to be an independent
contractor has to prove that he contracted to do the work according to his own methods
and without being subject to the employer’s control except only as to the results.
Same; Same; Respondents having performed tasks which are usually necessary and
desirable in the air transportation business of petitioner, they should be deemed its regular
employees and Synergy as a labor-only contractor.—Respondents having performed tasks
which are usually necessary and desirable in the air transportation business of petitioner,
they should be deemed its regular employees and Synergy as a labor-only contractor. The
express provision in the Agreement that Synergy was an independent contractor and there
would be “no employer-employee relationship between [Synergy] and/or its employees
on one hand, and [petitioner] on the other hand” is not legally binding and conclusive as
contractual provisions are not valid determinants of the existence of such relationship. For
it is the totality of the facts and surrounding circumstances of the case which is
determinative of the parties’ relationship.
Labor law; National Labor Relations Commission; Appeals; Well-established is the
principle that findings of fact of quasi-judicial bodies, like the NLRC, are accorded with
7
respect, even finality, if supported by substantial evidence.—We find no basis to overturn
the Court of Appeals and the NLRC. Well-established is the principle that findings of fact
of quasi-judicial bodies, like the NLRC, are accorded with respect, even finality, if
supported by substantial evidence. Particularly when passed upon and upheld by the
Court of Appeals, they are binding and conclusive upon the Supreme Court and will not
normally be disturbed.
Same; Employer-Employee Relationship; Factors to be considered in ascertaining an
employer-employee relationship.—This Court has invariably held that in ascertaining an
employer-employee relationship, the following factors are considered: (a) the selection and
engagement of employee; (b) the payment of wages; (c) the power of dismissal; and, (d)
the power to control an employee’s conduct, the last being the most important.
Same; Independent Contractor; It is not enough to show substantial capitalization or
investment in the form of tools, equipment, machinery and work premises, etc., to be
considered an independent contractor.—However, in Vinoya v. NLRC, we clarified that it
was not enough to show substantial capitalization or investment in the form of tools,
equipment, machinery and work premises, etc., to be considered an independent
contractor. In fact, jurisprudential holdings were to the effect that in determining the
existence of an independent contractor relationship, several factors may be considered,
such as, but not necessarily confined to, whether the contractor was carrying on an
independent business; the nature and extent of the work; the skill required; the term and
duration of the relationship; the right to assign the performance of specified pieces of work;
the control and supervision of the workers; the power of the employer with respect to the
hiring, firing and payment of the workers of the contractor; the control of the premises; the
duty to supply premises, tools, appliances, materials and labor; and the mode, manner and
terms of payment.
Same; Same; Distinction between an independent contractor and a labor-only contractor.—
On this point, we agree with petitioner as distinctions must be made. In legitimate job
contracting, the law creates an employer-employee relationship for a limited purpose, i.e.,
to ensure that the employees are paid their wages. The principal employer becomes jointly
and severally liable with the job contractor only for the payment of the employees’ wages
whenever the contractor fails to pay the same. Other than that, the principal employer is
not responsible for any claim made by the employees. On the other hand, in labor-only
contracting, the statute creates an employer-employee relationship for a comprehensive
purpose: to prevent a circumvention of labor laws. The contractor is considered merely an
agent of the principal employer and the latter is responsible to the employees of the labor-
only contractor as if such employees had been directly employed by the principal
employer. The principal employer therefore becomes solidarity liable with the labor-only
contractor for all the rightful claims of the employees.
SMC VS MAERC INTEGRATED SERVICES
Labor law; National Labor Relations Commission; Appeals; Well-established is the
principle that findings of fact of quasi-judicial bodies, like the NLRC, are accorded with
respect, even finality, if supported by substantial evidence.—We find no basis to overturn
the Court of Appeals and the NLRC. Well-established is the principle that findings of fact
of quasi-judicial bodies, like the NLRC, are accorded with respect, even finality, if
supported by substantial evidence. Particularly when passed upon and upheld by the
Court of Appeals, they are binding and conclusive upon the Supreme Court and will not
normally be disturbed.
Same; Employer-Employee Relationship; Factors to be considered in ascertaining an
employer-employee relationship.—This Court has invariably held that in ascertaining an
employer-employee relationship, the following factors are considered: (a) the selection and
engagement of employee; (b) the payment of wages; (c) the power of dismissal; and, (d)
the power to control an employee’s conduct, the last being the most important.
Same; Independent Contractor; It is not enough to show substantial capitalization or
investment in the form of tools, equipment, machinery and work premises, etc., to be
considered an independent contractor.—However, in Vinoya v. NLRC, we clarified that it
was not enough to show substantial capitalization or investment in the form of tools,
equipment, machinery and work premises, etc., to be considered an independent
contractor. In fact, jurisprudential holdings were to the effect that in determining the
existence of an independent contractor relationship, several factors may be considered,
such as, but not necessarily confined to, whether the contractor was carrying on an
independent business; the nature and extent of the work; the skill required; the term and
duration of the relationship; the right to assign the performance of specified pieces of work;
the control and supervision of the workers; the power of the employer with respect to the
hiring, firing and payment of the workers of the contractor; the control of the premises; the
duty to supply premises, tools, appliances, materials and labor; and the mode, manner and
terms of payment.
Same; Same; Distinction between an independent contractor and a labor-only contractor.—
On this point, we agree with petitioner as distinctions must be made. In legitimate job
contracting, the law creates an employer-employee relationship for a limited purpose, i.e.,
8
to ensure that the employees are paid their wages. The principal employer becomes jointly
and severally liable with the job contractor only for the payment of the employees’ wages
whenever the contractor fails to pay the same. Other than that, the principal employer is
not responsible for any claim made by the employees. On the other hand, in labor-only
contracting, the statute creates an employer-employee relationship for a comprehensive
purpose: to prevent a circumvention of labor laws. The contractor is considered merely an
agent of the principal employer and the latter is responsible to the employees of the labor-
only contractor as if such employees had been directly employed by the principal
employer. The principal employer therefore becomes solidarity liable with the labor-only
contractor for all the rightful claims of the employees.
Appeals; While factual findings of the Court of Appeals are generally binding upon the
Supreme Court, an exception to this rule is when the factual findings of the former are
contrary to those of the trial court, or the lower administrative body.—As a general rule,
factual findings of the Court of Appeals are binding upon the Supreme Court. One
exception to this rule is when the factual findings of the former are contrary to those of the
trial court, or the lower administrative body, as the case may be. This Court is obliged to
resolve an issue of fact herein due to the incongruent findings of the Labor Arbiter and the
NLRC and those of the Court of Appeals.
Labor Law; Job Contracting; Labor-Only Contracting; Words and Phrases; In a legitimate
job contract, an employer enters into a contract with a job contractor for the performance
of the former’s work; In legitimate job contracting, the law creates an employer-employee
relationship between the employer and the contractor’s employees only for a limited
purpose, i.e., to ensure that the employees are paid their wages; Labor-only contracting is
an arrangement wherein the contractor merely acts as an agent in recruiting and supplying
the principal employer with workers for the purpose of circumventing labor law
provisions setting down the rights of employees; A finding by appropriate authorities that
a contractor is a “labor-only” contractor establishes an employer-employee relationship
between the principal employer and the contractor’s employees and the former becomes
solidarily liable for all the rightful claims of the employees.—A legitimate job contract,
wherein an employer enters into a contract with a job contractor for the performance of the
former’s work, is permitted by law. Thus, the employer-employee relationship between
the job contractor and his employees is maintained. In legitimate job contracting, the law
creates an employer-employee relationship between the employer and the contractor’s
employees only for a limited purpose, i.e., to ensure that the employees are paid their
wages. The employer becomes jointly and severally liable with the job contractor only for
the payment of the employees’ wages whenever the contractor fails to pay the same. Other
than that, the employer is not responsible for any claim made by the contractor’s
employees. On the other hand, labor-only contracting is an arrangement wherein the
contractor merely acts as an agent in recruiting and supplying the principal employer with
workers for the purpose of circumventing labor law provisions setting down the rights of
employees. It is not condoned by law. A finding by the appropriate authorities that a
contractor is a “labor-only” contractor establishes an employer-employee relationship
between the principal employer and the contractor’s employees and the former becomes
solidarily liable for all the rightful claims of the employees.
Same; Same; Same; Performing activities directly related to the principal business of the
employer is only one of the two indicators that “labor-only” contracting exists—the other
is lack of substantial capital or investment.—The law clearly establishes an employer-
employee relationship between the principal employer and the contractor’s employee
upon a finding that the contractor is engaged in “labor-only” contracting. Article 106 of the
Labor Code categorically states: “There is ‘labor-only’ contracting where the person
supplying workers to an employee 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 persons are performing activities which are directly related
to the principal business of such employer.” Thus, performing activities directly related to
the principal business of the employer is only one of the two indicators that “labor-only”
contracting exists; the other is lack of substantial capital or investment. The Court finds
that both indicators exist in the case at bar.
Same; Same; Same; The Court does not set an absolute figure for what it considers
substantial capital for an independent job contractor, but it measures the same against the
type of work which the contractor is obligated to perform for the principal.—The Court
clarifies that although Interserve has an authorized capital stock amounting to
P2,000,000.00, only P625,000.00 thereof was paid up as of 31 December 2001. The Court
does not set an absolute figure for what it considers substantial capital for an independent
job contractor, but it measures the same against the type of work which the contractor is
obligated to perform for the principal. However, this is rendered impossible in this case
since the Contract between petitioner and Interserve does not even specify the work or the
project that needs to be performed or completed by the latter’s employees, and uses the
dubious phrase “tasks and activities that are considered contractible under existing laws
and regulations.” Even in its pleadings, petitioner carefully sidesteps identifying or
describing the exact nature of the services that Interserve was obligated to render to
petitioner. The importance of identifying with particularity the work or task which
Interserve was supposed to accomplish for petitioner becomes even more evident,
considering that the Articles of Incorporation of Interserve states that its primary purpose
is to operate, conduct, and maintain the business of janitorial and allied services. But
9
respondents were hired as salesmen and leadman for petitioner. The Court cannot, under
such ambiguous circumstances, make a reasonable determination if Interserve had
substantial capital or investment to undertake the job it was contracting with petitioner.
Same; Same; Same; Burden of Proof; The contractor, not the employee, has the burden of
proof that it has the substantial capital, investment, and tool to engage in job contracting.—
The contractor, not the employee, has the burden of proof that it has the substantial capital,
investment, and tool to engage in job contracting. Although not the contractor itself (since
Interserve no longer appealed the judgment against it by the Labor Arbiter), said burden
of proof herein falls upon petitioner who is invoking the supposed status of Interserve as
an independent job contractor. Noticeably, petitioner failed to submit evidence to establish
that the service vehicles and equipment of Interserve, valued at P510,000.00 and
P200,000.00, respectively, were sufficient to carry out its service contract with petitioner.
Certainly, petitioner could have simply provided the courts with records showing the
deliveries that were undertaken by Interserve for the Lagro area, the type and number of
equipment necessary for such task, and the valuation of such equipment. Absent evidence
which a legally compliant company could have easily provided, the Court will not
presume that Interserve had sufficient investment in service vehicles and equipment,
especially since respondents’ allegation—that they were using equipment, such as forklifts
and pallets belonging to petitioner, to carry out their jobs—was uncontroverted.
Same; Same; Same; Power of Control; An employer is a labor-only contractor where it does
not exercise the right to control the performance of the work of its employees.—It is also
apparent that Interserve is a labor-only contractor under Section 5(ii) of the Rules
Implementing Articles 106-109 of the Labor Code, as amended, since it did not exercise the
right to control the performance of the work of respondents. The lack of control of
Interserve over the respondents can be gleaned from the Contract of Services between
Interserve (as the CONTRACTOR) and petitioner (as the CLIENT).
Same; Same; Same; The power to recommend penalties or dismiss workers is the strongest
indication of a company’s right of control as direct employer.—Also significant was the
right of petitioner under paragraph 2 of the Contract to “request the replacement of the
CONTRACTOR’S personnel.” True, this right was conveniently qualified by the phrase “if
from its judgment, the jobs or the projects being done could not be completed within the
time specified or that the quality of the desired result is not being achieved,” but such
qualification was rendered meaningless by the fact that the Contract did not stipulate what
work or job the personnel needed to complete, the time for its completion, or the results
desired. The said provision left a gap which could enable petitioner to demand the removal
or replacement of any employee in the guise of his or her inability to complete a project in
time or to deliver the desired result. The power to recommend penalties or dismiss workers
is the strongest indication of a company’s right of control as direct employer.
Same; Same; Same; An independent job contractor, who is answerable to the principal only
for the results of a certain work, job, or service need not guarantee to said principal the
daily attendance of the workers assigned to the latter.—Paragraph 4 of the same Contract,
in which Interserve warranted to petitioner that the former would provide relievers and
replacements in case of absences of its personnel, raises another red flag. An independent
job contractor, who is answerable to the principal only for the results of a certain work, job,
or service need not guarantee to said principal the daily attendance of the workers assigned
to the latter. An independent job contractor would surely have the discretion over the pace
at which the work is performed, the number of employees required to complete the same,
and the work schedule which its employees need to follow.
ALVIADO VS. PROCTER & GAMBLE PHILS., INC.
Labor Law; Labor-Only Contracting; The Law and its implementing rules allow
contracting arrangements for the performance of specific jobs, works of services; The
current labor rules expressly prohibit labor-only contracting; Where there is labor-only
contracting; Elements of Labor-Only Contracting.—The law and its implementing rules
allow contracting arrangements for the performance of specific jobs, works or services.
Indeed, it is management prerogative to farm out any of its activities, regardless of whether
such activity is peripheral or core in nature. However, in order for such outsourcing to be
valid, it must be made to an independent contractor because the current labor rules
expressly prohibit labor-only contracting. To emphasize, there is labor-only contracting
when the contractor or sub-contractor merely recruits, supplies or places workers to
perform a job, work or service for a principal and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied
or placed by such contractor or subcontractor are performing activities which are directly
10
related to the main business of the principal; or ii) The contractor does not exercise the
right to control over the performance of the work of the contractual employee.
Same; Same; Independent Contractors; Promm-Gem cannot be considered as a labor-only
contractor; It is a legitimate independent contractor.—Under the circumstances, Promm-
Gem cannot be considered as a labor-only contractor. We find that it is a legitimate
independent contractor.
Same; Same; Where “labor-only” contracting exists, the Labor Code itself establishes an
employer-employee relationship between the employer and the employees of the “labor-
only” contractor; The contractor is considered merely an agent of the principal employer
and the latter is responsible to the employees of the labor-only contractor as if such
employees had been directly employed by the principal employer.—“Where ‘labor-only’
contracting exists, the Labor Code itself establishes an employer-employee relationship
between the employer and the employees of the ‘labor-only’ contractor.” The statute
establishes this relationship for a comprehensive purpose: to prevent a circumvention of
labor laws. The contractor is considered merely an agent of the principal employer and the
latter is responsible to the employees of the labor-only contractor as if such employees had
been directly employed by the principal employer.
Same; Termination of Employment; Misconduct; Grave Misconduct; Definition of
Misconduct; Elements for Misconduct to be a Just Cause for Dismissal.—Misconduct has
been defined as improper or wrong conduct; the transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, unlawful in character implying
wrongful intent and not mere error of judgment. The misconduct to be serious must be of
such grave and aggravated character and not merely trivial and unimportant. To be a just
cause for dismissal, such misconduct (a) must be serious; (b) must relate to the
performance of the employee’s duties; and (c) must show that the employee has become
unfit to continue working for the employer.
Same; Same; Same; Same; A misconduct which is not serious or grave, as that existing in
the instant case, cannot be a valid basis for dismissing an employee.—In the instant case,
petitioners-employees of Promm-Gem may have committed an error of judgment in
claiming to be employees of P&G, but it cannot be said that they were motivated by any
wrongful intent in doing so. As such, we find them guilty of only simple misconduct for
assailing the integrity of Promm-Gem as a legitimate and independent promotion firm. A
misconduct which is not serious or grave, as that existing in the instant case, cannot be a
valid basis for dismissing an employee.
Same; Same; Loss of Trust and Confidence; Loss of trust and confidence, as a ground for
dismissal, must be based on the willful breach of the trust reposed in the employee by his
employer.—Loss of trust and confidence, as a ground for dismissal, must be based on the
willful breach of the trust reposed in the employee by his employer. Ordinary breach will
not suffice. A breach of trust is willful if it is done intentionally, knowingly and purposely,
without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly,
heedlessly or inadvertently.
Same; Same; Same; In order to constitute a just cause for dismissal, the act complained of
must be work-related and must show that the employee is unfit to continue to work for
the employer.—Loss of trust and confidence, as a cause for termination of employment, is
premised on the fact that the employee concerned holds a position of responsibility or of
trust and confidence. As such, he must be in-
vested with confidence on delicate matters, such as custody, handling or care and
protection of the property and assets of the employer. And, in order to constitute a just
cause for dismissal, the act complained of must be work-related and must show that the
employee is unfit to continue to work for the employer. In the instant case, the petitioners-
employees of Promm-Gem have not been shown to be occupying positions of
responsibility or of trust and confidence. Neither is there any evidence to show that they
are unfit to continue to work as merchandisers for Promm-Gem.
Same; Same; In termination cases, the burden of proof rests upon the employer to show
that the dismissal is for just and valid cause.—Going back to the matter of dismissal, it
must be emphasized that the onus probandi to prove the lawfulness of the dismissal rests
with the employer. In termination cases, the burden of proof rests upon the employer to
show that the dismissal is for just and valid cause. In the instant case, P&G failed to
discharge the burden of proving the legality and validity of the dismissals of those
petitioners who are considered its employees. Hence, the dismissals necessarily were not
justified and are therefore illegal.
Labor Law; Labor Unions; Union Security Clauses; Words and Phrases; “Union Security,”
“Closed Shop,” “Union Shop,” and “Maintenance of Membership,” Explained.—“Union
security” is a generic term which is applied to and comprehends “closed shop,” “union
shop,” “maintenance of membership” or any other form of agreement which imposes upon
employees the obligation to acquire or retain union membership as a condition affecting
employment. There is union shop when all new regular employees are required to join the
union within a certain period for their continued employment. There is maintenance of
membership shop when employees, who are union members as of the effective date of the
11
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.
Same; Same; Same; It is the policy of the State to promote unionism to enable the workers
to negotiate with management on the same level and with more persuasiveness than if
they were to individually and independently bargain for the improvement of their
respective conditions—the purpose of a union shop or other union security arrangement
is to guarantee the continued existence of the union through enforced membership for the
benefit of the workers.—In the case of Liberty Flour Mills Employees v. Liberty Flour Mills,
Inc., 180 SCRA 668 (1989), we ruled that: It is the policy of the State to promote unionism
to enable the workers to negotiate with management on the same level and with more
persuasiveness than if they were to individually and independently bargain for the
improvement of their respective conditions. To this end, the Constitution guarantees to
them the rights “to self-organization, collective bargaining and negotiations and peaceful
concerted actions including the right to strike in accordance with law.” There is no
question that these purposes could be thwarted if every worker were to choose to go his
own separate way instead of joining his co-employees in planning collective action and
presenting a united front when they sit down to bargain with their employers. It is for this
reason that the law has sanctioned stipulations for the union shop and the closed shop as
a means of encouraging the workers to join and support the labor union of their own choice
as their representative in the negotiation of their demands and the protection of their
interest vis-à-vis the employer. (Emphasis ours.) In other words, the purpose of a union
shop or other union security arrangement is to guarantee the continued existence of the
union through enforced membership for the benefit of the workers.
Same; Same; Same; All employees in the bargaining unit covered by a Union Shop Clause
in their Collective Bargaining Agreement (CBA) with management are subject to its terms;
Exceptions.—All employees in the bargaining unit covered by a Union Shop Clause in their
CBA with management are subject to its terms. However, under law and jurisprudence,
the following kinds of employees are exempted from its coverage, namely, employees who
at the time the union shop agreement takes effect are bona fide members of a religious
organization which prohibits its members from joining labor unions on religious grounds;
employees already in the service and already members of a union other than the majority
at the time the union shop agreement took effect; confidential employees who are excluded the parties.—The Articles of Merger and Plan of Merger dated April 7, 2000 did not contain
from the rank and file bargaining unit; and employees excluded from the union shop by any specific stipulation with respect to the employment contracts of existing personnel of
express terms of the agreement. the non-surviving entity which is FEBTC. Unlike the Voluntary Arbitrator, this Court
cannot uphold the reasoning that the general stipulation regarding transfer of FEBTC
Same; Same; Same; Right of Association; When certain employees are obliged to join a
assets and liabilities to BPI as set forth in the Articles of Merger necessarily includes the
particular union as a requisite for continued employment, as in the case of Union Security
transfer of all FEBTC employees into the employ of BPI and neither BPI nor the FEBTC
Clauses, this condition is a valid restriction of the freedom or right not to join any labor
employees allegedly could do anything about it. Even if it is so, it does not follow that the
organization because it is in favor of unionism.—When certain employees are obliged to
absorbed employees should not be subject to the terms and conditions of employment
join a particular union as a requisite for continued employment, as in the case of Union
obtaining in the surviving corporation. The rule is that unless expressly assumed, labor
Security Clauses, this condition is a valid restriction of the freedom or right not to join any
contracts such as employment contracts and collective bargaining agreements are not
labor organization because it is in favor of unionism. This Court, on occasion, has even
enforceable against a transferee of an enterprise, labor contracts being in personam, thus
held that a union security clause in a CBA is not a restriction of the right of freedom of
binding only between the parties. A labor contract merely creates an action in personam
association guaranteed by the Constitution. Moreover, a closed shop agreement is an
and does not create any real right which should be respected by third parties. This
agreement whereby an employer binds himself to hire only members of the contracting
conclusion draws its force from the right of an employer to select his employees and to
union who must continue to remain members in good standing to keep their jobs. It is “the
decide when to engage them as protected under our Constitution, and the same can only
most prized achievement of unionism.” It adds membership and compulsory dues. By
be restricted by law through the exercise of the police power.
holding out to loyal members a promise of employment in the closed shop, it wields group
solidarity. Same; Same; Same; Involuntary Servitude; The Court believes that it is contrary to public
policy to declare the former employees of the absorbed bank as forming part of the assets
Same; Corporation Law; Corporate Mergers; Words and Phrases; In legal parlance, human
or liabilities that were transferred and absorbed by the other bank in the Articles of
beings are never embraced in the term “assets and liabilities”; The Corporation Code does
Merger—assets and liabilities, in this instance, should be deemed to refer only to property
not mandate the absorption of the employees of the non-surviving corporation by the
rights and obligations of the absorbed bank and do not include the employment contracts
surviving corporation in the case of a merger.—In legal parlance, however, human beings
of its personnel; The employees of the absorbed bank retained the prerogative to allow
are never embraced in the term “assets and liabilities.” Moreover, BPI’s absorption of
themselves to be absorbed or not, otherwise, that would be tantamount to involuntary
former FEBTC employees was neither by operation of law nor by legal consequence of
servitude.—This Court believes that it is contrary to public policy to declare the former
contract. There was no government regulation or law that compelled the merger of the two
FEBTC employees as forming part of the assets or liabilities of FEBTC that were transferred
banks or the absorption of the employees of the dissolved corporation by the surviving
and absorbed by BPI in the Articles of Merger. Assets and liabilities, in this instance, should
corporation. Had there been such law or regulation, the absorption of employees of the
be deemed to refer only to property rights and obligations of FEBTC and do not include
non-surviving entities of the merger would have been mandatory on the surviving
the employment contracts of its personnel. A corporation cannot unilaterally transfer its
corporation. In the present case, the merger was voluntarily entered into by both banks
employees to another employer like chattel. Certainly, if BPI as an employer had the right
presumably for some mutually acceptable consideration. In fact, the Corporation Code
to choose who to retain among FEBTC’s employees, FEBTC employees had the
does not also mandate the absorption of the employees of the non-surviving corporation
concomitant right to choose not to be absorbed by BPI. Even though FEBTC employees
by the surviving corporation in the case of a merger.
had no choice or control over the merger of their employer with BPI, they had a choice
whether or not they would allow themselves to be absorbed by BPI. Certainly nothing
prevented the FEBTC’s employees from resigning or retiring and seeking employment
Same; Same; Same; The rule is that unless expressly assumed, labor contracts such as elsewhere instead of going along with the proposed absorption. Employment is a personal
employment contracts and collective bargaining agreements are not enforceable against a consensual contract and absorption by BPI of a former FEBTC employee without the
transferee of an enterprise, labor contracts being in personam, thus binding only between consent of the employee is in violation of an individual’s freedom to contract. It would

12
have been a different matter if there was an express provision in the articles of merger that bargaining agreement is the certified union that has, in the appropriate certification
as a condition for the merger, BPI was being required to assume all the employment election, been shown to represent a majority of the members of the bargaining unit.
contracts of all existing FEBTC employees with the conformity of the employees. In the
absence of such a provision in the articles of merger, then BPI clearly had the business
management decision as to whether or not employ FEBTC’s employees. FEBTC employees Same; Same; Same; Labor Unions; Union Security Clauses; Words and Phrases; The Court
likewise retained the prerogative to allow themselves to be absorbed or not; otherwise, that should not uphold an interpretation of the term “new employee” based on the general and
would be tantamount to involuntary servitude. extraneous provisions of the Corporation Code on merger that would defeat, rather than
fulfill, the purpose of the union shop clause—the provision of the Article 248(e) of the
Same; Same; Same; From the tenor of local and foreign authorities, in voluntary mergers,
Labor Code in point mandates that nothing in the said Code or any other law should stop
absorption of the dissolved corporation’s employees or the recognition of the absorbed
the parties from requiring membership in a recognized collective bargaining agent as a
employees’ service with their previous employer may be demanded from the surviving
condition of employment.—Justice Brion himself points out that there is no clear,
corporation if required by provision of law or contract.—From the tenor of local and
categorical definition of “new employee” in the CBA. In other words, the term “new
foreign authorities, in voluntary mergers, absorption of the dissolved corporation’s
employee” as used in the union shop clause is used broadly without any qualification or
employees or the recognition of the absorbed employees’ service with their previous
distinction. However, the Court should not uphold an interpretation of the term “new
employer may be demanded from the surviving corporation if required by provision of
employee” based on the general and extraneous provisions of the Corporation Code on
law or contract. The dissent of Justice Arturo D. Brion tries to make a distinction as to the
merger that would defeat, rather than fulfill, the purpose of the union shop clause. To
terms and conditions of employment of the absorbed employees in the case of a corporate
reiterate, the provision of the Article 248(e) of the Labor Code in point mandates that
merger or consolidation which will, in effect, take away from corporate management the
nothing in the said Code or any other law should stop the parties from requiring
prerogative to make purely business decisions on the hiring of employees or will give it an
membership in a recognized collective bargaining agent as a condition of employment.
excuse not to apply the CBA in force to the prejudice of its own employees and their
recognized collective bargaining agent. In this regard, we disagree with Justice Brion. Same; Same; Same; Same; By law and jurisprudence, a merger only becomes effective upon
approval by the Securities and Exchange Commission (SEC) of the articles of merger.—By
Same; Same; Same; Although in a merger it is as if there is no change in the personality of
law and jurisprudence, a merger only becomes effective upon approval by the Securities
the employer, there is in reality a change in the situation of the employee—once an
and Exchange Commission (SEC) of the articles of merger. In Associated Bank v. Court of
employee is absorbed, there are presumably changes in his condition of employment even
Appeals, 291 SCRA 511 (1998), we held: The procedure to be followed is prescribed under
if his previous tenure and salary rate is recognized by the absorbing company.—That BPI
the Corporation Code. Section 79 of said Code requires the approval by the Securities and
is the same entity as FEBTC after the merger is but a legal fiction intended as a tool to
Exchange Commission (SEC) of the articles of merger which, in turn, must have been duly
adjudicate rights and obligations between and among the merged corporations and the
approved by a majority of the respective stockholders of the constituent corporations. The
persons that deal with them. Although in a merger it is as if there is no change in the
same provision further states that the merger shall be effective only upon the issuance by
personality of the employer, there is in reality a change in the situation of the employee.
the SEC of a certificate of merger. The effectivity date of the merger is crucial for
Once an FEBTC employee is absorbed, there are presumably changes in his condition of
determining when the merged or absorbed corporation ceases to exist; and when its rights,
employment even if his previous tenure and salary rate is recognized by BPI. It is
privileges, properties as well as liabilities pass on to the surviving corporation.
reasonable to assume that BPI would have different rules and regulations and company
practices than FEBTC and it is incumbent upon the former FEBTC employees to obey these Same; Same; Same; Same; Union Shop Clause; Words and Phrases; In law or even under
new rules and adapt to their new environment. Not the least of the changes in employment the express terms of the Collective Bargaining Agreement (CBA), there is no special class
condition that the absorbed FEBTC employees must face is the fact that prior to the merger of employees called “absorbed employees”—in order for the Court to apply or not apply
they were employees of an unorganized establishment and after the merger they became the Union Shop Clause, it can only classify the employees of the absorbed bank as either
employees of a unionized company that had an existing collective bargaining agreement “old” or “new.”—Petitioner limited itself to the argument that its absorbed employees do
with the certified union. This presupposes that the union who is party to the collective
13
not fall within the term “new employees” contemplated under the Union Shop Clause with
the apparent objective of excluding all, and not just some, of the former FEBTC employees
from the application of the Union Shop Clause. However, in law or even under the express
terms of the CBA, there is no special class of employees called “absorbed employees.” In
order for the Court to apply or not apply the Union Shop Clause, we can only classify the
former FEBTC employees as either “old” or “new.” If they are not “old” employees, they
are necessarily “new” employees. If they are new employees, the Union Shop Clause did
not distinguish between new employees who are non-regular at their hiring but who
subsequently become regular and new employees who are “absorbed” as regular and
permanent from the beginning of their employment. The Union Shop Clause did not so
distinguish, and so neither must we.
Same; Same; Same; Same; Same; The effect or consequence of BPI’s so-called “absorption”
of former Far East Bank and Trust Company (FEBTC) employees should be limited to what
they actually agreed to, i.e. recognition of the FEBTC employees’ years of service, salary
rate and other benefits with their previous employer—the effect should not be stretched
so far as to exempt former FEBTC employees from the existing Collective Bargaining
Agreement (CBA) terms, company policies and rules which apply to employees similarly
situated.—We agree with the Court of Appeals that there are no substantial differences
between a newly hired non-regular employee who was regularized weeks or months after
his hiring and a new employee who was absorbed from another bank as a regular
employee pursuant to a merger, for purposes of applying the Union Shop Clause. Both
employees were hired/employed only after the CBA was signed. At the time they are
being required to join the Union, they are both already regular rank and file employees of
BPI. They belong to the same bargaining unit being represented by the Union. They both
enjoy benefits that the Union was able to secure for them under the CBA. When they both
entered the employ of BPI, the CBA and the Union Shop Clause therein were already in
effect and neither of them had the opportunity to express their preference for unionism or
not. We see no cogent reason why the Union Shop Clause should not be applied equally
to these two types of new employees, for they are undeniably similarly situated. The effect
or consequence of BPI’s so-called “absorption” of former FEBTC employees should be
limited to what they actually agreed to, i.e. recognition of the FEBTC employees’ years of
service, salary rate and other benefits with their previous employer. The effect should not
be stretched so far as to exempt former FEBTC employees from the existing CBA terms,
company policies and rules which apply to employees similarly situated. If the Union Shop
Clause is valid as to other new regular BPI employees, there is no reason why the same
clause would be a violation of the “absorbed” employees’ freedom of association.
14
Same; Same; Same; Same; Same; It is but fair that similarly situated employees who enjoy
the same privileges of a Collective Bargaining Agreement (CBA) should be likewise subject
to the same obligations the CBA imposes upon them—a contrary interpretation of the
Union Shop Clause will be inimical to industrial peace and workers’ solidarity.—It is but
fair that similarly situated employees who enjoy the same privileges of a CBA should be
likewise subject to the same obligations the CBA imposes upon them. A contrary
interpretation of the Union Shop Clause will be inimical to industrial peace and workers’
solidarity. This unfavorable situation will not be sufficiently addressed by asking the
former FEBTC employees to simply pay agency fees to the Union in lieu of union
membership, as the dissent of Justice Carpio suggests. The fact remains that other new
regular employees, to whom the “absorbed employees” should be compared, do not have
the option to simply pay the agency fees and they must join the Union or face termination.
Same; Same; Same; Same; Same; A certified union whose membership falls below twenty
percent (20%) of the total members of the collective bargaining unit may lose its status as
a legitimate labor organization altogether, even in a situation where there is no competing
union, in which case, an interested party may file for the cancellation of the union’s
certificate of registration with the Bureau of Labor Relations.—Without the union shop
clause or with the restrictive interpretation thereof as proposed in the dissenting opinions,
the company can jeopardize the majority status of the certified union by excluding from
union membership all new regular employees whom the Company will “absorb” in future
mergers and all new regular employees whom the Company hires as regular from the
beginning of their employment without undergoing a probationary period. In this manner,
the Company can increase the number of members of the collective bargaining unit and if
this increase is not accompanied by a corresponding increase in union membership, the
certified union may lose its majority status and render it vulnerable to attack by another
union who wishes to represent the same bargaining unit. Or worse, a certified union whose
membership falls below twenty percent (20%) of the total members of the collective
bargaining unit may lose its status as a legitimate labor organization altogether, even in a
situation where there is no competing union. In such a case, an interested party may file
for the cancellation of the union’s certificate of registration with the Bureau of Labor
Relations. Plainly, the restrictive interpretation of the union shop clause would place the
certified union’s very existence at the mercy and control of the employer. Relevantly, only
BPI, the employer appears to be interested in pursuing this case. The former FEBTC
employees have not joined BPI in this appeal.
Same; Labor Unions; Union Security Clauses; Social Justice; The constitutional guarantee
given the right to form unions and the State policy to promote unionism have social justice
considerations.—It is unsurprising that significant provisions on labor protection of the
1987 Constitution are found in Article XIII on Social Justice. The constitutional guarantee
given the right to form unions and the State policy to promote unionism have social justice
considerations. In People’s Industrial and Commercial Employees and Workers
Organization v. People’s Industrial and Commercial Corporation, 112 SCRA 440 (1982),
we recognized that “[l]abor, being the weaker in economic power and resources than
capital, deserve protection that is actually substantial and material.”
Same; Same; Same; Right of Association; The rationale for upholding the validity of union
shop clauses in a Collective Bargaining Agreement (CBA), even if they impinge upon the
individual employee’s right or freedom of association, is not to protect the union for the
union’s sake—a strong and effective union presumably benefits all employees in the
bargaining unit since such a union would be in a better position to demand improved
benefits and conditions of work from the employer.—The rationale for upholding the
validity of union shop clauses in a CBA, even if they impinge upon the individual
employee’s right or freedom of association, is not to protect the union for the union’s sake.
Laws and jurisprudence promote unionism and afford certain protections to the certified
bargaining agent in a unionized company because a strong and effective union presumably
benefits all employees in the bargaining unit since such a union would be in a better
position to demand improved benefits and conditions of work from the employer. This is
the rationale behind the State policy to promote unionism declared in the Constitution,
which was elucidated in the above-cited case of Liberty Flour Mills Employees v. Liberty
Flour Mills, Inc., 180 SCRA 668 (1989).
Same; Same; Same; Same; Hierarchy of Rights; In the hierarchy of constitutional values,
this Court has repeatedly held that the right to abstain from joining a labor organization is
subordinate to the policy of encouraging unionism as an instrument of social justice.—In
the case at bar, since the former FEBTC employees are deemed covered by the Union Shop
Clause, they are required to join the certified bargaining agent, which supposedly has
gathered the support of the majority of workers within the bargaining unit in the
appropriate certification proceeding. Their joining the certified union would, in fact, be in
the best interests of the former FEBTC employees for it unites their interests with the
majority of employees in the bargaining unit. It encourages employee solidarity and
affords sufficient protection to the majority status of the union during the life of the CBA
which are the precisely the objectives of union security clauses, such as the Union Shop
Clause involved herein. We are indeed not being called to balance the interests of
individual employees as against the State policy of promoting unionism, since the
employees, who were parties in the court below, no longer contested the adverse Court of
Appeals’ decision. Nonetheless, settled jurisprudence has already swung the balance in
favor of unionism, in recognition that ultimately the individual employee will be benefited
15
by that policy. In the hierarchy of constitutional values, this Court has repeatedly held that
the right to abstain from joining a labor organization is subordinate to the policy of
encouraging unionism as an instrument of social justice.
CARPIO, J., Dissenting Opinion:
Labor Law; Labor Unions; Right of Association; This Court cannot adopt as part of its
jurisprudence a practice that clearly violates a fundamental constitutional right just
because the aggrieved employees gave up the fight to protect such right.—BPI,
independently of the absorbed FEBTC employees, has the right to challenge the
constitutionality of the union shop clause as applied to the absorbed FEBTC employees
because BPI is being compelled, against its best interests, to terminate their employment if
they do not join the Union. Besides, this Court cannot adopt as part of its jurisprudence a
practice that clearly violates a fundamental constitutional right just because the aggrieved
employees gave up the fight to protect such right. The Constitution guarantees the
fundamental right of all workers to “self-organization.” The right to “self-organi­zation”
is a species of the broader constitutional right of the people “to form unions, associations,
or societies for purposes not contrary to law,” which right “shall not be abridged.”
Same; Same; Same; Words and Phrases; “Self-organization” means voluntary association
without compulsion, threat of punishment, or threat of loss of livelihood—compulsory
membership is anathema to “self-organiza-tion.”—The right of workers to self-
organization means that workers themselves voluntarily organize, without compulsion
from outside forces. “Self-organization” means voluntary association without compulsion,
threat of punishment, or threat of loss of livelihood. Workers who “self-organize” are
workers who on their own volition freely and voluntarily form or join a union.
Compulsory membership is anathema to “self-organization.” The right to self-organize
includes the right not to exercise such right. Freedom to associate necessarily includes the
freedom not to associate. Thus, freedom to join unions necessarily includes the freedom
not to join unions.
Same; Same; Same; Union Security Clauses; Words and Phrases; In a “union shop,”
employees who are not union members at the time of signing of the contract need not join
the union, but all workers hired thereafter must join—non-members may be hired, but to
retain employment must become union members after a certain period; In a “closed shop,”
only union members can be hired by the company and they must remain union members
to retain employment in the company; A closed shop is so harsh that it must be strictly
construed and that doubts must be resolved against it.—To further strengthen the powers
of a union, the State has allowed the inclusion of union security clauses, including a “union
shop” (the type of union security clause involved in this case), in collective bargaining
agreements (CBA). In a “union shop,” employees who are not union members at the time
of signing of the contract need not join the union, but all workers hired thereafter must
join. Non-members may be hired, but to retain employment must become union members
after a certain period. The ponencia points out the validity in this jurisdiction of the more
stringent union security of “closed shop” and its applicability to old employees who are
non-union members at the time of effectivity of the CBA. In a “closed shop,” only union
members can be hired by the company and they must remain union members to retain
employment in the company. As explained in Guijarno, it was to “further increase the
effectiveness of [unions] that a closed shop has been allowed.” However, this undertaking
did not come without detrimental effects on the workers themselves, such that in
Confederated Sons of Labor v. Anakan Lumber Co., 107 Phil. 915 (1960), we declared that
a closed shop is “so harsh that it must be strictly construed” and that “doubts must be
resolved against [it].” We also ruled in Anakan that “In order that an employer may be
deemed bound, under a collective bargaining agreement, to dismiss employees for non-
union membership, the stipulation to this effect must be so clear and unequivocal as to
leave no room for doubt thereon.”
Same; Same; Same; Same; In the United States, closed shops, which require compulsory
union membership for all employees, have been declared unlawful since 1947, while union
shops, which allow old employees to remain non-union members but require new
employees to become members after a certain period, are generally allowed.—In the
United States, closed shops, which require compulsory union membership for all
employees, have been declared unlawful since 1947, while union shops, which allow old
employees to remain non-union members but require new employees to become members
after a certain period, are generally allowed. Previously, closed shops, union shops and
agency shops were all permitted under Section 8(3) of the National Labor Relations Act of
1935 (NLRA), also known as the Wagner Act. But in 1947, the US Congress “reacted to
widespread abuses of closed-shop agreements by banning such arrangements” through
the enactment of the Labor Management Relations Act (LMRA), or the Taft-Hartley Act,
which amended the NLRA by adding Section 8(a)(3). In National Labor Relations Board v.
General Motors Corporation, the US Supreme Court explained that the Taft-Hartley Act
amendments were intended to accomplish twin purposes, one of which is to abolish closed
shop to eliminate serious abuses of compulsory unionism.
Same; Same; Same; Same; Although United States laws and jurisprudence on closed shops
and union shops, as they now stand, are different from our own laws, it may be worthwhile
to treat them with careful regard since our Labor Code and its precursor, the Industrial
Peace Act, are patterned after US labor laws; Union security agreements were adopted in
16
our jurisdiction primarily to safeguard the rights of the working man—where utilized to
achieve a contrary purpose, these union devices should be curtailed and carefully
maneuvered to remain within the periphery of labor protection.—Although United States
laws and jurisprudence on closed shops and union shops, as they now stand, are different
from our own laws, it may be worthwhile to treat them with careful regard since our Labor
Code and its precursor, the Industrial Peace Act, are patterned after US labor laws. We
have previously ruled that when a statute has been adopted from another state or country
and such statute has previously been construed by the courts of such state or country, the
statute is deemed to have been adopted with the construction given to it. Where our labor
statutes are based on statutes in foreign jurisdiction, the decisions of the high courts in
those jurisdictions construing and interpreting the Act are given persuasive effects in the
application of Philippine law. Union security agreements were adopted in our jurisdiction
primarily to safeguard the rights of the working man. Where utilized to achieve a contrary
purpose, these union devices should be curtailed and carefully maneuvered to remain
within the periphery of labor protection.
Same; Same; Same; Corporation Law; Corporate Mergers; The merger of two corporations
does not authorize the surviving corporation to terminate the employees of the absorbed
corporation in the absence of just or authorized causes as provided in Articles 282 and 283
of the Labor Code.—The merger of two corporations does not authorize the surviving
corporation to terminate the employees of the absorbed corporation in the absence of just
or authorized causes as provided in Articles 282 and 283 of the Labor Code. Merger of two
corporations is not one of the just or authorized causes for termination of employment.
Not even a union shop agreement is just or authorized cause to terminate a permanent
employee. A union shop clause is only a ground to terminate a probationary employee
who refuses to join the union as a condition for continued employment. Once an employee
becomes permanent, he is protected by the security of tenure clause in the Constitution,
and he can be terminated only for just or authorized causes as provided by law. The right
to security of tenure of regular employees is enshrined in the Constitution. This right
cannot be eroded, let alone be forfeited except upon a clear and convincing showing of a
just and lawful cause. In this case, there is no showing that legal ground exists to warrant
a termination of the FEBTC employees. Therefore, BPI is obligated to continue FEBTC
employees’ regular employment in deference to their constitutional right to security of
tenure.
Same; Same; Same; Same; Same; A merger is a legitimate management prerogative which
cannot be opposed or rejected by the employees of the merging entities.—The FEBTC
employees had no choice but to accept the absorption by way of merger. A merger is a
legitimate management prerogative which cannot be opposed or rejected by the employees
of the merging entities. Hence, the absorption by BPI of the FEBTC employees was not to implement the State policy of promoting unionism. However, this duty cannot be done
within the FEBTC employees’ control, and the latter had no choice but to be absorbed by at the expense of a fundamental constitutional right of a worker. We cannot exalt union
BPI, unless they opted to give up their means of livelihood. rights over and above the freedom and right of employees to join or not to join a union.

Same; Same; Same; Same; Same; To compel the absorbed employees to join the Union at BRION, J., Dissenting Opinion:
the risk of losing their jobs is violative of their constitutional freedom to associate.—To
Labor Law; Labor Unions; Right to Association; Collective Bargaining Agreements;
require these absorbed employees to join the Union at the risk of losing their jobs is akin
Parties; In interpreting a Collective Bargaining Agreement (CBA) provision, the real
to forcing an existing non-union BPI employee to join the Union on pain of termination. In
parties in interest are the bargaining parties—the company and the union—the agreement
the same way that an existing non-union BPI employee is given the constitutional right to
is between them, hence, it matters not that the affected employees, mere necessary parties,
choose whether or not to join a union, an absorbed employee should be equally given the
are not direct parties in the present petition for review on certiorari.—The non-
same right. And this right must be conferred to the absorbed employee upon the effectivity
involvement of affected employees at this level of the litigation (a new point the modified
of the merger between FEBTC and BPI. Indisputably, the right to join or not to join a Union
ponencia raised) is not a stumbling block to the present petition as the ponencia now posits.
is part of the fundamental constitutional right to form associations. In Sta. Clara
In interpreting a CBA provision, the real parties in interest are the bargaining parties—the
Homeowners’ Association v. Gaston, 374 SCRA 396 (2002), we held that, “The
company and the union—the agreement is between them. Hence, it matters not that the
constitutionally guaranteed freedom of association includes the freedom not to associate.
affected employees, mere necessary parties, are not direct parties in the present petition
The right to choose with whom one will associate oneself is the very foundation and
for review on certiorari. For ease of appreciation, I submit the following discussions
essence of that partnership. It should be noted that the provision guarantees the right to
topically presented, not necessarily in the order of the ponencia’s presentation of positions
form an association. It does not include the right to compel others to form or join one.”
as shown above.
Thus, to compel the absorbed FEBTC employees to join the Union at the risk of losing their
jobs is violative of their constitutional freedom to associate. Corporation Law; Corporate Mergers; Unlike the old Corporation Code that did not
contain express provisions on mergers and consolidations, the present law now authorizes,
Same; Same; Same; Agency Fees; Unjust Enrichment; The legal basis of the union’s right to
under Section 76, two or more corporations to merge under one of the participating
agency fees is neither contractual nor statutory, but quasi-contractual, deriving from the
constituent corporations, or to consolidate into a new single corporation called the
established principle that non-union employees may not unjustly enrich themselves by
consolidated corporation.—A basic point of disagreement with the ponencia relates to the
benefiting from employment conditions negotiated by the bargaining union.—We held in
approach in resolving the issues raised. The ponencia appears to consider only the purely
Holy Cross of Davao College, Inc. v. Joaquin, 263 SCRA 358 (1996), that the collection of
labor law aspect of the case in determining the relationships among BPI, FEBTC and the
agency fees in an amount equivalent to union dues and fees, from employees who are not
absorbed employees. More than anything else, however, the issues before us are rooted in
union members, is recognized by Article 248 (e) of the Labor Code. The employee’s
the corporate merger that took place; thus, the first priority in resolving the issues before
acceptance of benefits resulting from a CBA justifies the deduction of agency fees from his
us should be to consider and analyze the nature and consequences of the BPI-FEBTC
pay and the union’s entitlement thereto. In this aspect, the legal basis of the union’s right
merger—essentially a matter under the Corporation Code. On the basis of this analysis,
to agency fees is neither contractual nor statutory, but quasi-contractual, deriving from the
the application of labor law can follow. Unlike the old Corporation Code that did not
established principle that non-union employees may not unjustly enrich themselves by
contain express provisions on mergers and consolidations, the present law now authorizes,
benefiting from employment conditions negotiated by the bargaining union.
under Section 76, two or more corporations to merge under one of the participating
Same; Same; Same; We cannot exalt union rights over and above the freedom and right of constituent corporations, or to consolidate into a new single corporation called the
employees to join or not to join a union.—In the present case, since the absorbed FEBTC consolidated corporation. In either case, no liquidation of the assets of the dissolved
employees will pay all union dues and fees, there is no reason to force them to join the corporations takes place, and the surviving or consolidated corporation assumes ipso jure
Union except to humiliate them by trampling upon their fundamental constitutional right the liabilities of the dissolved corporations, regardless of whether the creditors consented
to join or not to join a union. This the Court should not allow. It is this Court’s solemn duty to the merger or consolidation.

17
Same; Same; Words and Phrases; The levels of transfers of corporate assets and liabilities
are: (1) the assets-only level; (2) the business enterprise level; and (3) the equity level; Each
has its own impact on the participating corporations and the immediately affected parties,
among them, the employees; Beyond and encompassing all these levels of transfers is total
corporate merger or consolidation; In a total merger, the merged corporation transfers
everything—figuratively speaking, its “body and soul”—to the surviving corporation.—
An overview of the whole range or levels of transfers of corporate assets and liabilities, as
established by jurisprudence, is helpful and instructive for the full appreciation of the
nature of the BPI-FEBTC merger. These levels of transfers are: (1) the assets-only level; (2)
the business enterprise level; and (3) the equity level. Each has its own impact on the
participating corporations and the immediately affected parties, among them, the
employees. Beyond and encompassing all these levels of transfers is total corporate merger
or consolidation. The asset-only transfer affects only the corporate seller’s raw assets and
properties; the purchaser is not interested in the seller’s corporate personality—its
goodwill, or in other factors affecting the business itself. In this transaction, no
complications arise affecting the employer-employee relationship, except perhaps the
redundancy of employees whose presence in the selling company is affected by the sale of
the chosen assets and properties, but this is a development completely internal to the
selling corporation. In the business enterprise level transaction, the purchaser’s interest
goes beyond the assets and properties and extends into the seller corporation’s whole
business and “earning capability,” short of the seller’s juridical personality. Thus, a whole
business is sold and purchased but the parties retain their respective juridical personalities.
In this type of transaction, employer-employee and employer liability complications arise,
as can be seen from a survey of the cases on corporate transfers that this Court has already
passed upon. A transaction at the equity level does not disturb the participating
corporations’ separate juridical personality as both corporations continue to remain in
existence; the purchaser corporation simply buys the underlying equity of the selling
corporation which thus retains its separate corporate personality. The selling corporation
continues to run its business, but control of the business is transferred to the purchaser
corporation whose control of the selling corporation’s equity enables it to elect the
members of the selling corporation’s board of directors. As pointed out above, a total
merger or consolidation goes way beyond all three levels of dealings in corporate business,
assets and property. In a total merger, the merged corporation transfers everything—
figuratively speaking, its “body and soul”—to the surviving corporation. This was what
happened in the BPI-FEBTC merger.
Same; Same; Labor Law; Due consideration of Section 80 of the Corporation Code, the
constitutionally declared policies on work, labor and employment, and the specific Far
18
East Bank and Trust Company-Bank of the Philippine Islands (FEBTC-BPI) situation
should point this Court to a declaration that in a complete merger situation where there is
total takeover by one corporation over another and there is silence in the merger agreement
on what the fate of the human resource complement shall be, the latter should not be left
in legal limbo and should be properly provided for, by compelling the surviving entity to
absorb these employees.—In a corporate merger situation—where one corporation totally
surrenders itself, giving up to another corporation even the human resources that enable
its business to operate—the terms of the Constitution bar us from looking at the corporate
transaction purely as a contract that should be analyzed purely on the basis of the law on
contracts, in the way the ponencia suggested. Nor can we accept as valid the ponencia’s
pronouncement, apparently in line with its purely contractual analysis, that the transfer of
all assets and liabilities in a merger situation, as in this case, refers only to FEBTC’s
property rights and obligations and does not include the employment contracts of its
personnel. To my mind, due consideration of Section 80 of the Corporation Code, the
constitutionally declared policies on work, labor and employment, and the specific FEBTC-
BPI situation—i.e., a merger with complete “body and soul” transfer of all that FEBTC
embodied and possessed and where both participating banks were willing (albeit by deed,
not by their written agreement) to provide for the affected human resources by recognizing
continuity of employment—should point this Court to a declaration that in a complete
merger situation where there is total takeover by one corporation over another and there
is silence in the merger agreement on what the fate of the human resource complement
shall be, the latter should not be left in legal limbo and should be properly provided for,
by compelling the surviving entity to absorb these employees. This is what Section 80 of
the Corporation Code commands, as the surviving corporation has the legal obligation to
assume all the obligations and liabilities of the merged constituent corporation.
Same; Same; Same; Union Security Clauses; An intrinsic distinction exists between the
absorbed employees and those who are hired as immediate regulars, which distinction
cannot simply be disregarded—those who are immediately hired as regulars acquire their
status through the voluntary act of hiring done within the effective term or period of the
Collective Bargaining Agreement (CBA), while the absorbed employees merely continued
the employment they started with the absorbed corporation; Absorbed employees are
neither “new” employees nor employees who became regular only during the term of the
Collective Bargaining Agreement (CBA) in the way that newly regularized employees
become so.—An intrinsic distinction exists between the absorbed employees and those
who are hired as immediate regulars, which distinction cannot simply be disregarded
because it establishes how the absorbed employees came to work for BPI. Those who are
immediately hired as regulars acquire their status through the voluntary act of hiring done
within the effective term or period of the CBA. The absorbed employees, on the other hand,
merely continued the employment they started with FEBTC; they came to be BPI
employees by reason of a corporate merger that changed the personality of their employer
but did not at all give them any new employment. Thus, they are neither “new” employees
nor employees who became regular only during the term of the CBA in the way that newly
regularized employees become so. They were regular employees under their present
employment long before BPI succeeded to FEBTC’s role as employer.
Same; Same; Same; Ultimately, the absorbed employees are best recognized for what they
really are—a sui generis group of employees whose classification will not be duplicated
until Bank of the Philippine Islands (BPI) has another merger where it would be the
surviving corporation and no provision would be made to define the situation of the
employees of the merged constituent corporation.—It may well be asked: what then is the
classification under the CBA of the absorbed employees whose positions fall within the
bargaining unit? As discussed above, they cannot be new employees. In fact, they are more
similar to the “old” employees, if their continuity of service will be considered. This
characterization, nevertheless, is clearly inapt since they cannot also be treated in exactly
the same way as the pre-merger BPI employees. Besides, being “old” employees will not
compel them to join the union under the maintenance of membership provision as they
never had any union membership to maintain. Ultimately, the absorbed employees are
best recognized for what they really are—a sui generis group of employees whose
classification will not be duplicated until BPI has another merger where it would be the
surviving corporation and no provision would be made to define the situation of the
employees of the merged constituent corporation. Significantly, this classification—
obviously, not within the contemplation of the CBA parties when they executed their
CBA—is not contrary to, nor governed by, any of the agreed terms of the existing CBA on
union security, and thus occupies a gap that BPI, in the exercise of its management
prerogative, can fill.
DIAMOND FARMS, INC. VS. SOUTHERN PHILIPPINES FEDERATION OF LABOR
(SPFL)-WORKERS SOLIDARITY OF DARBMUPCO
MOSQUERA, respondents.
Labor Law; Job Contracting; Contracting or subcontracting is an arrangement whereby a
principal (or employer) agrees to put out or farm out with a contractor or subcontractor
19
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.—This case involves job
contracting, a labor arrangement expressly allowed by law. Contracting or subcontracting
is an arrangement whereby a principal (or employer) 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. It involves
a trilateral relationship among the principal or employer, the contractor or subcontractor,
and the workers engaged by the contractor or subcontractor.
Same; Same; Labor-Only Contracting; “Job Contracting” and “Labor-Only Contracting,”
Distinguished.—The Omnibus Rules Im-ple-menting the Labor Code distinguishes
between permissible job contracting (or independent contractorship) and labor-only
contracting. Job contracting is permissible under the Code if the following conditions are
met: (a) The contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own manner and
method, free from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof; and (b) The
contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of his
business. In contrast, job contracting shall be deemed as labor-only contracting, an
arrangement prohibited by law, if a person who undertakes to supply workers to an
employer: (1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and (2) The workers recruited
and placed by such person are performing activities which are directly related to the
principal business or operations of the employer in which workers are habitually
employed.
Same; Same; Same; As a general rule, a contractor is presumed to be a labor-only
contractor, unless such contractor overcomes the burden of proving that it has the
substantial capital, investment, tools and the like.—As a general rule, a contractor is
presumed to be a labor-only contractor, unless such contractor overcomes the burden of
proving that it has the substantial capital, investment, tools and the like.
Remedial Law; Evidence; Admissions; Judicial Admissions; Judicial admissions made by
parties in the pleadings, or in the course of the trial or other proceedings in the same case
are conclusive and so does not require further evidence to prove them.—Judicial
admissions made by parties in the pleadings, or in the course of the trial or other
proceedings in the same case are conclusive and so does not require further evidence to
prove them. Here, the respondent-contractors voluntarily pleaded that they are labor-only
contractors; hence, these admissions bind them.
Labor Law; Labor-Only Contracting; A finding that a contractor is a labor-only contractor
is equivalent to a declaration that there is an employer-employee relationship between the
principal, and the workers of the labor-only contractor; the labor-only contractor is deemed
only as the agent of the principal.—A finding that a contractor is a labor-only contractor is
equivalent to a declaration that there is an employer-employee relationship between the
principal, and the workers of the labor-only contractor; the labor-only contractor is deemed
only as the agent of the principal. Thus, in this case, respondent-contractors are the labor-
only contractors and either DFI or DARBMUPCO is their principal.
Same; Job Contracting; Under Article 106 of the Labor Code, a principal or employer refers
to the person who enters into an agreement with a job contractor, either for the
performance of a specified work or for the supply of manpower.—Under Article 106 of the
Labor Code, a principal or employer refers to the person who enters into an agreement
with a job contractor, either for the performance of a specified work or for the supply of
manpower.
Same; Labor-Only Contracting; In labor-only contracting, it is the law which creates an
employer-employee relationship between the principal and the workers of the labor-only
contractor.—In labor-only contracting, it is the law which creates an employer-employee
relationship between the principal and the workers of the labor-only contractor. Inasmuch
as it is the law that forms the employment ties, the stipulation in the BPPA that respondent-
workers are not employees of DFI is not controlling, as the proven facts show otherwise.
The law prevails over the stipulations of the parties. Thus, in Tabas v. California
Manufacturing Co., Inc., 169 SCRA 497 (1989), we held that: The existence of an employer-
employees relation is a question of law and being such, it cannot be made the subject of
agreement. Hence, the fact that the manpower supply agreement between Livi and
California had specifically designated the former as the petitioners’ employer and had
absolved the latter from any liability as an employer, will not erase either party’s
obligations as an employer, if an employer-employee relation otherwise exists between the
workers and either firm. x x x (Emphasis supplied) Clearly, DFI is the true employer of the
respondent-workers; respondent-contractors are only agents of DFI. Under Article 106 of
the Labor Code, DFI shall be solidarily liable with the respondent-contractors for the
rightful claims of the respondent-workers, to the same manner and extent as if the latter
are directly employed by DFI.
20
V. PROBATONARY EMPLOYMENT
HOLIDAY INN MANILA and/or HUBERT LINER and BABY DISQUITADO, petitioners,
vs. NATIONAL LABOR RELATIONS COMMISSION (Second Division) and ELENA
HONASAN, respondents.
Remedial Law; Notice of Judgment; Appeal; Notice of judgment to a party must be coursed
through his counsel and the running of the period to appeal must be reckoned from the
date of receipt of judgment by said counsel.—On the timeliness of the appeal, it is well-
settled that all notices which a party is entitled to receive must be coursed through his
counsel of record. Consequently, the running of the reglementary period is reckoned from
the date of receipt of the judgment by the counsel of the appellant. Notice to the appellant
himself is not sufficient notice. Honasan’s counsel received the decision of the Labor
Arbiter on May 18, 1992. Before that, however, the appeal had already been filed by
Honasan herself, on May 8, 1992. The petitioners claim that she filed it on the thirteenth
but this is irrelevant. Even if the latter date were accepted, the appeal was nevertheless still
filed on time, in fact even before the start of the reglementary period.
Labor Law; Illegal Dismissal; Probationary Employment; Probationary period shall not
exceed 6 months in accordance with Article 281 of the Labor Code.—On the issue of illegal
dismissal, we find that Honasan was placed by the petitioner on probation twice, first
during her on-the-job training for three weeks, and next during another period of six
months, ostensibly in accordance with Article 281. Her probation clearly exceeded the
period of six months prescribed by this article.
Same; Same; Same; Probation is the period where the employer determines if employee is
qualified for the inclusion in the regular force.—Probation is the period during which the
employer may determine if the employee is qualified for possible inclusion in the regular
force. In the case at bar, the period was for three weeks, during Honasan’s on-the-job
training. When her services were continued after this training, the petitioners in effect
recognized that she had passed probation and was qualified to be a regular employee.
Same; Same; Same; Same; Security of Tenure; Even when the employee had undergone on-
the-job training and her services were continued six months thereafter, said employee had
become regular and had acquired full security of tenure.—Even if it be supposed that the
probation did not end with the three-week period of on-the-job training, there is still no
reason why that period should not be included in the stipulated six-month period of
probation. Honasan was accepted for on-the-job training on April 15, 1991. Assuming that
her probation could be extended beyond that date, it nevertheless could continue only up
to October 15, 1991, after the end of six months from the earlier date. Under this more
lenient approach, she had become a regular employee of Holiday Inn and acquired full
security of tenure as of October 15, 1991.
Same; Same; Same; Same; The consequence is that said employee cannot summarily be
separated without just cause.—The consequence is that she could no longer be summarily
separated on the ground invoked by the petitioners. As a regular employee, she had
acquired the protection of Article 279 of the Labor Code stating as follows: Art. 279.
Security of Tenure.—In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled to reinstatement without
loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time
his compensation was withheld from him up to the time of his actual reinstatement.
Same; Regular Employee; Grounds and Procedure for Removal; Illegal Dismissal;
Employee was illegally dismissed where the requirements of just cause and due process
were not observed.—The grounds for the removal of a regular employee are enumerated
in Articles 282, 283 and 284 of the Labor Code. The procedure for such removal is
prescribed in Rule XIV, Book V of the Omnibus Rules Implementing the Labor Code. These
rules were not observed in the case at bar as Honasan was simply told that her services
were being terminated because they were found to be unsatisfactory. No administrative
investigation of any kind was undertaken to justify this ground. She was not even accorded
prior notice, let alone a chance to be heard.
Same; Same; Double probation is a circumvention of the rule on probationary employment.
Where an employee was not terminated on the probation period, the same may be
dismissed only on legal grounds and according to rules.—We find in the Hotel’s system of
double probation a transparent scheme to circumvent the plain mandate of the law and
make it easier for it to dismiss its employees even after they shall have already passed
probation. The petitioners had ample time to summarily terminate Honasan’s services
during her period of probation if they were deemed unsatisfactory. Not having done so,
they may dismiss her now only upon proof of any of the legal grounds for the separation
of regular employees, to be established according to the prescribed procedure.
Constitutional Law; Labor Law; The policy of the Constitution is to give utmost protection
to the right of the working class.—The policy of the Constitution is to give the utmost
protection to the working class when subjected to such maneuvers as the one attempted
21
by the petitioners. This Court is fully committed to that policy and has always been quick
to rise in defense of the rights of labor, as in this case.
MARIWASA MANUFACTURING, INC., and ANGEL T. DAZO, petitioners, vs. HON.
VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of Ministry of Labor
and Employment, and JOAQUIN A. DEQUILA, respondents.
Labor; Illegal dismissal, not a case of; Probationary employment; The employer and the
employee may by agreement extend the probationary period of employment beyond the
6-months period in Art. 282 of the Labor Code.—The Court agrees with the Solicitor
General, who takes the same position as the petitioners, that such an extension may
lawfully be covenanted, notwithstanding the seemingly restrictive language of the cited
provision. Buiser vs. Loegardo, Jr. recognized agreements stipulating longer probationary
periods as constituting lawful exceptions to the statutory prescription limiting such
periods to six months, when it upheld as valid an employment contract between an
employer and two of its employees that provided for an eighteen-month probation period.
Same; Same; Same; Same; Extension of the period of probationary employment is not a
mere strategem of petitioners to avoid the legal consequences of a probationary period
satisfactorily completed.—That in this case the inability of the probationer to make the
grade became apparent only at or about the end of the six-month period, hence an
extension could not have been pre-arranged as was done in Buiser assumes no adverse
significance, given the lack, as pointed out by the Solicitor General, of any indication that
the extension to which Dequila gave his agreement was a mere stratagem of petitioners to
avoid the legal consequences of a probationary period satisfactorily completed.
Same; Same; Same; Same; The extension of the employee’s probation was an act of
liberality by the employer affording him a second chance to make good after having failed
to prove his worth as an employee.—For aught that appears of record, the extension of
Dequila’s probation was ex gratia, an act of liberality on the part of his employer affording
him a second chance to make good after having initially failed to prove his worth as an
employee. Such an act cannot now unjustly be turned against said employer’s account to
compel it to keep on its payroll one who could not perform according to its work standards.
The law, surely, was never meant to produce such an inequitable result.
Same; Same; Same; Same; The employee’s agreement to the extension of the probationary
period is a waiver of any benefit that attached to the completion of said period if he failed
to make the grade during the extension period; Voluntary agreements to extend the
employee’s period of probation, not prohibited.—By voluntarily agreeing to an extension
of the probationary period, Dequila in effect waived any benefit attaching to the
completion of said period if he still failed to make the grade during the period of extension.
The Court finds nothing in the law which by any fair interpretation prohibits such a
waiver. And no public policy protecting the employee and the security of his tenure is
served by proscribing voluntary agreements which, by reasonably extending the period of
probation, actually improve and further a probationary employee’s prospects of
demonstrating his fitness for regular employment.
——o0o——
Note.—The filing of a motion for reconsideration is a condition sine qua non to the
institution of a special civil action for certiorari. (Aguilar vs. Manila Banking Corporation,
502 SCRA 354 [2006])
WOODRIDGE SCHOOL (now known as WOODRIDGE COLLEGE, INC.), petitioner,
vs. JOANNE C. PE BENITO and RANDY T. BALAGUER, respondents.
Actions; Pleadings and Practice; Verification; The lack of verification is merely a formal
defect that is neither jurisdictional nor fatal—a pleading required by the Rules of Court to
be verified may be given due course even without a verification, if the circumstances
warrant the suspension of the rules in the interest of justice.—Time and again, we have
said that the lack of verification is merely a formal defect that is neither jurisdictional nor
fatal. In a proper case, the court may order the correction of the pleading, or act on the
unverified pleading, if the attending circumstances are such that the rule may be dispensed
with in order to serve the ends of justice. It should be stressed that rules of procedure were
conceived and promulgated to effectively aid the court in the dispensation of justice.
Verification is mainly intended to secure the assurance that the allegations in the petition
are done in good faith or are true and correct and not mere speculation. In the instant case,
this requirement was substantially complied with when one of the petitioners
(respondents herein), who undoubtedly had sufficient knowledge and belief to swear to
the truth of the allegations in the petition, signed the verification attached to it. Indeed, the
Court has ruled in the past that a pleading required by the Rules of Court to be verified
may be given due course even without a verification, if the circumstances warrant the
suspension of the rules in the interest of justice, as in the present case.
Same; Same; Certification against Forum Shopping; While the general rule is that the
certificate of non-forum shopping must be signed by all the plaintiffs or petitioners in a
case and the signature of only one of them is insufficient, the Court has stressed that the
rules on forum shopping, which were designed to promote and facilitate the orderly
22
administration of justice, should not be interpreted with absolute literalness as to subvert
its own ultimate and legitimate objective; The Court has relaxed the rules on Certification
against Forum Shopping in a number of cases for two compelling reasons—social justice
considerations and the apparent merit of the petition.—As to the certification against
forum shopping, the CA correctly relaxed the Rules in order to serve the ends of justice.
While the general rule is that the certificate of non-forum shopping must be signed by all
the plaintiffs or petitioners in a case and the signature of only one of them is insufficient,
this Court has stressed that the rules on forum shopping, which were designed to promote
and facilitate the orderly administration of justice, should not be interpreted with absolute
literalness as to subvert its own ultimate and legitimate objective. Strict compliance with
the provisions regarding the certificate of non-forum shopping merely underscores its
mandatory nature in that the certification cannot be altogether dispensed with or its
requirements completely disregarded. It does not, however, interdict substantial
compliance with its provisions under justifiable circumstances. In fact, we have relaxed the
rules in a number of cases for two compelling reasons: social justice considerations and the
apparent merit of the petition. In light of these jurisprudential pronouncements, the CA
should not be faulted in setting aside the procedural infirmity, allowing the petition to
proceed and deciding the case on the merits. In rendering justice, courts have always been,
as they ought to be, conscientiously guided by the norm that on the balance, technicalities
take a backseat vis-à-vis substantive rights, and not the other way around.
Labor Law; Probationary Employees; Words and Phrases; A probationary employee is one
who, for a given period of time, is being observed and evaluated to determine whether or
not he is qualified for permanent employment.—A probationary employee is one who, for
a given period of time, is being observed and evaluated to determine whether or not he is
qualified for permanent employment. A probationary appointment affords the employer
an opportunity to observe the skill, competence and attitude of a probationer. The word
“probationary,” as used to describe the period of employment, implies the purpose of the
term or period. While the employer observes the fitness, propriety and efficiency of a
probationer to ascertain whether he is qualified for permanent employment, the
probationer at the same time, seeks to prove to the employer that he has the qualifications
to meet the reasonable standards for permanent employment.
Same; Same; Security of Tenure; 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.—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. However,
upon expiration of their contract of employment, probationary employees cannot claim
security of tenure and compel their employers to renew their employment contracts. In illegal, because of petitioner’s failure to satisfy the substantive aspect thereof, as discussed
fact, the services of an employee hired on probationary basis may be terminated when he above.
fails to qualify as a regular employee in accordance with reasonable standards made
Same; Same; Preventive Suspension; While the employer may place the worker concerned
known by the employer to the employee at the time of his engagement. There is nothing
under preventive suspension, it can do so only if the latter’s continued employment poses
that would hinder the employer from extending a regular or permanent appointment to
a serious and imminent threat to the life or property of the employer or of his co-workers—
an employee once the employer finds that the employee is qualified for regular
alleged violation of school rules and regulations on the wearing of uniform, tardiness or
employment even before the expiration of the probationary period. Conversely, if the
absence, and maliciously spreading false accusations against the school do not suffice.—
purpose sought by the employer is neither attained nor attainable within the said period,
The law is clear on this matter. While the employer may place the worker concerned under
the law does not preclude the employer from terminating the probationary employment
preventive suspension, it can do so only if the latter’s continued employment poses a
on justifiable ground.
serious and imminent threat to the life or property of the employer or of his co-workers. In
Same; Same; Misconduct; Words and Phrases; Misconduct is defined as improper or this case, the grounds relied upon by petitioner in placing respondents under preventive
wrong conduct—it is the transgression of some established and definite rule of action, a suspension were the alleged violation of school rules and regulations on the wearing of
forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and uniform, tardiness or absence, and maliciously spreading false accusations against the
not mere error of judgment.—Misconduct is defined as improper or wrong conduct. It is school. These grounds do not, in any way, pose a threat to the life or property of the school,
the transgression of some established and definite rule of action, a forbidden act, a of the teachers or of the students and their parents. Hence, we affirm the CA’s conclusion
dereliction of duty, willful in character, and implies wrongful intent and not mere error of that respondents’ preventive suspension was illegal.
judgment. The misconduct to be serious within the meaning of the Act, must be of such a
Same; Security of Tenure; As probationary employees, respondents’ security of tenure is
grave and aggravated character and not merely trivial or unimportant. Such misconduct,
limited to the period of their probation.—As probationary employees, respondents’
however serious, must nevertheless be in connection with the work of the employee to
security of tenure is limited to the period of their probation—for Pe Benito, until June 2001
constitute just cause for his separation. It is not sufficient that the act or conduct
and for Balaguer, June 2002. As they were no longer extended new appointments, they are
complained of has violated some established rules or policies. It is equally important and
not entitled to reinstatement and full backwages. Rather, Pe Benito is only entitled to her
required that the act or conduct must have been performed with wrongful intent.
salary for her 30-day preventive suspension. As to Balaguer, in addition to his 30-day
Same; Termination of Employment; Requisites; Due Process.—In the termination of salary during his illegal preventive suspension, he is entitled to his backwages for the
employment, the employer must (a) give the employee a written notice specifying the unexpired term of his contract of probationary employment.
ground or grounds of termination, giving to said employee reasonable opportunity within
Same; Illegal Dismissals; Damages; A dismissed employee is entitled to moral damages
which to explain his side; (b) conduct a hearing or conference during which the employee
when the dismissal is attended by bad faith or fraud; or constitutes an act oppressive to
concerned, with the assistance of counsel if the employee so desires, is given the
labor; or is done in a manner contrary to good morals, good customs or public policy.—A
opportunity to respond to the charge, present his evidence or rebut the evidence presented
dismissed employee is entitled to moral damages when the dismissal is attended by bad
against him; and (c) give the employee a written notice of termination indicating that upon
faith or fraud; or constitutes an act oppressive to labor; or is done in a manner contrary to
due consideration of all circumstances, grounds have been established to justify his
good morals, good customs or public policy. Exemplary damages, on the other hand, may
termination. Suffice it to state that respondents were afforded their rights to answer to
be awarded if the dismissal is effected in a wanton, oppressive or malevolent manner. The
petitioner’s allegation and were given the opportunity to present evidence in support of
award of said damages cannot be justified solely upon the premise that the employer fired
their defense. Nowhere in any of their pleadings did they question the procedure for their
his employee without just cause or due process. It is necessary that additional facts be
termination except to challenge the ground relied upon by petitioner. Ostensibly,
pleaded and proven that the act of dismissal was attended by bad faith, fraud, et al., and
therefore, petitioner had complied with the procedural aspect of due process in
that social humiliation, wounded feelings and grave anxiety resulted therefrom.
terminating the employment of respondents. However, we still hold that the dismissal is

23

ST. PAUL COLLEGE QUEZON CITY, SR. LILIA THERESE TOLENTINO, SPC, SR.
BERNADETTE RACADIO, SPC, and SR. SARAH MANAPOL, petitioners, vs.
REMIGIO MICHAEL A. ANCHETA II and CYNTHIA A. ANCHETA, respondent.
Labor Law; Probationary Employees; A reality we have to face in the consideration of
employment on probationary status of teaching personnel is that they are not governed
purely by the Labor Code.—A reality we have to face in the consideration of employment
on probationary status of teaching personnel is that they are not governed purely by the
Labor Code. The Labor Code is supplemented with respect to the period of probation by
special rules found in the Manual of Regulations for Private Schools.
Same; Same; A probationary employee or probationer is one who is on trial for an
employer, during which the latter determines whether or not he is qualified for permanent
employment.—A probationary employee or probationer is one who is on trial for an
employer, during which the latter determines whether or not he is qualified for permanent
employment. The probationary employment is intended to afford the employer an
opportunity to observe the fitness of a probationary employee while at work, and to
ascertain whether he will become an efficient and productive employee. While the
employer observes the fitness, propriety and efficiency of a probationer to ascertain
whether he is qualified for permanent employment, the probationer, on the other hand,
seeks to prove to the employer that he has the qualifications to meet the reasonable
standards for permanent employment. Thus, the word probationary, as used to describe
the period of employment, implies the purpose of the term or period, not its length.
Same; Illegal Dismissals; The Labor Code commands that before an employer may legally
dismiss an employee from the service, the requirement of substantial and procedural due
process must be complied with.—The Labor Code commands that before an employer may
legally dismiss an employee from the service, the requirement of substantial and
procedural due process must be complied with. Under the requirement of substantial due
process, the grounds for termination of employment must be based on just or authorized
causes.
Same; Management Prerogative; The authority to hire is likewise covered and protected
by its management prerogative.—The authority to hire is likewise covered and protected
by its management prerogative—the right of an employer to regulate all aspects of
24
employment, such as hiring, the freedom to prescribe work assignments, working
methods, process to be followed, regulation regarding transfer of employees, supervision
of their work, lay-off and discipline, and dismissal and recall of workers.
ST. PAUL COLLEGE QUEZON CITY VS. ANCHETA
Labor Law; Probationary Employees; A reality we have to face in the consideration of
employment on probationary status of teaching personnel is that they are not governed
purely by the Labor Code.—A reality we have to face in the consideration of employment
on probationary status of teaching personnel is that they are not governed purely by the
Labor Code. The Labor Code is supplemented with respect to the period of probation by
special rules found in the Manual of Regulations for Private Schools.
Same; Same; A probationary employee or probationer is one who is on trial for an
employer, during which the latter determines whether or not he is qualified for permanent
employment.—A probationary employee or probationer is one who is on trial for an
employer, during which the latter determines whether or not he is qualified for permanent
employment. The probationary employment is intended to afford the employer an
opportunity to observe the fitness of a probationary employee while at work, and to
ascertain whether he will become an efficient and productive employee. While the
employer observes the fitness, propriety and efficiency of a probationer to ascertain
whether he is qualified for permanent employment, the probationer, on the other hand,
seeks to prove to the employer that he has the qualifications to meet the reasonable
standards for permanent employment. Thus, the word probationary, as used to describe
the period of employment, implies the purpose of the term or period, not its length.
Same; Illegal Dismissals; The Labor Code commands that before an employer may legally
dismiss an employee from the service, the requirement of substantial and procedural due
process must be complied with.—The Labor Code commands that before an employer may
legally dismiss an employee from the service, the requirement of substantial and
procedural due process must be complied with. Under the requirement of substantial due
process, the grounds for termination of employment must be based on just or authorized
causes.
Same; Management Prerogative; The authority to hire is likewise covered and protected
by its management prerogative.—The authority to hire is likewise covered and protected
by its management prerogative—the right of an employer to regulate all aspects of
employment, such as hiring, the freedom to prescribe work assignments, working
methods, process to be followed, regulation regarding transfer of employees, supervision
of their work, lay-off and discipline, and dismissal and recall of workers.
TAMSON'S EMTERPRISES, INC. VS. COURT OF APPEALS
Labor Law; Probationary Employees; The word probationary as used to describe the
period of employment, implies the purpose of the term or period, not its length.—There is
probationary employment where the employee upon his engagement is made to undergo
a trial period during which the employer determines his fitness to qualify for regular
employment based on reasonable standards made known to him at the time of
engagement. The probationary employment is intended to afford the employer an
opportunity to observe the fitness of a probationary employee while at work, and to
ascertain whether he will become an efficient and productive employee. While the
employer observes the fitness, propriety and efficiency of a probationer to ascertain
whether he is qualified for permanent employment, the probationer, on the other hand,
seeks to prove to the employer that he has the qualifications to meet the reasonable
standards for permanent employment. Thus, the word probationary, as used to describe
the period of employment, implies the purpose of the term or period, not its length.
Same; Same; It is settled that even if probationary employees do not enjoy permanent
status, they are accorded the constitutional protection of security of tenure.—It is settled
that even if probationary employees do not enjoy permanent status, they are accorded the
constitutional protection of security of tenure. This means they may only be terminated for
a just cause or when they otherwise fail to qualify as regular employees in accordance with
reasonable standards made known to them by the employer at the time of their
engagement.
Same; Same; Court shares the view of the Court of Appeals that Sy’s employment was
unjustly terminated to prevent her from acquiring a regular status in circumvention of the
law on security of tenure.—For failure of the petitioners to support their claim of
unsatisfactory performance by Sy, this Court shares the view of the CA that Sy’s
employment was unjustly terminated to prevent her from acquiring a regular status in
circumvention of the law on security of tenure. As the Court previously stated, this is a
common and convenient practice of unscrupulous employers to circumvent the law on
security of tenure. Security of tenure, which is a right of paramount value guaranteed by
the Constitution, should not be denied to the workers by such a stratagem. The Court can
not permit such a subterfuge, if it is to be true to the law and social justice.
25
Same; Termination of Employment; Employer’s power to terminate as an exercise of
management prerogative is not without limitations.—Indeed, the Court recognizes the
employer’s power to terminate as an exercise of management prerogative. The petitioners,
however, must be reminded that such right is not without limitations. In this connection,
it is well to quote the ruling of the Court in the case of Dusit Hotel Nikko v. Gatbonton,
489 SCRA 671 (2006), where it was written: As Article 281 clearly states, a probationary
employee can be legally terminated either: (1) for a just cause; or (2) when the employee
fails to qualify as a regular employee in accordance with the reasonable standards made
known to him by the employer at the start of the employment. Nonetheless, the power of
the employer to terminate an employee on probation is not without limitations. First, this
power must be exercised in accordance with the specific requirements of the contract.
Second, the dissatisfaction on the part of the employer must be real and in good faith, not
feigned so as to circumvent the contract or the law; and third, there must be no unlawful
discrimination in the dismissal. In termination cases, the burden of proving just or valid
cause for dismissing an employee rests on the employer.
Same; Probationary Employees; The law is clear that in all cases of probationary
employment, the employer shall make known to the employee the standards under which
he will qualify as a regular employee at the time of his engagement.—The law is clear that
in all cases of probationary employment, the employer shall make known to the employee
the standards under which he will qualify as a regular employee at the time of his
engagement. Where no standards are made known to the employee at that time, he shall
be deemed a regular employee. The standards under which she would qualify as a regular
employee not having been communicated to her at the start of her probationary period, Sy
qualified as a regular employee.
MAURICIO VS. NATIONAL LABOR RELATIONS COMMISSION
Labor Law; Judgments; There is nothing “radical and highly questionable” with the NLRC
reversing its original decision if supported with substantial evidence.—There is nothing
“radical and highly questionable” with the NLRC reversing its original decision if
supported with substantial evidence. Thus, in Vitarich Corporation v. National Labor
Relations Commission this Court, in ruling out grave abuse of discretion on the part of the
NLRC when it reversed its original decision, held: x x x A careful scrutiny of the records
reveals that the decision of the Labor Arbiter is suffused with the established facts and a
correct understanding of them. Consequently, it is but proper for NLRC to abandon its
former stance and adopt, and correctly so, the findings of the Labor Arbiter. x x x
Same; Same; One of the inherent powers of courts which should apply in equal force to
quasi-judicial bodies is to amend and control their processes so as to make them
conformable to law and justice, and this includes their right to reverse themselves,
especially when in their opinion they have committed an error or mistake in judgment and
adherence to their decision would cause injustice.—One of the inherent powers of courts
which should apply in equal force to quasi-judicial bodies is to amend and control its
processes so as to make them conformable to law and justice. This includes the right to
reverse itself, especially when in its opinion it has committed an error or mistake in
judgment and adherence to its decision would cause injustice. This, the NLRC exercised
which bore the imprimatur of the CA. Petitioner has, however, failed to advance any
meritorious ground why this Court should disturb such exercise.
ROBINSONS GALLERIA/ROBINSONS SUPERMARKET CORPORATION VS.
RANCHEZ
Labor Law; Probationary Employees; Termination of Employment; A probationary
employee, like a regular employee, enjoys security of tenure; Grounds for termination on
the services of an employee engaged on probationary basis.—There is probationary
employment when the employee upon his engagement is made to undergo a trial period
during which the employer determines his fitness to qualify for regular employment based
on reasonable standards made known to him at the time of engagement. A probationary
employee, like a regular employee, enjoys security of tenure. However, in cases of
probationary employment, aside from just or authorized causes of termination, an
additional ground is provided under Article 281 of the Labor Code, i.e., the probationary
employee may also be terminated for failure to qualify as a regular employee in accordance
with reasonable standards made known by the employer to the employee at the time of
the engagement. Thus, 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.
Same; Same; Same; The Labor Code mandates the employer to furnish the worker whose
employment is sought to be terminated, a written notice containing a statement of the
causes of termination and shall afford the latter ample opportunity to be heard and to
defend himself with the assistance of a representative if he so desires.—Article 277(b) of
the Labor Code mandates that subject to the constitutional right of workers to security of
tenure and their right to be protected against dismissal, except for just and authorized
cause and without prejudice to the requirement of notice under Article 283 of the same
26
Code, the employer shall furnish the worker, whose employment is sought to be
terminated, a written notice containing a statement of the causes of termination, and shall
afford the latter ample opportunity to be heard and to defend himself with the assistance
of a representative if he so desires, in accordance with company rules and regulations
pursuant to the guidelines set by the Department of Labor and Employment.
Same; Same; Same; The due process requirements under the Labor Code are mandatory
and may not be supplanted by police investigation or court proceedings; Criminal aspect
of the case is considered independent of the administrative aspect.—As correctly pointed
out by the NLRC, the due process requirements under the Labor Code are mandatory and
may not be supplanted by police investigation or court proceedings. The criminal aspect
of the case is considered independent of the administrative aspect. Thus, employers should
not rely solely on the findings of the Prosecutor’s Office. They are mandated to conduct
their own sep,arate investigation, and to accord the employee every opportunity to defend
himself. Furthermore, respondent was not represented by counsel when she was strip-
searched inside the company premises or during the police investigation, and in the
preliminary investigation before the Prosecutor’s Office.
Same; Constructive Dismissals; Relief granted to an illegally or constructively dismissed
employee; these two reliefs are separate and distinct from each other and are awarded
conjunctively.—As an illegally or constructively dismissed employee, respondent is
entitled to: (1) either reinstatement, if viable, or separation pay, if reinstatement is no
longer viable; and (2) backwages. These two reliefs are separate and distinct from each
other and are awarded conjunctively.
Same; Same; The backwages that should be awarded to respondent shall be reckoned from
the time of her constructive dismissal until the date of the termination of her employment;
The computation should not cover the entire period from the time her compensation was
withheld up to the time of her actual reinstatement.—The backwages that should be
awarded to respondent shall be reckoned from the time of her constructive dismissal until
the date of the termination of her employment, i.e., from October 30, 1997 to March 14,
1998. The computation should not cover the entire period from the time her compensation
was withheld up to the time of her actual reinstatement. This is because respondent was a
probationary employee, and the lapse of her probationary employment without her
appointment as a regular employee of petitioner Supermarket effectively severed the
employer-employee relationship between the parties.
Same; Types of Employment; In all cases involving employees engaged on probationary
basis, the employer shall make known to its employees the standards under which they
will qualify as regular employees at the time of their engagement; Where no standards are
made known to an employee at the time, he shall be deemed a regular employee, unless
the job is self-descriptive, like maid, cook, driver, or messenger.—In all cases involving
employees engaged on probationary basis, the employer shall make known to its
employees the standards under which they will qualify as regular employees at the time
of their engagement. Where no standards are made known to an employee at the time, he
shall be deemed a regular employee, unless the job is self-descriptive, like maid, cook,
driver, or messenger. However, the constitutional policy of providing full protection to
labor is not intended to oppress or destroy management.
MAGIS YOUNG ACHIEVERS’ LEARNING CENTER and MRS. VIOLETA T.
CARIÑO, petitioners, vs. ADELAIDA P. MANALO, respondent.
Labor Law; Probationary Employment; Words and Phrases; The probationary
employment is intended to afford the employer an opportunity to observe the fitness of a
probationary employee while at work, and to ascertain whether he will become an efficient
and productive employee; The word probationary, as used to describe the period of
employment, implies the purpose of the term or period, not its length.—A probationary
employee or probationer is one who is on trial for an employer, during which the latter
determines whether or not he is qualified for permanent employment. The probationary
employment is intended to afford the employer an opportunity to observe the fitness of a
probationary employee while at work, and to ascertain whether he will become an efficient
and productive employee. While the employer observes the fitness, propriety and
efficiency of a probationer to ascertain whether he is qualified for permanent employment,
the probationer, on the other hand, seeks to prove to the employer that he has the
qualifications to meet the reasonable standards for permanent employment. Thus, the
word probationary, as used to describe the period of employment, implies the purpose of
the term or period, not its length. Indeed, the employer has the right, or is at liberty, to
choose who will be hired and who will be declined. As a component of this right to select
his employees, the employer may set or fix a probationary period within which the latter
may test and observe the conduct of the former before hiring him permanently.
Same; Same; Schools and Universities; For “academic personnel” in private schools,
colleges and universities, probationary employment which should not be more than three
(3) years, is governed by Section 92 of the 1992 Manual of Regulations for Private Schools
(Manual), supplemented by DOLE-DECS-CHED-TESDA Order No. 1 dated 7 February
1996; The period of probation for academic personnel shall be counted in terms of “school
years,” and not “calendar years.”—For “academic personnel” in private schools, colleges
27
and universities, probationary employment is governed by Section 92 of the 1992 Manual
of Regulations for Private Schools (Manual), which reads: Section 92. Probationary
Period.—Subject in all instances to compliance with the Department and school
requirements, the probationary period for academic personnel shall not be more than three
(3) consecutive years of satisfactory service for those in the elementary and secondary
levels, six (6) consecutive regular semesters of satisfactory service for those in the tertiary
level, and nine (9) consecutive trimesters of satisfactory service for those in the tertiary
level where collegiate courses are offered on a trimester basis. This was supplemented by
DOLE-DECS-CHED-TESDA Order No. 1 dated February 7, 1996, which provides that the
probationary period for academic personnel shall not be more than three (3) consecutive
school years of satisfactory service for those in the elementary and secondary levels. By
this supplement, it is made clear that the period of probation for academic personnel shall
be counted in terms of “school years,” and not “calendar years.” Then, Section 4.m(4)[c] of
the Manual delineates the coverage of Section 92, by defining the term “academic
personnel” to include: (A)ll school personnel who are formally engaged in actual teaching
service or in research assignments, either on full-time or part-time basis; as well as those
who possess certain prescribed academic functions directly supportive of teaching, such
as registrars, librarians, guidance counselors, researchers, and other similar persons. They
include school officials responsible for academic matters, and may include other school
officials.
Same; Same; Same; No vested right to a permanent appointment shall accrue until the
employee has completed the prerequisite three-year period necessary for the acquisition
of a permanent status.—For academic personnel in private elementary and secondary
schools, it is only after one has satisfactorily completed the probationary period of three
(3) school years and is rehired that he acquires full tenure as a regular or permanent
employee. In this regard, Section 93 of the Manual pertinently provides: Sec. 93. Regular
or Permanent Status.—Those who have served the probationary period shall be made
regular or permanent. Full-time teachers who have satisfactorily completed their
probationary period shall be considered regular or permanent. Accordingly, as held in
Escudero, v. Office of the President of the Philippines, 172 SCRA 783 (1989), no vested right
to a permanent appointment shall accrue until the employee has completed the
prerequisite three-year period necessary for the acquisition of a permanent status. Of
course, the mere rendition of service for three consecutive years does not automatically
ripen into a permanent appointment. It is also necessary that the employee be a full-time
teacher, and that the services he rendered are satisfactory.
Same; Same; Same; Security of Tenure; Teachers; Teachers on probationary employment
enjoy security of tenure.—Be that as it may, teachers on probationary employment enjoy
security of tenure. In Biboso v. Victorias Milling Co., Inc., 76 SCRA 250 (1977), we made
the following pronouncement: This is, by no means, to assert that the security of tenure
protection of the Constitution does not apply to probationary employees. x x x During such
period, they could remain in their positions and any circumvention of their rights, in
accordance with the statutory scheme, is subject to inquiry and thereafter correction by the
Department of Labor. The ruling in Biboso simply signifies that probationary employees
enjoy security of tenure during the term of their probationary employment. As such, they
cannot be removed except for cause as provided by law, or if at the end of every yearly
contract during the three-year period, the employee does not meet the reasonable
standards set by the employer at the time of engagement. But this guarantee of security of
tenure applies only during the period of probation. Once that period expires, the
constitutional protection can no longer be invoked.
Same; Same; Same; Fixed-Term Employment; It does not necessarily follow that where the
duties of the employees consist of activities usually necessary or desirable in the usual
business of the employer, the parties are forbidden from agreeing on a period of time for
the performance of such activities.—All these principles notwithstanding, we do not
discount the validity of fixed-term employment where—the fixed period of employment
was agreed upon knowingly and voluntarily by the parties, without any force, duress or
improper pressure being brought to bear upon the employee and absent any other
circumstances vitiating his consent, or where it satisfactorily appears that the employer
and employee dealt with each other on more or less equal terms with no moral dominance
whatever being exercised by the former over the latter. It does not necessarily follow that
where the duties of the employees consist of activities usually necessary or desirable in the
usual business of the employer, the parties are forbidden from agreeing on a period of time
for the performance of such activities. Thus, in St. Theresa’s School of Novaliches
Foundation v. NLRC, 289 SCRA 110 (1998), we held that a contractual stipulation
providing for a fixed term of nine (9) months, not being contrary to law, morals, good
customs, public order and public policy, is valid, binding and must be respected, as it is
the contract of employment that governs the relationship of the parties.
Same; Temporary Appointments; Words and Phrases; There should also be no doubt that
an employee’s appointment as Acting Principal is merely temporary, or one that is good
until another appointment is made to take its place—an “acting” appointment is
essentially a temporary appointment, revocable at will; The Court has acknowledged the
customary arrangement in private schools to rotate administrative positions, e.g., Dean or
Principal, among employees, without the employee so appointed attaining security of
tenure with respect to these positions.—There should also be no doubt that respondent’s
appointment as Acting Principal is merely temporary, or one that is good until another
28
appointment is made to take its place. An “acting” appointment is essentially a temporary
appointment, revocable at will. The undisturbed unanimity of cases shows that one who
holds a temporary appointment has no fixed tenure of office; his employment can be
terminated any time at the pleasure of the appointing power without need to show that it
is for cause. Further, in La Salette of Santiago v. NLRC, 195 SCRA 80 (1991), we
acknowledged the customary arrangement in private schools to rotate administrative
positions, e.g., Dean or Principal, among employees, without the employee so appointed
attaining security of tenure with respect to these positions.
Same; Resignation; Words and Phrases; Resignation is the voluntary act of an employee
who finds himself in a situation where he believes that personal reasons cannot be
sacrificed in favor of the exigency of the service, and that he has no other choice but to
dissociate himself from employment; It is the acceptance of an employee’s resignation that
renders it operative.—We are also inclined to agree with the CA that the resignation of the
respondent is not valid, not only because there was no express acceptance thereof by the
employer, but because there is a cloud of doubt as to the voluntariness of respondent’s
resignation. Resignation is the voluntary act of an employee who finds himself in a
situation where he believes that personal reasons cannot be sacrificed in favor of the
exigency of the service, and that he has no other choice but to dissociate himself from
employment. Voluntary resignation is made with the intention of relinquishing an office,
accompanied by the act of abandonment. It is the acceptance of an employee’s resignation
that renders it operative.
Same; All doubts regarding labor contracts should be construed in favor of labor.—In this
case, there truly existed a doubt as to which version of the employment agreement should
be given weight. In respondent’s copy, the period of effectivity of the agreement remained
blank. On the other hand, petitioner’s copy provided for a one-year period, surprisingly
from April 1, 2002 to March 31, 2003, even though the pleadings submitted by both parties
indicated that respondent was hired on April 18, 2002. What is noticeable even more is that
the handwriting indicating the one-year period in petitioner’s copy is different from the
handwriting that filled up the other needed information in the same agreement. Thus,
following Article 1702 of the Civil Code that all doubts regarding labor contracts should
be construed in favor of labor, then it should be respondent’s copy which did not provide
for an express period which should be upheld, especially when there are circumstances
that render the version of petitioner suspect. This is in line with the State policy of affording
protection to labor, such that the lowly laborer, who is usually at the mercy of the
employer, must look up to the law to place him on equal footing with his employer.
Same; Contracts of Adhesion; While contracts of adhesion are valid and binding, in cases
of doubt which will cause a great imbalance of rights against one of the parties, the contract
shall be construed against the party who drafted the same.—The employment agreement
may be likened into a contract of adhesion considering that it is petitioner who insists that
there existed an express period of one year from April 1, 2002 to March 31, 2003, using as
proof its own copy of the agreement. While contracts of adhesion are valid and binding, in
cases of doubt which will cause a great imbalance of rights against one of the parties, the
contract shall be construed against the party who drafted the same. Hence, in this case,
where the very employment of respondent is at stake, the doubt as to the period of
employment must be construed in her favor.
Same; Schools and Universities; Probationary Employment; In the absence of an express
period of probation for private school teachers, the three-year probationary period
provided by the Manual of Regulations for Private Schools must apply—absent any
concrete and competent proof that her performance as a teacher was unsatisfactory from
her hiring, she is entitled to continue her three-year period of probationary period such
that from the end of the first school year, her probationary employment is deemed
renewed for the following two school years.—In light of our ruling of Espiritu Santo
Parochial School v. NLRC, 177 SCRA 802 (1989), that, in the absence of an express period
of probation for private school teachers, the three-year probationary period provided by
the Manual of Regulations for Private Schools must apply likewise to the case of
respondent. In other words, absent any concrete and competent proof that her
performance as a teacher was unsatisfactory from her hiring on April 18, 2002 up to March
31, 2003, respondent is entitled to continue her three-year period of probationary period,
such that from March 31, 2003, her probationary employment is deemed renewed for the
following two school years.
ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE, EDWIN D. FEIST,
MARIA OLIVIA T. YABUTMISA, TERESITA C. BERNARDO, AND ALLAN G.
ALMAZAR, petitioners, vs. PEARLIE ANN F. ALCARAZ, respondent.
Remedial Law; Civil Procedure; Forum Shopping; Certification Against Forum Shopping;
The prohibition against forum shopping is different from a violation of the certification
requirement under Section 5, Rule 7 of the Rules of Court.—At the outset, it is noteworthy
to mention that the prohibition against forum shopping is different from a violation of the
certification requirement under Section 5, Rule 7 of the Rules of Court. In Sps. Ong v. CA,
384 SCRA 139 (2002), the Court explained that: x x x The distinction between the
prohibition against forum shopping and the certification requirement should by now be
29
too elementary to be misunderstood. To reiterate, compliance with the certification against
forum shopping is separate from and independent of the avoidance of the act of forum
shopping itself. There is a difference in the treatment between failure to comply with the
certification requirement and violation of the prohibition against forum shopping not only
in terms of imposable sanctions but also in the manner of enforcing them. The former
constitutes sufficient cause for the dismissal without prejudice [to the filing] of the
complaint or initiatory pleading upon motion and after hearing, while the latter is a
ground for summary dismissal thereof and for direct contempt.
Same; Same; Same; Forum shopping takes place when a litigant files multiple suits
involving the same parties, either simultaneously or successively, to secure a favorable
judgment.—Forum shopping takes place when a litigant files multiple suits involving the
same parties, either simultaneously or successively, to secure a favorable judgment. It
exists where the elements of litis pendentia are present, namely: (a) identity of parties, or
at least such parties who represent the same interests in both actions; (b) identity of rights
asserted and relief prayed for, the relief being founded on the same facts; and (c) the
identity with respect to the two preceding particulars in the two (2) cases is such that any
judgment that may be rendered in the pending case, regardless of which party is
successful, would amount to res judicata in the other case.
Same; Same; Same; Section 5(b), Rule 7 of the Rules of Court requires that a plaintiff who
files a case should provide a complete statement of the present status of any pending case
if the latter involves the same issues as the one that was filed.—Section 5(b), Rule 7 of the
Rules of Court requires that a plaintiff who files a case should provide a complete
statement of the present status of any pending case if the latter involves the same issues as
the one that was filed. If there is no such similar pending case, Section 5(a) of the same rule
provides that the plaintiff is obliged to declare under oath that to the best of his knowledge,
no such other action or claim is pending.
Labor Law; Probationary Employees; A probationary employee, like a regular employee,
enjoys security of tenure. However, in cases of probationary employment, aside from just
or authorized causes of termination, an additional ground is provided under Article 295
of the Labor Code, i.e., the probationary employee may also be terminated for failure to
qualify as a regular employee in accordance with the reasonable standards made known
by the employer to the employee at the time of the engagement.—A probationary
employee, like a regular employee, enjoys security of tenure. However, in cases of
probationary employment, aside from just or authorized causes of termination, an
additional ground is provided under Article 295 of the Labor Code, i.e., the probationary
employee may also be terminated for failure to qualify as a regular employee in accordance
with the reasonable standards made known by the employer to the employee at the time
of the engagement. Thus, the services of an employee who has been engaged on
probationary basis may be terminated for any of the following: (a) a just or (b) an
authorized cause; and (c) when he fails to qualify as a regular employee in accordance with
reasonable standards prescribed by the employer.
Same; Same; If the employer fails to inform the probationary employee of the reasonable
standards upon which the regularization would be based on at the time of the engagement,
then the said employee shall be deemed a regular employee.—Section 6(d), Rule I, Book
VI of the Implementing Rules of the Labor Code provides that if the employer fails to
inform the probationary employee of the reasonable standards upon which the
regularization would be based on at the time of the engagement, then the said employee
shall be deemed a regular employee, viz.: (d) In all cases of probationary employment, the
employer shall make known to the employee the standards under which he will qualify as
a regular employee at the time of his engagement. Where no standards are made known
to the employee at that time, he shall be deemed a regular employee. In other words, the
employer is made to comply with two (2) requirements when dealing with a probationary
employee: first, the employer must communicate the regularization standards to the
probationary employee; and second, the employer must make such communication at the
time of the probationary employee’s engagement. If the employer fails to comply with
either, the employee is deemed as a regular and not a probationary employee.
Same; Same; An employer is deemed to have made known the standards that would
qualify a probationary employee to be a regular employee when it has exerted reasonable
efforts to apprise the employee of what he is expected to do or accomplish during the trial
period of probation.—An employer is deemed to have made known the standards that
would qualify a probationary employee to be a regular employee when it has exerted
reasonable efforts to apprise the employee of what he is expected to do or accomplish
during the trial period of probation. This goes without saying that the employee is
sufficiently made aware of his probationary status as well as the length of time of the
probation. The exception to the foregoing is when the job is self-descriptive in nature, for
instance, in the case of maids, cooks, drivers, or messengers. Also, in Aberdeen Court, Inc.
v. Agustin, 456 SCRA 32 (2005), it has been held that the rule on notifying a probationary
employee of the standards of regularization should not be used to exculpate an employee
who acts in a manner contrary to basic knowledge and common sense in regard to which
there is no need to spell out a policy or standard to be met. In the same light, an employee’s
failure to perform the duties and responsibilities which have been clearly made known to
him constitutes a justifiable basis for a probationary employee’s nonregularization.
30
Same; Same; Basic knowledge and common sense dictate that the adequate performance
of one’s duties is, by and of itself, an inherent and implied standard for a probationary
employee to be regularized; such is a regularization standard which need not be literally
spelled out or mapped into technical indicators in every case.—Verily, basic knowledge
and common sense dictate that the adequate performance of one’s duties is, by and of itself,
an inherent and implied standard for a probationary employee to be regularized; such is a
regularization standard which need not be literally spelled out or mapped into technical
indicators in every case. In this regard, it must be observed that the assessment of adequate
duty performance is in the nature of a management prerogative which when reasonably
exercised — as Abbott did in this case — should be respected. This is especially true of a
managerial employee like Alcaraz who was tasked with the vital responsibility of handling
the personnel and important matters of her department.
Same; Same; If the termination is brought about by the failure of an employee to meet the
standards of the employer in case of probationary employment, it shall be sufficient that a
written notice is served the employee, within a reasonable time from the effective date of
termination.—A different procedure is applied when terminating a probationary
employee; the usual two-notice rule does not govern. Section 2, Rule I, Book VI of the
Implementing Rules of the Labor Code states that “[i]f the termination is brought about by
the x x x failure of an employee to meet the standards of the employer in case of
probationary employment, it shall be sufficient that a written notice is served the
employee, within a reasonable time from the effective date of termination.”
Same; Company Policy; A company policy partakes of the nature of an implied contract
between the employer and employee.— A company policy partakes of the nature of an
implied contract between the employer and employee. In Parts Depot, Inc. v. Beiswenger,
170 S.W.3d 354 (Ky. 2005), it has been held that: [E]mployer statements of policy . . . can
give rise to contractual rights in employees without evidence that the parties mutually
agreed that the policy statements would create contractual rights in the employee, and,
hence, although the statement of policy is signed by neither party, can be unilaterally
amended by the employer without notice to the employee, and contains no reference to a
specific employee, his job description or compensation, and although no reference was
made to the policy statement in pre-employment interviews and the employee does not
learn of its existence until after his hiring. Toussaint, 292 N.W.2d at 892. The principle is
akin to estoppel. Once an employer establishes an express personnel policy and the
employee continues to work while the policy remains in effect, the policy is deemed an
implied contract for so long as it remains in effect. If the employer unilaterally changes the
policy, the terms of the implied contract are also thereby changed.
Same; Termination of Employment; Nominal Damages; Case law has settled that an
employer who terminates an employee for a valid cause but does so through invalid
procedure is liable to pay the latter nominal damages.—Case law has settled that an
employer who terminates an employee for a valid cause but does so through invalid
procedure is liable to pay the latter nominal damages. In Agabon v. NLRC (Agabon), 442
SCRA 573 (2004), the Court pronounced that where the dismissal is for a just cause, the
lack of statutory due process should not nullify the dismissal, or render it illegal, or
ineffectual. However, the employer should indemnify the employee for the violation of his
statutory rights. Thus, in Agabon, the employer was ordered to pay the employee nominal
damages in the amount of P30,000.00.
Same; Same; If the dismissal is based on a just cause under Article 282 of the Labor Code
(now Article 296) 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; if the dismissal is based on an
authorized cause under Article 283 (now Article 297) 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.—It was explained
that if the dismissal is based on a just cause under Article 282 of the Labor Code (now
Article 296) 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; if the dismissal is based on an authorized
cause under Article 283 (now Article 297) 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. Hence, in Jaka, where the
employee was dismissed for an authorized cause of retrenchment — as
contradistinguished from the employee in Agabon who was dismissed for a just cause of
neglect of duty — the Court ordered the employer to pay the employee nominal damages
at the higher amount of P50,000.00.
Corporation Law; Liability of Corporate Directors; Requisites to Hold Corporate Directors,
Trustees or Officers Personally Liable for Corporate Acts.—It is hornbook principle that
personal liability of corporate directors, trustees or officers attaches only when: (a) they
assent to a patently unlawful act of the corporation, or when they are guilty of bad faith or
gross negligence in directing its affairs, or when there is a conflict of interest resulting in
damages to the corporation, its stockholders or other persons; (b) they consent to the
issuance of watered down stocks or when, having knowledge of such issuance, do not
forthwith file with the corporate secretary their written objection; (c) they agree to hold
31
themselves personally and solidarily liable with the corporation; or (d) they are made by
specific provision of law personally answerable for their corporate action.
Civil Law; Bad Faith; It is a well-settled rule that bad faith cannot be presumed and he who
alleges bad faith has the onus of proving it.—A judicious perusal of the records show that
other than her unfounded assertions on the matter, there is no evidence to support the fact
that the individual petitioners herein, in their capacity as Abbott’s officers and employees,
acted in bad faith or were motivated by ill will in terminating Alcaraz’s services. The fact
that Alcaraz was made to resign and not allowed to enter the workplace does not
necessarily indicate bad faith on Abbott’s part since a sufficient ground existed for the
latter to actually proceed with her termination. On the alleged loss of her personal
belongings, records are bereft of any showing that the same could be attributed to Abbott
or any of its officers. It is a well-settled rule that bad faith cannot be presumed and he who
alleges bad faith has the onus of proving it. All told, since Alcaraz failed to prove any
malicious act on the part of Abbott or any of its officers, the Court finds the award of moral
or exemplary damages unwarranted.
BRION, J., Dissenting Opinion:
Labor Law; Appeals; View that a labor case finds its way into the judicial system from the
National Labor Relations Commission (NLRC) whose decision is final and executory;
When an administrative ruling (or any ruling for that matter) is already final and
unappealable, the only recourse open under the Rules of Court is through a limited review
on jurisdictional grounds under Rule 65.—A labor case finds its way into the judicial
system from the NLRC whose decision is final and executory. Finality simply means that
the NLRC ruling is no longer appealable; the legal intent is to confine adjudication of labor
cases to labor tribunals with the expertise in these cases and thereby bring the resolution
of the case to a close at the soonest possible time. When an administrative ruling (or any
ruling for that matter) is already final and unappealable, the only recourse open under the
Rules of Court is through a limited review on jurisdictional grounds under Rule 65. This
has been the mode of review followed since the Labor Code took effect in November 1974;
labor cases were directly brought to this Court but only on jurisdictional grounds under
Rule 65.
Same; Same; View that under Section 65 of the Rules of Court, the sole ground or issue
allowed is jurisdictional — the presence or absence of grave abuse of discretion on the part
of the National Labor Relations Commission (NLRC) in ruling on the case; whereas, a Rule
45 review the Supreme Court simply determines whether the legal correctness of the Court
of Appeal’s finding that the NLRC ruling of illegal dismissal had basis in fact and in law.—
Under the Rule 65 review by the CA, Montoya reiterates that the sole ground or issue
allowed is jurisdictional – the presence or absence of grave abuse of discretion on the part
of the NLRC in ruling on the case. To state the obvious, this kind of review would have
made it easier for the CA to handle the case; in the absence of a grave abuse of discretion,
it can dismiss labor cases for lack of grave abuse of discretion as we do in this Court. From
the CA, further recourse is through a Rule 45 review by this Court on questions of law in
accordance with prevailing rulings. The office of a petition for review on certiorari is not
to examine and settle factual questions already ruled upon below. In this review, the Court
simply determines whether the legal correctness of the CA’s finding that the NLRC ruling
of illegal dismissal had basis in fact and in law.
Same; Probationary Employees; View that while the respondent might have been hired as
a probationary employee, the petitioner’s evidence did not establish the employers’
compliance with the probationary employment requirements under Article 281 of the
Labor Code (as amended) and Section 6(d) of the Implementing Rules of Book VI, Rule I
of the Labor Code (as amended). Thus, the respondent should be considered a regular
employee and the case should be reviewed on this basis.—While the respondent might
have been hired as a probationary employee, the petitioners’ evidence did not establish the
employers’ compliance with the probationary employment requirements under Article 281
of the Labor Code (as amended) and Section 6(d) of the Implementing Rules of Book VI,
Rule I of the Labor Code (as amended). Thus, the respondent should be considered a
regular employee and the case should be reviewed on this basis. Article 281 of the Labor
Code, as amended, provides: ART. 281. Probationary employment.—Probationary
employment shall not exceed six (6) months from the date the employee started working,
unless it is covered by an apprenticeship agreement stipulating a longer period. The
services of an employee who has been engaged on a probationary basis may be terminated
for a just cause or when he fails to qualify as a regular employee in accordance with
reasonable standards made known by the employer to the employee at the time of his
engagement. An employee who is allowed to work after a probationary period shall be
considered a regular employee. [italics supplied; emphasis ours] Further, Section 6(d) of
the Implementing Rules of Book VI, Rule I of the Labor Code, as amended, states: Sec. 6.
Probationary employment.—There is probationary employment where the employee,
upon his engagement, is made to undergo a trial period during which the employer
determines his fitness to qualify for regular employment, based on reasonable standards
made known to him at the time of engagement. [emphasis supplied]
Same; Same; View that a valid probationary employment requires the concurrence of two
requirements; Failing in one or both, the employee, even if initially hired as a probationary
employee, should be viewed and considered a regular employee.—A valid probationary
32
employment requires the concurrence of two requirements. First, the employer shall make
known the reasonable standard (performance standard) whose compliance will render the
employee qualified to be a regular employee. Second, the employer shall inform the
employee of the applicable performance standard at the time of his/her engagement.
Failing in one or both, the employee, even if initially hired as a probationary employee,
should be viewed and considered a regular employee. The ponencia apparently fully
agrees with the above statement of the applicable law as it substantially recites the same
requirements, including the consequence that upon failure to comply with these same
requirements, “the employee is deemed as a regular and not a probationary employee.” It
continues, however, with a twist that effectively negates what it has stated and admitted
about the need to communicate the regularization standards to the employee.
Same; Termination of Employment; View that to justify the dismissal of an employee, the
employer carries the burden of proving that the dismissal was for a just cause and with the
observance of due process prior to dismissal.—To justify the dismissal of an employee, the
employer carries the burden of proving that the dismissal was for a just cause and with the
observance of due process prior to dismissal. The employer has to discharge this burden
by clear, accurate, consistent and convincing evidence; in case of doubt, the presumption
in the employee’s favor under Article 4 of the Labor Code should apply.
Same; Same; View that a probationary employee does not have lesser rights than a regular
employee under the Labor Code in terms of the just cause for the termination of an
employment.—An important legal point that should not be lost in considering this case is
that a probationary employee does not have lesser rights than a regular employee under
the Labor Code in terms of the just cause for the termination of an employment. While the
strict application of Article 282 of the Labor Code may be relaxed because the employee is
still under probation (so that analogous probationary status rules may apply), the same
essential just cause for dismissal must be present and must be proven. In other words,
probationary employment does not mean that the employee is under an “employment at
will” situation as that phrase is understood in American jurisprudence. To reiterate, the
fact that the respondent was still in her probationary period of employment did not lessen
the burden of proof that the law imposed on the petitioners to prove the just cause for her
dismissal. Probationary employees are protected by the security of tenure provision of the
Constitution and they cannot be removed from their position except only for cause.
VI. A.) SECURITY OF TENURE AND TEMINATION OF EMPLOYMENT
KING OF KINGS TRANSPORT, INC., CLAIRE DELA FUENTE, and MELISSA LIM,
petitioners, vs. SANTIAGO O. MAMAC, respondent.
Labor Law; Due Process; Due Process under the Labor Code involves two aspects: first,
substantive—the valid and authorized causes of termination of employment under the
Labor Code, and second, procedural—the manner of dismissal.—Due process under the
Labor Code involves two aspects: first, substantive—the valid and authorized causes of
termination of employment under the Labor Code; and second, procedural—the manner
of dismissal. In the present case, the CA affirmed the findings of the labor arbiter and the
NLRC that the termination of employment of respondent was based on a “just cause.” This
ruling is not at issue in this case. The question to be determined is whether the procedural
requirements were complied with.
Same; Same; In order to enable the employees to intelligently prepare their explanation
and defenses, the notice should contain a detailed narration of the facts and circumstances
that will serve as basis for the charge against the employees—a general description of the
charge will not suffice.—The first written notice to be served on the employees should
contain the specific causes or grounds for termination against them, and a directive that
the employees are given the opportunity to submit their written explanation within a
reasonable period. “Reasonable opportunity” under the Omnibus Rules means 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 at least five (5)
calendar days from receipt of the 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. Moreover, in order to enable
the employees to intelligently prepare their explanation and defenses, the notice should
contain a detailed narration of the facts and circumstances that will serve as basis for the
charge against the employees. A general description of the charge will not suffice. Lastly,
the notice should specifically mention which company rules, if any, are violated and/or
which among the grounds under Art. 282 is being charged against the employees.
Same; Same; A verbal appraisal of the charges against an employee does not comply with
the first notice requirement.—In the instant case, KKTI admits that it had failed to provide
respondent with a “charge sheet.” However, it maintains that it had substantially complied
with the rules, claiming that “respondent would not have issued a written explanation had
he not been informed of the charges against him.” We are not convinced. First, respondent
was not issued a written notice charging him of committing an infraction. The law is clear
on the matter. A verbal appraisal of the charges against an employee does not comply with
the first notice requirement. In Pepsi Cola Bottling Co. v. NLRC, 210 SCRA 277 (1992), the
33
Court held that consultations or conferences are not a substitute for the actual observance
of notice and hearing. Also, in Loadstar Shipping Co., Inc. v. Mesano, 408 SCRA 478 (2003),
the Court, sanctioning the employer for disregarding the due process requirements, held
that the employee’s written explanation did not excuse the fact that there was a complete
absence of the first notice.
Same; Same; The doctrine in Serrano v. NLRC, 323 SCRA 445 (2000) had already been
abandoned in Agabon v. NLRC, 442 SCRA 573 (2004), by ruling that if the dismissal is
done without due process, the employer should indemnify the employee with nominal
damages.—After a finding that petitioners failed to comply with the due process
requirements, the CA awarded full backwages in favor of respondent in accordance with
the doctrine in Serrano v. NLRC, 323 SCRA 445 (2000). However, the doctrine in Serrano
had already been abandoned in Agabon v. NLRC, 442 SCRA 573 (2004), by ruling that if
the dismissal is done without due process, the employer should indemnify the employee
with nominal damages. Thus, for non-compliance with the due process requirements in
the termination of respondent’s employment, petitioner KKTI is sanctioned to pay
respondent the amount of thirty thousand pesos (PhP30,000) as damages.
Same; 13th-Month Pay; A bus conductor paid on commission only is not entitled to 13th-
month benefit.—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 commissions he was receiving each trip. Thus,
he was excluded from receiving the 13th-month pay benefit.
PHILIPPINE NATIONAL BANK, petitioner, vs. RAMON BRIGIDO L. VELASCO,
respondent.
Civil Procedure; Appeals; Certiorari; St. Martin Funeral Homes v. National Labor
Relations Commission, 295 SCRA 494 (1998) settled any doubt as to the manner of
elevating decisions of the National Labor Relations Commission (NLRC) to the Court of
Appeals (CA) by holding that the legislative intendment was that the special civil action
of certiorari was and still is the proper vehicle for judicial review of decisions of the
National Labor Relations Commission (NLRC).—The correct remedy that should have
been availed of is the special civil action of certiorari under Rule 65. As this Court held in
the case of Pure Foods Corporation v. NLRC, 171 SCRA 415 (1989), “the party may also
seasonably avail of the special civil action for certiorari, where the tribunal, board or officer
exercising judicial functions has acted without or in excess of its jurisdiction, or with grave
abuse of discretion, and praying that judgment be rendered annulling or modifying the
proceedings, as the law requires, of such tribunal, board or officer.” In any case, St. Martin
Funeral Home v. National Labor Relations Commission, 295 SCRA 494 (1998), settled any
doubt as to the manner of elevating decisions of the NLRC to the CA by holding that “the
legislative intendment was that the special civil action of certiorari was and still is the
proper vehicle for judicial review of decisions of the NLRC.”
Labor Law; Termination of Employment; Velasco committed serious misconduct, hence,
his dismissal is justified.—II. Velasco committed serious misconduct, hence, his dismissal
is justified. Article 282 of the Labor Code enumerates the just causes where an employer
may terminate the services of an employee, to wit: a) Serious misconduct or willful
disobedience by the employee of the lawful orders of his employer or representative in
connection with his work; b) Gross and habitual neglect by the employee of his duties; c)
Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative; d) Commission of a crime or offense by the employee
against the person of his employer or any immediate member of his family or his duly
authorized representative; and e) Other causes analogous to the foregoing.
Same; Misconduct; It is settled that in order for misconduct to be serious, “it must be of
such grave and aggravated character and not merely trivial or unimportant.”—Ordinary
misconduct would not justify the termination of the services of an employee. The law is
explicit that the misconduct should be serious. It is settled that in order for misconduct to
be serious, “it must be of such grave and aggravated character and not merely trivial or
unimportant.” As amplified by jurisprudence, the misconduct must (1) be serious; (2)
relate to the performance of the employee’s duties; and (3) show that the employee has
become unfit to continue working for the employer.
Banks and Banking; Velasco violated bank rules when he transacted a “no-book”
withdrawal by his failure to present his passbook to the PNB, Ligao, Albay Branch on June
30, 1995.—The misconduct is serious. Velasco violated bank rules when he transacted a
“no-book” withdrawal by his failure to present his passbook to the PNB Ligao, Albay
Branch on June 30, 1995. Section 1216 of the Manual of Regulations for Banks and Other
Financial Intermediaries state that “[b]anks are prohibited from issuing/accepting
‘withdrawal authority slips’ or any other similar instruments designed to effect
34
withdrawals of savings deposits without following the usual practice of requiring the
depositors concerned to present their passbooks and accomplishing the necessary
withdrawal slips.” Further, he failed to present any letter of introduction as mandated
under General Circular 3-72-92 which requires that “[b]efore going out-of-town, the
Depositor secures a Letter of Introduction from the branch/office where his Peso Savings
Account is maintained.”
Same; A strict reading of General Circular 3-72-92 would lead one to conclude that only
person with peso savings account are required to secure a letter of introduction. However,
simple logic dictates that those maintaining dollar savings account are also included.—
True, a strict reading of General Circular 3-72-92 would lead one to conclude that only
persons with peso savings account are required to secure a letter of introduction. However,
simple logic dictates that those maintaining dollar savings account are also included. No
cogent reason would be served by the rule if only persons with peso savings account are
required to get a letter of introduction. Otherwise, there can be a circumvention of the rule.
Nemo potest facere per alium qud non potest facere per directum. No one is allowed to do
indirectly what he is prohibited to do directly. Sinuman ay hindi pinapayagang gawin
nang hindi tuwiran ang ipinagbabawal gawin nang tuwiran.
Same; The banking system is an indispensable institution in the modern world. It plays a
vital role in the economic life of every civilized nation.—As an audit officer, Velasco should
be the first to ensure that banking laws, policies, rules and regulations, are strictly observed
and applied by its officers in the day-to-day transactions. The banking system is an
indispensable institution in the modern world. It plays a vital role in the economic life of
every civilized nation. Whether banks act as mere passive entities for the safekeeping and
saving of money, or as active instruments of business and commerce, they have become
an ubiquitous presence among the citizenry, who have come to regard them with respect
and even gratitude and, most of all, confidence.
Evidence; Alibi; The claim of Velasco that his initial answer was made under pressing
circumstances is too flimsy an excuse. It partakes of the nature of an alibi.—We find no
cogent reason to depart from Our ruling in Perez. The claim of Velasco that his initial
answer was made under pressing circumstances is too flimsy an excuse. It partakes of the
nature of an alibi. As such, it constitutes a self-serving negative evidence which cannot he
accorded greater evidentiary weight than the declaration of credible witnesses who
testified on affirmative matters. The Court has consistently frowned upon the defense of
alibi, and received it with caution, not only because it is inherently weak and unreliable
but also because it can be easily fabricated.
Labor Law; Termination of Employment; Fitness for continued employment cannot be
compartmentalized into tight little cubicles of aspects of character, conduct, and ability
separate and independent of each other. A service of irregularities, when combined, may
constitute serious misconduct which is a just cause for dismissal.—The Labor Arbiter and
the NLRC are in unison that Velasco transacted a no-book withdrawal and failed to present
a letter of introduction at PNB Ligao, Albay Branch on June 30, 1995. He also forged his
passbook to cover up his offense. Being duly supported by substantial evidence, We
sustain said finding. Fitness for continued employment cannot be compartmentalized into
tight little cubicles of aspects of character, conduct, and ability separate and independent
of each other. A service of irregularities, when combined, may constitute serious
misconduct which is a just cause for dismissal.
Same; Same; When he violated bank rules and regulations and tried to cover up his
infractions by falsifying his passbook, he was not only committing them as a depositor but
also, or rather more so, as an officer of the bank. It is akin to falsification of time cards, and
circulation of fake meal tickets, which this Court held as a just cause for terminating the
services of an employee.—On one hand, he failed to present his passbook and a letter of
introduction when he withdrew US$15,000.00 at PNB Ligao, Albay Branch on June 30,
1995. This serious misconduct was aggravated when he presented a falsified passbook to
make it appear that he did not commit any misdeed. On the other hand, he worked for
PNB for eighteen (18) long years, his last position having been as Manager 1 of the IAD.
As such, he was involved in the examination of the books of account of PNB. Thus, when
he violated bank rules and regulations and tried to cover up his infractions by falsifying
his passbook, he was not only committing them as a depositor but also, or rather more so,
as an officer of the bank. It is akin to falsification of time cards, and circulation of fake meal
tickets, which this Court held as a just cause for terminating the services of an employee.
Same; Managerial Employees; Managerial employees like Velasco are tasked to perform
key and senstitive functions and are bound by more exacting work ethics. Indeed, not even
his eighteen (18) years of service could exonerate him.—C. Velasco has become unfit to
continue working at PNB. His acts render him unfit to remain in the employ of the bank.
That it is his first offense is of no moment because he holds a managerial position.
Employers are allowed wide latitude of discretion in terminating managerial employees
who, by virtue of their position, require full trust and confidence in the performance of
their duties. Managerial employees like Velasco are tasked to perform key and sensitive
functions and are bound by more exacting work ethics. Indeed, not even his eighteen (18)
years of service could exonerate him. As this Court held in Equitable PCIBank v. Caguioa,
466 SCRA 686 (2005): The leniency sought by respondent on the basis of her 35 years of
service to the bank must be weighed in conjunction with the other considerations raised
35
by petitioners. As that service has been amply compensated, her plea for leniency cannot
offset her dishonesty. Even government employees who are validly dismissed from the
service by reason of timely discovered offenses are deprived of retirement benefits.
Treating respondent in the same manner as the loyal and code-abiding employees, despite
the timely discovery of her Code violations, may indeed have a demoralizing effect on the
entire bank. Be it remembered that banks thrive on and endeavor to retain public trust and
confidence, every violation of which must thus be accompanied by appropriate sanctions.
Same; Philippine National Bank; Philippine National Bank (PNB) was registered under the
Corporation Code under SEC Reg. No. ASO 96-005555 dated May 27, 1996. Thus, on that
day, employees of Philippine National Bank (PNB) came under the jurisdiction of the
Labor Code.—PNB was registered under the Corporation Code under SEC Reg. No. ASO
96-005555 dated May 27, 1996. Thus, on that day, employees of PNB came under the
jurisdiction of the Labor Code, whose Sections 8 and 9 of Rule XXIII, Book V of the
Implementing Rules state: Section 8. Preventive Suspension.—The employer may place the
worker concerned under preventive suspension if his continued employment poses a
serious and imminent threat to the life or property of the employer or his co-workers.
Section 9. No preventive suspension shall last longer than thirty (30) days. The employer
shall thereafter reinstate the worker in his former or in a substantially equivalent position
or the employer may extend the period of suspension provided that during the period of
extension, he pays the wages and other benefits due to the worker. In such case, the worker
shall not be bound to reimburse the amount paid to him during the extension if the
employer decides, after completion of the hearing, to dismiss the worker.
Same; Termination of Employment; He is not entitled to separation and backwages
because he was not illegally dismissed.—He is not entitled to separation and backwages
because he was not illegally dismissed. We note though that PNB was not at all insensitive
to his plight, considering (1) his restitution of the amount akin to no actual loss to the bank,
and (2) his length of service of eighteen (18) years. As stated earlier, PNB imposed on
Velasco the penalty of forced resignation with benefits, instead of dismissal. The records
bear out that he was granted P542,110.75 as separation benefits which was used to offset
his loan in the bank, leaving an outstanding balance of P167,625.82 as of May 27, 1997. We
find that PNB acted humanely under the circumstances.
Same; Same; The difference between the position of the employer and the employee,
simply considering the latter as economically weaker, is not a justification for the violation
of the rights of the former.—The law imposes great burdens on the employer. One needs
only to look at the varied provisions of the Labor Code. Indeed, the law is tilted towards
the plight of the working man. The Labor Code is titled that way and not as “Employer
Code.” As one American ruling puts it, the protection of labor is the highest office of our
laws. Corollary to this, however, is the right of the employer to expect from the employee
no less than adequate work, diligence and good conduct. As Mr. Justice Joseph McKenna
of the United States Supreme Court said in Arizona Copper Co. v. Hammer, 250 US 400
(1919), “[t]he difference between the position of the employer and the employee, simply
considering the latter as economically weaker, is not a justification for the violation of the
rights of the former.”
PHILIPPINE AIRLINES, INC., petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION (2nd Division), LABOR ARBITER JOSE DE VERA, and EDILBERTO
CASTRO, respondents.
Labor Law; Preventive Suspension; Preventive suspension is a disciplinary measure for
the protection of the company’s property pending investigation of any alleged malfeasance
or misfeasance committed by the employee.—Preventive suspension is a disciplinary
measure for the protection of the company’s property pending investigation of any alleged
malfeasance or misfeasance committed by the employee. The employer may place the
worker concerned under preventive suspension if his continued employment poses a
serious and imminent threat to the life or property of the employer or of his co-workers.
Same; Same; Preventive Suspension and Suspension as Penalty, Distinguished.—PAL
faults the Labor Arbiter and the NLRC for allegedly equating preventive suspension as
remedial measure with suspension as penalty for administrative offenses. The argument
though cogent is, however, inaccurate. A distinction between the two measures was clearly
elucidated by the Court in the case of Beja, Sr. v. CA, thus: “Imposed during the pendency
of an administrative investigation, preventive suspension is not a penalty in itself. It is
merely a measure of precaution so that the employee who is charged may be separated,
for obvious reasons, from the scene of his alleged misfeasance while the same is being
investigated. While the former may be imposed on a respondent during the investigation
of the charges against him, the latter is the penalty which may only be meted upon him at
the termination of the investigation or the final disposition of the case.”
Same; Same; An employee’s conformity to considering his prolonged preventive
suspension as constituting his penalty for the offense charged does not cure an employer’s
blatant violation of the law, and the same is null and void.—PAL contends that when
respondent consented to the resolution that the entire period of suspension shall constitute
36
his penalty for the offense charged, the latter is thereby estopped to question the validity
of said suspension. We concur with the labor arbiter when he ruled that the ensuing
conformity by respondent does not cure petitioner’s blatant violation of the law, and the
same is therefore null and void. Thus, “to uphold the validity of the subsequent agreement
between complainant and respondent regarding the imposition of the suspension would
be repulsive to the avowed policy of the State enshrined not only in the Constitution but
also in the Labor Code.”
Same; Same; The exercise by an employer of its rights to regulate all aspects of employment
must be in keeping with good faith and not be used as a pretext for defeating the rights of
employees under the laws and applicable contracts.—In fine, we do not question the right
of the petitioner to discipline its erring employees and to impose reasonable penalties
pursuant to law and company rules and regulations. “Having this right, however, should
not be confused with the manner in which that right must be exercised.” Thus, the exercise
by an employer of its rights to regulate all aspects of employment must be in keeping with
good faith and not be used as a pretext for defeating the rights of employees under the
laws and applicable contracts. Petitioner utterly failed in this respect. Philippine Airlines,
Inc. vs. NLRC (2nd Division), 292 SCRA 40, G.R. No. 114307 July 8, 1998
JO CINEMA CORPORATION and MICHAEL JO, petitioners, vs. LOLITA C.
ABELLANA and NATIONAL LABOR RELATIONS COMMISSION, respondents.
Labor Law; Dismissals; Words and Phrases.—Dismissal connotes a permanent severance
or complete separation of the worker from the service on the initiative of the employer
regardless of the reasons therefor.
Same; Same; Same; Constructive Dismissal.—A constructive discharge is defined as a
quitting because continued employment is rendered impossible, unreasonable or unlikely,
as an offer involving demotion in rank and a diminution in pay.
Same; Same; The right of an employee to demand for separation pay and backwages is
always premised on the fact that the employee was terminated either legally or illegally.—
Having thus determined that private respondent was not dismissed from the service, the
payment of separation pay and backwages are not in order. It must be emphasized that
the right of an employee to demand for separation pay and backwages is always premised
on the fact that the employee was terminated either legally or illegally. The award of
backwages belongs to an illegally dismissed employee by direct provision of law and it is
awarded on grounds of equity for earnings which a worker or employee has lost due to
illegal dismissal. Separation pay, on the other hand, is awarded as an alternative to illegally
dismissed employees where reinstatement is no longer possible.
CARLOS V. VALENZUELA, petitioner, vs. CALTEX PHILIPPINES, INC., respondent.
Actions; Pleadings, Practice and Procedure; The Rules do not specify the precise
documents, pleadings or parts of the records that should be appended to the petition other
than the judgment, final order, or resolution being assailed – the failure to submit certain
documents does not automatically warrant outright dismissal of its petition.—Equally
without merit is petitioner’s contention that the failure of respondent to submit certain
documents together with its petition for certiorari warrants the dismissal thereof. In
Quintano v. National Labor Relations Commission, 446 SCRA 193 (2004), we held, x x x
The Rules do not specify the precise documents, pleadings or parts of the records that
should be appended to the petition other than the judgment, final order, or resolution
being assailed. The Rules only state that such documents, pleadings or records should be
relevant or pertinent to the assailed resolution, judgment or orders; as such, the initial
determination of which pleading, document or parts of the records are relevant to the
assailed order, resolution, or judgment, falls upon the petitioner. The CA will ultimately
determine if the supporting documents are sufficient to even make out a prima facie case.
If the CA was of the view that the petitioner should have submitted other pleadings,
documents or portions of the records to enable it to determine whether the petition was
sufficient in substance, it should have accorded the petitioner, in the interest of substantial
justice, a chance to submit the same instead of dismissing the petition outright. Clearly,
this is the better policy. x x x (Emphasis supplied.) Thus, the failure to submit certain
documents, assuming there was such a failure on respondent’s part, does not
automatically warrant outright dismissal of its petition.
Labor Law; Termination of Employment; Gross Neglect of Duty; Words and Phrases;
Gross negligence connotes want of care in the performance of one’s duties, while habitual
neglect implies repeated failure to perform one’s duties for a period of time, depending
upon the circumstances.—Under Article 282 of the Labor Code, as amended, gross and
habitual neglect by the employee of his duties is a sufficient and legal ground to terminate
employment. Jurisprudence provides that serious misconduct and habitual neglect of
duties are among the just causes for terminating an employee. Gross negligence connotes
want of care in the performance of one’s duties. Habitual neglect implies repeated failure
to perform one’s duties for a period of time, depending upon the circumstances.
37
Same; Same; Fraud; The Labor Code, as amended, although sympathetic to the working
class, is aware of this scenario and in pursuit of fairness, included fraud or willful breach
of trust as a just cause for termination of employment.—Article 282 of the Labor Code, as
amended, also provides fraud or willful breach by employee of the trust reposed in him
by his employer as a just cause for termination. It is always a serious issue for the employer
when an employee performs acts which diminish or break the trust and confidence
reposed in him. The Labor Code, as amended, although sympathetic to the working class,
is aware of this scenario and in pursuit of fairness, included fraud or willful breach of trust
as a just cause for termination of employment.
Same; Preventive Suspension; After 30 days of preventive suspension, the employer shall
reinstate the worker in his former or in a substantially equivalent position or the employer
may extend the period of suspension provided that during the period of extension, he pays
the wages and other benefits due to the worker.—Sections 8 and 9 of Rule XXIII,
Implementing Book V of the Omnibus Rules Implementing the Labor Code provides:
“SEC. 8. Preventive suspension.—The employer may place the worker concerned under
preventive suspension if his continued employment poses a serious and imminent threat
to the life or property of the employer or of his co-workers. SEC. 9. Period of suspension.—
No preventive suspension shall last longer than thirty (30) days. The employer shall
thereafter reinstate the worker in his former or in a substantially equivalent position or the
employer may extend the period of suspension provided that during the period of
extension, he pays the wages and other benefits due to the worker. In such case, the worker
shall not be bound to reimburse the amount paid to him during the extension if the
employer decides, after completion of the hearing, to dismiss the worker.” (Emphasis
supplied.) In this case, petitioner was preventively suspended from November 26, 1999 to
December 25, 1999. Respondents extended his preventive suspension for thirty days, from
December 26, 1999 to January 24, 2000. After the conclusion of the administrative
investigation, he was finally terminated on January 21, 2000. There is no showing that
petitioner was paid his wages and benefits during the additional period of suspension.
Clearly, petitioner is entitled to his salary and other benefits prior to his dismissal, from
December 26, 1999 to January 21, 2000.
SMART COMMUNICATIONS, INC. VS. SOLIDUM
Labor Law; Preventive Suspension; The relevant provisions regarding preventive
suspensions are found in Sections 8 and 9 of Rule XXIII, Book V of the Omnibus Rules
Implementing the Labor Code (Omnibus Rules), as amended by Department Order (DO)
No. 9, Series of 1997.—The relevant provisions regarding preventive suspensions are
found in Sections 8 and 9 of Rule XXIII, Book V of the Omnibus Rules Implementing the
Labor Code (Omnibus Rules), as amended by Department Order No. 9, Series of 1997,
which read as follows: Section 8. Preventive suspension.—The employer may place the
worker concerned under preventive suspension only if his continued employment poses a
serious and imminent threat to the life or property of the employer or of his coworkers.
Section 9. Period of suspension.—No preventive suspension shall last longer than thirty
(30) days. The employer shall thereafter reinstate the worker in his former or in a
substantially equivalent position or the employer may extend the period of suspension
provided that during the period of extension, he pays the wages and other benefits due to
the worker. In such case, the worker shall not be bound to reimburse the amount paid to
him during the extension if the employer decides, after completion of the hearing, to
dismiss the worker.
Same; Same; By a preventive suspension an employer protects itself from further harm or
losses because of the erring employee.—By a preventive suspension an employer protects
itself from further harm or losses because of the erring employee. This concept was
explained by the Court in Gatbonton v. National Labor Relations Commission, 479 SCRA
416 (2006): Preventive suspension is a disciplinary measure for the protection of the
company’s property pending investigation of any alleged malfeasance or misfeasance
committed by the employee. The employer may place the worker concerned under
preventive suspension if his continued employment poses a serious and imminent threat
to the life or property of the employer or of his coworkers. However, when it is determined
that there is no sufficient basis to justify an employee’s preventive suspension, the latter is
entitled to the payment of salaries during the time of preventive suspension.
Same; Same; While the Omnibus Rules limits the period of preventive suspension to thirty
(30) days, such time frame pertains only to one (1) offense by the employee; However, if
the employee is charged with another offense, then the employer is entitled to impose a
preventive suspension not to exceed 30 days specifically for the new infraction.—While
the Omnibus Rules limits the period of preventive suspension to thirty (30) days, such time
frame pertains only to one offense by the employee. For an offense, it cannot go beyond 30
days. However, if the employee is charged with another offense, then the employer is
entitled to impose a preventive suspension not to exceed 30 days specifically for the new
infraction. Indeed, a fresh preventive suspension can be imposed for a separate or distinct
offense. Thus, an employer is well within its rights to preventively suspend an employee
for other wrongdoings that may be later discovered while the first investigation is ongoing.
Same; Administrative Agencies; National Labor Relations Commission; Jurisdiction; The
National Labor Relations Commission (NLRC) has the power and authority to promulgate
rules of procedure under Article 218(a) of the Labor Code.—Considering that it is the
38
NLRC that has interpreted its own rules on this matter, the Court is inclined to accept such
interpretation. The Court has held, “By reason of the special knowledge and expertise of
administrative agencies over matters falling under their jurisdiction, they are in a better
position to pass judgment on those matters.” Moreover, the NLRC properly relaxed the
rules on appeal bonds. The NLRC has the power and authority to promulgate rules of
procedure under Article 218(a) of the Labor Code. As such, it can suspend the rules if it
finds that the interests of justice will be better served if the strict compliance with the rules
should be relaxed. In short, a substantial compliance may be allowed by the NLRC
especially in this case where the party which submitted the bond is a multibillion company
which can easily pay whatever monetary award may be adjudged against it. Even if there
is no proof of security deposit or collateral, the surety bond issued by an accredited
company is adequate to answer for the liability if any to be incurred by Smart.
Same; Right to Cross-Examine; The Supreme Court (SC) explained the reason why cross-
examination is not required in the proceedings before the labor arbiter (LA) in Reyno v.
Manila Electric Company, 434 SCRA 660 (2004).—The controlling jurisprudence on the
matter is the ruling in the more recent Philippine Long Distance Telephone Company v.
Honrado, 637 SCRA 778 (2010), where the Court ruled: It is hornbook in employee
dismissal cases that “[t]he essence of due process is an opportunity to be heard, or as
applied to administrative proceedings, an opportunity to explain one’s side x x x. A formal
or trial type hearing is not at all times and in all instances essential to due process, the
requirements of which are satisfied where the parties are afforded fair and reasonable
opportunity to explain their side of the controversy.” Neither is it necessary that the
witnesses be cross-examined by counsel for the adverse party. (emphasis supplied) The
Court explained the reason why cross-examination is not required in the proceedings
before the labor arbiter in Reyno v. Manila Electric Company, 434 SCRA 660 (2004), citing
Rabago v. National Labor Relations Commission, 200 SCRA 158 (1991), where the Court
ruled: x x x The argument that the affidavit is hearsay because the affiants were not
presented for cross-examination is not persuasive because the rules of evidence are not
strictly observed in proceedings before administrative bodies like the NLRC where
decisions may be reached on the basis of position papers only.
Same; Termination of Employment; Loss of Trust and Confidence; Managerial Employees;
Solidum does not deny having “the authority to devise, implement and control strategic
and operational policies of the Department he was then heading”; Thus, the National
Labor Relations Commission (NLRC) and the Court of Appeals (CA) correctly found that
Solidum was a managerial employee. As such, he may be validly dismissed for loss of trust
and confidence.—Solidum denies that he is a managerial employee by stating that just
because he directed subordinates, he should be considered a managerial employee. He also
argues that just because he had a large salary does not mean that he was a managerial
employee. Finally, Solidum denies having the power to lay down and execute
management policies. Notably, however, Solidum does not deny having “the authority to
devise, implement and control strategic and operational policies of the Department he was
then heading.” This is clearly the authority to lay down and execute management policies.
Consequently, the CA affirmed these findings. Thus, the NLRC and the CA correctly found
that Solidum was a managerial employee. As such, he may be validly dismissed for loss of
trust and confidence.
ARIS PHILIPPINES, INC. VS. NLRC
Labor Law; Termination; Just Causes; Article 282 of the Labor Code.—The just causes of
termination of employment are specifically enumerated in Article 282 of the Labor Code.
Hence—“ART. 282. Termination by employer.—An employer may terminate an
employment for any of the following causes: “(a) Serious misconduct or willful
disobedience by the employee of the lawful orders of his employer or representative in
connection with his work; “(b) Gross and habitual neglect by the employee of his duties;
“(c) Fraud or willful breach by the employee of the trust reposed in him by his employer
or duly authorized representative; “(d) Commission of a crime or offense by the employee
against the person of his employer or any immediate member of his family or his duly
authorized representative; and “(e) Other causes analogous to the foregoing.”
Same; Same; Same; In order to constitute a "just cause” for dismissal, the act complained
of must be related to the performance of the duties of the employee such as would show
him to be thereby unfit to continue working for the employer.—It is not disputed that
private respondent has done, indeed he has admitted to having committed, a serious
misconduct. In order to constitute a “just cause” for dismissal, however, the act
complained of must be related to the performance of the duties of the employee such as
would show him to be thereby unfit to continue working for the employer. While we do
not condone the guilt of private respondent, we, nevertheless, are concluded by the factual
finding of the NLRC that his misconduct is not work-related and did not, in any way,
disrupt the operations of the company.
LAGROSAS VS. BRISTOL-MYERS SQUIBB (PHIL.), INC./MEAD JOHNSON PHIL.
Labor Law; Termination of Employment; Serious Misconduct; Requisites; Words and
Phrases; Serious misconduct as a valid cause for the dismissal of an employee is defined
39
simply as improper or wrong conduct, a 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 of judgment; To be a valid cause for termination, the
act complained of must be related to the performance of the employee’s duties such as
would show him to be unfit to continue working for the employer.—Serious misconduct
as a valid cause for the dismissal of an employee is defined simply as improper or wrong
conduct. It is a 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 of 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. However serious such misconduct, it must, nevertheless, be in connection
with the employee’s work to constitute just cause for his separation. The act complained
of must be related to the performance of the employee’s duties such as would show him
to be unfit to continue working for the employer. Thus, for misconduct or improper
behavior to be a just cause for dismissal, it (a) must be serious; (b) must relate to the
performance of the employee’s duties; and (c) must show that the employee has become
unfit to continue working for the employer.
Injunctions; Injunction Bond; It is settled that the purpose of a preliminary injunction is to
prevent threatened or continuous irremediable injury to some of the parties before their
claims can be thoroughly studied and adjudicated; The injunction bond is intended as a
security for damages in case it is finally decided that the injunction ought not to have been
granted, to protect the enjoined party against loss or damage by reason of the injunction,
and the bond is usually conditioned accordingly.—It is settled that the purpose of a
preliminary injunction is to prevent threatened or continuous irremediable injury to some
of the parties before their claims can be thoroughly studied and adjudicated. Its sole aim
is to preserve the status quo until the merits of the case can be heard fully. A preliminary
injunction may be granted only when, among other things, the applicant, not explicitly
exempted, files with the court where the action or proceeding is pending, a bond executed
to the party or person enjoined, in an amount to be fixed by the court, to the effect that the
applicant will pay such party or person all damages which he may sustain by reason of the
injunction or temporary restraining order if the court should finally decide that the
applicant was not entitled thereto. Upon approval of the requisite bond, a writ of
preliminary injunction shall be issued. The injunction bond is intended as a security for
damages in case it is finally decided that the injunction ought not to have been granted. Its
principal purpose is to protect the enjoined party against loss or damage by reason of the
injunction, and the bond is usually conditioned accordingly.
Same; Same; Where the enjoined party has been adjudged to have no right to the monetary Mendoza, Amular and Ducay interacted with one another in the performance of their
awards granted by the lower tribunals, and that the implementation of the writ of duties.
execution and notices of garnishment was properly enjoined, this in effect amounted to a
Same; Same; Misconduct; Respondent and his companion were purposely at the mall to
finding that he did not sustain any damage by reason of the injunction, resulting in the
confront Mendoza about their work-related problem, when the latter appeared, they
discharge or release of the injunction bond.—By its Decision dated January 28, 2005, the
accosted and mauled him—respondent committed misconduct or exhibited improper
appellate court disposed of the case by granting Bristol-Myers’ petition and reinstating the
behavior that constituted a valid cause for his dismissal under the law and jurisprudential
Decision dated September 24, 2002 of the NLRC which dismissed the complaint for
standards.—Looking back at the reason why Amular and Ducay were at the mall in the
dismissal. It also ordered the discharge of the TRO cash bond and injunction cash bond.
first place, this attributed causation hardly makes sense. To reiterate, they were purposely
Thus, both conditions of the writ of preliminary injunction were satisfied. Notably, the
there to confront Mendoza about their work-related problem. They waited for him at the
appellate court ruled that Lagrosas had no right to the monetary awards granted by the
place where they expected him to be. When Mendoza appeared, they accosted him and
labor arbiter and the NLRC, and that the implementation of the writ of execution and
put into motion the entire sorry incident. Under these circumstances, Amular undoubtedly
notices of garnishment was properly enjoined. This in effect amounted to a finding that
committed a misconduct or exhibited improper behavior that constituted a valid cause for
Lagrosas did not sustain any damage by reason of the injunction. To reiterate, the
his dismissal under the law and jurisprudential standards. The circumstances of his
injunction bond is intended to protect Lagrosas against loss or damage by reason of the
misdeed, to our mind, rendered him unfit to continue working for Technol; guilt is not
injunction only. Contrary to Lagrosas’ claim, it is not a security for the judgment award by
diminished by his claim that Technol’s management called the three of them to a meeting,
the labor arbiter. Considering the foregoing, we hold that the appellate court erred in
and asked them to explain their sides and settle their differences, which they did. Mendoza
disallowing the discharge and release of the injunction cash bond.
significantly denied the alleged settlement, maintaining that while they were summoned
by De Leon after the incident, he could not shake hands and settle with Amular and Ducay
since they did not even apologize or ask forgiveness for what they did. We do not find
TECHNOL EIGHT PHILIPPINES CORPORATION, petitioner, vs. NATIONAL
Mendoza’s denial of Amular’s claim unusual as Mendoza would not have stood his
LABOR RELATIONS COMMISSION AND DENNIS AMULAR, respondents.
ground in this case if a settlement had previously been reached. That a meeting had taken
Labor Law; Termination of Employment; While the mauling incident happened outside place does not appear disputed, but a settlement cannot be inferred simply because a
the company premises and after working hours, no disruption of work operations and it meeting took place.
did not result in a hostile environment in the company, nevertheless, there is work-
Constitutional Law; Due Process; The essence of due process is simply an opportunity to
connection because the motivation behind the confrontation concerned respondent’s
be heard; it is the denial of this opportunity that constitutes violation of due process of
questionable work behavior.—The appellate court’s benign treatment of Amular’s offense
law.—What we see in the records belie Amular’s claim of denial of procedural due process.
was based largely on its observation that the incident happened outside the company
He chose not to present his side at the administrative hearing. In fact, he avoided the
premises and after working hours; did not cause a disruption of work operations; and did
investigation into the charges against him by filing his illegal dismissal complaint ahead
not result in a hostile environment in the company. Significantly, it did not condone
of the scheduled investigation. Under these facts, he was given the opportunity to be heard
Amular’s infraction, but it considered that Amular’s dismissal was a harsh penalty that is
and he cannot now come to us protesting that he was denied this opportunity. To belabor
disproportionate with his offense. The record of the case, however, gives us a different
a point the Court has repeatedly made in employee dismissal cases, the essence of due
picture. Contrary to the CA’s perception, we find a work-connection in Amular’s and
process is simply an opportunity to be heard; it is the denial of this opportunity that
Ducay’s assault on Mendoza. As the CA itself noted, the underlying reason why Amular
constitutes violation of due process of law.
and Ducay confronted Mendoza was to question him about his report to De Leon—
Technol’s PCD assistant supervisor—regarding the duo’s questionable work behavior. The
motivation behind the confrontation, as we see it, was rooted on workplace dynamics as
ALEJANDRO ROQUERO, petitioner, vs. PHILIPPINE AIRLINES, INC., respondent.

40
Labor Law; Illegal Dismissals; Grounds; Serious Misconduct; Definition; Requisites.—
Serious misconduct is defined as “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.” For serious misconduct to warrant the dismissal
of an employee, it (1) must be serious; (2) must relate to the performance of the employee’s
duty; and (3) must show that the employee has become unfit to continue working for the
employer.
Same; Same; Due process; Twin-Notice Rule; PAL complied with the twin-notice
requirement before dismissing the petitioner.—Petitioner cannot complain he was denied
procedural due process. PAL complied with the twin-notice requirement before
dismissing the petitioner. The twin-notice rule requires (1) the notice which apprises the
employee of the particular acts or omissions for which his dismissal is being sought along
with the opportunity for the employee to air his side, and (2) the subsequent notice of the
employer’s decision to dismiss him. Both were given by respondent PAL.
Same; Courts; National Labor Relations Commission; Judgments; Execution Pending
Appeal; Rationale; The State may authorize an immediate implementation, pending
appeal, of a decision reinstating a dismissed or separated employee.—x x x Then, by and
pursuant to the same power (police power), the State may authorize an immediate
implementation, pending appeal, of a decision reinstating a dismissed or separated
employee since that saving act is designed to stop, although temporarily since the appeal
may be decided in favor of the appellant, a continuing threat or danger to the survival or
even the life of the dismissed or separated employee and his family.”
Same; Same; Same; Same; Same; The order of reinstatement is immediately executory.—
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.
Same; Same; Same; Same; Same; 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.—We reiterate the rule that
technicalities have no room in labor cases where the Rules of Court are applied only in a
suppletory manner and only to effectuate the objectives of the Labor Code and not to defeat
them. Hence, 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
41
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.
STANFORD MICROSYSTEMS, INC., petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and HENRY TRINIO, respondents.
Labor; NLRC; Illegal dismissal, not a case of; Sufficiency of evidence proving the acts
ascribed to the worker; Case at bar.—That there is sufficient evidence proving the acts
ascribed to Trinio is not seriously in dispute. Trinio did violate his employer’s rules: he
allowed women into the Security Office; he allowed liquor to be brought in; he drank that
liquor and invited another security guard to drink it, too; he and his lady friend, both being
married but not to each other, satisfied their carnal passions in a business office and in the
known presence of another person. This last act was, to be sure, one “repulsive to
morality,” as the Labor Arbiter has put it.
Same; Same; Same; Same; An employer cannot be expected to continue in employment a
person whose lack of morals, respect and loyalty to his employer, regard for his employer’s
rules, and appreciation of the dignity and responsibility of his office, has so plainly and
completely been bared; Penalty of dismissal of employee, proper, and his offense cannot
be excused upon a plea of their being “first offenses.”—The evidence has been misread by
public respondent. The evidence does establish the commission by Trinio of the acts with
which he was charged: drinking liquor on company time in company premises; openly
and deliberately sanctioning breach of company rules by persons under his
superintendence; public performance of an adulterous act of sexual intercourse on
company time and in company premises. Here was no mere tolerance or disregard of
infringement of company rules for the enforcement of which Trinio was particularly
charged, which would be bad enough. Here was an open invitation by him for others to
violate those rules, and* transgression even by him of those same rules in a manner that
could not but expose his personal depravity, and betray his contempt and scorn of those
rules as well as the lightness with which he held the responsibility entrusted to him to
protect his employer’s premises, chattels, interests, reputation and integrity. The offenses
cannot be excused upon a plea of their being “first offenses,” or have not resulted in
prejudice to the company in any way. No employer may rationally be expected to continue
in employment a person whose lack of morals, respect and loyalty to his employer, regard
for his employer’s rules, and appreciation of the dignity and responsibility of his office,
has so plainly and completely been bared.
Same; Same; Same; Same; Concern, sympathy and solicitude for the rights and welfare of
the working class should not result in disregard of the employer’s own rights and
interests.—That there should be concern, sympathy, and solicitude for the rights and
welfare of the working class, is meet and proper. That in controversies between a laborer
and his master, doubts reasonably arising from the evidence, or in the interpretation of
agreements and writings should be resolved in the former’s favor, is not an unreasonable
or unfair rule. But that disregard of the employer’s own rights and interests can be justified
by that concern and solicitude is unjust and unacceptable.
EVELYN CHUA-QUA, petitioner, vs. HON. JACOBO C. CLAVE, in his capacity as
Presidential Executive Assistant, and TAY TUNG HIGH SCHOOL, INC., respondents.
Certiorari; Labor Laws; Findings of fact must be supported by substantial evidence.—
Considering that there was no formal hearing conducted, we are constrained to review the
factual conclusions arrived at by public respondent, and to nullify his decision through the
extraordinary writ of certiorari if the same is tainted by absence or excess of jurisdiction or
grave abuse of discretion. The findings of fact must be supported by substantial evidence;
otherwise, this Court is not bound thereby.
Same; Same; Dismissal; Burden of proving just and valid cause for dismissal of an
employee rests on his employer.—It would seem quite obvious that the avowed policy of
the school in rearing and educating children is being unnecessarily bannered to justify the
dismissal of petitioner. This policy, however, is not at odds with and should not be
capitalized on to defeat the security of tenure granted by the Constitution to labor. In
termination cases, the burden of proving just and valid cause for dismissing an employee
rests on the employer and his failure to do so would result in a finding that the dismissal
is unjustified.
IMASEN PHILIPPINE MANUFACTURING CORPORATION, petitioner, vs.
RAMONCHITO T. ALCON and JOANN S. PAPA, respondents.
Labor Law; Security of Tenure; The law and jurisprudence guarantee to every employee
security of tenure.—The law and jurisprudence guarantee to every employee security of
tenure. This textual and the ensuing jurisprudential commitment to the cause and welfare
42
of the working class proceed from the social justice principles of the Constitution that the
Court zealously implements out of its concern for those with less in life. Thus, the Court
will not hesitate to strike down as invalid any employer act that attempts to undermine
workers’ tenurial security. All these the State undertakes under Article 279 (now Article
293) of the Labor Code which bar an employer from terminating the services of an
employee, except for just or authorized cause and upon observance of due process.
Same; In protecting the rights of the workers, the law, however, does not authorize the
oppression or self-destruction of the employer.—In protecting the rights of the workers,
the law, however, does not authorize the oppression or self-destruction of the employer.
The constitutional commitment to the policy of social justice cannot be understood to mean
that every labor dispute shall automatically be decided in favor of labor. The constitutional
and legal protection equally recognize the employer’s right and prerogative to manage its
operation according to reasonable standards and norms of fair play. Accordingly, except
as limited by special law, an employer is free to regulate, according to his own judgment
and discretion, all aspects of employment, including hiring, work assignments, working
methods, time, place and manner of work, tools to be used, processes to be followed,
supervision of workers, working regulations, transfer of employees, worker supervision,
layoff of workers and the discipline, dismissal and recall of workers. As a general
proposition, an employer has free reign over every aspect of its business, including the
dismissal of his employees as long as the exercise of its management prerogative is done
reasonably, in good faith, and in a manner not otherwise intended to defeat or circumvent
the rights of workers.
Same; Termination of Employment; Serious Misconduct; To constitute a valid cause for the
dismissal within the text and meaning of Article 282 of the Labor Code, the employee’s
misconduct must be serious, i.e., of such grave and aggravated character and not merely
trivial or unimportant.—The just causes for dismissing an employee are provided under
Article 282 (now Article 296) of the Labor Code. Under Article 282(a), serious misconduct
by the employee justifies the employer in terminating his or her employment. Misconduct
is defined as an improper or wrong conduct. It is a 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 constitute a valid cause for the
dismissal within the text and meaning of Article 282 of the Labor Code, the employee’s
misconduct must be serious, i.e., of such grave and aggravated character and not merely
trivial or unimportant. Additionally, the misconduct must be related to the performance
of the employee’s duties showing him to be unfit to continue working for the employer.
Further, and equally important and required, the act or conduct must have been performed
with wrongful intent.
Same; Same; Same; Sexual Intercourse in the Work Premises; Dismissal situations (on the
ground of serious misconduct) involving sexual acts, particularly sexual intercourse
committed by employees inside company premises and during work hours, are not usual
violations and are not found in abundance under jurisprudence.—Dis-missal situations
(on the ground of serious misconduct) involving sexual acts, particularly sexual
intercourse committed by employees inside company premises and during work hours,
are not usual violations and are not found in abundance under jurisprudence. Thus, in
resolving the present petition, we are largely guided by the principles we discussed above,
as applied to the totality of the circumstances that surrounded the petitioners’ dismissal.
In other words, we view the petitioners’ act from the prism of the elements that must
concur for an act to constitute serious misconduct, analyzed and understood within the
context of the overall circumstances of the case. In taking this approach, we are guided,
too, by the jurisdictional limitations that a Rule 45 review of the CA’s Rule 65 decision in
labor cases imposes on our discretion.
Same; Same; Same; Same; Whether aroused by lust or inflamed by sincere affection, sexual
acts should be carried out at such place, time and circumstance that, by the generally
accepted norms of conduct, will not offend public decency nor disturb the generally held
or accepted social morals.—Sexual acts and intimacies between two consenting adults
belong, as a principled ideal, to the realm of purely private relations. Whether aroused by
lust or inflamed by sincere affection, sexual acts should be carried out at such place, time
and circumstance that, by the generally accepted norms of conduct, will not offend public
decency nor disturb the generally held or accepted social morals. Under these parameters,
sexual acts between two consenting adults do not have a place in the work environment.
Indisputably, the respondents engaged in sexual intercourse inside company premises and
during work hours. These circumstances, by themselves, are already punishable
misconduct. Added to these considerations, however, is the implication that the
respondents did not only disregard company rules but flaunted their disregard in a
manner that could reflect adversely on the status of ethics and morality in the company.
CHERYLL SANTOS LEUS, petitioner, vs. ST. SCHOLASTICA’S COLLEGE
WESTGROVE and/or SR. EDNA QUIAMBAO, OSB, respondents.
Remedial Law; Civil Procedure; Appeals; Points of law, theories, issues, and arguments
not brought to the attention of the trial court ought not to be considered by a reviewing
court, as these cannot be raised for the first time on appeal.—“It is well-established that
issues raised for the first time on appeal and not raised in the proceedings in the lower
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court are barred by estoppel. Points of law, theories, issues, and arguments not brought to
the attention of the trial court ought not to be considered by a reviewing court, as these
cannot be raised for the first time on appeal. To consider the alleged facts and arguments
belatedly raised would amount to trampling on the basic principles of fair play, justice,
and due process.”
Department of Education; Schools; Section 57 specifically empowers the Department of
Education (DepEd) to promulgate rules and regulations necessary for the administration,
supervision and regulation of the educational system in accordance with the declared
policy of Batas Pambansa (BP) Bilang 232.—The 1992 MRPS, the regulation in force at the
time of the instant controversy, was issued by the Secretary of Education pursuant to BP
232. Section 70 of BP 232 vests the Secretary of Education with the authority to issue rules
and regulations to implement the provisions of BP 232. Concomitantly, Section 57
specifically empowers the Department of Education to promulgate rules and regulations
necessary for the administration, supervision and regulation of the educational system in
accordance with the declared policy of BP 232. The qualifications of teaching and
nonteaching personnel of private schools, as well as the causes for the termination of their
employment, are an integral aspect of the educational system of private schools.
Indubitably, ensuring that the teaching and nonteaching personnel of private schools are
not only qualified, but competent and efficient as well goes hand in hand with the declared
objective of BP 232 — establishing and maintaining relevant quality education. It is thus
within the authority of the Secretary of Education to issue a rule, which provides for the
dismissal of teaching and nonteaching personnel of private schools based on their
incompetence, inefficiency, or some other disqualification.
Remedial Law; Civil Procedure; Appeals; In a petition for review under Rule 45 of the
Rules of Court, such as the instant petition, where the Court of Appeals’ (CA’s) disposition
in a labor case is sought to be calibrated, the Court’s review is quite limited.—In a petition
for review under Rule 45 of the Rules of Court, such as the instant petition, where the CA’s
disposition in a labor case is sought to be calibrated, the Court’s review is quite limited. In
ruling for legal correctness, the Court has to view the CA decision in the same context that
the petition for certiorari it ruled upon was presented to it; the Court has to examine the
CA decision from the prism of whether it correctly determined the presence or absence of
grave abuse of discretion in the NLRC decision before it, not on the basis of whether the
NLRC decision on the merits of the case was correct.
Labor Law; Termination of Employment; Disgraceful and Immoral Conduct; The fact of
the petitioner’s pregnancy out of wedlock, without more, is not enough to characterize the
petitioner’s conduct as disgraceful or immoral.—The labor tribunals concluded that the
petitioner’s pregnancy out of wedlock, per se, is “disgraceful and immoral” considering
that she is employed in a Catholic educational institution. In arriving at such conclusion,
the labor tribunals merely assessed the fact of the petitioner’s pregnancy vis-à-vis the
totality of the circumstances surrounding the same. However, the Court finds no
substantial evidence to support the aforementioned conclusion arrived at by the labor
tribunals. The fact of the petitioner’s pregnancy out of wedlock, without more, is not
enough to characterize the petitioner’s conduct as disgraceful or immoral. There must be
substantial evidence to establish that premarital sexual relations and, consequently,
pregnancy out of wedlock, are indeed considered disgraceful or immoral.
Same; Same; Same; The determination of whether a conduct is disgraceful or immoral
involves a two (2)-step process: first, a consideration of the totality of the circumstances
surrounding the conduct; and second, an assessment of the said circumstances vis-à-vis
the prevailing norms of conduct, i.e., what the society generally considers moral and
respectable.—The determination of whether a conduct is disgraceful or immoral involves
a two-step process: first, a consideration of the totality of the circumstances surrounding
the conduct; and second, an assessment of the said circumstances vis-à-vis the prevailing
norms of conduct, i.e., what the society generally considers moral and respectable. That
the petitioner was employed by a Catholic educational institution per se does not
absolutely determine whether her pregnancy out of wedlock is disgraceful or immoral.
There is still a necessity to determine whether the petitioner’s pregnancy out of wedlock is
considered disgraceful or immoral in accordance with the prevailing norms of conduct.
Same; Same; Same; That the distinction between public and secular morality and religious
morality is important because the jurisdiction of the Court extends only to public and
secular morality.—In Estrada v. Escritor, 408 SCRA 1 (2003), an administrative case against
a court interpreter charged with disgraceful and immoral conduct, the Court stressed that
in determining whether a particular conduct can be considered as disgraceful and
immoral, the distinction between public and secular morality on the one hand, and
religious morality, on the other, should be kept in mind. That the distinction between
public and secular morality and religious morality is important because the jurisdiction of
the Court extends only to public and secular morality. The Court further explained that:
The morality referred to in the law is public and necessarily secular, not religious x x x.
“Religious teachings as expressed in public debate may influence the civil public order but
public moral disputes may be resolved only on grounds articulable in secular terms.”
Otherwise, if government relies upon religious beliefs in formulating public policies and
morals, the resulting policies and morals would require conformity to what some might
regard as religious programs or agenda. The nonbelievers would therefore be compelled
to conform to a standard of conduct buttressed by a religious belief, i.e., to a “compelled
44
religion,” anathema to religious freedom. Likewise, if government based its actions upon
religious beliefs, it would tacitly approve or endorse that belief and thereby also tacitly
disapprove contrary religious or nonreligious views that would not support the policy. As
a result, government will not provide full religious freedom for all its citizens, or even
make it appear that those whose beliefs are disapproved are second-class citizens.
Expansive religious freedom therefore requires that government be neutral in matters of
religion; governmental reliance upon religious justification is inconsistent with this policy
of neutrality. In other words, government action, including its proscription of immorality
as expressed in criminal law like concubinage, must have a secular purpose. That is, the
government proscribes this conduct because it is “detrimental (or dangerous) to those
conditions upon which depend the existence and progress of human society” and not
because the conduct is proscribed by the beliefs of one religion or the other. Although
admittedly, moral judgments based on religion might have a compelling influence on
those engaged in public deliberations over what actions would be considered a moral
disapprobation punishable by law. After all, they might also be adherents of a religion and
thus have religious opinions and moral codes with a compelling influence on them; the
human mind endeavors to regulate the temporal and spiritual institutions of society in a
uniform manner, harmonizing earth with heaven. Succinctly put, a law could be religious
or Kantian or Aquinian or utilitarian in its deepest roots, but it must have an articulable
and discernible secular purpose and justification to pass scrutiny of the religion clauses.
Same; Same; Same; The proscription against “disgraceful or immoral conduct” under
Section 94(e) of the 1992 Manual of Regulations for Private Schools (MRPS), which is made
as a cause for dismissal, must necessarily refer to public and secular morality.—It bears
stressing that the right of an employee to security of tenure is protected by the
Constitution. Perfunctorily, a regular employee may not be dismissed unless for cause
provided under the Labor Code and other relevant laws, in this case, the 1992 MRPS. As
stated above, when the law refers to morality, it necessarily pertains to public and secular
morality and not religious morality. Thus, the proscription against “disgraceful or immoral
conduct” under Section 94(e) of the 1992 MRPS, which is made as a cause for dismissal,
must necessarily refer to public and secular morality. Accordingly, in order for a conduct
to be considered as disgraceful or immoral, it must be “‘detrimental (or dangerous) to those
conditions upon which depend the existence and progress of human society’ and not
because the conduct is proscribed by the beliefs of one religion or the other.”
Same; Same; Same; Premarital sexual relations between two consenting adults who have
no impediment to marry each other, and consequently, conceiving a child out of wedlock,
gauged from a purely public and secular view of morality, does not amount to a
disgraceful or immoral conduct under Section 94(e) of the 1992 Manual of Regulations for
Private Schools (MRPS).—Admittedly, the petitioner is employed in an educational
institution where the teachings and doctrines of the Catholic Church, including that on
premarital sexual relations, is strictly upheld and taught to the students. That her
indiscretion, which resulted in her pregnancy out of wedlock, is anathema to the doctrines
of the Catholic Church. However, viewed against the prevailing norms of conduct, the
petitioner’s conduct cannot be considered as disgraceful or immoral; such conduct is not
denounced by public and secular morality. It may be an unusual arrangement, but it
certainly is not disgraceful or immoral within the contemplation of the law. To stress,
premarital sexual relations between two consenting adults who have no impediment to
marry each other, and, consequently, conceiving a child out of wedlock, gauged from a
purely public and secular view of morality, does not amount to a disgraceful or immoral
conduct under Section 94(e) of the 1992 MRPS.
Same; Same; Burden of Proof; Settled is the rule that in termination cases, the burden of
proving that the dismissal of the employees was for a valid and authorized cause rests on
the employer.—Settled is the rule that in termination cases, the burden of proving that the
dismissal of the employees was for a valid and authorized cause rests on the employer. It
is incumbent upon the employer to show by substantial evidence that the termination of
the employment of the employees was validly made and failure to discharge that duty
would mean that the dismissal is not justified and therefore illegal. “Substantial evidence
is more than a mere scintilla of evidence. It means such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion, even if other minds equally
reasonable might conceivably opine otherwise.”
Same; Same; Security of Tenure; Words and Phrases; Security of tenure is a right which
may not be denied on mere speculation of any unclear and nebulous basis.—Indubitably,
bare allegations do not amount to substantial evidence. Considering that the respondents
failed to adduce substantial evidence to prove their asserted cause for the petitioner’s
dismissal, the labor tribunals should not have upheld their allegations hook, line and
sinker. The labor tribunals’ respective findings, which were arrived at sans any substantial
evidence, amounts to a grave abuse of discretion, which the CA should have rectified.
“Security of tenure is a right which may not be denied on mere speculation of any unclear
and nebulous basis.”
Same; Management Prerogative; The exercise of management prerogative is not absolute
as it must be exercised in good faith and with due regard to the rights of labor.—The Court
has held that “management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments, working
methods, time, place and manner of work, processes to be followed, supervision of
45
workers, working regulations, transfer of employees, work supervision, layoff of workers
and discipline, dismissal and recall of workers. The exercise of management prerogative,
however, is not absolute as it must be exercised in good faith and with due regard to the
rights of labor.” Management cannot exercise its prerogative in a cruel, repressive, or
despotic manner.
Same; Illegal Dismissals; Reinstatement; Separation Pay; Strained Relations; In cases of
illegal dismissal, the accepted doctrine is that separation pay is available in lieu of
reinstatement when the latter recourse is no longer practical or in the best interest of the
parties.—Having established that the petitioner was illegally dismissed, the Court now
determines the reliefs that she is entitled to and their extent. Under the law and prevailing
jurisprudence, “an illegally dismissed employee is entitled to reinstatement as a matter of
right.” Aside from the instances provided under Articles 283 and 284 of the Labor Code,
separation pay is, however, granted when reinstatement is no longer feasible because of
strained relations between the employer and the employee. In cases of illegal dismissal,
the accepted doctrine is that separation pay is available in lieu of reinstatement when the
latter recourse is no longer practical or in the best interest of the parties.
Same; Same; Backwages; Employees who are illegally dismissed are entitled to full
backwages, inclusive of allowances and other benefits or their monetary equivalent,
computed from the time their actual compensation was withheld from them up to the time
of their actual reinstatement but if reinstatement is no longer possible, the backwages shall
be computed from the time of their illegal termination up to the finality of the decision.—
“Employees who are illegally dismissed are entitled to full backwages, inclusive of
allowances and other benefits or their monetary equivalent, computed from the time their
actual compensation was withheld from them up to the time of their actual reinstatement
but if reinstatement is no longer possible, the backwages shall be computed from the time
of their illegal termination up to the finality of the decision.” Accordingly, the petitioner is
entitled to an award of full backwages from the time she was illegally dismissed up to the
finality of this decision.
Same; Same; Moral Damages; Exemplary Damages; The petitioner is not entitled to moral
and exemplary damages; The records of this case are bereft of any clear and convincing
evidence showing that the respondents acted in bad faith or in a wanton or fraudulent
manner in dismissing the petitioner.—The petitioner is not entitled to moral and
exemplary damages. “A dismissed employee is entitled to moral damages when the
dismissal is attended by bad faith or fraud or constitutes an act oppressive to labor, or is
done in a manner contrary to good morals, good customs or public policy. Exemplary
damages may be awarded if the dismissal is effected in a wanton, oppressive or malevolent
manner.” “Bad faith, under the law, does not simply connote bad judgment or negligence.
It imports a dishonest purpose or some moral obliquity and conscious doing of a wrong,
or a breach of a known duty through some motive or interest or ill will that partakes of the
nature of fraud.” “It must be noted that the burden of proving bad faith rests on the one
alleging it” since basic is the principle that good faith is presumed and he who alleges bad
faith has the duty to prove the same. “Allegations of bad faith and fraud must be proved
by clear and convincing evidence.” The records of this case are bereft of any clear and
convincing evidence showing that the respondents acted in bad faith or in a wanton or
fraudulent manner in dismissing the petitioner. That the petitioner was illegally dismissed
is insufficient to prove bad faith. A dismissal may be contrary to law but by itself alone, it
does not establish bad faith to entitle the dismissed employee to moral damages. The
award of moral and exemplary damages cannot be justified solely upon the premise that
the employer dismissed his employee without cause.
Same; Same; Attorney’s Fees; The petitioner is entitled to attorney’s fees in the amount of
ten percent (10%) of the total monetary award pursuant to Article 111 of the Labor Code.—
The petitioner is entitled to attorney’s fees in the amount of ten percent (10%) of the total
monetary award pursuant to Article 111 of the Labor Code. “It is settled that where an
employee was forced to litigate and, thus, incur expenses to protect his rights and interest,
the award of attorney’s fees is legally and morally justifiable.”
ST. LUKE’S MEDICAL CENTER, INC., petitioner, vs. MARIA THERESA V.
SANCHEZ, respondent.
Labor Law; Management Prerogatives; Among the employer’s management prerogatives
is the right to prescribe reasonable rules and regulations necessary or proper for the
conduct of its business or concern, to provide certain disciplinary measures to implement
said rules and to assure that the same would be complied with.—The right of an employer
to regulate all aspects of employment, aptly called “management prerogative,” gives
employers the freedom to regulate, according to their discretion and best judgment, all
aspects of employment, including work assignment, working methods, processes to be
followed, working regulations, transfer of employees, work supervision, layoff of workers
and the discipline, dismissal and recall of workers. In this light, courts often decline to
interfere in legitimate business decisions of employers. In fact, labor laws discourage
interference in employers’ judgment concerning the conduct of their business. Among the
employer’s management prerogatives is the right to prescribe reasonable rules and
regulations necessary or proper for the conduct of its business or concern, to provide
certain disciplinary measures to implement said rules and to assure that the same would
be complied with. At the same time, the employee has the corollary duty to obey all
46
reasonable rules, orders, and instructions of the employer; and willful or intentional
disobedience thereto, as a general rule, justifies termination of the contract of service and
the dismissal of the employee.
Same; Termination of Employment; Willful Disobedience; For an employee to be validly
dismissed on willful disobedience, the employer’s orders, regulations, or instructions must
be: (1) reasonable and lawful, (2) sufficiently known to the employee, and (3) in connection
with the duties which the employee has been engaged to discharge.”—Article 296
(formerly Article 282) of the Labor Code provides: Article 296. Termination by
Employer.—An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or his representative in connection with his work; x x x x Note that for an
employee to be validly dismissed on this ground, the employer’s orders, regulations, or
instructions must be: (1) reasonable and lawful, (2) sufficiently known to the employee,
and (3) in connection with the duties which the employee has been engaged to discharge.”
Same; Same; Same; Whatever maybe the justification behind the violation of the company
rules regarding excess medical supplies is immaterial since it has been established that an
infraction was deliberately committed.—The Court observes that there lies no competent
basis to support the common observation of the NLRC and the CA that the retention of
excess medical supplies was a tolerated practice among the nurses at the Pediatric Unit.
While there were previous incidents of “hoarding,” it appears that such acts were — in
similar fashion — furtively made and the items secretly kept, as any excess items found in
the concerned nurse’s possession would have to be confiscated. Hence, the fact that no one
was caught and/or sanctioned for transgressing the prohibition therefor does not mean
that the so-called “hoarding” practice was tolerated by SLMC. Besides, whatever maybe
the justification behind the violation of the company rules regarding excess medical
supplies is immaterial since it has been established that an infraction was deliberately
committed. Doubtless, the deliberate disregard or disobedience of rules by the employee
cannot be countenanced as it may encourage him or her to do even worse and will render
a mockery of the rules of discipline that employees are required to observe.
Same; Same; Conviction in Criminal Case; An employee’s guilt or innocence in a criminal
case is not determinative of the existence of a just or authorized cause for his or her
dismissal. It is well-settled that conviction in a criminal case is not necessary to find just
cause for termination of employment.—The Court finds it inconsequential that SLMC has
not suffered any actual damage. While damage aggravates the charge, its absence does not
mitigate nor negate the employee’s liability. Neither is SLMC’s non-filing of the
appropriate criminal charges relevant to this analysis. An employee’s guilt or innocence in
a criminal case is not determinative of the existence of a just or authorized cause for his or
her dismissal. It is well-settled that conviction in a criminal case is not necessary to find
just cause for termination of employment, as in this case. Criminal and labor cases
involving an employee arising from the same infraction are separate and distinct
proceedings which should not arrest any judgment from one to the other. As it stands, the
Court thus holds that the dismissal of Sanchez was for a just cause, supported by
substantial evidence, and is therefore in order. By declaring otherwise, bereft of any
substantial bases, the NLRC issued a patently and grossly erroneous ruling tantamount to
grave abuse of discretion, which, in turn, means that the CA erred when it affirmed the
same. In consequence, the grant of the present petition is warranted.

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