G.R. No.

163942 November 11, 2008
NATIONAL UNION OF WORKERS IN THE HOTEL RESTAURANT AND ALLIED
INDUSTRIES (NUWHRAIN-APL-IUF) DUSIT HOTEL NIKKO CHAPTER, petitioner,
vs.
THE HONORABLE COURT OF APPEALS (Former Eighth Division), THE NATIONAL
LABOR RELATIONS COMMISSION (NLRC), PHILIPPINE HOTELIERS INC., owner and
operator of DUSIT HOTEL NIKKO and/or CHIYUKI FUJIMOTO, and ESPERANZA V.
ALVEZ, respondents.
was conducted by the Union on January 14, 2002 on which it was decided that the
Union would wage a strike.
Soon thereafter, in the afternoon of January 17, 2002, the Union held a general
assembly at its office located in the Hotel's basement, where some members
sported closely cropped hair or cleanly shaven heads. The next day, or on January
18, 2002, more male Union members came to work sporting the same hair style.
The Hotel prevented these workers from entering the premises claiming that they
violated the Hotel's Grooming Standards.

DECISION
VELASCO, JR., J.:
In G.R. No. 163942, the Petition for Review on Certiorari under Rule 45 of the
National Union of Workers in the Hotel Restaurant and Allied Industries Dusit Hotel
Nikko Chapter (Union) seeks to set aside the January 19, 2004 Decision1 and June 1,
2004 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 76568 which
affirmed the October 9, 2002 Decision3 of the National Labor Relations Commission
(NLRC) in NLRC NCR CC No. 000215-02.
In G.R. No. 166295, the Petition for Certiorari under Rule 65 of the Union seeks to
nullify the May 6, 2004 Decision4 and November 25, 2004 Resolution5 of the CA in
CA-G.R. SP No. 70778 which affirmed the January 31, 20026 and March 15, 20027
Orders of the Secretary of Labor and Employment, Patricia A. Sto. Tomas
(Secretary).
Evolution of the Present Petitions
The Union is the certified bargaining agent of the regular rank-and-file employees of
Dusit Hotel Nikko (Hotel), a five star service establishment owned and operated by
Philippine Hoteliers, Inc. located in Makati City. Chiyuki Fuijimoto and Esperanza V.
Alvez are impleaded in their official capacities as the Hotel's General Manager and
Director of Human Resources, respectively.
On October 24, 2000, the Union submitted its Collective Bargaining Agreement
(CBA) negotiation proposals to the Hotel. As negotiations ensued, the parties failed
to arrive at mutually acceptable terms and conditions. Due to the bargaining
deadlock, the Union, on December 20, 2001, filed a Notice of Strike on the ground
of the bargaining deadlock with the National Conciliation and Mediation Board
(NCMB), which was docketed as NCMB-NCR-NS-12-369-01. Thereafter, conciliation
hearings were conducted which proved unsuccessful. Consequently, a Strike Vote8
In view of the Hotel's action, the Union staged a picket outside the Hotel premises.
Later, other workers were also prevented from entering the Hotel causing them to
join the picket. For this reason the Hotel experienced a severe lack of manpower
which forced them to temporarily cease operations in three restaurants.
Subsequently, on January 20, 2002, the Hotel issued notices to Union members,
preventively suspending them and charging them with the following offenses: (1)
violation of the duty to bargain in good faith; (2) illegal picket; (3) unfair labor
practice; (4) violation of the Hotel's Grooming Standards; (5) illegal strike; and (6)
commission of illegal acts during the illegal strike. The next day, the Union filed with
the NCMB a second Notice of Strike on the ground of unfair labor practice and
violation of Article 248(a) of the Labor Code on illegal lockout, which was docketed
as NCMB-NCR-NS-01-019-02. In the meantime, the Union officers and members
submitted their explanations to the charges alleged by the Hotel, while they
continued to stage a picket just inside the Hotel's compound.
On January 26, 2002, the Hotel terminated the services of twenty-nine (29) Union
officers and sixty-one (61) members; and suspended eighty-one (81) employees for
30 days, forty-eight (48) employees for 15 days, four (4) employees for 10 days, and
three (3) employees for five days. On the same day, the Union declared a strike.
Starting that day, the Union engaged in picketing the premises of the Hotel. During
the picket, the Union officials and members unlawfully blocked the ingress and
egress of the Hotel premises.
Consequently, on January 31, 2002, the Union filed its third Notice of Strike with the
NCMB which was docketed as NCMB-NCR-NS-01-050-02, this time on the ground of
unfair labor practice and union-busting.
On the same day, the Secretary, through her January 31, 2002 Order, assumed
jurisdiction over the labor dispute and certified the case to the NLRC for compulsory
arbitration, which was docketed as NLRC NCR CC No. 000215-02. The Secretary's
Order partly reads:

1
WHEREFORE, in order to have a complete determination of the bargaining deadlock
and the other incidents of the dispute, this Office hereby consolidates the two
Notices of Strike - NCMB-NCR-NS-12-369-01 and NCMB-NCR-NS-01-019-02 - and
CERTIFIES the entire labor dispute covered by these Notices and the intervening
events, to the NATIONAL LABOR RELATIONS COMMISSION for compulsory
arbitration pursuant to Article 263 (g) of the Labor Code, as amended, under the
following terms:
xxxx
d. the Hotel is given the option, in lieu of actual reinstatement, to merely reinstate
the dismissed or suspended workers in the payroll in light of the special
circumstances attendant to their reinstatement;
xxxx
SO ORDERED. (Emphasis added.)
Pursuant to the Secretary's Order, the Hotel, on February 1, 2002, issued an Inter-
Office Memorandum,9 directing some of the employees to return to work, while
advising others not to do so, as they were placed under payroll reinstatement.
Unhappy with the Secretary's January 31, 2002 Order, the Union moved for
reconsideration, but the same was denied per the Secretary's subsequent March
15, 2002 Order. Affronted by the Secretary's January 31, 2002 and March 15, 2002
Orders, the Union filed a Petition for Certiorari with the CA which was docketed as
CA-G.R. SP No. 70778.
Meanwhile, after due proceedings, the NLRC issued its October 9, 2002 Decision in
NLRC NCR CC No. 000215-02, in which it ordered the Hotel and the Union to
execute a CBA within 30 days from the receipt of the decision. The NLRC also held
that the January 18, 2002 concerted action was an illegal strike in which illegal acts
were committed by the Union; and that the strike violated the "No Strike, No
Lockout" provision of the CBA, which thereby caused the dismissal of 29 Union
officers and 61 Union members. The NLRC ordered the Hotel to grant the 61
dismissed Union members financial assistance in the amount of ½ month's pay for
every year of service or their retirement benefits under their retirement plan
whichever was higher. The NLRC explained that the strike which occurred on
January 18, 2002 was illegal because it failed to comply with the mandatory 30-day
cooling-off period10 and the seven-day strike ban,11 as the strike occurred only 29
days after the submission of the notice of strike on December 20, 2001 and only
four days after the submission of the strike vote on January 14, 2002. The NLRC also
ruled that even if the Union had complied with the temporal requirements
mandated by law, the strike would nonetheless be declared illegal because it was
attended by illegal acts committed by the Union officers and members.
The Union then filed a Motion for Reconsideration of the NLRC's Decision which was
denied in the February 7, 2003 NLRC Resolution. Unfazed, the Union filed a Petition
for Certiorari under Rule 65 with the CA, docketed as CA-G.R. SP No. 76568, and
assailed both the October 9, 2002 Decision and the February 7, 2003 Resolution of
the NLRC.
Soon thereafter, the CA promulgated its January 19, 2004 Decision in CA-G.R. SP No.
76568 which dismissed the Union's petition and affirmed the rulings of the NLRC.
The CA ratiocinated that the Union failed to demonstrate that the NLRC committed
grave abuse of discretion and capriciously exercised its judgment or exercised its
power in an arbitrary and despotic manner.
For this reason, the Union filed a Motion for Reconsideration which the CA, in its
June 1, 2004 Resolution, denied for lack of merit.
In the meantime, the CA promulgated its May 6, 2004 Decision in CA-G.R. SP No.
70778 which denied due course to and consequently dismissed the Union's petition.
The Union moved to reconsider the Decision, but the CA was unconvinced and
denied the motion for reconsideration in its November 25, 2004 Resolution.
Thus, the Union filed the present petitions.
The Union raises several interwoven issues in G.R. No. 163942, most eminent of
which is whether the Union conducted an illegal strike. The issues presented for
resolution are:
-A-
WHETHER OR NOT THE UNION, THE 29 UNION OFFICERS AND 61 MEMBERS MAY BE
ADJUDGED GUILTY OF STAGING AN ILLEGAL STRIKE ON JANUARY 18, 2002 DESPITE
RESPONDENTS' ADMISSION THAT THEY PREVENTED SAID OFFICERS AND MEMBERS
FROM REPORTING FOR WORK FOR ALLEGED VIOLATION OF THE HOTEL'S
GROOMING STANDARDS
-B-
WHETHER OR NOT THE 29 UNION OFFICERS AND 61 MEMBERS MAY VALIDLY BE
DISMISSED AND MORE THAN 200 MEMBERS BE VALIDLY SUSPENDED ON THE BASIS
OF FOUR (4) SELF-SERVING AFFIDAVITS OF RESPONDENTS
2
-C-
WHETHER OR NOT RESPONDENTS IN PREVENTING UNION OFFICERS AND MEMBERS
FROM REPORTING FOR WORK COMMITTED AN ILLEGAL LOCK-OUT12
In G.R. No. 166295, the Union solicits a riposte from this Court on whether the
Secretary has discretion to impose "payroll" reinstatement when he assumes
jurisdiction over labor disputes.
The Court's Ruling
The Court shall first dispose of G.R. No. 166295.
According to the Union, there is no legal basis for allowing payroll reinstatement in
lieu of actual or physical reinstatement. As argued, Art. 263(g) of the Labor Code is
clear on this point.
The Hotel, on the other hand, claims that the issue is now moot and any decision
would be impossible to execute in view of the Decision of the NLRC which upheld
the dismissal of the Union officers and members.
The Union's position is untenable.
The Hotel correctly raises the argument that the issue was rendered moot when the
NLRC upheld the dismissal of the Union officers and members. In order, however, to
settle this relevant and novel issue involving the breadth of the power and
jurisdiction of the Secretary in assumption of jurisdiction cases, we now decide the
issue on the merits instead of relying on mere technicalities.
We held in University of Immaculate Concepcion, Inc. v. Secretary of Labor:
With respect to the Secretary's Order allowing payroll reinstatement instead of
actual reinstatement for the individual respondents herein, an amendment to the
previous Orders issued by her office, the same is usually not allowed. Article 263(g)
of the Labor Code aforementioned states that all workers must immediately return
to work and all employers must readmit all of them under the same terms and
conditions prevailing before the strike or lockout. The phrase "under the same
terms and conditions" makes it clear that the norm is actual reinstatement. This is
consistent with the idea that any work stoppage or slowdown in that particular
industry can be detrimental to the national interest.13
Thus, it was settled that in assumption of jurisdiction cases, the Secretary should
impose actual reinstatement in accordance with the intent and spirit of Art. 263(g)
of the Labor Code. As with most rules, however, this one is subject to exceptions.
We held in Manila Diamond Hotel Employees' Union v. Court of Appeals that payroll
reinstatement is a departure from the rule, and special circumstances which make
actual reinstatement impracticable must be shown.14 In one case, payroll
reinstatement was allowed where the employees previously occupied confidential
positions, because their actual reinstatement, the Court said, would be
impracticable and would only serve to exacerbate the situation.15 In another case,
this Court held that the NLRC did not commit grave abuse of discretion when it
allowed payroll reinstatement as an option in lieu of actual reinstatement for
teachers who were to be reinstated in the middle of the first term.16 We held that
the NLRC was merely trying its best to work out a satisfactory ad hoc solution to a
festering and serious problem.17
The peculiar circumstances in the present case validate the Secretary's decision to
order payroll reinstatement instead of actual reinstatement. It is obviously
impracticable for the Hotel to actually reinstate the employees who shaved their
heads or cropped their hair because this was exactly the reason they were
prevented from working in the first place. Further, as with most labor disputes
which have resulted in strikes, there is mutual antagonism, enmity, and animosity
between the union and the management. Payroll reinstatement, most especially in
this case, would have been the only avenue where further incidents and damages
could be avoided. Public officials entrusted with specific jurisdictions enjoy great
confidence from this Court. The Secretary surely meant only to ensure industrial
peace as she assumed jurisdiction over the labor dispute. In this case, we are not
ready to substitute our own findings in the absence of a clear showing of grave
abuse of discretion on her part.
The issues raised in G.R. No. 163942, being interrelated, shall be discussed
concurrently.
To be determined whether legal or not are the following acts of the Union:
(1) Reporting for work with their bald or cropped hair style on January 18, 2002;
and
(2) The picketing of the Hotel premises on January 26, 2002.
The Union maintains that the mass picket conducted by its officers and members
did not constitute a strike and was merely an expression of their grievance resulting
from the lockout effected by the Hotel management. On the other hand, the Hotel
argues that the Union's deliberate defiance of the company rules and regulations
was a concerted effort to paralyze the operations of the Hotel, as the Union officers
and members knew pretty well that they would not be allowed to work in their bald
3
or cropped hair style. For this reason, the Hotel argues that the Union committed an
illegal strike on January 18, 2002 and on January 26, 2002.
We rule for the Hotel.
Art. 212(o) of the Labor Code defines a strike as "any temporary stoppage of work
by the concerted action of employees as a result of an industrial or labor dispute."
In Toyota Motor Phils. Corp. Workers Association (TMPCWA) v. National Labor
Relations Commission, we cited the various categories of an illegal strike, to wit:
Noted authority on labor law, Ludwig Teller, lists six (6) categories of an illegal
strike, viz.:
(1) [when it] is contrary to a specific prohibition of law, such as strike by employees
performing governmental functions; or
(2) [when it] violates a specific requirement of law[, such as Article 263 of the Labor
Code on the requisites of a valid strike]; or
(3) [when it] is declared for an unlawful purpose, such as inducing the employer to
commit an unfair labor practice against non-union employees; or
(4) [when it] employs unlawful means in the pursuit of its objective, such as a
widespread terrorism of non-strikers [for example, prohibited acts under Art. 264(e)
of the Labor Code]; or
(5) [when it] is declared in violation of an existing injunction[, such as injunction,
prohibition, or order issued by the DOLE Secretary and the NLRC under Art. 263 of
the Labor Code]; or
(6) [when it] is contrary to an existing agreement, such as a no-strike clause or
conclusive arbitration clause.18
With the foregoing parameters as guide and the following grounds as basis, we hold
that the Union is liable for conducting an illegal strike for the following reasons:
First, the Union's violation of the Hotel's Grooming Standards was clearly a
deliberate and concerted action to undermine the authority of and to embarrass
the Hotel and was, therefore, not a protected action. The appearances of the Hotel
employees directly reflect the character and well-being of the Hotel, being a five-
star hotel that provides service to top-notch clients. Being bald or having cropped
hair per se does not evoke negative or unpleasant feelings. The reality that a
substantial number of employees assigned to the food and beverage outlets of the
Hotel with full heads of hair suddenly decided to come to work bald-headed or with
cropped hair, however, suggests that something is amiss and insinuates a sense that
something out of the ordinary is afoot. Obviously, the Hotel does not need to
advertise its labor problems with its clients. It can be gleaned from the records
before us that the Union officers and members deliberately and in apparent concert
shaved their heads or cropped their hair. This was shown by the fact that after
coming to work on January 18, 2002, some Union members even had their heads
shaved or their hair cropped at the Union office in the Hotel's basement. Clearly,
the decision to violate the company rule on grooming was designed and calculated
to place the Hotel management on its heels and to force it to agree to the Union's
proposals.
In view of the Union's collaborative effort to violate the Hotel's Grooming
Standards, it succeeded in forcing the Hotel to choose between allowing its
inappropriately hair styled employees to continue working, to the detriment of its
reputation, or to refuse them work, even if it had to cease operations in affected
departments or service units, which in either way would disrupt the operations of
the Hotel. This Court is of the opinion, therefore, that the act of the Union was not
merely an expression of their grievance or displeasure but, indeed, a calibrated and
calculated act designed to inflict serious damage to the Hotel's finances or its
reputation. Thus, we hold that the Union's concerted violation of the Hotel's
Grooming Standards which resulted in the temporary cessation and disruption of
the Hotel's operations is an unprotected act and should be considered as an illegal
strike.
Second, the Union's concerted action which disrupted the Hotel's operations clearly
violated the CBA's "No Strike, No Lockout" provision, which reads:
ARTICLE XXII - NO STRIKE/WORK STOPPAGE AND LOCKOUT
SECTION 1. No Strikes
The Union agrees that there shall be no strikes, walkouts, stoppage or slow-down of
work, boycott, refusal to handle accounts, picketing, sit-down strikes, sympathy
strikes or any other form of interference and/or interruptions with any of the
normal operations of the HOTEL during the life of this Agreement.
The facts are clear that the strike arose out of a bargaining deadlock in the CBA
negotiations with the Hotel. The concerted action is an economic strike upon which
the afore-quoted "no strike/work stoppage and lockout" prohibition is squarely
applicable and legally binding.19
4
Third, the Union officers and members' concerted action to shave their heads and
crop their hair not only violated the Hotel's Grooming Standards but also violated
the Union's duty and responsibility to bargain in good faith. By shaving their heads
and cropping their hair, the Union officers and members violated then Section 6,
Rule XIII of the Implementing Rules of Book V of the Labor Code.20 This rule
prohibits the commission of any act which will disrupt or impede the early
settlement of the labor disputes that are under conciliation. Since the bargaining
deadlock is being conciliated by the NCMB, the Union's action to have their officers
and members' heads shaved was manifestly calculated to antagonize and
embarrass the Hotel management and in doing so effectively disrupted the
operations of the Hotel and violated their duty to bargain collectively in good faith.
Fourth, the Union failed to observe the mandatory 30-day cooling-off period and
the seven-day strike ban before it conducted the strike on January 18, 2002. The
NLRC correctly held that the Union failed to observe the mandatory periods before
conducting or holding a strike. Records reveal that the Union filed its Notice of
Strike on the ground of bargaining deadlock on December 20, 2001. The 30-day
cooling-off period should have been until January 19, 2002. On top of that, the
strike vote was held on January 14, 2002 and was submitted to the NCMB only on
January 18, 2002; therefore, the 7-day strike ban should have prevented them from
holding a strike until January 25, 2002. The concerted action committed by the
Union on January 18, 2002 which resulted in the disruption of the Hotel's
operations clearly violated the above-stated mandatory periods.
Last, the Union committed illegal acts in the conduct of its strike. The NLRC ruled
that the strike was illegal since, as shown by the pictures21 presented by the Hotel,
the Union officers and members formed human barricades and obstructed the
driveway of the Hotel. There is no merit in the Union's argument that it was not its
members but the Hotel's security guards and the police officers who blocked the
driveway, as it can be seen that the guards and/or police officers were just trying to
secure the entrance to the Hotel. The pictures clearly demonstrate the tense and
highly explosive situation brought about by the strikers' presence in the Hotel's
driveway.
Furthermore, this Court, not being a trier of facts, finds no reason to alter or disturb
the NLRC findings on this matter, these findings being based on substantial evidence
and affirmed by the CA.22 Factual findings of labor officials, who are deemed to
have acquired expertise in matters within their respective jurisdictions, are
generally accorded not only respect but even finality, and bind us when supported
by substantial evidence.23 Likewise, we are not duty-bound to delve into the
accuracy of the factual findings of the NLRC in the absence of clear showing that
these were arrived at arbitrarily and/or bereft of any rational basis.24
What then are the consequent liabilities of the Union officers and members for
their participation in the illegal strike?
Regarding the Union officers and members' liabilities for their participation in the
illegal picket and strike, Art. 264(a), paragraph 3 of the Labor Code provides that
"[a]ny union officer who knowingly participates in an illegal strike and any worker or
union officer who knowingly participates in the commission of illegal acts during a
strike may be declared to have lost his employment status x x x." The law makes a
distinction between union officers and mere union members. Union officers may be
validly terminated from employment for their participation in an illegal strike, while
union members have to participate in and commit illegal acts for them to lose their
employment status.25 Thus, it is necessary for the company to adduce proof of the
participation of the striking employees in the commission of illegal acts during the
strikes.26
Clearly, the 29 Union officers may be dismissed pursuant to Art. 264(a), par. 3 of the
Labor Code which imposes the penalty of dismissal on "any union officer who
knowingly participates in an illegal strike." We, however, are of the opinion that
there is room for leniency with respect to the Union members. It is pertinent to
note that the Hotel was able to prove before the NLRC that the strikers blocked the
ingress to and egress from the Hotel. But it is quite apparent that the Hotel failed to
specifically point out the participation of each of the Union members in the
commission of illegal acts during the picket and the strike. For this lapse in
judgment or diligence, we are constrained to reinstate the 61 Union members.
Further, we held in one case that union members who participated in an illegal
strike but were not identified to have committed illegal acts are entitled to be
reinstated to their former positions but without backwages.27 We then held in G &
S Transport Corporation v. Infante:
With respect to backwages, the principle of a "fair day's wage for a fair day's labor"
remains as the basic factor in determining the award thereof. If there is no work
performed by the employee there can be no wage or pay unless, of course, the
laborer was able, willing and ready to work but was illegally locked out, suspended
or dismissed or otherwise illegally prevented from working. While it was found that
respondents expressed their intention to report back to work, the latter exception
cannot apply in this case. In Philippine Marine Officer's Guild v. Compañia Maritima,
as affirmed in Philippine Diamond Hotel and Resort v. Manila Diamond Hotel
Employees Union, the Court stressed that for this exception to apply, it is required
that the strike be legal, a situation that does not obtain in the case at bar.28
In this light, we stand by our recent rulings and reinstate the 61 Union members
without backwages.
5
WHEREFORE, premises considered, the CA's May 6, 2004 Decision in CA-G.R. SP No.
70778 is hereby AFFIRMED.

6
G.R. No. L-54334 January 22, 1986
KIOK LOY, doing business under the name and style SWEDEN ICE CREAM PLANT,
petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and PAMBANSANG KILUSAN NG
PAGGAWA (KILUSAN), respondents.
Ablan and Associates for petitioner.
Abdulcadir T. Ibrahim for private respondent.
CUEVAS, J.:
Petition for certiorari to annul the decision 1 of the National Labor Relations
Commission (NLRC) dated July 20, 1979 which found petitioner Sweden Ice Cream
guilty of unfair labor practice for unjustified refusal to bargain, in violation of par.
(g) of Article 2492 of the New Labor Code, 3 and declared the draft proposal of the
Union for a collective bargaining agreement as the governing collective bargaining
agreement between the employees and the management.
The pertinent background facts are as follows:
In a certification election held on October 3, 1978, the Pambansang Kilusang
Paggawa (Union for short), a legitimate late labor federation, won and was
subsequently certified in a resolution dated November 29, 1978 by the Bureau of
Labor Relations as the sole and exclusive bargaining agent of the rank-and-file
employees of Sweden Ice Cream Plant (Company for short). The Company's motion
for reconsideration of the said resolution was denied on January 25, 1978.
Thereafter, and more specifically on December 7, 1978, the Union furnished 4 the
Company with two copies of its proposed collective bargaining agreement. At the
same time, it requested the Company for its counter proposals. Eliciting no
response to the aforesaid request, the Union again wrote the Company reiterating
its request for collective bargaining negotiations and for the Company to furnish
them with its counter proposals. Both requests were ignored and remained unacted
upon by the Company.
Left with no other alternative in its attempt to bring the Company to the bargaining
table, the Union, on February 14, 1979, filed a "Notice of Strike", with the Bureau of
Labor Relations (BLR) on ground of unresolved economic issues in collective
bargaining. 5
Conciliation proceedings then followed during the thirty-day statutory cooling-off
period. But all attempts towards an amicable settlement failed, prompting the
Bureau of Labor Relations to certify the case to the National Labor Relations
Commission (NLRC) for compulsory arbitration pursuant to Presidential Decree No.
823, as amended. The labor arbiter, Andres Fidelino, to whom the case was
assigned, set the initial hearing for April 29, 1979. For failure however, of the
parties to submit their respective position papers as required, the said hearing was
cancelled and reset to another date. Meanwhile, the Union submitted its position
paper. The Company did not, and instead requested for a resetting which was
granted. The Company was directed anew to submit its financial statements for the
years 1976, 1977, and 1978.
The case was further reset to May 11, 1979 due to the withdrawal of the Company's
counsel of record, Atty. Rodolfo dela Cruz. On May 24, 1978, Atty. Fortunato
Panganiban formally entered his appearance as counsel for the Company only to
request for another postponement allegedly for the purpose of acquainting himself
with the case. Meanwhile, the Company submitted its position paper on May 28,
1979.
When the case was called for hearing on June 4, 1979 as scheduled, the Company's
representative, Mr. Ching, who was supposed to be examined, failed to appear.
Atty. Panganiban then requested for another postponement which the labor arbiter
denied. He also ruled that the Company has waived its right to present further
evidence and, therefore, considered the case submitted for resolution.
On July 18, 1979, labor arbiter Andres Fidelino submitted its report to the National
Labor Relations Commission. On July 20, 1979, the National Labor Relations
Commission rendered its decision, the dispositive portion of which reads as follows:
WHEREFORE, the respondent Sweden Ice Cream is hereby declared guilty of
unjustified refusal to bargain, in violation of Section (g) Article 248 (now Article
249), of P.D. 442, as amended. Further, the draft proposal for a collective bargaining
agreement (Exh. "E ") hereto attached and made an integral part of this decision,
sent by the Union (Private respondent) to the respondent (petitioner herein) and
which is hereby found to be reasonable under the premises, is hereby declared to
be the collective agreement which should govern the relationship between the
parties herein.
SO ORDERED. (Emphasis supplied)
Petitioner now comes before Us assailing the aforesaid decision contending that the
National Labor Relations Commission acted without or in excess of its jurisdiction or
7
with grave abuse of discretion amounting to lack of jurisdiction in rendering the
challenged decision. On August 4, 1980, this Court dismissed the petition for lack of
merit. Upon motion of the petitioner, however, the Resolution of dismissal was
reconsidered and the petition was given due course in a Resolution dated April 1,
1981.
Petitioner Company now maintains that its right to procedural due process has
been violated when it was precluded from presenting further evidence in support of
its stand and when its request for further postponement was denied. Petitioner
further contends that the National Labor Relations Commission's finding of unfair
labor practice for refusal to bargain is not supported by law and the evidence
considering that it was only on May 24, 1979 when the Union furnished them with a
copy of the proposed Collective Bargaining Agreement and it was only then that
they came to know of the Union's demands; and finally, that the Collective
Bargaining Agreement approved and adopted by the National Labor Relations
Commission is unreasonable and lacks legal basis.
The petition lacks merit. Consequently, its dismissal is in order.
Collective bargaining which is defined as negotiations towards a collective
agreement,6 is one of the democratic frameworks under the New Labor Code,
designed to stabilize the relation between labor and management and to create a
climate of sound and stable industrial peace. It is a mutual responsibility of the
employer and the Union and is characterized as a legal obligation. So much so that
Article 249, par. (g) of the Labor Code makes it an unfair labor practice for an
employer to refuse "to meet and convene promptly and expeditiously in good faith
for the purpose of negotiating an agreement with respect to wages, hours of work,
and all other terms and conditions of employment including proposals for adjusting
any grievance or question arising under such an agreement and executing a
contract incorporating such agreement, if requested by either party.
While it is a mutual obligation of the parties to bargain, the employer, however, is
not under any legal duty to initiate contract negotiation.7 The mechanics of
collective bargaining is set in motion only when the following jurisdictional
preconditions are present, namely, (1) possession of the status of majority
representation of the employees' representative in accordance with any of the
means of selection or designation provided for by the Labor Code; (2) proof of
majority representation; and (3) a demand to bargain under Article 251, par. (a) of
the New Labor Code . ... all of which preconditions are undisputedly present in the
instant case.
From the over-all conduct of petitioner company in relation to the task of
negotiation, there can be no doubt that the Union has a valid cause to complain
against its (Company's) attitude, the totality of which is indicative of the latter's
disregard of, and failure to live up to, what is enjoined by the Labor Code — to
bargain in good faith.
We are in total conformity with respondent NLRC's pronouncement that petitioner
Company is GUILTY of unfair labor practice. It has been indubitably established that
(1) respondent Union was a duly certified bargaining agent; (2) it made a definite
request to bargain, accompanied with a copy of the proposed Collective Bargaining
Agreement, to the Company not only once but twice which were left unanswered
and unacted upon; and (3) the Company made no counter proposal whatsoever all
of which conclusively indicate lack of a sincere desire to negotiate. 8 A Company's
refusal to make counter proposal if considered in relation to the entire bargaining
process, may indicate bad faith and this is specially true where the Union's request
for a counter proposal is left unanswered. 9 Even during the period of compulsory
arbitration before the NLRC, petitioner Company's approach and attitude-stalling
the negotiation by a series of postponements, non-appearance at the hearing
conducted, and undue delay in submitting its financial statements, lead to no other
conclusion except that it is unwilling to negotiate and reach an agreement with the
Union. Petitioner has not at any instance, evinced good faith or willingness to
discuss freely and fully the claims and demands set forth by the Union much less
justify its opposition thereto. 10
The case at bar is not a case of first impression, for in the Herald Delivery Carriers
Union (PAFLU) vs. Herald Publications 11 the rule had been laid down that "unfair
labor practice is committed when it is shown that the respondent employer, after
having been served with a written bargaining proposal by the petitioning Union, did
not even bother to submit an answer or reply to the said proposal This doctrine was
reiterated anew in Bradman vs. Court of Industrial Relations 12 wherein it was
further ruled that "while the law does not compel the parties to reach an
agreement, it does contemplate that both parties will approach the negotiation
with an open mind and make a reasonable effort to reach a common ground of
agreement
As a last-ditch attempt to effect a reversal of the decision sought to be reviewed,
petitioner capitalizes on the issue of due process claiming, that it was denied the
right to be heard and present its side when the Labor Arbiter denied the Company's
motion for further postponement.
Petitioner's aforesaid submittal failed to impress Us. Considering the various
postponements granted in its behalf, the claimed denial of due process appeared
totally bereft of any legal and factual support. As herein earlier stated, petitioner
had not even honored respondent Union with any reply to the latter's successive
letters, all geared towards bringing the Company to the bargaining table. It did not
8
even bother to furnish or serve the Union with its counter proposal despite
persistent requests made therefor. Certainly, the moves and overall behavior of
petitioner-company were in total derogation of the policy enshrined in the New
Labor Code which is aimed towards expediting settlement of economic disputes.
Hence, this Court is not prepared to affix its imprimatur to such an illegal scheme
and dubious maneuvers.

Neither are WE persuaded by petitioner-company's stand that the Collective

Bargaining Agreement which was approved and adopted by the NLRC is a total
nullity for it lacks the company's consent, much less its argument that once the
Collective Bargaining Agreement is implemented, the Company will face the
prospect of closing down because it has to pay a staggering amount of economic
benefits to the Union that will equal if not exceed its capital. Such a stand and the
evidence in support thereof should have been presented before the Labor Arbiter
which is the proper forum for the purpose.

We agree with the pronouncement that it is not obligatory upon either side of a
labor controversy to precipitately accept or agree to the proposals of the other. But
an erring party should not be tolerated and allowed with impunity to resort to
schemes feigning negotiations by going through empty gestures.13 More so, as in
the instant case, where the intervention of the National Labor Relations
Commission was properly sought for after conciliation efforts undertaken by the
BLR failed. The instant case being a certified one, it must be resolved by the NLRC
pursuant to the mandate of P.D. 873, as amended, which authorizes the said body
to determine the reasonableness of the terms and conditions of employment
embodied in any Collective Bargaining Agreement. To that extent, utmost
deference to its findings of reasonableness of any Collective Bargaining Agreement
as the governing agreement by the employees and management must be accorded
due respect by this Court.

WHEREFORE, the instant petition is DISMISSED. The temporary restraining order

issued on August 27, 1980, is LIFTED and SET ASIDE.

No pronouncement as to costs.

SO ORDERED.

9
G.R. No. 135547 : January 23, 2002
GERARDO F. RIVERA, ALFRED A. RAMISO, AMBROCIO PALAD, DENNIS R. ARANAS,
DAVID SORIMA, JR., JORGE P. DELA ROSA, and ISAGANI ALDEA, petitioners, vs. HON.
EDGARDO ESPIRITU in his capacity as Chairman of the PAL Inter-Agency Task Force
created under Administrative Order No. 16; HON. BIENVENIDO LAGUESMA in his
capacity as Secretary of Labor and Employment; PHILIPPINE AIRLINES (PAL), LUCIO
TAN, HENRY SO UY, ANTONIO V. OCAMPO, MANOLO E. AQUINO, JAIME J.
BAUTISTA, and ALEXANDER O. BARRIENTOS, Respondents.
DECISION
QUISUMBING, J.:
In this special civil action for certiorari and prohibition, petitioners charge public
respondents with grave abuse of discretion amounting to lack or excess of
jurisdiction for acts taken in regard to the enforcement of the agreement dated
September 27, 1998, between Philippine Airlines (PAL) and its union, the PAL
Employees Association (PALEA).
The factual antecedents of this case are as follows:
On June 5, 1998, PAL pilots affiliated with the Airline Pilots Association of the
Philippines (ALPAP) went on a three-week strike, causing serious losses to the
financially beleaguered flag carrier. As a result, PALs financial situation went from
bad to worse. Faced with bankruptcy, PAL adopted a rehabilitation plan and
downsized its labor force by more than one-third.
On July 22, 1998, PALEA went on strike to protest the retrenchment measures
adopted by the airline, which affected 1,899 union members. The strike ended four
days later, when PAL and PALEA agreed to a more systematic reduction in PALs
work force and the payment of separation benefits to all retrenched employees.
On August 28, 1998, then President Joseph E. Estrada issued Administrative Order
No. 16 creating an Inter-Agency Task Force (Task Force) to address the problems of
the ailing flag carrier. The Task Force was composed of the Departments of Finance,
Labor and Employment, Foreign Affairs, Transportation and Communication, and
Tourism, together with the Securities and Exchange Commission (SEC). Public
respondent Edgardo Espiritu, then the Secretary of Finance, was designated
chairman of the Task Force. It was empowered to summon all parties concerned for
conciliation, mediation (for) the purpose of arriving at a total and complete solution
of the problem.[1 Conciliation meetings were then held between PAL management
and the three unions representing the airlines employees,[2 with the Task Force as
mediator.
On September 4, 1998, PAL management submitted to the Task Force an offer by
private respondent Lucio Tan, Chairman and Chief Executive Officer of PAL, of a plan
to transfer shares of stock to its employees. The pertinent portion of said plan
reads:
1. From the issued shares of stock within the group of Mr. Lucio Tans holdings, the
ownership of 60,000 fully paid shares of stock of Philippine Airlines with a par value
of PHP5.00/share will be transferred in favor of each employee of Philippine Airlines
in the active payroll as of September 15, 1998. Should any share-owning employee
leave PAL, he/she has the option to keep the shares or sells (sic) his/her shares to
his/her union or other employees currently employed by PAL.
2. The aggregate shares of stock transferred to PAL employees will allow them three
(3) members to (sic) the PAL Board of Directors. We, thus, become partners in the
boardroom and together, we shall address and find solutions to the wide range of
problems besetting PAL.
3. In order for PAL to attain (a) degree of normalcy while we are tackling its
problems, we would request for a suspension of the Collective Bargaining
Agreements (CBAs) for 10 years.[3cräläwvirtualibräry
On September 10, 1998, the Board of Directors of PALEA voted to accept Tans offer
and requested the Task Forces assistance in implementing the same. Union
members, however, rejected Tans offer. Under intense pressure from PALEA
members, the unions directors subsequently resolved to reject Tans offer.
On September 17, 1998, PAL informed the Task Force that it was shutting down its
operations effective September 23, 1998, preparatory to liquidating its assets and
paying off its creditors. The airline claimed that given its labor problems,
rehabilitation was no longer feasible, and hence, the airline had no alternative but
to close shop.
On September 18, 1998, PALEA sought the intervention of the Office of the
President in immediately convening the parties, the PAL management, PALEA,
ALPAP, and FASAP, including the SEC under the direction of the Inter-Agency Task
Force, to prevent the imminent closure of PAL.[4cräläwvirtualibräry
On September 19, 1998, PALEA informed the Department of Labor and Employment
(DOLE) that it had no objection to a referendum on the Tans offer. 2,799 out of
6,738 PALEA members cast their votes in the referendum under DOLE supervision
10
held on September 21-22, 1998. Of the votes cast, 1,055 voted in favor of Tans offer
while 1,371 rejected it.
On September 23, 1998, PAL ceased its operations and sent notices of termination
to its employees.
Two days later, the PALEA board wrote President Estrada anew, seeking his
intervention. PALEA offered a 10-year moratorium on strikes and similar actions and
a waiver of some of the economic benefits in the existing CBA.[5 Tan, however,
rejected this counter-offer.
On September 27, 1998, the PALEA board again wrote the President proposing the
following terms and conditions, subject to ratification by the general membership:
1. Each PAL employee shall be granted 60,000 shares of stock with a par value of
P5.00, from Mr. Lucio Tans shareholdings, with three (3) seats in the PAL Board and
an additional seat from government shares as indicated by His Excellency;
2. Likewise, PALEA shall, as far as practicable, be granted adequate representation
in committees or bodies which deal with matters affecting terms and conditions of
employment;
3. To enhance and strengthen labor-management relations, the existing Labor-
Management Coordinating Council shall be reorganized and revitalized, with
adequate representation from both PAL management and PALEA;
4. To assure investors and creditors of industrial peace, PALEA agrees, subject to the
ratification by the general membership, (to) the suspension of the PAL-PALEA CBA
for a period of ten (10) years, provided the following safeguards are in place:
a. PAL shall continue recognizing PALEA as the duly certified bargaining agent of the
regular rank-and-file ground employees of the Company;
b. The union shop/maintenance of membership provision under the PAL-PALEA CBA
shall be respected.
c. No salary deduction, with full medical benefits.
5. PAL shall grant the benefits under the 26 July 1998 Memorandum of Agreement
forged by and between PAL and PALEA, to those employees who may opt to retire
or be separated from the company.
6. PALEA members who have been retrenched but have not received separation
benefits shall be granted priority in the hiring/rehiring of employees.
7. In the absence of applicable Company rule or regulation, the provisions of the
Labor Code shall apply.[6cräläwvirtualibräry
Among the signatories to the letter were herein petitioners Rivera, Ramiso, and
Aranas, as officers and/or members of the PALEA Board of Directors. PAL
management accepted the PALEA proposal and the necessary referendum was
scheduled.
On October 2, 1998, 5,324 PALEA members cast their votes in a DOLE-supervised
referendum. Of the votes cast, 61% were in favor of accepting the PAL-PALEA
agreement, while 34% rejected it.
On October 7, 1998, PAL resumed domestic operations. On the same date, seven
officers and members of PALEA filed this instant petition to annul the September
27, 1998 agreement entered into between PAL and PALEA on the following
grounds:
I
PUBLIC RESPONDENTS GRAVELY ABUSED THEIR DISCRETION AND EXCEEDED THEIR
JURISDICTION IN ACTIVELY PURSUING THE CONCLUSION OF THE PAL-PALEA
AGREEMENT AS THE CONSTITUTIONAL RIGHTS TO SELF-ORGANIZATION AND
COLLECTIVE BARGAINING, BEING FOUNDED ON PUBLIC POLICY, MAY NOT BE
WAIVED, NOR THE WAIVER, RATIFIED.
II
PUBLIC RESPONDENTS GRAVELY ABUSED THEIR DISCRETION AND EXCEEDED THEIR
JURISDICTION IN PRESIDING OVER THE CONCLUSION OF THE PAL-PALEA
AGREEMENT UNDER THREAT OF ABUSIVE EXERCISE OF PALS MANAGEMENT
PREROGATIVE TO CLOSE BUSINESS USED AS SUBTERFUGE FOR UNION-BUSTING.
The issues now for our resolution are:
(1) Is an original action for certiorari and prohibition the proper remedy to annul
the PAL-PALEA agreement of September 27, 1998;
(2) Is the PAL-PALEA agreement of September 27, 1998, stipulating the suspension
of the PAL-PALEA CBA unconstitutional and contrary to public policy?
11
Anent the first issue, petitioners aver that public respondents as functionaries of
the Task Force, gravely abused their discretion and exceeded their jurisdiction when
they actively pursued and presided over the PAL-PALEA agreement.
Respondents, in turn, argue that the public respondents merely served as
conciliators or mediators, consistent with the mandate of A.O. No. 16 and merely
supervised the conduct of the October 3, 1998 referendum during which the PALEA
members ratified the agreement. Thus, public respondents did not perform any
judicial and quasi-judicial act pertaining to jurisdiction. Furthermore, respondents
pray for the dismissal of the petition for violating the hierarchy of courts doctrine
enunciated in People v. Cuaresma[7and Enrile v. Salazar.[8cräläwvirtualibräry
Petitioners allege grave abuse of discretion under Rule 65 of the 1997 Rules of Civil
Procedure. The essential requisites for a petition for certiorari under Rule 65 are: (1)
the writ is directed against a tribunal, a board, or an officer exercising judicial or
quasi-judicial functions; (2) such tribunal, board, or officer has acted without or in
excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess
of jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate
remedy in the ordinary course of law.[9 For writs of prohibition, the requisites are:
(1) the impugned act must be that of a tribunal, corporation, board, officer, or
person, whether exercising judicial, quasi-judicial or ministerial functions; and (2)
there is no plain, speedy, and adequate remedy in the ordinary course of law.
[10cräläwvirtualibräry
The assailed agreement is clearly not the act of a tribunal, board, officer, or person
exercising judicial, quasi-judicial, or ministerial functions. It is not the act of public
respondents Finance Secretary Edgardo Espiritu and Labor Secretary Bienvenido
Laguesma as functionaries of the Task Force. Neither is there a judgment, order, or
resolution of either public respondents involved. Instead, what exists is a contract
between a private firm and one of its labor unions, albeit entered into with the
assistance of the Task Force. The first and second requisites for certiorari and
prohibition are therefore not present in this case.
Furthermore, there is available to petitioners a plain, speedy, and adequate remedy
in the ordinary course of law. While the petition is denominated as one for
certiorari and prohibition, its object is actually the nullification of the PAL-PALEA
agreement. As such, petitioners proper remedy is an ordinary civil action for
annulment of contract, an action which properly falls under the jurisdiction of the
regional trial courts.[11 Neither certiorari nor prohibition is the remedy in the
present case.
Petitioners further assert that public respondents were partial towards PAL
management. They allegedly pressured the PALEA leaders into accepting the
agreement. Petitioners ask this Court to examine the circumstances that led to the
signing of said agreement. This would involve review of the facts and factual issues
raised in a special civil action for certiorari which is not the function of this Court.
[12cräläwvirtualibräry
Nevertheless, considering the prayer of the parties principally we shall look into the
substance of the petition, in the higher interest of justice[13 and in view of the
public interest involved, inasmuch as what is at stake here is industrial peace in the
nations premier airline and flag carrier, a national concern.
On the second issue, petitioners contend that the controverted PAL-PALEA
agreement is void because it abrogated the right of workers to self-organization[14
and their right to collective bargaining.[15 Petitioners claim that the agreement was
not meant merely to suspend the existing PAL-PALEA CBA, which expires on
September 30, 2000, but also to foreclose any renegotiation or any possibility to
forge a new CBA for a decade or up to 2008. It violates the protection to labor
policy[16 laid down by the Constitution.
Article 253-A of the Labor Code reads:
ART. 253-A. Terms of a Collective Bargaining Agreement. Any Collective Bargaining
Agreement that the parties may enter into shall, insofar as the representation
aspect is concerned, be for a term of five (5) years. No petition questioning the
majority status of the incumbent bargaining agent shall be entertained and no
certification election shall be conducted by the Department of Labor and
Employment outside of the sixty-day period immediately before the date of expiry
of such five-year term of the Collective Bargaining Agreement. All other provisions
of the Collective Bargaining Agreement shall be renegotiated not later than three
(3) years after its execution. Any agreement on such other provisions of the
Collective Bargaining Agreement entered into within six (6) months from the date of
expiry of the term of such other provisions as fixed in such Collective Bargaining
Agreement, shall retroact to the day immediately following such date. If any such
agreement is entered into beyond six months, the parties shall agree on the
duration of the retroactivity thereof. In case of a deadlock in the renegotiation of
the collective bargaining agreement, the parties may exercise their rights under this
Code.
Under this provision, insofar as representation is concerned, a CBA has a term of
five years, while the other provisions, except for representation, may be negotiated
not later than three years after the execution.[17 Petitioners submit that a 10-year
CBA suspension is inordinately long, way beyond the maximum statutory life of a
CBA, provided for in Article 253-A. By agreeing to a 10-year suspension, PALEA, in
12
effect, abdicated the workers constitutional right to bargain for another CBA at the
mandated time.
We find the argument devoid of merit.
A CBA is a contract executed upon request of either the employer or the exclusive
bargaining representative incorporating the agreement reached after negotiations
with respect to wages, hours of work and all other terms and conditions of
employment, including proposals for adjusting any grievances or questions arising
under such agreement.[18 The primary purpose of a CBA is the stabilization of
labor-management relations in order to create a climate of a sound and stable
industrial peace.[19 In construing a CBA, the courts must be practical and realistic
and give due consideration to the context in which it is negotiated and the purpose
which it is intended to serve.[20cräläwvirtualibräry
The assailed PAL-PALEA agreement was the result of voluntary collective bargaining
negotiations undertaken in the light of the severe financial situation faced by the
employer, with the peculiar and unique intention of not merely promoting
industrial peace at PAL, but preventing the latters closure. We find no conflict
between said agreement and Article 253-A of the Labor Code. Article 253-A has a
two-fold purpose. One is to promote industrial stability and predictability. Inasmuch
as the agreement sought to promote industrial peace at PAL during its
rehabilitation, said agreement satisfies the first purpose of Article 253-A. The other
is to assign specific timetables wherein negotiations become a matter of right and
requirement. Nothing in Article 253-A, prohibits the parties from waiving or
suspending the mandatory timetables and agreeing on the remedies to enforce the
same.
In the instant case, it was PALEA, as the exclusive bargaining agent of PALs ground
employees, that voluntarily entered into the CBA with PAL. It was also PALEA that
voluntarily opted for the 10-year suspension of the CBA. Either case was the unions
exercise of its right to collective bargaining. The right to free collective bargaining,
after all, includes the right to suspend it.
The acts of public respondents in sanctioning the 10-year suspension of the PAL-
PALEA CBA did not contravene the protection to labor policy of the Constitution.
The agreement afforded full protection to labor; promoted the shared responsibility
between workers and employers; and the exercised voluntary modes in settling
disputes, including conciliation to foster industrial peace."[21cräläwvirtualibräry
Petitioners further allege that the 10-year suspension of the CBA under the PAL-
PALEA agreement virtually installed PALEA as a company union for said period,
amounting to unfair labor practice, in violation of Article 253-A of the Labor Code
mandating that an exclusive bargaining agent serves for five years only.
The questioned proviso of the agreement reads:
a. PAL shall continue recognizing PALEA as the duly certified-bargaining agent of the
regular rank-and-file ground employees of the Company;
Said proviso cannot be construed alone. In construing an instrument with several
provisions, a construction must be adopted as will give effect to all. Under Article
1374 of the Civil Code,[22 contracts cannot be construed by parts, but clauses must
be interpreted in relation to one another to give effect to the whole. The legal
effect of a contract is not determined alone by any particular provision
disconnected from all others, but from the whole read together.[23The aforesaid
provision must be read within the context of the next clause, which provides:
b. The union shop/maintenance of membership provision under the PAL-PALEA CBA
shall be respected.
The aforesaid provisions, taken together, clearly show the intent of the parties to
maintain union security during the period of the suspension of the CBA. Its
objective is to assure the continued existence of PALEA during the said period. We
are unable to declare the objective of union security an unfair labor practice. It is
State policy to promote unionism to enable workers to negotiate with management
on an even playing field and with more persuasiveness than if they were to
individually and separately bargain with the employer. For this reason, the law has
allowed stipulations for union shop and closed shop as means of encouraging
workers to join and support the union of their choice in the protection of their
rights and interests vis--vis the employer.[24cräläwvirtualibräry
Petitioners contention that the agreement installs PALEA as a virtual company
union is also untenable. Under Article 248 (d) of the Labor Code, a company union
exists when the employer acts [t]o initiate, dominate, assist or otherwise interfere
with the formation or administration of any labor organization, including the giving
of financial or other support to it or its organizers or supporters. The case records
are bare of any showing of such acts by PAL.
We also do not agree that the agreement violates the five-year representation limit
mandated by Article 253-A. Under said article, the representation limit for the
exclusive bargaining agent applies only when there is an extant CBA in full force and
effect. In the instant case, the parties agreed to suspend the CBA and put in
abeyance the limit on the representation period.
13
In sum, we are of the view that the PAL-PALEA agreement dated September 27,
1998, is a valid exercise of the freedom to contract. Under the principle of
inviolability of contracts guaranteed by the Constitution,[25 the contract must be
upheld.

WHEREFORE, there being no grave abuse of discretion shown, the instant petition is
DISMISSED. No pronouncement as to costs.

SO ORDERED.

14
G.R. No. 165756 June 5, 2009
HOTEL ENTERPRISES OF THE PHILIPPINES, INC. (HEPI), owner of Hyatt Regency
Manila, Petitioner,
vs.
SAMAHAN NG MGA MANGGAGAWA SA HYATT-NATIONAL UNION OF WORKERS IN
THE HOTEL AND RESTAURANT AND ALLIED INDUSTRIES (SAMASAH-NUWHRAIN),
Respondent.
DECISION
NACHURA, J.:
The Constitution affords full protection to labor, but the policy is not to be blindly
followed at the expense of capital. Always, the interests of both sides must be
balanced in light of the evidence adduced and the peculiar circumstances
surrounding each case.
This is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the Court of Appeals (CA) Decision1 dated July 20, 2004 and the
Resolution2 dated October 20, 2004 in CA-G.R. SP No. 81153. The appellate court,
in its decision and resolution, reversed the April 3, 2003 Resolution3 of the National
Labor Relations Commission (NLRC) and reinstated the October 30, 2002 Decision4
issued by Labor Arbiter Aliman Mangandog upholding the legality of the strike
staged by the officers and members of respondent Samahan ng mga Manggagawa
sa Hyatt-National Union of Workers in the Hotel Restaurant and Allied Industries
(Union).
We trace the antecedent facts below.
Respondent Union is the certified collective bargaining agent of the rank-and-file
employees of Hyatt Regency Manila, a hotel owned by petitioner Hotel Enterprises
of the Philippines, Inc. (HEPI).1avvphi1
In 2001, HEPI’s hotel business suffered a slump due to the local and international
economic slowdown, aggravated by the events of September 11, 2001 in the United
States. An audited financial report made by Sycip Gorres Velayo (SGV) & Co. on
January 28, 2002 indicated that the hotel suffered a gross operating loss amounting
to ₱16,137,217.00 in 2001,5 a staggering decline compared to its ₱48,608,612.00
gross operating profit6 in year 2000.7
2000 2001
Income from Hotel Operations ₱ 78,434,103 ₱ 12,230,248
Other Deductions
Provision for hotel rehabilitation 20,000,000 20,000,000
Provision for replacements of and
additions to furnishings and
equipment 9,825,491 8,367,465
29,825,491 28,367,465
Gross Operating Profit (Loss) ₱ 48,608,612 (₱ 16,137,217)
According to petitioner, the management initially decided to cost-cut by
implementing energy-saving schemes: prioritizing acquisitions/purchases; reducing
work weeks in some of the hotel’s departments; directing the employees to avail of
their vacation leaves; and imposing a moratorium on hiring employees for the year
2001 whenever practicable.8
Meanwhile, on August 31, 2001, the Union filed a notice of strike due to a
bargaining deadlock before the National Conciliation Mediation Board (NCMB),
docketed as NCMB-NCR-NS 08-253-01.9 In the course of the proceedings, HEPI
submitted its economic proposals for the rank-and-file employees covering the
years 2001, 2002, and 2003. The proposal included manning and staffing standards
for the 248 regular rank-and-file employees. The Union accepted the economic
proposals. Hence, a new collective bargaining agreement (CBA) was signed on
November 21, 2001, adopting the manning standards for the 248 rank-and-file
employees.10
Then, on December 21, 2001, HEPI issued a memorandum offering a "Special
Limited Voluntary Resignation/Retirement Program" (SLVRRP) to its regular
employees. Employees who were qualified to resign or retire were given separation
packages based on the number of years of service.11 The vacant positions, as well
as the regular positions vacated, were later filled up with contractual personnel and
agency employees.12lavvphi1
Subsequently, on January 21, 2002, petitioner decided to implement a downsizing
scheme after studying the operating costs of its different divisions to determine the
areas where it could obtain significant savings. It found that the hotel could save on
costs if certain jobs, such as engineering services, messengerial/courier services,
janitorial and laundry services, and operation of the employees’ cafeteria, which by
their nature were contractable pursuant to existing laws and jurisprudence, were
abolished and contracted out to independent job contractors. After evaluating the
hotel’s manning guide, the following positions were identified as redundant or in
excess of what was required for the hotel’s actual operation given the prevailing
poor business condition, viz.: a) housekeeping attendant-linen; b) tailor; c) room
attendant; d) messenger/mail clerk; and e) telephone technician.13 The effect was
to be a reduction of the hotel’s rank-and file employees from the agreed number of
15
248 down to just 15014 but it would generate estimated savings of around
₱9,981,267.00 per year.15
On January 24, 2002, petitioner met with respondent Union to formally discuss the
downsizing program.16 The Union opposed the downsizing plan because no
substantial evidence was shown to prove that the hotel was incurring heavy
financial losses, and for being violative of the CBA, more specifically the
manning/staffing standards agreed upon by both parties in November 2001.17 In a
financial analysis made by the Union based on Hyatt’s financial statements
submitted to the Securities and Exchange Commission (SEC), it noted that the hotel
posted a positive profit margin with respect to its gross operating and net incomes
for the years 1998, 1999, 2000, and even in 2001.18 Moreover, figures comprising
the hotel’s unappropriated retained earnings showed a consistent increase from
1998 to 2001, an indication that the company was, in fact, earning, contrary to
petitioner’s assertion. The net income from hotel operations slightly dipped from
₱78,434,103.00 in 2000 to ₱12,230,248.00 for the year 2001, but nevertheless
remained positive.19 With this, the Union, through a letter, informed the
management of its opposition to the scheme and proposed instead several cost-
saving measures.20
Despite its opposition, a list of the positions declared redundant and to be
contracted out was given by the management to the Union on March 22, 2002.21
Notices of termination were, likewise, sent to 48 employees whose positions were
to be retrenched or declared as redundant. The notices were sent on April 5, 2002
and were to take effect on May 5, 2002.22 A notice of termination was also
submitted by the management to the Department of Labor and Employment (DOLE)
indicating the names, positions, addresses, and salaries of the employees to be
terminated.23 Thereafter, the hotel management engaged the services of
independent job contractors to perform the following services: (1) janitorial
(previously, stewarding and public area attendants); (2) laundry; (3) sundry shop; (4)
cafeteria;24 and (5) engineering.25 Some employees, including one Union officer,
who were affected by the downsizing plan were transferred to other positions in
order to save their employment.26
On April 12, 2002, the Union filed a notice of strike based on unfair labor practice
(ULP) against HEPI. The case was docketed as NCMB-NCR-NS-04-139-02.27 On April
25, 2002, a strike vote was conducted with majority in the bargaining unit voting in
favor of the strike.28 The result of the strike vote was sent to NCMB-NCR Director
Leopoldo de Jesus also on April 25, 2002.29
On April 29, 2002, HEPI filed a motion to dismiss notice of strike which was opposed
by the Union. On May 3, 2002, the Union filed a petition to suspend the effects of
termination before the Office of the Secretary of Labor. On May 5, 2002, the hotel
management began implementing its downsizing plan immediately terminating
seven (7) employees due to redundancy and 41 more due to retrenchment or
abolition of positions.30 All were given separation pay equivalent to one (1)
month’s salary for every year of service.31
On May 8, 2002, conciliation proceedings were held between petitioner and
respondent, but to no avail. On May 10, 2002, respondent Union went on strike. A
petition to declare the strike illegal was filed by petitioner on May 22, 2002,
docketed as NLRC-NCR Case No. 05-03350-2002.
On June 14, 2002, Acting Labor Secretary Manuel Imson issued an order in NCM-
NCR-NS-04-139-02 (thence, NLRC Certified Case No. 000220-02), certifying the labor
dispute to the NLRC for compulsory arbitration and directing the striking workers,
except the 48 workers earlier terminated, to return to work within 24 hours. On
June 16, 2002, after receiving a copy of the order, members of respondent Union
returned to work.32 On August 1, 2002, HEPI filed a manifestation informing the
NLRC of the pending petition to declare the strike illegal. Because of this, the NLRC,
on November 15, 2002, issued an order directing Labor Arbiter Aliman Mangandog
to immediately suspend the proceedings in the pending petition to declare the
strike illegal and to elevate the records of the said case for consolidation with the
certified case.33 However, the labor arbiter had already issued a Decision34 dated
October 30, 2002 declaring the strike legal.35 Aggrieved, HEPI filed an appeal ad
cautelam before the NLRC questioning the October 30, 2002 decision.36 The Union,
on the other hand, filed a motion for reconsideration of the November 15, 2002
Order on the ground that a decision was already issued in one of the cases ordered
to be consolidated.37
On appeal, the NLRC reversed the labor arbiter’s decision. In a Resolution38 dated
April 3, 2003, it gave credence to the financial report of SGV & Co. that the hotel
had incurred huge financial losses necessitating the adoption of a downsizing
scheme. Thus, NLRC declared the strike illegal, suspended all Union officers for a
period of six (6) months without pay, and dismissed the ULP charge against HEPI.39
Respondent Union moved for reconsideration, while petitioner HEPI filed its partial
motion for reconsideration. Both were denied in a Resolution40 dated September
24, 2003.
The Union filed a petition for certiorari with the CA on December 19, 200341
questioning in the main the validity of the NLRC’s reversal of the labor arbiter’s
decision.42 But while the petition was pending, the hotel management, on
December 29, 2003, issued separate notices of suspension against each of the 12
Union officers involved in the strike in line with the April 3, 2003 resolution of the
NLRC.43
16

On July 20, 2004, the CA promulgated the assailed Decision,44 reversing the
resolution of the NLRC and reinstating the October 30, 2002 decision of the Labor
Arbiter which declared the strike valid. The CA also ordered the reinstatement of
the 48 terminated employees on account of the hotel management’s illegal
redundancy and retrenchment scheme and the payment of their backwages from
the time they were illegally dismissed until their actual reinstatement.45 HEPI
moved for reconsideration but the same was denied for lack of merit.46
Hence, this petition.
The issue boils down to whether the CA’s decision, reversing the NLRC ruling, is in
accordance with law and established facts.
We answer in the negative.
To resolve the correlative issues (i.e., the validity of the strike; the charges of ULP
against petitioner; the propriety of petitioner’s act of hiring contractual employees
from employment agencies; and the entitlement of Union officers and terminated
employees to reinstatement, backwages and strike duration pay), we answer first
the most basic question: Was petitioner’s downsizing scheme valid?
The pertinent provision of the Labor Code states:
ART. 283. x x x
The employer may also terminate the employment of any employee due to the
installation of labor-saving devices, redundancy, retrenchment to prevent losses or
the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a
written notice on the worker and the [Department] of Labor and Employment at
least one (1) month before the intended date thereof. In case of termination due to
the installation of labor saving devices or redundancy, the worker affected thereby
shall be entitled to a separation pay equivalent to at least his one (1) month pay or
to at least one (1) month pay for every year of service, whichever is higher. In case
of retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered as one (1) whole year.
Retrenchment is the reduction of work personnel usually due to poor financial
returns, aimed to cut down costs for operation particularly on salaries and wages.47
Redundancy, on the other hand, exists where the number of employees is in excess
of what is reasonably demanded by the actual requirements of the enterprise.48
Both are forms of downsizing and are often resorted to by the employer during
periods of business recession, industrial depression, or seasonal fluctuations, and
during lulls in production occasioned by lack of orders, shortage of materials,
conversion of the plant for a new production program, or introduction of new
methods or more efficient machinery or automation.49 Retrenchment and
redundancy are valid management prerogatives, provided they are done in good
faith and the employer faithfully complies with the substantive and procedural
requirements laid down by law and jurisprudence.50
For a valid retrenchment, the following requisites must be complied with: (1) the
retrenchment is necessary to prevent losses and such losses are proven; (2) written
notice to the employees and to the DOLE at least one month prior to the intended
date of retrenchment; and (3) payment of separation pay equivalent to one-month
pay or at least one-half month pay for every year of service, whichever is higher.51
In case of redundancy, the employer must prove that: (1) a written notice was
served on both the employees and the DOLE at least one month prior to the
intended date of retrenchment; (2) separation pay equivalent to at least one month
pay or at least one month pay for every year of service, whichever is higher, has
been paid; (3) good faith in abolishing the redundant positions; and (4) adoption of
fair and reasonable criteria in ascertaining which positions are to be declared
redundant and accordingly abolished.52
It is the employer who bears the onus of proving compliance with these
requirements, retrenchment and redundancy being in the nature of affirmative
defenses.53 Otherwise, the dismissal is not justified.54
In the case at bar, petitioner justifies the downsizing scheme on the ground of
serious business losses it suffered in 2001. Some positions had to be declared
redundant to cut losses. In this context, what may technically be considered as
redundancy may verily be considered as a retrenchment measure.55 To
substantiate its claim, petitioner presented a financial report covering the years
2000 and 2001 submitted by the SGV & Co., an independent external auditing
firm.56 From an impressive gross operating profit of ₱48,608,612.00 in 2000, it
nose-dived to negative ₱16,137,217.00 the following year. This was the same
financial report submitted to the SEC and later on examined by respondent Union’s
auditor. The only difference is that, in respondent’s analysis, Hyatt Regency Manila
was still earning because its net income from hotel operations in 2001 was
₱12,230,248.00. However, if provisions for hotel rehabilitation as well as
replacement of and additions to the hotel’s furnishings and equipments are
included, which respondent Union failed to consider, the result is indeed a
17
staggering deficit of more than ₱16 million. The hotel was already operating not
only on a slump in income, but on a huge deficit as well. In short, while the hotel did
earn, its earnings were not enough to cover its expenses and other liabilities; hence,
the deficit. With the local and international economic conditions equally unstable,
belt-tightening measures logically had to be implemented to forestall eventual
cessation of business.
Losses or gains of a business entity cannot be fully and satisfactorily assessed by
isolating or highlighting only a particular part of its financial report. There are
recognized accounting principles and methods by which a company’s performance
can be objectively and thoroughly evaluated at the end of every fiscal or calendar
year. What is important is that the assessment is accurately reported, free from any
manipulation of figures to suit the company’s needs, so that the company’s actual
financial condition may be impartially and accurately gauged.
The audit of financial reports by independent external auditors is strictly governed
by national and international standards and regulations for the accounting
profession.57 It bears emphasis that the financial statements submitted by
petitioner were audited by a reputable auditing firm and are clear and substantial
enough to prove that the company was in a precarious financial condition.
In the competitive and highly uncertain world of business, cash flow is as important
as – and oftentimes, even more critical than – profitability.58 So long as the hotel
has enough funds to pay its workers and satisfy costs for operations, maintenance
and other expenses, it may survive and bridge better days for its recovery. But to
ensure a viable cash flow amidst the growing business and economic uncertainty is
the trick of the trade. Definitely, this cannot be achieved if the cost-saving measures
continuously fail to cap the losses. More drastic, albeit painful, measures have to be
taken.
This Court will not hesitate to strike down a company’s redundancy program
structured to downsize its personnel, solely for the purpose of weakening the union
leadership.59 Our labor laws only allow retrenchment or downsizing as a valid
exercise of management prerogative if all other else fail. But in this case, petitioner
did implement various cost-saving measures and even transferred some of its
employees to other viable positions just to avoid the premature termination of
employment of its affected workers. It was when the same proved insufficient and
the amount of loss became certain that petitioner had to resort to drastic measures
to stave off ₱9,981,267.00 in losses, and be able to survive.
If we see reason in allowing an employer not to keep all its employees until after its
losses shall have fully materialized,60 with more reason should we allow an
employer to let go of some of its employees to prevent further financial slide.
This, in turn, gives rise to another question: Does the implementation of the
downsizing scheme preclude petitioner from availing the services of contractual and
agency-hired employees?
In Asian Alcohol Corporation v. National Labor Relations Commission, 61 we
answered in the negative. We said:
In any event, we have held that an employer’s good faith in implementing a
redundancy program is not necessarily destroyed by availment of the services of an
independent contractor to replace the services of the terminated employees. We
have previously ruled that the reduction of the number of workers in a company
made necessary by the introduction of the services of an independent contractor is
justified when the latter is undertaken in order to effectuate more economic and
efficient methods of production. In the case at bar, private respondent failed to
proffer any proof that the management acted in a malicious or arbitrary manner in
engaging the services of an independent contractor to operate the Laura wells.
Absent such proof, the Court has no basis to interfere with the bona fide decision of
management to effect more economic and efficient methods of production.
With petitioner’s downsizing scheme being valid, and the availment of contractual
and agency-hired employees legal, the strike staged by officers and members of
respondent Union is, perforce, illegal.
Given the foregoing finding, the only remaining question that begs resolution is
whether the strike was staged in good faith. On this issue, we find for the
respondent.
Procedurally, a strike to be valid must comply with Article 263 of the Labor Code,
which pertinently reads:
Article 263. x x x
xxxx
(c) In cases of bargaining deadlocks, the duly certified or recognized bargaining
agent may file a notice of strike or the employer may file a notice of lockout with
the [Department] at least 30 days before the intended date thereof. In cases of
unfair labor practice, the period of notice shall be 15 days and in the absence of a
duly certified or recognized bargaining agent, the notice of strike may be filed by
any legitimate labor organization in behalf of its members. However, in case of
dismissal from employment of union officers duly elected in accordance with the
union constitution and by-laws, which may constitute union busting where the
18
existence of the union is threatened, the 15-day cooling-off period shall not apply
and the union may take action immediately.
(d) The notice must be in accordance with such implementing rules and regulations
as the [Secretary] of Labor and Employment may promulgate.
(e) During the cooling-off period, it shall be the duty of the [Department] to exert all
efforts at mediation and conciliation to effect a voluntary settlement. Should the
dispute remain unsettled until the lapse of the requisite number of days from the
mandatory filing of the notice, the labor union may strike or the employer may
declare a lockout.
(f) A decision to declare a strike must be approved by a majority of the total union
membership in the bargaining unit concerned, obtained by secret ballot in meetings
or referenda called for that purpose. A decision to declare a lockout must be
approved by a majority of the board of directors of the corporation or association
or of the partners in a partnership, obtained by secret ballot in a meeting called for
the purpose. The decision shall be valid for the duration of the dispute based on
substantially the same grounds considered when the strike or lockout vote was
taken. The [Department] may at its own initiative or upon the request of any
affected party, supervise the conduct of the secret balloting. In every case, the
union or the employer shall furnish the [Department] the results of the voting at
least seven days before the intended strike or lockout, subject to the cooling-off
period herein provided.
Accordingly, the requisites for a valid strike are: (a) a notice of strike filed with the
DOLE 30 days before the intended date thereof or 15 days in case of ULP; (b) a
strike vote approved by a majority of the total union membership in the bargaining
unit concerned obtained by secret ballot in a meeting called for that purpose; and
(c) a notice to the DOLE of the results of the voting at least seven (7) days before
the intended strike.62 The requirements are mandatory and failure of a union to
comply therewith renders the strike illegal.63
In this case, respondent fully satisfied the procedural requirements prescribed by
law: a strike notice filed on April 12, 2002; a strike vote reached on April 25, 2002;
notification of the strike vote filed also on April 25, 2002; conciliation proceedings
conducted on May 8, 20002; and the actual strike on May 10, 2002.
Substantively, however, there appears to be a problem. A valid and legal strike must
be based on "strikeable" grounds, because if it is based on a "non-strikeable"
ground, it is generally deemed an illegal strike. Corollarily, a strike grounded on ULP
is illegal if no acts constituting ULP actually exist. As an exception, even if no such
acts are committed by the employer, if the employees believe in good faith that ULP
actually exists, then the strike held pursuant to such belief may be legal. As a
general rule, therefore, where a union believes that an employer committed ULP
and the surrounding circumstances warranted such belief in good faith, the
resulting strike may be considered legal although, subsequently, such allegations of
unfair labor practices were found to be groundless.64
Here, respondent Union went on strike in the honest belief that petitioner was
committing ULP after the latter decided to downsize its workforce contrary to the
staffing/manning standards adopted by both parties under a CBA forged only four
(4) short months earlier. The belief was bolstered when the management hired 100
contractual workers to replace the 48 terminated regular rank-and-file employees
who were all Union members.65 Indeed, those circumstances showed prima facie
that the hotel committed ULP. Thus, even if technically there was no legal ground to
stage a strike based on ULP, since the attendant circumstances support the belief in
good faith that petitioner’s retrenchment scheme was structured to weaken the
bargaining power of the Union, the strike, by exception, may be considered legal.
Because of this, we view the NLRC’s decision to suspend all the Union officers for six
(6) months without pay to be too harsh a punishment. A suspension of two (2)
months without pay should have been more reasonable and just. Be it noted that
the striking workers are not entitled to receive strike-duration pay, the ULP
allegation against the employer being unfounded. But since reinstatement is no
longer feasible, the hotel having permanently ceased operations on July 2, 2007,66
we hereby order the Labor Arbiter to instead make the necessary adjustments in
the computation of the separation pay to be received by the Union officers
concerned.
Significantly, the Manifestations67 filed by petitioner with respect to the quitclaims
executed by members of respondent Union state that 34 of the 48 employees
terminated on account of the downsizing program have already executed
quitclaims on various dates.68 We, however, take judicial notice that 33 of these
quitclaims failed to indicate the amounts received by the terminated employees.69
Because of this, petitioner leaves us no choice but to invalidate and set aside these
quitclaims. However, the actual amount received by the employees upon signing
the said documents shall be deducted from whatever remaining amount is due
them to avoid double recovery of separation pay and other monetary benefits. We
hereby order the Labor Arbiter to effect the necessary computation on this matter.
For this reason, this Court strongly admonishes petitioner and its counsel for
making its former employees sign quitclaim documents without indicating therein
the consideration for the release and waiver of their employees’ rights. Such
conduct on the part of petitioner and its counsel is reprehensible and puts in
serious doubt the candor and fairness required of them in their relations with their
19
hapless employees. They are reminded to observe common decency and good faith
in their dealings with their unsuspecting employees, particularly in undertakings
that ultimately lead to waiver of workers’ rights. This Court will not renege on its
duty to protect the weak against the strong, and the gullible against the wicked, be
it for labor or for capital.

However, with respect to the second batch of quitclaims signed by 85 of the

remaining 160 employees who were terminated following Hyatt’s permanent
closure,70 we hold that these are valid and binding undertakings. The said
documents indicate that the amount received by each of the employees represents
a reasonable settlement of their monetary claims against petitioner and were even
signed in the presence of a DOLE representative. A quitclaim, with clear and
unambiguous contents and executed for a valid consideration received in full by the
employee who signed the same, cannot be later invalidated because its signatory
claims that he was pressured into signing it on account of his dire financial need.
When it is shown that the person executing the waiver did so voluntarily, with full
understanding of what he was doing, and the consideration for the quitclaim is
credible and reasonable, the transaction must be recognized as a valid and binding
undertaking.71

WHEREFORE, the petition is PARTLY GRANTED. The downsizing scheme

implemented by petitioner is hereby declared a valid exercise of management
prerogative. The penalty of six (6) months suspension without pay imposed in the
April 3, 2003 NLRC Resolution72 is hereby reduced to two (2) months, to be
considered in the Labor Arbiter’s computation of the separation pay to be received
by the Union officers concerned. The first batch of quitclaims signed by 33 of the 48
terminated employees is hereby declared invalid and illegal for failure to state the
proper consideration therefor, but the amount received by the employees
concerned, if any, shall be deducted from their separation pay and other monetary
benefits, subject to the computation to be made by the Labor Arbiter. The second
batch of quitclaims signed by 85 of the 160 terminated employees, following Hyatt
Regency Manila’s permanent closure, is declared valid and binding.

SO ORDERED.

20
G.R. No. 179256 July 10, 2013
FIRST PHILIPPINE INDUSTRIAL CORPORATION, PETITIONER,
vs.
RAQUEL M. CALIMBAS AND LUISA P. MAHILOM, RESPONDENTS.
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
seeking the reversal of the Decision1 dated March 6, 2007 and Resolution2 dated
August 16, 2007 of the Court of Appeals (CA) in CA-G.R. SP No. 90527.
The factual and procedural antecedents, as found by the CA, are as follows:
Private respondent First Philippine Industrial Corporation (FPIC) is a domestic
corporation primarily engaged in the transportation of petroleum products by
pipeline. Upon the other hand, petitioners Raquel Calimbas and Luisa Mahilom
were engaged by De Guzman Manpower Services ("DGMS") to perform secretarial
and clerical jobs for FPIC. [DGMS] is engaged in the business of supplying manpower
to render general clerical, building and grounds maintenance, and janitorial and
utility services.
On March 29, 1993, FPIC, represented by its Senior Vice-President and Head of
Administration Department, Eustaquio Generoso, Jr. entered into a Contract of
Special Services with DGMS, represented by its Operations Manager, Manuel De
Guzman, wherein the latter agreed to undertake some aspects of building and
grounds maintenance at FPIC’s premises, offices and facilities, as well as to provide
clerical and other utility services as may be required from time to time by FPIC. The
pertinent portions of the said Contract, which took effect on April 1, 1993, reads:
B. Terms of Payment
FIRST PARTY [FPIC] shall pay the SECOND PARTY [DGMS] a contract price for
services rendered based on individual timesheets prepared and submitted by the
SECOND PARTY and duly authenticated by the FIRST PARTY’s representative. The
SECOND PARTY shall bill the FIRST PARTY on a semi-monthly basis.
xxx
C. Other Terms and Conditions
SECOND PARTY shall undertake FIRST PARTY’s projects only if covered by an
approved Project Contract (Appendix-B) which the FIRST PARTY will issue to the
SECOND PARTY when the need arises. The Project Contract shall indicate the scope
of work to be done, duration and the manpower required to undertake the work.
The composition of the workers to be assigned to a specific undertaking shall be
agreed upon between the FIRST PARTY and the SECOND PARTY;
SECOND PARTY shall assign to FIRST PARTY competent personnel to do what is
required in accordance with the Project Contract. FIRST PARTY shall have the right
to request for replacement of an assigned personnel who is observed to be non-
productive or unsafe, and if confirmed by its own investigation and findings,
SECOND PARTY shall replace such personnel;
SECOND PARTY shall provide the maintenance equipment and tools necessary to
complete assigned works. Parties hereto shall agree on the equipment, tools and
supplies to be provided by SECOND PARTY prior to the start of assigned work;
SECOND PARTY shall be liable for loss and/or damage to SECOND PARTY’s property,
found caused by willful act or negligence of SECOND PARTY’s personnel; and
There shall be no employer-employee relationship between the FIRST PARTY, on
the one hand, and the SECOND PARTY, and the person who the SECOND PARTY may
assign to perform the services called for, on the other. The SECOND PARTY hereby
acknowledges that no authority has been conferred upon it by the FIRST PARTY to
hire any person in behalf of the FIRST PARTY. The persons who (sic) the SECOND
PARTY which hereby warrants full and faithful compliance with the provisions of the
Labor Code of the Philippines, as well as with all Presidential Decrees, Executive
Orders, General Orders, Letter of Instructions, Law Rules and Regulations pertaining
to the employment of labor now existing. SECOND PARTY shall assist and defend
the FIRST PARTY in any suit or proceedings and shall hold the FIRST PARTY free and
harmless from any claims which the SECOND PARTY’s employees may lodge against
the FIRST PARTY.
xxxx
Pursuant to the said Contract, petitioner Raquel Calimbas and Luisa Mahilom were
engaged by the DGMS to render services to FPIC. Thereat, petitioner Calimbas was
assigned as a department secretary at the Technical Services Department beginning
June 3, 1996, while petitioner Mahilom served as a clerk at the Money Movement
Section of the Finance Division starting February 13, 1996.
On June 21, 2001, FPIC, through its Human Resources Manager, Lorna Young,
informed the petitioners that their services to the company would no longer be
21
needed by July 31, 2001 as a result of the "Pace-Setting" Study conducted by an
outside consultant. Accordingly, on July 9, 2001, Priscilla de Leon, Treasurer of
DGMS, formally notified both the petitioners that their respective work assignments
in FPIC were no longer available to them effective July 31, 2001, citing the
termination of the Project Contract with FPIC as the main reason thereof. On
August 3, 2001, petitioners Calimbas and Mahilom signed quitclaims, releasing and
discharging DGMS from whatever claims that they might have against it by virtue of
their past employment, upon receipt of the sums of ₱17,343.10 and ₱23,459.14,
respectively.
Despite having executed the said quitclaims, the petitioners still filed on August 16,
2001 a Complaint against FPIC for illegal dismissal and for the collection of
monetary benefits, damages and attorney’s fees, alleging that they were regular
employees of FPIC after serving almost five (5) years, and that they were dismissed
without cause. The Complaint was docketed as NLRC NCR Case No. 00-08-04331-01
and was raffled to Labor Arbiter Joel Lustria. After conducting three (3) mandatory
conferences, the parties failed to reach any amicable settlement; thus, they were
required to submit their respective position papers, together with their
documentary evidence.
In their Position Paper, the petitioners posited that they were regular employees of
FPIC for having served the same for almost five (5) years, rendering services which
were usually necessary or desirable in the usual business or trade of FPIC. They
claimed that they were illegally dismissed when they were relieved from their work
assignments on July 31, 2001 without valid and serious reasons therefor. The
petitioners maintained and (sic) that their real employer was FPIC, and that DGMS
was merely its agent for having been engaged in prohibited labor-only contracting.
The petitioners averred that DGMS did not have substantial capital or investment
by way of tools, equipment, machines, work places and other materials. They
claimed that they only used office equipment and materials owned by FPIC at its
offices in Ortigas Center, Pasig City. DGMS never exercised control over them in all
matters related to the performance of their work. In fact, DGMS never maintained
any representative at the FPIC’s office to supervise or oversee their work. They
insisted that their direct superiors, who were managerial employees of FPIC, had
control over them since the latter made sure that they always complied with the
policies of FPIC.
Upon the other hand, FPIC insisted in its Position Paper/ Motion to Dismiss that the
Complaint should be dismissed considering that the Labor Arbiter had no
jurisdiction over the case because there was absolutely no employer-employee
relationship between it and the petitioners. FPIC claimed that the petitioners had
never been its employees. FPIC insisted that their true employer was DGMS
considering that the petitioners were hired by DGMS and assigned them to the
Company to render services based on their Contract; that they received their wages
and other benefits from DGMS; and that they executed quitclaims in favor of
DGMS. Also, FPIC submitted that the termination of the petitioners’ employment
with their employer, DGMS, was valid and lawful since they executed quitclaims
with their employer.3
On December 11, 2002, the Labor Arbiter rendered a Decision4 holding that
respondents were regular employees of petitioner, and that they were illegally
dismissed when their employment was terminated without just or authorized
cause. The fallo reads:
WHEREFORE, premises considered, let the judgment be, as it is hereby rendered,
declaring complainants’ dismissal illegal, and ordering the respondent, as follows:
1) To reinstate complainants to their former positions without loss of seniority
rights and other privileges;
2) To pay complainants, Raquel M. Calimbas the amount of ₱131,555.19; and Luisa
P. Mahilom, the amount of ₱115,403.14 representing their full backwages, from the
time their salaries were withheld from them up to the date of their actual
reinstatement;
3) To pay the complainants the amount equivalent to ten (10%) percent of the total
judgment award, as and for attorney’s fees.
The amount received by complainants, Raquel M. Calimbas in the amount of
₱17,343.10, and Luisa P. Mahilom, the amount of ₱23,459.14 under the quitclaims
that they signed must be deducted from the awards herein made.
Other claims are hereby dismissed for lack of merit.
SO ORDERED.5
Aggrieved, petitioner elevated the case to the National Labor Relations Commission
(NLRC).
On December 22, 2003, the NLRC dismissed petitioner’s appeal and upheld the
Labor Arbiter’s decision.
Unsatisfied, petitioner filed a Motion for Reconsideration reiterating the arguments
brought up in its Position Paper/ Motion to Dismiss.
22
In a Resolution6 dated April 30, 2004, the NLRC reversed its decision dated
December 22, 2003 and disposed of as follows:
After a second look, We observe that from the above-quoted issues, the Labor
Arbiter assumed that complainants were regular employees of PDIC (sic) which we
find erroneous.
First, the Contract of Special Services was signed by FPIC and DGMS on March 29,
1993 which shows that complainants’ employment in February and June 1996 was
pursuant to said contract which belies their submission that their working paper
were forwarded by FPIC after directly employing them in February and June 1996.
Second, undisputed in FPIC’s statement that, capitalized at ₱75,000.00, DGMS
serviced the manpower requirements of other clients like the Makati Commercial
Estate Association and the Philippine Transmarine Carrier which reinforces its being
an independent contractor.
Third, complainants’ realization that DGMS and not respondent FPIC, was their
employer is shown by the fact that after they were disengaged, they went to DGMS,
which paid them the amount of ₱17,343. (sic) for Calimbas and ₱23,454.14 for
Mahilom.
We therefore find, again after a second look, at the records, that respondent First
Philippine Industrial Corporation was not the employer of complainants Calimbas
and Mahilom and that it was the De Guzman Manpower Services which was later
on incorporated as De Guzman Manpower Corporation which was their employer.
This finding, necessarily calls for the setting aside of the decision of Labor Arbiter
Lustria dated December 11, 2992 (sic) and Our decision promulgated on December
22, 2003.
WHEREFORE, as we reconsider our Decision promulgated December 22, 2003, we
set aside the decision of Labor Arbiter Joel A. Lustria dated December 11, 2002 and
declare respondent First Pacific (sic) Industrial Corporation free from any liability
whatsoever.
SO ORDERED.7
Respondents sought reconsideration of the above resolution, but the same was
denied in a Resolution8 dated April 20, 2005, maintaining that:
We deny. We find no legal basis to deem DGMS a "labor-only contracting" entity as
maintained by complainants. The fact that DGMS had only a capitalization of
₱75,000.00, without an investment in tools, equipment, etc., does not necessarily
constitute the latter as labor-only contractor since it has shown its adequacy of
resources, directly or indirectly, in the performance of completion of the job, work
or service contracted out, including operating costs, administrative costs such as
training, overhead and other costs as are necessary to enably (sic) DGMS to exercise
control, supervision, or direction over its employees in all aspects in performing or
completing the job, work or services contracted out. In the case of New Golden City
Builders and Development Corp. et. al. vs. CA, et. al. (G.R. No. 154715), December
11, 2003), the Supreme Court reiterated its ruling in Neri that not having
investment in the form of tools or machineries does not automatically reduce the
independent contractor to be a labor-only contractor. Moreover, the court has
taken judicial notice of the general practice adopted in several government and
private institution and industries of hiring independent contractors to perform
special services.
Furthermore, the copy of payroll adduced on record persuade us that complainants
received their wages from DGMS contrary to their allegations that the contract
consideration is by reimbursement of wages. The execution likewise by
complainants Calimbas and Mahilom of their respective quitclaim and release
fortifies the fact of their belief that their actual employer is DGMS and not
respondent FPIC.
WHEREFORE, we deny the motion. We accordingly AFFIRM the Resolution dated
April 30, 2004 in its entirety. No further motion of the same nature shall be
entertained.
SO ORDERED.9
Unfazed, respondents elevated the case before the CA.
On March 6, 2007, the CA reversed and set aside the NLRC’s resolutions and held as
follows:
WHEREFORE, the instant Petition is hereby GRANTED. The assailed Resolutions
dated April 30, 2004 and April 20, 2005 of the NLRC are REVERSED and SET ASIDE.
The Decision dated December 22, 2003 of the NLRC, affirming the Decision dated
December 11, 2002 of the Labor Arbiter is hereby REINSTATED.
SO ORDERED.10
Petitioner filed a Motion for Reconsideration, but the same was denied in a
Resolution dated August 16, 2007.
Hence, the present petition, wherein petitioner posits that:
23

I and placed by such person are performing activities which are directly related to the
THE COURT OF APPEALS COMMITTED GRIEVOUS ERROR IN NOT CONSIDERING AND
APPLYING HERETO PERTINENT LAW AND JURISPRUDENCE WHICH PROVIDE THAT
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES
MUST BE SUBSTANTIALLY ESTABLISHED AND NOT MERELY PRESUMED TO EXIST.
II
THE COURT OF APPEALS COMMITTED GRIEVOUS ERROR IN REVERSING THE
UPRIGHT AND JUDICIOUS RULING OF THE NATIONAL LABOR RELATIONS
COMMISSION WHICH FOUND THAT RESPONDENTS ARE NOT EMPLOYEES OF
PETITIONER AND THEREFORE WERE NOT ILLEGALLY DISMISSED AND AS SUCH ARE
NOT ENTITLED TO THEIR CLAIMS FOR REINSTATEMENT, BACKWAGES AND
ATTORNEY’S FEES.11
Simply, the issues are: (1) whether respondents are employees of petitioner; and (2)
whether respondents were lawfully dismissed from their employment.
Anent the first issue, Article 106 of the Labor Code pertinently provides:
Article 106. Contractor or subcontractor. – Whenever an employer enters into a
contract with another person for the performance of the former’s work, the
employees of the contractor and of the latter’s subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and severally
liable with his contractor or subcontractor to such employees to the extent of the
work performed under the contract, in the same manner and extent that he is liable
to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of workers established under the
Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job-contracting as well as differentiations
within these types of contracting and determine who among the parties involved
shall be considered the employer for purposes of this Code, to prevent any violation
or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited
principal business of such employer. In such cases, the person or intermediary shall
be considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by
him.
In the same manner, Sections 8 and 9 of DOLE Department Order No. 10, Series of
1997, state:
Sec. 8. Job contracting. – There is job contracting permissible under the Code if the
following conditions are met:
(1)
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
(2)
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.
Sec. 9. Labor-only contracting. –
(a)
Any person who undertakes to supply workers to an employer shall be deemed to
be engaged in labor-only contracting where such person:
(1)
Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
(2)
24
The workers recruited and placed by such persons are performing activities which
are directly related to the principal or operations of the employer in which workers
are habitually employed.
(b)
Labor-only contracting as defined herein is hereby prohibited and the person acting
as contractor shall be considered merely as an agent or intermediary of the
employer who shall be responsible to the workers in the same manner and extent
as if the latter were directly employed by him.
(c)
For cases not falling under this Article, the Secretary of Labor shall determine
through appropriate orders whether or not the contracting out of labor is
permissible in the light of the circumstances of each case and after considering the
operating needs of the employer and the rights of the workers involved. In such
case, he may prescribe conditions and restrictions to insure the protection and
welfare of the workers.
Given the foregoing standards, we sustain the findings of the CA that respondents
are petitioner’s employees and that DGMS is engaged in labor-only contracting.
First, in Vinoya v. National Labor Relations Commission,12 this Court categorically
stated that the actual paid-in capital of ₱75,000.00 could not be considered as
substantial capital. Thus, DGMS’s actual paid-in capital in the amount of ₱75,000.00
does not constitute substantial capital essential to carry out its business as an
independent job contractor. In spite of its bare assertion that the Vinoya case does
not apply in the present case, DGMS has not shown any serious and cogent reason
to disregard the ruling in the aforementioned case. Records likewise reveal that
DGMS has no substantial equipment in the form of tools, equipment and
machinery. As a matter of fact, respondents were using office equipment and
materials owned by petitioner while they were rendering their services at its offices.
Second, petitioner exercised the power of control and supervision over the
respondents. As aptly observed by the CA, "the daily time records of respondents
even had to be countersigned by the officials of petitioner to check whether they
had worked during the hours declared therein. Furthermore, the fact that DGMS
did not assign representatives to supervise over respondents’ work in petitioner’s
company tends to disprove the independence of DGMS. It is axiomatic that the test
to determine the existence of independent contractorship is whether one claiming
to be an independent contractor has contracted to do the work according to his
own methods and without being subjected to the control of the employer, except
only to the results of the work. Obviously, on this score alone, petitioner cannot
rightly claim that DGMS was an independent job contractor inasmuch as
respondents were subjected to the control and supervision of petitioner while they
were performing their jobs."13
Third, also worth stressing are the points highlighted by respondents: (1)
Respondents worked only at petitioner’s offices for an uninterrupted period of five
years, occupying the same position at the same department under the supervision
of company officials; (2) Three weeks ahead of the termination letters issued by
DGMS, petitioner’s HR Manager Lorna Young notified respondents, in a closed-door
meeting, that their services to the company would be terminated by July 31, 2001;
(3) In the termination letters prepared by DGMS, it was even stressed that the said
termination letters will formalize the verbal notice given by petitioner’s HR
Administration personnel; (4) The direct superiors of respondents were managerial
employees of petitioner, and had direct control over all the work-related activities
of the latter. This control included the supervision of respondents’ performance of
their work and their compliance with petitioner’s company policies and procedures.
DGMS, on the other hand, never maintained any representative at the petitioner’s
office to oversee the work of respondents.14
All told, an employer-employee relationship exists between petitioner and
respondents. And having served for almost five years at petitioner’s company,
respondents had already attained the status of regular employees.
As to the second issue, i.e., whether respondents were lawfully dismissed from their
employment, this Court rules in the negative.
Recently, in Skippers United Pacific, Inc. v. Daza,15 this Court held that for a
worker’s dismissal to be considered valid, it must comply with both procedural and
substantive due process, viz.:
For a worker’s dismissal to be considered valid, it must comply with both procedural
and substantive due process. The legality of the manner of dismissal constitutes
procedural due process, while the legality of the act of dismissal constitutes
substantive due process.
Procedural due process in dismissal cases consists of the twin requirements of
notice and hearing.1âwphi1 The employer must furnish the employee with two
written notices before the termination of employment can be effected: (1) the first
notice apprises the employee of the particular acts or omissions for which his
dismissal is sought; and (2) the second notice informs the employee of the
employer’s decision to dismiss him. Before the issuance of the second notice, the
25
requirement of a hearing must be complied with by giving the worker an
opportunity to be heard. It is not necessary that an actual hearing be conducted.

Substantive due process, on the other hand, requires that dismissal by the
employer be made under a just or authorized cause under Articles 282 to 284 of the
Labor Code.16

In the present case, petitioners failed to show any valid or just cause under the
Labor Code on which it may justify the termination of services of respondents. Also,
apart from notifying that their services had already been terminated, petitioner
failed to comply with the rudimentary requirement of notifying respondents
regarding the acts or omissions which led to the termination of their services as well
as giving them an ample opportunity to contest the legality of their dismissal.
Having failed to establish compliance with the requirements of termination of
employment under the Labor Code, respondents’ dismissal is tainted with illegality.

Resultantly, the CA correctly held that respondents are entitled to reinstatement

without loss of seniority rights, and other privileges and to their full backwages,
inclusive of allowances and other benefits or their monetary equivalent, computed
from the time their compensation was withheld up to the time of their actual
reinstatement. Considering that reinstatement is no longer feasible, respondents
are entitled instead to separation pay equivalent to one month salary for every year
of service.

WHEREFORE, premises considered, the Petition for Review on Certiorari is DENIED.

The Decision dated March 6, 2007 and Resolution dated August 16, 2007 of the
Court of Appeals in CA-G.R. SP No. 90527 are hereby AFFIRMED with
MODIFICATION that respondents shall be entitled to separation pay equivalent to
one month salary for every year of service.

SO ORDERED.

26
G.R. No. 174912 July 24, 2013
BPI EMPLOYEES UNION-DAVAO CITY-FUBU (BPIEU-DAVAO CITY-FUBU), Petitioner,
vs.
BANK OF THE PHILIPPINE ISLANDS (BPI), and BPI OFFICERS CLARO M. REYES, CECIL
CONANAN and GEMMA VELEZ, Respondents.
DECISION
MENDOZA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, assailing the April 5, 2006 Decision1 and August 17, 2006
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 74595 affirming the
December 21, 20013 and August 23, 20024 Resolutions of the National Labor
Relations Commission (NLRC) in declaring as valid and legal the action of
respondent Bank of the Philippine Islands-Davao City (BPI-Davao) in contracting out
certain functions to BPI Operations Management Corporation (BOMC).
The Factual Antecedents
BOMC, which was created pursuant to Central Bank5 Circular No. 1388, Series of
1993 (CBP Circular No. 1388, 1993), and primarily engaged in providing and/or
handling support services for banks and other financial institutions, is a subsidiary of
the Bank of Philippine Islands (BPI) operating and functioning as an entirely
separate and distinct entity.
A service agreement between BPI and BOMC was initially implemented in BPI’s
Metro Manila branches. In this agreement, BOMC undertook to provide services
such as check clearing, delivery of bank statements, fund transfers, card production,
operations accounting and control, and cash servicing, conformably with BSP
Circular No. 1388. Not a single BPI employee was displaced and those performing
the functions, which were transferred to BOMC, were given other assignments.
The Manila chapter of BPI Employees Union (BPIEU-Metro ManilaFUBU) then filed a
complaint for unfair labor practice (ULP). The Labor Arbiter (LA) decided the case in
favor of the union. The decision was, however, reversed on appeal by the NLRC.
BPIEU-Metro Manila-FUBU filed a petition for certiorari before the CA which denied
it, holding that BPI transferred the employees in the affected departments in the
pursuit of its legitimate business. The employees were neither demoted nor were
their salaries, benefits and other privileges diminished.6
On January 1, 1996, the service agreement was likewise implemented in Davao City.
Later, a merger between BPI and Far East Bank and Trust Company (FEBTC) took
effect on April 10, 2000 with BPI as the surviving corporation. Thereafter, BPI’s
cashiering function and FEBTC’s cashiering, distribution and bookkeeping functions
were handled by BOMC. Consequently, twelve (12) former FEBTC employees were
transferred to BOMC to complete the latter’s service complement.
BPI Davao’s rank and file collective bargaining agent, BPI Employees Union-Davao
City-FUBU (Union), objected to the transfer of the functions and the twelve (12)
personnel to BOMC contending that the functions rightfully belonged to the BPI
employees and that the Union was deprived of membership of former FEBTC
personnel who, by virtue of the merger, would have formed part of the bargaining
unit represented by the Union pursuant to its union shop provision in the CBA.7
The Union then filed a formal protest on June 14, 2000 addressed to BPI Vice
Presidents Claro M. Reyes and Cecil Conanan reiterating its objection. It requested
the BPI management to submit the BOMC issue to the grievance procedure under
the CBA, but BPI did not consider it as "grievable." Instead, BPI proposed a Labor
Management Conference (LMC) between the parties.8
During the LMC, BPI invoked management prerogative stating that the creation of
the BOMC was to preserve more jobs and to designate it as an agency to place
employees where they were most needed. On the other hand, the Union charged
that BOMC undermined the existence of the union since it reduced or divided the
bargaining unit. While BOMC employees perform BPI functions, they were beyond
the bargaining unit’s coverage. In contracting out FEBTC functions to BOMC, BPI
effectively deprived the union of the membership of employees handling said
functions as well as curtailed the right of those employees to join the union.
Thereafter, the Union demanded that the matter be submitted to the grievance
machinery as the resort to the LMC was unsuccessful. As BPI allegedly ignored the
demand, the Union filed a notice of strike before the National Conciliation and
Mediation Board (NCMB) on the following grounds:
a) Contracting out services/functions performed by union members that interfered
with, restrained and/or coerced the employees in the exercise of their right to self-
organization;
b) Violation of duty to bargain; and
c) Union busting.9
27
BPI then filed a petition for assumption of jurisdiction/certification with the
Secretary of the Department of Labor and Employment (DOLE), who subsequently
issued an order certifying the labor dispute to the NLRC for compulsory arbitration.
The DOLE Secretary directed the parties to cease and desist from committing any
act that might exacerbate the situation.
On October 27, 2000, a hearing was conducted. Thereafter, the parties were
required to submit their respective position papers. On November 29, 2000, the
Union filed its Urgent Omnibus Motion to Cease and Desist with a prayer that BPI-
Davao and/or Mr. Claro M. Reyes and Mr. Cecil Conanan be held in contempt for
the following alleged acts of BPI:
1. The Bank created a Task Force Committee on November 20, 2000 composed of
six (6) former FEBTC employees to handle the Cashiering, Distributing, Clearing,
Tellering and Accounting functions of the former FEBTC branches but the "task
force" conducts its business at the office of the BOMC using the latter’s equipment
and facilities.
2. On November 27, 2000, the bank integrated the clearing operations of the BPI
and the FEBTC. The clearing function of BPI, then solely handled by the BPI
Processing Center prior to the labor dispute, is now encroached upon by the BOMC
because with the merger, differences between BPI and FEBTC operations were
diminished or deleted. What the bank did was simply to get the total of all clearing
transactions under BPI but the BOMC employees process the clearing of checks at
the Clearing House as to checks coming from former FEBTC branches. Prior to the
labor dispute, the run-up and distribution of the checks of BPI were returned to the
BPI processing center, now all checks whether of BPI or of FEBTC were brought to
the BOMC. Since the clearing operations were previously done by the BPI
processing center with BPI employees, said function should be performed by BPI
employees and not by BOMC.10
On December 21, 2001, the NLRC came out with a resolution upholding the validity
of the service agreement between BPI and BOMC and dismissing the charge of ULP.
It ruled that the engagement by BPI of BOMC to undertake some of its activities was
clearly a valid exercise of its management prerogative.11 It further stated that the
spinning off by BPI to BOMC of certain services and functions did not interfere with,
restrain or coerce employees in the exercise of their right to self-organization.12
The Union did not present even an iota of evidence showing that BPI had
terminated employees, who were its members. In fact, BPI exerted utmost
diligence, care and effort to see to it that no union member was terminated.13 The
NLRC also stressed that Department Order (D.O.) No. 10 series of 1997, strongly
relied upon by the Union, did not apply in this case as BSP Circular No. 1388, series
of 1993, was the applicable rule.
After the denial of its motion for reconsideration, the Union elevated its grievance
to the CA via a petition for certiorari under Rule 65. The CA, however, affirmed the
NLRC’s December 21, 2001 Resolution with modification that the enumeration of
functions listed under BSP Circular No. 1388 in the said resolution be deleted. The
CA noted at the outset that the petition must be dismissed as it merely touched on
factual matters which were beyond the ambit of the remedy availed of.14 Be that
as it may, the CA found that the factual findings of the NLRC were supported by
substantial evidence and, thus, entitled to great respect and finality. To the CA, the
NLRC did not act with grave abuse of discretion as to merit the reversal of the
resolution.15
Furthermore, the CA ratiocinated that, considering the ramifications of the
corporate merger, it was well within BPI’s prerogatives "to determine what
additional tasks should be performed, who should best perform it and what should
be done to meet the exigencies of business."16 It pointed out that the Union did
not, by the mere fact of the merger, become the bargaining agent of the merged
employees17 as the Union’s right to represent said employees did not arise until it
was chosen by them.18
As to the applicability of D.O. No. 10, the CA agreed with the NLRC that the said
order did not apply as BPI, being a commercial bank, its transactions were subject
to the rules and regulations of the BSP.
Not satisfied, the Union filed a motion for reconsideration which was, however,
denied by the CA.1âwphi1
Hence, the present petition with the following
ASSIGNMENT OF ERRORS:
A. THE PETITION BEFORE THE COURT OF APPEALS INVOLVED QUESTIONS OF LAW
AND ITS DECISION DID NOT ADDRESS THE ISSUE OF WHETHER BPI’S ACT OF
OUTSOURCING FUNCTIONS FORMERLY PERFORMED BY UNION MEMBERS VIOLATES
THE CBA.
B. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT DOLE
DEPARTMENT ORDER NO. 10 DOES NOT APPLY IN THIS CASE.
The Union is of the position that the outsourcing of jobs included in the existing
bargaining unit to BOMC is a breach of the union-shop agreement in the CBA. In
transferring the former employees of FEBTC to BOMC instead of absorbing them in
BPI as the surviving corporation in the merger, the number of positions covered by
28
the bargaining unit was decreased, resulting in the reduction of the Union’s
membership. For the Union, BPI’s act of arbitrarily outsourcing functions formerly
performed by the Union members and, in fact, transferring a number of its
members beyond the ambit of the Union, is a violation of the CBA and interfered
with the employees’ right to self organization. The Union insists that the CBA covers
the agreement with respect, not only to wages and hours of work, but to all other
terms and conditions of work. The union shop clause, being part of these
conditions, states that the regular employees belonging to the bargaining unit,
including those absorbed by way of the corporate merger, were required to join the
bargaining union "as a condition for employment." Simply put, the transfer of
former FEBTC employees to BOMC removed them from the coverage of unionized
establishment. While the Union admitted that BPI has the prerogative to determine
what should be done to meet the exigencies of business in accordance with the
case of Sime Darby Pilipinas, Inc. v. NLRC,19 it insisted that the exercise of
management prerogative is not absolute, thus, requiring good faith and adherence
to the law and the CBA. Citing the case of Shell Oil Workers’ Union v. Shell Company
of the Philippines, Ltd.,20 the Union claims that it is unfair labor practice for an
employer to outsource the positions in the existing bargaining unit.
Position of BPI-Davao
For its part, BPI defended the validity of its service agreement with BOMC on three
(3) grounds: 1] that it was pursuant to the prevailing law at that time, CBP Circular
No. 1388; 2] that the creation of BOMC was within management prerogatives
intended to streamline the operations and provide focus for BPI’s core activities;
and 3] that the Union recognized, in its CBA, the exclusive right and prerogative of
BPI to conduct the management and operation of its business.21
BPI argues that the case of Shell Oil Workers’ Union v. Shell Company of the
Philippines, Ltd.,22 cited by the Union, is not on all fours with the present case. In
said case, the company dissolved its security guard section and replaced it with an
outside agency, claiming that such act was a valid exercise of management
prerogative. The Court, however, ruled against the said outsourcing because there
was an express assurance in the CBA that the security guard section would continue
to exist. Having failed to reserve its right to effect a dissolution, the company’s act
of outsourcing and transferring security guards was invalidated by the Court, ruling
that the unfair labor practice strike called by the Union did have the impression of
validity. In contrast, there is no provision in the CBA between BPI and the Union
expressly stipulating the continued existence of any position within the bargaining
unit. For BPI, the absence of this peculiar fact is enough reason to prevent the
application of Shell to this case.
BPI likewise invokes settled jurisprudence,23 where the Court upheld the acts of
management to contract out certain functions held by employees, and even notably
those held by union members. In these cases, the decision to outsource certain
functions was a justifiable business judgment which deserved no judicial
interference. The only requisite of this act is good faith on the part of the employer
and the absence of malicious and arbitrary action in the outsourcing of functions to
BOMC.
On the issue of the alleged curtailment of the right of the employees to self-
organization, BPI refutes the Union’s allegation that ULP was committed when the
number of positions in the bargaining was reduced. It cites as correct the CA ruling
that the representation of the Union’s prospective members is contingent on the
choice of the employee, that is, whether or not to join the Union. Hence, it was
premature for the Union to claim that the rights of its prospective members to self-
organize were restrained by the transfer of the former FEBTC employees to BOMC.
The Court’s Ruling
In essence, the primordial issue in this case is whether or not the act of BPI to
outsource the cashiering, distribution and bookkeeping functions to BOMC is in
conformity with the law and the existing CBA. Particularly in dispute is the validity
of the transfer of twelve (12) former FEBTC employees to BOMC, instead of being
absorbed in BPI after the corporate merger. The Union claims that a union shop
agreement is stipulated in the existing CBA. It is unfair labor practice for employer
to outsource the positions in the existing bargaining unit, citing the case of Shell Oil
Workers’ Union v. Shell Company of the Philippines, Ltd.24
The Union’s reliance on the Shell Case is misplaced. The rule now is covered by
Article 261 of the Labor Code, which took effect on November 1, 1974.25 Article
261 provides:
ART. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. – x
x x Accordingly, violations of a Collective Bargaining Agreement, except those which
are gross in character, shall no longer be treated as unfair labor practice and shall
be resolved as grievances under the Collective Bargaining Agreement. For purposes
of this article, gross violations of Collective Bargaining Agreement shall mean
flagrant and/or malicious refusal to comply with the economic provisions of such
agreement. [Emphases supplied]
Clearly, only gross violations of the economic provisions of the CBA are treated as
ULP. Otherwise, they are mere grievances.
29
In the present case, the alleged violation of the union shop agreement in the CBA,
even assuming it was malicious and flagrant, is not a violation of an economic
provision in the agreement. The provisions relied upon by the Union were those
articles referring to the recognition of the union as the sole and exclusive bargaining
representative of all rank-and-file employees, as well as the articles on union
security, specifically, the maintenance of membership in good standing as a
condition for continued employment and the union shop clause.26 It failed to take
into consideration its recognition of the bank’s exclusive rights and prerogatives,
likewise provided in the CBA, which included the hiring of employees, promotion,
transfers, and dismissals for just cause and the maintenance of order, discipline and
efficiency in its operations.27
The Union, however, insists that jobs being outsourced to BOMC were included in
the existing bargaining unit, thus, resulting in a reduction of a number of positions
in such unit. The reduction interfered with the employees’ right to self-organization
because the power of a union primarily depends on its strength in number.28
It is incomprehensible how the "reduction of positions in the collective bargaining
unit" interferes with the employees’ right to self-organization because the
employees themselves were neither transferred nor dismissed from the service. As
the NLRC clearly stated:
In the case at hand, the union has not presented even an iota of evidence that
petitioner bank has started to terminate certain employees, members of the union.
In fact, what appears is that the Bank has exerted utmost diligence, care and effort
to see to it that no union member has been terminated. In the process of the
consolidation or merger of the two banks which resulted in increased diversification
of functions, some of these non-banking functions were merely transferred to the
BOMC without affecting the union membership.29
BPI stresses that not a single employee or union member was or would be
dislocated or terminated from their employment as a result of the Service
Agreement.30 Neither had it resulted in any diminution of salaries and benefits nor
led to any reduction of union membership.31
As far as the twelve (12) former FEBTC employees are concerned, the Union failed
to substantially prove that their transfer, made to complete BOMC’s service
complement, was motivated by ill will, anti-unionism or bad faith so as to affect or
interfere with the employees’ right to self-organization.
It is to be emphasized that contracting out of services is not illegal perse.1âwphi1 It
is an exercise of business judgment or management prerogative. Absent proof that
the management acted in a malicious or arbitrary manner, the Court will not
interfere with the exercise of judgment by an employer.32 In this case, bad faith
cannot be attributed to BPI because its actions were authorized by CBP Circular No.
1388, Series of 199333 issued by the Monetary Board of the then Central Bank of
the Philippines (now Bangko Sentral ng Pilipinas). The circular covered amendments
in Book I of the Manual of Regulations for Banks and Other Financial Intermediaries,
particularly on the matter of bank service contracts. A finding of ULP necessarily
requires the alleging party to prove it with substantial evidence. Unfortunately, the
Union failed to discharge this burden.
Much has been said about the applicability of D.O. No. 10. Both the NLRC and the
CA agreed with BPI that the said order does not apply. With BPI, as a commercial
bank, its transactions are subject to the rules and regulations of the governing
agency which is the Bangko Sentral ng Pilipinas.34 The Union insists that D.O. No.
10 should prevail.
The Court is of the view, however, that there is no conflict between D.O. No. 10 and
CBP Circular No. 1388. In fact, they complement each other.
Consistent with the maxim, interpretare et concordare leges legibus est optimus
interpretandi modus, a statute should be construed not only to be consistent with
itself but also to harmonize with other laws on the same subject matter, as to form
a complete, coherent and intelligible system of jurisprudence.35 The seemingly
conflicting provisions of a law or of two laws must be harmonized to render each
effective.36 It is only when harmonization is impossible that resort must be made to
choosing which law to apply.37
In the case at bench, the Union submits that while the Central Bank regulates
banking, the Labor Code and its implementing rules regulate the employment
relationship. To this, the Court agrees. The fact that banks are of a specialized
industry must, however, be taken into account. The competence in determining
which banking functions may or may not be outsourced lies with the BSP. This does
not mean that banks can simply outsource banking functions allowed by the BSP
through its circulars, without giving regard to the guidelines set forth under D.O.
No. 10 issued by the DOLE.
While D.O. No. 10, Series of 1997, enumerates the permissible contracting or
subcontracting activities, it is to be observed that, particularly in Sec. 6(d) invoked
by the Union, the provision is general in character – "x x x Works or services not
directly related or not integral to the main business or operation of the principal… x
x x." This does not limit or prohibit the appropriate government agency, such as the
BSP, to issue rules, regulations or circulars to further and specifically determine the
permissible services to be contracted out. CBP Circular No. 138838 enumerated
functions which are ancillary to the business of banks, hence, allowed to be
30
outsourced. Thus, sanctioned by said circular, BPI outsourced the cashiering (i.e.,
cash-delivery and deposit pick-up) and accounting requirements of its Davao City
branches.39 The Union even described the extent of BPI’s actual and intended
contracting out to BOMC as follows:
"As an initiatory move, the functions of the Cashiering Unit of the Processing Center
of BPI, handled by its regular rank and file employees who are members of the
Union, xxx [were] transferred to BOMC with the Accounting Department as next in
line. The Distributing, Clearing and Bookkeeping functions of the Processing Center
of the former FEBTC were likewise contracted out to BOMC."40
supplies or places workers to perform a job, work or service for a principal or if 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 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.45

Thus, the subject functions appear to be not in any way directly related to the core WHEREFORE, the petition is DENIED.
activities of banks. They are functions in a processing center of BPI which does not
handle or manage deposit transactions. Clearly, the functions outsourced are not SO ORDERED.
inherent banking functions, and, thus, are well within the permissible services
under the circular.

The Court agrees with BPI that D.O. No. 10 is but a guide to determine what
functions may be contracted out, subject to the rules and established jurisprudence
on legitimate job contracting and prohibited labor-only contracting.41 Even if the
Court considers D.O. No. 10 only, BPI would still be within the bounds of D.O. No. 10
when it contracted out the subject functions. This is because the subject functions
were not related or not integral to the main business or operation of the principal
which is the lending of funds obtained in the form of deposits.42 From the very
definition of "banks" as provided under the General Banking Law, it can easily be
discerned that banks perform only two (2) main or basic functions – deposit and
loan functions. Thus, cashiering, distribution and bookkeeping are but ancillary
functions whose outsourcing is sanctioned under CBP Circular No. 1388 as well as
D.O. No. 10. Even BPI itself recognizes that deposit and loan functions cannot be
legally contracted out as they are directly related or integral to the main business or
operation of banks. The CBP's Manual of Regulations has even categorically stated
and emphasized on the prohibition against outsourcing inherent banking functions,
which refer to any contract between the bank and a service provider for the latter
to supply, or any act whereby the latter supplies, the manpower to service the
deposit transactions of the former.43

In one case, the Court held that it is management prerogative to farm out any of its
activities, regardless of whether such activity is peripheral or core in nature.44
What is of primordial importance is that the service agreement does not violate the
employee's right to security of tenure and payment of benefits to which he is
entitled under the law. Furthermore, the outsourcing must not squarely fall under
labor-only contracting where the contractor or sub-contractor merely recruits,

31
G.R. No. 192571 July 23, 2013 February 15, 2005 to August 14, 2005. The said contract was also signed by Abbott’s
General Manager, petitioner Edwin Feist (Feist):10
ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE, EDWIN D. FEIST, MARIA
OLIVIA T. YABUTMISA, TERESITA C. BERNARDO, AND ALLAN G. ALMAZAR, PROBATIONARY EMPLOYMENT
Petitioners,
vs. Dear Pearl,
PEARLIE ANN F. ALCARAZ, Respondent.
After having successfully passed the pre-employment requirements, you are hereby
DECISION appointed as follows:

PERLAS-BERNABE, J.: Position Title : Regulatory Affairs Manager

Assailed in this petition for review on certiorari1 are the Decision2 dated December Department : Hospira
10,2009 and Resolution3 dated June 9, 2010 of the Court of Appeals (CA) in CA-G.R.
SP No. 101045 which pronounced that the National Labor Relations Commission The terms of your employment are:
(NLRC) did not gravely abuse its discretion when it ruled that respondent Pearlie
Ann F. Alcaraz (Alcaraz) was illegally dismissed from her employment. Nature of Employment : Probationary

The Facts Effectivity : February 15, 2005 to August 14, 2005

On June 27, 2004, petitioner Abbott Laboratories, Philippines (Abbott) caused the
publication in a major broadsheet newspaper of its need for a Medical and
Regulatory Affairs Manager (Regulatory Affairs Manager) who would: (a) be
responsible for drug safety surveillance operations, staffing, and budget; (b) lead
the development and implementation of standard operating procedures/policies
for drug safety surveillance and vigilance; and (c) act as the primary interface with
internal and external customers regarding safety operations and queries.4 Alcaraz -
who was then a Regulatory Affairs and Information Manager at Aventis Pasteur
Philippines, Incorporated (another pharmaceutical company like Abbott) – showed
interest and submitted her application on October 4, 2004.5
Basic Salary : ₱110,000.00/ month
It is understood that you agree to abide by all existing policies, rules and regulations
of the company, as well as those, which may be hereinafter promulgated.
Unless renewed, probationary appointment expires on the date indicated subject to
earlier termination by the Company for any justifiable reason.
If you agree to the terms and conditions of your employment, please signify your
conformity below and return a copy to HRD.

On December 7, 2004, Abbott formally offered Alcaraz the abovementioned Welcome to Abbott!
position which was an item under the company’s Hospira Affiliate Local Surveillance
Unit (ALSU) department.6 In Abbott’s offer sheet.7 it was stated that Alcaraz was to Very truly yours,
be employed on a probationary basis.8 Later that day, she accepted the said offer
and received an electronic mail (e-mail) from Abbott’s Recruitment Officer, Sgd.
petitioner Teresita C. Bernardo (Bernardo), confirming the same. Attached to EDWIN D. FEIST
Bernardo’s e-mail were Abbott’s organizational chart and a job description of General Manager
Alcaraz’s work.9
CONFORME:
On February 12, 2005, Alcaraz signed an employment contract which stated, inter
alia, that she was to be placed on probation for a period of six (6) months beginning Sgd.
PEARLIE ANN FERRER-ALCARAZ

32

During Alcaraz’s pre-employment orientation, petitioner Allan G. Almazar (Almazar),
Hospira’s Country Transition Manager, briefed her on her duties and responsibilities
as Regulatory Affairs Manager, stating that: (a) she will handle the staff of Hospira
ALSU and will directly report to Almazar on matters regarding Hopira’s local
operations, operational budget, and performance evaluation of the Hospira ALSU
Staff who are on probationary status; (b) she must implement Abbott’s Code of
Good Corporate Conduct (Code of Conduct), office policies on human resources and
finance, and ensure that Abbott will hire people who are fit in the organizational
discipline; (c) petitioner Kelly Walsh (Walsh), Manager of the Literature Drug
Surveillance Drug Safety of Hospira, will be her immediate supervisor; (d) she
should always coordinate with Abbott’s human resource officers in the
management and discipline of the staff; (e) Hospira ALSU will spin off from Abbott in
early 2006 and will be officially incorporated and known as Hospira, Philippines. In
the interim, Hospira ALSU operations will still be under Abbott’s management,
excluding the technical aspects of the operations which is under the control and
supervision of Walsh; and (f) the processing of information and/or raw material
data subject of Hospira ALSU operations will be strictly confined and controlled
under the computer system and network being maintained and operated from the
United States. For this purpose, all those involved in Hospira ALSU are required to
use two identification cards: one, to identify them as Abbott’s employees and
another, to identify them as Hospira employees.11
On March 3, 2005, petitioner Maria Olivia T. Yabut-Misa (Misa), Abbott’s Human
Resources (HR) Director, sent Alcaraz an e-mail which contained an explanation of
the procedure for evaluating the performance of probationary employees and
further indicated that Abbott had only one evaluation system for all of its
employees. Alcaraz was also given copies of Abbott’s Code of Conduct and
Probationary Performance Standards and Evaluation (PPSE) and Performance
Excellence Orientation Modules (Performance Modules) which she had to apply in
line with her task of evaluating the Hospira ALSU staff.12
Abbott’s PPSE procedure mandates that the job performance of a probationary
employee should be formally reviewed and discussed with the employee at least
twice: first on the third month and second on the fifth month from the date of
employment. The necessary Performance Improvement Plan should also be made
during the third-month review in case of a gap between the employee’s
performance and the standards set. These performance standards should be
discussed in detail with the employee within the first two (2) weeks on the job. It
was equally required that a signed copy of the PPSE form must be submitted to
Abbott’s Human Resources Department (HRD) and shall serve as documentation of
the employee’s performance during his/her probationary period. This shall form the
basis for recommending the confirmation or termination of the probationary
employment.13
During the course of her employment, Alcaraz noticed that some of the staff had
disciplinary problems. Thus, she would reprimand them for their unprofessional
behavior such as non-observance of the dress code, moonlighting, and disrespect of
Abbott officers. However, Alcaraz’s method of management was considered by
Walsh to be "too strict."14 Alcaraz approached Misa to discuss these concerns and
was told to "lie low" and let Walsh handle the matter. Misa even assured her that
Abbott’s HRD would support her in all her management decisions.15
On April 12, 2005, Alcaraz received an e-mail from Misa requesting immediate
action on the staff’s performance evaluation as their probationary periods were
about to end. This Alcaraz eventually submitted.16
On April 20, 2005, Alcaraz had a meeting with petitioner Cecille Terrible (Terrible),
Abbott’s former HR Director, to discuss certain issues regarding staff performance
standards. In the course thereof, Alcaraz accidentally saw a printed copy of an e-
mail sent by Walsh to some staff members which essentially contained queries
regarding the former’s job performance. Alcaraz asked if Walsh’s action was the
normal process of evaluation. Terrible said that it was not.17
On May 16, 2005, Alcaraz was called to a meeting with Walsh and Terrible where
she was informed that she failed to meet the regularization standards for the
position of Regulatory Affairs Manager.18 Thereafter, Walsh and Terrible requested
Alcaraz to tender her resignation, else they be forced to terminate her services. She
was also told that, regardless of her choice, she should no longer report for work
and was asked to surrender her office identification cards. She requested to be
given one week to decide on the same, but to no avail.19
On May 17, 2005, Alcaraz told her administrative assistant, Claude Gonzales
(Gonzales), that she would be on leave for that day. However, Gonzales told her
that Walsh and Terrible already announced to the whole Hospira ALSU staff that
Alcaraz already resigned due to health reasons.20
On May 23, 2005, Walsh, Almazar, and Bernardo personally handed to Alcaraz a
letter stating that her services had been terminated effective May 19, 2005.21 The
letter detailed the reasons for Alcaraz’s termination – particularly, that Alcaraz: (a)
did not manage her time effectively; (b) failed to gain the trust of her staff and to
build an effective rapport with them; (c) failed to train her staff effectively; and (d)
was not able to obtain the knowledge and ability to make sound judgments on case
processing and article review which were necessary for the proper performance of
33
her duties.22 On May 27, 2005, Alcaraz received another copy of the said
termination letter via registered mail.23
Alcaraz felt that she was unjustly terminated from her employment and thus, filed a
complaint for illegal dismissal and damages against Abbott and its officers, namely,
Misa, Bernardo, Almazar, Walsh, Terrible, and Feist.24 She claimed that she should
have already been considered as a regular and not a probationary employee given
Abbott’s failure to inform her of the reasonable standards for her regularization
upon her engagement as required under Article 29525 of the Labor Code. In this
relation, she contended that while her employment contract stated that she was to
be engaged on a probationary status, the same did not indicate the standards on
which her regularization would be based.26 She further averred that the individual
petitioners maliciously connived to illegally dismiss her when: (a) they threatened
her with termination; (b) she was ordered not to enter company premises even if
she was still an employee thereof; and (c) they publicly announced that she already
resigned in order to humiliate her.27
On the contrary, petitioners maintained that Alcaraz was validly terminated from
her probationary employment given her failure to satisfy the prescribed standards
for her regularization which were made known to her at the time of her
engagement.28
The LA Ruling
In a Decision dated March 30, 2006,29 the LA dismissed Alcaraz’s complaint for lack
of merit.
The LA rejected Alcaraz’s argument that she was not informed of the reasonable
standards to qualify as a regular employee considering her admissions that she was
briefed by Almazar on her work during her pre-employment orientation meeting30
and that she received copies of Abbott’s Code of Conduct and Performance
Modules which were used for evaluating all types of Abbott employees.31 As
Alcaraz was unable to meet the standards set by Abbott as per her performance
evaluation, the LA ruled that the termination of her probationary employment was
justified.32 Lastly, the LA found that there was no evidence to conclude that
Abbott’s officers and employees acted in bad faith in terminating Alcaraz’s
employment.33
Displeased with the LA’s ruling, Alcaraz filed an appeal with the National Labor
Relations Commission (NLRC).
The NLRC Ruling
On September 15, 2006, the NLRC rendered a Decision,34 annulling and setting
aside the LA’s ruling, the dispositive portion of which reads:
WHEREFORE, the Decision of the Labor Arbiter dated 31 March 2006 [sic] is hereby
reversed, annulled and set aside and judgment is hereby rendered:
1. Finding respondents Abbot [sic] and individual respondents to have committed
illegal dismissal;
2. Respondents are ordered to immediately reinstate complainant to her former
position without loss of seniority rights immediately upon receipt hereof;
3. To jointly and severally pay complainant backwages computed from 16 May 2005
until finality of this decision. As of the date hereof the backwages is computed at
a. Backwages for 15 months - PhP 1,650,000.00
b. 13th month pay - 110,000.00
TOTAL PhP 1,760,000.00
4. Respondents are ordered to pay complainant moral damages of ₱50,000.00 and
exemplary damages of ₱50,000.00.
5. Respondents are also ordered to pay attorney’s fees of 10% of the total award.
6. All other claims are dismissed for lack of merit.
SO ORDERED.35
The NLRC reversed the findings of the LA and ruled that there was no evidence
showing that Alcaraz had been apprised of her probationary status and the
requirements which she should have complied with in order to be a regular
employee.36 It held that Alcaraz’s receipt of her job description and Abbott’s Code
of Conduct and Performance Modules was not equivalent to her being actually
informed of the performance standards upon which she should have been
evaluated on.37 It further observed that Abbott did not comply with its own
standard operating procedure in evaluating probationary employees.38 The NLRC
was also not convinced that Alcaraz was terminated for a valid cause given that
petitioners’ allegation of Alcaraz’s "poor performance" remained
unsubstantiated.39
Petitioners filed a motion for reconsideration which was denied by the NLRC in a
Resolution dated July 31, 2007.40
34
Aggrieved, petitioners filed with the CA a Petition for Certiorari with Prayer for
Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction,
docketed as CA G.R. SP No. 101045 (First CA Petition), alleging grave abuse of
discretion on the part of NLRC when it ruled that Alcaraz was illegally dismissed.41
Pending resolution of the First CA Petition, Alcaraz moved for the execution of the
NLRC’s Decision before the LA, which petitioners strongly opposed. The LA denied
the said motion in an Order dated July 8, 2008 which was, however, eventually
reversed on appeal by the NLRC.42 Due to the foregoing, petitioners filed another
Petition for Certiorari with the CA, docketed as CA G.R. SP No. 111318 (Second CA
Petition), assailing the propriety of the execution of the NLRC decision.43
The CA Ruling
With regard to the First CA Petition, the CA, in a Decision44 dated December 10,
2009, affirmed the ruling of the NLRC and held that the latter did not commit any
grave abuse of discretion in finding that Alcaraz was illegally dismissed.
It observed that Alcaraz was not apprised at the start of her employment of the
reasonable standards under which she could qualify as a regular employee.45 This
was based on its examination of the employment contract which showed that the
same did not contain any standard of performance or any stipulation that Alcaraz
shall undergo a performance evaluation before she could qualify as a regular
employee.46 It also found that Abbott was unable to prove that there was any
reasonable ground to terminate Alcaraz’s employment.47 Abbott moved for the
reconsideration of the aforementioned ruling which was, however, denied by the
CA in a Resolution48 dated June 9, 2010.
The CA likewise denied the Second CA Petition in a Resolution dated May 18, 2010
(May 18, 2010 Resolution) and ruled that the NLRC was correct in upholding the
execution of the NLRC Decision.49 Thus, petitioners filed a motion for
reconsideration.
While the petitioners’ motion for reconsideration of the CA’s May 18, 2010
Resolution was pending, Alcaraz again moved for the issuance of a writ of execution
before the LA. On June 7, 2010, petitioners received the LA’s order granting
Alcaraz’s motion for execution which they in turn appealed to the NLRC – through a
Memorandum of Appeal dated June 16, 2010 (June 16, 2010 Memorandum of
Appeal ) – on the ground that the implementation of the LA’s order would render
its motion for reconsideration moot and academic.50
Meanwhile, petitioners’ motion for reconsideration of the CA’s May 18, 2010
Resolution in the Second CA Petition was denied via a Resolution dated October 4,
2010.51 This attained finality on January 10, 2011 for petitioners’ failure to timely
appeal the same.52 Hence, as it stands, only the issues in the First CA petition are
left to be resolved.
Incidentally, in her Comment dated November 15, 2010, Alcaraz also alleges that
petitioners were guilty of forum shopping when they filed the Second CA Petition
pending the resolution of their motion for reconsideration of the CA’s December 10,
2009 Decision i.e., the decision in the First CA Petition.53 She also contends that
petitioners have not complied with the certification requirement under Section 5,
Rule 7 of the Rules of Court when they failed to disclose in the instant petition the
filing of the June 16, 2010 Memorandum of Appeal filed before the NLRC.54
The Issues Before the Court
The following issues have been raised for the Court’s resolution: (a) whether or not
petitioners are guilty of forum shopping and have violated the certification
requirement under Section 5, Rule 7 of the Rules of Court; (b) whether or not
Alcaraz was sufficiently informed of the reasonable standards to qualify her as a
regular employee; (c) whether or not Alcaraz was validly terminated from her
employment; and (d) whether or not the individual petitioners herein are liable.
The Court’s Ruling
A. Forum Shopping and
Violation of 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,55 the Court explained that:
x x x The distinction between the prohibition against forum shopping and the
certification requirement should by now be 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. x x x. 56
35
As to the first, 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.57
In this case, records show that, except for the element of identity of parties, the
elements of forum shopping do not exist. Evidently, the First CA Petition was
instituted to question the ruling of the NLRC that Alcaraz was illegally dismissed. On
the other hand, the Second CA Petition pertains to the propriety of the
enforcement of the judgment award pending the resolution of the First CA Petition
and the finality of the decision in the labor dispute between Alcaraz and the
petitioners. Based on the foregoing, a judgment in the Second CA Petition will not
constitute res judicata insofar as the First CA Petition is concerned. Thus,
considering that the two petitions clearly cover different subject matters and causes
of action, there exists no forum shopping.
As to the second, Alcaraz further imputes that the petitioners violated the
certification requirement under Section 5, Rule 7 of the Rules of Court58 by not
disclosing the fact that it filed the June 16, 2010 Memorandum of Appeal before the
NLRC in the instant petition.
In this regard, 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.
Records show that the issues raised in the instant petition and those in the June 16,
2010 Memorandum of Appeal filed with the NLRC likewise cover different subject
matters and causes of action. In this case, the validity of Alcaraz’s dismissal is at
issue whereas in the said Memorandum of Appeal, the propriety of the issuance of
a writ of execution was in question.
Thus, given the dissimilar issues, petitioners did not have to disclose in the present
petition the filing of their June 16, 2010 Memorandum of Appeal with the NLRC. In
any event, considering that the issue on the propriety of the issuance of a writ of
execution had been resolved in the Second CA Petition – which in fact had already
attained finality – the matter of disclosing the June 16, 2010 Memorandum of
Appeal is now moot and academic.
Having settled the foregoing procedural matter, the Court now proceeds to resolve
the substantive issues.
B. Probationary employment;
grounds for termination.
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.59 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.60
Corollary thereto, 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.
Keeping with these rules, 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
36
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.61 Also, in Aberdeen
Court, Inc. v. Agustin,62 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 non-regularization.
In this case, petitioners contend that Alcaraz was terminated because she failed to
qualify as a regular employee according to Abbott’s standards which were made
known to her at the time of her engagement. Contrarily, Alcaraz claims that Abbott
never apprised her of these standards and thus, maintains that she is a regular and
not a mere probationary employee.
The Court finds petitioners’ assertions to be well-taken.
A punctilious examination of the records reveals that Abbott had indeed complied
with the above-stated requirements. This conclusion is largely impelled by the fact
that Abbott clearly conveyed to Alcaraz her duties and responsibilities as Regulatory
Affairs Manager prior to, during the time of her engagement, and the incipient
stages of her employment. On this score, the Court finds it apt to detail not only the
incidents which point out to the efforts made by Abbott but also those
circumstances which would show that Alcaraz was well-apprised of her employer’s
expectations that would, in turn, determine her regularization:
(a) On June 27, 2004, Abbott caused the publication in a major broadsheet
newspaper of its need for a Regulatory Affairs Manager, indicating therein the job
description for as well as the duties and responsibilities attendant to the aforesaid
position; this prompted Alcaraz to submit her application to Abbott on October 4,
2004;
(b) In Abbott’s December 7, 2004 offer sheet, it was stated that Alcaraz was to be
employed on a probationary status;
(c) On February 12, 2005, Alcaraz signed an employment contract which specifically
stated, inter alia, that she was to be placed on probation for a period of six (6)
months beginning February 15, 2005 to August 14, 2005;
(d) On the day Alcaraz accepted Abbott’s employment offer, Bernardo sent her
copies of Abbott’s organizational structure and her job description through e-mail;
(e) Alcaraz was made to undergo a pre-employment orientation where Almazar
informed her that she had to implement Abbott’s Code of Conduct and office
policies on human resources and finance and that she would be reporting directly
to Walsh;
(f) Alcaraz was also required to undergo a training program as part of her
orientation;
(g) Alcaraz received copies of Abbott’s Code of Conduct and Performance Modules
from Misa who explained to her the procedure for evaluating the performance of
probationary employees; she was further notified that Abbott had only one
evaluation system for all of its employees; and
(h) Moreover, Alcaraz had previously worked for another pharmaceutical company
and had admitted to have an "extensive training and background" to acquire the
necessary skills for her job.63
Considering the totality of the above-stated circumstances, it cannot, therefore, be
doubted that Alcaraz was well-aware that her regularization would depend on her
ability and capacity to fulfill the requirements of her position as Regulatory Affairs
Manager and that her failure to perform such would give Abbott a valid cause to
terminate her probationary employment.
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.
In fine, the Court rules that Alcaraz’s status as a probationary employee and her
consequent dismissal must stand. Consequently, in holding that Alcaraz was illegally
dismissed due to her status as a regular and not a probationary employee, the
Court finds that the NLRC committed a grave abuse of discretion.
To elucidate, records show that the NLRC based its decision on the premise that
Alcaraz’s receipt of her job description and Abbott’s Code of Conduct and
37
Performance Modules was not equivalent to being actually informed of the
performance standards upon which she should have been evaluated on.64 It,
however, overlooked the legal implication of the other attendant circumstances as
detailed herein which should have warranted a contrary finding that Alcaraz was
indeed a probationary and not a regular employee – more particularly the fact that
she was well-aware of her duties and responsibilities and that her failure to
adequately perform the same would lead to her non-regularization and eventually,
her termination.
Accordingly, by affirming the NLRC’s pronouncement which is tainted with grave
abuse of discretion, the CA committed a reversible error which, perforce,
necessitates the reversal of its decision.
C. Probationary employment;
termination procedure.
A different procedure is applied when terminating a probationary employee; the
usual two-notice rule does not govern.65 Section 2, Rule I, Book VI of the
Implementing Rules of the Labor Code states that "if 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."
As the records show, Alcaraz's dismissal was effected through a letter dated May
19, 2005 which she received on May 23, 2005 and again on May 27, 2005. Stated
therein were the reasons for her termination, i.e., that after proper evaluation,
Abbott determined that she failed to meet the reasonable standards for her
regularization considering her lack of time and people management and decision-
making skills, which are necessary in the performance of her functions as
Regulatory Affairs Manager.66 Undeniably, this written notice sufficiently meets the
criteria set forth above, thereby legitimizing the cause and manner of Alcaraz’s
dismissal as a probationary employee under the parameters set by the Labor
Code.67
D. Employer’s violation of
company policy and
procedure.
Nonetheless, despite the existence of a sufficient ground to terminate Alcaraz’s
employment and Abbott’s compliance with the Labor Code termination procedure,
it is readily apparent that Abbott breached its contractual obligation to Alcaraz
when it failed to abide by its own procedure in evaluating the performance of a
probationary employee.
Veritably, a company policy partakes of the nature of an implied contract between
the employer and employee. In Parts Depot, Inc. v. Beiswenger,68 it has been held
that:
Employer 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.1âwphi1 (Emphasis and underscoring supplied.)
Hence, given such nature, company personnel policies create an obligation on the
part of both the employee and the employer to abide by the same.
Records show that Abbott’s PPSE procedure mandates, inter alia, that the job
performance of a probationary employee should be formally reviewed and
discussed with the employee at least twice: first on the third month and second on
the fifth month from the date of employment. Abbott is also required to come up
with a Performance Improvement Plan during the third month review to bridge the
gap between the employee’s performance and the standards set, if any.69 In
addition, a signed copy of the PPSE form should be submitted to Abbott’s HRD as
the same would serve as basis for recommending the confirmation or termination
of the probationary employment.70
In this case, it is apparent that Abbott failed to follow the above-stated procedure in
evaluating Alcaraz. For one, there lies a hiatus of evidence that a signed copy of
Alcaraz’s PPSE form was submitted to the HRD. It was not even shown that a PPSE
form was completed to formally assess her performance. Neither was the
performance evaluation discussed with her during the third and fifth months of her
employment. Nor did Abbott come up with the necessary Performance
Improvement Plan to properly gauge Alcaraz’s performance with the set company
standards.
38
While it is Abbott’s management prerogative to promulgate its own company rules
and even subsequently amend them, this right equally demands that when it does
create its own policies and thereafter notify its employee of the same, it accords
upon itself the obligation to faithfully implement them. Indeed, a contrary
interpretation would entail a disharmonious relationship in the work place for the
laborer should never be mired by the uncertainty of flimsy rules in which the latter’s
labor rights and duties would, to some extent, depend.
In this light, while there lies due cause to terminate Alcaraz’s probationary
employment for her failure to meet the standards required for her regularization,
and while it must be further pointed out that Abbott had satisfied its statutory duty
to serve a written notice of termination, the fact that it violated its own company
procedure renders the termination of Alcaraz’s employment procedurally infirm,
warranting the payment of nominal damages. A further exposition is apropos.
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),71 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.72 Thus, in Agabon, the employer
was ordered to pay the employee nominal damages in the amount of
₱30,000.00.73
Proceeding from the same ratio, the Court modified Agabon in the case of Jaka
Food Processing Corporation v. Pacot (Jaka)74 where it created a distinction
between procedurally defective dismissals due to a just cause, on one hand, and
those due to an authorized cause, on the other.
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.75 Hence, in Jaka, where the employee was dismissed
for an authorized cause of retrenchment76 – as contradistinguished from the
employee in Agabon who was dismissed for a just cause of neglect of duty77 – the
Court ordered the employer to pay the employee nominal damages at the higher
amount of ₱50,000.00.
Evidently, the sanctions imposed in both Agabon and Jaka proceed from the
necessity to deter employers from future violations of the statutory due process
rights of employees.78 In similar regard, the Court deems it proper to apply the
same principle to the case at bar for the reason that an employer’s contractual
breach of its own company procedure – albeit not statutory in source – has the
parallel effect of violating the laborer’s rights. Suffice it to state, the contract is the
law between the parties and thus, breaches of the same impel recompense to
vindicate a right that has been violated. Consequently, while the Court is wont to
uphold the dismissal of Alcaraz because a valid cause exists, the payment of
nominal damages on account of Abbott’s contractual breach is warranted in
accordance with Article 2221 of the Civil Code.79
Anent the proper amount of damages to be awarded, the Court observes that
Alcaraz’s dismissal proceeded from her failure to comply with the standards
required for her regularization. As such, it is undeniable that the dismissal process
was, in effect, initiated by an act imputable to the employee, akin to dismissals due
to just causes under Article 296 of the Labor Code. Therefore, the Court deems it
appropriate to fix the amount of nominal damages at the amount of ₱30,000.00,
consistent with its rulings in both Agabon and Jaka.
E. Liability of individual
petitioners as corporate
officers.
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
themselves personally and solidarily liable with the corporation; or (d) they are
made by specific provision of law personally answerable for their corporate
action.80
In this case, Alcaraz alleges that the individual petitioners acted in bad faith with
regard to the supposed crude manner by which her probationary employment was
terminated and thus, should be held liable together with Abbott. In the same vein,
she further attributes the loss of some of her remaining belongings to them.81
Alcaraz’s contention fails to persuade.
39
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.

WHEREFORE, the petition is GRANTED. The Decision dated December 10, 2009 and
Resolution dated June 9, 2010 of the Court of Appeals in CA-G.R. SP No. 101045 are
hereby REVERSED and SET ASIDE. Accordingly, the Decision dated March 30, 2006
of the Labor Arbiter is REINSTATED with the MODIFICATION that petitioner Abbott
Laboratories, Philippines be ORDERED to pay respondent Pearlie Ann F. Alcaraz
nominal damages in the amount of ₱30,000.00 on account of its breach of its own
company procedure.

SO ORDERED.

40
G.R. Nos. 196280 & 196286 April 2, 2014
UNIVERSIDAD DE STA. ISABEL, Petitioner,
vs.
MARVIN-JULIAN L. SAMBAJON, JR., Respondent.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 urging this Court to set
aside the Decision1 dated March 25, 2011 of the Court of Appeals (CA) in CA-GR. SP
Nos. 108103 and 108168 which affirmed with modification the Decision2 dated
August 1, 2008 of the National Labor Relations Commission (NLRC). The NLRC
affirmed the Decision3 dated August 22, 2006 of the Labor Arbiter in NLRC Sub-RAB
V-05-04-00053-05) declaring petitioner liable for illegal dismissal of respondent.
The Facts
Universidad de Sta. Isabel (petitioner) is a non-stock, non-profit religious
educational institution in Naga City. Petitioner hired Marvin-Julian L. Sambajon, Jr.
(respondent) as a full-time college faculty member with the rank of Assistant
Professor on probationary status, as evidenced by an Appointment Contract4 dated
November 1, 2002, effective November 1, 2002 up to March 30, 2003.
After the aforesaid contract expired, petitioner continued to give teaching loads to
respondent who remained a full-time faculty member of the Department of
Religious Education for the two semesters of school-year (SY) 2003-2004 (June 1,
2003 to March 31, 2004); and two semesters of SY 2004-2005 (June 2004 to March
31, 2005).5
Sometime in June 2003, after respondent completed his course in Master of Arts in
Education, major in Guidance and Counseling, he submitted the corresponding
Special Order from the Commission on Higher Education (CHED), together with his
credentials for the said master’s degree, to the Human Resources Department of
petitioner for the purpose of salary adjustment/increase. Subsequently,
respondent’s salary was increased, as reflected in his pay slips starting October 1-
15, 2004.6 He was likewise re-ranked from Assistant Professor to Associate
Professor.
In a letter dated October 15, 2004 addressed to the President of petitioner, Sr. Ma.
Asuncion G. Evidente, D.C., respondent vigorously argued that his salary increase
should be made effective as of June 2003 and demanded the payment of his salary
differential. The school administration thru Sr. Purita Gatongay, D.C., replied by
explaining its policy on re-ranking of faculty members7, viz:
xxxx
Please be informed that teachers in the Universidad are not re-ranked during their
probationary period. The Faculty Manual as revised for school year 2002-2003
provides (page 38) "Re-ranking is done every two years, hence the personnel hold
their present rank for two years. Those undergoing probationary period and those
on part-time basis of employment are not covered by this provision." This provision
is found also in the 2000-2001 Operations Manual.
Your personnel file shows that you were hired as a probationary teacher in the
second semester of school year 2002-2003. By October 2004, you will be
completing four (4) semesters (two school years) of service. Even permanent
teachers are re-ranked only every two years, and you are not even a permanent
teacher. I am informed that you have been told several times and made to read the
Provision in the Faculty Manual by the personnel office that you cannot be re-
ranked because you are still a probationary teacher.
x x x x8
Respondent insisted on his demand for retroactive pay. In a letter dated January 10,
2005, Sr. Evidente reiterated the school policy on re-ranking of teachers, viz:
xxx
Under the Faculty Manual a permanent teacher is not entitled to re-ranking oftener
than once every two years. From this it should be obvious that, with all the more
reason, a probationary teacher would not be entitled to "evaluation," which could
result in re-ranking or "adjustment in salary" oftener than once every two years.
Since you are a probationary teacher, the University is under no obligation to re-
rank you or adjust your salary after what you refer to as "evaluation." Nevertheless,
considering that in October 2004 you were completing two years of service, the
University adjusted your salary in the light of the CHED Special Order you submitted
showing that you had obtained the degree of Master of Arts in Education. Instead
of being grateful for the adjustment, you insist that the adjustment be made
retroactive to June 2003. Simply stated, you want your salary adjusted after one
semester of probationary service. We do not think a probationary teacher has
better rights than a permanent teacher in the matter of re-ranking or "evaluation."9
41
However, respondent found the above explanation insufficient and not clear
enough. In his letter dated January 12, 2005, he pointed out the case of another
faculty member -- whom he did not name -- also on probationary status whose
salary was supposedly adjusted by petitioner at the start of school year (June) after
he/she had completed his/her master’s degree in March. Respondent thus pleaded
for the release of his salary differential, or at the very least, that petitioner give him
categorical answers to his questions.10
Apparently, to resolve the issue, a dialogue was held between respondent and Sr.
Evidente. As to the outcome of this conversation, the parties gave conflicting
accounts. Respondent claimed that Sr. Evidente told him that the school
administration had decided to shorten his probationary period to two years on the
basis of his satisfactory performance.11 This was categorically denied by Sr.
Evidente though the latter admitted having informed respondent "that he was
made Associate Professor on account of his incessant requests for a salary increase
which the Universidad de Santa Isabel eventually accommodated…considering that
[respondent] had obtained a Master’s Degree in June 2003." She further informed
respondent that "his appointment as Associate Professor did not affect his status as
a probationary employee" and that petitioner "was not and did not exercise its
prerogative to shorten his probationary period to only two years." Sr. Stella O. Real,
D.C., who issued a Certificate of Employment to respondent, likewise denied that
she confirmed to respondent that petitioner has shortened his probationary
employment.12
On February 26, 2005, respondent received his letter of termination which stated:
Greetings of Peace in the Lord!
We regret to inform your good self that your full time probationary appointment
will not be renewed when it expires at the end of this coming March 31, 2005.
Thank you so much for the services that you have rendered to USI and to her
clientele the past several semesters. We strongly and sincerely encourage you to
pursue your desire to complete your Post Graduate studies in the University of your
choice as soon as you are able.
God bless you in all your future endeavors.
Godspeed!13
On April 14, 2005, respondent filed a complaint for illegal dismissal against the
petitioner.
In his Decision dated August 22, 2006, Labor Arbiter Jesus Orlando M. Quinones
ruled that there was no just or authorized cause in the termination of respondent’s
probationary employment. Consequently, petitioner was found liable for illegal
dismissal, thus:
WHEREFORE, in view of the foregoing, judgment is hereby rendered finding
respondent school UNIVERSIDAD DE SANTA ISABEL liable for the illegal dismissal of
complainant MARVIN-JULIAN L. SAMBAJON, JR.
Accordingly, and consistent with Article 279 of the Labor Code, respondent school is
hereby directed to pay complainant full backwages covering the period/duration of
the 1st semester of academic year 2005-2006. Reinstatement being rendered moot
by the expiration of the probationary period, respondent school is directed to pay
complainant separation pay in lieu of reinstatement computed at one (1) month’s
pay for every year of service. An award of 10% attorney’s fees in favor of
complainant is also held in order.
(please see attached computation of monetary award as integral part of this
decision).
All other claims and charges are DISMISSED for lack of legal and factual basis.
SO ORDERED.14
Petitioner appealed to the NLRC raising the issue of the correct interpretation of
Section 92 of the Manual of Regulations for Private Schools and DOLE-DECS-CHED-
TESDA Order No. 01, series of 1996, and alleging grave abuse of discretion
committed by the Labor Arbiter in ruling on a cause of action/issue not raised by
the complainant (respondent) in his position paper.
On August 1, 2008, the NLRC rendered its Decision affirming the Labor Arbiter and
holding that respondent had acquired a permanent status pursuant to Sections 91,
92 and 93 of the 1992 Manual of Regulations for Private Schools, in relation to
Article 281 of the Labor Code, as amended. Thus:
In the instant case, the first contract (records, pp. 36; 92) executed by the parties
provides that he was hired on a probationary status effective November 1, 2002 to
March 30, 2003. While his employment continued beyond the above-mentioned
period and lasted for a total of five (5) consecutive semesters, it appears that the
only other contract he signed is the one (records, p. 103) for the second semester of
SY 2003-2004. A portion of this contract reads:
42
"I am pleased to inform you that you are designated and commissioned to be an
Apostle of Love and Service, Unity and Peace as you dedicate and commit yourself
in the exercise of your duties and responsibilities as a:
FULL-TIME FACULTY MEMBER
of the Religious Education Department from November 1, 2003 to March 31, 2004.
Unless otherwise renewed in writing this designation automatically terminates as of
the date expiration above stated without further notice."
There is no showing that the complainant signed a contract for the first and second
semesters of SY 2004-2005.
Under the circumstances, it must be concluded that the complainant has acquired
permanent status. The last paragraph of Article 281 of the Labor Code provides that
"an employee who is allowed to work after a probationary period shall be
considered a regular employee." Based thereon, the complainant required [sic]
permanent status on the first day of the first semester of SY 2003-2004.
As presently worded, Section 92 of the revised Manual of Regulations for Private
Schools merely provides for the maximum lengths of the probationary periods of
academic personnel of private schools in the three (3) levels of education
(elementary, secondary, tertiary). The periods provided therein are not
requirements for the acquisition, by them, of permanent status.
WHEREFORE, the decision appealed from is hereby AFFIRMED.
SO ORDERED.15
Petitioner and respondent sought reconsideration of the above decision, with the
former contending that the NLRC resolved an issue not raised in the appeal
memorandum, while the latter asserted that the NLRC erred in not awarding him
full back wages so as to conform to the finding that he had acquired a permanent
status. Both motions were denied by the NLRC which ruled that regardless of
whether or not the parties were aware of the rules for the acquisition of permanent
status by private school teachers, these rules applied to them and overrode their
mistaken beliefs. As to respondent’s plea for back wages, the NLRC said the award
of back wages was not done in this case because respondent did not appeal the
Labor Arbiter’s decision.
Both parties filed separate appeals before the CA. On motion by respondent, the
two cases were consolidated (CA-G.R. SP Nos. 108103 and 108168).16
By Decision dated March 25, 2011, the CA sustained the conclusion of the NLRC that
respondent had already acquired permanent status when he was allowed to
continue teaching after the expiration of his first appointment-contract on March
30, 2003. However, the CA found it necessary to modify the decision of the NLRC to
include the award of back wages to respondent. The dispositive portion of the said
decision reads:
WHEREFORE, premises considered, the petition docketed as CA-G.R. SP No. 108103
is GRANTED. The challenged Decision of the NLRC dated August 1, 2008 in NLRC
NCR CA No. 050481-06 (NLRC Sub-RAB V-05-04-00053-05) is AFFIRMED with
MODIFICATION in that Universidad de Sta. Isabel is directed to reinstate Marvin-
Julian L. Sambajon, Jr. to his former position without loss of seniority rights and to
pay him full backwages computed from the time his compensation was withheld
from him up to the time of his actual reinstatement. All other aspects are
AFFIRMED.
As regards CA-G.R. SP No. 108168, the petition is DENIED for lack of merit.
SO ORDERED.17
The Petition/Issues
Before this Court, petitioner ascribes grave error on the part of the CA in sustaining
the NLRC which ruled that respondent was dismissed without just or authorized
cause at the time he had already acquired permanent or regular status since
petitioner allowed him to continue teaching despite the expiration of the first
contract of probationary employment for the second semester of SY 2002-2003.
Petitioner at the outset underscores the fact that the NLRC decided an issue which
was not raised on appeal, i.e., whether respondent had attained regular status. It
points out that the Labor Arbiter’s finding that respondent was dismissed while still
a probationary employee was not appealed by him, and hence such finding had
already become final.
In fine, petitioner asks this Court to rule on the following issues: (1) whether the
NLRC correctly resolved an issue not raised in petitioner’s appeal memorandum;
and (2) whether respondent’s probationary employment was validly terminated by
petitioner.
Our Ruling
The petition is partly meritorious.
Issues on Appeal before the NLRC
43

Section 4(d), Rule VI of the 2005 Revised Rules of Procedure of the NLRC, which was
in force at the time petitioner appealed the Labor Arbiter’s decision, expressly
provided that, on appeal, the NLRC shall limit itself only to the specific issues that
were elevated for review, to wit:
Section 4. Requisites for perfection of appeal. x x x.
xxxx
(d) Subject to the provisions of Article 218 of the Labor Code, once the appeal is
perfected in accordance with these Rules, the Commission shall limit itself to
reviewing and deciding only the specific issues that were elevated on appeal.
We have clarified that the clear import of the aforementioned procedural rule is
that the NLRC shall, in cases of perfected appeals, limit itself to reviewing those
issues which are raised on appeal. As a consequence thereof, any other issues
which were not included in the appeal shall become final and executory.18
In this case, petitioner sets forth the following issues in its appeal memorandum:
5.01
WHETHER THE MARVIN JULIAN L. SAMBAJON, JR. WAS ILLEGALLY DISMISSED FROM
THE UNIVERSIDAD DE STA. ISABEL.
5.02
WHETHER THE UNIVERSIDAD DE STA. ISABEL SHORTENED THE PROBATIONARY
PERIOD OF MARVIN JULIAN L. SAMBAJON.
5.03
WHETHER RESPONDENTS-APPELLANTS ARE ENTITLED TO DAMAGES.19
Specifically, petitioner sought the correct interpretation of the Manual of
Regulations for Private School Teachers and DOLE-DECS-CHED-TESDA Order No. 01,
series of 1996, insofar as the probationary period for teachers.
In reviewing the Labor Arbiter’s finding of illegal dismissal, the NLRC concluded that
respondent had already attained regular status after the expiration of his first
appointment contract as probationary employee. Such conclusion was but a logical
result of the NLRC’s own interpretation of the law. Since petitioner elevated the
questions of the validity of respondent’s dismissal and the applicable probationary
period under the aforesaid regulations, the NLRC did not gravely abuse its
discretion in fully resolving the said issues.
As the Court held in Roche (Phils.) v. NLRC20:
Petitioners then suggest that the respondent Commission abused its discretion in
awarding reliefs in excess of those stated in the decision of the labor arbiter despite
the absence of an appeal by Villareal. To stress this point, they cited Section 5(c) of
the Rules of Procedure of the National Labor Relations Commission which provides
that the Commission shall, in cases of perfected appeals, limits itself to reviewing
those issues which were raised on appeal. Consequently, those which were not
raised on appeal shall be final and executory.
There is no merit to this contention. The records show that the petitioners elevated
the issues regarding the correctness of the award of damages, reinstatement with
backpay, retirement benefits and the cost-saving bonus to the respondent
Commission in their appeal. This opened the said issues for review and any action
taken thereon by the Commission was well within the parameters of its jurisdiction.
(Emphasis supplied.)
Probationary Employment Period
A probationary employee is one who is on trial by the employer during which the
employer determines whether or not said employee is qualified for permanent
employment. A probationary appointment is made to afford the employer an
opportunity to observe the fitness of a probationary employee while at work, and
to ascertain whether he will become a proper and efficient employee. The word
probationary as used to describe the period of employment implies the purpose of
the term or period, but not its length.21
It is well settled that the employer has the right or is at liberty to choose who will be
hired and who will be denied employment. In that sense, it is within the exercise of
the right to select his employees that 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.22 The law, however, regulates the exercise of this
prerogative to fix the period of probationary employment. While there is no
statutory cap on the minimum term of probation, the law sets a maximum "trial
period" during which the employer may test the fitness and efficiency of the
employee.23
Article 281 of the Labor Code provides:
44
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.
The probationary employment of teachers in private schools is 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.24
On the matter of probationary period, Section 92 of the 1992 Manual of Regulations
for Private Schools regulations states:
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. (Emphasis supplied.)
Thus, it is the Manual of Regulations for Private Schools, and not the Labor Code,
that determines whether or not a faculty member in an educational institution has
attained regular or permanent status.25 Section 9326 of the 1992 Manual of
Regulations for Private Schools provides that full-time teachers who have
satisfactorily completed their probationary period shall be considered regular or
permanent.
In this case, the CA sustained the NLRC’s ruling that respondent was illegally
dismissed considering that he had become a regular employee when petitioner
allowed him to work beyond the date specified in his first probationary
appointment contract which expired on March 30, 2003. According to the CA:
… As can be gleaned from Section 92 of the 1992 Manual of Regulations for Private
Schools, the probationary period applicable in this case is not more than six (6)
consecutive regular semesters of satisfactory service. In other words, the
probationary period for academic personnel in the tertiary level runs from one (1)
semester to six (6) consecutive regular semesters of satisfactory service. In the
instant case, records reveal that Sambajon, Jr. only signed two appointment
contracts. The first appointment-contract which he signed was dated November
2002 for the period November 1, 2002 to March 30, 2003, as Assistant Professor 10
on probationary status. x x x The second appointment-contract which Sambajon, Jr.
executed was dated February 26, 2004, for the period November 1, 2003 to March
31, 2004. x x x Compared with the first appointment-contract, it was not indicated
in the February 26, 2004 appointment-contract that Sambajon, Jr. was hired on
probationary status, which explains the NLRC’s conclusion that Sambajon, Jr.
already attained permanent status. At this juncture, it is worthy to emphasize that
other than the period provided under Article 281 of the Labor Code, the following
quoted portion of Article 281 of the Labor Code still applies:
"ART. 281. PROBATIONARY EMPLOYMENT. –
x x x x An employee who is allowed to work after a probationary period shall be
considered a regular employee."
Thus, We sustain the NLRC’s conclusion that Sambajon, Jr. acquired permanent
status on the first day of the first semester of SY 2003-2004 when he was allowed to
continue with his teaching stint after the expiration of his first appointment-
contract on March 30, 2003.27
On record are five appointment contracts28 of respondent:
Date Contract Period
November 1, 2002 November 1, 2002-March 30, 2003
September 28, 2003 June 1, 2003-October 31, 2003
February 26, 2004 November 1, 2003-March 31, 2004
September 30, 2004 June 1, 2004-October 31, 2004
October 28, 2004 November 3, 2004-March 31, 2005
Only the first and third contracts were signed by the respondent. However, such
lack of signature in the second contract appears not to be the crucial element
considered by the CA but the fact that the third contract dated February 26, 2004,
unlike the previous contracts, does not indicate the nature of the appointment as
probationary employment. According to the CA, this implies, as concluded by the
NLRC, that respondent was already a regular employee.
We disagree.
The third appointment contract dated February 26, 2004 reads:
February 26, 2004
MR. MARVIN JULIAN SAMBAJON
Religious Education Department
45
Dear Mr. Sambajon,
I am pleased to inform you that you are designated and commissioned to be an
Apostle of Love and Service, Unity and Peace as you dedicate and commit yourself
in the exercise of your duties and responsibilities as a:
FULL TIME FACULTY MEMBER
of the Religious Education Department from November 1, 2003 to March 31, 2004.
Unless otherwise renewed in writing, this designation automatically terminates as
of the date expiration above states without further notice.
As a member of the academic/clinical community, you are expected to live by and
give your full support to the promotion and attainment of the Vision-Mission, goals
and objectives, the rules and regulations, the Core Values which the University
professes to believe and live by.
Congratulations and keep your work full in the spirit of the Lord for the Charity of
Christ urges us to live life to the fullest.
God bless
In Christ,
Sr. Ma. Asuncion G. Evidente, D.C.
USI President
Witness:
Sr. Stella O. Real, D.C.
HR Officer
I, ______________________ understand that unless renewed in writing, my
services as ________________ expires automatically on the specific date above
stated.
Furthermore, I fully accept this appointment to help build the Kingdom of God here
and now and to facilitate the living of the Core Values and the attainment of the
Vision-Mission and the goals and objectives of the University.
Received and Conforme:
(SGD.) MARVIN-JULIAN L. SAMBAJON, JR.29
Since it was explicitly provided in the above contract that unless renewed in writing
respondent’s appointment automatically expires at the end of the stipulated period
of employment, the CA erred in concluding that simply because the word
"probationary" no longer appears below the designation (Full-Time Faculty
Member), respondent had already become a permanent employee. Noteworthy is
respondent’s admission of being still under probationary period in his January 12,
2005 letter to Sr. Evidente reiterating his demand for salary differential, which letter
was sent almost one year after he signed the February 26, 2004 appointment
contract, to wit:
The problem is that your good office has never categorically resolved whether or
not probationary teachers can also be evaluated for salary adjustment.
Nevertheless, inferring from your statement that evaluation precedes re-ranking
and in fact is the basis for re-ranking, may I categorically ask: does it really mean
that since, it precedes re-ranking, evaluation should not take place among
probationary teachers for they can not yet be re-ranked? If so, then how pitiful are
we, probationary teachers for our credentials are never evaluated since we cannot
yet be re-ranked. Oh my goodness! Can your good office not give me a clearer and
more convincing argument shedding light on this matter?30
Respondent nonetheless claims that subsequently, the probationary period of three
years under the regulations was shortened by petitioner as relayed to him by Sr.
Evidente herself. However, the latter, together with Sr. Real, categorically denied
having informed respondent that his probationary period was abbreviated,
allegedly the reason his salary adjustment was not made retroactive. Apart from his
bare assertion, respondent has not adduced proof of any decision of the school
administration to shorten his probationary period.
In Rev. Fr. Labajo v. Alejandro,31 we held that:
The three (3)-year period of service mentioned in paragraph 75 [of the Manual of
Regulations for Private Schools] is of course the maximum period or upper limit, so
to speak, of probationary employment allowed in the case of private school
teachers. This necessarily implies that a regular or permanent employment status
may, under certain conditions, be attained in less than three (3) years. By and large,
however, whether or not one has indeed attained permanent status in one’s
employment, before the passage of three (3) years, is a matter of proof. (Emphasis
supplied.)
There can be no dispute that the period of probation may be reduced if the
employer, convinced of the fitness and efficiency of a probationary employee,
voluntarily extends a permanent appointment even before the three-year period
46
ends. Conversely, if the purpose sought by the employer is neither attained nor
attainable within the said period, the law does not preclude the employer from
terminating the probationary employment on justifiable ground; or, a shorter
probationary period may be incorporated in a collective bargaining agreement. But
absent any circumstances which unmistakably show that an abbreviated
probationary period has been agreed upon, the three-year probationary term
governs.32
As to the Certificate of Employment33 issued by Sr. Real on January 31, 2005, it
simply stated that respondent "was a full time faculty member in the Religious
Education Department of this same institution" and that he holds the rank of
Associate Professor. There was no description or qualification of respondent’s
employment as regular or permanent. Neither did the similar Certification34 also
issued by Sr. Real on March 18, 2005 prove respondent’s status as a permanent
faculty member of petitioner.
It bears stressing that full-time teaching primarily refers to the extent of services
rendered by the teacher to the employer school and not to the nature of his
appointment. Its significance lies in the rule that only full-time teaching personnel
can acquire regular or permanent status. The provisions of DOLE-DECS-CHED-TESDA
Order No. 01, series of 1996, "Guidelines on Status of Employment of Teachers and
of Academic Personnel in Private Educational Institutions" are herein reproduced:
2. Subject in all instances to compliance with the concerned agency and school
requirements, the probationary period for teaching or academic personnel shall not
be more than three (3) consecutive school 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 and graduate levels, and nine (9)
consecutive trimesters of satisfactory service for those in the tertiary level where
collegiate courses are offered on a trimester basis.
Unless otherwise provided by contract, school academic personnel who are under
probationary employment cannot be dismissed during the applicable probationary
period, unless dismissal is compelled by a just cause or causes.
3. Teachers or academic personnel who have served the probationary period as
provided for in the immediately preceding paragraph shall be made regular or
permanent if allowed to work after such probationary period. The educational
institution, however, may shorten the probationary period after taking into account
the qualifications and performance of the probationary teachers and academic
personnel.
Full-time teaching or academic personnel are those meeting all the following
requirements:
3.1. Who possess at least the minimum academic qualifications prescribed by the
Department of Education, Culture and Sports for Basic Education, the Commission
on Higher Education for Tertiary Education, and the Technical Education and Skills
Development Authority for Technical and Vocational Education under their
respective Manual of Regulations governing said personnel;
3.2 Who are paid monthly or hourly, based on the normal or regular teaching loads
as provided for in the policies, rules and standards of the agency concerned;
3.3 Whose regular working day of not more than eight (8) hours a day is devoted to
the school;
3.4 Who have no other remunerative occupation elsewhere requiring regular hours
of work that will conflict with the working hours in the school; and
3.5 Who are not teaching full-time in any other educational institution.
All teaching or academic personnel who do not meet the foregoing qualifications
are considered part time.
4. Part-time teaching or academic personnel cannot acquire regular or permanent
employment status.
5. Teaching or academic personnel who do not meet the minimum academic
qualifications shall not acquire tenure or regular status. The school may terminate
their services when a qualified teacher becomes available.35
In this case, petitioner applied the maximum three-year probationary period –
equivalent to six consecutive semesters – provided in the Manual of Regulations.
This can be gleaned from the letter dated March 24, 2004 of Sr. Grace Namocancat,
D.C. addressed to respondent, informing the latter of the result of evaluation of his
performance for SY 2003-2004 and stating that November 2004 marks his second
year of full-time teaching, which means he had one more year to become a
permanent employee.36
The circumstance that respondent’s services were hired on semester basis did not
negate the applicable probationary period, which is three school years or six
consecutive semesters. In Magis Young Achievers’ Learning Center37 the Court
explained the three years probationary period rule in this wise:
47
The common practice is for the employer and the teacher to enter into a contract,
effective for one school year. At the end of the school year, the employer has the
option not to renew the contract, particularly considering the teacher’s
performance. If the contract is not renewed, the employment relationship
terminates. If the contract is renewed, usually for another school year, the
probationary employment continues. Again, at the end of that period, the parties
may opt to renew or not to renew the contract. If renewed, this second renewal of
the contract for another school year would then be the last year – since it would be
the third school year – of probationary employment. At the end of this third year,
the employer may now decide whether to extend a permanent appointment to the
employee, primarily on the basis of the employee having met the reasonable
standards of competence and efficiency set by the employer. For the entire
duration of this three-year period, the teacher remains under probation. Upon the
expiration of his contract of employment, being simply on probation, he cannot
automatically claim security of tenure and compel the employer to renew his
employment contract. It is when the yearly contract is renewed for the third time
that Section 93 of the Manual becomes operative, and the teacher then is entitled
to regular or permanent employment status.38 (Emphasis supplied.)
Petitioner argues that respondent’s probationary period expires after each
semester he was contracted to teach and hence it was not obligated to renew his
services at the end of the fifth semester (March 2005) of his probationary
employment. It asserts that the practice of issuing appointment contracts for every
semester was legal and therefore respondent was not terminated when petitioner
did not renew his contract for another semester as his probationary contract
merely expired. Plainly, petitioner considered the subject appointment contracts as
fixed-term contracts such that it can validly dismiss respondent at the end of each
semester for the reason that his contract had expired.
The Court finds no merit in petitioner’s interpretation of the Manual of Regulations,
supplemented by DOLE-DECS-CHED-TESDA Order No. 01, series of 1996. As we
made clear in the afore-cited case of Magis Young Achievers’ Learning Center, the
teacher remains under probation for the entire duration of the three-year period.
Subsequently, in the case of Mercado v. AMA Computer College-Parañaque City,
Inc.39 the Court, speaking through Justice Arturo D. Brion, recognized the right of
respondent school to determine for itself that it shall use fixed-term employment
contracts as its medium for hiring its teachers. Nevertheless, the Court held that the
teachers’ probationary status should not be disregarded simply because their
contracts were fixed-term. Thus:
The Conflict: Probationary Status
and Fixed-term Employment
The existence of the term-to-term contracts covering the petitioners’ employment
is not disputed, nor is it disputed that they were on probationary status – not
permanent or regular status – from the time they were employed on May 25, 1998
and until the expiration of their Teaching Contracts on September 7, 2000. As the
CA correctly found, their teaching stints only covered a period of at least seven (7)
consecutive trimesters or two (2) years and three (3) months of service. This case,
however, brings to the fore the essential question of which, between the two
factors affecting employment, should prevail given AMACC’s position that the
teachers contracts expired and it had the right not to renew them. In other words,
should the teachers’ probationary status be disregarded simply because the
contracts were fixed-term?
The provision on employment on probationary status under the Labor Code is a
primary example of the fine balancing of interests between labor and management
that the Code has institutionalized pursuant to the underlying intent of the
Constitution.
On the one hand, employment on probationary status affords management the
chance to fully scrutinize the true worth of hired personnel before the full force of
the security of tenure guarantee of the Constitution comes into play. Based on the
standards set at the start of the probationary period, management is given the
widest opportunity during the probationary period to reject hirees who fail to meet
its own adopted but reasonable standards. These standards, together with the just
and authorized causes for termination of employment the Labor Code expressly
provides, are the grounds available to terminate the employment of a teacher on
probationary status. For example, the school may impose reasonably stricter
attendance or report compliance records on teachers on probation, and reject a
probationary teacher for failing in this regard, although the same attendance or
compliance record may not be required for a teacher already on permanent status.
At the same time, the same just and authorize[d] causes for dismissal under the
Labor Code apply to probationary teachers, so that they may be the first to be laid-
off if the school does not have enough students for a given semester or trimester.
Termination of employment on this basis is an authorized cause under the Labor
Code.
Labor, for its part, is given the protection during the probationary period of knowing
the company standards the new hires have to meet during the probationary period,
and to be judged on the basis of these standards, aside from the usual standards
applicable to employees after they achieve permanent status. Under the terms of
the Labor Code, these standards should be made known to the teachers on
probationary status at the start of their probationary period, or at the very least
under the circumstances of the present case, at the start of the semester or the
trimester during which the probationary standards are to be applied. Of critical
48
importance in invoking a failure to meet the probationary standards, is that the
school should show – as a matter of due process – how these standards have been
applied. This is effectively the second notice in a dismissal situation that the law
requires as a due process guarantee supporting the security of tenure provision,
and is in furtherance, too, of the basic rule in employee dismissal that the employer
carries the burden of justifying a dismissal. These rules ensure compliance with the
limited security of tenure guarantee the law extends to probationary employees.
When fixed-term employment is brought into play under the above probationary
period rules, the situation – as in the present case – may at first blush look muddled
as fixed-term employment is in itself a valid employment mode under Philippine
law and jurisprudence. The conflict, however, is more apparent than real when the
respective nature of fixed-term employment and of employment on probationary
status are closely examined.
The fixed-term character of employment essentially refers to the period agreed
upon between the employer and the employee; employment exists only for the
duration of the term and ends on its own when the term expires. In a sense,
employment on probationary status also refers to a period because of the technical
meaning "probation" carries in Philippine labor law – a maximum period of six
months, or in the academe, a period of three years for those engaged in teaching
jobs. Their similarity ends there, however, because of the overriding meaning that
being "on probation" connotes, i.e., a process of testing and observing the
character or abilities of a person who is new to a role or job.
Understood in the above sense, the essentially protective character of probationary
status for management can readily be appreciated. But this same protective
character gives rise to the countervailing but equally protective rule that the
probationary period can only last for a specific maximum period and under
reasonable, well-laid and properly communicated standards. Otherwise stated,
within the period of the probation, any employer move based on the probationary
standards and affecting the continuity of the employment must strictly conform to
the probationary rules.
Under the given facts where the school year is divided into trimesters, the school
apparently utilizes its fixed-term contracts as a convenient arrangement dictated by
the trimestral system and not because the workplace parties really intended to limit
the period of their relationship to any fixed term and to finish this relationship at
the end of that term. If we pierce the veil, so to speak, of the parties’ so-called
fixed-term employment contracts, what undeniably comes out at the core is a fixed-
term contract conveniently used by the school to define and regulate its relations
with its teachers during their probationary period.
To be sure, nothing is illegitimate in defining the school-teacher relationship in this
manner. The school, however, cannot forget that its system of fixed-term contract
is a system that operates during the probationary period and for this reason is
subject to the terms of Article 281 of the Labor Code. Unless this reconciliation is
made, the requirements of this Article on probationary status would be fully
negated as the school may freely choose not to renew contracts simply because
their terms have expired. The inevitable effect of course is to wreck the scheme
that the Constitution and the Labor Code established to balance relationships
between labor and management.
Given the clear constitutional and statutory intents, we cannot but conclude that in
a situation where the probationary status overlaps with a fixed-term contract not
specifically used for the fixed term it offers, Article 281 should assume primacy and
the fixed-period character of the contract must give way. This conclusion is
immeasurably strengthened by the petitioners’ and the AMACC’s hardly concealed
expectation that the employment on probation could lead to permanent status, and
that the contracts are renewable unless the petitioners fail to pass the school’s
standards.40 (Additional emphasis supplied.)
Illegal Dismissal
Notwithstanding the limited engagement of probationary employees, they are
entitled to constitutional protection of security of tenure during and before the end
of the probationary period.41 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.42
Thus, while no vested right to a permanent appointment had as yet accrued in favor
of respondent since he had not completed the prerequisite three-year period (six
consecutive semesters) necessary for the acquisition of permanent status as
required by the Manual of Regulations for Private Schools43 -- which has the force
of law44 -- he enjoys a limited tenure. During the said probationary period, he
cannot be terminated except for just or authorized causes, or if he fails to qualify in
accordance with reasonable standards prescribed by petitioner for the acquisition
of permanent status of its teaching personnel.
In a letter dated February 26, 2005, petitioner terminated the services of
respondent stating that his probationary employment as teacher will no longer be
renewed upon its expiry on March 31, 2005, respondent’s fifth semester of
teaching. No just or authorized cause was given by petitioner. Prior to this,
respondent had consistently achieved above average rating based on evaluation by
petitioner’s officials and students. He had also been promoted to the rank of
49
Associate Professor after finishing his master’s degree course on his third semester
of teaching. Clearly, respondent’s termination after five semesters of satisfactory SO ORDERED.
service was illegal.

Respondent therefore is entitled to continue his three-year probationary period,

such that from March 31, 2005, his probationary employment is deemed renewed
for the following semester (1st semester of SY 2005-2006). However, given the
discordant relations that had arisen from the parties’ dispute, it can be inferred
with certainty that petitioner had opted not to retain respondent in its employ
beyond the three-year period.

On the appropriate relief and damages, we adhere to our disposition in Magis

Young Achievers’ Learning Center45:

Finally, we rule on the propriety of the monetary awards.1âwphi1 Petitioner, as

employer, is entitled to decide whether to extend respondent a permanent status
by renewing her contract beyond the three-year period. Given the acrimony
between the parties which must have been generated by this controversy, it can be
said unequivocally that petitioner had opted not to extend respondent's
employment beyond this period. Therefore, the award of backwages as a
consequence of the finding of illegal dismissal in favor of respondent should be
confined to the three-year probationary period. Computing her monthly salary of
F15,000.00 for the next two school years (F15,000.00 x 10 months x 2), respondent
already having received her full salaries for the year 2002-2003, she is entitled to a
total amount of F300,000.00. Moreover, respondent is also entitled to receive her
13th month pay correspondent to the said two school years, computed as yearly
salary, divided by 12 months in a year, multiplied by 2, corresponding to the school
years 2003-2004 and 2004-2005, or F150,000.00 I 12 months x 2 = F25,000.00.
Thus, the NLRC was correct in awarding respondent the amount of F325,000.00 as
backwages, inclusive of 13th month pay for the school years 2003-2004 and 2004-
2005, and the amount of ₱3,750.00 as pro-rated 13th month pay.

WHEREFORE, the petition for review on certiorari is PARTLY GRANTED. The Decision
dated March 25, 2011 of the Court of Appeals in CA-G.R. SP Nos. 108103 & 108168
is hereby MODIFIED. Petitioner Universidad de Sta. Isabel is hereby DIRECTED to
PAY respondent Marvin-Julian L. Sambajon, Jr. back wages corresponding to his full
monthly salaries for one semester (1st semester of SY 2005-2006) and pro-rated
13th month pay.

The case is REMANDED to the Labor Arbiter for a recomputation of the amounts
due to respondent in conformity with this Decision.

No pronouncement as to costs.

50
G.R. Nos. 173254-55 & 173263, January 13, 2016
DIAMOND FARMS, INC., Petitioner, v. SOUTHERN PHILIPPINES FEDERATION OF
LABOR (SPFL)-WORKERS SOLIDARITY OF DARBMUPCO/DIAMOND-SPFL, DIAMOND
FARMS AGRARIAN REFORM BENEFICIARIES MULTI-PURPOSE COOPERATIVE
(DARBMUPCO), VOLTER LOPEZ, RUEL ROMERO, PATRICK) CAPRECHO, REY
DIMACALI, ELESIO EMANEL, VICTOR SINGSON, NILDA DIMACALI, PREMITIVO* DIAZ,
RUDY VISTAL, ROGER MONTERO, JOSISIMO GOMEZ AND MANUEL MOSQUERA,
Respondents.
DECISION
JARDELEZA, J.:
We resolve in this Petition for Review1 under Rule 45 of the Rules of Court, the
issue of who among Diamond Farms, Inc. ("DFI"), Diamond Farms Agrarian Reform
Beneficiaries Multi-Purpose Cooperative ("DARBMUPCO") and the individual
contractors2 ("respondent-contractors") is the employer of the 400 employees
("respondent-workers").
DFI challenges the March 31, 2006 Decision3 and May 30, 2006 Resolution4 of the
Court Appeals, Special Twenty-Second Division, Cagayan De Oro City for being
contrary to law and jurisprudence. The Decision dismissed DFI's Petition for
Certiorari in C.A.-G.R. SP Nos. 53806 and 61607 and granted DARBMUPCO's Petition
for Certiorari in C.A.-G.R. SP No. 59958. It declared DFI as the statutory employer of
the respondent-workers.
The Facts
DFI owns an 800-hectare banana plantation ("original plantation") in Alejal, Carmen,
Davao.5 Pursuant to Republic Act No. 6657 or the Comprehensive Agrarian Reform
Law of 1988 ("CARL"), commercial farms shall be subject to compulsory acquisition
and distribution,6 thus the original plantation was covered by the law. However, the
Department of Agrarian Reform ("DAR") granted DFI a deferment privilege to
continue agricultural operations until 1998.7 Due to adverse marketing problems
and observance of the so-called "lay-follow" or the resting of a parcel of land for a
certain period of time after exhaustive utilization, DFI closed some areas of
operation in the original plantation and laid off its employees.8 These employees
petitioned the DAR for the cancellation of DFI's deferment privilege alleging that DFI
already abandoned its area of operations.9 The DAR Regional Director recalled DFI's
deferment privilege resulting in the original plantation's automatic compulsory
acquisition and distribution under the CARL.10 DFI filed a motion for
reconsideration which was denied. It then appealed to the DAR Secretary.11
In the meantime, to minimize losses, DPI offered to give up its rights and interest
over the original plantation in favor of the government by way of a Voluntary Offer
to Sell.12 The DAR accepted DFI's offer to sell the original plantation. However, out
of the total 800 hectares, the DAR only approved the disposition of 689.88 hectares.
Hence, the original plantation was split into two: 689.88 hectares were sold to the
government ("awarded plantation") and the remaining 200 hectares, more or less,
were retained by DPI ("managed area").13 The managed area is subject to the
outcome of the appeal on the cancellation of the deferment privilege before the
DAR Secretary.
On January 1, 1996, the awarded plantation was turned over to qualified agrarian
reform beneficiaries ("ARBs") under the CARL. These ARBs are the same farmers
who were working in the original plantation. They subsequently organized
themselves into a multi-purpose cooperative named "DARBMUPCO," which is one
of the respondents in this case.14
On March 27, 1996, DARBMUPCO entered into a Banana Production and Purchase
Agreement ("BPPA")15 with DFI.16 Under the BPPA, DARBMUPCO and its members
as owners of the awarded plantation, agreed to grow and cultivate only high grade
quality exportable bananas to be sold exclusively to DPI.17 The BPPA is effective for
10 years.18
On April 20, 1996, DARBMUPCO and DFI executed a "Supplemental to
Memorandum Agreement" ("SMA").19 The SMA stated that DFI shall take care of
the labor cost arising from the packaging operation, cable maintenance, irrigation
pump and irrigation maintenance that the workers of DARBMUPCO shall conduct
for DFI's account under the BPPA.20
From the start, DARBMUPCO was hampered by lack of manpower to undertake the
agricultural operation under the BPPA because some of its members were not
willing to work.21 Hence, to assist DARBMUPCO in meeting its production
obligations under the BPPA, DFI engaged the services of the respondent-
contractors, who in turn recruited the respondent-workers.22
The engagement of the respondent-workers, as will be seen below, started a series
of labor disputes among DARBMUPCO, DFI and the respondent-contractors.
CA. G.R. SP No. 53806
51
On February 10, 1997, respondent Southern Philippines Federation of Labor
("SPFL")—a legitimate labor organization with a local chapter in the awarded
plantation—filed a petition for certification election in the Office of the Med-Arbiter
in Davao City.23 SPFL filed the petition on behalf of some 400 workers (the
respondent-workers in this petition) "jointly employed by DFI and DARBMUPCO"
working in the awarded plantation.
DARBMUPCO and DFI dented that they are the employers of the respondent-
workers. They claimed, instead, that the respondent-workers are the employees of
the respondent-contractors.24
In an Order dated May 14, 1997,25 the Med-Arbiter granted the petition for
certification election. It directed the conduct of certification election and declared
that DARBMUPCO was the employer of the respondent-workers. The Order stated
that "whether the said workers/employees were hired by independent contractors
is of no moment. What is material is that they were hired purposely to work on the
689.88 hectares banana plantation [the awarded plantation] now owned and
operated by DARBMUPCO."26
DARBMUPCO appealed to the Secretary of Labor and Employment ("SOLE"). In a
Resolution dated February 18, 1999,27 the SOLE modified the decision of the Med-
Arbiter. The SOLE held that DFI, through its manager and personnel, supervised and
directed the performance of the work of the respondent-contractors. The SOLE thus
declared DFI as the employer of the respondent-workers.28
DFI filed a motion for reconsideration which the SOLE denied in a Resolution dated
May 4, 1999.29
On June 11, 1999, DFI elevated the case to the Court of Appeals ("CA") via a Petition
for Certiorari30 under Rule 65 of the Rules of Court. The case was raffled to the CA's
former Twelfth Division and was docketed as C.A.-G.R. SP No. 53806.
CA.-G.R. SP No. 59958
Meanwhile, on June 20, 199731 and September 15, 1997,32 SPFL, together with
more than 300 workers, filed a case for underpayment of wages, nonpayment of
13th month pay and service incentive leave pay and attorney's fees against DFI,
DARBMUPCO and the respondent-contractors before the National Labor Relations
Commission ("NLRC") in Davao City. DARBMUPCO averred that it is not the
employer of respondent-workers; neither is DFI. It asserted that the money claims
should be directed against the true employer—the respondent-contractors.33
In a Decision dated January 22, 1999,34 the Labor Arbiter ("LA") held that die
respondent-contractors are "labor-only contractors." The LA gave credence to the
affidavits of the other contractors35 of DFI (who are not party-respondents in this
petition) asserting that DFI engaged their services, and supervised and paid their
laborers. The affidavits also stated that the contractors had no dealings with
DARBMUPCO, except that their work is done in the awarded plantation.36
The LA held that, under the law, DFI is deemed as the statutory employer of all the
respondent-workers.37 The LA dismissed the case against DARBMUPCO and the
respondent-contractors.38
DFI appealed to the NLRC. In a Resolution dated May 24, 1999,39 the NLRC Fifth
Division modified the Decision of the LA and declared that DARBMUPCO and DFI are
the statutory employers of the workers rendering services in the awarded
plantation and the managed area, respectively.40 It adjudged DFI and DARBMUPCO
as solidarity liable with the respondent-contractors for the monetary claims of the
workers, in proportion to their net planted area.41
DARBMUPCO filed a motion for reconsideration which was denied.42 It filed a
second motion for reconsideration in the NLRC, which was also denied for lack of
merit and for being barred under the NLRC Rules of Procedure.43 Hence,
DARBMUPCO elevated the case to the CA by way of a Petition for Certiorari.44 The
case was docketed as CA.-G.R. SP. No. 59958.
The former Eleventh Division of the CA consolidated C.A. G.R. SP. No. 59958 and
C.A.-G.R. SP No. 53806 in a Resolution dated January 27, 2001.45
C.A.-G.R. SPNo. 61607
Pursuant to the May 4, 1999 Resolution of the SOLE approving the conduct of
certification election, the Department of Labor and Employment ("DOLE")
conducted a certification election on October 1, 1999.46 On even date, DFI filed an
election protest47 before the Med-Arbiter arguing that the certification election
was premature due to the pendency of a petition for certiorari before the CA
assailing the February 18, 1999 and May 4, 1999 Resolutions of the SOLE (previously
discussed in C.A.-G.R. SP No. 53806).
In an Order dated December 15, 1999,48 the Med-Arbiter denied DFI's election
protest, and certified SPFL- Workers Solidarity of DARBMUPCO/DIAMOND-SPFL
("WSD-SPFL") as the exclusive bargaining representative of the respondent-
workers. DPI filed a Motion for Reconsideration49 which the Med-Arbiter treated as
an appeal, and which the latter elevated to the SOLE.
52
In a Resolution dated July 18, 2000,50 the SOLE dismissed the appeal. The
Resolution stated that the May 4, 1999 Resolution directing the conduct of
certification election is already final and executory on June 4, 1999. It pointed out
that the filing of the petition for certiorari before the CA assailing the February 18,
1999 and May 4, 1999 Resolutions does not stay the conduct of the certification
election because the CA did not issue a restraining order.51 DFI filed a Motion for
Reconsideration but the motion was denied.52
On October 27, 2000, DFI filed a Petition for Certiorari53 before the CA, docketed as
C.A.-G.R. SP No. 61607.
In a Resolution dated August 2, 2005,54 the CA Twenty-Third Division consolidated
C.A.-G.R. SP No. 61607 with C.A.-G.R. SP. No. 59958 and C.A. G.R. SP No. 53806.
The Assailed CA Decision and Resolution
The CA was confronted with two issues:55
(1)
"Whether DFI or DARBMUPCO is the statutory employer of the [respondent-
workers] in these petitions; and
(2)
Whether or not a certification election may be conducted pending the resolution of
the petition for certiorari filed before this Court, the main issue of which is the
identity of the employer of the [respondent-workers] in these petitions."
On the first issue, the CA agreed with the ruling of the SOLE56 that DFI is the
statutory employer of the respondent-workers. It noted that the DFI hired the
respondent-contractors, who in turn procured their own men to work in the land
owned by DARBMUPCO. Further, DFI admitted that the respondent-contractors
worked under the direction and supervision of DFI's managers and personnel. DFI
also paid for the respondent-contractors' services.57 The CA said that the fact that
the respondent-workers worked in the land owned by DARBMUPCO is immaterial.
"Ownership of the land is not one of the four (4) elements generally considered to
establish employer-employee relationship."58
The CA also ruled that DFI is the true employer of the respondent-workers because
the respondent-contractors are not independent contractors.59 The CA stressed
that in its pleadings before the Med-Arbiter, the SOLE, and the CA, DFI revealed that
DARBMUPCO lacks manpower to fulfill the production requirements under the
BPPA. This impelled DFI to hire contractors to supply labor enabling DARBMUPCO to
meet its quota. The CA observed that while the various agencies involved in the
consolidated petitions sometimes differ as to who the statutory employer of the
respondent-workers is, they are uniform in finding that the respondent-contractors
are labor-only contractors.60
On the second issue, the CA reiterated the ruling of the SOLE61 that absent an
injunction from the CA, the pendency of a petition for certiorari does not stay the
holding of the certification election.62 The challenged Resolution of the SOLE is
already final and executory as evidenced by an Entry of Judgment dated July 14,
1999; hence, the merits of the case can no longer be reviewed.63
The CA thus held in its Decision dated March 31, 2006:
WHEREFORE, premises considered, this Court hereby ORDERS:
(1)
the DISMISSAL of the petitions in C.A.-G.R. SP No. 53806 and C.A.-G.R. SP No.
61607; and
(2)
the GRANTING of the petition in C.A.-G.R. SP No. 59958 and the SETTING ASIDE of
the assailed resolutions of the NLRC dated 24 May 1999, 30 July 1999 and 26 June
2000, respectively.
SO ORDERED.64ChanRoblesVirtualawlibrary
DFI filed a Motion for Reconsideration of the CA Decision which was denied in a
Resolution dated May 30, 2006.65
DFI is now before us by way of Petition for Review on Certiorari praying that
DARBMUPCO be declared the true employer of the respondent-workers.
DARBMUPCO filed a Comment66 maintaining that under the control test, DFI is the
true employer of the respondent-workers.
Respondent-contractors filed a Verified Explanation and Memorandum67 asserting
that they were labor-only contractors; hence, they are merely agents of the true
employer of the respondent-workers.
SPFL did not file any comment or memorandum on behalf of the respondent-
workers.68
The Issue
The issue before this Court is who among DFI, DARBMUPCO and the respondent-
contractors is the employer of the respondent-workers.
Our Ruling
We deny the petition.
53
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.69 It involves a trilateral
relationship among the principal or employer, the contractor or subcontractor, and
the workers engaged by the contractor or subcontractor.70
Article 106 of the Labor Code of the Philippines71 (Labor Code) explains the
relations which may arise between an employer, a contractor, and the contractor's
employees,72 thus:
ART. 106. Contractor or subcontracting. - Whenever an employer enters into a
contract with another person for the performance of the formers work, the
employees of the contractor and of the latter's subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and severally
liable with his contractor or subcontractor to such employees to the extent of the
work performed under the contract, in the same manner and extent that he is liable
to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or
prohibit the contracting out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the
parties involved shall be considered the employer for purposes of this Code, to
prevent any violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to the
principal business of such employer. In such cases, the person or intermediary shall
be considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by
him.
The Omnibus Rules Implementing the Labor Code73 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:
(1)
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
(2)
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.74
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.75
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.76
Based on the conditions for permissible job contracting, we rule that respondent-
contractors are labor-only contractors.
There is no evidence showing that respondent-contractors are independent
contractors. The respondent-contractors, DFI, and DARBMUPCO did not offer any
proof that respondent-contractors were not engaged in labor-only contracting. In
this regard, we cite our ruling in Caro v. Rilloraza,77 thus:
"In regard to the first assignment of error, the defendant company pretends to
show through Venancio Nasol's own testimony that he was an independent
contractor who undertook to construct a railway line between Maropadlusan and
Mantalisay, but as far as the record shows, Nasol did not testify that the defendant
company had no control over him as to the manner or methods he employed in
pursuing his work. On the contrary, he stated that he was not bonded, and that he
only depended upon the Manila Railroad for money to be paid to his laborers. As
stated by counsel for the plaintiffs, the word 'independent contractor' means 'one
who exercises independent employment and contracts to do a piece of work
according to his own methods and without being subject to control of his employer
except as to result of the work.' furthermore, if the employer claims that the
54
workmen is an independent contractor, for whose acts he is not responsible, the
burden is on him to show his independence.
Tested by these definitions and by the fact that the defendant has presented
piactically no evidence to determine whether Venancio Nasol was in reality an
independent contractor or not, we are inclined to think that he is nothing but an
intermediary between the defendant and certain laborers. It is indeed difficult to
find that Nasol is an independent contractor; a person who possesses no capital or
money of his own to pay his obligations to them, who files no bond to answer for
any fulfillment of his contract with his employer and specially subject to the control
and supervision of his employer, falls short of the requisites or conditions necessary
for the common and independent contractor."78 (Citations omitted; Emphasis
supplied.)
To support its argument that respondent-contractors are the employers of
respondent-workers, and not merely labor-only contractors, DFI should have
presented proof showing that respondent-contractors carry on an independent
business and have sufficient capitalization. The record, however, is bereft of
showing of even an attempt on the part of DFI to substantiate its argument.
DFI cannot cite the May 24, 1999 Resolution of the NLRC as basis that respondent-
contractors are independent contractors. Nowhere in the NLRC Resolution does it
say that the respondent-contractors are independent contractors. On the contrary,
the NLRC declared that "it was not clearly established on record that said
[respondent-]contractors are independent, xxx."79
Further, respondent-contractors admit, and even insist that they are engaged in
labor-only contracting. As will be seen below, respondent-contractors made the
admissions and declarations on two occasions: first was in their Formal Appearance
of Counsel and Motion for Exclusion of Individual Party-Respondents filed before
the LA; and second was in their Verified Explanation and Memorandum filed before
this Court.
Before the LA, respondent-contractors categorically stated that they are "labor-
only" contractors who have been engaged by DFI and DARBMUPCO.80 They
admitted that they do not have substantial capital or investment in the form of
tools, equipment, machineries, work premises and other materials, and they
recruited workers to perform activities directly related to the principal operations of
their employer.81
Before this Court, respondents-contractors again admitted that they are labor-only
contractors. They narrated that:
Herein respondents, Voltaire Lopez, Jr., et al., were commissioned and contracted
by petitioner, Diamond Farms, Inc. (DFI) to recruit farm workers, who are the
complaining [respondent-workers] (as represented by Southern Philippines
Federation of Labor (SPFL) in this appeal by certiorari), in order to perform specific
farm activities, such as pruning, dcleafing, fertilizer application, bud inject, stem
spray, drainage, bagging, etc., on banana plantation lands awarded to private
respondent, Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose
Cooperative (DARBMUPCO) and on banana planted lands owned and managed by
petitioner, DFI.
All farm tools, implements and equipment necessary to performance of such farm
activities were supplied by petitioner DFI to respondents Voltaire Lopez, Jr., et. al.
as well as to respondents-SPFL, et. al. Herein respondents Voltaire Lopez, Jr. et. al.
had no adequate capital to acquire or purchase such tools, implements, equipment,
etc.
Herein respondents Voltaire Lopez, Jr., et. al. as well as rcspondents-SPFL, et. al.
were being directly supervised, controlled and managed by petitioner DFI farm
managers and supervisors, specifically on work assignments and performance
targets. DFI managers and supervisors, at their sole discretion and prerogative,
could directly hire and terminate any or all of the respondents-SPFL, et. al.,
including any or all of the herein respondents Voltaire Lopez, Jr., et. al.
Attendance/Time sheets of respondents-SPFL, et. al. were being prepared by herein
respondents Voltaire Lopez, Jr., et. al., and correspondingly submitted to petitioner
DFI. Payment of wages to respondents-SPFL, et. al. were being paid for by petitioner
DFI thru herein respondents Voltaire Lopez, [Jr.], et. al. The latter were also
receiving their wages/salaries from petitioner DFI for monitoring/leading/recruiting
the respondents- SPFL, et. al.
No monies were being paid directly by private respondent DARBMUPCO to
respondents-SPFL, et al., nor to herein respondents Voltaire Lopez, [Jr.], et. al. Nor
did respondent DARBMUPCO directly intervene much less supervise any or all of
[the] respondents- SPFL, et. al. including herein respondents Voltaire Lopez, Jr.. et.
al.82 (Emphasis supplied.)
The foregoing admissions are legally binding on respondent-contractors.83 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.84 Here, the respondent-contractors voluntarily pleaded
that they are labor-only contractors; hence, these admissions bind them.
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
55
the agent of the principal.85 Thus, in this case, respondent-contractors are the
labor-only contractors and either DFI or DARBMUPCO is their principal.
We hold that DFI is the principal.
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.86 In this regard, we quote with
approval the findings of the CA, to wit:
The records show that it is DFI which hired the individual [respondent-contractors]
who in turn hired their own men to work in the 689.88 hectares land of
DARBMUPCO as well as in the managed area of the plantation. DFI admits [that]
these [respondent-contractors] worked under the direction and supervision of the
DFI. managers and personnel. DFI paid the [respondent-contractors] for the services
rendered in the plantation and the [respondent-contractors] in turn pay their
workers after they [respondent-contractors] received payment from DFI xxx
DARBMUPCO did not have anything to do with the hiring, supervision and payment
of the wages of the workers-respondents thru the contractors-respondents. xxx87
(Emphasis supplied.)
DFI does not deny that it engaged the services of the respondent-contractors. It
does not dispute the claims of respondent-contractors that they sent their billing to
DFI for payment; and that DFI's managers and personnel are in close consultation
with the respondent-contractors.88
DFI cannot argue that DARBMUPCO is the principal of the respondent-contractors
because it (DARBMUPCO) owns the awarded plantation where respondent-
contractors and respondent-workers were working;89 and therefore DARBMUPCO
is the ultimate beneficiary of the employment of the respondent-workers.90
That DARBMUPCO owns the awarded plantation where the respondent-contractors
and respondent-workers were working is immaterial. This does not change the
situation of the parties. As correctly found by the CA, DFI, as the principal, hired the
respondent-contractors and the latter, in turn, engaged the services of the
respondent-workers.91 This was also the unanimous finding of the SOLE,92 the
LA,93 and the NLRC.94 Factual findings of the NLRC, when they coincide with the LA
and affirmed by the CA are accorded with great weight and respect and even finality
by this Court.95
Alilin v. Petron Corporation96 is applicable. In that case, this Court ruled that the
presence of the power of control on the part of the principal over the workers of
the contractor, under the facts, prove the employer-employee relationship
between the former and the latter, thus:
[A] finding that a contractor is a 'labor-only' contractor is equivalent to declaring
that there is an employer-employee relationship between the principal and the
employees of the supposed contractor." In this case, the employer-employee
relationship between Pctron and petitioners becomes all the more apparent due to
the presence of the power of control on the part of the former over the latter.
It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals that:
This Court has constantly adhered to the "fourfold test" to determine whether
there exists an employer-employee relationship between the parties. The four
elements of an employment relationship are: (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
power to control the employee's conduct.
Of these four elements, it is the power to control which is the most crucial and most
determinative factor, so important, in fact, that, the other elements may even be
disregarded.
Hence, the facts that petitioners were hired by Romeo or his father and that their
salaries were paid by them do not detract from the conclusion that there exists an
employer-employee relationship between the parties due to Pctron's power of
control over the petitioners. One manifestation of the power of control is the power
to transfer employees from one work assignment to another. Here, Petron could
order petitioners to do work outside of their regular "maintenance/utility" job. Also,
petitioners were required to report for work everyday at the bulk plant, observe an
8:00 a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and safety
helmets as prescribed by the safety and security measures being implemented
within the bulk plant. All these imply control. In an industry where safety is of
paramount concern, control and supervision over sensitive operations, such as
those performed by the petitioners, are inevitable if not at all necessary. Indeed,
Petron deals with commodities that are highly volatile and flammable which, if
mishandled or not properly attended to, may cause serious injuries and damage to
property and the environment. Naturally, supervision by Petron is essential in every
aspect of its product handling in order not to compromise the integrity, quality and
safety of the products that it distributes to the consuming public.97 (Citations
omitted; Emphasis supplied)
That DFI is the employer of the respondent-workers is bolstered by the CA's finding
that DFI exercises control over the respondent-workers.98 DFI, through its manager
and supervisors provides for the work assignments and performance targets of the
respondent-workers. The managers and supervisors also have the power to directly
hire and terminate the respondent-workers.99 Evidently, DFI wields control over
the respondent-workers.
Neither can DFI argue that it is only the purchaser of the bananas produced in the
awarded plantation under the BPPA,100 and that under the terms of the BPPA, no
56
employer-employee relationship exists between DFI and the respondent-
workers,101 to wit:
UNDERTAKING OF THE FIRST PARTY

xxx

3. THE FIRST PARTY [DARBMUPCO] shall be responsible for the proper conduct,
safety, benefits and general welfare of its members working in the plantation and
specifically render free and harmless the SECOND PARTY [DPI] of any expense,
liability or claims arising therefrom. It is clearly recognized, by the FIRST PARTY that
its members and other personnel utilized in the performance of its function under
this agreement are not employees of the SECOND PARTY.102 (Emphasis supplied)
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.103

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.,104 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. xxx105 (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.106

WHEREFORE, the petition is DENIED for lack of merit. The March 31, 2006 Decision
and the May 30, 2006 Resolution of the Court of Appeals in C.A.-G.R. SP Nos. 53806,
61607 and 59958 are hereby AFFIRMED.

SO ORDERED.chanroblesvirtuallawlibrary

57
THIRD DIVISION
G.R. Nos. 183200-01, June 29, 2016
PHILIPPINE NATIONAL OIL COMPANY-ENERGY DEVELOPMENT CORPORATION
AND/OR PAUL AQUINO AND ESTER R. GUERZON, Petitioners, v. AMELYN A.
BUENVIAJE, Respondent.
G.R. Nos. 183253 & 183257
AMELYN A. BUENVIAJE, Petitioner, v. PHILIPPINE NATIONAL OIL COMPANY-ENERGY
DEVELOPMENT CORPORATION, PAUL A. AQUINO AND ESTER R. GUERZON,
Respondents.
DECISION
JARDELEZA, J.:
Before us are consolidated petitions for review on certiorari1 of the Decision2 dated
October 31, 2007 and Resolution3 dated June 3, 2008 of the Court of Appeals (CA)
in CA-G.R. S.P. Nos. 94359 and 94458. The CA partially modified the Resolutions4 of
the National Labor Relations Commission (NLRC) dated September 27, 2005 and
January 31, 2006, which in turn partially modified the Decision5 of the Labor Arbiter
dated December 10, 2004.
The Facts
Philippine National Oil Company-Energy Development Corporation (PNOC-EDC)
hired Amelyn Buenviaje (Buenviaje) as Assistant to the then Chairman/President
and Chief Executive Officer Sergio A.F. Apostol (Apostol), her father. Buenviaje's
employment contract provided that she will serve until June 30, 2004 or co-
terminous with the tenure of Apostol, whichever comes
first.6ChanRoblesVirtualawlibrary
On August 4, 2003, Apostol approved the creation of PNOC-EDC's new Marketing
Division composed of thirty (30) positions. Seven (7) of these thirty (30) positions
were also newly created,7 one of which was that of a Marketing Division Manager.8
Buenviaje assumed this position as early as the time of the creation of the
Marketing Division.9ChanRoblesVirtualawlibrary
On January 5, 2004, Apostol filed his Certificate of Candidacy as Governor for the
province of Leyte, yet continued to discharge his functions as President in PNOC-
EDC.10 Buenviaje also continued to perform her duties as Assistant to the
Chairman/President and Marketing Division Manager in PNOC-
EDC.11ChanRoblesVirtualawlibrary
On February 2, 2004, Paul Aquino (Aquino), the new President of PNOC-EDC,
appointed Buenviaje to the position of Senior Manager for Marketing Division
effective February 1, 2004.12 The appointment letter partly
provides:chanRoblesvirtualLawlibrary
By copy of this letter, HRMD [Human Resources Management Division] is instructed
to amend your present employment status from your present position as Assistant
to the President (co-terminus) to regular status and as such you will be entitled to
all the rights and privileges granted to your new position under the company's
benefit policies subject to existing rules and regulations. This appointment is subject
to confirmation by your immediate superior based on your performance during the
next six months. x x x For record purposes, please take note that your regular status
is retroactive to July 1, 2001. This date will be used for the computation of your
service credits, retirement and other company benefits allowed under company
policy.13cralawred
Pursuant to the instructions in the appointment letter, Buenviaje affixed her
signature to the letter, signifying that she has read and understood its
contents.14ChanRoblesVirtualawlibrary
In line with PNOC-EDCs policies, Buenviaje was subjected to a performance
appraisal during the first week of May 2004.15 She received a satisfactory grade of
three (3).16 In her subsequent performance appraisal covering the period of May 1,
2004 to June 30, 2004, she received an unsatisfactory grade of four (4).17 Thus,
Ester Guerzon (Guerzon), Vice President for Corporate Affairs of PNOC-EDC,
informed Buenviaje that she did not qualify for regular employment.18 PNOC-EDC,
through Guerzon, communicated in writing to Buenviaje her non-confirmation of
appointment as well as her separation from the company effective July 31, 2004.19
On July 2, 2004, Buenviaje gave her written comments on the results of her second
performance appraisal.20 In reply, PNOC-EDC sent her two (2) more letters
reiterating her non-confirmation and separation from the company.21 Aquino also
issued a Memorandum to Buenviaje instructing her to prepare a turnover report
before her physical move-out.22ChanRoblesVirtualawlibrary
Buenviaje responded by filing a complaint before the Labor Arbiter for illegal
dismissal, unpaid 13th month pay, illegal deduction with claim for moral as well as
exemplary damages, including attorney's fees and
backwages.23ChanRoblesVirtualawlibrary
The Ruling of the Labor Arbiter
58
The Labor Arbiter rendered a decision in favor of Buenviaje, the dispositive portion
of which states:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby rendered declaring
complainant a regular employee. As a consequence thereof, her dismissal without
any basis is hereby deemed illegal. Respondents PNOC-Energy Development
Corporation, and/or Paul Aquino and Ester R. Guerzon are hereby ordered to
reinstate complainant to her former position without loss of seniority rights and
other benefits and with full backwages reckoned from August 1, 2004 up to her
actual or payroll reinstatement, which as of this date is in the amount of
P718,260.40.
Further, for having acted with manifest bad faith and given the extent of the
damage done to complainant who occupies a high managerial position,
respondents are jointly and severally ordered to pay complainant moral damages in
the amount of P1,000,000.00 and exemplary damages in the amount of
P500,000.00.
Finally, respondents are hereby ordered to return to complainant the amount of
P51,692.72, which they illegally deducted from her last salary and to pay the sum
equivalent to ten percent of the judgment award as and by way of attorney's fees.
SO ORDERED.24 (Emphasis in the original.)cralawred
The Labor Arbiter held that Buenviaje was a regular employee because her
appointment letter clearly says so. Any doubt caused by the statement in the
appointment letter that Buenviaje's appointment was subject to confirmation must
be resolved against PNOC-EDC. In addition, PNOC-EDC failed to prove that
reasonable standards were explained to Buenviaje at the time of her engagement,
thusly negating PNOC-EDC's claim that she was merely a probationary employee.
The Labor Arbiter noted that PNOC-EDC even admitted that the alleged standards
were only set and discussed with Buenviaje more than a month after her actual
appointment.25ChanRoblesVirtualawlibrary
The Labor Arbiter further ruled that PNOC-EDC also failed to explain why Buenviaje
was allowed to enjoy benefits that were supposed to be exclusive for regular
employees. As a regular employee, therefore, Buenviaje could only be dismissed for
any of the just or authorized causes under Articles 282 and 28326 of the Labor
Code. Since the cause for Buenviaje's dismissal was not included in any of the
grounds enumerated in either Article, she was considered illegally dismissed. The
Labor Arbiter found Guerzon and Aquino to have acted in bad faith due to their
failure to explain the standards to Buenviaje, as well as why the evaluation form for
regular employees was used in her evaluation. They also failed to respond to
Buenviaje's allegation that the second evaluation was done in bad faith to serve as
an excuse in dismissing her. The Labor Arbiter noted that the second evaluation
appeared irregular because it did not bear the signature and approval of Aquino.
Consequently, for lack of the required approval, the second evaluation could not
serve as a valid basis to remove Buenviaje.27ChanRoblesVirtualawlibrary
Both parties appealed to the NLRC.
The Ruling of the National Labor Relations Commission
In its Resolution28 dated September 27, 2005, the NLRC
ruled:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the appeal is partly GRANTED and the Decision
dated 10 December 2004 is hereby MODIFIED ordering respondent-appellant
PNOC-Energy Development Corporation to pay complainant-appellee financial
assistance in the amount of P229,681.35 only and her accrued wages in the amount
of P1,224,967.28 for the period covering December 2004, the date of the decision
ordering her reinstatement until the date of this Resolution. The order to return to
complainant-appellee the amount of P51,692.72, which represents deduction from
her salary and not raised on appeal, STANDS. Finally, the award of moral and
exemplary damages and attorney's fees, as well as the joint and solidarily (sic)
liability of individual respondents Paul A. Aquino and Ester R. Guerzon are hereby
DELETED.
SO ORDERED.29 (Emphasis in the original.)cralawred
The NLRC agreed with the Labor Arbiter that Buenviaje was a regular employee of
PNOC-EDC, noting that the terms of her appointment expressly grants a regular
status of employment.30 The NLRC also found that PNOC-EDC admitted that
Buenviaje has been performing the functions of a Marketing Division Manager for
more than six (6) months before she was formally appointed to the said position.31
Nevertheless, the NLRC ruled that she was not illegally dismissed because she did
not enjoy security of tenure.32 The NLRC noted that the condition in Buenviaje's
appointment letter, which provided that her appointment is subject to confirmation
by her immediate superior based on her performance during the next six (6)
months, was clear and understood by her when she affixed her signature to the
appointment letter.33 The NLRC concluded that only upon confirmation of her
appointment will Buenviaje enjoy the right to security of tenure.34 As it was, PNOC-
EDC found her performance unsatisfactory and Buenviaje failed to disprove these
findings. Therefore, Buenviaje failed to complete her appointment as a regular
employee and her non-confirmation cannot be considered as an illegal
dismissal.35ChanRoblesVirtualawlibrary
With respect to Buenviaje's prayer for moral and exemplary damages, and
attorney's fees, the NLRC found no basis to grant the same. The NLRC also found no
basis for the solidary liability of Aquino and Guerzon.36ChanRoblesVirtualawlibrary
59

Both parties asked the NLRC to reconsider its Resolution, but the NLRC denied their
motions. Thus, both parties filed their petitions for certiorari with the CA.
The Ruling of the Court of Appeals
The CA partially modified the Resolution of the NLRC. The dispositive portion of the
CA Decision37 dated October 31, 2007 reads:chanRoblesvirtualLawlibrary
WHEREFORE, in view of all the foregoing, the September 27, 2005 and January 31,
2006 Resolutions of the NLRC are MODIFIED as follows:
For having been illegally dismissed, petitioner Amelyn Buenviaje is entitled to
receive a separation pay equivalent to 1/2 month pay for every year of service (with
a fraction of at least 6 months considered one whole year) in lieu of reinstatement.
In addition she is also to receive full backwages inclusive of allowances and other
benefits or their monetary equivalent, computed from the time the compensation
was withheld up to the finality of this decision.
The other awards in the NLRC decision as well as the deletion of the joint and
solidary liabilities of Paul A. Aquino and Ester R. Guerzon are hereby AFFIRMED.
SO ORDERED.38 (Emphasis in the original.)cralawred
The CA found no reason to disturb the findings of both the Labor Arbiter and the
NLRC that Buenviaje was a regular employee of PNOC-EDC. However, it disagreed
with the NLRC's ruling that Buenviaje failed to acquire security of tenure. The CA
stated that where an employee has been engaged to perform activities which are
usually necessary or desirable in the usual business of the employer, such employee
is deemed a regular employee and is entitled to security of tenure notwithstanding
the contrary provisions of his contract of employment.39 As a regular employee,
Buenviaje may only be dismissed if there are just or authorized causes. Thus, PNOC-
EDC's reasoning that she failed to qualify for the position cannot be countenanced
as a valid basis for her dismissal.40ChanRoblesVirtualawlibrary
Both parties filed their respective motions for reconsideration, which the CA
denied. Hence, these consolidated petitions, which present the following
issues:chanRoblesvirtualLawlibrary
Whether Buenviaje was a permanent employee;
Whether Buenviaje was illegally dismissed;
Whether Buenviaje is entitled to moral and exemplary damages as well as
attorney's fees;
Whether Buenviaje should be given separation pay in lieu of reinstatement; and
Whether Aquino and Guerzon should be held jointly and severally liable to
Buenviaje.
Our Ruling
Buenviaje was a permanent employee
Buenviaje was hired as a Marketing Division Manager, a position that performs
activities that are usually necessary and desirable to the business of PNOC-EDC and
is thusly, regular. As an employer, PNOC-EDC has an exclusive management
prerogative to hire someone for the position, either on a permanent status right
from the start or place him first on probation. In either case, the employee's right to
security of tenure immediately attaches at the time of hiring.41 As a permanent
employee, he may only be validly dismissed for a just42 or authorized43 cause. As a
probationary employee, he may also be validly dismissed for a just or authorized
cause, or when he fails to qualify as a regular employee in accordance with
reasonable standards made known to him by the employer at the time of his
engagement.44 Apart from the protection this last ground in the dismissal of a
probationary employee affords the employee, it is also in line with the right or
privilege of the employer to choose who will be accorded with regular or
permanent status and who will be denied employment after the period of
probation. It is within the exercise of this right that the employers may set or fix a
probationary period within which it may test and observe the employee's conduct
before hiring him permanently.45ChanRoblesVirtualawlibrary
Here, PNOC-EDC exercised its prerogative to hire Buenviaje as a permanent
employee right from the start or on February 1, 2004, the effectivity date of her
appointment. In her appointment letter, PNOC-EDC's President expressly instructed
the HRMD to amend Buenviaje's status from co-terminous to regular. He also
informed her that her regular status shall be retroactive to July 1, 2001. Nowhere in
the appointment letter did PNOC-EDC say that Buenviaje was being hired on
probationary status. Upon evaluation on two (2) occasions, PNOC-EDC used a
performance appraisal form intended for permanent managerial employees, even if
the company had a form for probationary employees. The intention, therefore, all
along was to grant Buenviaje regular or permanent employment. As correctly
observed by the CA:chanRoblesvirtualLawlibrary
Accordingly, at the time of her formal appointment to the position on February 2,
2004, Amelyn Buenviaje has been performing the functions of a Senior Manager of
the Marketing Division for almost six months. After having had the opportunity to
observe her performance for almost six months as Senior Marketing Manager,
PNOC should not have formally appointed her if she appeared to have been
60
unqualified for the position. But as it is, Amelyn Buenviaje was formally appointed
and given a regular status. x x x46cralawred
This intention was clear notwithstanding the clause in the appointment letter saying
that Buenviaje's appointment was subject to confirmation by her immediate
superior based on her performance during the next six (6) months. This clause did
not make her regularization conditional, but rather, effectively informed Buenviaje
that her work performance will be evaluated later on. PNOC-EDC, on the other
hand, insists that this clause demonstrates that Buenviaje was merely a
probationary employee. Consequently, when she failed to meet the standards set
by PNOC-EDC, the latter was well within its rights not to confirm her appointment
and to dismiss her.
We are not persuaded.
Firstly, if the clause in the appointment letter did cause an ambiguity in the
employment status of Buenviaje, we hold that the ambiguity should be resolved in
her favor. This is in line with the policy under our Labor Code to afford protection to
labor and to construe doubts in favor of labor.47 We upheld this policy in De Castro
v. Liberty Broadcasting Network, Inc.,48 ruling that between a laborer and his
employer, doubts reasonably arising from the evidence or interpretation of
agreements and writing should be resolved in the former's favor.49 Hence, what
would be more favorable to Buenviaje would be to accord her a permanent status.
But more importantly, apart from the express intention in her appointment letter,
there is substantial evidence to prove that Buenviaje was a permanent employee
and not a probationary one.
A probationary employee is defined as one who is on trial by an employer during
which the employer determines whether or not he is qualified for permanent
employment.50 In general, probationary employment cannot exceed six (6)
months, otherwise the employee concerned shall be considered a regular
employee.51 It is also indispensable in probationary employment that the employer
informs the employee of the reasonable standards that will be used as a basis for
his or her regularization at the time of his or her engagement.52 If the employer
fails to comply with this, then the employee is considered a regular
employee.53ChanRoblesVirtualawlibrary
In their reply to Buenviaje dated July 28, 2004, PNOC-EDC reminded Buenviaje that
the standards "were thoroughly discussed with [her] separately soon alter [she]
signed [her] contract, as well as that which was contained in the job description
attached thereto."54 PNOC-EDC maintained this position in its appeal
memorandum,55 asserting that Buenviaje was apprised of the reasonable
standards for regularization by virtue of the job description attached to her
appointment.56 They also alleged that the standards were discussed with Buenviaje
prior to her first and second appraisals.57 We, however, do not find these
circumstances sufficient to categorize Buenviaje as a probationary employee.
In Abbott Laboratories, Philippines v. Alcaraz,58 we were confronted with the
similar question of whether Alcaraz was sufficiently informed of the reasonable
standards that would qualify her as a regular employee. In affirming that she was,
we enumerated the details and circumstances prior to, during the time of her
engagement, and the incipient stages of her employment that show she was well-
apprised of her employer's expectations that would, in turn, determine her
regularization. These were:chanRoblesvirtualLawlibrary
(a) On June 27, 2004, Abbott caused the publication in a major broadsheet
newspaper of its need for a Regulatory Affairs Manager, indicating therein the job
description for as well as the duties and responsibilities attendant to the aforesaid
position; this prompted Alcaraz to submit her application to Abbott on October 4,
2004;
(b) In Abbott's December 7, 2004 offer sheet, it was stated that Alcaraz was to be
employed on a probationary status;
(c) On February 12, 2005, Alcaraz signed an employment contract which specifically
stated, inter alia, that she was to be placed on probation for a period of six (6)
months beginning February 15, 2005 to August 14, 2005;
(d) On the day Alcaraz accepted Abbott's employment offer, Bernardo sent her
copies of Abbott's organizational structure and her job description through e-mail;
(e) Alcaraz was made to undergo a pre-employment orientation where Almazar
informed her that she had to implement Abbott's Code of Conduct and office
policies on human resources and finance and that she would be reporting directly
to Walsh;
(f) Alcaraz was also required to undergo a training program as part of her
orientation;
(g) Alcaraz received copies of Abbott's Code of Conduct and Performance Modules
from Misa who explained to her the procedure for evaluating the performance of
probationary employees; she was further notified that Abbott had only one
evaluation system for all of its employees; and
(h) Moreover, Alcaraz had previously worked for another pharmaceutical company
and had admitted to have an "extensive training and background" to acquire the
necessary skills for her job.59cralawred
61
We concluded that "[c]onsidering the totality of the above-stated circumstances, it
cannot, therefore, be doubted that Alcaraz was well-aware that her regularization
would depend on her ability and capacity to fulfill the requirements of her position
as Regulatory Affairs Manager and that her failure to perform such would give
Abbott a valid cause to terminate her probationary
employment."60ChanRoblesVirtualawlibrary
We stress here that the receipt by Buenviaje of her job description does not make
this case on all fours with Abbott. The receipt of job description and the company's
code of conduct in that case was just one of the attendant circumstances which we
found equivalent to being actually informed of the performance standards upon
which a probationary employee should be evaluated. What was significant in that
case was that both the offer sheet and the employment contract specifically stated
that respondent was being employed on a probationary status. Thus, the intention
of Abbott was to hire Alcaraz as a probationary employee. This circumstance is not
obtaining in this case and the opposite, as we have already discussed, is true.
Of equal significance, the job description attached to Buenviaje's appointment letter
merely answers the question: "what duties and responsibilities does the position
entail?", but fails to provide the answer/s to the question: "how would the
employer gauge the performance of the probationary employee?". The job
description merely contains her job identification, her immediate superior and
subordinates, a list of her job objectives, duties and responsibilities, and the
qualification guidelines required of her position (i.e., minimum education, minimum
experience, and special skills). There is no question that performance of duties and
responsibilities is a necessary standard for qualifying for regular employment. It
does not stop on mere performance, however. There must be a measure as to how
poor, fair, satisfactory, or excellent the performance has been. PNOC-EDC, in fact,
used an appraisal form when it evaluated the performance of Buenviaje twice. A
copy of this appraisal form, unlike in Abbot, was not given to Buenviaje at any time
prior to, during the time of her engagement, and the incipient stages of her
employment. A comparison of the job description and the standards in the
appraisal form reveals that they are distinct. The job description is just that, an
enumeration of the duties and responsibilities of Buenviaje. To better illustrate, the
job objectives, duties and responsibilities of Buenviaje are set out
below:chanRoblesvirtualLawlibrary
III. JOB OBJECTIVE
To set the overall marketing objectives and directions of EDC, in coordination with
EDC Operations, through the Department Managers and Corporate Services units.
To initiate the preparation of detailed/specific short (annual) and medium to long
term (2-5 years) marketing plans and programs.
To monitor the implementation of the work performance and execution of the
plans and programs of Public & Marketing Relations, Power & Energy Services, and
Market Development.
To manage the functional and administrative requirements of the managers for
Public & Marketing Relations, Power & Energy Services, and Market Development.
IV. DUTIES AND RESPONSIBILITIES
Ensures that a survey of potential markets and customers in relation to newly
developed or soon-to-be- completed power projects are regularly initiated.
Develops marketing plans and strategies with Managers and staff, relevant to new
and/or uncommitted power and/or resources for both contracted and through the
Wholesale Electricity Spot Market (WESM).
Develops marketing plans and strategies with managers on new opportunities for
Energy Services (Drilling, Geoscientific, Design and Engineering, etc.).
Ensures and oversees the development of a business networking system and
database.
Establishes business contacts (domestic and overseas) and oversees market
development and opportunities through the subordinate managers.
Ensures and oversees the development of an effective advertising program,
annually and as needed (print, publication, etc.), to propagate and enhance EDC's
public image and awareness of its marketable products and services.
Develops new marketable products and services, in coordination with Operations
and Corporate Services.
Represents Top Management in various fora, conventions, etc. for
business/marketing opportunities domestically and internationally.
Ensures that an effective system of customer after-sales and service monitoring is in
place.
Approves all expense disbursements, contracts, and other corporate documents in
accordance with the approval limits specified in the EDC Approvals Policy.
Issues instructions on marketing matters to the subordinate managers in
accordance with decisions from Top Management/Board and/or as coordinated
with Operations and Corporate Services.
62
Initiates and conducts check-up meetings and conferences with the subordinate
managers and their staff.
Functions as budget administrator of the Senior Manager's Office.
Oversees the preparation of the consolidated annual capital and operating expense
budget for the division.
Lixecutes EDC's marketing/contracts, in accordance with approvals policy.
Oversees the preparation and consolidation of all the personnel performance
appraisals of the division and effectively administers the forced-ranking program,
consistent with company guidelines.
Administers the personnel performance appraisal of office staff and managers.
Oversees the preparation of the training requirements of the subordinate managers
and their staff.
Performs other duties which may be assigned from time to time.61
The foregoing, however, invite the question as to what are the specific qualitative
and/or quantitative standards of PNOC-EDC. With respect to the first job objective
listed above, for instance, one may ask: "how will PNOC-EDC measure the
performance of Buenviaje as to whether she has adequately set the overall
marketing objectives and directions of PNOC-EDC, in coordination with PNOC-EDC
Operations, through the Department Managers and Corporate Service units?". The
same is true with the first duty: "how will PNOC-EDC measure the performance of
Buenviaje as to whether she has ensured that a survey of potential markets and
customers in relation to newly developed or soon-to-be-completed power projects
are regularly initiated?".
On the other hand, the appraisal form appraises the elements of performance,
which are categorized into results-based factors, individual effectiveness and co-
worker effectiveness.62 Pertinently, the results-based factors, which are broken
down into output indicators of: 1.) quality, 2.) quantity, 3.) timeliness, 4.) cost
effectiveness, 5.) safety/housekeeping/environmental consciousness, and 6.) profit
objectives, are rated according to expected outputs or key result areas,
performance standards, and actual accomplishments. Clearly, the form specifies the
performance standards PNOC-EDC will use, which demonstrates that PNOC-EDC
expected a certain manner, level, or extent by which she should perform her job.
PNOC-EDC knew the job description and the performance appraisal form are not
one and the same, having specifically used the latter when it evaluated Buenviaje
and not the job description attached to the appointment letter. The fact, therefore,
that PNOC-EDC used a performance appraisal form with standards expected from
Buenviaje further negates any assumption that these standards were of basic
knowledge and common sense,63 or that Buenviaje's position was self-descriptive
such that there was no need to spell out the standards at the time of her
engagement.64ChanRoblesVirtualawlibrary
Buenviaje was illegally dismissed
The foregoing discussion proves Buenviaje was hired as a permanent employee on
February 1, 2004. As a permanent employee, she may only be dismissed by PNOC-
EDC after observing the following substantive and procedural
requirements:chanRoblesvirtualLawlibrary
The dismissal must be for a just or authorized cause;
The employer must furnish the employee with two (2) written notices before
termination of employment can be legally effected. The first notice states the
particular acts or omissions for which dismissal is sought while the second notice
states the employer's decision to dismiss the employee; and
The employee must be given an opportunity to be heard.65
PNOC-EDC failed to observe these requirements because it operated on the wrong
premise that Buenviaje was a probationary employee. But even if we were to
assume that she was, she would still be illegally dismissed in light of PNOC-EDC's
violation of the provisions of the Labor Code in dismissing a probationary employee.
A probationary employee also enjoys security of tenure, although it is not on the
same plane as that of a permanent employee.66 This is so because aside from just
and authorized causes, a probationary employee may also be dismissed due to
failure to qualify in accordance with the standards of the employer made known to
him at the time of his engagement.67 PNOC-EDC dismissed Buenviaje on this latter
ground; that is, Buenviaje allegedly failed to meet the standards set by the
company. In dismissing probationary employees on this ground, there is no need for
a notice and hearing.68 The employer, however, must still observe due process of
law in the form of: 1) informing the employee of the reasonable standards expected
of him during his probationary period at the time of his engagement;69 and 2)
serving the employee with a written notice within a reasonable time from the
effective date of termination.70 By the very nature of a probationary employment,
the employee needs to know from the very start that he will be under close
observation and his performance of his assigned duties and functions would be
under continuous scrutiny by his superiors. It is in apprising him of the standards
against which his performance shall be continuously assessed where due process
lies.71 Likewise, probationary employees are entitled to know the reason for their
failure to qualify as regular employees.72ChanRoblesVirtualawlibrary
63

As we have previously settled, PNOC-EDC failed to inform Buenviaje of the
reasonable standards for her regularization at the time of her engagement. The
unfairness of this failure became apparent with the results of Buenviaje's appraisals.
In her first appraisal covering a three-month period from February 1, 2004 to April
30, 2004, Buenviaje received a satisfactory rating. It was in her second appraisal
covering a two-month period from May 1, 2004 to June 30, 2004 where she
received an unsatisfactory rating that led to her dismissal. There was no proof,
however, that per PNOC-EDC's standards, receiving an unsatisfactory rating of four
(4) from a satisfactory rating of three (3) will result to failure to qualify for
regularization.
Neither would PNOC-EDC's reason for dismissing Buenviaje qualify as a just cause.
Under Article 297 of the Labor Code, an unsatisfactory rating can be a just cause for
dismissal only if it amounts to gross and habitual neglect of duties.73 Analogous to
this ground, an unsatisfactory performance may also mean gross inefficiency.
"Gross inefficiency" is closely related to "gross neglect," for both involve specific
acts of omission on the part of the employee resulting in damage to the employer
or to his business.74 Failure to observe prescribed standards of work or to fulfill
reasonable work assignments due to inefficiency may constitute just cause for
dismissal. Such inefficiency is understood to mean failure to attain work goals or
work quotas, either by failing to complete the same within the allotted reasonable
period, or by producing unsatisfactory results. This management prerogative of
requiring standards may be availed of so long as they are exercised in good faith for
the advancement of the employer's interest.75ChanRoblesVirtualawlibrary
The fact that an employee's performance is found to be poor or unsatisfactory does
not necessarily mean that the employee is grossly and habitually negligent of or
inefficient in his duties.76 Buenviaje's performance, poor as it might have been, did
not amount to gross and habitual neglect of duties or gross inefficiency. The
markedly different results of several factors in the appraisals in a span of five (5)
months prove this. To illustrate:chanRoblesvirtualLawlibrary
February 1, 2004 - April 30, 2004
May 1, 2004 - June 30, 2004
Quantity — x x x Completed the public relations programs scheduled within the
period including those directed on special assignment basis like the Dr. Alcaraz
lounge.
Quantity — While several marketing programs have been undertaken, no
submissions were made on the projects required by immediate superior x x x.
Timeliness — Timely submission of reports and processed invoices. PR programs
were responsive to company's call.
Timeliness — Mas not met organizational needs as the required projects on
Tongonan I and Bacman deemed important for the formulation of strategies have
not been submitted. x x x Priorities have not been set so as to be responsive to
company needs.
Cost Effectiveness — Observed in general the proper use of operating and capital
budgets.
Cost Effectiveness — Some recommendations tended to be expensive and
demonstrated non-optimization of funds, methods and manpower.
Judgment — Able to come up with good decisions but has to arrive at more
complete and conclusive recommendations. Examples: x x x
Judgment — Needed to come up with more sound decisions. Examples: x x x
Leadership — She has a strong personality and able to influence others specially the
subordinates to accomplish their tasks diligently.77
Leadership — x x x Not much supervision and direction is given to her various
departments as can be gleaned from the quality of work produced particularly in
Market Development where results are mere researchers (sic) without firm
recommendations where applicable.78
Gross negligence implies a want or absence of or failure to exercise slight care or
diligence, or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them.79 As a just cause, it also
has to be habitual, which implies repeated failure to perform one's duties for a
period of time, depending upon the circumstances. A single or isolated act of
negligence, as was shown here, does not constitute a just cause for the dismissal of
the employee.80ChanRoblesVirtualawlibrary
PNOC-EDC would also be in violation of procedural due process if Buenviaje were
dismissed on the purported ground of gross negligence or inefficiency. For
termination of employees based on just causes, the employer must furnish the
employee with two (2) written notices before termination of employment can be
effected: a first written notice that informs the employee of the particular acts or
omissions for which his or her dismissal is sought, and a second written notice
which informs the employee of the employer's decision to dismiss him. In
considering whether the charge in the first notice is sufficient to warrant dismissal
under the second notice, the employer must afford the employee ample
opportunity to be heard.81 Although Buenviaje indeed received two (2) letters from
PNOC-EDC regarding her termination, these letters fall short of the two (2) notices
required under the law. The first letter sent to Buenviaje failed to apprise her of the
particular acts or omissions on which her dismissal was based. It was merely a bare
statement that Buenviaje's performance failed to meet PNOC-EDC's minimum
requirements. True, Buenviaje replied to the first letter, but considering that it did
not specify the acts or omissions warranting her dismissal but only served to inform
her of her termination, Buenviaje was not afforded a reasonable and meaningful
opportunity to explain her side.
Buenviaje is entitled to separation pay and attorney's fees
64

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.82 However, there are instances when reinstatement is no
longer feasible, such as when the employer-employee relationship has become
strained. In these cases, separation pay may be granted in lieu of reinstatement, the
payment of which favors both parties. As we have previously stated in Bank of
Lubao, Inc. v. Manabat:83
x x x On one hand, such payment [of separation pay] liberates the employee from
what could be a highly oppressive work environment. On the other hand, it releases
the employer from the grossly unpalatable obligation of maintaining in its employ a
worker it could no longer trust.84cralawred
Separation pay or financial assistance may also be granted to a legally terminated
employee as an act of social justice and equity when the circumstances so
warrant.85 In awarding financial assistance, the interests of both the employer and
the employee must be tempered, if only to approximate what Justice Laurel calls
justice in its secular sense.86 As the term suggests, its objective is to enable an
employee to get by after he has been stripped of his source of income from which
he relies mainly, if not, solely.87ChanRoblesVirtualawlibrary
We agree with the CA that the reinstatement of Buenviaje is no longer viable given
the irreconcilable differences and strained relations between her and PNOC-EDC. In
light of this, separation pay with full backwages, in lieu of Buenviaje's
reinstatement, is warranted.
Moreover, it is a well-settled rule that in actions for recovery of wages, or where an
employee was forced to litigate and, thus, incur expenses to protect his rights and
interests, attorney's fees may be granted pursuant to Article 111 of the Labor
Code.88 Considering, therefore, that she was forced to litigate in order to assert her
rights,89 Buenviaje is entitled to attorney's fees in the amount often percent (10%)
of the total award of backwages.90ChanRoblesVirtualawlibrary
Buenviaje is entitled to moral and exemplary damages
The claim for moral damages cannot be justified solely upon the premise that the
employer fired his employee without just cause or due process. Additional facts
must be pleaded and proven to warrant the grant of moral damages under the Civil
Code, these being, that the act of dismissal was attended by bad faith or fraud, or
was oppressive to labor, or done in a manner contrary to morals, good customs, or
public policy; and, of course, that social humiliation, wounded feelings, grave
anxiety, etc., resulted therefrom.91 Bad faith "implies a conscious and intentional
design to do a wrongful act for a dishonest purpose or moral obliquity."92 Bad faith
must be proven through clear and convincing evidence. This is because bad faith
and fraud are serious accusations that can be so conveniently and casually invoked,
and that is why they are never presumed. They amount to mere slogans or
mudslinging unless convincingly substantiated by whoever is alleging
them.93ChanRoblesVirtualawlibrary
Exemplary damages, on the other hand, may be granted when the dismissal of the
employee was done in a wanton, oppressive or malevolent
manner.94ChanRoblesVirtualawlibrary
Buenviaje argues that she is entitled to an award of these damages because PNOC-
EDC, Aquino, and Guerzon acted in bad faith.95 To Buenviaje's mind, the following
acts of PNOC-EDC, Aquino, and Guerzon prove that they acted in bad
faith:chanRoblesvirtualLawlibrary
They used the evaluation form for regular employees in evaluating Buenviaje;
Buenviaje was evaluated using the standards for regular employees;
Unlike the first evaluation, Aquino did not sign the second evaluation; and
The second evaluation was conducted without Buenviaje's knowledge.96
We agree that there was manifest bad faith when Buenviaje was evaluated using
the standards and performance appraisal form for regular employees, yet, in
dismissing her, she was treated as a probationary employee. To reiterate, the clear
intention of PNOC-EDC from the start was to grant Buenviaje a permanent status.
She was evaluated in a short span of five (5) months, in which her previous
satisfactory outputs turned unsatisfactory. There were also factors or variables that
showed PNOC-EDC initially found as her strengths but were now inexplicably
viewed as negative. For example, PNOC-EDC found Buenviaje's political connections
helpful in pushing for marketing programs; yet, PNOC-EDC criticized her for
flaunting her strong political connections as an instrument in achieving the
company's objectives.97ChanRoblesVirtualawlibrary
With regard to the third and fourth acts, though, we find no malice or bad faith
against PNOC-EDC. PNOC-EDC was able to refute the allegation that Aquino did not
sign the second evaluation by annexing a signed one in its appeal memorandum.98
As to the allegation that her second evaluation was conducted without her
knowledge, we find the same inconsequential. To repeat, Buenviaje's appointment
letter apprised her of performance evaluations in the horizon for the next six (6)
months. Even if it weren't expressly communicated to her, it would have certainly
been reasonable for Buenviaje to expect that her performance would be gauged
and appraised at any given time.
65
Thus, the Labor Arbiter's award of moral and exemplary damages is proper. We are WHEREFORE, the petition in G.R. Nos. 183200-01 is DENIED while the petition in
wont, however, to reduce the amounts he fixed by reason alone of the "extent of G.R. Nos. 183253 and 183257 is PARTIALLY GRANTED. The October 31, 2007
the damage done to [Buenviaje] who occupies a high managerial position."99 We Decision and June 3, 2008 Resolution of the CA in CA-G.R. S.P. Nos. 94359 and
find his award excessive in the absence of evidence to prove the degree of moral 94458 are AFFIRMED with the MODIFICATION that PNOC-EDC is ordered to pay
suffering or injury that Buenviaje suffered.100 In line with our ruling in Magsaysay Amelyn Buenviaje moral damages in the amount of P30,000, exemplary damages in
Maritime Corporation v. Chin, Jr.,101 we hold that an award of P30,000 as moral the amount of P25,000, and attorney's fees equivalent to ten percent (10%) of the
damages and P25,000 as exemplary damages is more fair and reasonable. We total award of backwages.
explained:chanRoblesvirtualLawlibrary
x x x It has been held that in order to arrive at a judicious approximation of SO ORDERED.chanroblesvirt
emotional or moral injury, competent and substantial proof of the suffering
experienced must be laid before the court. It is worthy to stress that moral damages
are awarded as compensation for actual injury suffered and not as a penalty. The
Court believes that an award of P30,000.00 as moral damages is commensurate to
the anxiety and inconvenience that Chin suffered.

As for exemplary damages, the award of P25,000.00 is already sufficient to

discourage petitioner Magsaysay from entering into iniquitous agreements with its
employees that violate their right to collect the amounts to which they are entitled
under the law. Exemplary damages are imposed not to enrich one party or
impoverish another but to serve as a deterrent against or as a negative incentive to
curb socially deleterious actions.102 (Citations omitted.)cralawred
However, the extent of liability of the respondents should not be solidary.

A corporation, as a juridical entity, may act only through its directors, officers and
employees. Obligations incurred as a result of the directors' and officers' acts as
corporate agents, are not their personal liability but the direct responsibility of the
corporation they represent. As a rule, they are only solidarity liable with the
corporation for the illegal termination of services of employees if they acted with
malice or bad faith.103ChanRoblesVirtualawlibrary

To hold a director or officer personally liable for corporate obligations, two (2)
requisites must concur: (1) it must be alleged in the complaint that the director or
officer assented to patently unlawful acts of the corporation or that the officer was
guilty of gross negligence or bad faith; and (2) there must be proof that the officer
acted in bad faith.104ChanRoblesVirtualawlibrary

While the position paper of Buenviaje alleges that the respondents acted in bad
faith and that Aquino and Guerzon, in particular, conspired with each other to
terminate her illegally, we find these allegations were not clearly and convincingly
proved. To our mind, there was insufficient evidence that Aquino and Guerzon were
personally motivated by ill-will in dismissing
Buenviaje.105ChanRoblesVirtualawlibrary

66
G.R. No. 207838, January 25, 2017
LEO T. MAULA, Petitioner, v. XIMEX DELIVERY EXPRESS, INC., Respondent.
DECISION
PERALTA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Civil Procedure
seeks to reverse the November 20, 2012 Decision1 and June 21, 2013 Resolution2
of the Court of Appeals (CA) in CA G.R. SP No. 121176, which set aside the
December 15, 2010 Resolution3 and July 20, 2011 Decision4 of the National Labor
Relations Commission (NLRC) that affirmed the February 18, 2010 Decision5 of the
Labor Arbiter (LA) finding the illegal dismissal of petitioner.
On May 12, 2009, petitioner Leo T. Maula filed a complaint against respondent
Ximex Delivery Express, Inc. and its officers (Jerome Ibañez, Lilibeth Gorospe, and
Amador Cabrera) for illegal dismissal, underpayment of salary/wages, non-
payment/underpayment of overtime pay, underpayment of holiday premium,
underpayment of 13th month pay, non-payment of ECOLA, non-
payment/underpayment of night shift differential, illegal deduction, illegal
suspension, regularization, harassment, underremittance of SSS premiums,
deduction of tax without tax identification number, moral and exemplary damages,
and attorney's fees.6
The factual antecedents, according to petitioner, are as follows:
Petitioner was hired by the respondent as Operation Staff on March 23, 2002. As
Operation Staff, he performed a variety of duties such as but not limited to
documentation, checker, dispatcher or airfreight coordinator. He [was] on call
anytime of the day or night. He was rendering night duty which [started] at
6:00p.m. More often it went beyond the normal eight hour schedule such that he
normally rendered duty until 6:00 or 7:00 the following morning. This [was] without
payment of the corresponding night shift differential and overtime pay. His salary
from March 2002 to December 2004 was PhP3,600.00 per month; from January
2005 to July 25, 2006 at PhP6,200.00 per month; from July 26, 2006 to March 15,
2008 at PhP7,500.00 per month; from March 16, 2008 to February 15, 2009 at
PhP9,412.00 per month; and, from February 16, 2009 to March 31, 2009 at
PhP9,932.00 per month. x x x.
Petitioner's employment was uneventful until came February 18, 2009 when the
[respondent's] HRD required him and some other employees to sign a form sub-
titled "Personal Data for New Hires." When he inquired about it he was told it was
nothing but merely for the twenty peso increase which the company owner
allegedly wanted to see. He could not help but entertain doubts on the scheme as
they were hurriedly made to sign the same. It also [appeared] from the form that
the designated salary/wage [was] daily instead of on a monthly basis. x x x.
On February 21, 2009, a Saturday evening, they were surprised to receive an
invitation from the manager for a dinner and drinking spree in a restaurant-bar. It
indeed came as a surprise as he never had that kind of experience with the
manager in his seven (7) years working for the company.
On February 25, 2009, he, together with some other concerned employees[,]
requested for a meeting with their manager together with the manager of the HRD.
They questioned the document and aired their side voicing their apprehensions
against the designation "For New Hires" since they were long time regular
employees earning monthly salary/wages and not daily wage earners. The
respondent company's manager[,] Amador Cabrera[,] retorted: "Ay wala yan
walang kwenta yan." When he disclosed that he consulted a lawyer, respondent
Cabrera insisted it was nothing and accordingly, no lawyer could say that it really
matters. Cabrera even dared the petitioner to present the lawyer. The meeting was
concluded. When he was about to exit from the conference room he was addressed
with the parting words: "'Baka gusto mo, mag-labor ka!" He did not react.
On March 4, 2009, petitioner filed a complaint before the National Conciliation and
Mediation Board. During the hearing held on March 25, 2009, it was
stipulated/agreed upon that:
(1) Company's counsel admits that petitioner is a regular employee;
(2) There shall be no retaliatory action between petitioner and the company arising
from this complaint;
(3) Issues anent BIR and SSS shall be brought to the proper forum.
xxx
Not long thereafter, or on March 25, 2009, in the evening, a supposed problem
cropped up. A misroute of cargo was reported and the company [cast] the whole
blame on the petitioner. It was alleged that he erroneously wrote the label on the
box - the name and destination, and allegedly [was] the one who checked the cargo.
The imputation is quite absurd because it was the client who actually wrote the
name and destination, whereas, it was not the petitioner but his co-employee who
checked the cargo. The following day, he received a memorandum charging him
with "negligence in performing duties."
67

On April 2, 2009 at 4:00 p.m., he received another memorandum of '"reassignment"
wherein he was directed to report effective April 2, 2009 to Richard Omalza and
Ferdinand Marzan in another department of the company. But then, at around 4:30
p.m. of the same day, he was instructed by the HR manager to proceed to his
former office for him to train his replacement. He went inside the warehouse and at
around 6:00 p.m. he began teaching his replacement. At 8:00 p.m.[,] his
replacement went outside. He waited for sometime and came to know later when
he verified outside that the person already went straight home. When he went back
inside, his supervisor insisted [to] him to continue with his former work, but due to
the "reassignment paper" he had some reservations. Sensing he might again be
framed up and maliciously accused of such as what happened on March 25, 2009,
he thus refused. Around 10:30 p.m., he went home. x x x.
The following day, an attempt to serve another memorandum was made on him.
This time he was made to explain by the HR Manager why he did not perform his
former work and not report to his reassignment. It only [validated] his
apprehension of a set-up. For how could he be at two places at [the same] time (his
former work is situated in Sucat, Parafiaque, whereas, his new assignment is in FTI,
Taguig City). It bears emphasizing that the directive for him to continue discharging
his former duties was merely verbal. At this point, petitioner lost his composure.
Exasperated, he refused to receive the memorandum and thus retorted "Seguro na
abnormal na ang utak mo" as it dawned on him that they were out looking for every
means possible to pin him down.
Nonetheless, he reported to his reassignment in FTI Taguig on April3, 2009. There
he was served with the memorandum suspending him from work for thirty (30)
days effective April 4, 2009 for alleged "Serious misconduct and willful disobedience
by the employee of the lawful orders of his employer or representative in
connection with his work." His apprehension was thus confirmed. x x x.
On April 8, 2009, he filed a case anew with the NCMB x x x Hearings were scheduled
at the NCMB on April 20, 27, and May 5, 2009 but the respondents never appeared.
On May 4, 2009, he reported to the office only to be refused entry. Instead, a
dismissal letter was handed to him. X XX.
On May 5, 2009, at the NCMB, the mediator decided that the case be brought to
the National Labor Relations Commission for arbitration. Thus, he withdrew his
complaint. On May 12, 2009[,] he was able to re-file his complaint with the
Arbitration Branch of the NLRC. Efforts were exerted by the Labor Arbiter to
encourage the parties to amicably settle but without success.7
Respondent countered that: it is a duly registered domestic corporation engaged in
the business of cargo forwarding and truck-hauling; petitioner and several other
employees misinterpreted the use of its old form "For New Hires," that they were
relegated to the status of new employees when in fact they have been employed
for quite some time already; after the conciliation conference before the NCMB, it
relied on his promise that he would not disturb the peace in the company premises,
which proved to be wishful thinking; as to the misdelivered cargo of Globe
Telecoms, initial investigation disclosed that he was tasked to check the correct
information in the package to ensure prompt delivery, hence, a Memorandum
dated March 27, 2009 was issued to him to explain his side; thereafter, it was
learned from his co-employees that he abandoned his work a few hours after
logging in, which was a serious disobedience to the HR Head's order for him to
teach the new employees assigned to his group; also, he refused to accept a
company order with respect to his transfer of assignment to another client,
Fullerlife; for the series of willful disobedience, a Memorandum dated April 3, 2009
was personally served to him by Gorospe, but he repeatedly refused to receive the
memorandum and howled at her, "Seguro na abnormal ang utak mo!"; his arrogant
actuations, which were directed against a female superior who never made any
provocation and in front of many employees, were contemptuous, gravely
improper, and breeds disrespect, even ignominy, against the company and its
officers; on April 3, 2009, another memorandum was issued to give him the
opportunity to explain his side and to inform him of his preventive suspension for
thirty (30) days pending investigation; and the management, after evaluating the
gravity of the charges and the number of infractions, decided to dismiss him from
employment through a notice of dismissal dated April 27, 2009, which was sent via
registered mail.
The LA ruled for petitioner, opining that:
[Petitioner] had cause for alarm and exasperation it appearing that, after he joined
a complaint in the NCMB, in a brief period from [March 27, 2009] to [April 3, 2009],
[he] was served with a memo on alleged mishandling which turned out to be
baseless, he was reassigned with no clear explanation and was being charged for
disobedience of which was not eventually acted upon. There is no indication that
the altercation between [him] and the HR Manager was of such aggravated
character as to constitute serious misconduct.
This Office finds, on the other hand, that the respondents appeared bent on
terminating the services of complainant following his taking the respondents to task
for the new form and in the eventual dispute before the NCMB.
As to the relief, [petitioner], as an illegally dismissed employee[,] is entitled to the
twin relief of reinstatement with backwages. However, considering the attendant
68
circumstances, it would not be to the best interest of the [petitioner] to be
reinstated as he would be working under an unjustified suspicion from his
employer. Thus, this office finds the award of full backwages from the time of
dismissal on [April27, 2009] up to [the] date of this decision and separation pay of
one month pay per year of service in order.
Thus, the backwages due to the [petitioner] is computed at P9,932.00 x 10 months x
1.08 or P107,265.00. His separation pay is also set at P9,932.00 x 8 years or
P79,456.00. Other claims are dismissed for lack of factual and legal basis.
Individual respondents Jerome Ibanez, Lilibeth Gorospe and Amador Cabrera are
held liable for being the responsible officers of the respondent company.
WHEREFORE, in view of the foregoing, decision is hereby rendered declaring the
dismissal of the [petitioner] to be illegal and ordering respondents XIMEX DELIVERY
EXPRESS, INC., JEROME IBANEZ, LILIBETH GOROSPE and AMADOR CABRERA to pay
[petitioner] the amount of P186,721.00, as computed above, as backwages and
separation pay. All other claims are dismissed.
SO ORDERED.8
On appeal, the NLRC affirmed in toto the LA's decision. It added:
While We concur that each employee should deal with his co-employees with due
respect, the attending circumstances[,] however[,] should be taken into
consideration why said utterance was made in order to arrive at a fair and equitable
decision in this case.
In a span of one week[,] [petitioner] received three (3) [memoranda] requiring him
to explain three (3) different offenses. The utterance was more of an outburst of
[his] emotion, having been subjected to three [memoranda] in successive days, the
last of which placed him under suspension for 30 days. Clearly[,] said utterance
[cannot] be considered grave and aggravated in character to warrant the dismissal
of herein [petitioner]. x x x.9
Respondent and its accountable officers moved for reconsideration.10 In partially
granting the motion, the NLRC ruled that while the memoranda charging petitioner
of negligence, misconduct, and disobedience were unfounded and that he could not
be blamed for his emotional flare-up due to what he considered as successive
retaliatory actions, there was no malice or bad faith on the part of Ibañez, Gorospe,
and Cabrera to justify their solidary liability with respondent.11 Petitioner did not
move to reconsider the modified judgment.
Still aggrieved, respondent elevated the case to the CA, which reversed and set
aside the December 15, 2010 Resolution and the July 20, 2011 Decision of the NLRC.
The appellate court held:
x x x [A]fter a careful scrutiny of the facts on record, we find that [petitioner's]
behavior constitute serious misconduct which was of grave and aggravated
character. When he threw the Memorandum served on him by HR Supervisor
Gorospe in front of her and when he later on shouted at her, "Siguro na abnormal
ang utak mo!", he was not only being disrespectful, he also manifested a willful
defiance of authority and insubordination. Much more, he did it in the presence of
his co-employees which if not corrected would create a precedent to [respondent's]
detriment. [Petitioner's] actuations were willfully done as shown by the foul
language he used against his superior, with apparent wrongful intent and not mere
error in judgment, making him unfit to continue working for [respondent].
[Petitioner] attempted to blame [respondent] for his behaviour allegedly because
he was provoked by the successive memoranda it issued to him in a span of two (2)
days. This, however, is a lame excuse and did not in any way justify the
inflammatory language he used against Gorospe and the throwing of the
Memorandum at the HR Supervisor, in the presence of his co-employees at that.
Condoning his behaviour is not what the law contemplates when it mandated a
liberal treatment in favor of the working man. An employer cannot be compelled to
continue employing an employee guilty of acts inimical to the employer's interest,
justifying loss of confidence in him. A company has the right to dismiss its erring
employees as a measure of self-protection against acts inimical to its interest. x x x.
xxxx
Further, in a long line of cases, it was ruled that accusatory and inflammatory
language used by an employee to the employer or superior can be a ground for
dismissal or termination. Likewise, it did not escape Our attention that [petitioner]
had been intentionally defying the orders of his immediate superiors when he
refused to train his replacement prior to his transfer at Fullerlife in Taguig City
despite being told to do so. This defiance was also manifested when he left his work
station without his superior's permission. Undoubtedly, [petitioner's] behavior
makes him unfit to continue his employment with [respondent] who was rendered
helpless by his acts of insubordination.
On the other hand, [respondent] complied with the due process requirements in
effecting [petitioner's] dismissal. It furnished the latter two (2) written notices, first,
in Memorandum dated April 3, 2009 apprising him of the charge of serious
misconduct for which his dismissal was sought and second, in Notice of Dismissal
dated April27, 2009 which informed him of [respondent's] decision to dismiss
him.12
69

The petition is meritorious.
Standard of Review
In a Rule 45 petition of the CA decision rendered under Rule 65, We are guided by
the following rules:
[I]n a Rule 45 review (of the CA decision rendered under Rule 65), the question of
law that confronts the Court is the legal correctness of the CA decision - i.e.,
whether the CA correctly determined the presence or absence of grave abuse of
discretion in the NLRC decision before it, and not on the basis of whether the NLRC
decision on the merits of the case was correct. ...
Specifically, in reviewing a CA labor ruling under Rule 45 of the Rules of Court, the
Court's review is limited to:
(1) Ascertaining the correctness of the CA's decision in finding the presence or
absence of a grave abuse of discretion. This is done by examining, on the basis of
the parties' presentations, whether the CA correctly determined that at the NLRC
level, all the adduced pieces of evidence were considered; no evidence which
should not have been considered was considered; and the evidence presented
supports the NLRC findings; and
(2) Deciding any other jurisdictional error that attended the CA's interpretation or
application of the law. 13
The general rule is that certiorari does not lie to review errors of judgment of a
quasi-judicial tribunal since the judicial review does not go as far as to examine and
assess the evidence of the parties and to weigh their probative value.14 However,
the CA may grant the petition when the factual findings complained of are not
supported by the evidence on record; when it is necessary to prevent a substantial
wrong or to do substantial justice; when the findings of the NLRC contradict those
of the Labor Arbiter; and when necessary to arrive at a just decision of the case.15
As will be shown later, none of the recognized exceptions is present in this case;
hence, the CA erred when it made its own factual determination of the matters
involved and, on that basis, reversed the NLRC ruling that affirmed the findings of
the labor arbiter. While this Court, in a Rule 45 petition, is not a trier of facts and
does not analyze and weigh again the evidence presented before the tribunals
below, the conflicting findings of the administrative bodies exercising quasi-judicial
functions and the CA compels Us to make Our own independent findings of facts.16
Termination of Employment
While an employer is given a wide latitude of discretion in managing its own affairs,
in the promulgation of policies, rules and regulations on work-related activities of
its employees, and in the imposition of disciplinary measures on them, the exercise
of disciplining and imposing appropriate penalties on erring employees must be
practiced in good faith and for the advancement of the employer's interest and not
for the purpose of defeating or circumventing the rights of employees under special
laws or under valid agreements.17 The reason being that-
Security of tenure of workers is not only statutorily protected, it is also a
constitutionally guaranteed right. Thus, any deprivation of this right must be
attended by due process of law. This means that any disciplinary action which
affects employment must pass due process scrutiny in both its substantive and
procedural aspects.
The constitutional protection for workers elevates their work to the status of a
vested right. It is a vested right protected not only against state action but against
the arbitrary acts of the employers as well. This court in Philippine Movie Pictures
Workers' Association v. Premier Productions, Inc. categorically stated that "[t]he
right of a person to his labor is deemed to be property within the meaning of
constitutional guarantees." Moreover, it is of that species of vested constitutional
right that also affects an employee's liberty and quality of life. Work not only
contributes to defining the individual, it also assists in determining one's purpose.
Work provides for the material basis of human dignity.18
Dismissal from employment have two facets: first, the legality of the act of
dismissal, which constitutes substantive due process; and, second, the legality of
the manner of dismissal, which constitutes procedural due process.19 The burden
of proof rests upon the employer to show that the disciplinary action was made for
lawful cause or that the termination of employment was valid.20 In administrative
and quasi-judicial proceedings, the quantum of evidence required is substantial
evidence or "such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion."21 Thus, unsubstantiated suspicions,
accusations, and conclusions of the employer do not provide legal justification for
dismissing the employee.22 When in doubt, the case should be resolved in favor of
labor pursuant to the social justice policy of our labor laws and the 1987
Constitution.23
Act of Dismissal
Respondent manifestly failed to prove that petitioner's alleged act constitutes
serious misconduct.
70

Misconduct is improper or wrong conduct; it is 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.24 The
misconduct, to be serious within the meaning of the Labor Code, must be of such a
grave and aggravated character and not merely trivial or unimportant.25 Thus, for
misconduct or improper behavior to be a just cause for dismissal, (a) it must be
serious; (b) it must relate to the performance of the employee's duties; and (c) it
must show that the employee has become unfit to continue working for the
employer.26
While this Court held in past decisions that accusatory and inflammatory language
used by an employee to the employer or superior can be a ground for dismissal or
termination,27 the circumstances peculiar to this case find the previous rulings
inapplicable. The admittedly insulting and unbecoming language uttered by
petitioner to the HR Manager on April 3, 2009 should be viewed with reasonable
leniency in light of the fact that it was committed under an emotionally charged
state. We agree with the labor arbiter and the NLRC that the on-the-spur-of-the-
moment outburst of petitioner, he having reached his breaking point, was due to
what he perceived as successive retaliatory and orchestrated actions of respondent.
Indeed, there was only lapse in judgment rather than a premeditated defiance of
authority.
Further, petitioner's purported "thug-like" demeanor is not serious in nature.
Despite the "grave embarassment" supposedly caused on Gorospe, she did not
even take any separate action independent of the company. Likewise, respondent
did not elaborate exactly how and to what extent that its "nature of business" and
"industrial peace" were damaged by petitioner's misconduct. It was not shown in
detail that he has become unfit to continue working for the company and that the
continuance of his services is patently inimical to respondent's interest.
Even if a just cause exists, the employer still has the discretion whether to dismiss
the employee, impose a lighter penalty, or condone the offense committed.28 In
making such decision, the employee's past offenses may be taken into
consideration.29
x x x In Merin v. National Labor Relations Commission, this Court expounded on the
principle of totality of infractions as follows:
The totality of infractions or the number of violations committed during the period
of employment shall be considered in determining the penalty to be imposed upon
an erring employee. The offenses committed by petitioner should not be taken
singly and separately. Fitness for continued employment cannot be
compartmentalized into tight little cubicles of aspects of character, conduct and
ability separate and independent of each other. While it may be true that petitioner
was penalized for his previous infractions, this does not and should not mean that
his employment record would be wiped clean of his infractions. After all, the record
of an employee is a relevant consideration in determining the penalty that should
be meted out since an employee's past misconduct and present behavior must be
taken together in determining the proper imposable penalty[.] Despite the
sanctions imposed upon petitioner, he continued to commit misconduct and exhibit
undesirable behavior on board. Indeed, the employer cannot be compelled to
retain a misbehaving employee, or one who is guilty of acts inimical to its
interests.30
In this case, respondent contends that aside from petitioner's disrespectful remark
against Gorospe, he also committed several prior intentional misconduct, to wit:
erroneous packaging of a cargo of respondent's client, abandoning work after
logging in, failing to teach the rudiments of his job to the new employees assigned
to his group despite orders from his superior, and refusing to accept the
management's order on the transfer of assignment. After evaluating the gravity of
the charges and the number of infractions, respondent decided to dismiss
petitioner from his employment.
We do not agree. Respondent cannot invoke the principle of totality of infractions
considering that petitioner's alleged previous acts of misconduct were not
established in accordance with the requirements of procedural due process. In fact,
respondent conceded that he "was not even censured for any infraction in the
past." It admitted that "[the] March 25, 2009 incident that [petitioner] was referring
to could not be construed as laying the predicate for his dismissal, because [he] was
not penalized for the misrouting incident when he had adequately and satisfactorily
explained his side. Neither was he penalized for the other [memoranda] previously
or subsequently issued to him."31
This Court finds the penalty of dismissal too harsh. Not every case of
insubordination or willful disobedience by an employee reasonably deserves the
penalty of dismissal because the penalty to be imposed on an erring employee must
be commensurate with the gravity of his or her offense.32 Petitioner's termination
from employment is also inappropriate considering that he had been with
respondent company for seven (7) years and he had no previous derogatory record.
It is settled that notwithstanding the existence of a just cause, dismissal should not
be imposed, as it is too severe a penalty, if the employee had been employed for a
considerable length of time in the service of his or her employer, and such
employment is untainted by any kind of dishonesty and irregularity.33
Manner of dismissal
71

The procedural due process requirement was not complied with. King of Kings
Transport, Inc. v. Mamac,34 provided for the following rules m terminating the
services of employees:
(1) 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.
(2) After serving the first notice, the employers should schedule and conduct a
hearing or conference wherein the employees will be given the opportunity to: (1)
explain and clarify their defenses to the charge against them; (2) present evidence
in support of their defenses; and (3) rebut the evidence presented against them by
the management. During the hearing or conference, the employees are given the
chance to defend themselves personally, with the assistance of a representative or
counsel of their choice. Moreover, this conference or hearing could be used by the
parties as an opportunity to come to an amicable settlement.
(3) After determining that termination of employment is justified, the employers
shall serve the employees a written notice of termination indicating that: (1) all
circumstances involving the charge against the employees have been considered;
and (2) rounds have been established to justify the severance of their
employment.35
Later, Perez, et al. v. Phil. Telegraph and Telephone Co. et al.,36 clarified that an
actual or formal hearing is not an absolute requirement. The Court en banc held:
Article 277(b) of the Labor Code provides that, in cases of termination for a just
cause, an employee must be given "ample opportunity to be heard and to defend
himself." Thus, the opportunity to be heard afforded by law to the employee is
qualified by the word "ample" which ordinarily means "considerably more than
adequate or sufficient." In this regard, the phrase "ample opportunity to be heard"
can be reasonably interpreted as extensive enough to cover actual hearing or
conference. To this extent, Section 2(d), Rule I of the Implementing Rules of Book VI
of the Labor Code is in conformity with Article 277(b).
Nonetheless, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor
Code should not be taken to mean that holding an actual hearing or conference is a
condition sine qua non for compliance with the due process requirement in
termination of employment. The test for the fair procedure guaranteed under
Article 277(b) cannot be whether there has been a formal pretermination
confrontation between the employer and the employee. The "ample opportunity to
be heard" standard is neither synonymous nor similar to a formal hearing. To
confine the employee's right to be heard to a solitary form narrows down that right.
It deprives him of other equally effective forms of adducing evidence in his defense.
Certainly, such an exclusivist and absolutist interpretation is overly restrictive. The
"very nature of due process negates any concept of inflexible procedures
universally applicable to every imaginable situation."
The standard for the hearing requirement, ample opportunity, is couched in general
language revealing the legislative intent to give some degree of flexibility or
adaptability to meet the peculiarities of a given situation. To confine it to a single
rigid proceeding such as a formal hearing will defeat its spirit.
Significantly, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor
Code itself provides that the so-called standards of due process outlined therein
shall be observed "substantially," not strictly. This is a recognition that while a
formal hearing or conference is ideal, it is not an absolute, mandatory or exclusive
avenue of due process.
An employee's right to be heard in termination cases under Article 277(b) as
implemented by Section 2(d), Rule I of the Implementing Rules of Book VI of the
Labor Code should be interpreted in broad strokes. It is satisfied not only by a
formal face to face confrontation but by any meaningful opportunity to controvert
the charges against him and to submit evidence in support thereof.
A hearing means that a party should be given a chance to adduce his evidence to
support his side of the case and that the evidence should be taken into account in
the adjudication of the controversy. "To be heard" does not mean verbal
argumentation alone inasmuch as one may be heard just as effectively through
written explanations, submissions or pleadings. Therefore, while the phrase "ample
opportunity to be heard" may in fact include an actual hearing, it is not limited to a
formal hearing only. In other words, the existence of an actual, formal "trial-type"
72
hearing, although preferred, is not absolutely necessary to satisfy the employee's
right to be heard.
xxxx
[T]he employer may provide an employee with ample opportunity to be heard and
defend himself with the assistance of a representative or counsel in ways other
than a formal hearing. The employee can be fully afforded a chance to respond to
the charges against him, adduce his evidence or rebut the evidence against him
through a wide array of methods, verbal or written.
After receiving the first notice apprising him of the charges against him, the
employee may submit a written explanation (which may be in the form of a letter,
memorandum, affidavit or position paper) and offer evidence in support thereof,
like relevant company records (such as his 201 file and daily time records) and the
sworn statements of his witnesses. For this purpose, he may prepare his
explanation personally or with the assistance of a representative or counsel. He
may also ask the employer to provide him copy of records material to his defense.
His written explanation may also include a request that a formal hearing or
conference be held. In such a case, the conduct of a formal hearing or conference
becomes mandatory, just as it is where there exist substantial evidentiary disputes
or where company rules or practice requires an actual hearing as part of
employment pretermination procedure. To this extent, we refine the decisions we
have rendered so far on this point of law.
This interpretation of Section 2(d), Rule I of the Implementing Rules of Book VI of
the Labor Code reasonably implements the "ample opportunity to be heard"
standard under Article 277(b) of the Labor Code without unduly restricting the
language of the law or excessively burdening the employer. This not only respects
the power vested in the Secretary of Labor and Employment to promulgate rules
and regulations that will lay down the guidelines for the implementation of Article
277(b). More importantly, this is faithful to the mandate of Article 4 of the Labor
Code that "[a]ll doubts in the implementation and interpretation of the provisions
of [the Labor Code], including its implementing rules and regulations shall be
resolved in favor of labor."
In sum, the following are the guiding principles in connection with the hearing
requirement in dismissal cases:
(a) "ample opportunity to be heard" means any meaningful opportunity (verbal or
written) given to the employee to answer the charges against him and submit
evidence in support of his defense, whether in a hearing, conference or some other
fair, just and reasonable way.
(b) a formal hearing or conference becomes mandatory only when requested by the
employee in writing or substantial evidentiary disputes exist or a company rule or
practice requires it, or when similar circumstances justify it.
(c) the "ample opportunity to be heard" standard in the Labor Code prevails over
the "hearing or conference" requirement in the implementing rules and
regulations.37
In this case, the Memorandum dated April 3, 2009 provided:
Ito ay patungkol sa pangyayari kanina, mga bandang alas kuwatro ng hapon, na
kung saan ang mga ipinakita at ini-asal mo sa akin bilang iyong HR Supervisor na
pagbato/paghagis na may kasamang pagdadabog ang memo na ibinigay para sa iyo
na nagsasaad na ikaw ay pinag papaliwanag lamang sa mga alegasyon laban sa iyo
na dinulog sa aming tanggapan. Ikaw ay binigyan ng pagkakataon na ibigay ang
iyong paliwanag ngunit ang iyong ginawa ay, ikaw ay nagdabog at inihagis ang
memo sa harapan mismo ng iyong HR Supervisor sa kadahilanang hindi mo lamang
matanggap ang mga alegasyong inirereklamo tungkol sayo. Ang paninigaw mo at
pagsasabi na "Abnormal pala utak mo eh" sa HR Supervisor mo na mas nakatataas
sa iyo sa harap ng maraming empleyado ay nagpapakita lang na ikaw ay lumabag sa
patakaran ng kumpanya na "Serious Misconduct and willful disobedience by the
employee of the lawful orders of his employer or representative in connection with
his work."
Dahil dito, ang pamunuan ay nagdesisyon na ikaw ay suspendihin ng tatlumpung
araw (30) habang isinasagawa ang imbestigasyon at ito ay magsisimula
pagkatanggap mo ng liham na ito.
Para sa iyong kaalaman at pagsunod.38
On the other hand, the dismissal letter dated April 27, 2009, which was also signed
by Gorospe, stated:
Ito ay patungkol sa pangyayari na kung saan, ipinakita mo ang hindi kagandahang
asal at kagaspangan ng iyong pag-uugali at hindi pagbibigay ng respeto sa mas
nakatataas sa iyo. Na kung saan ay iyong ibinato/inihagis ang memo para sa iyo na
nagsasaad na ikaw ay pinag papaliwanag at binibigyan ng pagkakataon na marinig
ang iyong panig laban sa mga alegasyon na iyong kinakaharap. Ang paninigaw mo at
pagsasabi na "Abnormal pala utak mo eh" sa akin na HR Supervisor mo na mas
nakatataas sa iyo sa harap ng maraming empleyado ay nagpapakita lamang na ikaw
ay lumabag sa patakaran ng kumpanya, ang "Serious Misconduct by the employee
of the lawful orders of his employer or representative in connection with his work."
73
Nais naming sabihin na hindi pinahihintulutan ng pamunuan ang ganitong mga
pangyayari.
Dahil dito, ang pamunuan ay nagdesisyon na ikaw ay tanggalin sa kumpanyang ito
na magsisimula pagkatanggap mo ng sulat [na] ito.
Paki sa ayos ang iyong mga trabahong maiiwan.39
Evidently, Memorandum dated April 3, 2009 does not contain the following: a
detailed narration of facts and circumstances for petitioner to intelligently prepare
his explanation and defenses, the specific company rule violated and the
corresponding penalty therefor, and a directive giving him at least five (5) calendar
days to submit a written explanation. No ample opportunity to be heard was also
accorded to petitioner. Instead of devising a just way to get the side of petitioner
through testimonial and/or documentary evidence, respondent took advantage of
his "refusal" to file a written explanation. This should not be so. An employer is
duty-bound to exert earnest efforts to arrive at a settlement of its differences with
the employee. While a full adversarial hearing or conference is not required, there
must be a fair and reasonable opportunity for the employee to explain the
controversy at hand.40 Finally, the termination letter issued by respondent
miserably failed to satisfy the requisite contents of a valid notice of termination.
Instead of discussing the facts and circumstances to support the violation of the
alleged company rule that imposed a penalty of dismissal, the letter merely repeats
the self-serving accusations stated in Memorandum dated April 3, 2009.
Preventive Suspension
Similar to a case,41 no hearing or conference was called with respect to petitioner's
alleged misconduct. Instead, he was immediately placed under preventive
suspension for thirty (30) days and was dismissed while he was still serving his
suspension. According to respondent, it is proper to suspend him pending
investigation because his continued employment poses serious and imminent
threat to the life of the company officials and also endanger the operation of the
business of respondent, which is a common carrier duty bound to observe extra
ordinary diligence.42
Preventive suspension may be legally imposed against an employee whose alleged
violation is the subject of an investigation. The purpose of suspension is to prevent
harm or injury to the company as well as to fellow employees.43 The pertinent
rules dealing with preventive suspension are found in Sections 8 and 9 of Rule XXIII,
Book V of the Omnibus Rules Implementing the Labor Code, which read:
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.
As succinctly stated above, preventive suspension is justified where the employee's
continued employment poses a serious and imminent threat to the life or property
of the employer or of the employee's co-workers. Without this kind of threat,
preventive suspension is not proper.44 Here, it cannot be said that petitioner posed
a danger on the lives of the officers or employees of respondent or their properties.
Being one of the Operation Staff, which was a rank and file position, he could not
and would not be able to sabotage the operations of respondent. The difficulty of
finding a logical and reasonable connection between his assigned tasks and the
necessity of his preventive suspension is apparent from the fact that even
respondent was not able to present concrete evidence to support its general
allegation.
WHEREFORE, premises considered, the petition is GRANTED. The November 20,
2012 Decision and June 21, 2013 Resolution of the Court of Appeals in CA G.R. SP
No. 121176, which set aside the December 15, 2010 Resolution and July 20, 2011
Decision of the National Labor Relations Commission that affirmed the February 18,
2010 Decision of the Labor Arbiter finding the illegal dismissal of petitioner, are
hereby REVERSED AND SET ASIDE. The Labor Arbiter is DIRECTED to recompute the
proper amount of backwages and separation pay due to petitioner in accordance
with this decision.
SO ORDERED.
74
G.R. No. 206390
JACK C. VALENCIA, Petitioner,
vs.
CLASSIQUE VINYL PRODUCTS CORPORATION, JOHNNY CHANG (Owner) and/or
CANTINGAS MANPOWER SERVICES, Respondents.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari assails the December 5, 2012 Decision1 and
March 18, 2013 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 120999,
which respectively denied the Petition for Certiorari filed therewith by petitioner
Jack C. Valencia (Valencia) and the motion for reconsideration thereto.
Factual Antecedents
On March 24, 2010, Valencia filed with the Labor Arbiter a Complaint3 for
Underpayment of Salary and Overtime Pay; Non-Payment of Holiday Pay, Service
Incentive Leave Pay, 13th Month Pay; Regularization; Moral and Exemplary
Damages; and, Attorney's Fees against respondents Classique Vinyl Products
Corporation (Classique Vinyl) and its owner Johnny Chang (Chang) and/or
respondent Cantingas Manpower Services (CMS). When Valencia, however, asked
permission from Chang to attend the hearing in connection the said complaint on
April 17, 2010, the latter allegedly scolded him and told him not to report for work
anymore. Hence, Valencia amended his complaint to include illegal dismissal.4
In his Sinumpaang Salaysay, 5 Valencia alleged that he applied for work with
Classique Vinyl but was told by the latter's personnel office to proceed to CMS, a
local manpower agency, and therein submit the requirements for employment.
Upon submission thereof, CMS made him sign a contract of employment6 but no
copy of the same was given to him. He then proceeded to Classique Vinyl for
interview and thereafter started working for the company in June 2005 as felitizer
operator. Valencia claimed that he worked 12 hours a day from Monday to
Saturday and was receiving ₱187.52 for the first eight hours and an overtime pay of
₱117.20 for the next four hours, or beyond the then minimum wage mandated by
law. Five months later, he was made to serve as extruder operator but without the
corresponding increase in sa1aiy. He was neither paid his holiday pay, service
incentive leave pay, and 13th month pay. Worse, premiums for Philhealth and Pag-
IBIG Fund were not paid and his monthly deductions for Social Security System (SSS)
premiums were not properly remitted. He was also being deducted the amounts of
₱100.00 and ₱60.00 a week for Cash Bond and Agency Fee, respectively. Valencia
averred that his salary was paid on a weekly basis but his pay slips neither bore the
name of Classique Vinyl nor of CMS; that all the machineries that he was
using/operating in connection with his work were all owned by Classique Vinyl; and
that his work was regularly supervised by Classique Vinyl. He further averred that
he worked for Classique Vinyl for four years until his dismissal. Hence, by operation
of law, he had already attained the status of a regular employee of his true
employer, Classique Vinyl, since according to him, CMS is a mere labor-only
contractor. Valencia, therefore, argued that Classique Vinyl should be held guilty of
illegal dismissal for failing to comply with the twin-notice requirement when it
dismissed him from the service and be made to pay for his monetary claims.
Classique Vinyl, for its part, denied having hired Valencia and instead pointed to
CMS as the one who actually selected, engaged, and contracted out Valencia's
services. It averred that CMS would only deploy Valencia to Classique Vinyl
whenever there was an urgent specific task or temporary work and these occasions
took place sometime in the years 2005, 2007, 2009 and 2010. It stressed that
Valencia's deployment to Classique Vinyl was intermittent and limited to three to
four months only in each specific year. Classique Vinyl further contended that
Valencia's performance was exclusively and directly supervised by CMS and that his
wages and other benefits were also paid by the said agency. It likewise denied
dismissing Valencia from work and instead averred that on April 16, 2010, while
deployed with Classique Vinyl, Valencia went on a prolonged absence from work for
reasons only known to him. In sum, Classique Vinyl asserted that there was no
employer-employee relationship between it and Valencia, hence, it could not have
illegally dismissed the latter nor can it be held liable for Valencia's monetary claims.
Even assuming that Valencia is entitled to monetary benefits, Classique Vinyl
averred that it cannot be made to pay the same since it is an establishment
regularly employing less than 10 workers. As such, it is exempted from paying the
prescribed wage orders in its area and other benefits under the Labor Code. At any
rate, Classique Vinyl insisted that Valencia's true employer was CMS, the latter
being an independent contractor as shown by the fact that it was duly incorporated
and registered not only with the Securities and Exhange Commission but also with
the Department of Labor and Employment; and, that it has substantial capital or
investment in connection with the work performed and services rendered by its
employees to clients.
CMS, on the other hand, denied any employer-employee relationship between it
and Valencia. It contended that after it deployed Valencia to Classique Vinyl, it was
already the latter which exercised full control and supervision over him. Also,
Valencia's wages were paid by Classique Vinyl only that it was CMS which physically
handed the same to Valencia.
Ruling of the Labor Arbiter
75

On September 13, 2010, the Labor Arbiter issued a Decision,7 the pertinent
portions of which read:
Is [Valencia] a regular employee of respondent (Classique Vinyl]?
The Certificate of Business Name Registration issued by the Department of Trade
and Industry dated 17 August 2007 and the Renewal of PRP A License No. M-08-03-
269 for the period 29 August 2008 to 28 August 2010 issued by the Regional
Director of the National Capital Region of the Department of Labor and
Employment [on the] 1st day of September 2008 are pieces of evidence to prove
that respondent [CMS] is a legitimate Private Recruitment and Placement Agency.
Pursuant to its business objective, respondent CMS entered into several
Employment Contracts with complainant Valencia as Contractual Employee for
deployment to respondent [Classique Vinyl], the last of which was signed by
[Valencia] on 06 February 2010.
The foregoing Employment Contract for a definite period supports respondent
[Classique Vinyl's] assertion that [Valencia] was not hired continuously but
intermittently ranging from 3 months to 4 months for the years 2005, 2007, 2009
and 2010. Notably, no controverting evidence was offered to dispute respondent
[Classique Vinyl's] assertion.
Obviously, [Valencia] was deployed by CMS to [Classique Vinyl] for a fixed period.
In Pangilinan v. General Milling Corporation, G.R. No. 149329, July 12, 2004, the
Supreme Court ruled that it does not necessarily follow that where the duties of the
employee 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. There is thus nothing essentially contradictory
between a definite period of employment and the nature of the employee's duties.
Thus, even if respondent [Classique Vinyl] exercises full control and supervision over
the activities perfom1ed by [Valencia], the latter's employment cannot be
considered as regular.
Likewise, even if [Valencia] is considered the regular employee of respondent CMS,
the complaint for illegal dismissal cannot prosper as [the] employment was not
terminated by respondent CMS.
On the other hand, there is no substantial evidence to support
[Valencia's] view that he was actually dismissed from his employment by
respondent [Classique Vinyl]. After all, it is elementary that he who makes an
affirmative allegation has the burden of proof. On this score, [Valencia] failed to
establish that he was actually dismissed from his job by respondent [Classique
Vinyl], aside from his bare allegation.
With regard to underpayment of salary, respondent CMS admitted that it received
from respondent [Classique Vinyl] the salary for [Valencia's] deployment.
Respondent CMS never contested that the amount received was sufficient for the
payment of [Valencia's] salary.
Furthermore, respondent [Classique Vinyl] cannot be obliged to pay [Valencia's]
overtime pay, holiday pay, service incentive leave and 13th month pay as well as
the alleged illegal deduction on the following grounds:
a) [Valencia] is not a rank-and-file employee of [Classique Vinyl];
b) No proof was offered to establish that [Valencia] actually rendered overtime
services;
c) [Valencia had] not [worked] continuously or even intermittently for [one whole]
(1) year[-]period during the specific year of his deployment with respondent
[Classique Vinyl] to be entitled to service incentive leave pay.
d) [Valencia] failed to offer substantial evidence to prove that respondent
[Classique Vinyl] illegally deducted from his sala.7 the alleged agency and cash
bond.
Moreover, as against respondent CMS[,] the record is bereft of factual basis for the
exact computation of [Valencia's] money claims as it has remained uncontroverted
that [Valencia] was not deployed continuously neither with respondent [Classique
Vinyl] and/or to such other clientele.
WHEREFORE, premises considered, judgment is hereby rendered [d]ismissing the
above-entitled case for lack of merit and/or factual basis
SO ORDERED,8
Ruling of the National Labor Relations Commission
Valencia promptly appealed to the National Labor Relations Commission (NLRC).
Applying the four-fold test, the NLRC, however, declared CMS as Valencia's
employer in its Resolution9 dated April 14, 2011, viz.:
76

In Order to determine the existence of an employer-employee relationship, the
following yardstick had been consistently applied: (l) the selection and engagement;
(2) payment of wages; (3) power of dismissal and; (4) the power to control the
employee[']s conduct.
In this case, [Valencia] admitted that he applied for work with respondent [CMS] x x
x. Upon the acceptance of his application, he was made to sign an employment
contract x x x. [Valencia] also admitted that he received his wages from respondent
[CMS] x x x. As a matter of fact, respondent [CMS] argued that [Valencia] was given
a non-cash wage in the approximate amount of Php3,000.00 x x x.
Notably, it is explicitly stated in the employment contract of [Valencia] that he is
required to observe all the rules and regulations of the company as well as [the]
lawful instructions of the management during his employment. That failure to do so
would cause the termination of his employment contract. The pertinent provision
of the contract reads:
2. The employee shall observe all the rules and regulations of the company during
the period of employment and [the] lawful instructions of the management or its
representatives. Failure to do so or if performance is below company standards,
management [has] the right to immediatelycancel this contract. x x x
The fact that [Vale1icia] was subjected to such restriction is an evident exercise of
the power of control over [Valencia].
The power of control of respondent [CMS] over Valencia was further bolstered by
the declaration of the former that they will not take against [Valencia] his numerous
tardiness and absences at work and[;] his nonobservance of the company rules,·
The statement of [CMS] reads:
Needless to say that [Valencia] in the course of his employment has incurred many
infractions like tardiness and absences, non-observance of company rules, but
respondent [CMS], in reiteration will not take this up as leverage against [Valencia].
xxx
Though [Valencia] worked in the premises of Classique Vinyl x x x and that the
[equipment] he used in the performance of his work was provided by the between
[Valencia] and Classique Vinyl x x x in view of the foregoing circumstances earlier
reflected. Besides, as articulated by jurisprudence, the power of control does not
require actual exercise of the power but the power to wield that power x x x.
With the foregoing chain of events, it is evident that [Valencia] is an employee of
respondent [CMS].
x x x x10
Accordingly, the NLRC held that there is no basis for Valencia to hold Classique Vinyl
liable for his alleged illegal dismissal as well as for his money claims. Hence, the
NLRC dismissed Valencia's appeal and affirmed the decision of the Labor Arbiter.
Valencia's motion for reconsideration thereto was likewise denied for lack of merit
in the Resolution11 dated June 8, 2011.
Ruling of the Court of Appeals
When Valencia sought recourse from the CA, the said court rendered a Decision12
dated December 5, 2012 denying his Petition for Certiorari and affirming the ruling
of the NLRC.
Valencia's motion for reconsideration was likewise denied in a Resolution 13 dated
March 18, 2013.
Hence, this Petition for Review on Certiorari imputing upon the CA the following
errors:
WITH DUE RESPECT, IT IS A SERIOUS ERROR WHICH CONSTITUTE[S] GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION ON THE
PART OF THE HONORABLE COURT OF APPEALS TO HAVE RULED THAT PETITIONER IS
AN EMPLOYEE OF CMS AND FURTHER RULED THAT HE IS NOT ENTITLED TO HIS
MONETARY CLAIMS.
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS['] DECISION AND
RESOLUTION ARE CONTRARY TO LAW AND WELL-SETTLED RULE.14
Valencia points out that the CA, in ruling that he was an employee of CMS, relied
heavily on the employment contract which the latter caused him to sign. He argues,
however, that the said contract deserves scant consideration since aside from being
improperly filled up (there were many portions without entries), the same was not
notarized. Valencia likewise stresses that ti.11e burden of proving that CMS is a
legitimate job contractor lies with respondents. Here, neither Classique Vinyl nor
CMS was able to present proof that the latter has substantial capital to do business
as to be considered a legitimate independent contractor. Hence, CMS is presumed
to be a mere labor-only contractor and Classique Vinyl, as CMS' principal, was
Valencia's true employer. As to his alleged dismissal, Valencia argues that
77
respondents failed to establish just or authorized cause, thus, his dismissal was
illegal. Anent his monetary claims, Valencia invokes the principle that he who
pleads payment has the burden of proving it. Since respondents failed to present
even a single piece of evidence that he has been paid his labor standards benefits,
he believes that he is entitled to recover them from respondents who must be held
jointly and severally liable for the same. Further, Valencia contends that
respondents should be assessed moral and exemplary damages for circumventing
pertinent labor laws by preventing him from attaining regular employment status.
Lastly, for having been compelled to engage the services of counsel, Valencia claims
that he is likewise entitled to attorney's fees.
For their part, respondents Classique Vinyl and Chang point out that the issues
raised by Valencia involve questions of fact which are not within the ambit of a
petition for review on certiorari. Besides, findings of facts of the labor tribunals
when affirmed by the CA are generally binding on this Court. At any rate, the said
respondents reiterate the argun1ents they raised before the labor tribunals and the
CA.
With respect to respondent CMS, the Court dispensed with the filing of its
comment15 when the resolution requiring it to file one was returned to the Court
unserved 16 and after Valencia informed the Court that per Certification 17 of the
Office of the Treasurer of Valenzuela City where CMS's office was located, the latter
had already closed down its business on March 21, 2012.
Our Ruling
There is no merit in the Petition.
The core issue here is whether there exists an employer-employee relationship
between Classique Vinyl and Valencia. Needless to state, it is from the said
detennination that the other issues raised, i.e., whether Valencia was illegally
dismissed by Classique Vinyl and whether the latter is liable for his monetary claims,
hinge. However, as correctly pointed out by Classique Vinyl, "[t]he issue of whether
or not an employer-employee relationship existed between [Valencia] and
[Classique Vinyl] is essentially a question of fact." 18 "The Court is not a trier of facts
and will not review the factual findings of the lower tribunals as these are generally
binding and conclusive."'19 While there are recognized exceptions,20 none of them
applies in this case.
Even if otherwise, the Court is not inclined to depart from the uniform findings of
the Labor Arbiter, the NLRC and the CA.
"It is an oft-repeated rule that in labor cases, as in other administrative and quasi-
judicial proceedings, 'the quantum of proof necessary is substantial evidence, or
such amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.’ ‘The burden of proof rests upon the party who
asserts the affirmative of an issue’."21 Since it is Valencia here who is claiming to be
an employee of Classique Vinyl, it is thus incumbent upon him to proffer evidence
to prove the existence of employer-employee relationship between them. He
"needs to show by substantial evidence that he was indeed an employee of the
company against which he claims illegal dismissal."22 Corollary, the burden to
prove the elements of an employer-employee relationship, viz.: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power of control, lies upon Valencia.
Indeed, there is no hard and fast rule designed to establish the aforementioned
elements of employer-employee relationship.23 "Any competent and relevant
evidence to prove the relationship may be admitted."24 In this case, however,
Valencia failed to present competent evidence, documentary or otherwise, to
support his claimed employer-employee relationship between him and Classique
Vinyl. All he advanced were mere factual assertions unsupported by proof.
In fact, most of Valencia's allegations even militate against his claim that Classique
Vinyl was his true employer. For one, Valencia stated in his Sinumpaang Salaysay
that his application was actually received and processed by CMS which required him
to submit the necessary requirements for employment. Upon submission thereof, it
was CMS that caused him to sign an employment contract, which upon perusal, is
actually a contract between him and CMS. It was only after he was engaged as a
contractual employee of CMS that he was deployed to Classique Vinyl. Clearly,
Valencia's selection and engagement was undertaken by CMS and conversely, this
negates the existence of such element insofar as Classique Vinyl is concerned. It
bears to state, in addition, that as opposed to Valencia's argument, the lack of
notarization of the said employment contract did not adversely affect its veracity
and effectiveness since significantly, Valencia does not deny having signed the
same.25 The CA, therefore, did not err in relying on the said employment contract
in its determination of the merits of this case. For another, Valencia himself
acknowledged that the pay slips26 he submitted do not bear the name of Classique
Vinyl. While the Court in Vinoya v. National Labor Relations Commission27took
judicial notice of the practice of employer to course through the purported
contractor the act of paying wages to evade liabilities under the Labor Code, hence,
the non-appearance of employer's name in the pay slip, the Court is not inclined to
rule that such is the case here. This is conside1ing that although CMS claimed in its
supplemental Position Paper/Comment that the money it used to pay Valencia's
wages came from Classique Vinyl,28 the same is a mere allegation without proof
Moreover, such allegation is inconsistent with CMS's earlier assertion in its Position
78
Paper29 that Valencia received from it non-cash wages in an approximate amount
of ₱3,000.00. A clear showing of the element of payment of wages by Classique
Vinyl is therefore absent.
Aside from the afore-mentioned inconsistent allegations of Valencia, his claim that
his work was supervised by Classique Vinyl does not hold water. Again, the Court
finds the same as a self-serving assertion unworthy of credence. On the other hand,
the employment contract which Valencia signed with CMS categorically states that
the latter possessed not only the power of control but also of dismissal over him,
viz.:
xxxx
2. That the employee shall observe all rules and regulations of the company during
the period of employment and [the] lawful instructions of the management or its
representatives. Failure to do so or if performance is below company standards,
management [has] the right to immediately cancel this contract.
of this case, however, failed to establish that there is any circumvention of labor
laws as to call for the creation by the statute of an employer-employee relationship
between Classique Vinyl and Valencia. In fact, even as against CMS, Valencia's
money claims has been debunked by the labor tribunals and the CA. Again, the
Court is not inclined to disturb the same.
In view of the above disquisition, the Court finds no necessity to dwell on the issue
of whether Valencia was illegally dismissed by Classique Vinyl and whether the
latter is liable for Valencia's money claims.
WHEREFORE, the Petition for Review on Certiorari is DENIED. 'The assailed
December 5, 2012 Decision and March 18, 2013 Resolution of the Court of Appeals
in CA-G.R. SP No. 120999 are AFFIRMED.
SO ORDERED.

x x x x30

Clearly, therefore, no error can be attributed on the part of the labor tribunals and
the CA in ruling out the existence of employer-employee relationship between
Valencia and Classique Vinyl.

Further, the Court finds untenable Valencia's argument that neither Classique Vinyl
nor CMS was able to present proof that the latter is a legitimate independent
contractor and therefore, unable to rebut the presumption that a contractor is
presumed to be a labor-only contractor. "Genera1ly, the presumption is that the
contractor is a labor-only [contractor] unless such contractor overcomes the burden
of proving that it has the substantial capital, investment, tools and the lik.e."31
Here, to prove that CMS was a legitimate contractor, Classique Vinyl presented the
former's Certificate of Registration32 with the Department of Trade and Industry
and, License33 as private recruitment and placement agency from the Department
of Labor and Employment. Indeed, these documents are not conclusive evidence of
the status of CMS as a contractor. However, such fact of registration of CMS
prevented the legal presumption of it being a mere labor-only contractor from
arising.34 In any event, it must be stressed that "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 solidarily liable with
the labor-only contractor for all the rightful claims of the employees."35 The facts

79
G.R. No. 166208 June 29, 2007
KING OF KINGS TRANSPORT INC., CLAIRE DELA FUENTE and MELISSA LIM,
petitioners,
vs.
SANTIAGO O. MAMAC, respondent.
DECISION
VELASCO, JR., J.:
Is a verbal appraisal of the charges against the employee a breach of the procedural
due process? This is the main issue to be resolved in this plea for review under Rule
45 of the September 16, 2004 Decision1 of the Court of Appeals (CA) in CA-GR SP
No. 81961. Said judgment affirmed the dismissal of bus conductor Santiago O.
Mamac from petitioner King of Kings Transport, Inc. (KKTI), but ordered the bus
company to pay full backwages for violation of the twin-notice requirement and
13th-month pay. Likewise assailed is the December 2, 2004 CA Resolution2
rejecting KKTI’s Motion for Reconsideration.
The Facts
Petitioner KKTI is a corporation engaged in public transportation and managed by
Claire Dela Fuente and Melissa Lim.
Respondent Mamac was hired as bus conductor of Don Mariano Transit
Corporation (DMTC) on April 29, 1999. The DMTC employees including respondent
formed the Damayan ng mga Manggagawa, Tsuper at Conductor-Transport
Workers Union and registered it with the Department of Labor and Employment.
Pending the holding of a certification election in DMTC, petitioner KKTI was
incorporated with the Securities and Exchange Commission which acquired new
buses. Many DMTC employees were subsequently transferred to KKTI and excluded
from the election.
The KKTI employees later organized the Kaisahan ng mga Kawani sa King of Kings
(KKKK) which was registered with DOLE. Respondent was elected KKKK president.
Respondent was required to accomplish a "Conductor’s Trip Report" and submit it
to the company after each trip. As a background, this report indicates the ticket
opening and closing for the particular day of duty. After submission, the company
audits the reports. Once an irregularity is discovered, the company issues an
"Irregularity Report" against the employee, indicating the nature and details of the
irregularity. Thereafter, the concerned employee is asked to explain the incident by
making a written statement or counter-affidavit at the back of the same Irregularity
Report. After considering the explanation of the employee, the company then
makes a determination of whether to accept the explanation or impose upon the
employee a penalty for committing an infraction. That decision shall be stated on
said Irregularity Report and will be furnished to the employee.
Upon audit of the October 28, 2001 Conductor’s Report of respondent, KKTI noted
an irregularity. It discovered that respondent declared several sold tickets as
returned tickets causing KKTI to lose an income of eight hundred and ninety pesos.
While no irregularity report was prepared on the October 28, 2001 incident, KKTI
nevertheless asked respondent to explain the discrepancy. In his letter,3
respondent said that the erroneous declaration in his October 28, 2001 Trip Report
was unintentional. He explained that during that day’s trip, the windshield of the
bus assigned to them was smashed; and they had to cut short the trip in order to
immediately report the matter to the police. As a result of the incident, he got
confused in making the trip report.
On November 26, 2001, respondent received a letter4 terminating his employment
effective November 29, 2001. The dismissal letter alleged that the October 28, 2001
irregularity was an act of fraud against the company. KKTI also cited as basis for
respondent’s dismissal the other offenses he allegedly committed since 1999.
On December 11, 2001, respondent filed a Complaint for illegal dismissal, illegal
deductions, nonpayment of 13th-month pay, service incentive leave, and
separation pay. He denied committing any infraction and alleged that his dismissal
was intended to bust union activities. Moreover, he claimed that his dismissal was
effected without due process.
In its April 3, 2002 Position Paper,5 KKTI contended that respondent was legally
dismissed after his commission of a series of misconducts and misdeeds. It claimed
that respondent had violated the trust and confidence reposed upon him by KKTI.
Also, it averred that it had observed due process in dismissing respondent and
maintained that respondent was not entitled to his money claims such as service
incentive leave and 13th-month pay because he was paid on commission or
percentage basis.
On September 16, 2002, Labor Arbiter Ramon Valentin C. Reyes rendered judgment
dismissing respondent’s Complaint for lack of merit.6
Aggrieved, respondent appealed to the National Labor Relations Commission
(NLRC). On August 29, 2003, the NLRC rendered a Decision, the dispositive portion
of which reads:
80
WHEREFORE, the decision dated 16 September 2002 is MODIFIED in that
respondent King of Kings Transport Inc. is hereby ordered to indemnify complainant
in the amount of ten thousand pesos (P10,000) for failure to comply with due
process prior to termination.
The other findings are AFFIRMED.
SO ORDERED.7
Respondent moved for reconsideration but it was denied through the November
14, 2003 Resolution8 of the NLRC.
Thereafter, respondent filed a Petition for Certiorari before the CA urging the
nullification of the NLRC Decision and Resolution.
The Ruling of the Court of Appeals
Affirming the NLRC, the CA held that there was just cause for respondent’s
dismissal. It ruled that respondent’s act in "declaring sold tickets as returned tickets
x x x constituted fraud or acts of dishonesty justifying his dismissal."9
Also, the appellate court sustained the finding that petitioners failed to comply with
the required procedural due process prior to respondent’s termination. However,
following the doctrine in Serrano v. NLRC,10 it modified the award of PhP 10,000 as
indemnification by awarding full backwages from the time respondent’s
employment was terminated until finality of the decision.
Moreover, the CA held that respondent is entitled to the 13th-month pay benefit.
Hence, we have this petition.
The Issues
Petitioner raises the following assignment of errors for our consideration:
Whether the Honorable Court of Appeals erred in awarding in favor of the
complainant/private respondent, full back wages, despite the denial of his petition
for certiorari.
Whether the Honorable Court of Appeals erred in ruling that KKTI did not comply
with the requirements of procedural due process before dismissing the services of
the complainant/private respondent.
Whether the Honorable Court of Appeals rendered an incorrect decision in that [sic]
it awarded in favor of the complaint/private respondent, 13th month pay benefits
contrary to PD 851.11
The Court’s Ruling
The petition is partly meritorious.
The disposition of the first assigned error depends on whether petitioner KKTI
complied with the due process requirements in terminating respondent’s
employment; thus, it shall be discussed secondly.
Non-compliance with the Due Process Requirements
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.12 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.
Art. 277 of the Labor Code provides the manner of termination of employment,
thus:
Art. 277. Miscellaneous Provisions.––x x x
(b) Subject to the constitutional right of workers to security of tenure and their right
to be protected against dismissal except for a just and authorized cause without
prejudice to the requirement of notice under Article 283 of this Code, the employer
shall furnish the worker whose employment is sought to be terminated a written
notice containing a statement of the causes for termination and shall afford the
latter ample opportunity to be heard and to defend himself with the assistance of
his representative if he so desires in accordance with company rules and regulations
promulgated pursuant to guidelines set by the Department of Labor and
Employment. Any decision taken by the employer shall be without prejudice to the
right of the worker to contest the validity or legality of his dismissal by filing a
complaint with the regional branch of the National Labor Relations Commission.
The burden of proving that the termination was for a valid or authorized cause shall
rest on the employer.
Accordingly, the implementing rule of the aforesaid provision states:
81
SEC. 2. Standards of due process; requirements of notice.––In all cases of
termination of employment, the following standards of due process shall be
substantially observed:
I. For termination of employment based on just causes as defined in Article 282 of
the Code:
(a) A written notice served on the employee specifying the ground or grounds for
termination, and giving said employee reasonable opportunity within which to
explain his side.
(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if he so desires is given opportunity to respond to the charge,
present his evidence, or rebut the evidence presented against him.
(c) A written notice of termination served on the employee, indicating that upon
due consideration of all the circumstances, grounds have been established to justify
his termination. 13
In case of termination, the foregoing notices shall be served on the employee’s last
known address.14
To clarify, the following should be considered in terminating the services of
employees:
(1) 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.15 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.
(2) After serving the first notice, the employers should schedule and conduct a
hearing or conference wherein the employees will be given the opportunity to: (1)
explain and clarify their defenses to the charge against them; (2) present evidence
in support of their defenses; and (3) rebut the evidence presented against them by
the management. During the hearing or conference, the employees are given the
chance to defend themselves personally, with the assistance of a representative or
counsel of their choice. Moreover, this conference or hearing could be used by the
parties as an opportunity to come to an amicable settlement.
(3) After determining that termination of employment is justified, the employers
shall serve the employees a written notice of termination indicating that: (1) all
circumstances involving the charge against the employees have been considered;
and (2) grounds have been established to justify the severance of their
employment.
In the instant case, KKTI admits that it had failed to provide respondent with a
"charge sheet."16 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."17
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,18 the 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,19 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.
Second, even assuming that petitioner KKTI was able to furnish respondent an
Irregularity Report notifying him of his offense, such would not comply with the
requirements of the law. We observe from the irregularity reports against
respondent for his other offenses that such contained merely a general description
of the charges against him. The reports did not even state a company rule or policy
that the employee had allegedly violated. Likewise, there is no mention of any of
the grounds for termination of employment under Art. 282 of the Labor Code. Thus,
KKTI’s "standard" charge sheet is not sufficient notice to the employee.
Third, no hearing was conducted. Regardless of respondent’s written explanation, a
hearing was still necessary in order for him to clarify and present evidence in
82
support of his defense. Moreover, respondent made the letter merely to explain the
circumstances relating to the irregularity in his October 28, 2001 Conductor’s Trip
Report. He was unaware that a dismissal proceeding was already being effected.
Thus, he was surprised to receive the November 26, 2001 termination letter
indicating as grounds, not only his October 28, 2001 infraction, but also his previous
infractions.
Sanction for Non-compliance with Due Process Requirements
As stated earlier, 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.20 However, the doctrine in
Serrano had already been abandoned in Agabon v. NLRC by ruling that if the
dismissal is done without due process, the employer should indemnify the
employee with nominal damages.21
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 (PhP 30,000) as damages.
Thirteenth (13th)-Month Pay
Section 3 of the Rules Implementing Presidential Decree No. 85122 provides the
exceptions in the coverage of the payment of the 13th-month benefit. The
provision states:
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,24 respondent admitted that he was paid on
commission only. Moreover, this fact is supported by his pay slips25 which
indicated the varying amount of commissions he was receiving each trip. Thus, he
was excluded from receiving the 13th-month pay benefit.
WHEREFORE, the petition is PARTLY GRANTED and the September 16, 2004
Decision of the CA is MODIFIED by deleting the award of backwages and 13th-
month pay. Instead, petitioner KKTI is ordered to indemnify respondent the amount
of thirty thousand pesos (PhP 30,000) as nominal damages for failure to comply
with the due process requirements in terminating the employment of respondent.
No costs.
SO ORDERED.

SEC. 3. Employers covered.––The Decree shall apply to all employers except to:

xxxx

e) Employers of those who are paid on purely commission, boundary, or task basis,
and those who are paid a fixed amount for performing a specific work, irrespective
of the time consumed in the performance thereof, except where the workers are
paid on piece-rate basis in which case the employer shall be covered by this
issuance insofar as such workers are concerned.

Petitioner KKTI maintains that respondent was paid on purely commission basis;
thus, the latter is not entitled to receive the 13th-month pay benefit. However,
applying the ruling in Philippine Agricultural Commercial and Industrial Workers
Union v. NLRC,23 the CA held that respondent is entitled to the said 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

83
G.R. No. 181995 July 16, 2012
BIBIANO C. ELEGIR, Petitioner,
vs.
PHILIPPINE AIRLINES, INC., Respondent.
DECISION
REYES, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking
to annul and set aside the Decision1 dated August 6, 2007 of the Court of Appeals
(CA) in CA-G.R. SP No. 79111, which reversed and set aside the Decision2 dated
March 18, 2002 and Order3 dated June 30, 2003 of the National Labor Relations
Commission (NLRC) in NLRC NCR Case No. 00-08-06135-97 and NLRC NCR CA No.
015030-98.
Factual Antecedents
As culled from the records, the instant case stemmed from the following factual
antecedents:
Petitioner Bibiano C. Elegir (petitioner) was hired by Philippine Airlines, Inc. (PAL) as
a commercial pilot, specifically designated as HS748 Limited First Officer, on March
16, 1971.4
In 1995, PAL embarked on a refleeting program and acquired new and highly
sophisticated aircrafts. Subsequently, it sent an invitation to bid to all its flight deck
crew, announcing the opening of eight (8) B747-400 Captain positions that were
created by the refleeting program. The petitioner, who was then holding the
position of A-300 Captain, submitted his bid and was fortunately awarded the
same.5 The petitioner, together with seven (7) other pilots, was sent for training at
Boeing in Seattle, Washington, United States of America on May 8, 1995, to acquire
the necessary skills and knowledge in handling the new aircraft. He completed his
training on September 19, 1995.6
On November 5, 1996, after rendering twenty-five (25) years, eight (8) months and
twenty (20) days of continuous service, the petitioner applied for optional
retirement authorized under the Collective Bargaining Agreement (CBA) between
PAL and the Airline Pilots Association of the
Philippines (ALPAP), in which he was a member of good standing. In response, PAL
asked him to reconsider his decision, asseverating that the company has yet to
recover the full value of the costs of his training. It warned him that if he leaves PAL
before he has rendered service for at least three (3) years, it shall be constrained to
deduct the costs of his training from his retirement pay.7
On November 6, 1996, the petitioner went on terminal leave for thirty (30) days and
thereafter made effective his retirement from service. Upon securing his clearance,
however, he was informed that the costs of his training will be deducted from his
retirement pay, which will be computed at the rate of ₱ 5,000.00 per year of
service. The petitioner, through his counsel, sent PAL a correspondence, asserting
that his retirement benefits should be based on the computation stated in Article
287 of the Labor Code, as amended by Republic Act (R.A.) No. 7641, and that the
costs of his training should not be deducted therefrom. In its Reply dated August 4,
1997, PAL refused to yield to the petitioner’s demand and maintained that his
retirement pay should be based on PAL-ALPAP Retirement Plan of 1967 (PAL-ALPAP
Retirement Plan) and that he should reimburse the company with the
proportionate costs of his training. Thus, on August 27, 1997, the petitioner filed a
complaint for non-payment of retirement pay, moral damages, exemplary damages
and attorney’s fees against PAL.8
On February 6, 1998, the Labor Arbiter (LA) rendered a Decision,9 the pertinent
portions of which read:
From the foregoing, it is manifestly clear that an employee’s retirement benefits
under any collective bargaining agreement shall not be less than those provided
under the New Retirement Pay Law and if such benefits are less, the employee shall
pay the difference between the amount due the employee and that provided under
the CBA or individual agreement or retirement plan (Par. 3.2, Sec. 3, rules
Implementing the New Retirement Pay Law).
Thus, applying the pertinent CBA provision in correlation with the New Retirement
Pay Law, complainant should receive the following amount, to wit:
22.5 x 26 yrs. x P138,447.00= P2,700,301.50
If we were to follow the PAL’s computation of petitioner’s retirement pay, the
latter’s retirement benefits in the amount of P125,000.00 based on Section 2,
Article VII of the Retirement Plan of the CBA at P5,000.00 per every year of service
would be much less than his monthly salary of P138,477.00 at the time of his
retirement. This was never envisioned by the law. Instead, it is the clear intention of
our law makers to provide a bigger and better retirement pay or benefits under
existing laws and/or existing CBA or other agreements.
xxxx
84
 respondent. This is covered by the provision in the first paragraph of Article 287 of
WHEREFORE, in view of the foregoing, we find PAL liable to the petitioner for the the Labor Code which states that an employee may be retired upon reaching the
payment of his retirement benefits as follows: retirement age established in the collective bargaining agreement or other
applicable employment contract, inasmuch as the CBA in question does not provide
Retirement Benefits for any retirement age, but limited itself to the number of years of service or flying
(22.5 x 26 years x P138,477.00) ₱ 2,700,301.50 hours of the employee concerned. Consequently, anytime that an employee of
Accrued Trip Leave 760,299.37 respondent PAL reaches twenty (20) years of service or 20,000 (flying) hours as a
Accrued Vacation Leave 386,546.44 pilot of PAL, then his age at that precise time would be considered as the
1996 Unutilized days off 105,089.46 retirement age, as far as he is concerned.
Nov. ‘96 Prod. Allow. (net) 1,726.92
Unpaid Salary 12/1/-5/96 22,416.65 The retirement benefits of petitioner should, therefore, be computed in accordance
1996 w/tax refund 2,464.42 with both Article 287 of the Labor Code and the Retirement Plan in the CBA of PAL
13th month backpay for the year and ALPAP.
1988-1991 171,262.50
TOTAL On the second issue, we rule that petitioner is under obligation to reimburse a
₱ 4,150,106.20 portion of the expenses incurred for his training as B747-400 Captain.
plus legal interest of 12% per annum from November 06, 1996.
It would be grossly unfair and unjust to PAL if the petitioner would be allowed to
Finally, ten percent (10%) of all sums owing to petitioner is hereby adjudged as reap the fruits of this training, which upgraded his knowledge and skills that would
attorney’s fees. enable him to demand higher pay, if he would not be made to return said benefits
in the form of service for a reasonable period of time, say three (3) years as PAL’s
SO ORDERED.10 company policy demands. x x x

The LA ratiocinated that PAL had no right to withhold the payment of the xxxx
petitioner’s retirement benefits simply because he retired from service before the
lapse of three (3) years. To begin with, there was no document evidencing the fact Thus, with the adjudged reimbursement for training expenses of P921,281.71 (sic),
that the petitioner was required to stay with PAL for three (3) years from the the awards due to petitioner shall be, as follows:
completion of his training or that he was bound to reimburse the company of the
costs of his training should he retire from service before the completion of the Retirement Pay (P138,477.00 divided by 2 times 26) - P1,800,201.00
period. The LA likewise dismissed the theory espoused by PAL that the petitioner’s Service Incentive Leave (P138,477.00 divided by 30 x 5) - 23,074.50
submission of his bid for the new position which necessarily requires training Accrued Trip Leave - 386,546.44
created an innominate contract of du ut facias between him and the company since 13th Month Pay - 138,477.00
their relationship is governed by the CBA between the management and the 1996 Unutilized days off - 105,089.48
ALPAP.11 Nov. 1996 Productive Allowance (net) - 1,726.92
Unpaid salary 12/1-5/96 - 22,416.63
On appeal, the NLRC took a different stance and modified the decision of the LA in 1996 w/ tax refund - 2,464.42
its Decision dated March 18, 2002, which pertinently states: TOTAL - [₱] 2,479.996.39
LESS:
Considering that [petitioner] was only fifty-two (52) years when he opted to retire Reimbursement of training expenses 981,281.71
on November 6, 1996, he was, strictly, not yet qualified to receive the benefits 1996 13thmonth pay overpayment 19,837.16
provided under said Article 287 of the Labor Code, as amended by R.A. 7641. 1996 Christmas bonus overpayment 11,539.75
However, petitioner is eligible for retirement under the CBA between respondent PESALA 567.93
PAL and ALPAP, as he had already served for more than 25 years with said TOTAL - 1,013,226.55

85
RETIREMENT PAY STILL PAYABLE - [₱] 1,466,769.81 Code. Petitioner did not refute that he already got retirement benefits from
IN VIEW OF THE FOREGOING, the decision of the Labor Arbiter should be MODIFIED another retirement plan – the PAL
by increasing the awards to the petitioner to ONE MILLION FOUR HUNDRED SIXTY
SIX THOUSAND SEVEN HUNDRED SIXTY-NINE and 84/100 (P1,466,769.84) PESOS as Pilots Retirement Plan. It appearing that the retirement benefits amounting to
computed above. P1,800,201.00 being the main bone of contention herein, this Court proceeds to
compute the balance of Capt. Elegir’s retirement benefits as follows:
SO ORDERED.12
Retirement Pay (P5,000 x 25 years) ₱125,000.00
Both PAL and petitioner filed their respective motions for partial reconsideration Trip Leave Pay 757,564.04
from the decision of the NLRC. In its Motion for Partial Reconsideration,13 PAL Vacation Leave Pay 385,155.76
asseverated that the decision of the NLRC, directing the computation of the 1996 Unutilized Day-Off 104,711.38
petitioner’s retirement benefits based on Article 287 of the Labor Code, instead of Productivity Allowance for 1996 1,726.92
the CBA, was inconsistent with the disposition of this Court in Philippine Airlines, Unpaid Salary for December 1-5, 1996 22,335.00
Inc. v. Airline Pilots Association of the Philippines.14 It emphasized that in said case, 1996 Withholding Tax Refund 2,464.42
this Court sustained PAL’s position and directed the payment of retirement benefits P1,398,957.52
of the complainant pilot in accordance with the PAL-ALPAP Retirement Plan. Less Accountabilities:
However, in an Order15 dated June 30, 2003, the NLRC denied PAL’s motion for Training Cost ₱981,281.71
reconsideration. 1996 13th Month Pay Overpayment 19,837.16
1996 Christmas Bonus 11,539.75
Unyielding, PAL filed a petition for certiorari with the CA. In said petition, PAL PESALA 567.93
emphasized that the petitioner’s case should be decided in light of the ruling in 1,013,226.55
Philippine Airlines, Inc., where this Court held that the computation of the BALANCE ₱ 385,730.97
retirement pay of a PAL pilot who retired before reaching the retirement age of pursuant to the ruling in G.R. No. 143686.
sixty (60) should be based on the PAL-ALPAP Retirement Plan or at the rate of
P5,000.00 for every year of service.16 xxxx

In its Decision dated August 6, 2007, the CA ruled that the petitioner’s retirement
pay should be computed in accordance with PAL-ALPAP Retirement Plan and the
PAL Pilots’ Retirement Benefit Plan as was held in Philippine Airlines, Inc. It held,
thus:
The present case squarely falls within the state of facts upon which the ruling in
Philippine Airlines, Inc., vs. Airline Pilots Association of the Philippines was
enunciated. Petitioner herein applies for retirement at an age below 60. A
distinction was made between a pilot who retires at the age of sixty and another
who retires earlier. The Supreme Court was explicit when it declared:
"A pilot who retires after twenty years of service or after flying 20,000 hours would
still be in the prime of his life and at the peak of his career, compared to one who
retires at the age of 60 years old."
Furthermore, petitioner would not be getting less if his retirement pay is computed
on the PAL-ALPAP retirement plan rather than the formula provided by the Labor
WHEREFORE, the petition is GRANTED. The Decision of public respondent dated
March 18, 2002 and its Order of June 30, 2003 are REVERSED and SET ASIDE. The
retirement benefits of petitioner Capt. Bibiano Elegir shall be based on the 1967
PAL-ALPAP Retirement Plan andthe PAL Pilots Retirement Benefit Plan and the
balance still due him, pegged at P385,730.97.
SO ORDERED.17 (Citation omitted and emphasis supplied)
The petitioner filed a motion for reconsideration but the same was denied in a
Resolution18 dated February 21, 2008. Aggrieved, the petitioner appealed to this
Court.
Essentially, we are called upon to rule on the following issues:
1. Whether the petitioner’s retirement benefits should be computed based on
Article 287 of the Labor Code or on PAL’s retirement plans;

86
2. Whether the petitioner should reimburse PAL with the proportionate costs of his
training; and
3. Whether interest should be imposed on the monetary award in favor of the
petitioner.
The Ruling of this Court
The petitioner’s retirement pay should be computed based on PAL’s retirement
plans.
The petitioner maintains that it is Article 287 of the Labor Code which should be
applied in the computation of his retirement pay since the same provides for higher
benefits. He contends that the CA erroneously resorted to the ruling in Philippine
Airlines, Inc. since the circumstances in the said case, which led this Court to rule in
favor of the applicability of PAL’s retirement plans in computing retirement
benefits, are unavailing in the present case. Specifically, he pointed out that the
pilot in Philippine Airlines, Inc. retired at the age of forty-five (45), while he opted to
retire at fifty-two (52). He further emphasized that the ruling was anchored on a
finding that the retirement benefits that the pilot would get under Article 287 of the
Labor Code are less than those he would get under PAL’s retirement plans.19
Apparently, the petitioner failed to appreciate the heart behind the ruling in
Philippine Airlines, Inc. To recapitulate, the case stemmed from PAL’s unilateral act
of retiring airline pilot Captain Albino Collantes (Collantes) under the authority of
Section 2, Article VII of the PAL-ALPAP Retirement Plan. Thereafter, ALPAP filed a
Notice of Strike with the Department of Labor and Employment (DOLE),
asseverating that the retirement of Collantes constituted illegal dismissal and union
busting. The Secretary of Labor assumed jurisdiction and eventually upheld PAL’s
action of retiring Collantes as a valid exercise of its option under Section 2, Article
VII of the PAL-ALPAP Retirement Plan. It further directed for the computation of
Collantes’ retirement benefits on the basis of Article 287 of the Labor Code.20
Acting on Collantes’ petition for certiorari, the CA held that the pilot’s retirement
benefits should be based on Article 287 of the Labor Code and not on the PAL-
ALPAP Retirement Plan. On appeal to this Court, we reversed the CA and ruled that
Collantes’ retirement benefits should be computed based on the PAL-ALPAP
Retirement Plan and the PAL Pilots’ Retirement Benefit Plan and not on Article 287
of the Labor Code since the benefits under the two (2) plans are substantially higher
than the latter. The dispositive portion of the decision reads:
WHEREFORE, in view of all the foregoing, the petition is GRANTED. The March 2,
2000 Decision and the June 19, 2000 Resolution of the Court of Appeals in CA-G.R.
SP No. 54403 are REVERSED and SET ASIDE. The Order of the Secretary of Labor in
NCMB-NCR-N.S. 12-514-97 dated June 13, 1998, is MODIFIED as follows: The
retirement benefits to be awarded to Captain Albino Collantes shall be based on the
1967 PAL-ALPAP Retirement Plan and the PAL Pilots’ Retirement Benefit Plan. The
directive contained in subparagraph (2) of the dispositive portion thereof, which
required petitioner to consult the pilot involved before exercising its option to retire
him, is DELETED. The said Order is AFFIRMED in all other respects.
SO ORDERED.21 (Emphasis supplied)
It bears reiterating that there are only two retirement schemes at point in this case:
(1) Article 287 of the Labor Code, and; (2) the PAL-ALPAP Retirement Plan and the
PAL Pilots’ Retirement Benefit Plan. The two retirement schemes are alternative in
nature such that the retired pilot can only be entitled to that which provides for
superior benefits.
Article 287 of the Labor Code states:
Art. 287. Retirement. - Any employee may be retired upon reaching the retirement
age established in the collective bargaining agreement or other applicable
employment contract.
In case of retirement, the employee shall be entitled to receive such retirement
benefits as he may have earned under existing laws and any collective bargaining
agreement and other agreements: provided, however, that an employee’s
retirement benefits under any collective bargaining and other agreements shall not
be less than those provided herein.
In the absence of a retirement plan or agreement plan providing for retirement
benefits of employees in the establishment, an employee upon reaching the age of
sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared as the compulsory retirement age, who has served at least five (5) years in
the said establishment, may retire and shall be entitled to retirement pay
equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term ‘one-half (1/2) month
salary’ shallmean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay
and the cash equivalent of not more than five (5) days of service incentive leaves. x
x x (Emphasis supplied)
It can be clearly inferred from the language of the foregoing provision that it is
applicable only to a situation where (1) there is no CBA or other applicable
employment contract providing for retirement benefits for an employee, or (2)
87
there is a CBA or other applicable employment contract providing for retirement
benefits for an employee, but it is below the requirement set by law. The rationale
for the first situation is to prevent the absurd situation where an employee,
deserving to receive retirement benefits, is denied them through the nefarious
scheme of employers to deprive employees of the benefits due them under existing
labor laws. On the other hand, the second situation aims to prevent private
contracts from derogating from the public law.22
The primary application of existing CBA in computing retirement benefits is implied
in the title of R.A. No. 7641 which amended Article 287 of the Labor Code. The
complete title of R.A. No. 7641 reads: "An Act Amending Article 287 of Presidential
Decree No. 442, As Amended, otherwise known as the Labor Code of the
Philippines, By Providing for Retirement Pay to Qualified Private Sector in the
Absence of Any Retirement Plan in the Establishment."23
Emphasis must be placed on the fact that the purpose of the amendment is not
merely to establish precedence in application or accord blanket priority to existing
CBAs in computing retirement benefits. The determining factor in choosing which
retirement scheme to apply is still superiority in terms of benefits provided. Thus,
even if there is an existing CBA but the same does not provide for retirement
benefits equal or superior to that which is provided under Article 287 of the Labor
Code, the latter will apply. In this manner, the employee can be assured of a
reasonable amount of retirement pay for his sustenance.
Consistent with the purpose of the law, the CA correctly ruled for the computation
of the petitioner’s retirement benefits based on the two (2) PAL retirement plans
because it is under the same that he will reap the most benefits. Under the PAL-
ALPAP Retirement Plan, the petitioner, who qualified for late retirement after
rendering more than twenty (20) years of service as a pilot, is entitled to a lump
sum payment of P125,000.00 for his twenty-five (25) years of service to PAL.
Section 2, Article VII of the PAL-ALPAP Retirement Plan provides:
Section 2. Late Retirement. Any member who remains in the service of the company
after his normal retirement date may retire either at his option or at the option of
the Company, and when so retired he shall be entitled either: (a) to a lump sum
payment of P5,000.00 for each completed year of service rendered as a pilot, or (b)
to such termination pay benefits to which he may be entitled under existing laws,
whichever is the greater amount.24
Apart from the abovementioned benefit, the petitioner is also entitled to the equity
of the retirement fund under PAL Pilots’ Retirement Benefit Plan, which pertains to
the retirement fund raised from contributions exclusively from PAL of amounts
equivalent to 20% of each pilot’s gross monthly pay. Each pilot stands to receive the
full amount of the contribution upon his retirement which is equivalent to 240% of
his gross monthly income for every year of service he rendered to PAL. This is in
addition to the amount of not less than P100,000.00 that he shall receive under the
PAL-ALPAP Retirement Plan.25
In sum, therefore, the petitioner will receive the following retirement benefits:
(1) P125,000.00 (25 years x P5,000.00) for his 25 years of service to PAL under the
PAL-ALPAP Retirement Plan, and;
(2) 240% of his gross monthly salary for every year of his employment or, more
specifically, the summation of PAL’s monthly contribution of an amount equivalent
to 20% of his actual monthly salary, under the PAL Pilots’ Retirement Benefit Plan.
As stated in the records, the petitioner already received the amount due to him
under the PAL Pilots’ Retirement Benefit Plan.26 As much as we would like to
demonstrate with specificity the amount of the petitioner’s entitlement under said
plan, we are precluded from doing so because there is no record of the petitioner’s
salary, including increments thereto, attached to the records of this case. To
reiterate, the benefit under the PAL Pilots’ Retirement Benefit Plan pertains to the
totality of PAL’s monthly contribution for every pilot, which amounts to 20% of the
actual monthly salary. Necessarily, the computation of this benefit requires a record
of the petitioner’s salary, which was unfortunately not submitted by either of the
parties. At any rate, the petitioner did not dispute the fact that he already received
his entitlement under the PAL Pilots’ Retirement Benefit Plan nor did he question
the propriety of the amount tendered. Thus, we can reasonably assume that he
received the rightful amount of his entitlement under the plan.
On the other hand, under Article 287 of the Labor Code, the petitioner would only
be receiving a retirement pay equivalent to at least one-half (1/2) of his monthly
salary for every year of service, a fraction of at least six (6) months being considered
as one whole year. To stress, one-half (1/2) month salary means 22.5 days: 15 days
plus 2.5 days representing one-twelfth (1/12) of the 13th month pay and the
remaining 5 days for service incentive leave.27
Comparing the benefits under the two (2) retirement schemes, it can readily be
perceived that the 22.5 days worth of salary for every year of service provided
under Article 287 of the Labor Code cannot match the 240% of salary or almost two
and a half worth of monthly salary per year of service provided under the PAL
Pilots’ Retirement Benefit Plan, which will be further added to the P125,000.00 to
which the petitioner is entitled under the PAL-ALPAP Retirement Plan. Clearly then,
it is to the petitioner’s advantage that PAL’s retirement plans were applied in the
computation of his retirement benefits.
88

The petitioner should reimburse PAL with the costs of his training.
As regards the issue of whether the petitioner should be obliged to reimburse PAL
with the costs of his training, the ruling in Almario v. Philippine Airlines, Inc.28 is
controlling. Essentially, in the mentioned case, this Court recognized the right of
PAL to recoup the costs of a pilot’s training in the form of service for a period of at
least three (3) years. This right emanated from the CBA between PAL and ALPAP,
which must be complied with good faith by the parties. Thus:
"The CBA is the law between the contracting parties – the collective bargaining
representative and the employer-company. Compliance with a CBA is mandated by
the expressed policy to give protection to labor. In the same vein, CBA provisions
should be "construed liberally rather than narrowly and technically, and the courts
must place a practical and realistic construction upon it, giving due consideration to
the context in which it is negotiated and purpose which it is intended to serve." This
is founded on the dictum that a CBA is not an ordinary contract but one impressed
with public interest. It goes without saying, however, that only provisions embodied
in the CBA should be so interpreted and complied with. Where a proposal raised by
a contracting party does not find print in the CBA, it is not a part thereof and the
proponent has no claim whatsoever to its implementation."
In N.S. Case No. 11-506-87, "In re Labor Dispute at the Philippine Airlines, Inc.," the
Secretary of the Department of Labor and Employment (DOLE), passing on the
failure of PAL and ALPAP to agree on the terms and conditions for the renewal of
their CBA which expired on December 31, 1987 and construing Section 1 of Article
XXIII of the 1985-1987 CBA, held:
xxxx
Section 1, Article XXIII of the 1985-1987 CBA provides:
Pilots fifty-five (55) years of age or over who have not previously qualified in any
Company turbo-jet aircraft shall not be permitted to bid into the Company’s turbo-
jet operations. Pilots fifty-five (55) years of age or over who have previously
qualified in the company’s turbo-jet operations may be by-passed at Company
option, however, any such pilot shall be paid the by-pass pay effective upon the
date a junior pilot starts to occupy the bidded position.
x x x PAL x x x proposed to amend the provision in this wise:
The compulsory retirement age for all pilots is sixty (60) years. Pilots who reach the
age of fifty-five (55) years and over without having previously qualified in any
Company turbo-jet aircraft shall not be permitted to occupy any position in the
Company’s turbo-jet fleet. Pilots fifty-four (54) years of age and over are ineligible
for promotion to any position in Group I. Pilots reaching the age of fifty-five (55)
shall be frozen in the position they currently occupy at that time and shall be
ineligible for any further movement to any other positions.
PAL’s contention is basically premised on prohibitive training costs. The return on
this investment in the form of the pilot promoted is allegedly five (5) years.
Considering the pilot’s age, the chances of full recovery are asserted to be quite
slim.
ALPAP opposed the proposal and argued that the training cost is offset by the pilot’s
maturity, expertise and experience.
By way of compromise, we rule that a pilot should remain in the position where he
is upon reaching age fifty-seven (57), irrespective of whether or not he has
previously qualified in the Company’s turbo-jet operations. The rationale behind
this is that a pilot who will be compulsorily retired at age sixty (60) should no longer
be burdened with training for a new position. But if a pilot is only at age fifty-five
(55), and promotional positions are available, he should still be considered and
promoted if qualified, provided he has previously qualified in any company turbo-
jet aircraft. In the latter case, the prohibitive training costs are more than offset by
the maturity, expertise, and experience of the pilot.
Thus, the provision on age limit should now read:
Pilots fifty-seven (57) years of age shall be frozen in their positions.1âwphi1 Pilots
fifty-five (55) [sic] years of age provided they have previously qualified in any
company turbo-jet aircraft shall be permitted to occupy any position in the
company’s turbo-jet fleet.29 (Citations omitted and emphasis supplied)
Further, we considered PAL’s act of sending its crew for training as an investment
which expects an equitable return in the form of service within a reasonable period
of time such that a pilot who decides to leave the company before it is able to
regain the full value of the investment must proportionately reimburse the latter
for the costs of his training. We ratiocinated:
It bears noting that when Almario took the training course, he was about 39 years
old, 21 years away from the retirement age of 60. Hence, with the maturity,
expertise, and experience he gained from the training course, he was expected to
serve PAL for at least three years to offset "the prohibitive costs" thereof.
89
The pertinent provision of the CBA and its rationale aside, contrary to Almario’s
claim, Article 22 of the Civil Code which reads:
"Art. 22. Every person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him," applies.
This provision on unjust enrichment recognizes the principle that one may not
enrich himself at the expense of another. An authority on Civil Law writes on the
subject, viz:
"Enrichment of the defendant consists in every patrimonial, physical, or moral
advantage, so long as it is appreciable in money. It may consist of some positive
pecuniary value incorporated into the patrimony of the defendant, such as: (1) the
enjoyment of a thing belonging to the plaintiff; (2) the benefits from service
rendered by the plaintiff to the defendant; (3) the acquisition of a right, whether
real or personal; (4) the increase of value of property of the defendant; (5) the
improvement of a right of the defendant, such as the acquisition of a right of
preference; (6) the recognition of the existence of a right in the defendant; and (7)
the improvement of the conditions of life of the defendant.
x x x x"
Admittedly, PAL invested for the training of Almario to enable him to acquire a
higher level of skill, proficiency, or technical competence so that he could efficiently
discharge the position of A-300 First Officer. Given that, PAL expected to recover
the training costs by availing of Almario’s services for at least three years. The
expectation of PAL was not fully realized, however, due to Almario’s resignation
after only eight months of service following the completion of his training course.
He cannot, therefore, refuse to reimburse the costs of training without violating the
principle of unjust enrichment.30 (Citation omitted and emphasis supplied)
After perusing the records of this case, we fail to find any significant fact or
circumstance that could warrant a departure from the established jurisprudence.
The petitioner admitted that as in Almario, the prevailing CBA between PAL and
ALPAP at the time of his retirement incorporated the same stipulation in Section 1,
Article XXIII of the 1985-1987 CBA31 which provides:
Pilots fifty-seven (57) years of age shall be frozen in their positions. Pilots fifty-five
(55) [sic] years of age provided they have previously qualified in any company
turbo-jet aircraft shall be permitted to occupy any position in the company’s turbo-
jet fleet.32
As discussed in Almario, the above provision initially set the age of fifty-five (55)
years as the reckoning point when a pilot becomes disqualified to bid for a higher
position. The age of disqualification was set at 55 years old to enable PAL to fully
recover the costs of the pilot’s training within a period of five (5) years before the
pilot reaches the compulsory retirement age of sixty (60). The DOLE Secretary
however lowered the age to fifty-seven (57), thereby cutting the supposed period of
recovery of investment to three (3) years. The DOLE Secretary justified the
amendment in that the "prohibitive training costs are more than offset by the
maturity, expertise and the experience of the pilot."33
By carrying over the same stipulation in the present CBA, both PAL and ALPAP
recognized that the company’s effort in sending pilots for training abroad is an
investment which necessarily expects a reasonable return in the form of service for
a period of at least three (3) years. This stipulation had been repeatedly adopted by
the parties in the succeeding renewals of their CBA, thus validating the impression
that it is a reasonable and acceptable term to both PAL and ALPAP. Consequently,
the petitioner cannot conveniently disregard this stipulation by simply raising the
absence of a contract expressly requiring the pilot to remain within PAL’s employ
within a period of 3 years after he has been sent on training. The supposed absence
of contract being raised by the petitioner cannot stand as the CBA clearly covered
the petitioner’s obligation to render service to PAL within 3 years to enable it to
recoup the costs of its investment.
Further, to allow the petitioner to leave the company before it has fulfilled the
reasonable expectation of service on his part will amount to unjust enrichment.
Pertinently, Article 22 of the New Civil Code states:
Art. 22. Every person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him.
There is unjust enrichment when a person unjustly retains a benefit at the loss of
another, or when a person retains the money or property of another against the
fundamental principles of justice, equity and good conscience. Two conditions must
concur: (1) a person is unjustly benefited; and (2) such benefit is derived at the
expense of or with damages to another. The main objective of the principle of
unjust enrichment is to prevent one from enriching oneself at the expense of
another. It is commonly accepted that this doctrine simply means that a person
shall not be allowed to profit or enrich himself inequitably at another’s expense.34
The enrichment may consist of a patrimonial, physical, or moral advantage, so long
as it is appreciable in money.35 It must have a correlative prejudice, disadvantage
or injury to the plaintiff which may consist, not only of the loss of the property or
the deprivation of its enjoyment, but also of the non-payment of compensation for
90
a prestation or service rendered to the defendant without intent to donate on the
part of the plaintiff, or the failure to acquire something what the latter would have
obtained.36
As can be gathered from the facts, PAL invested a considerable amount of money in
sending the petitioner abroad to undergo training to prepare him for his new
appointment as B747-400 Captain. In the process, the petitioner acquired new
knowledge and skills which effectively enriched his technical know-how. As all other
investors, PAL expects a return on investment in the form of service by the
petitioner for a period of 3 years, which is the estimated length of time within
which the costs of the latter’s training can be fully recovered. The petitioner is, thus,
expected to work for PAL and utilize whatever knowledge he had learned from the
training for the benefit of the company. However, after only one (1) year of service,
the petitioner opted to retire from service, leaving PAL stripped of a necessary
manpower.
Undeniably, the petitioner was enriched at the expense of PAL. After undergoing
the training fully shouldered by PAL, he acquired a higher level of technical
competence which, in the professional realm, translates to a higher compensation.
To prove this point, his monthly salary of P125,692.00 was increased to
P131,703.00 while he was still undergoing training. After his training, his salary was
further increased to P137,977.00.37 Further, his training broadened his
opportunities for a better employment as in fact he was able to transfer to another
airline company immediately after he left PAL.38 To allow the petitioner to simply
leave the company without reimbursing it for the proportionate amount of the
expenses it incurred for his training will only magnify the financial disadvantage
sustained by PAL. Reason and fairness dictate that he must return to the company a
proportionate amount of the costs of his training.
Award of interest not warranted under the circumstances.
The petitioner claims that the CA should have imposed interest on the monetary
award in his favor. To support his claim, he cited the case of Eastern Shipping Lines,
Inc. v. Court of Appeals,39 where this Court summarized the rules in the imposition
of the proper interest rates:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,
delicts or quasi-delicts is breached, the contravenor can be held liable for damages.
The provisions under Title XVIII on "Damages" of the Civil Code govern in
determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages except when or until the demand can
be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time
the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case,
be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit.40 (Citations omitted and emphasis supplied)
The petitioner, however, took the foregoing guidelines out of context and
entertained a misplaced supposition that all judgments which include a monetary
award must be imposed with interest. The jurisprudential guideline clearly referred
to breach of an obligation consisting of a forbearance of money, goods or credit
before the imposition of a legal interest of 12% can be warranted. Such essential
element is nowhere to be found in the facts of this case. Even granting that an
interest of 6% may be imposed in cases of breached obligations not constituting
loan or forbearance of money, loan or credit, such depends upon the discretion of
the court. If at all, the monetary award in favor of the petitioner will earn legal
interest from the time the judgment becomes final and executory until the same is
fully satisfied, regardless of the nature of the breached obligation. The imposition is
justified considering that the interim period from the finality of judgment, awarding
91
a monetary claim and until payment thereof, is deemed to be equivalent to a
forbearance of credit.41

WHEREFORE, in view of the foregoing disquisitions, the petition is DENIED. The

Decision dated August 6, 2007 of the Court of Appeals in CA-G.R. SP No. 79111 is
AFFIRMED. The Labor Arbiter is hereby DIRECTED to compute Bibiano C. Elegir's
retirement pay based on the 1967 PAL-ALPAP Retirement Plan and the PAL Pilots'
Retirement Benefit Plan, crediting Philippine Airlines, Inc. for the amount it had
already paid the petitioner under the mentioned plans.

SO ORDERED.

92
G.R. No. 214961, September 16, 2015
BANCO DE ORO UNIBANK, INC., Petitioner, v. GUILLERMO C. SAGAYSAY,
Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and set aside the March
31, 2014 Decision1 and the October 8, 2014 Resolution2 of the Court of Appeals
(CA) in CA-G.R. SP No. 126586, which reversed and set aside the February 29, 2012
Decision3 and the June 25, 2012 Resolution4 of the National Labor Relations
Commission (NLRC) and reinstated the July 19, 2011 Decision5 of the Labor Arbiter
(LA) in NLRC Case No. RAB II 02-0067-11.
The Facts
On May 16, 2006, respondent Guillermo Sagaysay (Sagaysay) was hired by
petitioner Banco De Oro Unibank, Inc., (BDO) as Senior Accounting Assistant 5 in its
San Jose, Nueva Ecija, branch as a result of a merger with United Overseas Bank
(UOB), with BDO as the surviving bank. Sagaysay was previously employed in UOB
from 2004 to 2006 or for two (2) years. Prior thereto, he worked for Metropolitan
Bank and Trust Co. (Metrobank) from 1976 to 2004 for a period of twenty-eight (28)
years.
In a letter,6 dated January 8, 2010, BDO informed Sagaysay that, pursuant to the
retirement policy of the bank which mandated its retirement age to be sixty (60), he
would be formally retired effective September 1, 2010, a few days after his 60th
birthday. The normal or compulsory retirement age of the bank was based on its
retirement plan7 which was implemented on July 1, 1994, Section 1, Article V of
which reads:chanRoblesvirtualLawlibrary
Section 1. Normal Retirement
The Normal Retirement Date of each member shall be the first day of the month
coincident with or next following his sixtieth (60th) birthday. The Member's Normal
Retirement Benefit shall be a sum determined in accordance with the Retirement
Benefit Schedule stated in Section 4 of this Article as of his retirement
date.8ChanRoblesVirtualawlibrary
In an e-mail,9 dated July 27, 2010, Sagaysay wrote that, although the time had
come that the BDO Retirement Program would be implemented to those reaching
the age of sixty (60), he requested that his services be extended because he had an
outstanding loan and his children were still in college. He assured BDO that he was
healthy and could still perform his duties in the branch. BDO denied Sagaysay's
request.
In another e-mail,10 dated August 19, 2010, Sagaysay appealed to BDO to extend
his service for 8.5 months or up to May 16, 2011 so that he could render at least
five (5) years of employment which would entitle him to 50% of his basic pay for
every year of service upon his retirement. BDO denied Sagaysay's appeal and
retired him on September 1, 2010. As of his last day of work, he was earning a
monthly salary of P28,048.00.
Sagaysay then signed Release, Waiver and Quitclaim11 (quitclaim), dated October
22, 2010, for and in consideration of P98,376.14. The quitclaim stated, among
others, that in consideration of the foregoing payment, Sagaysay released and
discharged the bank, its affiliates and its subsidiaries from any action, suit, claim or
demand in connection with his employment.
On January 10, 2011, Sagaysay filed a complaint12 for illegal dismissal with prayer
for reinstatement and payment of backwages, moral damages, exemplary damages,
and attorney's fee against BDO before the Labor Arbiter (LA). He claimed that
despite his appeal, BDO compulsory retired him on September 1, 2010. As a result,
he and his family suffered damages in the amount of P2,225,403.00 which he would
have received if he was made to retire at the age of sixty-five (65).
For its part, BDO countered that after the bank denied Sagaysay's request for
extension of services, he was paid the amount of P98,376.14 representing the full
and final settlement of his compensation, allowances, benefits and other
emoluments. BDO stressed that he was not dismissed but was retired from the
service.
The LA Ruling
In a decision, dated July 19, 2011, the LA ruled that Sagaysay was illegally dismissed
because he was forced to avail of an optional retirement at the age of sixty (60)
which was contrary to the provisions of Article 287 of the Labor Code.13 The LA
opined that he was terminated on the basis of a provision in a retirement plan to
which he did not freely assent. BDO took advantage of his predicament and made
him sign a quitclaim in exchange for a small consideration. The decretal portion of
the LA decision reads:chanRoblesvirtualLawlibrary
WHEREFORE, in view of the foregoing, judgment is hereby rendered declaring that
complainant GUILLERMO C. SAGAYSAY was illegally dismissed from work. Hence,
respondent BDO UNIBANK, INC. is ordered to REINSTATE complainant to his former
position as Senior Accounting Assistant 5 without loss of seniority rights and
93
privileges and to pay him backwages in the sum of P280,480.00 as of July 7, 2011,
plus ten percent (10%) thereof as attorney's fees or a total of P308,528.00.
The reinstatement aspect is immediately executory, even pending appeal.
Respondent is hereby ordered to show proof that it complied with the
reinstatement of complainant within ten (10) calendar days from receipt hereof.
Respondents [are] also ordered to pay complainant P50,000.00 each as moral and
exemplary damages.
SO ORDERED.14ChanRoblesVirtualawlibrary
Aggrieved, BDO appealed to the NLRC arguing chiefly that Sagaysay freely assented
to its retirement plan.
The NLRC Ruling
On February 29, 2012, the NLRC reversed and set aside the ruling of the LA. The
NLRC explained that BDO's retirement plan, which mandated a normal or
compulsory retirement date at the age of sixty (60), was effective as early as June 1,
1994. The plan was renamed Banco de Oro Multiemployer Retirement Plan on July
1, 2004, but the compulsory retirement age of sixty (60) was preserved. When
Sagaysay was employed on May 16, 2006, the retirement plan was already in full
force and effect. Thus, the NLRC concluded that when he accepted his employment
with BDO, he assented to the provisions of the retirement plan.
The NLRC found it difficult to believe that Sagaysay started his employment with
BDO without familiarizing himself with the bank's retirement policy considering that
he had previously retired from two (2) other banks. Further, the NLRC stated that a
more concrete proof of his acceptance of BDO's retirement plan was his execution
of a quitclaim where he declared that he had no cause of action against the bank
and its agents. The dispositive portion of the NLRC decision
states:chanRoblesvirtualLawlibrary
WHEREFORE, the appeal is GRANTED. The Decision of Labor Arbiter Ma. Lourdes R.
Baricaua dated July 19, 2011 is REVERSED and SET ASIDE and a new one entered
DISMISSING the complaint.
SO ORDERED.15ChanRoblesVirtualawlibrary
Sagaysay filed a motion for reconsideration, but it was denied by the NLRC in its
Resolution, dated June 25, 2012.
Undaunted, Sagaysay filed a petition for certiorari16 before the CA contending that
it was neither stated in his employment contract nor stipulated in the collective
bargaining agreement (CBA) between BDO and its employees that the compulsory
retirement age was sixty (60) years old.
The CA Ruling
On March 31, 2014, the CA rendered the assailed decision which reversed the NLRC
ruling. The appellate court explained that while the cases of Pantranco North
Express, Inc., v. NLRC17 and Philippine Airlines v. Airline Pilots Association of the
Philippines18 affirmed that the employer may provide an earlier retirement age,
the retirement plans therein were the result of negotiations and agreement
between employer and employee. The CA continued that, in this case, the
retirement plan was not a result of a mutual agreement of employer and employee.
This was affirmed by the BDO Memorandum,19 dated June 1, 2009, stating that the
retirement plan was to be implemented in the merged bank. Citing Cercado v.
UNIPROM Inc.20 (Cercado), the CA ruled that a retirement plan with no voluntary
acquiescence on the part of the employee was ineffective.
The CA stated that Sagaysay was forced to participate in the retirement plan.
Equally, the quitclaim he executed was not given credence because his subsequent
filing of a complaint for illegal dismissal manifested that he had no intention to
relinquish his employment. Nonetheless, the CA deleted the awards of moral and
exemplary damages for lack of basis. The appellate court disposed the case in this
wise:chanRoblesvirtualLawlibrary
WHEREFORE, the petition is GRANTED. The Decision dated February 29, 2012 and
the Resolution dated June 25, 2012 of the National Labor Relations Commission are
REVERSED and SET ASIDE. The July 19, 2011 Decision of the Labor Arbiter is
REINSTATED, with MODIFICATION that the awards of moral and exemplary
damages are DELETED for lack of basis.
SO ORDERED.21ChanRoblesVirtualawlibrary
BDO moved for reconsideration, but the motion was denied by the CA in the
assailed resolution, dated October 8, 2014.
Hence, this petition.
The issues presented can be summarized as follows:chanRoblesvirtualLawlibrary
I
WHETHER THE RETIREMENT PLAN IS VALID AND EFFECTIVE AND, CONSEQUENTLY,
THE MANDATORY RETIREMENT AGE OF 60 YEARS OLD IS ALSO BINDING.
II
94
WHETHER THE EXECUTION OF A RELEASE, WAIVER AND QUITCLAIM BY
RESPONDENT IS VALID.ChanRoblesVirtualawlibrary
BDO principally argues that the retirement plan has been valid and effective since
June 1, 1994; that having been in place for such a long period, the retirement plan is
deemed to have been written into Sagaysay's employment contract, executed on
May 16, 2006; that he even asked for an extension to become eligible to avail of the
benefits under the same retirement plan; and that the 2005-2010 CBA stated, "[t]he
Bank shall continue to grant retirement pay," showing that the CBA likewise
recognized the existing retirement plan.
BDO also contends that the CA erred in citing Cercado because in that case, the
retirement plan was executed only after the employment of petitioner therein.
Moreover, Sagaysay, as a veteran banker, fully knew the effects of the release,
waiver and quitclaim when he signed it.
In his Comment,22 Sagaysay countered that he was retired by BDO against his will;
that there was no provision in any CBA that employees who reached sixty (60) years
of age could be compulsorily retired; that there was no agreement either between
Sagaysay and BDO that he would be retired upon reaching sixty (60); and that the
quitclaim was invalid because BDO took undue advantage of his situation and dire
financial problems to obtain his signature therein.
In its Reply,23 BDO reiterated that the retirement plan was not forced upon
Sagaysay; and that at the time he was employed by BDO in 2006, he had every
opportunity to refuse employment if he disagreed with the retirement policy of the
bank.chanrobleslaw
The Court's Ruling
The Court finds the petition meritorious.
The petition essentially centers on whether the June 1, 1994 retirement plan is valid
and effective against Sagaysay. To resolve this issue, a review of the relevant laws
and jurisprudence regarding the compulsory retirement age is warranted.
Laws and jurisprudence on early age of retirement
Retirement is the result of a bilateral act of the parties, a voluntary agreement
between the employer and the employee whereby the latter, after reaching a
certain age, agrees to sever his or her employment with the former.24 Article 287
of the Labor Code is the primary provision which governs the age of retirement and
states:chanRoblesvirtualLawlibrary
Art. 287. Retirement. xxx
In the absence of a retirement plan or agreement providing for retirement benefits
of employees in the establishment, an employee upon reaching the age of sixty (60)
years or more, but not beyond sixty-five (65) years which is hereby declared the
compulsory retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay equivalent to at
least one-half (1/2) month salary for every year of service, a fraction of at least six
(6) months being considered as one whole year.
[Emphasis Supplied]
Doubtless, under this provision, the retirement age is primarily determined by the
existing agreement or employment contract. Only in the absence of such an
agreement shall the retirement age be fixed by law, which provides for a
compulsory retirement age at 65 years, while the minimum age for optional
retirement is set at 60 years.25cralawred
Retirement plans allowing employers to retire employees who have not yet reached
the compulsory retirement age of 65 years are not per se repugnant to the
constitutional guaranty of security of tenure. By its express language, the Labor
Code permits employers and employees to fix the applicable retirement age at 60
years or below, provided that the employees' retirement benefits under any CBA
and other agreements shall not be less than those provided therein.26
Jurisprudence is replete with cases discussing the employer's prerogative to lower
the compulsory retirement age subject to the consent of its employees. In
Pantranco North Express, Inc. v. NLRC,27 the Court upheld the retirement of the
private respondent therein pursuant to a CBA allowing the employer to
compulsorily retire employees upon completing 25 years of service to the company.
Interpreting Article 287, the Court held that the Labor Code permits employers and
employees to fix the applicable retirement age lower than 60 years of age. The
Court also stressed that "[p]roviding in a CBA for compulsory retirement of
employees after twenty-five (25) years of service is legal and enforceable so long as
the parties agree to be governed by such CBA."28
In Progressive Development Corporation v. NLRC,29 the retirement plan, which
allowed the employer to retire employees who had rendered more than 20 years of
service, was declared valid and enforceable even though it was not embodied in a
CBA. In that case, the Court concluded that the employees, who were hired before
the execution of the employer's retirement plan on April 1, 1980, were bound by it
because the retirement plan was expressly made known and accepted by them.
In contrast, the case of Jaculbe v. Silliman University30 did not allow the application
of a lower retirement age. The petitioner in the said case was employed sometime
95
in 1958 while the retirement plan, which automatically retired its members upon
reaching the age of 65 or after 35 years of uninterrupted service to the university,
came into being in 1970. The said retirement plan was not applied to the petitioner
because there was no agreement to which the latter assented.
Similarly, the case of Cercado, which was heavily relied on by the CA, involved a
non-contributory retirement plan which provided that any employee with twenty
(20) years of service, regardless of age, may be retired at his option or at the option
of the company. The said plan was adopted on April 1, 1980 while the petitioner
therein was employed earlier on December 15, 1978. When respondent UNIPROM
retired the petitioner pursuant to its retirement plan, the latter objected stating
that she did not consent to it. The Court ruled in favor of the petitioner because
there was no voluntary acquiescence to UNIPROM's early retirement age option on
her part. It elucidated that:
Acceptance by the employees of an early retirement age option must be explicit,
voluntary, free, and uncompelled. While an employer may unilaterally retire an
employee earlier than the legally permissible ages under the Labor Code, this
prerogative must be exercised pursuant to a mutually instituted early retirement
plan. In other words, only the implementation and execution of the option may be
unilateral, but not the adoption and institution of the retirement plan containing
such option. For the option to be valid, the retirement plan containing it must be
voluntarily assented to by the employees or at least by a majority of them through a
bargaining representative.31
On the other hand, in Obusan v. Philippine National Bank32 (Obusan), the
petitioner therein, who was hired by PNB in 1979, was deemed covered by its
retirement plan adopted on December 22, 2000. It mandated that the employee
should retire when he attained the age of sixty (60), regardless of his length of
service, or when he had rendered thirty (30) years of service, regardless of age,
whichever of the said conditions came first. Considering that on February 21, 2001,
PNB had informed all of its officers and employees about the said retirement plan,
the said plan was then registered with the B1R and was later recognized by the
Philnabank Employees Association in its CBA. Despite the proper dissemination of
information, no one questioned the retirement plan. Hence, the Court deemed it
valid and effective as due notice of the employer's decision to retire an employee
was adequately provided.
A scrutiny of the above-discussed cases reveals that the retirement plan was
adopted after the employees were hired by their employer. This is in stark contrast
with the case at bench wherein the adoption of the retirement plan came before
the hiring of Sagaysay. Thus, the present petition portrays a unique predicament on
whether a retirement plan adopted before the employment of an employee is
deemed binding on the latter.
Sagaysay was sufficiently informed of the retirement plan
After a judicious study of records, the Court is convinced that Sagaysay was
undeniably informed and had consented to the retirement plan of BDO before his
compulsory retirement on September 1, 2010 based on the following:
First, the retirement plan was established as early as July 1, 1994. The purpose of
the plan was to create a BDO employee's retirement trust fund which would
provide for retirement and other benefits for all employees of the bank. It was also
intended to support the funding of the benefits indicated in the CBA.33 The
retirement plan provided several retirement options such as normal retirement,
early retirement, late retirement, and disability retirement. Normal or compulsory
retirement was mandated at the first day of the month following the employee's
sixtieth (60th) birthday, while early or optional retirement age was pegged at the
age of fifty (50) with at least 10 years of credited service. It also discussed the
different benefits that an employee could be entitled to upon retirement,
resignation or separation.
It was renamed on June 1, 2004, but its provision on the normal retirement age was
retained. Twelve (12) years after the adoption of the retirement plan, Sagaysay was
employed by the bank. From its inception until his hiring, no employee had
earnestly questioned the retirement plan. By then, it was unquestionably an
established policy within the BDO, applied to each and every worker of the bank.
Second, by accepting the employment offer of BDO, Sagaysay was deemed to have
assented to all existing rules, regulations and policy of the bank, including the
retirement plan. Likewise, he consented to the CBA34 between BDO and the
National Union of Bank Employees Banco De Oro Chapter. Section 2 of Article XVII
of the CBA provides that "[t]he Bank shall continue to grant retirement/gratuity pay
xxx." Notably, both the retirement plan and the CBA recognize that the bank has a
continued and existing practice of granting the retirement pay to its employees.
Third, on June 1, 2009, BDO issued a memorandum35 regarding the
implementation of its retirement program, reiterating that the normal retirement
date was the first day of the month following the employee's sixtieth (60th)
birthday. Similar to the case of Obusan, the memorandum was addressed to all
employees and officers. By that time, Sagaysay was already an employee and he did
not deny being informed of such memorandum.
96
For four years, from the time he was employed until his retirement, and having
actual knowledge of the BDO retirement plan, Sagaysay had every opportunity to
question the same, if indeed he knew it would not be beneficial to him. Yet, he did
not express his dissent. As observed in Obusan, "[t]his deafening silence eloquently
speaks of [his] lack of disagreement with its provisions."36
Lastly, perhaps the most telling detail indicative of Sagaysay's assent to the
retirement plan was his e-mails to the bank, dated July 27, 2010 and August 19,
2010. In these communications, albeit having been informed of his upcoming
retirement, Sagaysay never opposed the company's compulsory age of retirement.
In fact, he recognized that "the time has come that BDO Retirement Program will be
implemented to those reaching the age of sixty (60)."37
Glaringly, he even requested that his services be extended, at least until May 16,
2011, so that he could render five (5) years of service.38 Sagaysay's request reflects
the late retirement option where an employee may be allowed by the bank to
continue to work on a yearly extension basis beyond his normal retirement date.39
The late retirement option is embodied in the same retirement plan, of which,
ironically, he claimed to be unaware. With such inconsistent stance, the Court can
only conclude that Sagaysay was indeed notified and had accepted the provisions of
the retirement plan. It was only when his request for late retirement was denied
that he suddenly became oblivious to the said plan.
The case of Cercado is not applicable
The case of Cercado is not applicable in the present case as it has a different factual
milieu. First, in Cercado, the petitioner was employed on December 15, 1978, which
was almost two (2) years before the adoption of the employer's retirement plan on
April 1, 1980. The Court explained that, logically, her employment contract did not
include the retirement plan, much less the early retirement age option contained
therein.
In the case at bench, Sagaysay was employed on May 16, 2006, which was almost
twelve (12) years after the adoption of retirement plan on July 1, 1994. Accordingly,
from the moment that Sagaysay accepted his employment, he was deemed to have
consented to all existing company rules and regulations, including the policy on the
early age retirement.
Second, in Cercado, the retirement plan was implemented when the petitioner
therein was already employed. The Court held that because of the automatic
application of the retirement plan to the current employees without their voluntary
conformity, "[p]etitioner was forced to participate in the plan, and the only way she
could have rejected the same was to resign or lose her job." Necessarily, it
undermined the petitioner's security of tenure.
The ruling in Cercado cannot be applied to this case as Sagaysay was not yet
employed when the retirement plan was adopted. When he was offered
employment by the bank in 2006, the established retirement plan was not forced
upon him. Sagaysay had the free will whether to undertake the employment and
accept the bank's corresponding policies or look for a job elsewhere. Corollarily, no
security of tenure had yet attached at that specific moment.
In other words, the evil sought to be prevented in Cercardo does not exist in the
present case as Sagaysay was given the opportunity to accept or reject the lower
retirement age policy.
Third, the petitioner in Cercado refused the early retirement package in the amount
of P171,982.90 from her employer. From the very beginning, she was adamant that
she did not consent to the retirement plan of her employer.
The opposite cam be observed in the present case. It has been uncontroverted that
Sagaysay earlier acknowledged the retirement program of BDO and even requested
for an extension of service. Moreover, he signed a quitclaim for and in
consideration of P98,376.14 which discharged the bank, its affiliates and its
subsidiaries from any action, suit, claim or demand in connection with his
employment.
Generally, a quitclaim is frowned upon. As an exception, a quitclaim, with clear and
unambiguous contents and executed for a valid consideration received in full by the
employee who signed the same, cannot be later invalidated because its signatory
claims that he was pressured into signing it on account of his dire financial need.
When it is shown that the person executing the waiver did so voluntarily, with full
understanding of what he was doing, and the consideration for the quitclaim was
credible and reasonable, the transaction must be recognized as a valid and binding
undertaking.40
Here, the Court is of the view that the quitclaim was validly executed. For the
consideration of the quitclaim, Sagaysay received the amount of P98,376.14. As
admitted by him, the amount was based on a liquidation data sheet which showed
the computation of benefits and emoluments of a rank and file employee.41
Understandably, the amount given would not reflect the retirement benefits he
demanded because he did not qualify under the retirement plan of BDO for he had
not completed five (5) years of service upon his compulsory retirement. Thus, the
consideration provided in the quitclaim was justified and reasonable.
97
Further, it has been duly proven that Sagaysay was a seasoned banker, spending
thirty-four (34) years of his career in different banking establishments. He was
learned in his profession and even experienced separation from his previous
employments. Consequently, it cannot be said that he was naive in dealing with his
employer and that he failed to exercise his free and voluntary will when faced with
the documents relating to his retirement. Not an iota of evidence showed that BDO
exerted undue influence against him to acquire his consent. In fine, absent any
doubt to the contrary, his quitclaim must stand.

Extension of service

Finally, on Sagaysay's request to extend his length of service despite the compulsory
retirement age of sixty (60) which was denied by BDO and eventually sparked the
present controversy, the Court holds that BDO had the management prerogative to
deny the extension of service. It is important to state that upon the compulsory
retirement of an employee or official in the public or private service his
employment is deemed terminated. The matter of extension of service of such
employee or official is addressed to the sound discretion of the employer. It is a
privilege only the employer can grant.42

Although the Court has, more often than not, been inclined towards the plight of
the workers and has upheld their cause in their conflicts with the employers, such
inclination has not blinded it to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and applicable law
and doctrine.43

WHEREFORE, the petition is GRANTED. The March 31, 2014 Decision and the
October 8, 2014 Resolution of the Court of Appeals in CA-G.R. SP No. 126586 are
REVERSED and SET ASIDE, and the February 29, 2012 Decision and the June 25,
2012 Resolution of the National Labor Relations Commission in NLRC LAC No. 08-
002069-11 are REINSTATED.

SO ORDERED.chanroblesvirtuallawlibrary

98
G.R. No. 205813
ALFREDO F. LAY A, JR., Petitioner
vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINE
VETERANS BANK and RICARDO A. BALBIDO, JR., Respondents
DECISION
BERSAMIN, J.:
An employee in the private sector who did not expressly agree to the terms of an
early retirement plan cannot be separated from the service before he reaches the
age of 65 years. The employer who retires the employee prematurely is guilty of
illegal dismissal, and is liable to pay his backwages and to reinstate him without loss
of seniority and other benefits, unless the employee has meanwhile reached the
mandatory retirement age under the Labor Code, in which case he is entitled to
separation pay pursuant to theterms of the plan, with legal interest on the
backwages and separation pay reckoned from the finality of the decision.
The Case
The petitioner seeks the review and reversal of the adverse decision promulgated
on August 31, 2012,1 whereby the Court of Appeals (CA) upheld the ruling of the
National Labor Relations Commission (NLRC) dated June 21, 2010 affirming the
dismissal of his complaint for illegal dismissal by the Labor Arbiter.
Antecedents
The CA summarized the factual antecedents as follows:
On 1 June 2001, petitioner Alfredo F. Laya, Jr. was hired by respondent Philippine
Veterans Bank as its Chief Legal Counsel with a rank of Vice President. Among
others, the terms and conditions of his appointment are as follows; (sic)
"3. As a Senior Officer of the Bank, you are entitled to the following executive
ben[e]fits:
• Car Plan limit of ₱700,000.00, without equity on your part; a gasoline subsidy of
300 liters per month and subject further to The Car Plan Policy of the Bank.
• Membership in a professional organization in relation to your profession and/or
assigned functions in the Bank.
• Membership in the Provident Fund Program/Retirement Program.
• Entitlement to any and all other basic and fringe benefits enjoyed by the officers;
core of the Bank relative to Insurance covers, Healthcare Insurance, vacation and
sick leaves, among others."
On the other hand, private respondent has its Retirement Plan Rules and
Regulations which provides among others, as follows:
ARTICLE IV
RETIREMENT DATES
Section 1. Normal Retirement. The normal retirement date of a Member shall be
the first day of the month coincident with or next following his attainment of age
60.
Section 2. Early Retirement. A Member may, with the approval of the Board of
Directors, retire early on the first day of any month coincident with or following his
attainment of age 50 and completion of at least 10 years of Credited Service.
Section 3. Late Retirement. A Member may, with the approval of the Board of
Directors, extend his service beyond his normal retirement date but not beyond age
65. Such deferred retirement shall be on a case by case and yearly extension basis.
On 14 June, 2007, petitioner was informed thru letter by the private respondent of
his retirement effective on 1 July 2007. On 21 June 2007 petitioner wrote Col.
Emmanuel V. De Ocampo, Chairman of respondent bank, requesting for an
extension of his tenure for two (2) more years pursuant to the Bank's Retirement
Plan (Late Retirement).
On 26 June 2008, private respondent issued a memorandum directing the
petitioner to continue to discharge his official duties and functions as chief legal
counsel pending his request. However on 18 July 2007, petitioner was informed
thru its president Ricardo A. Balbido Jr. that his request for an extension of tenure
was denied.2
According to the petitioner, he was made aware of the retirement plan of
respondent Philippine Veterans Bank (PVB) only after he had long been employed
and was shown a photocopy of the Retirement Plan Rules and Regulations,3 but
PVB's President Ricardo A. Balbido, Jr. had told him then that his request for
extension of his service would be denied "to avoid precedence."4 He sought the
99
reconsideration of the denial of the request for the extension of his retirement,5
but PVB certified his retirement from the service as of July 1, 2007 on March 6,
2008.6
On December 24, 2008, the petitioner filed his complaint for illegal dismissal against
PVB and Balbido, Jr. in the NLRC to protest his unexpected retirement.7
Ruling of the Labor Arbiter
On August 28, 2009, the Labor Arbiter rendered a decision dismissing the complaint
for illegal dismissal,8 to wit:
WHEREFORE, the charge of illegal dismissal and money claims raised by the
complainant, together with the counterclaim raised by the respondents are
DISMISSED for lack of merit but by reason of a flaw in the denial of complainant's
application for term extension as discussed above, the respondent bank is hereby
ordered to pay the complainant the amount of ₱200,000.00 by way of reasonble
(sic) indemnity.
Ricardo Balbido, Jr., is hereby dropped as party respondent.
SO ORDERED.9
After his motion for reconsideration was denied,10 the petitioner appealed to the
NLRC.11
Ruling of the NLRC
On June 21, 2010, the NLRC affirmed the dismissal of the petitioner's complaint, and
deleted the indemnity imposed by the Labor Arbiter,12 viz.:
WHEREFORE, premises considered the appeal of the complainant is hereby DENIED
for lack of merit. The appeal of respondents is GRANTED. The Decision below is
hereby AFFIRMED with MODIFICATION, deleting the award of indemnity to
complainant.
SO ORDERED.13
The petitioner assailed the ruling to the CA through certiorari.
Ruling of the CA
On August 31, 2012, the CA promulgated the now assailed decision,14 holding that
the petitioner's acceptance of his appointment as Chief Legal Officer of PVB
signified his conformity to the retirement program;15 that he could not have been
unaware of the retirement program which had been in effect since January 1,
1996;16 that the lowering of the retirement age through the retirement plan was a
recognized exception under the provisions of Article 287 of the Labor Code; 17 that
considering his failure to adduce evidence showing that PVB had acted maliciously
in applying the provisions of the retirement plan to him and in denying his request
for the extension of his service, PVB 's implementation of the retirement plan was a
valid exercise of its management prerogative.18
The CA denied the petitioner's motion for reconsideration on February 8, 2013.19
On April 8, 2013, the Court (First Division) denied the petition for review on
certiorari.20 In his motion for reconsideration, the petitioner not only prayed for
the reconsideration of the denial but also sought the referral of his petition to the
Court En Banc,21 arguing that the CA and the NLRC had erroneously applied laws
and legal principles intended for corporations in the private sector to a public
instrumentality like PVB;22 and that to allow the adverse rulings to stand would be
to condone the creation of a private corporation by Congress other than by a
general law on incorporation.23
In its resolution promulgated on August 28, 2013, the Court (First Division) denied
the petitioner's motion for reconsideration, as well as his prayer to refer the case to
the Court En Banc. 24The entry of judgment was issued on December 6, 2013.25
The petitioner filed a second motion for reconsideration on December 18, 2013,26
whereby he expounded on the issues he was raising in his first motion for
reconsideration. He urged that the Court should find and declare PVB as a public
instrumentality; that the law applicable to his case was Presidential Decree No.
1146 (GSIS Law), which stipulated the compulsory retirement age of 65 years;27
and that the compulsory retirement age for civil servants could not be "contracted
out."28
On March 25, 2014, the Court En Banc accepted the referral of this case by the First
Division.29
On April 22, 2014, the Court En Banc required PVB and the Office of the Solicitor
General (OSG) to file their comments on the petitioner's second motion for
reconsideration.30
The comment of PVB poses several challenges to the petition.
100
In support of its first challenge, PVB contends that the Court should not have
accepted the referral of the case to the Banc because the First Division had already
denied with finality the petitioner's first motion for reconsideration, as well as his
motion to refer the case to the Banc;31 that the Court En Bane's acceptance of the
case was in violation of the principle of immutability of final judgments as well as of
Section 3, Rule 15 of the Internal Rules of the Supreme Court32to the effect that a
second motion for reconsideration could be allowed only "before the ruling sought
to be reconsidered becomes final by operation of law or by the Court's
declaration;"33 and that the First Division had correctly denied the petition for
review because the issues raised therein were factual matters that this mode of
appeal could not review and pass upon.34
As its second challenge, PVB demurrs to the propriety of the petitioner's attack on
its corporate existence. It submits that he should not be allowed to pose such attack
for the first time in this appeal;35 that his argument was also an impermissible
collateral attack on the constitutionality of Republic Act No. 3518 and Republic Act
No. 7169;36 and that his seeking a declaration of PVB as a public institution
"partakes the nature of a petition for declaratory relief which is an action beyond
the original jurisdiction of the Honorable Court."37
Nevertheless, PVB maintains that it is not a public or government entity for several
reasons, namely: (1) the Government does not own a single share in it;38 (2) the
Government has no appointee or representative in the Board of Directors, and is
not involved in its management;39 and (3) it does not administer government
funds.40
PVB insists that its creation as a private bank with a special charter does not in any
way violate Section 16, Article XII of the Constitution,41 explaining:
Firstly, the mischief which the constitutional provision seeks to prevent, i.e., giving
certain individuals, families or groups special privileges denied to other citizens, will
not be present insofar as the Bank is concerned. As this Honorable Court observed
in Philippine Veterans Bank Employees Union-NUBE vs. Philippine Veterans Bank –
These stockholdings (of the veterans, widows, orphans or compulsory heirs) do not
enjoy any special immunity over and above shares of stock in any other
corporation, which are always subject to the vicissitudes of business. Their value
may appreciate or decline or the stocks may become worthless altogether. Like any
other property, they do not have a fixed but a fluctuating price. Certainly, the mere
acceptance of these shares of stock by the petitioners did not create any legal
assurance from the Government that their original value would be preserved and
that the owners could not be deprived of such property under any circumstance no
matter how justified
Secondly, the obvious legislative intent is "to give meaning and realization to the
constitutional mandate to provide immediate and adequate care, benefits and
other forms of assistance to war veterans and veterans of military campaigns, their
surviving spouses and orphans" Article XVI, Section 7 of the Constitution states:
Section 7. The State shall provide immediate and adequate care, benefits and other
forms of assistance to war veterans and veterans of military campaigns, their
surviving spouses and orphans. Funds shall be provided therefor and due
consideration shall be given them in the disposition of agricultural lands of the
public domain and, in appropriate cases, in the utilization of natural resources.
The creation of Veterans Bank through Republic Act Nos. 3518 and 7169 should
therefore be taken in conjunction and harmonized with Section 16, Article XII of the
Constitution. The predilection of the said Republic Acts towards the welfare of the
veterans, their widows, orphans or compulsory heirs is supported by no less than a
constitutional provision. That Republic Act Nos. 3518 and 7169 do not fall within
the proscription against the creation of private corporations is readily apparent
from the fact that in both laws, the intendment of the legislature is that Veterans
Bank will eventually be operated, managed and exist under the general laws, i.e.,
Corporation Code and General Banking Act. The mere circumstance that the charter
was granted directly by Congress does not signify that only Congress can modify or
abrogate it by another enactment.
Thirdly, the following mandate of Section 3 of Republic Act No. 7169 had been
accomplished:
"The operations and changes in the capital structure of the Veterans Bank, as well
as other amendments to its articles of incorporation and by-laws as prescribed
under Republic Act No. 3518, shall be in accordance with the Corporation Code, the
General Banking Act, and other related laws."
Pursuant hereto, the Bank had registered with the Securities and Exchange
Commission under its certificate of incorporation/registration number 24681. It has
its articles of incorporation and by-laws separate and distinct from the provisions of
Republic Act Nos. 3518 and 7169. The manner by which the Bank's Board of
Directors is to be organized and the Officers to be elected or appointed are stated in
the by-laws. The latest Definitive Information Sheet of the Bank indicates that as of
April 30, 2014, the total number of shareholders of record (common and preferred)
is 383,852. There had been 25,303,869 common shares and 3,611,556 preferred
shares issued, none of which belong to the government. It is thus operating under
and by virtue of the Corporation Code and the General Banking Act.42
101
Through its comment, the OSG presents an opinion favorable to the position of the
petitioner, opining upon the authority of Boy Scouts of the Philippines v.
Commission on Audit43 and Article 44 of the Civil Code44that PVB is a public
corporation created in the public interest, and a government instrumentality with
juridical personality;45 hence, the law governing the petitioner's compulsory
retirement age was Republic Act No. 8291, and the compulsory retirement age for
him should be 65 years.46
Issues
The following procedural and substantive issues are to be considered and resolved,
namely: (1) whether or not the Court could accept the petitioner's second motion
for reconsideration; (2) whether PVB is a private entity or a public instrumentality;
and (3) whether the petitioner was validly retired by PVB at age 60.
Ruling of the Court
In light of pertinent laws and relevant jurisprudence, the Court has ascertained,
after going over the parties' arguments and the records of the case, that the
reconsideration of the Court's resolutions promulgated on April 8, 2013 and August
28, 2013, and the lifting of the entry of judgment made herein are in order; and that
the appeal by the petitioner should be given due course.
1.
The Court En Banc properly accepted the petitioner's second motion for
reconsideration.
As a general rule, second and subsequent motions for reconsideration are
forbidden.47 Nevertheless, there are situations in which exceptional circumstances
warrant allowing such motions for reconsideration, and for that reason the Court
has recognized several exceptions to the general rule. We have extensively
expounded on the exceptions in McBurnie v. Ganzon,48 where we observed:
At the outset, the Court emphasizes that second and subsequent motions for
reconsideration are, as a general rule, prohibited. Section 2, Rule 52 of the Rules of
Court provides that "[n]o second motion for reconsideration of a judgment or final
resolution by the same party shall be entertained." The rule rests on the basic tenet
of immutability of judgments. "At some point, a decision becomes final and
executory and, consequently, all litigations must come to an end."
The general rule, however, against second and subsequent motions for
reconsideration admits of settled exceptions. For one, the present Internal Rules of
the Supreme Court, particularly Section 3, Rule 15 thereof, provides:
Sec. 3. Second motion for reconsideration. - The Court shall not entertain a second
motion for reconsideration, and any exception to this rule can only be granted in
the higher interest of justice by the Court en bane upon a vote of at least two-thirds
of its actual membership. There is reconsideration "in the higher interest of justice"
when the assailed decision is not only legally erroneous, but is likewise patently
unjust and potentially capable of causing unwarranted and irremediable injury or
damage to the parties. A second motion for reconsideration can only be entertained
before the ruling sought to be reconsidered becomes final by operation of law or by
the Court's declaration.
xxxx
In a line of cases, the Court has then entertained and granted second motions for
reconsideration "in the higher interest of substantial justice," as allowed under the
Internal Rules when the assailed decision is "legally erroneous," "patently unjust"
and "potentially capable of causing unwarranted and irremediable injury or damage
to the parties." In Tirazona v. Philippine EDS Techno-Service, Inc. (PET, Inc.), we also
explained that a second motion for reconsideration may be allowed in instances of
"extraordinarily persuasive reasons and only after an express leave shall have been
obtained." In Apo Fruits Corporation v. Land Bank of the Philippines we allowed a
second motion for reconsideration as the issue involved therein was a matter of
public interest, as it pertained to the proper application of a basic
constitutionallyguaranteed right in the government's implementation of its agrarian
reform program. In San Miguel Corporation v. NLRC, the Court set aside the
decisions of the LA and the NLRC that favored claimants-security guards upon the
Court's review of San Miguel Corporation's second motion for reconsideration. In
Vir-Jen Shipping and Marine Services, Inc. v. NLRC, et al., the Court en bane
reversed on a third motion for reconsideration the ruling of the Court's Division on
therein private respondents' claim for wages and monetary benefits.
It is also recognized that in some instances, the prudent action towards a just
resolution of a case is for the Court to suspend rules of procedure, for "the power of
this Court to suspend its own rules or to except a particular case from its operations
whenever the purposes of justice require it, cannot be questioned." In De Guzman
v. Sandiganbayan, the Court, thus, explained:
[T]he rules of procedure should be viewed as mere tools designed to facilitate the
attainment of justice. Their strict and rigid application, which would result in
technicalities that tend to frustrate rather than promote substantial justice, must
102
always be avoided. Even the Rules of Court envision this liberality. This power to
suspend or even disregard the rules can be so pervasive and encompassing so as to
alter even that which this Court itself has already declared to be final, as we are
now compelled to do in this case x x x.
xxxx
The Rules of Court was conceived and promulgated to set forth guidelines in the
dispensation of justice but not to bind and chain the hand that dispenses it, for
otherwise, courts will be mere slaves to or robots of technical rules, shorn of judicial
discretion. That is precisely why courts in rendering real justice have always been,
as they in fact ought to be, conscientiously guided by the norm that when on the
balance, technicalities take a backseat against substantive rights, and not the other
way around. Truly then, technicalities, in the appropriate language of Justice
Makalintal, "should give way to the realities of the situation." x x x.
Consistent with the foregoing precepts, the Court has then reconsidered even
decisions that have attained finality, finding it more appropriate to lift entries of
judgments already made in these cases. In Navarro v. Executive Secretary, we
reiterated the pronouncement in DeGuzman that the power to suspend or even
disregard rules of procedure can be so pervasive and compelling as to alter even
that which this Court itself has already declared final. The Court then recalled in
Navarro an entry of judgment after it had determined the validity and
constitutionality of Republic Act No. 9355, explaining that:
Verily, the Court had, on several occasions, sanctioned the recall of entries of
judgment in light of attendant extraordinary circumstances. The power to suspend
or even disregard rules of procedure can be so pervasive and compelling as to alter
even that which this Court itself had already declared final. In this case, the
compelling concern is not only to afford the movants-intervenors the right to be
heard since they would be adversely affected by the judgment in this case despite
not being original parties thereto, but also to arrive at the correct interpretation of
the provisions of the [Local Government Code (LGC)] with respect to the creation of
local government units. x x x.
In Munoz v. CA, the Court resolved to recall an entry of judgment to prevent a
miscarriage of justice. This justification was likewise applied in Tan Tiac Chiong v.
Hon. Cosico, wherein the Court held that:
The recall of entries of judgments, albeit rare, is not a novelty. In Munoz v. CA,
where the case was elevated to this Court and a first and second motion for
reconsideration had been denied with finality, the Court, in the interest of
substantial justice, recalled the Entry of Judgment as well as the letter of transmittal
of the records to the Court of Appeals.
In Barnes v. Judge Padilla, we ruled:
[A] final and executory judgment can no longer be attacked by any of the parties or
be modified, directly or indirectly, even by the highest court of the land.
However, this Court has relaxed this rule in order to serve substantial justice
considering (a) matters of life, liberty, honor or property, (b) the existence of special
or compelling circumstances, (c) the merits of the case, (d) a cause not entirely
attributable to the fault or negligence of the party favored by the suspension of the
rules, (e) a lack of any showing that the review sought is merely frivolous and
dilatory, and (t) the other party will not be unjustly prejudiced thereby. (Citations
omitted; underscoring supplied)49
In short, the Court may entertain second and subsequent motions for
reconsideration when the assailed decision is legally erroneous, patently unjust and
potentially capable of causing unwarranted and irremediable injury or damage to
the parties. Under these circumstances, even final and executory judgments may be
set aside because of the existence of compelling reasons.
It is notable that the retirement program in question herein was established solely
by PVB as the employer. Although PVB could validly impose a retirement age lower
than 65 years for as long as it did so with the employees' consent,50 the consent
must be explicit, voluntary, free, and uncompelled.51 In dismissing the petition for
review on certiorari, the Court's First Division inadvertently overlooked that the law
required the employees' consent to be express and voluntary in order for them to
be bound by the retirement program providing for a retirement age earlier than the
age of 65 years. Hence, the Court deems it proper to render a fair adjudication on
the merits of the appeal upon the petitioner's second motion for reconsideration.
Furthermore, allowing this case to be reviewed on its merits furnishes the Court
with the opportunity to re-examine the case in order to ascertain whether or not
the dismissal produced results patently unjust to the petitioner. These reasons do
justify treating this case as an exception to the general rule on immutability of
judgments.
2.
The pronouncement of the Court in Philippine Veterans Bank Employees Union-
NUBE v. The Philippine Veterans Bank is still doctrinal on the status of the Philippine
Veterans Bank as a private, not a government, entity
103
In Philippine Veterans Bank Employees Union-NUBE v. The Philippine Veterans
Bank,52 we pertinently pronounced:
Coming now to the ownership of the Bank, we find it is not a government bank, as
claimed by the petitioners.1âwphi1 The fact is that under Section 3(b) of its charter,
while 51 % of the capital stock of the Bank was initially fully subscribed by the
Republic of the Philippines for and in behalf of the veterans, their widows, orphans
or compulsory heirs, the corresponding shares of stock were to be turned over
within 5 years from the organization by the Bank to the said beneficiaries who
would thereafter have the right to vote such common shares. The balance of about
49% was to be divided into preferred shares which would be opened for
subscription by any recognized veteran, widow, orphans or compulsory heirs of said
veteran at the rate of one preferred share per veteran, on the condition that in case
of failure of any particular veteran to subscribe for any preferred share of stock so
offered to him within thirty (30) days from the date of receipt of notice, said share
of stock shall be available for subscription to other veterans in accordance with
such rules or regulations as may be promulgated by the Board of Directors.
Moreover, under Sec. 6(a), the affairs of the Bank are managed by a board of
directors composed of eleven members, three of whom are ex officio members,
with the other eight being elected annually by the stockholders in the manner
prescribed by the Corporation Law. Significantly, Sec. 28 also provides as follows:
Sec. 28. Articles of incorporation. - This Act, upon its approval, shall be deemed and
accepted to all legal intents and purposes as the statutory articles of incorporation
or Charter of the Philippine Veterans' Bank; and that, notwithstanding the
provisions of any existing law to the contrary, said Bank shall be deemed registered
and duly authorized to do business and operate as a commercial bank as of the date
of approval of this Act.
This point is important because the Constitution provides in its Article IX-B, Section
2(1) that "the Civil Service embraces all branches, subdivisions, instrumentalities,
and agencies of the Government, including government-owned or controlled
corporations with original charters." As the Bank is not owned or controlled by the
Government although it does have an original charter in the form of R.A. No. 3518,
it clearly does not fall under the Civil Service and should be regarded as an ordinary
commercial corporation. Section 28 of the said law so provides. The consequence is
that the relations of the Bank with its employees should be governed by the labor
laws, under which in fact they have already been paid some of their claims.53 (Bold
underscoring supplied for emphasis)
Anent whether PVB was a government or a private entity, therefore, we declare
that it is the latter. The foregoing jurisprudential pronouncement remains to be
good law, and should be doctrinal and controlling.
We also note that Congress enacted Republic Act No. 7169,54 whereby it
acknowledged the Filipino veterans of World War II as the owners of PVB, but their
ownership had not been fully realized despite the implementation of Republic Act
No. 3518.55 As one of the mechanisms to rehabilitate PVB, Congress saw fit to
modify PVB' s operations, capital structure, articles of incorporation and by-laws
through the enactment of Republic Act No. 7169.56 By restoring PVB as envisioned
by Republic Act No. 3518,57 and by providing that the creation of the PVB would be
in accord with the Corporation Code, the General Banking Act, and other related
laws, Congress undeniably bestowed upon the PVB the personality of a private
commercial bank through Republic Act No. 7169. In that regard, Section 8 of
Republic Act No. 7169 directed the Filipino veterans to raise ₱750,000,000.00 in
total unimpaired capital accounts, prior to PVB's reopening, but excused the
Government from making any new capital infusion, viz.:
Section 8. Transitory Provisions. - Without requiring new capital infusion either
from the Government or from outside investigators, the Filipino veterans of World
War II who are real owners-stockholders of the Veterans Bank shall cause the said
bank to have at least Seven hundred fifty million pesos (₱750,000,000.00) in total
unimpaired capital accounts prior to reopening pursuant to this Act as a commercial
bank.
It is hereby provided that the Board of Trustees of the Veterans of World War II
(BTVWW II) created under Republic Act No. 3518 is hereby designated as trustee of
all issued but undelivered shares of stock.
With the Government having no more stake in PVB, there is no justification for the
insistence of the petitioner that PVB "is a public corporation masquerading as a
private corporation."58
3.
Petitioner Alfredo Laya was not validly retired at age 60
Notwithstanding the rejection of the petitioner's insistence that PVB was a public
corporation, we find and declare that the petitioner was not validly retired at age
60.
Before going further, we clarify that the CA, in the exercise of its certiorari
jurisdiction, is limited to determining whether or not the NLRC committed grave
abuse of discretion amounting to lack or excess of jurisdiction. The remedy is the
special civil action for certiorari under Rule 65 of the Rules of Court brought in the
CA, and once the CA decides the case the party thereby aggrieved may appeal the
104
decision of the CA by petition for review on certiorari under Rule 45 of the Rules of
Court.
However, rigidly limiting the authority of the CA to the determination of grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of the
NLRC does not fully conform with prevailing case law, particularly St. Martin Funeral
Home v. NLRC,59 where we firmly observed that because of the "growing number
of labor cases being elevated to this Court which, not being a trier of fact, has at
times been constrained to remand the case to the NLRC for resolution of unclear or
ambiguous factual findings"60 the CA could more properly address petitions for
certiorari brought against the NLRC. Conformably with such observation made in St.
Martin Funeral Homes, we have then later on clarified that the CA, in its exercise of
its certiorari jurisdiction, can review the factual findings or even the legal
conclusions of the NLRC,61 viz.:
In St. Martin Funeral Home[s] v. NLRC, it was held that the special civil action of
certiorari is the mode of judicial review of the decisions of the NLRC either by this
Court and the Court of Appeals, although the latter court is the appropriate forum
for seeking the relief desired "in strict observance of the doctrine on the hierarchy
of courts" and that, in the exercise of its power, the Court of Appeals can review the
factual findings or the legal conclusions of the NLRC. The contrary rule in Jamer was
thus overruled.62
There is now no dispute that the CA can make a determination whether the factual
findings by the NLRC or the Labor Arbiter were based on the evidence and in accord
with pertinent laws and jurisprudence.
The significance of this clarification is that whenever the decision of the CA in a
labor case is appealed by petition for review on certiorari, the Court can
competently delve into the propriety of the factual review not only by the CA but
also by the NLRC. Such ability is still in pursuance to the exercise of our review
jurisdiction over administrative findings of fact that we have discoursed on in
several rulings, including Aklan Electric Coooperative, Inc. v. National Labor
Relations Commission,63 where we have pointed out:
While administrative findings of fact are accorded great respect, and even finality
when supported by substantial evidence, nevertheless, when it can be shown that
administrative bodies grossly misappreciated evidence of such nature as to compel
a contrary conclusion, this Court had not hesitated to reverse their factual findings.
Factual findings of administrative agencies are not infallible and will be set aside
when they fail the test of arbitrariness.64
The review of the findings of the CA becomes more compelling herein, inasmuch as
it appears that the CA did not appreciate the fact that the retirement plan was not
the sole prerogative of the employer, and that the petitioner was automatically
made a member of the plan. Upon reviewing the resolution by the NLRC, the CA
simply concluded that the petitioner's acceptance of the employment offer had
carried with it his acquiescence, which implied his knowledge of the plan, thus:
This Court finds petitioner's argument to be misplaced. It must be stressed that
when petitioner was appointed as Chief Legal Officer on 01 June 2001 among the
terms and conditions of his employment is the membership in the Provident Fund
Program/Retirement Program. Worthy to note that when petitioner accepted his
appointment as Chief Legal Officer, he likewise signified his conformity with the
provisions of the Retirement Program considering that the same has already been
in existence and effective since 1 January 1996, i.e. prior to his appointment. As
such, this Court is not convinced that petitioner was not aware of the private
respondent's retirement program.65
The retirement of employees in the private sector is governed by Article 287 of the
Labor Code:66
Art. 287. Retirement. Any employee may be retired upon reaching the retirement
age established in the collective bargaining agreement or other applicable
employment contract.
In case of retirement, the employee shall be entitled to receive such retirement
benefits as he may have earned under existing laws and any collective bargaining
agreement and other agreements: Provided, however, That an employee's
retirement benefits under any collective bargaining and other agreements shall not
be less than those provided therein.
In the absence of a retirement plan or agreement providing for retirement benefits
of employees in the establishment, an employee upon reaching the age of sixty (60)
years or more, but not beyond sixty-five (65) years which is hereby declared the
compulsory retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay x x x x.
Under the provision, the employers and employees may agree to fix the retirement
age for the latter, and to embody their agreement in either their collective
bargaining agreements (CBAs) or their employment contracts. Retirement plans
allowing employers to retire employees who have not yet reached the compulsory
retirement age of 65 years are not per se repugnant to the constitutional guaranty
of security of tenure, provided that the retirement benefits are not lower than
those prescribed by law.67
105
The CA concluded that the petitioner had agreed to be bound by the retirement
plan of PVB when he accepted the letter of appointment as its Chief Legal Counsel.
We disagree with the conclusion. We declare that based on the clear circumstances
herein the CA erred in so concluding.
The petitioner's letter of appointment pertinently stated:
3. As a Senior Officer of the Bank, you are entitled to the following executive
benefits:
•Car Plan limit of ₱700,000.00, without equity on your part; a gasoline subsidy of
300 liters per month and subject further to The Car Plan Policy of the Bank.
• Membership in a professional organization in relation to your profession and/or
assigned functions in the Bank.
• Membership in the Provident Fund Program/Retirement Program.
• Entitlement to any and all other basic and fringe benefits enjoyed by the officers;
core of the Bank relative to Insurance covers, Healthcare Insurance, vacation and
sick leaves, among others.68
Obviously, the mere mention of the retirement plan in the letter of appointment did
not sufficiently inform the petitioner of the contents or details of the retirement
program. To construe from the petitioner's acceptance of his appointment that he
had acquiesced to be retired earlier than the compulsory age of 65 years would,
therefore, not be warranted. This is because retirement should be the result of the
bilateral act of both the employer and the employee based on their voluntary
agreement that the employee agrees to sever his employment upon reaching a
certain age.69
That the petitioner might be well aware of the existence of the retirement program
at the time of his engagement did not suffice. His implied knowledge, regardless of
duration, did not equate to the voluntary acceptance required by law in granting an
early retirement age option to the employee. The law demanded more than a
passive acquiescence on the part of the employee, considering that his early
retirement age option involved conceding the constitutional right to security of
tenure.70
In Cercado v. Uniprom, Inc.,71 we have underscored the character of the
employee's consent in agreeing to the early retirement policy of the employer, viz.:
Acceptance by the employees of an early retirement age option must be explicit,
voluntary, free, and uncompelled. While an employer may unilaterally retire an
employee earlier than the legally permissible ages under the Labor Code, this
prerogative must be exercised pursuant to a mutually instituted early retirement
plan. In other words, only the implementation and execution of the option may be
unilateral, but not the adoption and institution of the retirement plan containing
such option. For the option to be valid, the retirement plan containing it must be
voluntarily assented to by the employees or at least by a majority of them through a
bargaining representative.72 (Bold emphasis supplied)
Furthermore, the petitioner's membership in the retirement plan could not be
justifiably attributed to his signing of the letter of appointment that only listed the
minimum benefits provided to PVB's employees. Indeed, in Cercado, we have
declared that the employee's consent to the retirement plan that came into being
two years after the hiring could not be inferred from her signature on the personnel
action forms accepting the terms of her job description, and compliance with the
company policies, rules and regulations, to wit:
We also cannot subscribe to respondent's submission that petitioner's consent to
the retirement plan may be inferred from her signature in the personnel action
forms containing the phrase: "Employee hereby expressly acknowledges receipt of
and undertakes to abide by the provisions of his/her Job Description, Company
Code of Conduct and such other policies, guidelines, rules and regulations the
company may prescribe."
It should be noted that the personnel action forms relate to the increase in
petitioner's salary at various periodic intervals. To conclude that her acceptance of
the salary increases was also, simultaneously, a concurrence to the retirement plan
would be tantamount to compelling her to agree to the latter. Moreover, voluntary
and equivocal acceptance by an employee of an early retirement age option in a
retirement plan necessarily connotes that her consent specifically refers to the plan
or that she has at least read the same when she affixed her conformity thereto.73
A perusal of PVB's retirement plan shows that under its Article III all the regular
employees of PVB were automatically admitted into membership, thus:
ARTICLE III
MEMBERSHIP IN THE PLAN
Section 1. Eligibility at Effective Date. Any Employee of the Bank as of January 1,
1996 shall automatically be a Member of the Plan as of such date.
106
Section 2. Eligibility after Effective Date. Any person who becomes an Employee
after January 1, 1996 shall automatically become a Member of the Plan on the date
he becomes a regular permanent Employee, provided he is less than 55 years old as
of such date.
Section 3. Continuation/Termination of Membership. Membership in the Plan shall
be concurrent with employment with the Bank, and shall cease automatically upon
termination of the Member's service with the Bank for any reason whatsoever.74
(Bold underscoring supplied for emphasis)
Having thus automatically become a member of the retirement plan through his
acceptance of employment as Chief Legal Officer of PVB,75 the petitioner could not
withdraw from the plan except upon his termination from employment.
It is also notable that the retirement plan had been in existence since January 1,
1996,76 or more than five years prior to the petitioner's employment by PVB. The
plan was established solely by the PVB,77 and approved by its president.78 As such,
the plan was in the nature of a contract of adhesion,79 in respect to which the
petitioner was reduced to mere submission by accepting his employment, and
automatically became a member of the plan. With the plan being a contract of
adhesion, to consider him to have voluntarily and freely given his consent to the
terms thereof as to warrant his being compulsorily retired at the age of 60 years is
factually unwarranted.
In view of the foregoing, the Court disagrees with the view tendered by Justice
Leonen to the effect that the petitioner, because of his legal expertise and
educational attainment, could not now validly claim that he was not informed of
the provisions of the retirement program. The pertinent rule on retirement plans
does not presume consent or acquiescence from the high educational attainment or
legal knowledge of the employee. In fact, the rule provides that the acquiescence
by the employee cannot be lightly inferred from his acceptance of employment.
Moreover, it was incumbent upon PVB to prove that the petitioner had been fully
apprised of the terms of the retirement program at the time of his acceptance of
the offer of employment. PVB did not discharge its burden, for the petitioner's
appointment letter apparently enumerated only the minimum benefits that he
would enjoy during his employment by PVB, and contained no indication of PVB
having given him a copy of the program itself in order to fully apprise him of the
contents and details thereof. Nonetheless, even assuming that he subsequently
obtained information about the program in the course of his employment, he still
could not opt to simply withdraw from the program due to his membership therein
being automatic for the regular employees of PVB.
To stress, company retirement plans must not only comply with the standards set
by the prevailing labor laws but must also be accepted by the employees as
commensurate to their faithful services to the employer within the requisite
period.80 Although the employer could be free to impose a retirement age lower
than 65 years for as long its employees consented,81 the retirement of the
employee whose intent to retire was not clearly established, or whose retirement
was involuntary is to be treated as a discharge.82
With the petitioner having been thus dismissed pursuant to the retirement
provision that he had not knowingly and voluntarily agreed to, PVB was guilty of
illegal dismissal as to him. Being an illegally dismissed employee, he was entitled to
the reliefs provided under Article 27983 of the Labor Code, to wit:
Article 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.
Considering that the petitioner's reinstatement is no longer feasible because of his
having meanwhile reached the compulsory retirement age of 65 years by June 11,
2012, he should be granted separation pay. In this regard, retirement benefits and
separation pay are not mutually exclusive.84
The basis for computing the separation pay should accord with Section 4,85 Article
III of PVB's retirement plan. Hence, his full backwages should be computed from
July 18, 2007 - the date when he was illegally dismissed - until his compulsory
retirement age of 65 years on June 11, 2012. Such backwages shall all be subject to
legal interest of 12% per annum from July 18, 2007 until June 30, 2013, and then to
legal interest of 6% interest per annum from July 1, 2013 until full satisfaction,
conformably with Nacar v. Gallery Frames.86
WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and
SETS ASIDE the decision promulgated by the Court of Appeals on August 31, 2012;
FINDS and DECLARES respondent PHILIPPINE VETERANS BANK guilty of illegally
dismissing the petitioner; and ORDERS respondent PHILIPPINE VETERANS BANK to
pay to the petitioner, as follows: (a) backwages computed from July 18, 2007, the
time of his illegal dismissal, until his compulsory age of retirement, plus legal
interest of 12% per annum from July 18, 2007 until June 30, 2013, and legal interest
of 6% per annum from July 1, 2013 until full satisfaction; (b) separation pay
107
computed at the rate of 100% of the final monthly salary received by the petitioner
pursuant to Section 4, Article V of the PVB Retirement Plan; and (c) the costs of suit.

The Court DIRECTS that any amount that the petitioner received from respondent
PHILIPPINE VETERANS BANK by virtue of his illegal retirement shall be deducted
from the amounts hereby awarded to him.

The Court DIRECTS the National Labor Relations Commission to facilitate the
computation and payment of the total monetary benefits and awards due to the
petitioner in accordance with this decision.

SO ORDERED.

108
REPUBLIC ACT No. 10757
AN ACT REDUCING THE RETIREMENT AGE OF SURFACE MINE WORKERS FROM SIXTY
(60) TO FIFTY (50) YEARS, AMENDING FOR THE PURPOSE ARTICLE 302 OF
PRESIDENTIAL DECREE NO. 442, AS AMENDED, OTHERWISE KNOWN AS THE “LABOR
CODE OF THE PHILIPPINES”
Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:
SECTION 1. Declaration of Policy. – It is hereby declared the policy of the State to
enhance the welfare of mine workers, both surface and underground, by
appropriately adjusting their retirement age. The State recognizes the vulnerability
of miners due to the presence of innumerable harmful elements in their profession
leading to more serious health problems, especially as these individuals age, and
how the circumstances are more dangerous compared to the ordinary worker far
away from mines.
SECTION 2. Article 302 of Presidential Decree No. 442, as amended, otherwise
known as the “Labor Code of the Philippines”, is hereby amended to read as
follows:
“Article 302. Retirement. – Any employee may be .retired upon reaching the
retirement age established in the collective bargaining agreement or other
applicable employment contract.
“In case of retirement, the employee shall be entitled to receive such retirement
benefits as he may have earned under existing laws and any collective bargaining
agreement and other agreements: Provided, however, That an employee’s
retirement benefits under any collective bargaining and other agreements shall not
be less than those provided herein.
“In the absence of a retirement plan or agreement providing for retirement benefits
of employees in the establishment, an employee upon reaching the age of sixty (60)
years or more, but not beyond sixty-five (65) years which is hereby declared the
compulsory retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay equivalent to at
least one-half (1/2) month salary for every year of service, a fraction of at least six
(6) months-being considered as one (1) whole year.
“Unless the parties provide for broader inclusions, the term ‘one-half (1/2) month
salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay
and the cash equivalent of not more than five (5) days of service incentive leaves.
“An underground or surface mining employee upon reaching the age of fifty (50)
years or more, but not beyond sixty (60) years which is hereby declared the
compulsory retirement age for both underground and surface mine workers, who
has served at least five (5) years as underground or surface mine worker may retire
and shall be entitled to all the retirement benefits provided for in this Article.
“For purposes of this Act, surface mine workers shall only include mill plant
workers, electrical, mechanical and tailings pond personnel.
“Retail, service and agricultural establishments or operations employing not more
than ten (10) employees or workers are exempted from the coverage of this
provision.
“Violation of this provision is hereby declared unlawful and subject to the penal
provisions provided under Article 302 of this Code.”
“Nothing in this Article shall deprive any employee of benefits to which he may be
entitled under Section 12-B of Republic Act No. 1161, as amended, otherwise
known as the Social Security Act of 1997 and other existing laws or company
policies or practices.”
SECTION 3. Renumbering. – For purposes of uniformity, the numerical designation
of Title II (Retirement), Book Six of Presidential Decree No. 442, as Article 302 in
Section 1 of this Act, shall be renumbered in accordance with Republic Act No.
10151 and as promulgated by the Department of Labor and Employment in their
Department Advisory Order No. 01, series of 2015. .
SECTION 4. Implementing Rules and Regulations. – Within thirty (30) days from the
effectivity of this Act, the Secretary of Labor and Employment shall, in consultation
and coordination with the President of the Social Security System, promulgate the
necessary rules and regulations for the effective implementation of this Act.
SECTION 5. Repealing Clause. – Section 12-B of Republic Act No. 1161, as amended,
otherwise known as the Social Security Act of 1997, is hereby amended and
modified accordingly to entitle underground or surface mining employees to the
benefits provided therein upon reaching the retirement age of fifty (50) years old.
All other laws, decrees, executive orders, proclamations, rules and regulations, and
other issuances or parts thereof inconsistent with the provisions of this Act are
hereby repealed or modified accordingly.
SECTION 6. Effectivity Clause. – This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation.
109
110
G.R. No. 164774 April 12, 2006
STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA, Petitioners,
vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, Respondents.
DECISION
PUNO, J.:
We are called to decide an issue of first impression: whether the policy of the
employer banning spouses from working in the same company violates the rights of
the employee under the Constitution and the Labor Code or is a valid exercise of
management prerogative.
At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals
dated August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National
Labor Relations Commission (NLRC) which affirmed the ruling of the Labor Arbiter.
Petitioner Star Paper Corporation (the company) is a corporation engaged in trading
– principally of paper products. Josephine Ongsitco is its Manager of the Personnel
and Administration Department while Sebastian Chua is its Managing Director.
The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol),
Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all regular
employees of the company.1
Simbol was employed by the company on October 27, 1993. He met Alma Dayrit,
also an employee of the company, whom he married on June 27, 1998. Prior to the
marriage, Ongsitco advised the couple that should they decide to get married, one
of them should resign pursuant to a company policy promulgated in 1995,2 viz.:
1. New applicants will not be allowed to be hired if in case he/she has [a] relative,
up to [the] 3rd degree of relationship, already employed by the company.
2. In case of two of our employees (both singles [sic], one male and another female)
developed a friendly relationship during the course of their employment and then
decided to get married, one of them should resign to preserve the policy stated
above.3
Simbol resigned on June 20, 1998 pursuant to the company policy.4
Comia was hired by the company on February 5, 1997. She met Howard Comia, a
co-employee, whom she married on June 1, 2000. Ongsitco likewise reminded them
that pursuant to company policy, one must resign should they decide to get
married. Comia resigned on June 30, 2000.5
Estrella was hired on July 29, 1994. She met Luisito Zuñiga (Zuñiga), also a co-
worker. Petitioners stated that Zuñiga, a married man, got Estrella pregnant. The
company allegedly could have terminated her services due to immorality but she
opted to resign on December 21, 1999.6
The respondents each signed a Release and Confirmation Agreement. They stated
therein that they have no money and property accountabilities in the company and
that they release the latter of any claim or demand of whatever nature.7
Respondents offer a different version of their dismissal. Simbol and Comia allege
that they did not resign voluntarily; they were compelled to resign in view of an
illegal company policy. As to respondent Estrella, she alleges that she had a
relationship with co-worker Zuñiga who misrepresented himself as a married but
separated man. After he got her pregnant, she discovered that he was not
separated. Thus, she severed her relationship with him to avoid dismissal due to the
company policy. On November 30, 1999, she met an accident and was advised by
the doctor at the Orthopedic Hospital to recuperate for twenty-one (21) days. She
returned to work on December 21, 1999 but she found out that her name was on-
hold at the gate. She was denied entry. She was directed to proceed to the
personnel office where one of the staff handed her a memorandum. The
memorandum stated that she was being dismissed for immoral conduct. She
refused to sign the memorandum because she was on leave for twenty-one (21)
days and has not been given a chance to explain. The management asked her to
write an explanation. However, after submission of the explanation, she was
nonetheless dismissed by the company. Due to her urgent need for money, she
later submitted a letter of resignation in exchange for her thirteenth month pay.8
Respondents later filed a complaint for unfair labor practice, constructive dismissal,
separation pay and attorney’s fees. They averred that the aforementioned company
policy is illegal and contravenes Article 136 of the Labor Code. They also contended
that they were dismissed due to their union membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint
for lack of merit, viz.:
[T]his company policy was decreed pursuant to what the respondent corporation
perceived as management prerogative. This management prerogative is quite broad
and encompassing for it covers hiring, work assignment, working method, time,
111
place and manner of work, tools to be used, processes to be followed, supervision
of workers, working regulations, transfer of employees, work supervision, lay-off of
workers and the discipline, dismissal and recall of workers. Except as provided for or
limited by special law, an employer is free to regulate, according to his own
discretion and judgment all the aspects of employment.9 (Citations omitted.)
On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter
on January 11, 2002. 10
Respondents filed a Motion for Reconsideration but was denied by the NLRC in a
Resolution11 dated August 8, 2002. They appealed to respondent court via Petition
for Certiorari.
In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the
NLRC decision, viz.:
WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the
National Labor Relations Commission is hereby REVERSED and SET ASIDE and a new
one is entered as follows:
(1) Declaring illegal, the petitioners’ dismissal from employment and ordering
private respondents to reinstate petitioners to their former positions without loss
of seniority rights with full backwages from the time of their dismissal until actual
reinstatement; and
(2) Ordering private respondents to pay petitioners attorney’s fees amounting to
10% of the award and the cost of this suit.13
On appeal to this Court, petitioners contend that the Court of Appeals erred in
holding that:
1. x x x the subject 1995 policy/regulation is violative of the constitutional rights
towards marriage and the family of employees and of Article 136 of the Labor Code;
and
2. x x x respondents’ resignations were far from voluntary.14
We affirm.
The 1987 Constitution15 states our policy towards the protection of labor under the
following provisions, viz.:
Article II, Section 18. The State affirms labor as a primary social economic force. It
shall protect the rights of workers and promote their welfare.
xxx
Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of
employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining
and negotiations, and peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure, humane
conditions of work, and a living wage. They shall also participate in policy and
decision-making processes affecting their rights and benefits as may be provided by
law.
The State shall promote the principle of shared responsibility between workers and
employers, recognizing the right of labor to its just share in the fruits of production
and the right of enterprises to reasonable returns on investments, and to expansion
and growth.
The Civil Code likewise protects labor with the following provisions:
Art. 1700. The relation between capital and labor are not merely contractual. They
are so impressed with public interest that labor contracts must yield to the common
good. Therefore, such contracts are subject to the special laws on labor unions,
collective bargaining, strikes and lockouts, closed shop, wages, working conditions,
hours of labor and similar subjects.
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be
construed in favor of the safety and decent living for the laborer.
The Labor Code is the most comprehensive piece of legislation protecting labor. The
case at bar involves Article 136 of the Labor Code which provides:
Art. 136. It shall be unlawful for an employer to require as a condition of
employment or continuation of employment that a woman employee shall not get
married, or to stipulate expressly or tacitly that upon getting married a woman
employee shall be deemed resigned or separated, or to actually dismiss, discharge,
discriminate or otherwise prejudice a woman employee merely by reason of her
marriage.
112
Respondents submit that their dismissal violates the above provision. Petitioners
allege that its policy "may appear to be contrary to Article 136 of the Labor Code"
but it assumes a new meaning if read together with the first paragraph of the rule.
The rule does not require the woman employee to resign. The employee spouses
have the right to choose who between them should resign. Further, they are free to
marry persons other than co-employees. Hence, it is not the marital status of the
employee, per se, that is being discriminated. It is only intended to carry out its no-
employment-for-relatives-within-the-third-degree-policy which is within the ambit
of the prerogatives of management.16
It is true that the policy of petitioners prohibiting close relatives from working in the
same company takes the nature of an anti-nepotism employment policy.
Companies adopt these policies to prevent the hiring of unqualified persons based
on their status as a relative, rather than upon their ability.17 These policies focus
upon the potential employment problems arising from the perception of favoritism
exhibited towards relatives.
With more women entering the workforce, employers are also enacting
employment policies specifically prohibiting spouses from working for the same
company. We note that two types of employment policies involve spouses: policies
banning only spouses from working in the same company (no-spouse employment
policies), and those banning all immediate family members, including spouses, from
working in the same company (anti-nepotism employment policies).18
Unlike in our jurisdiction where there is no express prohibition on marital
discrimination,19 there are twenty state statutes20 in the United States prohibiting
marital discrimination. Some state courts21 have been confronted with the issue of
whether no-spouse policies violate their laws prohibiting both marital status and
sex discrimination.
In challenging the anti-nepotism employment policies in the United States,
complainants utilize two theories of employment discrimination: the disparate
treatment and the disparate impact. Under the disparate treatment analysis, the
plaintiff must prove that an employment policy is discriminatory on its face. No-
spouse employment policies requiring an employee of a particular sex to either
quit, transfer, or be fired are facially discriminatory. For example, an employment
policy prohibiting the employer from hiring wives of male employees, but not
husbands of female employees, is discriminatory on its face.22
On the other hand, to establish disparate impact, the complainants must prove that
a facially neutral policy has a disproportionate effect on a particular class. For
example, although most employment policies do not expressly indicate which
spouse will be required to transfer or leave the company, the policy often
disproportionately affects one sex.23
The state courts’ rulings on the issue depend on their interpretation of the scope of
marital status discrimination within the meaning of their respective civil rights acts.
Though they agree that the term "marital status" encompasses discrimination
based on a person's status as either married, single, divorced, or widowed, they are
divided on whether the term has a broader meaning. Thus, their decisions vary.24
The courts narrowly25 interpreting marital status to refer only to a person's status
as married, single, divorced, or widowed reason that if the legislature intended a
broader definition it would have either chosen different language or specified its
intent. They hold that the relevant inquiry is if one is married rather than to whom
one is married. They construe marital status discrimination to include only whether
a person is single, married, divorced, or widowed and not the "identity, occupation,
and place of employment of one's spouse." These courts have upheld the
questioned policies and ruled that they did not violate the marital status
discrimination provision of their respective state statutes.
The courts that have broadly26 construed the term "marital status" rule that it
encompassed the identity, occupation and employment of one's spouse. They strike
down the no-spouse employment policies based on the broad legislative intent of
the state statute. They reason that the no-spouse employment policy violate the
marital status provision because it arbitrarily discriminates against all spouses of
present employees without regard to the actual effect on the individual's
qualifications or work performance.27 These courts also find the no-spouse
employment policy invalid for failure of the employer to present any evidence of
business necessity other than the general perception that spouses in the same
workplace might adversely affect the business.28 They hold that the absence of
such a bona fide occupational qualification29 invalidates a rule denying
employment to one spouse due to the current employment of the other spouse in
the same office.30 Thus, they rule that unless the employer can prove that the
reasonable demands of the business require a distinction based on marital status
and there is no better available or acceptable policy which would better accomplish
the business purpose, an employer may not discriminate against an employee
based on the identity of the employee’s spouse.31 This is known as the bona fide
occupational qualification exception.
We note that since the finding of a bona fide occupational qualification justifies an
employer’s no-spouse rule, the exception is interpreted strictly and narrowly by
these state courts. There must be a compelling business necessity for which no
alternative exists other than the discriminatory practice.32 To justify a bona fide
occupational qualification, the employer must prove two factors: (1) that the
113
employment qualification is reasonably related to the essential operation of the job
involved; and, (2) that there is a factual basis for believing that all or substantially all
persons meeting the qualification would be unable to properly perform the duties
of the job.33
The concept of a bona fide occupational qualification is not foreign in our
jurisdiction. We employ the standard of reasonableness of the company policy
which is parallel to the bona fide occupational qualification requirement. In the
recent case of Duncan Association of Detailman-PTGWO and Pedro Tecson v. Glaxo
Wellcome Philippines, Inc.,34 we passed on the validity of the policy of a
pharmaceutical company prohibiting its employees from marrying employees of
any competitor company. We held that Glaxo has a right to guard its trade secrets,
manufacturing formulas, marketing strategies and other confidential programs and
information from competitors. We considered the prohibition against personal or
marital relationships with employees of competitor companies upon Glaxo’s
employees reasonable under the circumstances because relationships of that
nature might compromise the interests of Glaxo. In laying down the assailed
company policy, we recognized that Glaxo only aims to protect its interests against
the possibility that a competitor company will gain access to its secrets and
procedures.35
The requirement that a company policy must be reasonable under the
circumstances to qualify as a valid exercise of management prerogative was also at
issue in the 1997 case of Philippine Telegraph and Telephone Company v. NLRC.36
In said case, the employee was dismissed in violation of petitioner’s policy of
disqualifying from work any woman worker who contracts marriage. We held that
the company policy violates the right against discrimination afforded all women
workers under Article 136 of the Labor Code, but established a permissible
exception, viz.:
[A] requirement that a woman employee must remain unmarried could be justified
as a "bona fide occupational qualification," or BFOQ, where the particular
requirements of the job would justify the same, but not on the ground of a general
principle, such as the desirability of spreading work in the workplace. A requirement
of that nature would be valid provided it reflects an inherent quality reasonably
necessary for satisfactory job performance.37 (Emphases supplied.)
The cases of Duncan and PT&T instruct us that the requirement of reasonableness
must be clearly established to uphold the questioned employment policy. The
employer has the burden to prove the existence of a reasonable business necessity.
The burden was successfully discharged in Duncan but not in PT&T.
We do not find a reasonable business necessity in the case at bar.
Petitioners’ sole contention that "the company did not just want to have two (2) or
more of its employees related between the third degree by affinity and/or
consanguinity"38 is lame. That the second paragraph was meant to give teeth to
the first paragraph of the questioned rule39 is evidently not the valid reasonable
business necessity required by the law.
It is significant to note that in the case at bar, respondents were hired after they
were found fit for the job, but were asked to resign when they married a co-
employee. Petitioners failed to show how the marriage of Simbol, then a Sheeting
Machine Operator, to Alma Dayrit, then an employee of the Repacking Section,
could be detrimental to its business operations. Neither did petitioners explain how
this detriment will happen in the case of Wilfreda Comia, then a Production Helper
in the Selecting Department, who married Howard Comia, then a helper in the
cutter-machine. The policy is premised on the mere fear that employees married to
each other will be less efficient. If we uphold the questioned rule without valid
justification, the employer can create policies based on an unproven presumption
of a perceived danger at the expense of an employee’s right to security of tenure.
Petitioners contend that their policy will apply only when one employee marries a
co-employee, but they are free to marry persons other than co-employees. The
questioned policy may not facially violate Article 136 of the Labor Code but it
creates a disproportionate effect and under the disparate impact theory, the only
way it could pass judicial scrutiny is a showing that it is reasonable despite the
discriminatory, albeit disproportionate, effect. The failure of petitioners to prove a
legitimate business concern in imposing the questioned policy cannot prejudice the
employee’s right to be free from arbitrary discrimination based upon stereotypes of
married persons working together in one company.40
Lastly, the absence of a statute expressly prohibiting marital discrimination in our
jurisdiction cannot benefit the petitioners. The protection given to labor in our
jurisdiction is vast and extensive that we cannot prudently draw inferences from the
legislature’s silence41 that married persons are not protected under our
Constitution and declare valid a policy based on a prejudice or stereotype. Thus, for
failure of petitioners to present undisputed proof of a reasonable business
necessity, we rule that the questioned policy is an invalid exercise of management
prerogative. Corollarily, the issue as to whether respondents Simbol and Comia
resigned voluntarily has become moot and academic.
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the
singular fact that her resignation letter was written in her own handwriting. Both
ruled that her resignation was voluntary and thus valid. The respondent court failed
114
to categorically rule whether Estrella voluntarily resigned but ordered that she be
reinstated along with Simbol and Comia.

Estrella claims that she was pressured to submit a resignation letter because she
was in dire need of money. We examined the records of the case and find Estrella’s
contention to be more in accord with the evidence. While findings of fact by
administrative tribunals like the NLRC are generally given not only respect but, at
times, finality, this rule admits of exceptions,42 as in the case at bar.

Estrella avers that she went back to work on December 21, 1999 but was dismissed
due to her alleged immoral conduct. At first, she did not want to sign the
termination papers but she was forced to tender her resignation letter in exchange
for her thirteenth month pay.

The contention of petitioners that Estrella was pressured to resign because she got
impregnated by a married man and she could not stand being looked upon or
talked about as immoral43 is incredulous. If she really wanted to avoid
embarrassment and humiliation, she would not have gone back to work at all. Nor
would she have filed a suit for illegal dismissal and pleaded for reinstatement. We
have held that in voluntary resignation, the employee is compelled by personal
reason(s) to dissociate himself from employment. It is done with the intention of
relinquishing an office, accompanied by the act of abandonment. 44 Thus, it is
illogical for Estrella to resign and then file a complaint for illegal dismissal. Given the
lack of sufficient evidence on the part of petitioners that the resignation was
voluntary, Estrella’s dismissal is declared illegal.

IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477
dated August 3, 2004 is AFFIRMED.1avvphil.net

SO ORDERED.

115
G.R. No. 168081 October 17, 2008
ARMANDO G. YRASUEGUI, petitioners,
vs.
PHILIPPINE AIRLINES, INC., respondents.
DECISION
REYES, R.T., J.:
THIS case portrays the peculiar story of an international flight steward who was
dismissed because of his failure to adhere to the weight standards of the airline
company.
He is now before this Court via a petition for review on certiorari claiming that he
was illegally dismissed. To buttress his stance, he argues that (1) his dismissal does
not fall under 282(e) of the Labor Code; (2) continuing adherence to the weight
standards of the company is not a bona fide occupational qualification; and (3) he
was discriminated against because other overweight employees were promoted
instead of being disciplined.
After a meticulous consideration of all arguments pro and con, We uphold the
legality of dismissal. Separation pay, however, should be awarded in favor of the
employee as an act of social justice or based on equity. This is so because his
dismissal is not for serious misconduct. Neither is it reflective of his moral character.
The Facts
Petitioner Armando G. Yrasuegui was a former international flight steward of
Philippine Airlines, Inc. (PAL). He stands five feet and eight inches (5’8") with a large
body frame. The proper weight for a man of his height and body structure is from
147 to 166 pounds, the ideal weight being 166 pounds, as mandated by the Cabin
and Crew Administration Manual1 of PAL.
The weight problem of petitioner dates back to 1984. Back then, PAL advised him to
go on an extended vacation leave from December 29, 1984 to March 4, 1985 to
address his weight concerns. Apparently, petitioner failed to meet the company’s
weight standards, prompting another leave without pay from March 5, 1985 to
November 1985.
After meeting the required weight, petitioner was allowed to return to work. But
petitioner’s weight problem recurred. He again went on leave without pay from
October 17, 1988 to February 1989.
On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal weight.
In line with company policy, he was removed from flight duty effective May 6, 1989
to July 3, 1989. He was formally requested to trim down to his ideal weight and
report for weight checks on several dates. He was also told that he may avail of the
services of the company physician should he wish to do so. He was advised that his
case will be evaluated on July 3, 1989.2
On February 25, 1989, petitioner underwent weight check. It was discovered that
he gained, instead of losing, weight. He was overweight at 215 pounds, which is 49
pounds beyond the limit. Consequently, his off-duty status was retained.
On October 17, 1989, PAL Line Administrator Gloria Dizon personally visited
petitioner at his residence to check on the progress of his effort to lose weight.
Petitioner weighed 217 pounds, gaining 2 pounds from his previous weight. After
the visit, petitioner made a commitment3 to reduce weight in a letter addressed to
Cabin Crew Group Manager Augusto Barrios. The letter, in full, reads:
Dear Sir:
I would like to guaranty my commitment towards a weight loss from 217 pounds to
200 pounds from today until 31 Dec. 1989.
From thereon, I promise to continue reducing at a reasonable percentage until such
time that my ideal weight is achieved.
Likewise, I promise to personally report to your office at the designated time
schedule you will set for my weight check.
Respectfully Yours,
F/S Armando Yrasuegui4
Despite the lapse of a ninety-day period given him to reach his ideal weight,
petitioner remained overweight. On January 3, 1990, he was informed of the PAL
decision for him to remain grounded until such time that he satisfactorily complies
with the weight standards. Again, he was directed to report every two weeks for
weight checks.
Petitioner failed to report for weight checks. Despite that, he was given one more
month to comply with the weight requirement. As usual, he was asked to report for
weight check on different dates. He was reminded that his grounding would
continue pending satisfactory compliance with the weight standards.5
116

Again, petitioner failed to report for weight checks, although he was seen
submitting his passport for processing at the PAL Staff Service Division.
On April 17, 1990, petitioner was formally warned that a repeated refusal to report
for weight check would be dealt with accordingly. He was given another set of
weight check dates.6 Again, petitioner ignored the directive and did not report for
weight checks. On June 26, 1990, petitioner was required to explain his refusal to
undergo weight checks.7
When petitioner tipped the scale on July 30, 1990, he weighed at 212 pounds.
Clearly, he was still way over his ideal weight of 166 pounds.
From then on, nothing was heard from petitioner until he followed up his case
requesting for leniency on the latter part of 1992. He weighed at 219 pounds on
August 20, 1992 and 205 pounds on November 5, 1992.
On November 13, 1992, PAL finally served petitioner a Notice of Administrative
Charge for violation of company standards on weight requirements. He was given
ten (10) days from receipt of the charge within which to file his answer and submit
controverting evidence.8
On December 7, 1992, petitioner submitted his Answer.9 Notably, he did not deny
being overweight. What he claimed, instead, is that his violation, if any, had already
been condoned by PAL since "no action has been taken by the company" regarding
his case "since 1988." He also claimed that PAL discriminated against him because
"the company has not been fair in treating the cabin crew members who are
similarly situated."
On December 8, 1992, a clarificatory hearing was held where petitioner manifested
that he was undergoing a weight reduction program to lose at least two (2) pounds
per week so as to attain his ideal weight.10
On June 15, 1993, petitioner was formally informed by PAL that due to his inability
to attain his ideal weight, "and considering the utmost leniency" extended to him
"which spanned a period covering a total of almost five (5) years," his services were
considered terminated "effective immediately."11
His motion for reconsideration having been denied,12 petitioner filed a complaint
for illegal dismissal against PAL.
Labor Arbiter, NLRC and CA Dispositions
On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled13 that petitioner was
illegally dismissed. The dispositive part of the Arbiter ruling runs as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered, declaring the
complainant’s dismissal illegal, and ordering the respondent to reinstate him to his
former position or substantially equivalent one, and to pay him:
a. Backwages of Php10,500.00 per month from his dismissal on June 15, 1993 until
reinstated, which for purposes of appeal is hereby set from June 15, 1993 up to
August 15, 1998 at ₱651,000.00;
b. Attorney’s fees of five percent (5%) of the total award.
SO ORDERED.14
The Labor Arbiter held that the weight standards of PAL are reasonable in view of
the nature of the job of petitioner.15 However, the weight standards need not be
complied with under pain of dismissal since his weight did not hamper the
performance of his duties.16 Assuming that it did, petitioner could be transferred to
other positions where his weight would not be a negative factor.17 Notably, other
overweight employees, i.e., Mr. Palacios, Mr. Cui, and Mr. Barrios, were promoted
instead of being disciplined.18
Both parties appealed to the National Labor Relations Commission (NLRC).19
On October 8, 1999, the Labor Arbiter issued a writ of execution directing the
reinstatement of petitioner without loss of seniority rights and other benefits.20
On February 1, 2000, the Labor Arbiter denied21 the Motion to Quash Writ of
Execution22 of PAL.
On March 6, 2000, PAL appealed the denial of its motion to quash to the NLRC.23
On June 23, 2000, the NLRC rendered judgment24 in the following tenor:
WHEREFORE, premises considered[,] the Decision of the Arbiter dated 18
November 1998 as modified by our findings herein, is hereby AFFIRMED and that
part of the dispositive portion of said decision concerning complainant’s
entitlement to backwages shall be deemed to refer to complainant’s entitlement to
his full backwages, inclusive of allowances and to his other benefits or their
monetary equivalent instead of simply backwages, from date of dismissal until his
actual reinstatement or finality hereof. Respondent is enjoined to manifests (sic) its
choice of the form of the reinstatement of complainant, whether physical or
117
through payroll within ten (10) days from notice failing which, the same shall be
deemed as complainant’s reinstatement through payroll and execution in case of
non-payment shall accordingly be issued by the Arbiter. Both appeals of respondent
thus, are DISMISSED for utter lack of merit.25
According to the NLRC, "obesity, or the tendency to gain weight uncontrollably
regardless of the amount of food intake, is a disease in itself."26 As a consequence,
there can be no intentional defiance or serious misconduct by petitioner to the
lawful order of PAL for him to lose weight.27
Like the Labor Arbiter, the NLRC found the weight standards of PAL to be
reasonable. However, it found as unnecessary the Labor Arbiter holding that
petitioner was not remiss in the performance of his duties as flight steward despite
being overweight. According to the NLRC, the Labor Arbiter should have limited
himself to the issue of whether the failure of petitioner to attain his ideal weight
constituted willful defiance of the weight standards of PAL.28
PAL moved for reconsideration to no avail.29 Thus, PAL elevated the matter to the
Court of Appeals (CA) via a petition for certiorari under Rule 65 of the 1997 Rules of
Civil Procedure.30
By Decision dated August 31, 2004, the CA reversed31 the NLRC:
WHEREFORE, premises considered, we hereby GRANT the petition. The assailed
NLRC decision is declared NULL and VOID and is hereby SET ASIDE. The private
respondent’s complaint is hereby DISMISSED. No costs.
SO ORDERED.32
The CA opined that there was grave abuse of discretion on the part of the NLRC
because it "looked at wrong and irrelevant considerations"33 in evaluating the
evidence of the parties. Contrary to the NLRC ruling, the weight standards of PAL
are meant to be a continuing qualification for an employee’s position.34 The failure
to adhere to the weight standards is an analogous cause for the dismissal of an
employee under Article 282(e) of the Labor Code in relation to Article 282(a). It is
not willful disobedience as the NLRC seemed to suggest.35 Said the CA, "the
element of willfulness that the NLRC decision cites is an irrelevant consideration in
arriving at a conclusion on whether the dismissal is legally proper."36 In other
words, "the relevant question to ask is not one of willfulness but one of
reasonableness of the standard and whether or not the employee qualifies or
continues to qualify under this standard."37
Just like the Labor Arbiter and the NLRC, the CA held that the weight standards of
PAL are reasonable.38 Thus, petitioner was legally dismissed because he repeatedly
failed to meet the prescribed weight standards.39 It is obvious that the issue of
discrimination was only invoked by petitioner for purposes of escaping the result of
his dismissal for being overweight.40
On May 10, 2005, the CA denied petitioner’s motion for reconsideration.41
Elaborating on its earlier ruling, the CA held that the weight standards of PAL are a
bona fide occupational qualification which, in case of violation, "justifies an
employee’s separation from the service."42
Issues
In this Rule 45 petition for review, the following issues are posed for resolution:
I.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
PETITIONER’S OBESITY CAN BE A GROUND FOR DISMISSAL UNDER PARAGRAPH (e)
OF ARTICLE 282 OF THE LABOR CODE OF THE PHILIPPINES;
II.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
PETITIONER’S DISMISSAL FOR OBESITY CAN BE PREDICATED ON THE "BONA FIDE
OCCUPATIONAL QUALIFICATION (BFOQ) DEFENSE";
III.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
PETITIONER WAS NOT UNDULY DISCRIMINATED AGAINST WHEN HE WAS
DISMISSED WHILE OTHER OVERWEIGHT CABIN ATTENDANTS WERE EITHER GIVEN
FLYING DUTIES OR PROMOTED;
IV.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT BRUSHED
ASIDE PETITIONER’S CLAIMS FOR REINSTATEMENT [AND] WAGES ALLEGEDLY FOR
BEING MOOT AND ACADEMIC.43 (Underscoring supplied)
Our Ruling
118
I. The obesity of petitioner is a ground for dismissal under Article 282(e) 44 of the
Labor Code.
A reading of the weight standards of PAL would lead to no other conclusion than
that they constitute a continuing qualification of an employee in order to keep the
job. Tersely put, an employee may be dismissed the moment he is unable to comply
with his ideal weight as prescribed by the weight standards. The dismissal of the
employee would thus fall under Article 282(e) of the Labor Code. As explained by
the CA:
x x x [T]he standards violated in this case were not mere "orders" of the employer;
they were the "prescribed weights" that a cabin crew must maintain in order to
qualify for and keep his or her position in the company. In other words, they were
standards that establish continuing qualifications for an employee’s position. In this
sense, the failure to maintain these standards does not fall under Article 282(a)
whose express terms require the element of willfulness in order to be a ground for
dismissal. The failure to meet the employer’s qualifying standards is in fact a ground
that does not squarely fall under grounds (a) to (d) and is therefore one that falls
under Article 282(e) – the "other causes analogous to the foregoing."
By its nature, these "qualifying standards" are norms that apply prior to and after
an employee is hired. They apply prior to employment because these are the
standards a job applicant must initially meet in order to be hired. They apply after
hiring because an employee must continue to meet these standards while on the
job in order to keep his job. Under this perspective, a violation is not one of the
faults for which an employee can be dismissed pursuant to pars. (a) to (d) of Article
282; the employee can be dismissed simply because he no longer "qualifies" for his
job irrespective of whether or not the failure to qualify was willful or intentional. x x
x45
Petitioner, though, advances a very interesting argument. He claims that obesity is a
"physical abnormality and/or illness."46 Relying on Nadura v. Benguet
Consolidated, Inc.,47 he says his dismissal is illegal:
Conscious of the fact that Nadura’s case cannot be made to fall squarely within the
specific causes enumerated in subparagraphs 1(a) to (e), Benguet invokes the
provisions of subparagraph 1(f) and says that Nadura’s illness – occasional attacks
of asthma – is a cause analogous to them.
Even a cursory reading of the legal provision under consideration is sufficient to
convince anyone that, as the trial court said, "illness cannot be included as an
analogous cause by any stretch of imagination."
It is clear that, except the just cause mentioned in sub-paragraph 1(a), all the others
expressly enumerated in the law are due to the voluntary and/or willful act of the
employee. How Nadura’s illness could be considered as "analogous" to any of them
is beyond our understanding, there being no claim or pretense that the same was
contracted through his own voluntary act.48
The reliance on Nadura is off-tangent. The factual milieu in Nadura is substantially
different from the case at bar. First, Nadura was not decided under the Labor Code.
The law applied in that case was Republic Act (RA) No. 1787. Second, the issue of
flight safety is absent in Nadura, thus, the rationale there cannot apply here. Third,
in Nadura, the employee who was a miner, was laid off from work because of
illness, i.e., asthma. Here, petitioner was dismissed for his failure to meet the
weight standards of PAL. He was not dismissed due to illness. Fourth, the issue in
Nadura is whether or not the dismissed employee is entitled to separation pay and
damages. Here, the issue centers on the propriety of the dismissal of petitioner for
his failure to meet the weight standards of PAL. Fifth, in Nadura, the employee was
not accorded due process. Here, petitioner was accorded utmost leniency. He was
given more than four (4) years to comply with the weight standards of PAL.
In the case at bar, the evidence on record militates against petitioner’s claims that
obesity is a disease. That he was able to reduce his weight from 1984 to 1992
clearly shows that it is possible for him to lose weight given the proper attitude,
determination, and self-discipline. Indeed, during the clarificatory hearing on
December 8, 1992, petitioner himself claimed that "[t]he issue is could I bring my
weight down to ideal weight which is 172, then the answer is yes. I can do it
now."49
True, petitioner claims that reducing weight is costing him "a lot of expenses."50
However, petitioner has only himself to blame. He could have easily availed the
assistance of the company physician, per the advice of PAL.51 He chose to ignore
the suggestion. In fact, he repeatedly failed to report when required to undergo
weight checks, without offering a valid explanation. Thus, his fluctuating weight
indicates absence of willpower rather than an illness.
Petitioner cites Bonnie Cook v. State of Rhode Island, Department of Mental Health,
Retardation and Hospitals,52 decided by the United States Court of Appeals (First
Circuit). In that case, Cook worked from 1978 to 1980 and from 1981 to 1986 as an
institutional attendant for the mentally retarded at the Ladd Center that was being
operated by respondent. She twice resigned voluntarily with an unblemished
record. Even respondent admitted that her performance met the Center’s
legitimate expectations. In 1988, Cook re-applied for a similar position. At that time,
"she stood 5’2" tall and weighed over 320 pounds." Respondent claimed that the
119
morbid obesity of plaintiff compromised her ability to evacuate patients in case of
emergency and it also put her at greater risk of serious diseases.
Cook contended that the action of respondent amounted to discrimination on the
basis of a handicap. This was in direct violation of Section 504(a) of the
Rehabilitation Act of 1973,53 which incorporates the remedies contained in Title VI
of the Civil Rights Act of 1964. Respondent claimed, however, that morbid obesity
could never constitute a handicap within the purview of the Rehabilitation Act.
Among others, obesity is a mutable condition, thus plaintiff could simply lose weight
and rid herself of concomitant disability.
The appellate Court disagreed and held that morbid obesity is a disability under the
Rehabilitation Act and that respondent discriminated against Cook based on
"perceived" disability. The evidence included expert testimony that morbid obesity
is a physiological disorder. It involves a dysfunction of both the metabolic system
and the neurological appetite – suppressing signal system, which is capable of
causing adverse effects within the musculoskeletal, respiratory, and cardiovascular
systems. Notably, the Court stated that "mutability is relevant only in determining
the substantiality of the limitation flowing from a given impairment," thus
"mutability only precludes those conditions that an individual can easily and quickly
reverse by behavioral alteration."
Unlike Cook, however, petitioner is not morbidly obese. In the words of the District
Court for the District of Rhode Island, Cook was sometime before 1978 "at least one
hundred pounds more than what is considered appropriate of her height."
According to the Circuit Judge, Cook weighed "over 320 pounds" in 1988. Clearly,
that is not the case here. At his heaviest, petitioner was only less than 50 pounds
over his ideal weight.
In fine, We hold that the obesity of petitioner, when placed in the context of his
work as flight attendant, becomes an analogous cause under Article 282(e) of the
Labor Code that justifies his dismissal from the service. His obesity may not be
unintended, but is nonetheless voluntary. As the CA correctly puts it,
"[v]oluntariness basically means that the just cause is solely attributable to the
employee without any external force influencing or controlling his actions. This
element runs through all just causes under Article 282, whether they be in the
nature of a wrongful action or omission. Gross and habitual neglect, a recognized
just cause, is considered voluntary although it lacks the element of intent found in
Article 282(a), (c), and (d)."54
II. The dismissal of petitioner can be predicated on the bona fide occupational
qualification defense.
Employment in particular jobs may not be limited to persons of a particular sex,
religion, or national origin unless the employer can show that sex, religion, or
national origin is an actual qualification for performing the job. The qualification is
called a bona fide occupational qualification (BFOQ).55 In the United States, there
are a few federal and many state job discrimination laws that contain an exception
allowing an employer to engage in an otherwise unlawful form of prohibited
discrimination when the action is based on a BFOQ necessary to the normal
operation of a business or enterprise.56
Petitioner contends that BFOQ is a statutory defense. It does not exist if there is no
statute providing for it.57 Further, there is no existing BFOQ statute that could
justify his dismissal.58
Both arguments must fail.
First, the Constitution,59 the Labor Code,60 and RA No. 727761 or the Magna Carta
for Disabled Persons62 contain provisions similar to BFOQ.
Second, in British Columbia Public Service Employee Commission (BSPSERC) v. The
British Columbia Government and Service Employee’s Union (BCGSEU),63 the
Supreme Court of Canada adopted the so-called "Meiorin Test" in determining
whether an employment policy is justified. Under this test, (1) the employer must
show that it adopted the standard for a purpose rationally connected to the
performance of the job;64 (2) the employer must establish that the standard is
reasonably necessary65 to the accomplishment of that work-related purpose; and
(3) the employer must establish that the standard is reasonably necessary in order
to accomplish the legitimate work-related purpose. Similarly, in Star Paper
Corporation v. Simbol,66 this Court held that in order to justify a BFOQ, the
employer must prove that (1) the employment qualification is reasonably related to
the essential operation of the job involved; and (2) that there is factual basis for
believing that all or substantially all persons meeting the qualification would be
unable to properly perform the duties of the job.67
In short, the test of reasonableness of the company policy is used because it is
parallel to BFOQ.68 BFOQ is valid "provided it reflects an inherent quality
reasonably necessary for satisfactory job performance."69
In Duncan Association of Detailman-PTGWTO v. Glaxo Wellcome Philippines, Inc.,70
the Court did not hesitate to pass upon the validity of a company policy which
prohibits its employees from marrying employees of a rival company. It was held
that the company policy is reasonable considering that its purpose is the protection
of the interests of the company against possible competitor infiltration on its trade
secrets and procedures.
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Verily, there is no merit to the argument that BFOQ cannot be applied if it has no
supporting statute. Too, the Labor Arbiter,71 NLRC,72 and CA73 are one in holding
that the weight standards of PAL are reasonable. A common carrier, from the
nature of its business and for reasons of public policy, is bound to observe
extraordinary diligence for the safety of the passengers it transports.74 It is bound
to carry its passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with due regard for all the
circumstances.75
The law leaves no room for mistake or oversight on the part of a common carrier.
Thus, it is only logical to hold that the weight standards of PAL show its effort to
comply with the exacting obligations imposed upon it by law by virtue of being a
common carrier.
The business of PAL is air transportation. As such, it has committed itself to safely
transport its passengers. In order to achieve this, it must necessarily rely on its
employees, most particularly the cabin flight deck crew who are on board the
aircraft. The weight standards of PAL should be viewed as imposing strict norms of
discipline upon its employees.
In other words, the primary objective of PAL in the imposition of the weight
standards for cabin crew is flight safety. It cannot be gainsaid that cabin attendants
must maintain agility at all times in order to inspire passenger confidence on their
ability to care for the passengers when something goes wrong. It is not farfetched
to say that airline companies, just like all common carriers, thrive due to public
confidence on their safety records. People, especially the riding public, expect no
less than that airline companies transport their passengers to their respective
destinations safely and soundly. A lesser performance is unacceptable.
The task of a cabin crew or flight attendant is not limited to serving meals or
attending to the whims and caprices of the passengers. The most important activity
of the cabin crew is to care for the safety of passengers and the evacuation of the
aircraft when an emergency occurs. Passenger safety goes to the core of the job of
a cabin attendant. Truly, airlines need cabin attendants who have the necessary
strength to open emergency doors, the agility to attend to passengers in cramped
working conditions, and the stamina to withstand grueling flight schedules.
On board an aircraft, the body weight and size of a cabin attendant are important
factors to consider in case of emergency. Aircrafts have constricted cabin space, and
narrow aisles and exit doors. Thus, the arguments of respondent that "[w]hether
the airline’s flight attendants are overweight or not has no direct relation to its
mission of transporting passengers to their destination"; and that the weight
standards "has nothing to do with airworthiness of respondent’s airlines," must fail.
The rationale in Western Air Lines v. Criswell76 relied upon by petitioner cannot
apply to his case. What was involved there were two (2) airline pilots who were
denied reassignment as flight engineers upon reaching the age of 60, and a flight
engineer who was forced to retire at age 60. They sued the airline company,
alleging that the age-60 retirement for flight engineers violated the Age
Discrimination in Employment Act of 1967. Age-based BFOQ and being overweight
are not the same. The case of overweight cabin attendants is another matter. Given
the cramped cabin space and narrow aisles and emergency exit doors of the
airplane, any overweight cabin attendant would certainly have difficulty navigating
the cramped cabin area.
In short, there is no need to individually evaluate their ability to perform their task.
That an obese cabin attendant occupies more space than a slim one is an
unquestionable fact which courts can judicially recognize without introduction of
evidence.77 It would also be absurd to require airline companies to reconfigure the
aircraft in order to widen the aisles and exit doors just to accommodate overweight
cabin attendants like petitioner.
The biggest problem with an overweight cabin attendant is the possibility of
impeding passengers from evacuating the aircraft, should the occasion call for it.
The job of a cabin attendant during emergencies is to speedily get the passengers
out of the aircraft safely. Being overweight necessarily impedes mobility. Indeed, in
an emergency situation, seconds are what cabin attendants are dealing with, not
minutes. Three lost seconds can translate into three lost lives. Evacuation might
slow down just because a wide-bodied cabin attendant is blocking the narrow
aisles. These possibilities are not remote.
Petitioner is also in estoppel. He does not dispute that the weight standards of PAL
were made known to him prior to his employment. He is presumed to know the
weight limit that he must maintain at all times.78 In fact, never did he question the
authority of PAL when he was repeatedly asked to trim down his weight. Bona fides
exigit ut quod convenit fiat. Good faith demands that what is agreed upon shall be
done. Kung ang tao ay tapat kanyang tutuparin ang napagkasunduan.
Too, the weight standards of PAL provide for separate weight limitations based on
height and body frame for both male and female cabin attendants. A progressive
discipline is imposed to allow non-compliant cabin attendants sufficient opportunity
to meet the weight standards. Thus, the clear-cut rules obviate any possibility for
the commission of abuse or arbitrary action on the part of PAL.
121
III. Petitioner failed to substantiate his claim that he was discriminated against by
PAL.
Petitioner next claims that PAL is using passenger safety as a convenient excuse to
discriminate against him.79 We are constrained, however, to hold otherwise. We
agree with the CA that "[t]he element of discrimination came into play in this case
as a secondary position for the private respondent in order to escape the
consequence of dismissal that being overweight entailed. It is a confession-and-
avoidance position that impliedly admitted the cause of dismissal, including the
reasonableness of the applicable standard and the private respondent’s failure to
comply."80 It is a basic rule in evidence that each party must prove his affirmative
allegation.81
Since the burden of evidence lies with the party who asserts an affirmative
allegation, petitioner has to prove his allegation with particularity. There is nothing
on the records which could support the finding of discriminatory treatment.
Petitioner cannot establish discrimination by simply naming the supposed cabin
attendants who are allegedly similarly situated with him. Substantial proof must be
shown as to how and why they are similarly situated and the differential treatment
petitioner got from PAL despite the similarity of his situation with other employees.
Indeed, except for pointing out the names of the supposed overweight cabin
attendants, petitioner miserably failed to indicate their respective ideal weights;
weights over their ideal weights; the periods they were allowed to fly despite their
being overweight; the particular flights assigned to them; the discriminating
treatment they got from PAL; and other relevant data that could have adequately
established a case of discriminatory treatment by PAL. In the words of the CA, "PAL
really had no substantial case of discrimination to meet."82
We are not unmindful that findings of facts of administrative agencies, like the
Labor Arbiter and the NLRC, are accorded respect, even finality.83 The reason is
simple: administrative agencies are experts in matters within their specific and
specialized jurisdiction.84 But the principle is not a hard and fast rule. It only applies
if the findings of facts are duly supported by substantial evidence. If it can be shown
that administrative bodies grossly misappreciated evidence of such nature so as to
compel a conclusion to the contrary, their findings of facts must necessarily be
reversed. Factual findings of administrative agencies do not have infallibility and
must be set aside when they fail the test of arbitrariness.85
Here, the Labor Arbiter and the NLRC inexplicably misappreciated evidence. We
thus annul their findings.
To make his claim more believable, petitioner invokes the equal protection clause
guaranty86 of the Constitution. However, in the absence of governmental
interference, the liberties guaranteed by the Constitution cannot be invoked.87 Put
differently, the Bill of Rights is not meant to be invoked against acts of private
individuals.88 Indeed, the United States Supreme Court, in interpreting the
Fourteenth Amendment,89 which is the source of our equal protection guarantee,
is consistent in saying that the equal protection erects no shield against private
conduct, however discriminatory or wrongful.90 Private actions, no matter how
egregious, cannot violate the equal protection guarantee.91
IV. The claims of petitioner for reinstatement and wages are moot.
As his last contention, petitioner avers that his claims for reinstatement and wages
have not been mooted. He is entitled to reinstatement and his full backwages,
"from the time he was illegally dismissed" up to the time that the NLRC was
reversed by the CA.92
At this point, Article 223 of the Labor Code finds relevance:
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be
executory, even pending appeal. The employee shall either be admitted back to
work under the same terms and conditions prevailing prior to his dismissal or
separation or, at the option of the employer, merely reinstated in the payroll. The
posting of a bond by the employer shall not stay the execution for reinstatement
provided herein.
The law is very clear. Although an award or order of reinstatement is self-executory
and does not require a writ of execution,93 the option to exercise actual
reinstatement or payroll reinstatement belongs to the employer. It does not belong
to the employee, to the labor tribunals, or even to the courts.
Contrary to the allegation of petitioner that PAL "did everything under the sun" to
frustrate his "immediate return to his previous position,"94 there is evidence that
PAL opted to physically reinstate him to a substantially equivalent position in
accordance with the order of the Labor Arbiter.95 In fact, petitioner duly received
the return to work notice on February 23, 2001, as shown by his signature.96
Petitioner cannot take refuge in the pronouncements of the Court in a case97 that
"[t]he unjustified refusal of the employer to reinstate the dismissed employee
entitles him to payment of his salaries effective from the time the employer failed
to reinstate him despite the issuance of a writ of execution"98 and ""even if the
order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on
122
the part of the employer to reinstate and pay the wages of the employee during the
period of appeal until reversal by the higher court."99 He failed to prove that he
complied with the return to work order of PAL. Neither does it appear on record
that he actually rendered services for PAL from the moment he was dismissed, in
order to insist on the payment of his full backwages.

In insisting that he be reinstated to his actual position despite being overweight,

petitioner in effect wants to render the issues in the present case moot. He asks PAL
to comply with the impossible. Time and again, the Court ruled that the law does
not exact compliance with the impossible.100

V. Petitioner is entitled to separation pay.

Be that as it may, all is not lost for petitioner.

Normally, a legally dismissed employee is not entitled to separation pay. This may
be deduced from the language of Article 279 of the Labor Code that "[a]n employee
who is unjustly dismissed from work shall be entitled to reinstatement without loss
of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to the time of his actual
reinstatement." Luckily for petitioner, this is not an ironclad rule.

Exceptionally, separation pay is granted to a legally dismissed employee as an act

"social justice,"101 or based on "equity."102 In both instances, it is required that
the dismissal (1) was not for serious misconduct; and (2) does not reflect on the
moral character of the employee.103

Here, We grant petitioner separation pay equivalent to one-half (1/2) month’s pay
for every year of service.104 It should include regular allowances which he might
have been receiving.105 We are not blind to the fact that he was not dismissed for
any serious misconduct or to any act which would reflect on his moral character.
We also recognize that his employment with PAL lasted for more or less a decade.

WHEREFORE, the appealed Decision of the Court of Appeals is AFFIRMED but

MODIFIED in that petitioner Armando G. Yrasuegui is entitled to separation pay in
an amount equivalent to one-half (1/2) month’s pay for every year of service, which
should include his regular allowances.

SO ORDERED.

123
G.R. No. 162994 September 17, 2004
DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners,
vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.
RESOLUTION
TINGA, J.:
Confronting the Court in this petition is a novel question, with constitutional
overtones, involving the validity of the policy of a pharmaceutical company
prohibiting its employees from marrying employees of any competitor company.
This is a Petition for Review on Certiorari assailing the Decision1 dated May 19,
2003 and the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R.
SP No. 62434.2
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome
Philippines, Inc. (Glaxo) as medical representative on October 24, 1995, after
Tecson had undergone training and orientation.
Thereafter, Tecson signed a contract of employment which stipulates, among
others, that he agrees to study and abide by existing company rules; to disclose to
management any existing or future relationship by consanguinity or affinity with co-
employees or employees of competing drug companies and should management
find that such relationship poses a possible conflict of interest, to resign from the
company.
The Employee Code of Conduct of Glaxo similarly provides that an employee is
expected to inform management of any existing or future relationship by
consanguinity or affinity with co-employees or employees of competing drug
companies. If management perceives a conflict of interest or a potential conflict
between such relationship and the employee’s employment with the company, the
management and the employee will explore the possibility of a "transfer to another
department in a non-counterchecking position" or preparation for employment
outside the company after six months.
Tecson was initially assigned to market Glaxo’s products in the Camarines Sur-
Camarines Norte sales area.
Subsequently, Tecson entered into a romantic relationship with Bettsy, an
employee of Astra Pharmaceuticals3 (Astra), a competitor of Glaxo. Bettsy was
Astra’s Branch Coordinator in Albay. She supervised the district managers and
medical representatives of her company and prepared marketing strategies for
Astra in that area.
Even before they got married, Tecson received several reminders from his District
Manager regarding the conflict of interest which his relationship with Bettsy might
engender. Still, love prevailed, and Tecson married Bettsy in September 1998.
In January 1999, Tecson’s superiors informed him that his marriage to Bettsy gave
rise to a conflict of interest. Tecson’s superiors reminded him that he and Bettsy
should decide which one of them would resign from their jobs, although they told
him that they wanted to retain him as much as possible because he was performing
his job well.
Tecson requested for time to comply with the company policy against entering into
a relationship with an employee of a competitor company. He explained that Astra,
Bettsy’s employer, was planning to merge with Zeneca, another drug company; and
Bettsy was planning to avail of the redundancy package to be offered by Astra. With
Bettsy’s separation from her company, the potential conflict of interest would be
eliminated. At the same time, they would be able to avail of the attractive
redundancy package from Astra.
In August 1999, Tecson again requested for more time resolve the problem. In
September 1999, Tecson applied for a transfer in Glaxo’s milk division, thinking that
since Astra did not have a milk division, the potential conflict of interest would be
eliminated. His application was denied in view of Glaxo’s "least-movement-
possible" policy.
In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-
Agusan del Sur sales area. Tecson asked Glaxo to reconsider its decision, but his
request was denied.
Tecson sought Glaxo’s reconsideration regarding his transfer and brought the
matter to Glaxo’s Grievance Committee. Glaxo, however, remained firm in its
decision and gave Tescon until February 7, 2000 to comply with the transfer order.
Tecson defied the transfer order and continued acting as medical representative in
the Camarines Sur-Camarines Norte sales area.
During the pendency of the grievance proceedings, Tecson was paid his salary, but
was not issued samples of products which were competing with similar products
manufactured by Astra. He was also not included in product conferences regarding
such products.
124

Because the parties failed to resolve the issue at the grievance machinery level,
they submitted the matter for voluntary arbitration. Glaxo offered Tecson a
separation pay of one-half (½) month pay for every year of service, or a total of
₱50,000.00 but he declined the offer. On November 15, 2000, the National
Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid
Glaxo’s policy on relationships between its employees and persons employed with
competitor companies, and affirming Glaxo’s right to transfer Tecson to another
sales territory.
Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the
NCMB Decision.
On May 19, 2003, the Court of Appeals promulgated its Decision denying the
Petition for Review on the ground that the NCMB did not err in rendering its
Decision. The appellate court held that Glaxo’s policy prohibiting its employees
from having personal relationships with employees of competitor companies is a
valid exercise of its management prerogatives.4
Tecson filed a Motion for Reconsideration of the appellate court’s Decision, but the
motion was denied by the appellate court in its Resolution dated March 26, 2004.5
Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals
erred in affirming the NCMB’s finding that the Glaxo’s policy prohibiting its
employees from marrying an employee of a competitor company is valid; and (ii)
the Court of Appeals also erred in not finding that Tecson was constructively
dismissed when he was transferred to a new sales territory, and deprived of the
opportunity to attend products seminars and training sessions.6
Petitioners contend that Glaxo’s policy against employees marrying employees of
competitor companies violates the equal protection clause of the Constitution
because it creates invalid distinctions among employees on account only of
marriage. They claim that the policy restricts the employees’ right to marry.7
They also argue that Tecson was constructively dismissed as shown by the following
circumstances: (1) he was transferred from the Camarines Sur-Camarines Norte
sales area to the Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in
pay, (3) he was excluded from attending seminars and training sessions for medical
representatives, and (4) he was prohibited from promoting respondent’s products
which were competing with Astra’s products.8
In its Comment on the petition, Glaxo argues that the company policy prohibiting its
employees from having a relationship with and/or marrying an employee of a
competitor company is a valid exercise of its management prerogatives and does
not violate the equal protection clause; and that Tecson’s reassignment from the
Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City and
Agusan del Sur sales area does not amount to constructive dismissal.9
Glaxo insists that as a company engaged in the promotion and sale of
pharmaceutical products, it has a genuine interest in ensuring that its employees
avoid any activity, relationship or interest that may conflict with their
responsibilities to the company. Thus, it expects its employees to avoid having
personal or family interests in any competitor company which may influence their
actions and decisions and consequently deprive Glaxo of legitimate profits. The
policy is also aimed at preventing a competitor company from gaining access to its
secrets, procedures and policies.10
It likewise asserts that the policy does not prohibit marriage per se but only
proscribes existing or future relationships with employees of competitor
companies, and is therefore not violative of the equal protection clause. It
maintains that considering the nature of its business, the prohibition is based on
valid grounds.11
According to Glaxo, Tecson’s marriage to Bettsy, an employee of Astra, posed a real
and potential conflict of interest. Astra’s products were in direct competition with
67% of the products sold by Glaxo. Hence, Glaxo’s enforcement of the foregoing
policy in Tecson’s case was a valid exercise of its management prerogatives.12 In
any case, Tecson was given several months to remedy the situation, and was even
encouraged not to resign but to ask his wife to resign form Astra instead.13
Glaxo also points out that Tecson can no longer question the assailed company
policy because when he signed his contract of employment, he was aware that such
policy was stipulated therein. In said contract, he also agreed to resign from
respondent if the management finds that his relationship with an employee of a
competitor company would be detrimental to the interests of Glaxo.14
Glaxo likewise insists that Tecson’s reassignment to another sales area and his
exclusion from seminars regarding respondent’s new products did not amount to
constructive dismissal.
It claims that in view of Tecson’s refusal to resign, he was relocated from the
Camarines Sur-Camarines Norte sales area to the Butuan City-Surigao City and
Agusan del Sur sales area. Glaxo asserts that in effecting the reassignment, it also
considered the welfare of Tecson’s family. Since Tecson’s hometown was in Agusan
del Sur and his wife traces her roots to Butuan City, Glaxo assumed that his transfer
from the Bicol region to the Butuan City sales area would be favorable to him and
125
his family as he would be relocating to a familiar territory and minimizing his travel
expenses.15
In addition, Glaxo avers that Tecson’s exclusion from the seminar concerning the
new anti-asthma drug was due to the fact that said product was in direct
competition with a drug which was soon to be sold by Astra, and hence, would pose
a potential conflict of interest for him. Lastly, the delay in Tecson’s receipt of his
sales paraphernalia was due to the mix-up created by his refusal to transfer to the
Butuan City sales area (his paraphernalia was delivered to his new sales area
instead of Naga City because the supplier thought he already transferred to
Butuan).16
The Court is tasked to resolve the following issues: (1) Whether the Court of
Appeals erred in ruling that Glaxo’s policy against its employees marrying
employees from competitor companies is valid, and in not holding that said policy
violates the equal protection clause of the Constitution; (2) Whether Tecson was
constructively dismissed.
The Court finds no merit in the petition.
The stipulation in Tecson’s contract of employment with Glaxo being questioned by
petitioners provides:
… employee, to arrive at a solution within six (6) months, either by transfer to another
10. You agree to disclose to management any existing or future relationship you
may have, either by consanguinity or affinity with co-employees or employees of
competing drug companies. Should it pose a possible conflict of interest in
management discretion, you agree to resign voluntarily from the Company as a
matter of Company policy.
…17
The same contract also stipulates that Tescon agrees to abide by the existing
company rules of Glaxo, and to study and become acquainted with such policies.18
In this regard, the Employee Handbook of Glaxo expressly informs its employees of
its rules regarding conflict of interest:
1. Conflict of Interest
Employees should avoid any activity, investment relationship, or interest that may
run counter to the responsibilities which they owe Glaxo Wellcome.
Specifically, this means that employees are expected:
a. To avoid having personal or family interest, financial or otherwise, in any
competitor supplier or other businesses which may consciously or unconsciously
influence their actions or decisions and thus deprive Glaxo Wellcome of legitimate
profit.
b. To refrain from using their position in Glaxo Wellcome or knowledge of Company
plans to advance their outside personal interests, that of their relatives, friends and
other businesses.
c. To avoid outside employment or other interests for income which would impair
their effective job performance.
d. To consult with Management on such activities or relationships that may lead to
conflict of interest.
1.1. Employee Relationships
Employees with existing or future relationships either by consanguinity or affinity
with co-employees of competing drug companies are expected to disclose such
relationship to the Management. If management perceives a conflict or potential
conflict of interest, every effort shall be made, together by management and the
department in a non-counter checking position, or by career preparation toward
outside employment after Glaxo Wellcome. Employees must be prepared for
possible resignation within six (6) months, if no other solution is feasible.19
No reversible error can be ascribed to the Court of Appeals when it ruled that
Glaxo’s policy prohibiting an employee from having a relationship with an employee
of a competitor company is a valid exercise of management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing
strategies and other confidential programs and information from competitors,
especially so that it and Astra are rival companies in the highly competitive
pharmaceutical industry.
The prohibition against personal or marital relationships with employees of
competitor companies upon Glaxo’s employees is reasonable under the
circumstances because relationships of that nature might compromise the interests
of the company. In laying down the assailed company policy, Glaxo only aims to
protect its interests against the possibility that a competitor company will gain
access to its secrets and procedures.
126

That Glaxo possesses the right to protect its economic interests cannot be denied.
No less than the Constitution recognizes the right of enterprises to adopt and
enforce such a policy to protect its right to reasonable returns on investments and
to expansion and growth.20 Indeed, while our laws endeavor to give life to the
constitutional policy on social justice and the protection of labor, it does not mean
that every labor dispute will be decided in favor of the workers. The law also
recognizes that management has rights which are also entitled to respect and
enforcement in the interest of fair play.21
As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard
business confidentiality and protect a competitive position by even-handedly
disqualifying from jobs male and female applicants or employees who are married
to a competitor. Consequently, the court ruled than an employer that discharged an
employee who was married to an employee of an active competitor did not violate
Title VII of the Civil Rights Act of 1964.23 The Court pointed out that the policy was
applied to men and women equally, and noted that the employer’s business was
highly competitive and that gaining inside information would constitute a
competitive advantage.
The challenged company policy does not violate the equal protection clause of the
Constitution as petitioners erroneously suggest. It is a settled principle that the
commands of the equal protection clause are addressed only to the state or those
acting under color of its authority.24 Corollarily, it has been held in a long array of
U.S. Supreme Court decisions that the equal protection clause erects no shield
against merely private conduct, however, discriminatory or wrongful.25 The only
exception occurs when the state29 in any of its manifestations or actions has been
found to have become entwined or involved in the wrongful private conduct.27
Obviously, however, the exception is not present in this case. Significantly, the
company actually enforced the policy after repeated requests to the employee to
comply with the policy. Indeed, the application of the policy was made in an
impartial and even-handed manner, with due regard for the lot of the employee.
In any event, from the wordings of the contractual provision and the policy in its
employee handbook, it is clear that Glaxo does not impose an absolute prohibition
against relationships between its employees and those of competitor companies. Its
employees are free to cultivate relationships with and marry persons of their own
choosing. What the company merely seeks to avoid is a conflict of interest between
the employee and the company that may arise out of such relationships. As
succinctly explained by the appellate court, thus:
The policy being questioned is not a policy against marriage. An employee of the
company remains free to marry anyone of his or her choosing. The policy is not
aimed at restricting a personal prerogative that belongs only to the individual.
However, an employee’s personal decision does not detract the employer from
exercising management prerogatives to ensure maximum profit and business
success. . .28
The Court of Appeals also correctly noted that the assailed company policy which
forms part of respondent’s Employee Code of Conduct and of its contracts with its
employees, such as that signed by Tescon, was made known to him prior to his
employment. Tecson, therefore, was aware of that restriction when he signed his
employment contract and when he entered into a relationship with Bettsy. Since
Tecson knowingly and voluntarily entered into a contract of employment with
Glaxo, the stipulations therein have the force of law between them and, thus,
should be complied with in good faith."29 He is therefore estopped from
questioning said policy.
The Court finds no merit in petitioners’ contention that Tescon was constructively
dismissed when he was transferred from the Camarines Norte-Camarines Sur sales
area to the Butuan City-Surigao City-Agusan del Sur sales area, and when he was
excluded from attending the company’s seminar on new products which were
directly competing with similar products manufactured by Astra. Constructive
dismissal is defined as a quitting, an involuntary resignation resorted to when
continued employment becomes impossible, unreasonable, or unlikely; when there
is a demotion in rank or diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to the employee.30
None of these conditions are present in the instant case. The record does not show
that Tescon was demoted or unduly discriminated upon by reason of such transfer.
As found by the appellate court, Glaxo properly exercised its management
prerogative in reassigning Tecson to the Butuan City sales area:
. . . In this case, petitioner’s transfer to another place of assignment was merely in
keeping with the policy of the company in avoidance of conflict of interest, and thus
valid…Note that [Tecson’s] wife holds a sensitive supervisory position as Branch
Coordinator in her employer-company which requires her to work in close
coordination with District Managers and Medical Representatives. Her duties
include monitoring sales of Astra products, conducting sales drives, establishing and
furthering relationship with customers, collection, monitoring and managing Astra’s
inventory…she therefore takes an active participation in the market war
characterized as it is by stiff competition among pharmaceutical companies.
Moreover, and this is significant, petitioner’s sales territory covers Camarines Sur
and Camarines Norte while his wife is supervising a branch of her employer in
Albay. The proximity of their areas of responsibility, all in the same Bicol Region,
renders the conflict of interest not only possible, but actual, as learning by one
spouse of the other’s market strategies in the region would be inevitable.
127
[Management’s] appreciation of a conflict of interest is therefore not merely
illusory and wanting in factual basis…31

In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32

which involved a complaint filed by a medical representative against his employer
drug company for illegal dismissal for allegedly terminating his employment when
he refused to accept his reassignment to a new area, the Court upheld the right of
the drug company to transfer or reassign its employee in accordance with its
operational demands and requirements. The ruling of the Court therein, quoted
hereunder, also finds application in the instant case:

By the very nature of his employment, a drug salesman or medical representative is

expected to travel. He should anticipate reassignment according to the demands of
their business. It would be a poor drug corporation which cannot even assign its
representatives or detail men to new markets calling for opening or expansion or to
areas where the need for pushing its products is great. More so if such
reassignments are part of the employment contract.33

As noted earlier, the challenged policy has been implemented by Glaxo impartially
and disinterestedly for a long period of time. In the case at bar, the record shows
that Glaxo gave Tecson several chances to eliminate the conflict of interest brought
about by his relationship with Bettsy. When their relationship was still in its initial
stage, Tecson’s supervisors at Glaxo constantly reminded him about its effects on
his employment with the company and on the company’s interests. After Tecson
married Bettsy, Glaxo gave him time to resolve the conflict by either resigning from
the company or asking his wife to resign from Astra. Glaxo even expressed its desire
to retain Tecson in its employ because of his satisfactory performance and
suggested that he ask Bettsy to resign from her company instead. Glaxo likewise
acceded to his repeated requests for more time to resolve the conflict of interest.
When the problem could not be resolved after several years of waiting, Glaxo was
constrained to reassign Tecson to a sales area different from that handled by his
wife for Astra. Notably, the Court did not terminate Tecson from employment but
only reassigned him to another area where his home province, Agusan del Sur, was
included. In effecting Tecson’s transfer, Glaxo even considered the welfare of
Tecson’s family. Clearly, the foregoing dispels any suspicion of unfairness and bad
faith on the part of Glaxo.34

WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.

SO ORDERED.

128
G.R. No. 163269 April 19, 2006
ROLANDO C. RIVERA, Petitioner,
vs.
SOLIDBANK CORPORATION, Respondent.
DECISION
CALLEJO, SR., J.:
Assailed in this Petition for Review on Certiorari is the Decision1 of the Court of
Appeals (CA) in CA-G.R. CV No. 52235 as well as its Resolution2 denying the Motion
for Partial Reconsideration of petitioner Rolando C. Rivera.
Petitioner had been working for Solidbank Corporation since July 1, 1977.3 He was
initially employed as an Audit Clerk, then as Credit Investigator, Senior Clerk,
Assistant Accountant, and Assistant Manager. Prior to his retirement, he became
the Manager of the Credit Investigation and Appraisal Division of the Consumer’s
Banking Group. In the meantime, Rivera and his brother-in-law put up a poultry
business in Cavite.
In December 1994, Solidbank offered two retirement programs to its employees: (a)
the Ordinary Retirement Program (ORP), under which an employee would receive
85% of his monthly basic salary multiplied by the number of years in service; and (b)
the Special Retirement Program (SRP), under which a retiring employee would
receive 250% of the gross monthly salary multiplied by the number of years in
service.4 Since Rivera was only 45 years old, he was not qualified for retirement
under the ORP. Under the SRP, he was entitled to receive P1,045,258.95 by way of
benefits.5
Deciding to devote his time and attention to his poultry business in Cavite, Rivera
applied for retirement under the SRP. Solidbank approved the application and
Rivera was entitled to receive the net amount of P963,619.28. This amount included
his performance incentive award (PIA), and his unearned medical, dental and
optical allowances in the amount of P1,666.67, minus his total accountabilities to
Solidbank amounting to P106,973.00.6 Rivera received the amount and confirmed
his separation from Solidbank on February 25, 1995.7
Subsequently, Solidbank required Rivera to sign an undated Release, Waiver and
Quitclaim, which was notarized on March 1, 1995.8 Rivera acknowledged receipt of
the net proceeds of his separation and retirement benefits and promised that "[he]
would not, at any time, in any manner whatsoever, directly or indirectly engage in
any unlawful activity prejudicial to the interest of Solidbank, its parent, affiliate or
subsidiary companies, their stockholders, officers, directors, agents or employees,
and their successors-in-interest and will not disclose any information concerning
the business of Solidbank, its manner or operation, its plans, processes, or data of
any kind."9
Aside from acknowledging that he had no cause of action against Solidbank or its
affiliate companies, Rivera agreed that the bank may bring any action to seek an
award for damages resulting from his breach of the Release, Waiver and Quitclaim,
and that such award would include the return of whatever sums paid to him by
virtue of his retirement under the SRP.10 Rivera was likewise required to sign an
undated Undertaking as a supplement to the Release, Waiver and Quitclaim in favor
of Solidbank in which he declared that he received in full his entitlement under the
law (salaries, benefits, bonuses and other emoluments), including his separation
pay in accordance with the SRP. In this Undertaking, he promised that "[he] will not
seek employment with a competitor bank or financial institution within one (1) year
from February 28, 1995, and that any breach of the Undertaking or the provisions
of the Release, Waiver and Quitclaim would entitle Solidbank to a cause of action
against him before the appropriate courts of law.11 Unlike the Release, Waiver and
Quitclaim, the Undertaking was not notarized.
On May 1, 1995, the Equitable Banking Corporation (Equitable) employed Rivera as
Manager of its Credit Investigation and Appraisal Division of its Consumers’ Banking
Group.12 Upon discovering this, Solidbank First Vice-President for Human
Resources Division (HRD) Celia J.L. Villarosa wrote a letter dated May 18, 1995,
informing Rivera that he had violated the Undertaking. She likewise demanded the
return of all the monetary benefits he received in consideration of the SRP within
five (5) days from receipt; otherwise, appropriate legal action would be taken
against him.13
When Rivera refused to return the amount demanded within the given period,
Solidbank filed a complaint for Sum of Money with Prayer for Writ of Preliminary
Attachment14 before the Regional Trial Court (RTC) of Manila on June 26, 1995.
Solidbank, as plaintiff, alleged therein that in accepting employment with a
competitor bank for the same position he held in Solidbank before his retirement,
Rivera violated his Undertaking under the SRP. Considering that Rivera accepted
employment with Equitable barely three months after executing the Undertaking, it
was clear that he had no intention of honoring his commitment under said deed.
Solidbank prayed that Rivera be ordered to return the net amount of P963,619.28
plus interests therein, and attorney’s fees, thus:
WHEREFORE, it is respectfully prayed that:
129
1. At the commencement of this action and upon the filing of a bond in such
amount as this Honorable Court may fix, a writ of preliminary attachment be
forthwith issued against the properties of the defendant as satisfaction of any
judgment that plaintiff may secure;
2. After trial, judgment be rendered ordering defendant to pay plaintiff the
following sums: NINE HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED NINETEEN
AND 28/100 ONLY (P963,619.28) PESOS, Philippine Currency, as of 23 May 1995,
plus legal interest of 12% per annum until fully paid;
3. Such sum equivalent to 10% of plaintiff’s claims plus P2,000.00 for every
appearance by way of attorney’s fees; and
4. Costs of suit.
PLAINTIFF prays for other reliefs just and equitable under the premises.15
Solidbank appended the Affidavit of HRD First Vice-President Celia Villarosa and a
copy of the Release, Waiver and Quitclaim and Undertaking which Rivera
executed.16
In an Order dated July 6, 1995, the trial court issued a Writ of Preliminary
Attachment17 ordering Deputy Sheriff Eduardo Centeno to attach all of Rivera’s
properties not exempt from execution. Thus, the Sheriff levied on a parcel of land
owned by Rivera.
In his Answer with Affirmative Defenses and Counterclaim, Rivera admitted that he
received the net amount of P963,619.28 as separation pay. However, the
employment ban provision in the Undertaking was never conveyed to him until he
was made to sign it on February 28, 1995. He emphasized that, prior to said date,
Solidbank never disclosed any condition to the retirement scheme, nor did it
impose such employment ban on the bank officers and employees who had
previously availed of the SRP. He alleged that the undertaking not to "seek
employment with any competitor bank or financial institution within one (1) year
from February 28, 1995" was void for being contrary to the Constitution, the law
and public policy, that it was unreasonable, arbitrary, oppressive, discriminatory,
cruel, unjust, inhuman, and violative of his human rights. He further claimed that
the Undertaking was a contract of adhesion because it was prepared solely by
Solidbank without his participation; considering his moral and economic
disadvantage, it must be liberally construed in his favor and strictly against the
bank.
On August 15, 1995, Solidbank filed a Verified Motion for Summary Judgment,
alleging therein that Rivera raised no genuine issue as to any material fact in his
Answer except as to the amount of damages. It prayed that the RTC render
summary judgment against Rivera. Solidbank alleged that whether or not the
employment ban provision contained in the Undertaking is unreasonable, arbitrary,
or oppressive is a question of law. It insisted that Rivera signed the Undertaking
voluntarily and for valuable consideration; and under the Release, Waiver and
Quitclaim, he was obliged to return the P963,619.28 upon accepting employment
from a competitor bank within the one-year proscribed period. Solidbank appended
to its motion the Affidavit of Villarosa, where she declared that Rivera was
employed by Equitable on May 1, 1995 for the same position he held before his
retirement from Solidbank.
Rivera opposed the motion contending that, as gleaned from the pleadings of the
parties as well as Villarosa’s Affidavit, there are genuine issues as to material facts
which call for the presentation of evidence. He averred that there was a need for
the parties to adduce evidence to prove that he did not sign the Undertaking
voluntarily. He claimed that he would not have been allowed to avail of the SRP if
he had not signed it, and consequently, his retirement benefits would not have
been paid. This was what Ed Nallas, Solidbank Assistant Vice-President for HRD and
Personnel, told him when he received his check on February 28, 1995. Senior Vice-
President Henry Valdez, his superior in the Consumers’ Banking Group, also did not
mention that he would have to sign such Undertaking which contained the assailed
provision. Thus, he had no choice but to sign it. He insisted that the question of
whether he violated the Undertaking is a genuine issue of fact which called for the
presentation of evidence during the hearing on the merits of the case. He also
asserted that he could not cause injury or prejudice to Solidbank’s interest since he
never acquired any sensitive or delicate information which could prejudice the
bank’s interest if disclosed.
Rivera averred that he had the right to adduce evidence to prove that he had been
faithful to the provisions of the Release, Waiver and Quitclaim, and the
Undertaking, and had not committed any act or done or said anything to cause
injury to Solidbank.18
Rivera appended to his Opposition his Counter-Affidavit in which he reiterated that
he had to sign the Undertaking containing the employment ban provision,
otherwise his availment of the SRP would not push through. There was no truth to
the bank’s allegation that, "in exchange for receiving the larger amount of
P1,045,258.95 under the SRP, instead of the very much smaller amount of
P224,875.81 under the ORP, he agreed that he will not seek employment in a
competitor bank or financial institution within one year from February 28, 1995." It
was the bank which conceived the SRP to streamline its organization and all he did
130
was accept it. He stressed that the decision whether to allow him to avail of the SRP
belonged solely to Solidbank. He also pointed out that the employment ban
provision in the Undertaking was not a consideration for his availment of the SRP,
and that if he did not avail of the retirement program, he would have continued
working for Solidbank for at least 15 more years, earning more than what he
received under the SRP. He alleged that he intended to go full time into the poultry
business, but after about two months, found out that, contrary to his expectations,
the business did not provide income sufficient to support his family. Being the
breadwinner, he was then forced to look for a job, and considering his training and
experience as a former bank employee, the job with Equitable was all he could find.
He insisted that he had remained faithful to Solidbank and would continue to do so
despite the case against him, the attachment of his family home, and the resulting
mental anguish, torture and expense it has caused them.19
In his Supplemental Opposition, Rivera stressed that, being a former bank
employee, it was the only kind of work he knew. The ban was, in fact, practically
absolute since it applied to all financial institutions for one year from February 28,
1995. He pointed out that he could not work in any other company because he did
not have the qualifications, especially considering his age. Moreover, after one year
from February 28, 1995, he would no longer have any marketable skill, because by
then, it would have been rendered obsolete by non-use and rapid technological
advances. He insisted that the ban was not necessary to protect the interest of
Solidbank, as, in the first place, he had no access to any "secret" information which,
if revealed would be prejudicial to Solidbank’s interest. In any case, he was not one
to reveal whatever knowledge or information he may have acquired during his
employment with said bank.20
In its Reply, Solidbank averred that the wisdom of requiring the Undertaking from
the 1995 SRP is purely a management prerogative. It was not for Rivera to question
and decry the bank’s policy to protect itself from unfair competition and disclosure
of its trade secrets. The substantial monetary windfall given the retiring officers was
meant to tide them over the one-year period of hiatus, and did not prevent them
from engaging in any kind of business or bar them from being employed except
with competitor banks/financial institutions.21
On December 18, 1995, the trial court issued an Order of Summary Judgment.22
The fallo of the decision reads:
WHEREFORE, SUMMARY JUDGMENT is hereby rendered in favor of plaintiff and
against defendant ordering the latter to pay to plaintiff bank the amount of NINE
HUNDRED SIXTY-THREE THOUSAND SIX HUNDRED NINETEEN AND 28/100
(P963,619.28) PESOS, Philippine Currency, as of May 23, 1995, plus legal interest at
12% per annum until fully paid, and the costs of the suit.
FURTHER, NEVERTHELESS, both parties are hereby encouraged as they are directed
to meet again and sit down to find out how they can finally end this rift and
litigation, all in the name of equity, for after all, defendant had worked for the bank
for some 18 years.23
The trial court declared that there was no genuine issue as to a matter of fact in the
case since Rivera voluntarily executed the Release, Waiver and Quitclaim, and the
Undertaking. He had a choice not to retire, but opted to do so under the SRP, and,
in fact, received the benefits under it.
According to the RTC, the prohibition incorporated in the Undertaking was not
unreasonable. To allow Rivera to be excused from his undertakings in said deed
and, at the same time, benefit therefrom would be to allow him to enrich himself at
the expense of Solidbank. The RTC ruled that Rivera had to return the P963,619.28
he received from Solidbank, plus interest of 12% per annum from May 23, 1998
until fully paid.
Aggrieved, Rivera appealed the ruling to the CA which rendered judgment on June
14, 2002 partially granting the appeal. The fallo of the decision reads:
WHEREFORE, the appeal is PARTIALLY GRANTED. The decision appealed from is
AFFIRMED with the modification that the attachment and levy upon the family
home covered by TCT No. 51621 of the Register of Deeds, Las Piñas, Metro Manila,
is hereby SET ASIDE and DISCHARGED.
SO ORDERED.24
The CA declared that there was no genuine issue regarding any material fact except
as to the amount of damages. It ratiocinated that the agreement between Rivera
and Solidbank was the law between them, and that the interpretation of the
stipulations therein could not be left upon the whims of Rivera. According to the CA,
Rivera never denied signing the Release, Waiver, and Quitclaim, including the
Undertaking regarding the employment prohibition. He even admitted joining
Equitable as an employee within the proscribed one-year period. The alleged
defenses of Rivera, the CA declared, could not prevail over the admissions in his
pleadings.1avvphil.net Moreover, Rivera’s justification for taking the job with
Equitable, "dire necessity," was not an acceptable ground for annulling the
Undertaking since there were no earmarks of coercion, undue influence, or fraud in
its execution. Having executed the said deed and thereafter receiving the benefits
under the SRP, he is deemed to have waived the right
131
to assail the same, hence, is estopped from insisting or retaining the said amount of
P963,619.28.
However, the CA ruled that the attachment made upon Rivera’s family home was
void, and, pursuant to the mandate of Article 155, in relation to Article 153 of the
Family Code, must be discharged.
Hence, this recourse to the Court.
Petitioner avers that –
I.
THE COURT OF APPEALS ERRED IN UPHOLDING THE PROPRIETY OF THE SUMMARY
JUDGMENT RENDERED BY THE TRIAL COURT CONSIDERING THE EXISTENCE OF
GENUINE ISSUES AS TO MATERIAL FACTS WHICH CALL FOR THE PRESENTATION OF
EVIDENCE IN A TRIAL ON THE MERITS.
II.
THE COURT OF APPEALS ERRED IN NOT DECLARING THE ONE-YEAR EMPLOYMENT
BAN IMPOSED BY RESPONDENT SOLIDBANK UPON HEREIN PETITIONER NULL AND
VOID FOR BEING UNREASONABLE AND OPPRESSIVE AND FOR CONSTITUTING
RESTRAINT OF TRADE WHICH VIOLATES PUBLIC POLICY AS ENUNCIATED IN OUR
CONSTITUTION AND LAWS.
III.
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT’S DECISION
ORDERING HEREIN RESPONDENT TO PAY SOLIDBANK THE AMOUNT OF P963,619.28
AS OF MAY 23, 1995, PLUS LEGAL INTEREST OF 12% PER ANNUM UNTIL FULLY PAID.
IV.
MORE SPECIFICALLY, THE COURT OF APPEALS ERRED IN AFFIRMING THE PORTION
OF THE SUMMARY JUDGMENT ORDERING PETITIONER TO PAY SOLIDBANK LEGAL
INTEREST OF 12% PER ANNUM UNTIL FULLY PAID ON THE AFOREMENTIONED SUM
[OF] P963,619.28.25
The issues for resolution are: (1) whether the parties raised a genuine issue in their
pleadings, affidavits, and documents, that is, whether the employment ban
incorporated in the Undertaking which petitioner executed upon his retirement is
unreasonable, oppressive, hence, contrary to public policy; and (2) whether
petitioner is liable to respondent for the restitution of P963,619.28 representing his
retirement benefits, and interest thereon at 12% per annum as of May 23, 1995
until payment of the full amount.
On the first issue, petitioner claims that, based on the pleadings of the parties, and
the documents and affidavits appended thereto, genuine issues as to matters of
fact were raised therein. He insists that the resolution of the issue of whether the
employment ban is unreasonable requires the presentation of evidence on the
circumstances which led to respondent bank’s offer of the SRP and ORP, and
petitioner’s eventual acceptance and signing of the Undertaking on March 1, 1995.
There is likewise a need to adduce evidence on whether the employment ban is
necessary to protect respondent’s interest, and whether it is an undue restraint on
petitioner’s constitutional right to earn a living to support his family. He further
insists that respondent is burdened to prove that it sustained damage or injury by
reason of his alleged breach of the employment ban since neither the Release,
Waiver and Quitclaim, and Undertaking he executed contain any provision that
respondent is automatically entitled to the restitution of the P963,619.28.
Petitioner points out that all the deeds provide is that, in case of breach thereof,
respondent is entitled to protection before the appropriate courts of law.
On the second issue, petitioner avers that the prohibition incorporated in the
Release, Waiver and Quitclaim barring him as retiree from engaging directly or
indirectly in any unlawful activity and disclosing any information concerning the
business of respondent bank, as well as the employment ban contained in the
Undertaking he executed, are oppressive, unreasonable, cruel and inhuman
because of its overbreath. He reiterates that it is against public policy, an
unreasonable restraint of trade, because it prohibits him to work for one year in the
Philippines, ultimately preventing him from supporting his family. He points out that
a breadwinner in a family of four minor daughters who are all studying, with a wife
who does not work, one would have a very difficult time meeting the financial
obligations even with a steady, regular-paying job. He insists that the Undertaking
deprives him of the means to support his family, and ultimately, his children’s
chance for a good education and future. He reiterates that the returns in his poultry
business fell short of his expectations, and unfortunately, the business was totally
destroyed by typhoon "Rosing" in November 1995.
Petitioner further maintains that respondent’s management prerogative does not
give it a license to entice its employees to retire at a very young age and prohibit
them from seeking employment in a so-called competitor bank or financial
institution, thus prevent them from working and supporting their families
(considering that banking is the only kind of work they know). Petitioner avers that
"management’s prerogative must be without abuse of discretion. A line must be
drawn between management prerogative regarding business operations per se and
132
those which affect the rights of the employees. In treating its employees,
management should see to it that its employees are at least properly informed of
its decision or modes of action."
On the last issue, petitioner alleges that the P1,045,258.95 he received was his
retirement benefit which he earned after serving the bank for 18 years. It was not a
mere gift or gratuity given by respondent bank, without the latter giving up
something of value in return. On the contrary, respondent bank received "valuable
consideration," that is, petitioner quit his job at the relatively young age of 45, thus
enabling respondent to effect its reorganization plan and forego the salary,
benefits, bonuses, and promotions he would have received had he not retired early.
Petitioner avers that, under the Undertaking, respondent would be entitled to a
cause of action against him before the appropriate courts of law if he had violated
the employment ban. He avers that respondent must prove its entitlement to the
P963,619.28. The Undertaking contains no provision that he would have to return
the amount he received under the SRP; much less does it provide that he would
have to pay 12% interest per annum on said amount. On the other hand, the
Release, Waiver and Quitclaim does not contain the provision prohibiting him from
being employed with any competitor bank or financial institution within one year
from February 28, 1995. Petitioner insists that he acted in good faith when he
received his retirement benefits; hence, he cannot be punished by being ordered to
return the sum of P963,619.28 which was given to him for and in consideration of
his early retirement.
Neither can petitioner be subjected to the penalty of paying 12% interest per
annum on his retirement pay of P963,619.28 from May 23, 1995, as it is improper
and oppressive to him and his family. As of July 3, 2002, the interest alone would
amount to P822,609.67, thus doubling the amount to be returned to respondent
bank under the decision of the RTC and the CA. The imposition of interest has no
basis because the Release, Waiver and Quitclaim, and the Undertaking do not
provide for payment of interest. The deeds only state that breach thereof would
entitle respondent to bring an action to seek damages, to include the return of the
amount that may have been paid to petitioner by virtue thereof. On the other hand,
any breach of the Undertaking or the Release, Waiver and Quitclaim would only
entitle respondent to a cause of action before the appropriate courts of law.
Besides, the amount received by petitioner was not a loan and, therefore, should
not earn interest pursuant to Article 1956 of the Civil Code.
Finally, petitioner insists that he acted in good faith in seeking employment with
another bank within one year from February 28, 1995 because he needed to earn a
living to support his family and finance his children’s education. Hence, the
imposition of interest, which is a penalty, is unwarranted.
By way of Comment on the petition, respondent avers that the Undertaking is the
law between it and petitioner. As such, the latter could not assail the deed after
receiving the retirement benefit under the SRP. As gleaned from the averments in
his petition, petitioner admitted that he executed the Undertaking after having
been informed of the nature and consequences of his refusal to sign the same, i.e.,
he would not be able to receive the retirement benefit under the SRP.
Respondent maintains that courts have no power to relieve parties of obligations
voluntarily entered into simply because their contracts turned out to be disastrous
deeds. Citing the ruling of this Court in Eastern Shipping Lines, Inc. v. Court of
Appeals,26 respondent avers that petitioner is obliged to pay 12% per annum
interest of the P963,619.28 from judicial or extrajudicial demand.
In reply, petitioner asserts that respondent failed to prove that it sustained
damages, including the amount thereof, and that neither the Release, Waiver and
Quitclaim nor the Undertaking obliged him to pay interest to respondent.
The petition is meritorious.
Sections 1 and 3, Rule 34 of the Revised Rules of Civil Procedure provide:
Section 1. Summary judgment for claimant. – A party seeking to recover upon a
claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at any time
after the pleading in answer thereto has been served, move with supporting
affidavits, depositions or admissions for a summary judgment in his favor upon all
or any part thereof.
xxxx
Sec. 3. Motion and proceedings thereon. – The motion shall be served at least ten
(10) days before the time specified for the hearing. The adverse party may serve
opposing affidavits, depositions, or admissions at least three (3) days before the
hearing. After the hearing, the judgment sought shall be rendered forthwith if the
pleadings, supporting affidavits, depositions, and admissions on file, show that,
except as to the amount of damages, there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a matter of law.
For a summary judgment to be proper, the movant must establish two requisites:
(a) there must be no genuine issue as to any material fact, except for the amount of
damages; and (b) the party presenting the motion for summary judgment must be
entitled to a judgment as a matter of law.27 Where, on the basis of the pleadings of
a moving party, including documents appended thereto, no genuine issue as to a
133
material fact exists, the burden to produce a genuine issue shifts to the opposing
party. If the opposing party fails, the moving party is entitled to a summary
judgment.28
A genuine issue is an issue of fact which requires the presentation of evidence as
distinguished from an issue which is a sham, fictitious, contrived or a false claim.
The trial court can determine a genuine issue on the basis of the pleadings,
admissions, documents, affidavits or counteraffidavits submitted by the parties.
When the facts as pleaded appear uncontested or undisputed, then there is no real
or genuine issue or question as to any fact and summary judgment called for. On
the other hand, where the facts pleaded by the parties are disputed or contested,
proceedings for a summary judgment cannot take the place of a trial.29 The
evidence on record must be viewed in light most favorable to the party opposing
the motion who must be given the benefit of all favorable inferences as can
reasonably be drawn from the evidence.30
Courts must be critical of the papers presented by the moving party and not of the
papers/documents in opposition thereto.31 Conclusory assertions are insufficient to
raise an issue of material fact.32 A party cannot create a genuine dispute of
material fact through mere speculations or compilation of differences.33 He may
not create an issue of fact through bald assertions, unsupported contentions and
conclusory statements.34 He must do more than rely upon allegations but must
come forward with specific facts in support of a claim. Where the factual context
makes his claim implausible, he must come forward with more persuasive evidence
demonstrating a genuine issue for trial.35
Where there are no disputed material facts, the determination of whether a party
breached a contract is a question of law and is appropriate for summary
judgment.36 When interpreting an ambiguous contract with extrinsic evidence,
summary judgment is proper so long as the extrinsic evidence presented to the
court supports only one of the conflicting interpretations.37 Where reasonable men
could differ as to the contentions shown from the evidence, summary judgment
might be denied.
In United Rentals (North America), Inc. v. Keizer,38 the U.S. Circuit Court of Appeals
resolved the issue of whether a summary judgment is proper in a breach of contract
action involving the interpretation of such contract, and ruled that:
[A] contract can be interpreted by the court on summary judgment if (a) the
contract’s terms are clear, or (b) the evidence supports only one construction of the
controverted provision, notwithstanding some ambiguity. x x x If the court finds no
ambiguity, it should proceed to interpret the contract – and it may do so at the
summary judgment stage. If, however, the court discerns an ambiguity, the next
step – involving an examination of extrinsic evidence – becomes essential. x x x
Summary judgment may be appropriate even if ambiguity lurks as long as the
extrinsic evidence presented to the court supports only one of the conflicting
interpretations.39
In this case, there is no dispute between the parties that, in consideration for his
availment of the SRP, petitioner executed the Release, Waiver and Quitclaim, and
the Undertaking as supplement thereto, and that he received retirement pay
amounting to P963,619.28 from respondent. On May 1, 1995, within the one-year
ban and without prior knowledge of respondent, petitioner was employed by
Equitable as Manager of its Credit Investigation and Appraisal Division, Consumers’
Banking Group. Despite demands, petitioner failed to return the P963,619.28 to
respondent on the latter’s allegation that he had breached the one-year ban by
accepting employment from Equitable, which according to respondent was a
competitor bank.
We agree with petitioner’s contention that the issue as to whether the post-
retirement competitive employment ban incorporated in the Undertaking is against
public policy is a genuine issue of fact, requiring the parties to present evidence to
support their respective claims.
As gleaned from the records, petitioner made two undertakings. The first is
incorporated in the Release, Waiver and Quitclaim that he signed, to wit:
4. I will not, at any time, in any manner whatsoever, directly or indirectly engage in
any unlawful activity prejudicial to the interest of the BANK, its parent, affiliate or
subsidiary companies, their stockholders, officers, directors, agents or employees,
and their successors-in-interest and will not disclose any information concerning
the business of the BANK, its manner or operation, its plans, processes or data of
any kind.40
The second undertaking is incorporated in the Undertaking following petitioner’s
execution of the Release, Waiver and Quitclaim which reads:
4. That as a supplement to the Release and Quitclaim, I executed in favor of
Solidbank on FEBRUARY 28, 1995, I hereby expressly undertake that I will not seek
employment with any competitor bank or financial institution within one (1) year
from February 28, 1995.41
In the Release, Waiver and Quitclaim, petitioner declared that respondent may
bring "an action for damages which may include, but not limited to the return of
whatever sums he may have received from respondent under said deed if he breaks
his undertaking therein."42 On the other hand, petitioner declared in the
134
Undertaking that "any breach on his part of said Undertaking or the terms and
conditions of the Release, Waiver and Quitclaim will entitle respondent to a cause
of action against [petitioner] for protection before the appropriate courts of law."43
Article 1306 of the New Civil Code provides that the contracting parties may
establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public
order or public policy. The freedom of contract is both a constitutional and
statutory right.44 A contract is the law between the parties and courts have no
choice but to enforce such contract as long as it is not contrary to law, morals, good
customs and against public policy.
The well-entrenched doctrine is that the law does not relieve a party from the
effects of an unwise, foolish or disastrous contract, entered into with full awareness
of what he was doing and entered into and carried out in good faith. Such a
contract will not be discarded even if there was a mistake of law or fact. Courts
have no jurisdiction to look into the wisdom of the contract entered into by and
between the parties or to render a decision different therefrom. They have no
power to relieve parties from obligation voluntarily assailed, simply because their
contracts turned out to be disastrous deals.45
On the other hand, retirement plans, in light of the constitutional mandate of
affording full protection to labor, must be liberally construed in favor of the
employee, it being the general rule that pension or retirement plans formulated by
the employer are to be construed against it.46 Retirement benefits, after all, are
intended to help the employee enjoy the remaining years of his life, releasing him
from the burden of worrying for his financial support, and are a form of reward for
being loyal to the employer.47
In Ferrazzini v. Gsell,48 the Court defined public policy in civil law countries and in
the United States and the Philippines:
By "public policy," as defined by the courts in the United States and England, is
intended that principle of the law which holds that no subject or citizen can lawfully
do that which has a tendency to be injurious to the public or against the public
good, which may be termed the "policy of the law," or "public policy in relation to
the administration of the law." (Words & Phrases Judicially Defined, vol. 6, p. 5813,
and cases cited.) Public policy is the principle under which freedom of contract or
private dealing is restricted by law for the good of the public. (Id., Id.) In
determining whether a contract is contrary to public policy the nature of the subject
matter determines the source from which such question is to be solved. (Hartford
Fire Ins. Co. v. Chicago, M. & St. P. Ry. Co., 62 Fed. 904, 906.)
The foregoing is sufficient to show that there is no difference in principle between
the public policy (orden publico) in the two jurisdictions (the United States and the
Philippine Islands) as determined by the Constitution, laws, and judicial decisions.49
The Court proceeded to define "trade" as follows:
x x x In the broader sense, it is any occupation or business carried on for subsistence
or profit. Anderson’s Dictionary of Law gives the following definition: "Generally
equivalent to occupation, employment, or business, whether manual or mercantile;
any occupation, employment or business carried on for profit, gain, or livelihood,
not in the liberal arts or in the learned professions." In Abbott’s Law Dictionary, the
word is defined as "an occupation, employment or business carried on for gain or
profit." Among the definitions given in the Encyclopaedic Dictionary is the following:
"The business which a person has learnt, and which he carries on for subsistence or
profit; occupation; particularly employment, whether manual or mercantile, as
distinguished from the liberal arts or the learned professions and agriculture."
Bouvier limits the meaning to commerce and traffic, and the handicraft of
mechanics. (In re Pinkney, 47 Kan., 89.) We are inclined to adopt and apply the
broader meaning given by the lexicographers.50
In the present case, the trial court ruled that the prohibition against petitioner
accepting employment with a competitor bank or financial institution within one
year from February 28, 1995 is not unreasonable. The appellate court held that
petitioner was estopped from assailing the post-retirement competitive
employment ban because of his admission that he signed the Undertaking and had
already received benefits under the SRP.
The rulings of the trial court and the appellate court are incorrect.
There is no factual basis for the trial court’s ruling, for the simple reason that it
rendered summary judgment and thereby foreclosed the presentation of evidence
by the parties to prove whether the restrictive covenant is reasonable or not.
Moreover, on the face of the Undertaking, the post-retirement competitive
employment ban is unreasonable because it has no geographical limits; respondent
is barred from accepting any kind of employment in any competitive bank within
the proscribed period. Although the period of one year may appear reasonable, the
matter of whether the restriction is reasonable or unreasonable cannot be
ascertained with finality solely from the terms and conditions of the Undertaking, or
even in tandem with the Release, Waiver and Quitclaim.
Undeniably, petitioner retired under the SRP and received P963,619.28 from
respondent. However, petitioner is not proscribed, by waiver or estoppel, from
135
assailing the post-retirement competitive employment ban since under Article 1409
of the New Civil Code, those contracts whose cause, object or purpose is contrary to
law, morals, good customs, public order or public policy are inexistent or void from
the beginning. Estoppel cannot give validity to an act that is prohibited by law or
one that is against public policy.51
Respondent, as employer, is burdened to establish that a restrictive covenant
barring an employee from accepting a competitive employment after retirement or
resignation is not an unreasonable or oppressive, or in undue or unreasonable
restraint of trade, thus, unenforceable for being repugnant to public policy. As the
Court stated in Ferrazzini v. Gsell,52 cases involving contracts in restraint of trade
are to be judged according to their circumstances, to wit:
x x x There are two principal grounds on which the doctrine is founded that a
contract in restraint of trade is void as against public policy. One is, the injury to the
public by being deprived of the restricted party’s industry; and the other is, the
injury to the party himself by being precluded from pursuing his occupation, and
thus being prevented from supporting himself and his family.
And in Gibbs vs. Consolidated Gas Co. of Baltimore, supra, the court stated the rule
thus:
Public welfare is first considered, and if it be not involved, and the restraint upon
one party is not greater than protection to the other party requires, the contract
may be sustained. The question is, whether, under the particular circumstances of
the case and the nature of the particular contract involved in it, the contract is, or is
not, unreasonable.53
In cases where an employee assails a contract containing a provision prohibiting
him or her from accepting competitive employment as against public policy, the
employer has to adduce evidence to prove that the restriction is reasonable and not
greater than necessary to protect the employer’s legitimate business interests.54
The restraint may not be unduly harsh or oppressive in curtailing the employee’s
legitimate efforts to earn a livelihood and must be reasonable in light of sound
public policy.55
Courts should carefully scrutinize all contracts limiting a man’s natural right to
follow any trade or profession anywhere he pleases and in any lawful manner. But it
is just as important to protect the enjoyment of an establishment in trade or
profession, which its employer has built up by his own honest application to every
day duty and the faithful performance of the tasks which every day imposes upon
the ordinary man. What one creates by his own labor is his. Public policy does not
intend that another than the producer shall reap the fruits of labor; rather, it gives
to him who labors the right by every legitimate means to protect the fruits of his
labor and secure the enjoyment of them to himself.56 Freedom to contract must
not be unreasonably abridged. Neither must the right to protect by reasonable
restrictions that which a man by industry, skill and good judgment has built up, be
denied.57
The Court reiterates that the determination of reasonableness is made on the
particular facts and circumstances of each case.58 In Esmerson Electric Co. v.
Rogers,59 it was held that the question of reasonableness of a restraint requires a
thorough consideration of surrounding circumstances, including the subject matter
of the contract, the purpose to be served, the determination of the parties, the
extent of the restraint and the specialization of the business of the employer. The
court has to consider whether its enforcement will be injurious to the public or
cause undue hardships to the employee, and whether the restraint imposed is
greater than necessary to protect the employer. Thus, the court must have before it
evidence relating to the legitimate interests of the employer which might be
protected in terms of time, space and the types of activity proscribed.60
Consideration must be given to the employee’s right to earn a living and to his
ability to determine with certainty the area within which his employment ban is
restituted. A provision on territorial limitation is necessary to guide an employee of
what constitutes as violation of a restrictive covenant and whether the geographic
scope is co-extensive with that in which the employer is doing business. In
considering a territorial restriction, the facts and circumstances surrounding the
case must be considered.61
Thus, in determining whether the contract is reasonable or not, the trial court
should consider the following factors: (a) whether the covenant protects a
legitimate business interest of the employer; (b) whether the covenant creates an
undue burden on the employee; (c) whether the covenant is injurious to the public
welfare; (d) whether the time and territorial limitations contained in the covenant
are reasonable; and (e) whether the restraint is reasonable from the standpoint of
public policy.62
Not to be ignored is the fact that the banking business is so impressed with public
interest where the trust and interest of the public in general is of paramount
importance such that the appropriate standard of diligence must be very high, if not
the highest degree of diligence.63
We are not impervious of the distinction between restrictive covenants barring an
employee to accept a post-employment competitive employment or restraint on
trade in employment contracts and restraints on post-retirement competitive
employment in pension and retirement plans either incorporated in employment
136
contracts or in collective bargaining agreements between the employer and the
union of employees, or separate from said contracts or collective bargaining
agreements which provide that an employee who accepts post retirement
competitive employment will forfeit retirement and other benefits or will be
obliged to restitute the same to the employer. The strong weight of authority is that
forfeitures for engaging in subsequent competitive employment included in pension
and retirement plans are valid even though unrestricted in time or geography. The
raison d’etre is explained by the United States Circuit Court of Appeals in Rochester
Corporation v. W.L. Rochester, Jr.:64
x x x The authorities, though, generally draw a clear and obvious distinction
between restraints on competitive employment in employment contracts and in
pension plans. The strong weight of authority holds that forfeitures for engaging in
subsequent competitive employment, included in pension retirement plans, are
valid, even though unrestricted in time or geography. The reasoning behind this
conclusion is that the forfeiture, unlike the restraint included in the employment
contract, is not a prohibition on the employee’s engaging in competitive work but is
merely a denial of the right to participate in the retirement plan if he does so
engage. A leading case on this point is Van Pelt v. Berefco, Inc., supra, 208 N.E.2d at
p. 865, where, in passing on a forfeiture provision similar to that here, the Court
said:
"A restriction in the contract which does not preclude the employee from engaging
in competitive activity, but simply provides for the loss of rights or privileges if he
does so is not in restraint of trade." (emphasis added)65
A post-retirement competitive employment restriction is designed to protect the
employer against competition by former employees who may retire and obtain
retirement or pension benefits and, at the same time, engage in competitive
employment.66
We have reviewed the Undertaking which respondent impelled petitioner to sign,
and find that in case of failure to comply with the promise not to accept
competitive employment within one year from February 28, 1995, respondent will
have a cause of action against petitioner for "protection in the courts of law." The
words "cause of action for protection in the courts of law" are so broad and
comprehensive, that they may also include a cause of action for prohibitory and
mandatory injunction against petitioner, specific performance plus damages, or a
damage suit (for actual, moral and/or exemplary damages), all inclusive of the
restitution of the P963,619.28 which petitioner received from respondent. The
Undertaking and the Release, Waiver and Quitclaim do not provide for the
automatic forfeiture of the benefits petitioner received under the SRP upon his
breach of said deeds. Thus, the post-retirement competitive employment ban
incorporated in the Undertaking of respondent does not, on its face, appear to be
of the same class or genre as that contemplated in Rochester.
It is settled that actual damages or compensatory damages may be awarded for
breach of contracts. Actual damages are primarily intended to simply make good or
replace the loss covered by said breach.67 They cannot be presumed. Even if
petitioner had admitted to having breached the Undertaking, respondent must still
prove that it suffered damages and the amount thereof.68 In determining the
amount of actual damages, the Court cannot rely on mere assertions, speculations,
conjectures or guesswork but must depend on competent proof and on the best
evidence obtainable regarding the actual amount of losses.69 The benefit to be
derived from a contract which one of the parties has absolutely failed to perform is
of necessity to some extent a matter of speculation of the injured party.
On the assumption that the competitive employment ban in the Undertaking is
valid, petitioner is not automatically entitled to return the P963,619.28 he received
from respondent. To reiterate, the terms of the Undertaking clearly state that any
breach by petitioner of his promise would entitle respondent to a cause of action
for protection in the courts of law; as such, restitution of the P963,619.28 will not
follow as a matter of course. Respondent is still burdened to prove its entitlement
to the aforesaid amount by producing the best evidence of which its case is
susceptible.70
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the
Court of Appeals in CA-G.R. CV No. 52235 is SET ASIDE. Let this case be REMANDED
to the Regional Trial Court of Manila for further proceedings conformably with this
decision of the Court.
SO ORDERED.
137
G.R. No. 163512 February 28, 2007
DAISY B. TIU, Petitioner
vs.
PLATINUM PLANS PHIL., INC., Respondent.
DECISION
QUISUMBING, J.:
For review on certiorari are the Decision1 dated January 20, 2004 of the Court of
Appeals in CA-G.R. CV No. 74972, and its Resolution2 dated May 4, 2004 denying
reconsideration. The Court of Appeals had affirmed the decision3 dated February
28, 2002 of the Regional Trial Court (RTC) of Pasig City, Branch 261, in an action for
damages, ordering petitioner to pay respondent ₱100,000 as liquidated damages.
The relevant facts are as follows:
Respondent Platinum Plans Philippines, Inc. is a domestic corporation engaged in
the pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu was its Division
Marketing Director.
On January 1, 1993, respondent re-hired petitioner as Senior Assistant Vice-
President and Territorial Operations Head in charge of its Hongkong and Asean
operations. The parties executed a contract of employment valid for five years.4
On September 16, 1995, petitioner stopped reporting for work. In November 1995,
she became the Vice-President for Sales of Professional Pension Plans, Inc., a
corporation engaged also in the pre-need industry.
Consequently, respondent sued petitioner for damages before the RTC of Pasig City,
Branch 261. Respondent alleged, among others, that petitioner’s employment with
Professional Pension Plans, Inc. violated the non-involvement clause in her contract
of employment, to wit:
8. NON INVOLVEMENT PROVISION – The EMPLOYEE further undertakes that during
his/her engagement with EMPLOYER and in case of separation from the Company,
whether voluntary or for cause, he/she shall not, for the next TWO (2) years
thereafter, engage in or be involved with any corporation, association or entity,
whether directly or indirectly, engaged in the same business or belonging to the
same pre-need industry as the EMPLOYER. Any breach of the foregoing provision
shall render the EMPLOYEE liable to the EMPLOYER in the amount of One Hundred
Thousand Pesos (P100,000.00) for and as liquidated damages.5
Respondent thus prayed for ₱100,000 as compensatory damages; ₱200,000 as
moral damages; ₱100,000 as exemplary damages; and 25% of the total amount due
plus ₱1,000 per counsel’s court appearance, as attorney’s fees.
Petitioner countered that the non-involvement clause was unenforceable for being
against public order or public policy: First, the restraint imposed was much greater
than what was necessary to afford respondent a fair and reasonable protection.
Petitioner contended that the transfer to a rival company was an accepted practice
in the pre-need industry. Since the products sold by the companies were more or
less the same, there was nothing peculiar or unique to protect. Second, respondent
did not invest in petitioner’s training or improvement. At the time petitioner was
recruited, she already possessed the knowledge and expertise required in the pre-
need industry and respondent benefited tremendously from it. Third, a strict
application of the non-involvement clause would amount to a deprivation of
petitioner’s right to engage in the only work she knew.
In upholding the validity of the non-involvement clause, the trial court ruled that a
contract in restraint of trade is valid provided that there is a limitation upon either
time or place. In the case of the pre-need industry, the trial court found the two-
year restriction to be valid and reasonable. The dispositive portion of the decision
reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendant, ordering the latter to pay the following:
1. the amount of One Hundred Thousand Pesos (P100,000.00) for and as damages,
for the breach of the non-involvement provision (Item No. 8) of the contract of
employment;
2. costs of suit.
There being no sufficient evidence presented to sustain the grant of attorney’s fees,
the Court deems it proper not to award any.
SO ORDERED.6
On appeal, the Court of Appeals affirmed the trial court’s ruling. It reasoned that
petitioner entered into the contract on her own will and volition. Thus, she bound
herself to fulfill not only what was expressly stipulated in the contract, but also all
its consequences that were not against good faith, usage, and law. The appellate
court also ruled that the stipulation prohibiting non-employment for two years was
valid and enforceable considering the nature of respondent’s business.
138

Petitioner moved for reconsideration but was denied. Hence, this appeal by
certiorari where petitioner alleges that the Court of Appeals erred when:
A.
… [IT SUSTAINED] THE VALIDITY OF THE NON-INVOLVEMENT CLAUSE IN
PETITIONER’S CONTRACT CONSIDERING THAT THE PERIOD FIXED THEREIN IS VOID
FOR BEING OFFENSIVE TO PUBLIC POLICY
B.
… [IT SUSTAINED] THE AWARD OF LIQUIDATED DAMAGES CONSIDERING THAT IT
BEING IN THE NATURE OF A PENALTY THE SAME IS EXCESSIVE, INIQUITOUS OR
UNCONSCIONABLE7
Plainly stated, the core issue is whether the non-involvement clause is valid.
Petitioner avers that the non-involvement clause is offensive to public policy since
the restraint imposed is much greater than what is necessary to afford respondent a
fair and reasonable protection. She adds that since the products sold in the pre-
need industry are more or less the same, the transfer to a rival company is
acceptable. Petitioner also points out that respondent did not invest in her training
or improvement. At the time she joined respondent, she already had the knowledge
and expertise required in the pre-need industry. Finally, petitioner argues that a
strict application of the non-involvement clause would deprive her of the right to
engage in the only work she knows.
Respondent counters that the validity of a non-involvement clause has been
sustained by the Supreme Court in a long line of cases. It contends that the
inclusion of the two-year non-involvement clause in petitioner’s contract of
employment was reasonable and needed since her job gave her access to the
company’s confidential marketing strategies. Respondent adds that the non-
involvement clause merely enjoined her from engaging in pre-need business akin to
respondent’s within two years from petitioner’s separation from respondent. She
had not been prohibited from marketing other service plans.
As early as 1916, we already had the occasion to discuss the validity of a non-
involvement clause. In Ferrazzini v. Gsell,8 we said that such clause was
unreasonable restraint of trade and therefore against public policy. In Ferrazzini,
the employee was prohibited from engaging in any business or occupation in the
Philippines for a period of five years after the termination of his employment
contract and must first get the written permission of his employer if he were to do
so. The Court ruled that while the stipulation was indeed limited as to time and
space, it was not limited as to trade. Such prohibition, in effect, forces an employee
to leave the Philippines to work should his employer refuse to give a written
permission.
In G. Martini, Ltd. v. Glaiserman,9 we also declared a similar stipulation as void for
being an unreasonable restraint of trade. There, the employee was prohibited from
engaging in any business similar to that of his employer for a period of one year.
Since the employee was employed only in connection with the purchase and export
of abaca, among the many businesses of the employer, the Court considered the
restraint too broad since it effectively prevented the employee from working in any
other business similar to his employer even if his employment was limited only to
one of its multifarious business activities.
However, in Del Castillo v. Richmond,10 we upheld a similar stipulation as legal,
reasonable, and not contrary to public policy. In the said case, the employee was
restricted from opening, owning or having any connection with any other drugstore
within a radius of four miles from the employer’s place of business during the time
the employer was operating his drugstore. We said that a contract in restraint of
trade is valid provided there is a limitation upon either time or place and the
restraint upon one party is not greater than the protection the other party requires.
Finally, in Consulta v. Court of Appeals,11 we considered a non-involvement clause
in accordance with Article 130612 of the Civil Code. While the complainant in that
case was an independent agent and not an employee, she was prohibited for one
year from engaging directly or indirectly in activities of other companies that
compete with the business of her principal. We noted therein that the restriction
did not prohibit the agent from engaging in any other business, or from being
connected with any other company, for as long as the business or company did not
compete with the principal’s business. Further, the prohibition applied only for one
year after the termination of the agent’s contract and was therefore a reasonable
restriction designed to prevent acts prejudicial to the employer.
Conformably then with the aforementioned pronouncements, a non-involvement
clause is not necessarily void for being in restraint of trade as long as there are
reasonable limitations as to time, trade, and place.
In this case, the non-involvement clause has a time limit: two years from the time
petitioner’s employment with respondent ends. It is also limited as to trade, since it
only prohibits petitioner from engaging in any pre-need business akin to
respondent’s.1awphi1.net
139
More significantly, since petitioner was the Senior Assistant Vice-President and
Territorial Operations Head in charge of respondent’s Hongkong and Asean
operations, she had been privy to confidential and highly sensitive marketing
strategies of respondent’s business. To allow her to engage in a rival business soon
after she leaves would make respondent’s trade secrets vulnerable especially in a
highly competitive marketing environment. In sum, we find the non-involvement
clause not contrary to public welfare and not greater than is necessary to afford a
fair and reasonable protection to respondent.13

In any event, Article 1306 of the Civil Code provides that parties to a contract may
establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public
order, or public policy.

Article 115914 of the same Code also provides that obligations arising from
contracts have the force of law between the contracting parties and should be
complied with in good faith. Courts cannot stipulate for the parties nor amend their
agreement where the same does not contravene law, morals, good customs, public
order or public policy, for to do so would be to alter the real intent of the parties,
and would run contrary to the function of the courts to give force and effect
thereto.15 Not being contrary to public policy, the non-involvement clause, which
petitioner and respondent freely agreed upon, has the force of law between them,
and thus, should be complied with in good faith.16

Thus, as held by the trial court and the Court of Appeals, petitioner is bound to pay
respondent ₱100,000 as liquidated damages. While we have equitably reduced
liquidated damages in certain cases,17 we cannot do so in this case, since it appears
that even from the start, petitioner had not shown the least intention to fulfill the
non-involvement clause in good faith.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated January
20, 2004, and the Resolution dated May 4, 2004, of the Court of Appeals in CA-G.R.
CV No. 74972, are AFFIRMED. Costs against petitioner.

SO ORDERED.

140
G.R. No. 183385 February 13, 2009
EVANGELINA MASMUD (as substitute complainant for ALEXANDER J. MASMUD),
Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (First Division) and ATTY. ROLANDO B.
GO, JR., Respondents.
RESOLUTION
NACHURA, J.:
Before the Court is a petition for review on certiorari1 assailing the Decision2 dated
October 31, 2007 and the Resolution dated June 6, 2008 of the Court of Appeals
(CA) in CA-G.R. SP No. 96279.
The facts of the case are as follows:
On July 9, 2003, Evangelina Masmud’s (Evangelina) husband, the late Alexander J.
Masmud (Alexander), filed a complaint3 against First Victory Shipping Services and
Angelakos (Hellas) S.A. for non-payment of permanent disability benefits, medical
expenses, sickness allowance, moral and exemplary damages, and attorney’s fees.
Alexander engaged the services of Atty. Rolando B. Go, Jr. (Atty. Go) as his counsel.
In consideration of Atty. Go’s legal services, Alexander agreed to pay attorney’s fees
on a contingent basis, as follows: twenty percent (20%) of total monetary claims as
settled or paid and an additional ten percent (10%) in case of appeal. It was likewise
agreed that any award of attorney’s fees shall pertain to respondent’s law firm as
compensation.
On November 21, 2003, the Labor Arbiter (LA) rendered a Decision granting the
monetary claims of Alexander. The dispositive portion of the decision, as quoted in
the CA Decision, reads:
WHEREFORE, foregoing considered, judgment is rendered finding the [First Victory
Shipping Services and Angelakos (Hellas) S.A.] jointly and severally liable to pay
[Alexander’s] total permanent disability benefits in the amount of US$60,000.00
and his sickness allowance of US$2,348.00, both in Philippine currency at the
prevailing rate of exchange at the time of payment; and to pay further the amount
of ₱200,000.00 as moral damages, ₱100,000.00 as exemplary damages and
attorney’s fees equivalent to ten percent (10%) of the total monetary award.
[Alexander’s] claim for payment of medical expenses is dismissed for lack of basis.
SO ORDERED.4
Alexander’s employer filed an appeal before the National Labor Relations
Commission (NLRC). During the pendency of the proceedings before the NLRC,
Alexander died. After explaining the terms of the lawyer’s fees to Evangelina, Atty.
Go caused her substitution as complainant. On April 30, 2004, the NLRC rendered a
Decision dismissing the appeal of Alexander’s employer. The employer
subsequently filed a motion for reconsideration. The NLRC denied the same in an
Order dated October 26, 2004.
On appeal before the CA, the decision of the LA was affirmed with modification. The
award of moral and exemplary damages was deleted.5 Alexander’s employers filed
a petition for certiorari6 before this Court. On February 6, 2006, the Court issued a
Resolution dismissing the case for lack of merit.
Eventually, the decision of the NLRC became final and executory. Atty. Go moved
for the execution of the NLRC decision, which was later granted by the LA. The
surety bond of the employer was garnished. Upon motion of Atty. Go, the surety
company delivered to the NLRC Cashier, through the NLRC Sheriff, the check
amounting to ₱3,454,079.20. Thereafter, Atty. Go moved for the release of the said
amount to Evangelina.
On January 10, 2005, the LA directed the NLRC Cashier to release the amount of
₱3,454,079.20 to Evangelina. Out of the said amount, Evangelina paid Atty. Go the
sum of ₱680,000.00.
Dissatisfied, Atty. Go filed a motion to record and enforce the attorney’s lien
alleging that Evangelina reneged on their contingent fee agreement. Evangelina
paid only the amount of ₱680,000.00, equivalent to 20% of the award as attorney’s
fees, thus, leaving a balance of 10%, plus the award pertaining to the counsel as
attorney’s fees.
In response to the motion filed by Atty. Go, Evangelina filed a comment with motion
to release the amount deposited with the NLRC Cashier. In her comment,
Evangelina manifested that Atty. Go’s claim for attorney’s fees of 40% of the total
monetary award was null and void based on Article 111 of the Labor Code.
On February 14, 2005, the LA issued an Order7 granting Atty. Go’s motion, the fallo
of which reads:
WHEREFORE, premises considered, and further considering the substitute
complainant’s initial payment of 20% to movant-counsel of the monetary claims as
141
paid, let the balance or unpaid twenty (20%) per cent of attorney’s fees due
movant-counsel (or the amount of ₱839,587.39) be recorded as lien upon all the
monies that may still be paid to substitute complainant Evangelina Masmud.
Accordingly, the NLRC Cashier is directed to pay movant-counsel the amount of
₱677,589.96 which is currently deposited therein to partially satisfy the lien.
SO ORDERED.8
Evangelina questioned the February 14, 2005 Order of the LA before the NLRC. On
January 31, 2006, the NLRC issued a Resolution9 dismissing the appeal for lack of
merit.
Evangelina then elevated the case to the CA via a petition for certiorari.10 On
October 31, 2007, the CA rendered a Decision11 partially granting the petition. The
dispositive portion of the decision reads:
WHEREFORE, the petition is PARTIALLY GRANTED. The Resolutions dated January
31, 2006 and July 18, 2006 are hereby AFFIRMED with MODIFICATION in that the
Attorney’s fees of respondent Atty. Rolando B. Go, Jr. is declared fully compensated
by the amount of ₱1,347,950.11 that he has already received.
SO ORDERED.12
Evangelina filed a motion for reconsideration. However, on June 6, 2008, the CA
issued a Resolution13 denying the motion for reconsideration for lack of merit.
Hence, the instant petition.
Evangelina presented this issue, viz.:
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR OF LAW IN
ITS DECISION DATED 31 OCTOBER 2007 AND RESOLUTION DATED 6 JUNE 2008
INSOFAR AS IT UPHOLDS RESPONDENT LAWYER’S CLAIM OF FORTY PERCENT (40%)
OF THE MONETARY AWARD IN A LABOR CASE AS ATTORNEY’S FEES.14
In effect, petitioner seeks affirmance of her conviction that the legal compensation
of a lawyer in a labor proceeding should be based on Article 111 of the Labor Code.
There are two concepts of attorney's fees. In the ordinary sense, attorney's fees
represent the reasonable compensation paid to a lawyer by his client for the legal
services rendered to the latter. On the other hand, in its extraordinary concept,
attorney's fees may be awarded by the court as indemnity for damages to be paid
by the losing party to the prevailing party,15 such that, in any of the cases provided
by law where such award can be made, e.g., those authorized in Article 2208 of the
Civil Code, the amount is payable not to the lawyer but to the client, unless they
have agreed that the award shall pertain to the lawyer as additional compensation
or as part thereof.16
Here, we apply the ordinary concept of attorney’s fees, or the compensation that
Atty. Go is entitled to receive for representing Evangelina, in substitution of her
husband, before the labor tribunals and before the court.
Evangelina maintains that Article 111 of the Labor Code is the law that should
govern Atty. Go’s compensation as her counsel and assiduously opposes their
agreed retainer contract.
Article 111 of the said Code provides:
ART. 111. Attorney's fees. — (a) In cases of unlawful withholding of wages the
culpable party may be assessed attorney's fees equivalent to ten percent of the
amount of the wages recovered.1avvphi1.zw+
Contrary to Evangelina’s proposition, Article 111 of the Labor Code deals with the
extraordinary concept of attorney’s fees. It regulates the amount recoverable as
attorney's fees in the nature of damages sustained by and awarded to the prevailing
party. It may not be used as the standard in fixing the amount payable to the lawyer
by his client for the legal services he rendered.17
In this regard, Section 24, Rule 138 of the Rules of Court should be observed in
determining Atty. Go’s compensation. The said Rule provides:
SEC. 24. Compensation of attorney's; agreement as to fees. — An attorney shall be
entitled to have and recover from his client no more than a reasonable
compensation for his services, with a view to the importance of the subject matter
of the controversy, the extent of the services rendered, and the professional
standing of the attorney. No court shall be bound by the opinion of attorneys as
expert witnesses as to the proper compensation, but may disregard such testimony
and base its conclusion on its own professional knowledge. A written contract for
services shall control the amount to be paid therefor unless found by the court to
be unconscionable or unreasonable.18
The retainer contract between Atty. Go and Evangelina provides for a contingent
fee. The contract shall control in the determination of the amount to be paid, unless
found by the court to be unconscionable or unreasonable.19 Attorney's fees are
unconscionable if they affront one's sense of justice, decency or reasonableness.20
142
The decree of unconscionability or unreasonableness of a stipulated amount in a
contingent fee contract will not preclude recovery. It merely justifies the fixing by
the court of a reasonable compensation for the lawyer's services.21
The criteria found in the Code of Professional Responsibility are also to be
considered in assessing the proper amount of compensation that a lawyer should
receive.1avvph¡1.zw+ Canon 20, Rule 20.01 of the said Code provides:
CANON 20 — A LAWYER SHALL CHARGE ONLY FAIR AND REASONABLE FEES.
Rule 20.01. — A lawyer shall be guided by the following factors in determining his
fees:
(a) The time spent and the extent of the services rendered or required;
(b) The novelty and difficulty of the question involved;
(c) The importance of the subject matter;
(d) The skill demanded;
(e) The probability of losing other employment as a result of acceptance of the
proffered case;
(f) The customary charges for similar services and the schedule of fees of the IBP
Chapter to which he belongs;
(g) The amount involved in the controversy and the benefits resulting to the client
from the service;
(h) The contingency or certainty of compensation;
(i) The character of the employment, whether occasional or established; and
(j) The professional standing of the lawyer.
Contingent fee contracts are subject to the supervision and close scrutiny of the
court in order that clients may be protected from unjust charges.22 The amount of
contingent fees agreed upon by the parties is subject to the stipulation that counsel
will be paid for his legal services only if the suit or litigation prospers. A much higher
compensation is allowed as contingent fees because of the risk that the lawyer may
get nothing if the suit fails.23 The Court finds nothing illegal in the contingent fee
contract between Atty. Go and Evangelina’s husband. The CA committed no error of
law when it awarded the attorney’s fees of Atty. Go and allowed him to receive an
equivalent of 39% of the monetary award.
The issue of the reasonableness of attorney's fees is a question of fact. Well-settled
is the rule that conclusions and findings of fact of the CA are entitled to great
weight on appeal and will not be disturbed except for strong and cogent reasons
which are absent in the case at bench. The findings of the CA, which are supported
by substantial evidence, are almost beyond the power of review by the Supreme
Court.24
Considering that Atty. Go successfully represented his client, it is only proper that
he should receive adequate compensation for his efforts. Even as we agree with the
reduction of the award of attorney's fees by the CA, the fact that a lawyer plays a
vital role in the administration of justice emphasizes the need to secure to him his
honorarium lawfully earned as a means to preserve the decorum and respectability
of the legal profession. A lawyer is as much entitled to judicial protection against
injustice or imposition of fraud on the part of his client as the client is against abuse
on the part of his counsel. The duty of the court is not alone to ensure that a lawyer
acts in a proper and lawful manner, but also to see that a lawyer is paid his just
fees. With his capital consisting of his brains and with his skill acquired at
tremendous cost not only in money but in expenditure of time and energy, he is
entitled to the protection of any judicial tribunal against any attempt on the part of
his client to escape payment of his just compensation. It would be ironic if after
putting forth the best in him to secure justice for his client, he himself would not get
his due.25
WHEREFORE, in view of the foregoing, the Decision dated October 31, 2007 and the
Resolution dated June 6, 2008 of the Court of Appeals in CA-G.R. SP No. 96279 are
hereby AFFIRMED.
SO ORDERED.
143
G.R. No. 180962 February 26, 2014
PIDLTRANCO SERVICE ENTERPRISES, INC., represented by its Vice-President for
Administration, M/GEN. NEMESIO M. SIGAYA, Petitioner,
vs.
PHILTRANCO WORKERS UNION-ASSOCIATION OF GENUINE LABOR ORGANIZATIONS
(PWU-AGLO), represented by JOSE JESSIE OLIVAR, Respondent.
DECISION
DEL CASTILLO, J.:
While a government office1 may prohibit altogether the filing of a motion for
reconsideration with respect to its decisions or orders, the fact remains that
certiorari inherently requires the filing of a motion for reconsideration, which is the
tangible representation of the opportunity given to the office to correct itself.
Unless it is filed, there could be no occasion to rectify. Worse, the remedy of
certiorari would be unavailing. Simply put, regardless of the proscription against the
filing of a motion for reconsideration, the same may be filed on the assumption that
rectification of the decision or order must be obtained, and before a petition for
certiorari may be instituted.
This Petition for Review on Certiorari2 seeks a review and setting aside of the
September 20, 2007 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
100324,4 as well as its December 14, 2007 Resolution5 denying petitioner’s Motion
for Reconsideration.
Factual Antecedents
On the ground that it was suffering business losses, petitioner Philtranco Service
Enterprises, Inc., a local land transportation company engaged in the business of
carrying passengers and freight, retrenched 21 of its employees. Consequently, the
company union, herein private respondent Philtranco Workers Union-Association of
Genuine Labor Organizations (PWU-AGLU), filed a Notice of Strike with the
Department of Labor and Employment (DOLE), claiming that petitioner engaged in
unfair labor practices. The case was docketed as NCMB-NCR CASE No. NS-02-028-
07.
Unable to settle their differences at the scheduled February 21, 2007 preliminary
conference held before Conciliator-Mediator Amorsolo Aglibut (Aglibut) of the
National Conciliation and Mediation Board (NCMB), the case was thereafter
referred to the Office of the Secretary of the DOLE (Secretary of Labor), where the
case was docketed as Case No. OS-VA-2007-008.
After considering the parties’ respective position papers and other submissions,
Acting DOLE Secretary Danilo P. Cruz issued a Decision6 dated June 13, 2007, the
dispositive portion of which reads, as follows:
WHEREFORE, premises considered, we hereby ORDER Philtranco to:
1. REINSTATE to their former positions, without loss of seniority rights, the
ILLEGALLY TERMINATED 17 "union officers", x x x, and PAY them BACKWAGES from
the time of termination until their actual or payroll reinstatement, provided in the
computation of backwages among the seventeen (17) who had received their
separation pay should deduct the payments made to them from the backwages due
them.
2. MAINTAIN the status quo and continue in full force and effect the terms and
conditions of the existing CBA – specifically, Article VI on Salaries and Wages
(commissions) and Article XI, on Medical and Hospitalization – until a new
agreement is reached by the parties; and
3. REMIT the withheld union dues to PWU-AGLU without unnecessary delay.
The PARTIES are enjoined to strictly and fully comply with the provisions of the
existing CBA and the other dispositions of this Decision.
SO ORDERED.7
Petitioner received a copy of the above Decision on June 14, 2007. It filed a Motion
for Reconsideration on June 25, 2007, a Monday. Private respondent, on the other
hand, submitted a "Partial Appeal."
In an August 15, 2007 Order8 which petitioner received on August 17, 2007, the
Secretary of Labor declined to rule on petitioner’s Motion for Reconsideration and
private respondent’s "Partial Appeal", citing a DOLE Regulation9 which provided
that voluntary arbitrators’ decisions, orders, resolutions or awards shall not be the
subject of motions for reconsideration. The Secretary of Labor held:
WHEREFORE, the complainant’s and the respondent’s respective pleadings are
hereby NOTED as pleadings that need not be acted upon for lack of legal basis.
SO ORDERED.10
The Assailed Court of Appeals Resolutions
144
On August 29, 2007, petitioner filed before the CA an original Petition for Certiorari
and Prohibition, and sought injunctive relief, which case was docketed as CA-G.R. SP
No. 100324.
On September 20, 2007, the CA issued the assailed Resolution which decreed as
follows:
WHEREFORE, premises considered, the instant Petition for Certiorari and
Prohibition with Prayer for Temporary Restraining Order and Preliminary Injunction
is hereby DISMISSED. Philtranco’s pleading entitled "Reiterating Motion for The
Issuance of Writ of Preliminary Injunction and/or Temporary Restraining Order" is
NOTED.
SO ORDERED.11
The CA held that, in assailing the Decision of the DOLE voluntary arbitrator,
petitioner erred in filing a petition for certiorari under Rule 65 of the 1997 Rules,
when it should have filed a petition for review under Rule 43 thereof, which
properly covers decisions of voluntary labor arbitrators.12 For this reason, the
petition is dismissible pursuant to Supreme Court Circular No. 2-90.13 The CA added
that since the assailed Decision was not timely appealed within the reglementary
15-day period under Rule 43, the same became final and executory. Finally, the
appellate court ruled that even assuming for the sake of argument that certiorari
was indeed the correct remedy, still the petition should be dismissed for being filed
out of time. Petitioner’s unauthorized Motion for Reconsideration filed with the
Secretary of Labor did not toll the running of the reglementary 60-day period within
which to avail of certiorari; thus, from the time of its receipt of Acting Labor
Secretary Cruz’s June 13, 2007 Decision on June 14 or the following day, petitioner
had until August 13 to file the petition – yet it filed the same only on August 29.
Petitioner filed a Motion for Reconsideration, which was denied by the CA through
the second assailed December 14, 2007 Resolution. In denying the motion, the CA
held that the fact that the Acting Secretary of Labor rendered the decision on the
voluntary arbitration case did not remove the same from the jurisdiction of the
NCMB, which thus places the case within the coverage of Rule 43.
Issues
In this Petition,14 the following errors are assigned:
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE PETITIONER
AVAILED OF THE ERRONEOUS REMEDY IN FILING A PETITION FOR CERTIORARI
UNDER RULE 65 INSTEAD OF UNDER RULE 43 OF THE RULES OF COURT.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT THE PETITION
FOR CERTIORARI WAS FILED OUT OF TIME.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT DISMISSED THE PETITION
OUTRIGHT ON THE BASIS OF PURE TECHNICALITY.15
Petitioner’s Arguments
In its Petition and Reply,16 petitioner argues that a petition for certiorari under Rule
65 – and not a petition for review under Rule 43 – is the proper remedy to assail the
June 13, 2007 Decision of the DOLE Acting Secretary, pointing to the Court’s
pronouncement in National Federation of Labor v. Hon. Laguesma17 that the
remedy of an aggrieved party against the decisions and discretionary acts of the
NLRC as well as the Secretary of Labor is to timely file a motion for reconsideration,
and then seasonably file a special civil action for certiorari under Rule 65 of the
1997 Rules of Civil Procedure.
Petitioner adds that, contrary to the CA’s ruling, NCMB-NCR CASE No. NS-02-028-07
is not a simple voluntary arbitration case. The character of the case, which involves
an impending strike by petitioner’s employees; the nature of petitioner’s business
as a public transportation company, which is imbued with public interest; the merits
of its case; and the assumption of jurisdiction by the Secretary of Labor – all these
circumstances removed the case from the coverage of Article 262,18 and instead
placed it under Article 263,19 of the Labor Code. Besides, Rule 43 does not apply to
judgments or final orders issued under the Labor Code.20
On the procedural issue, petitioner insists that it timely filed the Petition for
Certiorari with the CA, arguing that Rule 65 fixes the 60-day period within which to
file the petition from notice of the denial of a timely filed motion for
reconsideration, whether such motion is required or not. It cites the Court’s
pronouncement in ABS-CBN Union Members v. ABS-CBN Corporation21 that
"before a petition for certiorari under Rule 65 of the Rules of Court may be availed
of, the filing of a motion for reconsideration is a condition sine qua non to afford an
opportunity for the correction of the error or mistake complained of" and since "a
decision of the Secretary of Labor is subject to judicial review only through a special
civil action of certiorari x x x [it] cannot be resorted to without the aggrieved party
having exhausted administrative remedies through a motion for reconsideration".
Respondent’s Arguments
In its Comment,22 respondent argues that the Secretary of Labor decided Case No.
OS-VA-2007-008 in his capacity as voluntary arbitrator; thus, his decision, being that
145
of a voluntary arbitrator, is only assailable via a petition for review under Rule 43. It
further echoes the CA’s ruling that even granting that certiorari was the proper
remedy, the same was filed out of time as the filing of a motion for reconsideration,
which was an unauthorized pleading, did not toll the running of the 60-day period.
Finally, it argues that on the merits, petitioner’s case could not hold water as it
failed to abide by the requirements of law in effecting a retrenchment on the
ground of business losses.
Our Ruling
The Court grants the Petition.
It cannot be said that in taking cognizance of NCMB-NCR CASE No. NS-02-028-07,
the Secretary of Labor did so in a limited capacity, i.e., as a voluntary arbitrator. The
fact is undeniable that by referring the case to the Secretary of Labor, Conciliator-
Mediator Aglibut conceded that the case fell within the coverage of Article 263 of
the Labor Code; the impending strike in Philtranco, a public transportation company
whose business is imbued with public interest, required that the Secretary of Labor
assume jurisdiction over the case, which he in fact did. By assuming jurisdiction over
the case, the provisions of Article 263 became applicable, any representation to the
contrary or that he is deciding the case in his capacity as a voluntary arbitrator
notwithstanding.
It has long been settled that the remedy of an aggrieved party in a decision or
resolution of the Secretary of Labor is to timely file a motion for reconsideration as
a precondition for any further or subsequent remedy, and then seasonably file a
special civil action for certiorari under Rule 65 of the 1997 Rules on Civil
Procedure.23 There is no distinction: when the Secretary of Labor assumes
jurisdiction over a labor case in an industry indispensable to national interest, "he
exercises great breadth of discretion" in finding a solution to the parties’ dispute.24
"[T]he authority of the Secretary of Labor to assume jurisdiction over a labor
dispute causing or likely to cause a strike or lockout in an industry indispensable to
national interest includes and extends to all questions and controversies arising
therefrom. The power is plenary and discretionary in nature to enable him to
effectively and efficiently dispose of the primary dispute."25 This wide latitude of
discretion given to the Secretary of Labor may not be the subject of appeal.
Accordingly, the Secretary of Labor’s Decision in Case No. OS-VA-2007-008 is a
proper subject of certiorari, pursuant to the Court’s pronouncement in National
Federation of Labor v. Laguesma,26 thus:
Though appeals from the NLRC to the Secretary of Labor were eliminated, presently
there are several instances in the Labor Code and its implementing and related
rules where an appeal can be filed with the Office of the Secretary of Labor or the
Secretary of Labor issues a ruling, to wit:
xxxx
(6) Art. 263 provides that the Secretary of Labor shall decide or resolve the labor
dispute [over] which he assumed jurisdiction within thirty (30) days from the date
of the assumption of jurisdiction. His decision shall be final and executory ten (10)
calendar days after receipt thereof by the parties.
From the foregoing we see that the Labor Code and its implementing and related
rules generally do not provide for any mode for reviewing the decision of the
Secretary of Labor. It is further generally provided that the decision of the Secretary
of Labor shall be final and executory after ten (10) days from notice. Yet, like
decisions of the NLRC which under Art. 223 of the Labor Code become final after
ten (10) days, decisions of the Secretary of Labor come to this Court by way of a
petition for certiorari even beyond the ten-day period provided in the Labor Code
and the implementing rules but within the reglementary period set for Rule 65
petitions under the 1997 Rules of Civil Procedure. x x x
xxxx
In fine, we find that it is procedurally feasible as well as practicable that petitions
for certiorari under Rule 65 against the decisions of the Secretary of Labor rendered
under the Labor Code and its implementing and related rules be filed initially in the
Court of Appeals. Paramount consideration is strict observance of the doctrine on
the hierarchy of the courts, emphasized in St. Martin Funeral Homes v. NLRC, on
"the judicial policy that this Court will not entertain direct resort to it unless the
redress desired cannot be obtained in the appropriate courts or where exceptional
and compelling circumstances justify availment of a remedy within and calling for
the exercise of our primary jurisdiction."27
On the question of whether the Petition for Certiorari was timely filed, the Court
agrees with petitioner’s submission. Rule 65 states that where a motion for
reconsideration or new trial is timely filed, whether such motion is required or not,
the petition shall be filed not later than 60 days counted from the notice of the
denial of the motion.28 This can only mean that even though a motion for
reconsideration is not required or even prohibited by the concerned government
office, and the petitioner files the motion just the same, the 60-day period shall
nonetheless be counted from notice of the denial of the motion. The very nature of
certiorari – which is an extraordinary remedy resorted to only in the absence of
plain, available, speedy and adequate remedies in the course of law – requires that
the office issuing the decision or order be given the opportunity to correct itself.
146
Quite evidently, this opportunity for rectification does not arise if no motion for
reconsideration has been filed. This is precisely what the Court said in the ABS-CBN
Union Members case, whose essence continues to this day. Thus:
Section 8, Rule VIII, Book V of the Omnibus Rules Implementing the Labor Code,
provides:
"The Secretary shall have fifteen (15) calendar days within which to decide the
appeal from receipt of the records of the case. The decision of the Secretary shall
be final and inappealable." x x x
The aforecited provision cannot be construed to mean that the Decision of the
public respondent cannot be reconsidered since the same is reviewable by writ of
certiorari under Rule 65 of the Rules of Court. As a rule, the law requires a motion
for reconsideration to enable the public respondent to correct his mistakes, if any.
In Pearl S. Buck Foundation, Inc., vs. NLRC, this Court held:
"Hence, the only way by which a labor case may reach the Supreme Court is
through a petition for certiorari under Rule 65 of the Rules of Court alleging lack or
excess of jurisdiction or grave abuse of discretion. Such petition may be filed within
a reasonable time from receipt of the resolution denying the motion for
reconsideration of the NLRC decision." x x x
Petitioner received a copy of the Acting Secretary of Labor’s Decision on June 14,
2007.1âwphi1 It timely filed a Motion for Reconsideration on June 25, which was a
Monday, or the first working day following the last day (Sunday, June 24) for filing
the motion. But for lack of procedural basis, the same was effectively denied by the
Secretary of Labor via his August 15, 2007 Order which petitioner received on
August 17. It then filed the Petition for Certiorari on August 29, or well within the
fresh 60-day period allowed by the Rules from August 17. Given these facts, the
Court finds that the Petition was timely filed.
Going by the foregoing pronouncements, the CA doubly erred in dismissing CA-G.R.
SP No. 100324.
WHEREFORE, the Petition is GRANTED. The assailed September 20, 2007 and
December 14, 2007 Resolutions of the Court of Appeals are REVERSED and SET
ASIDE. The Petition in CA-G.R. SP No. 100324 is ordered REINSTATED and the Court
of Appeals is DIRECTED to RESOLVE the same with DELIBERATE DISPATCH.
SO ORDERED.

Clearly, before a petition for certiorari under Rule 65 of the Rules of Court may be
availed of, the filing of a motion for reconsideration is a condition sine qua non to
afford an opportunity for the correction of the error or mistake complained of.

So also, considering that a decision of the Secretary of Labor is subject to judicial

review only through a special civil action of certiorari and, as a rule, cannot be
resorted to without the aggrieved party having exhausted administrative remedies
through a motion for reconsideration, the aggrieved party, must be allowed to
move for a reconsideration of the same so that he can bring a special civil action for
certiorari before the Supreme Court.29

Indeed, what needs to be realized is that while a government office may prohibit
altogether the filing of a motion for reconsideration with respect to its decisions or
orders, the fact remains that certiorari inherently requires the filing of a motion for
reconsideration, which is the tangible representation of the opportunity given to
the office to correct itself. Unless it is filed, there could be no occasion to rectify.
Worse, the remedy of certiorari would be unavailing. Simply put, regardless of the
proscription against the filing of a motion for reconsideration, the same may be
filed on the assumption that rectification of the decision or order must be obtained,
and before a petition for certiorari may be instituted.

147
G.R. No. 188492, August 28, 2018
GUAGUA NATIONAL COLLEGES, Petitioner, v. COURT OF APPEALS, GNC FACULTY
AND LABOR UNION AND GNC NON-TEACHING MAINTENANCE LABOR UNION,
Respondents.
DECISION
BERSAMIN, J.:
This case focuses on the correct period for appealing the decision or award of the
Voluntary Arbitrator or Panel of Arbitrators. The issue arises because the decision
or award of the Voluntary Arbitrator or Panel of Arbitrators is appealable to the
Court of Appeals (CA) by petition for review under Rule 43 of the Rules of Court,
which provides a period of 15 days from notice of the decision or award within
which to file the petition for review. On the other hand, Article 262-A (now Article
276)1 of the Labor Code sets 10 days as the period within which the appeal is to be
made.
The Case
Petitioner Guagua National Colleges (GNC) hereby assails by petition for certiorari
the resolution promulgated on December 15, 2008,2 whereby the Court of Appeals
(CA) denied its Motion to Dismiss filed vis-à-vis the respondents' petition for
certiorari in the following manner:
This Court resolves:
1. x x x
2. To Deny:
a) respondent's Motion to Dismiss dated 22 July 2008. While it is true that Coca-
Cola Bottlers Philippines, Inc., Sales Force Union-PTGWO-Balais vs. Coca-Cola
Bottlers Philippines, Inc. held in part:
"x x x [U]nder Section 6, Rule VII of the same guidelines implementing Article 262-A
of the Labor Code, this Decision, as a matter of course, would become final and
executory after ten (10) calendar days from receipt of copies of the decision by the
parties x xx unless, in the meantime, a motion for reconsideration or a petition for
review to the Court of Appeals under Rule 43 of the Rules of Court is filed within the
same 10-day period. x xx;",
We, more importantly recognize the pronouncement of the Supreme Court in
Manila Midtown vs. Borromeo which reads in part:
"Upon receipt of a copy of the Voluntary Arbitrator's Decision, petitioner should
have filed with the Court of Appeals, within the 15-day reglementary period, a
petition for review x xx"
Coca-Cola Bottlers is not in direct conflict with Manila Midtown as there is no
categorical ruling in the former that the petition for review under Rule 43 of the
Rules of Court assailing the decision of the Voluntary Arbitrator should be filed
within ten (10) days from receipt thereof and not the customary reglementary
period of fifteen (15) days. Likewise, Leyte IV Electric Cooperative, Inc. vs. LEYECO IV
Employees Unio-ALU, reiterating the landmark Case of Luzon Development Bank vs.
Association of Luzon Development Bank Employees, declared that the proper
remedy from the award of a voluntary arbitrator is a petition for review to the CA,
following Revised Administrative Circular No. 1-95, which in turn provides for a
reglementary period of fifteen (15) days within which to appeal.
Keeping in mind Article 4 of the Labor Code which mandates that all doubts in the
implementation and interpretation of its provisions, including its implementing
rules and regulations, should be resolved in favor of labor and considering that
technicalities are not supposed to stand in the way of equitably and completely
resolving the rights and obligations of labor arid capital, We rule that the Petition
for Review was seasonably filed. Moreso that We have already granted petitioners'
Urgent Motion for Extension.
3. x x x
SO ORDERED.
Antecedents
Under Section 5(2)3 of Republic Act No. 6728 (Government Assistance To Students
and Teachers In Private Education Act), 70% of the increase in tuition fees shall go
to the payment of salaries, wages, allowances and other benefits of the teaching
and non-teaching personnel. Pursuant to this provision, the petitioner imposed a
7% increase of its tuition fees for school year 2006-2007.4
Shortly thereafter, and in order to save the depleting funds of the petitioner's
Retirement Plan, its Board of Trustees approved the funding of the retirement
program out of the 70% net incremental proceeds arising from the tuition fee
increases.5 Respondents GNC-Faculty Labor Union and GNC Non-Teaching
148
Maintenance Labor Union challenged the petitioner's unilateral decision by claiming
that the increase violated Section 5(2) of R.A. No. 6728.
The parties referred the matter to voluntary arbitration after failing to settle the
controversy by themselves.6
Decision of the Voluntary Arbitrator
After hearing the parties, Voluntary Arbitrator Froilan M. Bacungan rendered his
decision dated June 16, 2008 in favor of GNC,7 holding that retirement benefits fell
within the category of "other benefits" that could be charged against the 70% net
incremental proceeds pursuant to Section 5(2) of R.A. No. 6728.
After receiving a copy of the decision on June 16, 2008, the respondents filed an
Urgent Motion for Extension praying that the CA grant them an extension of 15
days from July 1, 2008, or until July 16, 2008, within which to file their petition for
review.8
Ruling of the CA
On July 2, 2008, the CA issued a resolution granting the Urgent Motion for
Extension.9 The respondents filed the petition for review10 on July 16, 2008.11
Subsequently, the petitioner filed its Motion to Dismiss,12 asserting that the
decision of the Voluntary Arbitrator had already become final and executory
pursuant to Article 276 of the Labor Code and in accordance with the ruling in Coca-
Cola Bottlers Philippines, Inc. Sales Force Union PTGWO-Balais v. Coca-Cola Bottlers
Philippines, Inc.13
The CA acted on the Motion to Dismiss on December 15, 2008 through the now
assailed resolution denying the Motion to Dismiss.14
The petitioner sought reconsideration,15 but the CA denied the motion for
reconsideration on January 30, 2009.16
Hence, the petitioner instituted its petition for certiorari.
Issue
The petitioner submits the lone issue that—
THE COURT OF APPEALS, WITH ALL DUE RESPECT, IS ACTING WITHOUT OR IN
EXCESS OF ITS JURISDICTION IN CA-G.R. SP NO. 104109 CONSIDERING THAT THE
DECISION OF THE VOLUNTARY ARBITRATOR IN AC-025-RB3-04-01-03-2007,
FOLLOWING RULE [276] OF THE LABOR CODE AND THE DECISION OF THE
HONORABLE COURT IN COCA-COLA BOTTLERS PHILIPPINES, INC. SALES FORCE
UNION-PTGWO BALAIS v. COCA-COLA BOTTLERS PHILIPPINES, INC. XXXX, HAD
ALREADY BECOME FINAL AND EXECUTORY, HENCE UNCHALLENGEABLE SINCE THE
"URGENT MOTION FOR EXTENSION" DATED 30 JUNE 2008 AND 16 JULY 2008
RESPECTIVELY, OR TEN (10) DAYS AFTER THE UNIONS AND THEIR COUNSEL OF
RECORD WERE PERSONALLY SERVED THE VOLUNTARY ARBITRATOR'S DECISION ON
16 JUNE 2008.17
The petitioner argues that the CA went beyond its jurisdiction when it denied the
Motion to Dismiss despite the finality of the decision of the Voluntary Arbitrator
pursuant to Article 276 of the Labor Code; that following the pronouncement in
Coca-Cola Bottlers Philippines, Inc. Sales Force Union-PTGWO-Balais v. Coca-Cola
Bottlers Philippines, Inc.18 the CA was no longer authorized to exercise its appellate
jurisdiction;19 that the CA's reliance on the rulings in Manila Midtown Hotel v.
Borromeo20 and Leyte IV Electric Cooperative, Inc. v. Leyeco IV Employees Union-
ALU21 was misplaced because said rulings did not define the reglementary period
to appeal the decision or award of the Voluntary Arbitrator;22 and that the CA
misapplied the rule on equity in the absence of strong or compelling reasons to
suspend the rules of procedure.23
The petitioner emphasizes the need to harmonize Rule 43 of the Rules of Court with
Article 276 of the Labor Code in view of their conflicting provisions on the period for
the appeal from the decision of the Voluntary Arbitrator. It maintains that unless
Congress amends Article 276 of the Labor Code, the reglementary period within
which to appeal the decision or award of the Voluntary Arbitrator is 10 days
following the ruling in Coca-Cola Bottlers Philippines, Inc. Sales Force Union-
PTGWO-Balais v. Coca-Cola Bottlers Philippines, Inc., instead of 15 days under Rule
43 of the Rules of Court.
In contrast, the respondents insist that they have a meritorious case because the
controversy involves the interpretation of Section 5(2) of R.A. No. 6728 on the
disposition of the tuition fee increase;24 that the CA did not abuse its discretion
given the rule on the liberal application of rules of procedure to achieve substantial
justice, and the policy on the liberal construction of laws in favor of labor;25 that a
long line of jurisprudence26 set the remedy of appeal under Rule 43 of the Rules of
Court as applicable in challenging the decisions or awards of the Voluntary
Arbitrator.
Did the CA gravely abuse its discretion in denying the petitioner's Motion to Dismiss
despite the finality of the decision of the Voluntary Arbitrator pursuant to Article
276 of the Labor Code?
149

Ruling of the Court
We dismiss the petition for certiorari.
I
The petition for review shall be filed within 15 days
pursuant to Section 4, Rules 43 of the Rules of Court;
the 10-day period under Article 276 of the Labor Code
refers to the filing of a motion for reconsideration
vis-à-vis the Voluntary Arbitrator's decision or award
In resolving whether or not the CA committed grave abuse of discretion, the Court
has first to determine which between the two periods found in Article 276 of the
Labor Code and Section 4 of Rule 43 of the Rules of Court governs the appeal from
the decision or award by the Voluntary Arbitrator or Panel of Arbitrators.
The petitioner posits that the appeal from the decision or award of the Voluntary
Arbitrator should be filed within 10 days in view of Article 276 of the Labor Code
which reads in full:
Article 276. Procedures. – The Voluntary Arbitrator or panel of Voluntary Arbitrators
shall have the power to hold hearings, receive evidences and take whatever action
is necessary to resolve the issue or issues subject of the dispute, including efforts to
effect a voluntary settlement between parties.
All parties to the dispute shall be entitled to attend the arbitration proceedings. The
attendance of any third party or the exclusion of any witness from the proceedings
shall be determined by the Voluntary Arbitrator or panel of Voluntary Arbitrators.
Hearings may be adjourned for cause or upon agreement by the parties.
Unless the parties agree otherwise, it shall be mandatory for the Voluntary
Arbitrator or panel of Voluntary Arbitrators to render an award or decision within
twenty (20) calendar days from the date of submission of the dispute to voluntary
arbitration.
The award or decision of the Voluntary Arbitrator or panel of Voluntary Arbitrators
shall contain the facts and the law on which it is based. It shall be final and
executory after ten (10) calendar days from receipt of the copy of the award or
decision by the parties.
Upon motion of any interested party, the Voluntary Arbitrator or panel of Voluntary
Arbitrators or the Labor Arbiter in the region where the movant resides, in case of
the absence or incapacity of the Voluntary Arbitrator or panel of Voluntary
Arbitrators, for any reason, may issue a writ of execution requiring either the sheriff
of the Commission or regular courts or any public official whom the parties may
designate in the submission agreement to execute the final decision, order or
award. (Bold underscoring supplied for emphasis)
Article 276 is an amendment introduced by R.A. No. 6715.27 Prior to the effectivity
of the amendment on March 21, 1989,28 Article 262 (the predecessor provision)
stated that voluntary arbitration decisions or awards would be final, unappealable
and executory. Despite such immediately executory nature of the decisions and
awards of the Voluntary Arbitrators, however, the Court pronounced in Oceanic Bic
Division (FFW) v. Romero29 that the decisions or awards of the Voluntary
Arbitrators involving interpretations of law were within the scope of the Court's
power of review. The Court explained:
x x x x We agree with the petitioner that the decisions of voluntary arbitrators must
be given the highest respect and as a general rule must be accorded a certain
measure of finality. This is especially true where the arbitrator chosen by the parties
[enjoys] the first rate credentials of Professor Flerida Ruth Pineda Romero, Director
of the U.P. Law Center and an academician of unquestioned expertise in the field of
Labor Law. It is not correct, however, that this respect precludes the exercise of
judicial review over their decisions. Article 262 of the Labor Code making voluntary
arbitration awards final, inappealable, and executory except where the money
claims exceed P100,000.00 or 40% of paid-up capital of the employer or where
there is abuse of discretion or gross incompetence refers to appeals to the National
Labor Relations Commission and not to judicial review.
Inspite of statutory provisions making '"final" the decisions of certain administrative
agencies, we have taken cognizance of petitions questioning these decisions where
want of jurisdiction, grave abuse of discretion, violation of due process, denial of
substantial justice, or erroneous interpretation of the law were brought to our
attention. There is no provision for appeal in the statute creating the
Sandiganbayan but this has not precluded us from examining decisions of this
special court brought to us in proper petitions. Thus, we have ruled:
"Yanglay raised a jurisdictional question which was not brought up by respondent
public officials. He contends that this Court has no jurisdiction to review the
decisions of the NLRC and the Secretary of Labor 'under the principle of separation
of powers' and that judicial review is not provided for in Presidential Decree No. 21.
"That contention is a flagrant error, it is generally understood that as to
administrative agencies exercising quasi judicial or legislative power there is an
underlying power in the courts to scrutinize the acts of such agencies on questions
150
of law and jurisdiction even though no right of review is given by statute' (73 C.J.S.
506, note 56).
"The purpose of judicial review is to keep the administrative agency within its
jurisdiction and protect substantial rights of parties affected by its decisions' (73
C.J.S. 507, Sec. 165). It is part of the system of checks and balances which restricts
the separation of powers and forestalls arbitrary and unjust adjudications.
"Judicial review is proper in case of lack of jurisdiction, grave abuse of discretion,
error of law, fraud or collusion (Timbancaya vs. Vicente, 62 O.G. 9424; Macatangay
vs. Secretary of Public Works and Communications, 63 O.G. 11236; Ortua vs.
Singson Encarnacion, 59 Phil. 440).
"'The courts may declare an action or resolution of an administrative authority to be
illegal (1) because it violates or fails to comply with some mandatory provision of
the law or (2) because it is corrupt, arbitrary or capricious' (Borromeo vs. City of
Manila and Rodriguez Lanuza, 62 Phil. 512, 516; Villegas vs. Auditor General, L-
21352, November 29, 1966, 18 SCRA 877, 891). [San Miguel Corporation v.
Secretary of Labor, 64 SCRA 60].
xxx xxx xxx
"It is now settled rule that under the present Labor Code, (Presidential Decree No.
442, as amended [1974] if lack of power or arbitrary or improvident exercise of
authority be shown, thus giving rise to a jurisdictional question, this Court may, in
appropriate certiorari proceedings, pass upon the validity of the decisions reached
by officials or administrative agencies in labor controversies. So it was assumed in
Maglasang v. Ople, (L-38813, April 29, 1975, 63 SCRA 508). It was explicitly
announced in San Miguel Corporation v. Secretary of Labor, (L-39195, May 16,
1975, 64 SCRA 56) the opinion being penned by Justice Aquino. Accordingly, cases
of that character continue to find a place in our docket. (Cf. United Employees
Union of Gelmart Industries v. Noriel, L-40810, Oct. 3, 1975, 67 SCRA 267) The
present suit is of that category. [Kapisanan ng mga Manggagawa sa La Suerte-Foitaf
vs. Noriel, 77 SCRA 415-416].
A voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity.
There is no reason why her decisions involving interpretation of law should be
beyond this Court's review. Administrative officials are presumed to act in
accordance with law and yet we do not hesitate to pass upon their work where a
question of law is involved or where a showing of abuse of authority or discretion in
their official acts is properly raised in petitions for certiorari.30
Accordingly, the decisions and awards of Voluntary Arbitrators, albeit immediately
final and executory, remained subject to judicial review in appropriate cases
through petitions for certiorari.31
Such was the state of things until the promulgation in 1995 of the ruling in Luzon
Development Bank v. Association of Luzon Development Bank Employees.32
Therein, the Court noted the silence of R.A. No. 6715 on the availability of appeal
from the decisions or awards of the Voluntary Arbitrators. In declaring the
Voluntary Arbitrators or Panels of Voluntary Arbitrators as quasi-judicial
instrumentalities, Luzon Development Bank v. Association of Luzon Development
Bank Employees pronounced the decisions or awards of the Voluntary Arbitrators
to be appealable to the CA, viz.:
It will thus be noted that the jurisdiction conferred by law on a voluntary arbitrator
or a panel of such arbitrators is quite limited compared to the original jurisdiction of
the labor arbiter and the appellate jurisdiction of the National Labor Relations
Commission (NLRC) for that matter. The state of our present law relating to
voluntary arbitration provides that "(t)he award or decision of the Voluntary
Arbitrator x x x shall be final and executory after ten (10) calendar days from receipt
of the copy of the award or decision by the parties," while the "(d)ecision, awards,
or orders of the Labor Arbiter are final and executory unless appealed to the
Commission by any or both parties within ten (10) calendar days from receipt of
such decisions, awards, or orders." Hence, while there is an express mode of appeal
from the decision of a labor arbiter, Republic Act No. 6715 is silent with respect to
an appeal from the decision of a voluntary arbitrator.
Yet, past practice shows that a decision or award of a voluntary arbitrator is, more
often than not, elevated to the Supreme Court itself on a petition for certiorari, in
effect equating the voluntary arbitrator with the NLRC or the Court of Appeals. In
the view of the Court, this is illogical and imposes an unnecessary burden upon it.
In Volkschel Labor Union, et al. v. NLRC, et al., on the settled premise that the
judgments of courts and awards of [quasi-judicial] agencies must become final at
some definite time, this Court ruled that the awards of voluntary arbitrators
determine the rights of parties; hence, their decisions have the same legal effect as
judgments of a court. In Oceanic Bic Division (FFW), et al. v. Romero, et al., this
Court ruled that "a voluntary arbitrator by the nature of her functions acts in a
quasi-judicial capacity." Under these rulings, it follows that the voluntary arbitrator,
whether acting solely or in a panel, enjoys in law the status of a quasi-judicial
agency but independent of, and apart from, the NLRC since his decisions are not
appealable to the latter.
151
Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902, provides that the
Court of Appeals shall exercise:
"xxx xxx xxx (3) Exclusive appellate jurisdiction over all final judgments, decisions,
resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards or commissions, including the Securities and Exchange
Commission, the Employees' Compensation Commission and the Civil Service
Commission, except those falling within the appellate jurisdiction of the Supreme
Court in accordance with the Constitution, the Labor Code of the Philippines under
Presidential Decree No. 442, as amended, the provisions of this Act, and of
subparagraph (1) of the third paragraph and subparagraph (4) of the fourth
paragraph of Section 17 of the Judiciary Act of 1948.
xxx xxx xxx"
Assuming arguendo that the voluntary arbitrator or the panel of voluntary
arbitrators may not strictly be considered as a [quasi-judicial] agency, board or
commission, still both he and the panel are comprehended within the concept of a
"quasi-judicial instrumentality." It may even be stated that it was to meet the very
situation presented by the quasi-judicial functions of the voluntary arbitrators here,
as well as the subsequent arbitrator/arbitral tribunal operating under the
Construction Industry Arbitration Commission, that the broader term
"instrumentalities" was purposely included in the above-quoted provision.
An "instrumentality" is anything used as a means or agency. Thus, the terms
governmental "agency" or "instrumentality" are synonymous in the sense that
either of them is a means by which a government acts, or by which a certain
government act or function is performed. The word "instrumentality," with respect
to a state, contemplates an authority to which the state delegates governmental
power for the performance of a state function. An individual person, like an
administrator or executor, is a judicial instrumentality in the settling of an estate, in
the same manner that a sub-agent appointed by a bankruptcy court is an
instrumentality of the court, and a trustee in bankruptcy of a defunct corporation is
an instrumentality of the state.
The voluntary arbitrator no less performs a state function pursuant to a
governmental power delegated to him under the provisions therefor in the Labor
Code and he falls, therefore, within the contemplation of the term
"instrumentality" in the aforequoted Sec. 9 of B.P. 129. The fact that his functions
and powers are provided for in the Labor Code does not place him within the
exceptions to said Sec.. 9 since he is a quasi-judicial instrumentality as
contemplated therein. It will be noted that, although the Employees' Compensation
Commission is also provided for in the Labor Code, Circular No. 1-91, which is the
forerunner of the present Revised Administrative Circular No. 1-95, laid down the
procedure for the appealability of its decisions to the Court of Appeals under the
foregoing rationalization, and this was later adopted by Republic Act No. 7902 in
amending Sec. 9 of B.P. 129.
A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators
should likewise be appealable to the Court of Appeals, in line with the procedure
outlined in Revised Administrative Circular No. 1-95, just like those of the quasi-
judicial agencies, boards and commissions enumerated therein.
This would be in furtherance of, and consistent with, the original purpose of Circular
No. 1-91 to provide a uniform procedure for the appellate review of adjudications
of all quasi-judicial entities not expressly excepted from the coverage of Sec. 9 of
B.P. 129 by either the Constitution or another statute. Nor will it run counter to the
legislative intendment that decisions of the NLRC be reviewable directly by the
Supreme Court since, precisely, the cases within the adjudicative competence of the
voluntary arbitrator are excluded from the jurisdiction of the NLRC or the labor
arbiter.33
In other words, the remedy of appeal by petition for review under Rule 43 of the
Rules of Court became available to the parties aggrieved by the decisions or awards
of the Voluntary Arbitrators or Panels of Arbitrators.
In the 2004 ruling in Sevilla Trading Company v. Semana,34 the Court ruled that the
decision of the Voluntary Arbitrator became final and executory after the expiration
of the 15-day reglementary period within which to file the petition for review under
Rule 43. Manila Midtown Hotel v. Borromeo35 also ruled so. The 15-day period was
likewise adverted to in the ruling in Nippon Paint Employees Union-Olalia v. Court
of Appeals,36 promulgated in November 2004.
In 2005, the Court promulgated the decision in Coca-Cola Bottlers Philippines, Inc.,
Sales Force Union-PTGWO-Balais v. Coca-Cola Bottlers Philippines, Inc.,37 wherein it
made reference for the first time to the 10-day period for the filing of the petition
for review vis-a-vis decisions or awards of the Voluntary Arbitrator provided in
Article 262-A (now Article 276).38 Within the same year, Philex Gold Philippines,
Inc. v. Philex Bulawan Supervisors Union39 applied the period of 10 days in
declaring the appeal to have been timely filed.
Thereafter, the Court has variantly applied either the 15-day or the 10- day period
as the time within which to appeal the decisions or awards of the Voluntary
Arbitrators or Panels of Arbitrators. Thus, in the 2007 ruling in Leyte IV Electric
Cooperative, Inc. v. Leyeco IV Employees Union-ALU,40 the Court recognized the
15-day reglementary period under Rule 43. This was reiterated in AMA Computer
152
College-Santiago City, Inc. v. Nacino (2008),41Mora v. Avesco Marketing
Corporation42 (2008), Samahan Ng Mga Manggagawa sa Hyatt-NUWHRAIN-APL v.
Bacungan (2009),43Saint Luis University, Inc. v. Cobarrubias44 (2010), Samahan ng
mga Manggagawa sa Hyatt (SAMASAH-NUWHRAIN) v. Magsalin45 (2011) and Royal
Plant Workers Union v. Coca Cola Bottlers Philippines, Inc.-Cebu Plant (2013). 46
But in Philippine Electric Corporation (PHILEC) v. Court of Appeals47 (2014),
Baronda v. Court of Appeals48 (2015), and NYK-FIL Ship Management, Inc. v.
Dabu49 (2017), the Court, citing Article 276 of the Labor Code, applied the 10-day
period. Notably, the Court opined in Philippine Electric Corporation (PHILEC) v.
Court of Appeals that despite the period provided in Rule 43, the 10-day period
should apply in determining the timeliness of appealing the decision or award of the
Voluntary Arbitrator or Panel of Arbitrators, to wit:
Despite Rule 43 providing for a 15-day period to appeal, we rule that the Voluntary
Arbitrator's decision must be appealed before the Court of Appeals within 10
calendar days from receipt of the decision as provided in the Labor Code.
Appeal is a "statutory privilege," which may be exercised "only in the manner and in
accordance with the provisions of the law." "Perfection of an appeal within the
reglementary period is not only mandatory but also jurisdictional so that failure to
do so rendered the decision final and executory, and deprives the appellate court of
jurisdiction to alter the final judgment much less to entertain the appeal."
We ruled that Article 262-A of the Labor Code allows the appeal of decisions
rendered by Voluntary Arbitrators. Statute provides that the Voluntary Arbitrator's
decision "shall be final and executory after ten (10) calendar days from receipt of
the copy of the award or decision by the parties." Being provided in the statute, this
10-day period must be complied with; otherwise, no appellate court will have
jurisdiction over the appeal. This absurd situation occurs when the decision is
appealed on the 11th to 15th day from receipt as allowed under the Rules, but
which decision, under the law, has already become final and executory.
Furthermore, under Article VIII, Section 5 (5) of the Constitution, this court "shall
not diminish, increase, or modify substantive rights" in promulgating rules of
procedure in courts. The 10-day period to appeal under the Labor Code being a
substantive right, this period cannot be diminished, increased, or modified through
the Rules of Court.
In Shioji v. Harvey, this Court held that the "rules of court, promulgated by authority
of law, have the force and effect of law, if not in conflict with positive law." Rules of
Court are "subordinate to the statute." In case of conflict between the law and the
Rules of Court, "the statute will prevail."
The rule, therefore, is that a Voluntary Arbitrator's award or decision shall be
appealed before the Court of Appeals within 10 days from receipt of the award or
decision. Should the aggrieved party choose to file a motion for reconsideration
with the Voluntary Arbitrator, the motion must be filed within the same 10-day
period since a motion for reconsideration is filed "within the period for taking an
appeal."50
The ratiocination in Philippine Electric Corporation (PHILEC) v. Court of Appeals
backstopped the ruling in NYK-FIL Ship Management, Inc. v. Dabu.
Given the variable rulings of the Court, what should now be the period to be
followed in appealing the decisions or awards of the Voluntary Arbitrators or Panel
of Arbitrators?
In the 2010 ruling in Teng v. Pagahac,51 the Court clarified that the 10-day period
set in Article 276 of the Labor Code gave the aggrieved parties the opportunity to
file their motion for reconsideration, which was more in keeping with the principle
of exhaustion of administrative remedies, holding thusly:
In the exercise of its power to promulgate implementing rules and regulations, an
implementing agency, such as the Department of Labor, is restricted from going
beyond the terms of the law it seeks to implement; it should neither modify nor
improve the law. The agency formulating the rules and guidelines cannot exceed
the statutory authority granted to it by the legislature.
By allowing a 10-day period, the obvious intent of Congress in amending Article 263
to Article 262-A is to provide an opportunity for the party adversely affected by the
VA's decision to seek recourse via a motion for reconsideration or a petition for
review under Rule 43 of the Rules of Court filed with the CA. Indeed, a motion for
reconsideration is the more appropriate remedy in line with the doctrine of
exhaustion. of administrative remedies. For this reason, an appeal from
administrative agencies to the CA via Rule 43 of the Rules of Court requires
exhaustion of available remedies as a condition precedent to a petition under that
Rule.
The requirement that administrative remedies be exhausted is based on the
doctrine that in providing for a remedy before an administrative agency, every
opportunity must be given to the agency to resolve the matter and to exhaust all
opportunities for a resolution under the given remedy before bringing an action in,
or resorting to, the courts of justice. Where Congress has not clearly required
exhaustion, sound judicial discretion governs, guided by congressional intent.
153
By disallowing reconsideration of the VA's decision, Section 7, Rule XIX of DO 40-03
and Section 7 of the 2005 Procedural Guidelines went directly against the legislative
intent behind Article 262-A of the Labor Code. These rules deny the VA the chance
to correct himself and compel the courts of justice to prematurely intervene with
the action of an administrative agency entrusted with the adjudication of
controversies coming under its special knowledge, training and specific field of
expertise. In this era of clogged court dockets, the need for specialized
administrative agencies with the special knowledge, experience and capability to
hear and determine promptly disputes on technical matters or intricate questions of
facts, subject to judicial review, is indispensable. In Industrial Enterprises, Inc. v.
Court of Appeals, we ruled that relief must first be obtained in an administrative
proceeding before a remedy will be supplied by the courts even though the matter
is within the proper jurisdiction of a court.52 (Emphasis supplied)
Hence, the 10-day period stated in Article 276 should be understood as the period
within which the party adversely affected by the ruling of the Voluntary Arbitrators
or Panel of Arbitrators may file a motion for reconsideration. Only after the
resolution of the motion for reconsideration may the aggrieved party appeal to the
CA by filing the petition for review under Rule 43 of the Rules of Court within 15
days from notice pursuant to Section 4 of Rule 43.
The Court notes that despite the clarification made in Teng v. Pagahac, the
Department of Labor and Employment (DOLE) and the National Conciliation and
Mediation Board (NCMB) have not revised or amended the Revised Procedural
Guidelines in the Conduct of Voluntary Arbitration Proceedings insofar as its Section
7 of Rule VII53 is concerned. This inaction has obviously sown confusion,
particularly in regard to the filing of the motion for reconsideration as a condition
precedent to the filing of the petition for review in the CA. Consequently, we need
to direct the DOLE and the NCMB to cause the revision or amendment of Section 7
of Rule VII of the Revised Procedural Guidelines in the Conduct of Voluntary
Arbitration Proceedings in order to allow the filing of motions for reconsideration in
line with Article 276 of the Labor Code.
II
Certiorari does not lie in assailing
the CA's denial of a motion to dismiss
Generally, the denial of a motion to dismiss cannot be assailed by petition for
certiorari. As we indicated in Biñan Rural Bank v. Carlos:54
The denial of a motion to dismiss generally cannot be questioned in a special civil
action for certiorari, as this remedy is designed to correct only errors of jurisdiction
and not errors of judgment. Neither can a denial of a motion to dismiss be the
subject of an appeal which is available only after a judgment or order on the merits
has been rendered. Only when the denial of the motion to dismiss is tainted with
grave abuse of discretion can the grant of the extraordinary remedy of certiorari be
justified.
Although it admits being aware of this rule, the petitioner insists on the propriety of
its petition for certiorari based on its belief that the CA had gravely abused its
discretion in assuming jurisdiction over the respondents' petition. It argues that the
decision rendered by Voluntary Arbitrator Bacungan had already become final
pursuant to Article 276 of the Labor Code, and, accordingly, the CA could no longer
exercise its appellate jurisdiction.
The petitioner is mistaken.
Grave abuse of discretion means either that the judicial or quasi-judicial power was
exercised in an arbitrary or despotic manner by reason of passion or personal
hostility, or that the respondent judge, tribunal or board evaded a positive duty, or
virtually refused to perform the duty enjoined or to act in contemplation of law,
such as when such judge, tribunal or board exercising judicial or quasi-judicial
powers acted in a capricious or whimsical manner as to be equivalent to lack of
jurisdiction.55
Here, the CA did not act arbitrarily in denying the petitioner's Motion to Dismiss. It
correctly noted that Coca-Cola Bottlers Philippines, Inc. Sales Force Union-PTGWO-
Balais v. Coca-Cola Bottlers Philippines, Inc. did not make a definitive ruling on the
correct reglementary period for the filing of the petition for review. Given the
varying applications of the periods defined in Article 276 and Section 4 of Rule 43,
the CA could not be objectively held to be guilty of grave abuse of discretion in
applying the equitable rule on construction in favor of labor. To be underscored is
that the underlying aim for the requirement of strict adherence to procedural rules,
particularly on appeals, should always be the prevention of needless delays that
could enable the unscrupulous employers to wear out the efforts and meager
resources of their workers to the point that the latter would be constrained to
settle for less than what were due to them.56
ACCORDINGLY, the Court DISMISSES the unmeritorious petition for certiorari;
AFFIRMS the decision promulgated on December 15, 2008 by the Court of Appeals;
and DIRECTS the Department of Labor and Employment and the National
Conciliation and Mediation Board to revise or amend the Revised Procedural
Guidelines in the Conduct of Voluntary Arbitration Proceedings to amend the
Revised Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings
to reflect the foregoing ruling herein.
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No pronouncement on costs of suit.

SO ORDERED.

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