Sometime in March and April of 1997, Rene A.

Corona and Alex

Republic of the Philippines B. Catingan (private respondents) were interviewed by
Supreme Court petitioner. Corona then started working with petitioner on March 7,
Manila 1997 while Catingan started on April 11, 1997. Pursuant to the
  service contract, petitioner paid Universal the sum of P4,637.00
  per driver. As to overtime pay however, petitioner directly paid the
FIRST DIVISION private respondents.
   
  A controversy arose when the overtime paid by the accounting
7K CORPORATION, G.R. No. 148490 department of petitioner was short of the actual overtime rendered
Petitioner, by the private respondents. Private respondents time-cards
Present: reflected overtime of up to 70 hours, however, the accounting
  personnel reduced them to only 20 hours. After their grievances
PANGANIBAN, C.J. were repeatedly ignored, respondents filed separate complaints for
(Chairperson) illegal dismissal, payment of salary differentials, unpaid overtime,
YNARES-SANTIAGO, and reinstatement with backwages, against Universal
- versus - AUSTRIA-MARTINEZ, and/or petitioner before the Labor Arbiter (LA). The cases,
CALLEJO, SR., and docketed as RAB-11-11-01127-97 and RAB-11-12-01138-97, were
CHICO-NAZARIO, JJ. consolidated and tried jointly.[3] Only petitioner and the private
  respondents filed their position papers.[4]
NATIONAL LABOR RELATIONS  
COMMISSION, RENE A. CORONA, On November 20, 1998, LA Antonio M. Villanueva rendered a
and ALEX B. CATINGAN, Decision declaring Universal as the employer of the private
Respondents. Promulgated: respondents. He also held that the respondents were illegally
November 22, 2006 dismissed, thus entitled to backwages and separation pay. He gave
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - weight to the service contract between petitioner and Universal
---------x which provided that:
  The Contractor [Universal] shall continue to be the
  employer of the workers assigned to the clients
DECISION [petitioners] premises and shall assume all
  responsibilities of an employer as provided for under
AUSTRIA-MARTINEZ, J.: the Labor Code of the Philippines, and shall be solely
  responsible to its employees for labor laws, rules and
  regulations, particularly those relating to minimum
Before the Court is a Petition for Review on Certiorari assailing the wage, overtime pay, holiday pay, thirteenth month
Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 56597 pay and similar labor standardsThe Contractor shall
dated September 29, 2000 as well as its Resolution [2] dated May exercise in full its power of control and supervision
25, 2001. over the workers assigned. The Contractor shall
  monitor the conduct of its workers in their working
The antecedents are as follows: conditions.[5]
In February of 1997, 7K Corporation (petitioner) and Universal  
Janitorial and Allied Services (Universal) entered into a service The LA disposed of the case as follows:
contract where Universal bound itself to provide petitioner with  
drivers at the rate of P4,637.00 per driver a month.  
 IN VIEW OF ALL THE FOREGOING, judgment
is hereby rendered:
 
(1.)             Declaring the Universal Janitorial
& Allied Services as the employer of complainants;
 
(2.)             Declaring the termination of
complainants as illegal and awarding them six
months backwages plus separation pay in the total
amount of P52,650.00 (R. Corona P26,325.00 &
A. Catingan P26,325.00);
 
(3.)             Awarding to complainants their
holiday pay, 13th month pay (prop.) and salary
differentials in the total amount of P8,080.74 (R.
Corona P4,040.37 & A. Catingan P4,040.37);
(4.)             10% attorneys fees of the total
award or in the amount of P6,073.07; and
(5.)             Dismissing all the other claims
for lack of merit.
TOTAL AWARD: P66,803.81[6]
Universal appealed to the National Labor Relations Commission
(NLRC) claiming that it is petitioner which is the employer of the
private respondents because: it was petitioner which hired and
accepted the two as its drivers; it was petitioner which had direct
control and supervision over the two; petitioner may select,
replace, and dismiss the driver whose services are found to be
unsatisfactory; and petitioner directly paid the private respondents
their overtime pay. Universal also claimed that private respondents
were not illegally dismissed, thus they are not entitled
to backwages and reinstatement.[7]
 
On March 30, 1999, the NLRC issued a Resolution [8] modifying the
LAs Decision, thus:
 
WHEREFORE, the decision of the Labor Arbiter is
Modified. The award for backwages is ordered
Deleted in view of the findings that complainants
were not illegally dismissed. However, Universal
Janitorial and Allied Services and 7K Corporation are
jointly and severally liable to pay complainants their
salary differentials, proportionate 13th month pay and
holiday pay which are maintained in this decision.
 
SO ORDERED.[9]
 
The NLRC found that Universal is a labor-only contractor since it
does not have substantial capital or investment in the form of
tools, equipments, machineries and the like, and the workers
recruited are performing activities which are directly related to the
principal business of the employer. The NLRC further held that
since Universal is a labor-only contractor, petitioner as the principal
employer, is solidarily liable with Universal for all the rightful claims
of private respondents. There was also no illegal dismissal as the
LA failed to identify who dismissed the complainants.[10]
Both petitioner and the private respondents filed their respective
motions for reconsideration.
On August 23, 1999, the NLRC issued its Resolution denying the
motions for reconsideration, thus:
 
Records show that Universals appeal was regularly
filed x x x
 
x x x
 
The Commissions findings in its challenged resolution
that Universal was a labor-only contractor stemmed
from the latters failure to allege and prove that it has
substantial capital or investment in the form of tools,
equipment and machineries to qualify it as a labor
contractor. It cannot be presumed. It must alleged
(sic) and prove this fact by substantial and
competent evidence, otherwise, the only inescapable
conclusion is that it is a labor only contractor.
 
In labor only contracting, the employer-employee
relationship is established by law between the
principal employer, in this case, 7K Corporation, and
 the employees of the labor-only contractor, that is
the complainants.
 
The Commission did not exceed its jurisdiction when
it modified the Labor Arbiters decision. The
Commission merely defined the relationship between
complainants and the respondent firms in accordance
with the provisions of Articles 107 and 109 in
relation to Article 106 of the Labor Code. The fact
that complainants did not appeal therefrom will not
deprive the Commission from entertaining the appeal
of Universal.
 
The cases cited by 7K Corporation[11] to buttress its
argument that the NLRC cannot modify the award
granted to the employee who did not interpose an
appeal from the Labor Arbiters decision is to say the
least specious. Significantly, in this (sic) cases, the
NLRC erroneously modified the Labor Arbiters
decision for giving additional awards to the employee
who did not appeal, more than what the Labor
Arbiter awarded. Such is not the case here. The
Labor Arbiters decision was modified because of the
Commissions conclusion that complainants were not
illegally dismissed. Hence, the deletion of the Labor
Arbiters award for separation pay and backwages as
only illegally separated employees are entitled to
such awards. The other awards granted by the Labor
Arbiter were maintained. However, in view of the
Commissions finding that Universal was a labor only
contractor, the provision of Article 206 of the Labor
Code finds application in the relationship between
the principal and the employees. There is, therefore,
no cogent reason to disturb our resolution.
PREMISES considered, the motion for reconsideration
is hereby DENIED for want of merit.
 
SO ORDERED.[12]
Petitioner went to the CA on a petition for certiorari claiming that
the NLRC gravely abused its discretion when it implicated petitioner
which was not a party to the appealed case, and by ignoring the
fact that the LA decision has already become final and executory.
The CA dismissed the petition and ruled that: Universals appeal to
the NLRC was regularly filed; petitioner failed to substantiate its
claim that the LA decision had become final and executory;
petitioners claim that the LAs decision was already final with
respect to them and the private respondents is without merit,
because when a party files a seasonable appeal, in this case
Universal, the whole case goes up to the appellate court for review
and all the parties below automatically become parties on appeal;
the cases cited by petitioner to support its argument that the NLRC
can not modify the award granted to an employee who did not
appeal the decision of the LA are not applicable to the case at bar
since in the said cases, the NLRC modified the LAs decision and
gave additional awards to employees who did not appeal; in this
case, there was no additional award given and some of the awards
granted by the LA were even deleted; Universal is a labor-only
contractor as defined under Art. 106, par. 4 of the Labor Code;
Universal admitted such fact in its appeal memorandum when it
stated that the power of control over complainants was vested in
and exercised by petitioner; petitioner filed out of time its petition
before the CA because the petition for certiorari[13] assailing the
same NLRC Resolution earlier filed with the Supreme Court was
dismissed in its Resolution dated November 22, 1999, and did not
toll the running of the period to appeal.[14]
 
Petitioner now comes before this Court alleging that the CA gravely
erred:
I
 
x x x IN NOT HOLDING THAT THE NATIONAL LABOR
RELATIONS COMMISSION HAD NO JURISDICTION T
O ENTERTAIN THE BELATED APPEAL OF UNIVERSAL
JANITORIAL & ALLIED SERVICES AS THE DECISION
OF THE LABOR ARBITER ALREADY BECAME FINAL
AND EXECUTORY.
II
 
x x x IN NOT HOLDING THAT THE NATIONAL LABOR
RELATIONS COMMISSION DID NOT ACQUIRE
JURISDICTION OVER THE PERSON OF PETITIONER
IN NLRC CA NO. M-004588 CONSIDERING THAT
PETITIONER WAS NEITHER AN APPELLANT NOR AN
APPELLEE IN THE SAID CASE.
 III
 
x x x IN NOT HOLDING THAT THE NATIONAL LABOR
RELATIONS COMMISSION EXCEEDED ITS
AUTHORITY IN DECLARING THAT UNIVERSAL
JANITORIAL & ALLIED SERVICES IS A LABOR-ONLY
CONTRACTOR.[15]
 
 
Petitioner argues that: private respondents and petitioner did not
appeal from the decision of the LA in RAB-11-10-01127-97 and
RAB-11-12-01138-97, thus such decision had long become final
and executory as to them; it is presumed that private respondents
agreed in toto with the said decision as they did not appeal the
decision of the LA and they even filed a motion for execution of
said judgment; even with respect to Universal, the LA decision had
already become final and executory as its appeal to the NLRC was
filed out of time in violation of Section 3, Rule VI of the NLRC New
Rules of Procedure relating to the requisites for perfecting an
appeal;[16] considering that the LAs decision has become final
and executory as far as petitioner and private respondents are
concerned and considering that Universal failed to perfect its
appeal with the NLRC, the latter had no jurisdiction to decide said
appeal; as Universal did not file a position paper with the LA, its
right to appeal with the NLRC should be deemed foreclosed; NLRC
did not acquire jurisdiction over petitioner considering that
petitioner was neither an appellant nor an appellee in the appealed
case; a judgment cannot bind persons not parties to it; as the LA
found that Universal admitted that private respondents were their
employees, such finding by the LA, which had first-hand evidence
of the controversy, should be given great respect; by acquiescing
with the decision of the LA, private respondents are estopped from
taking a position inconsistent with the terms of the decision;
Universal is not a labor-only contractor because there is nothing on
record which shows that it does not have substantial capital or
investment in the form of tools, equipment, machineries, and the
like.[17]
 
In their Comment, private respondents pointed out that petitioner
failed to file its petition before the CA on time. They also expressed
that they did not appeal from the decision of the LA and are willing
to abide by whatever decision the Court would render on whether
or not Universal is a labor-only contractor as the issue of which
entity will pay private respondents claims are matters which have
become the concern of petitioner and Universal.[18]
 
In its Reply to Comment, petitioner contends that while it filed its
petition before the CA beyond the reglementary period, courts
should give due course to appeals perfected out of time when
doing so would serve the demands of substantial justice; and that
the reason why private respondents declined to make any further
comment on the petition is the fact that they are amenable to the
decision rendered by the LA.[19]
We find the petition bereft of merit.
 
First of all, the admission of petitioner in its Reply to Comment that
it filed its petition with the CA beyond the reglementary period,
sustains the CA findings on the matter, and therefore, the CA did
not err in dismissing the petition. There is no showing that
substantial justice would have been served had the CA given due
course to the petition.
 
However, the Court opts to resolve the issues raised by petitioner
on the present petition to clarify once and for all the liability of
petitioner.
 
The contention of petitioner that the appeal of Universal before
the NLRC was filed out of time is not supported by the
records. Universal received the LA decision on December 15,
1998 and filed its appeal with the NLRC also on the same day.
[20]
 The NLRC also categorically held that Universals appeal was
regularly filed.[21] Absent any proof to the contrary, the Court is
constrained to uphold such finding.
 
Also without merit is the contention that since petitioner and
private respondents did not appeal the LAs decision, then the LA
decision has become final as far as they are concerned.
 
Records show that Universal filed a timely appeal before the NLRC
and therefore the decision of the LA has not yet become final
and executory, notwithstanding the choice of petitioner and private
respondents not to file any appeal.
 
Equally unavailing is the contention of petitioner that NLRC did not
acquire jurisdiction over its person since it was neither an appellant
nor an appellee in the case before it. As aptly stated by the CA,
when an appeal is seasonably filed by a party, the whole case goes
up to the appellate court/tribunal for review and all the parties
below automatically become parties on appeal either as appellants
or as appellees.
 
Further, Universals failure to categorically implead petitioner as
an appellee in Universals appeal before the NLRC, while
unfortunate, is not a fatal procedural flaw, as petitioner was not
deprived of opportunity to ventilate its arguments and challenge
Universal through counsel before the NLRC.[22] Administrative
tribunals exercising quasi-judicial powers are unfettered by the
rigidity of certain procedural requirements subject to the
observance of fundamental and essential requirements of due
process.[23] In this case, petitioner was properly furnished by
Universal of its appeal memorandum where Universal alleged that
it is petitioner which should be held liable for respondents
claims.Petitioner was also able to submit its Motion for
Reconsideration to the March 30, 1999 Resolution of the NLRC
where petitioner was able to sufficiently argue its case. Finally, the
NLRC, in its Resolution dated August 23, 1999, adequately
addressed the issues raised by petitioner thus meeting the
requirements of due process.
Petitioner also claims that the NLRC and the CA erred in
finding Universal as a labor-only contractor.
We disagree.
Factual findings of quasi-judicial bodies, like the NLRC are
accorded great respect if supported by substantial evidence and
passed upon and upheld by the CA.[24] Unless the aggrieved party
establishes that grave abuse of discretion amounting to excess or
lack of jurisdiction was committed, such factual findings are
conclusive on this Court.[25]
 
No such grave abuse of discretion was shown by petitioner
in this case.
 
The fact that the service contract entered into by petitioner and
Universal stipulated that private respondents shall be the
employees of Universal, would not help petitioner, as the language
of a contract is not determinative of the relationship of the parties.
[26]
 Petitioner and Universal cannot dictate, by the mere expedient
of a declaration in a contract, the character of Universals
business, i.e., whether as labor-only contractor, or job contractor,
it being crucial that Universals character be measured in terms of
and determined by the criteria set by statute.[27]
Art. 106 of the Labor Code provides that there is labor-only
contracting where (1) 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
(2) the workers recruited and placed by such person are
performing activities which are directly related to the principal
business of such employer.
Sec. 4 (f), Rule VIII-A, Book III of the Omnibus Rules
Implementing the Labor Code further defines labor-only
contracting as follows:
 
(f) Labor-only contracting prohibited under
this Rule is an arrangement where the contractor or
subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a
principal, and the following elements are present:
 
i)    The contractor or subcontractor does not
have substantial capital or investment to actually
perform the job, work or service under its own
account and responsibility; and
ii)     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.
 
That private respondents are performing activities which are
directly related to the principal business of such employer are not
questioned by any of the parties.
 
Petitioners main argument is that since there is no proof that
Universal does not have substantial capital, then Universal should
be considered as a legitimate job contractor and not a labor-only
contractor. Such contention is incorrect.
 
The presumption is that a contractor is a labor-only
contractor unless such contractor overcomes the burden of proving
that it has substantial capital, investment, tools and the like.[28] The
employees, in this case, private respondents, should not be
expected to prove the negative fact that the contractor does not
have substantial capital, investment and tools to engage in job-
contracting.[29]
 
 Since neither petitioner nor Universal was able to adduce
evidence that Universal had any substantial capital, investment or
assets to perform the work contracted for, the presumption that
Universal is a labor-only contractor stands.
 
Thus, petitioner, the principal employer, is solidarily liable with
Universal, the labor-only contractor, for the rightful claims of the
employees.[30] Under this set-up, Universal, as the labor-only
contractor, is deemed an agent of the principal, herein petitioner,
and the law makes the principal responsible to the employees of
the labor-only contractor as if the principal itself directly hired or
employed the employees.[31]
 
 
Petitioner is therefore solidarily liable with Universal for the
payment of holiday pay, 13th month pay and salary differentials in
the amount of P4,040.37 per respondent, as awarded by the NLRC
and affirmed by the CA.
Even granting en arguendo that Universal is a legitimate job
contractor and not a labor-only contractor, still petitioner cannot
escape liability because even without a direct employer-employee
relationship between the principal employer and the employees,
the former is still jointly and severally liable with the job contractor
for the employees monetary claims[32] following Arts. 106, 107 and
109 of the Labor Code, to wit:
Art. 106. Contractor or subcontractor. Whenever an
employer enters into a contract with another person
for the performance of the formers work, the
employees of the contractor and the latters
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.
 
x x x
 
Art. 107. Indirect employer. The provisions of the
immediately preceding Article shall likewise apply to
any person, partnership, association or corporation
which, not being an employer contracts with an
independent contractor for the performance of any
work, task, job or project.
 
x x x
 
Art. 109. Solidary liability. - The provisions
of existing laws to the contrary notwithstanding,
every employer or indirect employer shall be held
responsible with his contractor or subcontractor for
any violation of any provision of this Code. For
purposes of determining the extent of their civil
liability under this Chapter, they shall be considered
as direct employers.
As explained by the Court in San Miguel Corporation v.
MAERC Integrated Services, Inc.[33]
In legitimate job contracting, the law creates an
employer-employee relationship for a limited
purpose, i.e., to ensure that the employees are paid
their wages. The principal employer becomes jointly
and severally liable with the job contractor only for
the payment of the employees' wages whenever the
contractor fails to pay the same. Other than that, the
principal employer is not responsible for any claim
made by the employees.
On the other hand, in labor-only
contracting, the statute creates an employer-
employee relationship for a comprehensive
purpose: to prevent a circumvention of labor
laws.The contractor is considered merely an
agent of the principal employer and the latter is
responsible to the employees of the labor-only
contractor as if such employees had been
directly employed by the principal
employer. The principal employer therefore
becomes solidarily liable with the labor-only
contractor for all the rightful claims of the
employees.[34]
   assigned to it by its contracted security agency. However, in the
In legitimate job contracting, the law creates an employer- absence of proof that the employer itself committed the acts
employee relationship for a limited purpose, to ensure that the constitutive of illegal dismissal or conspired with the security
employees are paid their wages. In such an arrangement, the agency in the performance of such acts, the employer shall not be
principal employer becomes jointly and severally liable with the job liable for back wages and/or separation pay arising as a
contractor for the payment of the employees wages whenever the consequence of such unlawful termination.
contractor fails to pay the same.[35] As the claim of private
respondents in this case involve only monetary claims that fall
within the purview of wages, petitioner, even if found as the The Case
principal employer in a legitimate job contracting, is still liable to
them for the payment of such claims.
  These are the legal principles on which this Court bases its
The Court finds no error in the assailed decision of the Court of resolution of this special civil action for certiorari, seeking the
Appeals. nullification of the April 28, 1994 Resolution and the July 12, 1994
  Order of the National Labor Relations Commission, which dismissed
WHEREFORE, the petition is DENIED for lack of merit. petitioners appeal from the labor arbiters Decision and denied its
  Motion for Reconsideration, respectively, in NLRC NCR Case Nos.
Costs against petitioner. 00-05-02834-91, 00-08-04630-91, 00-07-03966-91, 00-09-
SO ORDERED. 05617-91, 00-07-03967-91, 00-07-04455-91, 00-08-05030-91,
  00-11-06389-91, and 00-03-01642-92.
 
On May 13, 1991, a complaint for illegal dismissal;
FIRST DIVISION underpayment of wages; and for nonpayment of overtime pay,
legal holiday pay, premium pay for holiday and rest day, thirteenth
month pay, cash bond deposit, unpaid wages and damages was
filed against Veterans Philippine Scout Security Agency and/or
[G.R. Nos. 116476-84. May 21, 1998] Sergio Jamila IV (collectively referred to as the security agency, for
brevity). Thereafter, petitioner was impleaded as a third-party
respondent by the security agency. In due course, Labor Arbiter
Ricardo C. Nora rendered a consolidated Decision dated March 26,
ROSEWOOD PROCESSING, INC., petitioner, vs. NATIONAL 1993, which disposed as follows:[1]
LABOR RELATIONSCOMMISSION, NAPOLEON C.
MAMON, ARSENIO GAZZINGAN, ROMEO C. VELASCO, IN VIEW OF ALL THE FOREGOING, respondents Veterans Philippine
ARMANDO L. BALLON, VICTOR E. ALDEZA, JOSE L. Scout Security Agency, Sergio Jamila IV, and third-party
CABRERA, VETERANS PHILIPPINE SCOUT SECURITY respondent Rosewood Processing, Inc. are hereby ordered to pay
AGENCY, and/or ENGR. SERGIO JAMILA jointly and severally complainants the following amounts, to wit:
IV, respondents.
1. Napoleon Mamon P126,411.10
DECISION
PANGANIBAN, J.: 2. Arsenio Gazzingan 128,639.71

Under the Labor Code, an employer is solidarily liable for legal 3. Rodolfo Velasco 147,114.43
wages due security guards for the period of time they were
4. Armando Ballon 116,894.70
5. Jose L. Cabrera 133,047.81
6. Victor Aldeza 137,046.64
TOTAL P789,154.39
===========
representing their monetary benefits in the amount of SEVEN
HUNDRED EIGHTY NINE THOUSAND ONE HUNDRED FIFTY FOUR
PESOS AND 39/100 CENTAVOS (P789,154.39).
Respondents are likewise ordered to pay attorneys fees in the
amount of P78,915.43 within ten (10) days from receipt of this
Decision.
All other issues are hereby [d]ismissed for failure of the
complainants to fully substantiate their claims.
The appeal filed by petitioner was dismissed by the National
Labor Relations Commission[2] in its Resolution promulgated April
28, 1994, for failure of the petitioner to file the required appeal
bond within the reglementary period.[3] Pertinent portions of the
challenged Resolution are herewith quoted:
It appears on record that [petitioner] received their copy of the
[labor arbiters] decision on April 2, 1993 and subsequently filed a
Notice of Appeal with Memorandum of Appeal on April 26, 1993, in
violation of Rule VI, Section 1, 3, and 6 of the 1990 New Rules of
Procedure of the NLRC xxx.
x x x x x x x x x
Clearly, the appeal filed by the [petitioners] on April 12, 1993 was
not perfected within the reglementary period, and the decision
dated March 26, 1993 became final and executory as of April 23,
1993.
WHEREFORE, the appeal is hereby DISMISSED.
In its motion for reconsideration, petitioner contended that it
received a copy of the labor arbiters Decision only on April 6, 1993,
and that it filed on April 16, 1993 within the prescribed time, a
Notice of Appeal with a Memorandum on Appeal, a Motion to
Reduce Appeal Bond and a surety bond issued by Prudential
Guarantee and Assurance, Inc. in the amount of P50,000.[4] Though
not opposed by the complainants and the security agency, the
arguments stated in the motion were not taken up by Respondent
Commission. Reconsideration was nonetheless denied by
Respondent Commission in its Order of July 12, 1994, quoted
below:[5]
Section 14, Rule VII of the NLRC New Rules of Procedure allows
[u]s to entertain a motion for reconsideration only on palpable or
patent errors [w]e may have committed in [o]ur disputed April 28,
1994 resolution.
There being no such assignment here, [petitioners] motion for
reconsideration dated May 19, 1994 is hereby DENIED for lack of
merit.
Hence, this recourse.[6]
In a Resolution dated March 20, 1995, this Court issued a
temporary restraining order enjoining the respondents and their
agents from implementing and enforcing the assailed Resolution
and Order until further notice.[7]
The Facts
Undisputed are the facts of this case, narrated by the labor
arbiter as follows:
All the complainants were employed by the [security agency] as
security guards: Napoleon Mamon on October 7, 1989; Arsenio
Gazzingan on September 25, 1988; Rodolfo C. Velasco on January
5, 1987; Armando Ballon on June 28, 1990; Victor Aldeza on March
21, 1990; and Jose L. Cabrera [in] January 1988.
Napoleon Mamon started working for the [security agency] on
October 7, 1989 and was assigned as office guard for three (3)
days without any pay nor allowance as it was allegedly an on[-
the-]job training so there [was] no pay[.] On October 10, 1989, he
was transferred to the residence of Mr. Benito Ong with 12 hours
duty a day receiving a salary very much less than the minimum
wage for eight (8) hours work until February 3, 1990 when he
received an order transferring him to Rosewood Processing, Inc.
effective that date xxx; [a]t Rosewood Processing, Inc., he was
required to render also 12 hours duty every day with a salary
of P2,600.00/month. He was not given his pay for February 1 and
2 by the paymaster of [the security agency] allegedly because the
payroll could not be located so after 3 to 4 times of going back and
forth to [the security agencys] office to get his salary[;] [after] xxx
two (2) days he gave up because he was already spending more
than what he could get thru transportation alone. On May 16,
1991, Rosewood Processing, Inc. asked for the relief of Mamon and
other guards at Rosewood because they came to know that
complainants filed a complaint for underpayment on May 13, 1991
with the National Labor Relations Commission[.] On May 18 to 19,
1991, [the security agency] assigned him to their [m]ain
[o]ffice. After that, complainant was floated until May 29, 1991
when he was assigned to Mead Johnson Philippines
Corporation. [A]t about a week later, [the security agency]
received summons on complainants complaint for underpayment
and he was called to [the security agencys] office. When he
reported, he was told to sign a Quitclaim and Waiver[] by Lt. R.
Rodriguez because according to the latter, he [could] only get a
measly sum from his complaint with the NLRC and if he
(complainant) [signed] the quitclaim and waiver he [would] be
retained at his present assignment which [was] giving quite a good
salary and other benefits but if he [did] not sign the quitclaim and
waiver, he [would] be relieved from his post and [would] no longer
be given any assignment. xxx He was given up to the end of July
1991 to think it over. At the end of July 1991, h[e] was approached
by the Security in Charge A. Azuela and asked him to sign the
quitclaim and waiver and when he refused to sign, he was told that
the following day August 1, 1991, he [would have] no more
assignment and should report to their office. Thinking that it was
only a joke, he reported the following day to the detachment
commander Mr. A. Yadao and he was told that the main office xxx
relieved him because he did not sign the quitclaim and waiver. He
reported to their office asking for an assignment but he was told by
R. Rodriguez that I no longer can be given an assignment so I had
better resign. He went back several times to the office of the
[security agency] but every time the answer was the same[:] that
he better tender his resignation because he cannot be given any
assignment although respondent was recruiting new guards and
posting them.
Arsenio Gazzingan started to work for the [security agency] on
September 29, 1988. [Note: the introductory paragraph stated
September 25, 1988.] He was assigned to Purefoods Breeding
Farm at Calauan, Laguna and given a salary of P54.00 a day
working eight (8) hours. After three (3) months, he was given an
examination and passed the same. On December 26, 1988, he was
given an increase and was paid P64.00/day working eight (8)
hours; [h]e remained at the same post for 8 months and
transferred to Purefoods Feed Mill at Sta. Rosa, Laguna, with the
same salary and the same tour of duty, 8 hours[.] After four (4)
months, he was transferred to Purefoods Grand Perry at Sta. Rosa,
Laguna, and after eleven (11) days on June 1989, he was
transferred to Rosewood Processing, Inc. at Meycauayan, Bulacan
and required to work for 12 hours at a salary of P94.00/day for one
year. [In] June 1990, he was assigned at Purefoods DELPAN [to]
guard x x x a barge loaded with corn and rendered 12 hours
work/day with a salary of only P148.00/day and after 24 days, he
was floated for one month. He reported to [the security agencys]
office and was assigned to Purefoods Breeder Farm in Canlubang
rendering 8 hours work per day receiving only P78.00/day. After
11 days, he asked to be transferred to Manila[.] [B]ecause of the
distance from his home xxx the transfer was approved but instead
of being transferred to Manila, he was assigned to Purefoods B-F-4
in Batangas rendering 12 hours duty/day and receiving
only P148.00 per day until January 28, 1991[;] and again he
requested for transfer which was also approved by the [security
agencys] office[,] but since then he was told to come back again
and again. [U]p to the present he has not been given any
assignment. Because of the fact that his family [was] in danger of
going hungry, he sought relief from the NLRC-NCR-Arbitration
Branch.
Rodolfo Velasco started working for the [security agency] on
January 5, 1987. He was assigned to PCI Bank Elcano, Tondo
Branch, as probationary, and [for] working 8 hours a day for 9
days he received only P400.00. On January 16, 1987, he was
assigned to [the security agencys] headquarters up to January 31,
1987, working 12 hours a day[; he] received only P650.00 for the
16 days. On September 1, 1988, he was assigned to Imperial
Synthetic Rubber Products rendering 12 hours duty per day until
December 31, 1988 and was given a salary
of P1,600.00/month. He was later transferred to various posts like
Polypaper Products working 12 hours a day given a salary
of P1,800.00 a month; Paramount Electrical, Inc. working 12 hours
a day given P1,100.00 for 15 days; Rosewood Processing, Inc.,
rendering 12 hours duty per day receiving P2,200.00/month until
May 16, 1991[;] Alen Engineering rendering 12 hours duty/day
receiving P1,100/month; Purefoods Corporation on Delta II
rendering 12 hours duty per day received P4,200.00 a month. He
was relieved on August 24 and his salary for the period August 20
to 23 has not been paid by [the security agency.] He was
suspended for no cause at all.
Armando Ballon started as security guard with [the security
agency] July 1990 [Note: the introductory paragraph stated June
28, 1990] and was assigned to Purefoods Corporation in Marikina
for five (5) months and received a salary of P50.00 per day for 8
hours. He was transferred to Rosewood Processing, Inc. on
November 6, 1990 rendering 12 hours duty as [d]etachment
[c]ommander and a salary of P2,700.00/month including P200.00
officers allowance until May 15, 1991. On May 16, 1991, he applied
for sick leave on orders of his doctor for 15 days but the HRM, Miss
M. Andres[,] got angry and crumpled his application for sick leave,
that [was] why he was not able to forward it to the SSS. After 15
days, he came back to the office of [the security agency] asking for
an assignment and he was told that he [was] already
terminated. Complainant found out that the reason why Miss
Andres crumpled his application for sick leave was because of the
complaint he previously filed and was dismissed for failure to
appear. He then refiled this case to seek redress from this Office.
Jose L. Cabrera started working for the [security agency] as
security guard January, 1988 and was assigned to Alencor
Residence rendering 12 hours duty per day and received a salary
of P2,400.00 a month for 3 months[.] [I]n May, 1988, he was
transferred to E & L Restaurant rendering 12 hours duty per day
and receiv[ing] a salary of P1,500.00 per month for 6 months[.]
[I]n January, 1989, he was transferred to Paramount rendering 12
hours duty per day receiving only P1,800.00 per month for 6
months[.] [I]n July 1989, he was transferred to Benito Ong[s]
residence rendering 12 hours duty per day and receiving a salary
of P1,400.00 per month for 4 months[.] [I]n December, 1989, he
was transferred to Sea Trade International rendering xxx 12 hours
duty per day and receiving a salary of P1,900 per month for 6
months[.] [I]n July, 1990, he was transferred to Holland Pacific &
Paper Mills rendering 8 hours duty per day and receiving a salary
of P2,400.00 per month until September 1990[.] [In] October
1990, he was transferred to RMG residence rendering 12 hours
duty per day receiving a salary of P2,200.00 per month for 3
months[.] [In] February 1991, he was transferred to Purefoods
Corporation at Mabini, Batangas rendering 12 hours duty per day
with a salary of P3,600.00 per month for only one month because
he was hospitalized due to a stab wound inflicted by his
[d]etachment [c]ommander. When he was discharged from the
hospital and after he was examined and declared fit to work by the
doctor, he reported back to [the security agencys] office but was
given the run-around [and was told to] come back tomorrow[.]
[H]e [could] see that [the agency was] posting new recruits. He
then complained to this Honorable Office to seek redress, hiring the
services of a counsel.
Victor Aldeza started working for the [security agency] on March
21, 1990 and was assigned to Meridian Condominium, rendering 12
hours work per day and receiving a salary of P1,500.00 per
month. Although he knew that the salary was below minimum yet
he persevered because he had spent much to get this job and
stayed on until October 15, 1990[.] On October 16, 1990, he was
transferred to Rosewood Processing, Inc., rendering 12 hours duty
per day and receiving a salary of P2,600.00 per month up to May
15, 1991[.] On the later part of May 1991, he was assigned to
UPSSA (Sandoval Shipyard) rendering 12 hours duty per day
receiving a salary of P3,200.00 per month. [Aldeza] complained to
[the security agency] about the salary but [the agency] did not
heed him; thus, he filed his complaint for underpayment[.] [The
agency] upon complainants complaint for underpayment xxx,
instead of adjusting his salary to meet the minimum prescribed by
law[,] relieved him and left him floating[.] xxx When he
complained of the treatment, he was told to resign because he
could no longer be given any assignment.Because of this,
complainant was forced to file another complaint for illegal
dismissal.
Labor Arbiters Ruling
The labor arbiter noted the failure of the security agency to
present evidence to refute the complainants allegation. Instead, it
impleaded the petitioner as third-party respondent, contending Separation Pay _11,531.55 P147,114.43
that its actions were primarily caused by petitioners noncompliance
with its obligations under the contract for security services, and the 4. Armando Ballon
subsequent cancellation of the said contract.
The labor arbiter held petitioner jointly and severally liable with Wage Differentials P31,176.85
the security agency as the complainants indirect employer under
Articles 106, 107 and 109 of the Labor Code, citing the case Backwages 81,874.00
of Spartan Security & Detective Agency, Inc. vs. National Labor
Relations Commission.[8] Separation Pay __3,843.85 P116,894.70
Although the security agency could lawfully place the
5. Jose Cabrera
complainants on floating status for a period not exceeding six
months, the act was illegal because the former had issued a
newspaper advertisement for new security guards. Since the Wage Differentials P30,032.63
relation between the complainants and the agency was already
strained, the labor arbiter ordered the payment of separation pay Backwages 91,483.63
in lieu of reinstatement.
Separation Pay _11,531.55 P133,047.81
The award for wage differential, limited back wages and
separation pay contained the following details:
6. Victor Aldeza
1. Napoleon Mamon
Wage Differentials P49,406.86
Wage Differentials P45,959.02
Backwages 83,795.93
Backwages 72,764.38
Separation Pay __3,843.85 P137,046.64
Separation Pay __7,687.70 P126,411.10
P789,154.39
2. Arsenio Gazzingan
=========
Wage Differentials P24,855.76

Backwages 96,096.25 Ruling of Respondent Commission

Separation Pay __7,687.70 P128,639.71 As earlier stated, Respondent Commission dismissed

petitioners appeal, because it was allegedly not perfected within
3. Rodolfo Velasco the reglementary ten-day period. Petitioner received a copy of the
labor arbiters Decision on April 2, 1993, and it filed its
Wage Differentials P66,393.58 Memorandum of Appeal on April 12, 1993. However, it submitted
the appeal bond on April 26, 1993, or twelve days after the
Backwages 69,189.30 expiration of the period for appeal per Rule VI, Sections 1, 3 and 6
of the 1990 Rules of Procedure of the National Labor Relations
Commission. Thus, it ruled that the labor arbiters Decision became
final and executory on April 13, 1993.
In the assailed Order, Respondent Commission denied
reconsideration, because petitioner allegedly failed to raise any
palpable or patent error committed by said commission.
Assignment of Errors
Petitioner imputes the following errors to Respondent
Commission:
Respondent NLRC committed grave abuse of discretion amounting
to lack of jurisdiction when it dismissed petitioners appeal despite
the fact that the same was perfected within the reglementary
period provided by law.
Respondent NLRC committed grave abuse of discretion amounting
to lack of jurisdiction when it dismissed petitioners appeal despite
the clearly meritorious grounds relied upon therein.
Otherwise stated, the petition raises these two issues: first,
whether the appeal from the labor arbiter to the NLRC was
perfected on time; and second, whether petitioner is solidarily
liable with the security agency for the payment of back wages,
wage differential and separation pay.
The Courts Ruling
The petition is impressed with some merit and deserves partial
grant.
First Issue: Substantial Compliance with the Appeal Bond
Requirement
The perfection of an appeal within the reglementary period and
in the manner prescribed by law is jurisdictional, and
noncompliance with such legal requirement is fatal and effectively
renders the judgment final and executory.[9] The Labor Code
provides:
ART. 223. Appeal.Decisions, 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. xxx
x x x x x x x x x
In case of a judgment involving a monetary award, an appeal by
the employer may be perfected only upon the posting of a cash or
surety bond issued by a reputable bonding company duly
accredited by the Commission in the amount equivalent to the
monetary award in the judgment appealed from.
x x x x x x x x x.
Indisputable is the legal doctrine that the appeal of a decision
involving a monetary award in labor cases may be perfected only
upon the posting of a cash or surety bond. [10] The lawmakers
intended the posting of the bond to be an indispensable
requirement to perfect an employers appeal.[11]
However, in a number of cases, this Court has relaxed this
requirement in order to bring about the immediate and appropriate
resolution of controversies on the merits.[12] Some of these cases
include: (a) counsels reliance on the footnote of the notice of the
decision of the labor arbiter that the aggrieved party may appeal
xxx within ten (10) working days; (b) fundamental consideration of
substantial justice; (c) prevention of miscarriage of justice or of
unjust enrichment, as where the tardy appeal is from a decision
granting separation pay which was already granted in an earlier
final decision; and (d) special circumstances of the case combined
with its legal merits or the amount and the issue involved.[13]
In Quiambao vs. National Labor Relations Commission,[14] this
Court ruled that a relaxation of the appeal bond requirement could
be justified by substantial compliance with the rule.
In Globe General Services and Security Agency vs. National
Labor Relations Commission,[15] the Court observed that the NLRC,
in actual practice, allows the reduction of the appeal bond upon
motion of the appellant and on meritorious grounds; hence,
petitioners in that case should have filed a motion to reduce the
bond within the reglementary period for appeal.
That is the exact situation in the case at bar. Here, petitioner
claims to have received the labor arbiters Decision on April 6,
1993.[16] On April 16, 1993, it filed, together with its memorandum
on appeal[17] and notice of appeal, a motion to reduce the appeal
bond[18] accompanied by a surety bond for fifty thousand pesos
issued by Prudential Guarantee and Assurance, Inc.[19] Ignoring
petitioners motion (to reduce bond), Respondent Commission
rendered its assailed Resolution dismissing the appeal due to the
late filing of the appeal bond.
The solicitor general argues for the affirmation of the assailed
Resolution for the sole reason that the appeal bond, even if it was
filed on time, was defective, as it was not in an amount equivalent
to the monetary award in the judgment appealed from. The Court
disagrees.
We hold that petitioners motion to reduce the bond is a
substantial compliance with the Labor Code. This holding is
consistent with the norm that letter-perfect rules must yield to the
broader interest of substantial justice.[20]
Where a decision may be made to rest on informed judgment
rather than rigid rules, the equities of the case must be accorded
their due weight because labor determinations should not only
be secundum rationem but also secundum caritatem.[21] A judicious
reading of the memorandum of appeal would have made it evident
to Respondent Commission that the recourse was
meritorious. Respondent Commission acted with grave abuse of
discretion in peremptorily dismissing the appeal without passing
upon -- in fact, ignoring -- the motion to reduce the appeal bond.
We repeat: Considering the clear merits which appear, res ipsa
loquitur, in the appeal from the labor arbiters Decision, and the
petitioners substantial compliance with rules governing appeals, we
hold that the NLRC gravely abused its discretion in dismissing said
appeal and in failing to pass upon the grounds alleged in the
Motion for Reconsideration.
Second Issue: Liability of an Indirect Employer
The overriding premise in the labor arbiters Decision holding
the security agency and the petitioner liable was that said parties
offered no evidence refuting or rebutting the complainants
computation of their monetary claims. The arbiter ruled that
petitioner was liable in solidum with the agency for salary
differentials based on Articles 106, 107 and 109 of the Labor Code
which hold an employer jointly and severally liable with its
contractor or subcontractor, as if it is the direct employer. We
quote said provisions below:
ART. 106. Contractor or subcontractor. -- 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
latters 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.
x x x x x x x x x.
ART. 107. Indirect employer. -- The provisions of the immediately
preceding Article shall likewise apply to any person, partnership,
association or corporation which, not being an employer, contracts
with an independent contractor for the performance of any work,
task, job or project.
ART. 109. Solidary liability. -- The provisions of existing laws to the
contrary notwithstanding, every employer or indirect employer
shall be held responsible with his contractor or subcontractor for
any violation of any provision of this Code. For purposes of
determining the extent of their civil liability under this Chapter,
they shall be considered as direct employers.
Upon the other hand, back wages and separation pay were
awarded because the complainants were constructively and illegally
dismissed by the security agency which placed them on floating
status and at the same time gave assignments to newly hired
security guards. Noting that the relationship between the security
agency and the complainants was already strained, the labor
arbiter granted separation pay in lieu of reinstatement.
In its memorandum of appeal, petitioner controverts its liability
for the mentioned monetary awards on the following grounds:[22]
A. Complainant Jose Cabrera never rendered security services to
[petitioner] or was [n]ever assigned as security guard [for] the
latters business establishment;
B. Complainants Napoleon Mamon, Arsenio Gazzingan, Rodolfo
Velasco, Armando Ballon and Victor Aldeza rendered security
services to [petitioner] for a fixed period and were thereafter
assigned to other entities or establishments or were floated or
recalled to the headquarters of Veterans; and,
C. The relationship between [petitioner] and Veterans was
governed by a Contract for Guard Services under which [petitioner]
dutifully paid a contract price of P3,500.00 a month for 12 hour
duty per guard and later increased to P4,250.00 a month for 12
hour duty per guard which are within the prevailing rates in the
industry and in accordance with labor standard laws.
The first two grounds are meritorious. Legally untenable,
however, is the contention that petitioner is not liable for any wage
differential for the reason that it paid the employees in accordance
with the contract for security services which it had entered into
with the security agency. Notwithstanding the service contract
between the petitioner and the security agency, the former is still
solidarily liable to the employees, who were not privy to said
contract, pursuant to the aforecited provisions of the Code. Labor
standard legislations are enacted to alleviate the plight of workers
whose wages barely meet the spiraling costs of their basic needs.
They are considered written in every contract, and stipulations
in violation thereof are considered not written. Similarly, legislated
wage increases are deemed amendments to the contract. Thus,
employers cannot hide behind their contracts in order to evade
their or their contractors or subcontractors liability for
noncompliance with the statutory minimum wage.
The joint and several liability of the employer or principal was
enacted to ensure compliance with the provisions of the Code,
principally those on statutory minimum wage. The contractor or
subcontractor is made liable by virtue of his or her status as a
direct employer, and the principal as the indirect employer of the
contractors employees. This liability facilitates, if not guarantees,
payment of the workers compensation, thus, giving the workers
ample protection as mandated by the 1987 Constitution. [23] This is
not unduly burdensome to the employer.Should the indirect
employer be constrained to pay the workers, it can recover
whatever amount it had paid in accordance with the terms of the
service contract between itself and the contractor.[24]
Withal, fairness likewise dictates that the petitioner should not,
however, be held liable for wage differentials incurred while the
complainants were assigned to other companies. Under these cited
provisions of the Labor Code, should the contractor fail to pay the
wages of its employees in accordance with law, the indirect
employer (the petitioner in this case), is jointly and severally liable
with the contractor, but such responsibility should be understood to
be limited to the extent of the work performed under the contract,
in the same manner and extent that he is liable to the employees
directly employed by him. This liability of petitioner covers the
payment of the workers performance of any work, task, job or
project. So long as the work, task, job or project has been
performed for petitioners benefit or on its behalf, the liability
accrues for such period even if, later on, the employees are
eventually transferred or reassigned elsewhere.
We repeat: The indirect employers liability to the contractors
employees extends only to the period during which they were
working for the petitioner, and the fact that they were reassigned
to another principal necessarily ends such responsibility. The
principal is made liable to his indirect employees, because it can
protect itself from irresponsible contractors by withholding such
sums and paying them directly to the employees or by requiring a
bond from the contractor or subcontractor for this purpose.
Similarly, the solidary liability for payment of back wages and
separation pay is limited, under Article 106, to the extent of the
work performed under the contract; under Article 107, to the
performance of any work, task, job or project; and under Article
109, to the extent of their civil liability under this Chapter [on
payment of wages].
These provisions cannot apply to petitioner, considering that
the complainants were no longer working for or assigned to it when
they were illegally dismissed. Furthermore, an order to pay back
wages and separation pay is invested with a punitive character,
such that an indirect employer should not be made liable without a
finding that it had committed or conspired in the illegal dismissal.
The liability arising from an illegal dismissal is unlike an order
to pay the statutory minimum wage, because the workers right to
such wage is derived from law. The proposition that payment of
back wages and separation pay should be covered by Article 109,
which holds an indirect employer solidarily responsible with his
contractor or subcontractor for any violation of any provision of this
Code, would have been tenable if there were proof -- there was
none in this case -- that the principal/employer had conspired with
the contractor in the acts giving rise to the illegal dismissal.
With the foregoing discussion in mind, we now take up in detail the
petitioners liability to each of the complainants.
Case No. NCR-00-08-04630-91
Mamon worked for petitioner for a period of a little more than
one year beginning February 3, 1990 until May 16,
1991. Inasmuch as petitioner was his indirect employer during
such time, it should thus be severally liable for wage differential
from the time of his employment until his relief from duty. He was
relieved upon the request of petitioner, after it had learned of the
complaint for underpayment of wages filed by Mamon and several
other security guards.
However, this was not a dismissal from work because Mamon
was still working for the security agency and was immediately
assigned, on May 29, 1991, to its other client, Mead Johnson
Philippines. His dismissal came about later, when he refused to
sign a quitclaim and waiver in favor of the security agency. Thus,
he was illegally dismissed by the agency when he was no longer
employed by petitioner, which cannot thus be held liable for back
wages and separation pay in his case.
Napoleon Mamon x x x received an order transferring him to
Rosewood Processing, Inc. effective x x x February 3, 1990; x x
x. On May 16, 1991, Rosewood Processing, Inc. asked for the relief
of Mamon and other guards at Rosewood because they came to
know that complainants filed a complaint for underpayment on May
13, 1991 with the National Labor Relations Commission[.] x x
x After that, complainant was floated until May 29, 1991 when he
was assigned to Mead Johnson Philippines Corporation. x x x [A]
week later, [the security agency] received summons on
complainants complaint for underpayment and he was called to
[the security agency] office. When he reported, he was told to sign
a Quitclaim and Waiver[] by Lt. R. Rodriguez x x x and x x x if he
[did] not sign the quitclaim and waiver, he [would] be relieved
from his post and [would] no longer be given any
assignment. xxxx At the end of July 1991, he was approached by
the Security in Charge, A. Azuela, x x x [for him] to sign the
quitclaim and waiver[,] and when he refused to sign, he was told
that x x x he ha[d] no more assignment and should report to their
office. x x x [H]e reported the following day to the detachment
commander, Mr. A. Yadao and he was told that the main office
ha[d] relieved him x x x. He reported to their office asking for an
assignment but he was told by R. Rodriguez that I no longer can be
given an assignment so I had better resign. He went back several
times to the office of the [security agency] but every time the
answer was the same x x x although respondent was recruiting
new guards and posting them.[25]
Case No. NCR-00-07-03966-91
Gazzingan was assigned to petitioner as a security guard for a
period of one year. For said period, petitioner is solidarily liable
with the agency for underpayment of wages based on Articles 106,
107 and 109 of the Code.
Arsenio Gazzingan x x x after eleven (11) days on June 1989, xxx
was transferred to Rosewood Processing, Inc. x x x. [I]n June
1990, he was assigned at Purefoods DELPAN x x x. After 11 days,
he asked to be transferred to Manila because of the distance from
his home and the transfer was approved but instead of being
transferred to Manila, he was assigned to Purefoods B-F-4 in
Batangas x x x again he requested for transfer which was also
approved by the [security agency] office but since then he was told
to come back again and again and up to the present he has not
been given any assignment. x x x x.[26]
His dismissal cannot be blamed on the petitioner. Like Mamon,
Gazzingan had already been assigned to another client of the
agency when he was illegally dismissed. Thus, Rosewood cannot be
held liable, jointly and severally with the agency, for back wages
and separation pay.
Case No. NCR-00-07-03967-91
Rodolfo Velasco was assigned to petitioner from December 31,
1988 until May 16, 1991. Thus, petitioner is solidarily liable for
wage differentials during such period. Petitioner is not, however,
liable for back wages and separation pay, because Velasco was no
longer working for petitioner at the time of his illegal dismissal.
Rodolfo Velasco started working for the [security agency] on
January 5, 1987. x x x [On] December 31, 1988 xxx he was x x x
transferred to various posts like x x x Rosewood Processing, Inc., x
x x until May 16, 1991 x x x. He was relieved on August 24 and his
salary for the period August 20 to 23 has not been paid by [the
security agency]; [h]e was suspended for no cause at all.[27]
Case No. NCR-00-07-0445-91
Petitioner was the indirect employer of Ballon during the period
beginning November 6, 1990 until May 15, 1991; thus, it is liable
for wage differentials for said period. However, it is not liable for
back wages and separation pay, as there was no evidence
presented to show that it participated in Ballons illegal dismissal.
x x x [H]e [Armando Ballon] was transferred to Rosewood
Processing, Inc. on November 6, 1990 rendering 12 hours duty as
[d]etachment [c]ommander and received a salary
of P2,700.00/month including P200.00 officers allowance until May
15, 1991. On May 16, 1991, he applied for sick leave on orders of
his doctor for 15 days but the HRM, Miss M. Andres[,] got angry
and crumpled his application for sick leave that is why he was not
able to forward it to the SSS. After 15 days, he came back to the
office of [the security agency] asking for an assignment and he
was told that he [was] already terminated. Complainant found out
that the reason why Miss Andres crumpled his application for sick
leave was because of the complaint he previously filed and was
dismissed for failure to appear. He then refiled this case to seek
redress from this Office.[28]
Case No. NCR-00-08-05030-91
Petitioner is liable for wage differentials in favor of Aldeza
during the period he worked with petitioner, that is, October 16,
1990 until May 15, 1991.
x x x On October 16, 1990, he [Aldeza] was transferred to
Rosewood Processing, Inc., x x x up to May 15, 1991[.] On the
later part of May 1991, he was assigned to UPSSA (Sandoval
Shipyard) x x x. Complainant [sic] complained to [the security
agency] about the salary but [the security agency] did not heed
him; thus, he filed his complaint for underpayment[.] [The security
agency] upon complainants complaint for underpayment reacted
xxx, instead of adjusting his salary to meet the minimum
prescribed by law[,] relieved him and left him floating[;] and when
he complained of the treatment, he was told to resign because he
could no longer be given any assignment. Because of this,
complainant was forced to file another complaint for illegal
dismissal.[29]
The cause of Aldezas illegal dismissal is imputable, not to
petitioner, but solely to the security agency. In Aldezas case, the
solidary liability for back wages and separation pay arising from
Articles 106, 107 and 109 of the Code has no application.
Case No. NCR-00-09-05617-91
Cabrera was an employee of the security agency, but he never
rendered security services to petitioner. This fact is evident in the
labor arbiters findings:
Jose L. Cabrera started working for the [security agency] as [a]
security guard on January, 1988 and was assigned to Alencor
Residence x x x. [I]n May, 1988, he was transferred to E & L
Restaurant x x x[.] [I]n January, 1989, he was transferred to
Paramount x x x[.] [I]n July 1989, he was transferred to Benito
Ong[s] residence x x x[.] [I]n December, 1989, he was transferred OUR HAUS REALTY DEVELOPMENT
to Sea Trade International xxx[.] [I]n July, 1990, he was CORPORATION, Petitioner, 
transferred to Holland Pacific & Paper Mills x x x[.] [I]n October vs.
1990, he was transferred to RMG [R]esidence x x x[.] [I]n ALEXANDER PARIAN, JAY C. ERINCO, ALEXANDER CANLAS,
February 1991, he was transferred to Purefoods Corporation at BERNARD TENEDERO and JERRY SABULAO, Respondents.
Mabini, Batangas x x x. When he was discharged from the hospital
and after he was examined and declared fit to work by the doctor, DECISION
he reported back to [the security agency] office but was given the
run-around [and was told to] come back tomorrow[,] although he BRION, J.:
[could] see that [it was] posting new recruits. He then complained
to this Honorable Office to seek redress, hiring the services of a
We resolve in this petition for review on certiorari1 the challenge to
counsel.[30]
the May 7, 2012 decision2 and the November 27, 2012
resolution3 (assailed CA rulings) of the Court of Appeals (CA) in CA-
Hence, petitioner is not liable to Cabrera for anything. G.R. SP No. 123273. These assailed CA rulings affirmed the July
In all these cases, however, the liability of the security agency 20, 2011 decision4 and the December 2, 2011 resolution5 (NLRC
is without question, as it did not appeal from the Decisions of the rulings) of the National Labor Relations Commission (NLRC) in
labor arbiter and Respondent Commission. NLRC LAC No. 02-000489-11 (NLRC NCR Case No. 06-08544-10).
The NLRC rulings in turn reversed and set aside the December 10,
WHEREFORE, the petition is partially GRANTED. The assailed 2010 decision6 of the labor arbiter (LA).
Decision is hereby MODIFIED, such that petitioner, with the
security agency, is solidarily liable to PAY the complainants only Factual Antecedents
wage differentials during the period that the complainants were
actually under its employ, as above detailed. Petitioner
Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry
is EXONERATED from the payment of back wages and separation
Sabulao and Bernardo Tenederowere all laborers working for
pay.
petitioner Our Haus Realty Development Corporation (Our Haus), a
The temporary restraining order issued earlier is LIFTED, but company engaged in the construction business.The respondents’
the petitioner is deemed liable only for the aforementioned wage respective employment records and daily wage rates from 2007 to
differentials which Respondent Commission is required 2010 are summarized in the table7 below:
to RECOMPUTE within fifteen days from the finality of this
Decision. No costs. Years of Daily
Name Date Hired Year and Place of Assignment
SO ORDERED. Service Rate
Alexander M. October
10 years 2007-2010- Quezon City ₱353.5
Parian 1999
Republic of the Philippines January 2008- Quezon City 2009-
SUPREME COURT Jay C. Erinco 10 years ₱342.0
2000 Antipolo 2010- Quezon City
Manila
Alexander R.
2005 5 years 2007-2010- Quezon City ₱312.0
SECOND DIVISION Canlas
Jerry Q. August 2008- Quezon City 2009-
G.R. No. 204651               August 6, 2014 10 years ₱342.0
Sabulao 1999 Antipolo 2010- Quezon City
Bernardo N.
1994 16 years 2007-2010- Quezon City
Tenedero
Sometime in May 2010, Our Haus experienced financial distress. To
alleviate its condition, Our Haus suspended some of its
construction projects and asked the affected workers, including the
respondents, to take vacation leaves.8
Eventually, the respondents were asked to report back to work but
instead of doing so, they filed with the LA a complaint for
underpayment of their daily wages. They claimed that except for
respondent Bernardo N. Tenedero, their wages were below the
minimum rates prescribed in the following wage orders from 2007
to 2010:
1. Wage Order No. NCR-13, which provides for a daily
minimum wage rate of ₱362.00for the non-agriculture
sector (effective from August 28, 2007 until June 13, 2008);
and
2. Wage Order No. NCR-14, which provides for a daily
minimum wage rate of ₱382.00for the non-agriculture
sector (effective from June 14, 2008 until June 30, 2010).
The respondents also alleged thatOur Haus failed to pay them their
holiday, service incentive leave (SIL), 13th month and overtime
pays.9
The Labor Arbitration Rulings
Before the LA, Our Haus primarily argued that the respondents’
wages complied with the law’s minimum requirement. Aside from
paying the monetary amount of the respondents’ wages, Our Haus
also subsidized their meals (3 times a day), and gave them free
lodging near the construction project they were assigned to.10 In
determining the total amount of the respondents’ daily wages, the
value of these benefits should be considered, in line with Article
97(f)11 of the Labor Code.
Our Haus also rejected the respondents’ other monetary claims for
lack of proof that they were entitled to it.12
On the other hand, the respondents argued that the value of their
₱383.50
meals should not be considered in determining their wages’ total
amount since the requirements set under Section 413 of
DOLE14 Memorandum Circular No. 215were not complied with.
The respondents pointed out that Our Haus never presented any
proof that they agreed in writing to the inclusion of their meals’
value in their wages.16 Also, Our Haus failed to prove that the value
of the facilities it furnished was fair and reasonable.17 Finally,
instead of deducting the maximum amount of 70% of the value of
the meals, Our Haus actually withheld its full value (which was
Php290.00 per week for each employee).18
The LA ruled in favor of Our Haus. He held that if the reasonable
values of the board and lodging would be taken into account, the
respondents’ daily wages would meet the minimum wage rate.19 As
to the other benefits, the LA found that the respondents were not
able to substantiate their claims for it.20
The respondents appealed the LA’s decision to the NLRC, which in
turn, reversed it. Citing the case of Mayon Hotel & Restaurant v.
Adana,21 the NLRC noted that the respondents did not authorize
Our Haus in writing to charge the values of their board and lodging
to their wages. Thus, the samecannot be credited.
The NLRC also ruled that the respondents are entitled to their
respective proportionate 13th month payments for the year 2010
and SIL payments for at least three years,immediately preceding
May 31, 2010, the date when the respondents leftOur Haus.
However, the NLRC sustained the LA’s ruling that the respondents
were not entitled to overtime pay since the exact dates and times
when they rendered overtime work had not been proven.22
Our Haus moved for the reconsideration23 of the NLRC’s decision
and submitted new evidence (the five kasunduans) to show that
the respondents authorized Our Haus in writing to charge the
values of their meals and lodging to their wages.
The NLRC denied Our Haus’ motion, thus it filed a Rule 65
petition24 with the CA. In its petition, Our Haus propounded a new
theory. It made a distinction between deduction and charging. A
written authorization is only necessary if the facility’s value will be
deducted and will not be needed if it will merely be charged or
included in the computation of wages.25 Our Haus claimed that it
did not actually deduct the values of the meals and housing
benefits. It only considered these in computing the total amount of
wages paid to the respondents for purposes of compliance with the
minimum wage law. Hence, the written authorization requirement
should not apply.
Our Haus also asserted that the respondents’ claim for SIL pay
should be denied as this was not included in their pro
formacomplaint. Lastly, it questioned the respondents’entitlement
to attorney’s fees because they were not represented by a private
lawyer but by the Public Attorney’s Office (PAO).
The CA’s Ruling
The CA dismissed Our Haus’ certiorari petition and affirmed the
NLRC rulings in toto. It found no real distinction between deduction
and charging,26 and ruled that the legal requirements before any
deduction or charging can be made, apply to both. Our Haus,
however, failed to prove that it complied with any of the
requirements laid down in Mabeza v. National Labor Relations
Commission.27 Accordingly, it cannot consider the values of its meal
and housing facilities in the computation of the respondents’ total
wages.
Also, the CA ruled that since the respondents were able to allege
non-payment of SIL in their position paper, and Our Haus, in fact,
opposed it in its various pleadings,28 then the NLRC properly
considered it as part of the respondents’ causes of action. Lastly,
the CA affirmed the respondent’s entitlement to attorney’s fees.29
Our Haus filed a motion for reconsideration but the CA denied its
motion, prompting it to file the present petition for review on
certiorari under Rule 45.
The Petition
Our Haus submits that the CA erred in ruling that the legal
requirements apply without distinction ―whether the facility’s
value will be deducted or merely included in the computation of the
wages. At any rate, it complied with the requirements for
deductibility of the value of the facilities. First, the five kasunduans
executed by the respondents constitute the written authorization
for the inclusion of the board and lodging’s values to their wages.
Second, Our Haus only withheld the amount of ₱290.00 which
represents the food’s raw value; the weekly cooking cost (cook’s
wage, LPG, water) at ₱239.40 per person is a separate expense
that Our Haus did not withhold from the respondents’ wages.30 This
disproves the respondents’claim that it deducted the full amount of
the meals’ value.
Lastly, the CA erred in ruling that the claim for SIL pay may still be
granted though not raised in the complaint; and that the
respondents are entitled to an award of attorney’s fees.31
The Case for the Respondents
The respondents prayed for the denial of the petition.32 They
maintained that the CA did not err inruling that the values of the
board and lodging cannot be deducted from their wages for failure
to comply with the requirements set by law.33 And though the claim
for SIL pay was not included in their pro forma complaint, they
raised their claims in their position paper and Our Haus had the
opportunity to contradict it in its pleadings.34
Finally, under the PAO law, the availment of the PAO’s legal
services does not exempt its clients from an award of attorney’s
fees.35
The Court’s Ruling
We resolve to DENYthe petition.
The nature of a Rule 45 petition ― only questions of law
Basic is the rule that only questions of lawmay be raised in a Rule
45 petition.36 However, in this case, weare confronted with mixed
questions of fact and law that are subsumed under the issue of
whether Our Haus complied with the legal requirements on the
deductibility of the value of facilities. Strictly, factual issues cannot
be considered under Rule 45 except in the course of resolving if the
CA correctly determined whether or not the NLRC committed grave
abuse of discretion in considering and appreciating the factual
issues before it.37
In ruling for legal correctness, we have to view the CA decision in
the same context that the petition for certiorariit ruled upon was
presented to it; we have to examine the CA decision from the
prism of whether it correctly determined the presence or absence
of grave abuse of discretion in the NLRC decision before it, not on
the basis of whether the NLRC decision, on the merits of the case,
was correct. In other words, we have to be keenly aware that the
CA undertook a Rule 65 review, not a review on appeal, of the
NLRC decision challenged before it. This is the approach that
should bebasic in a Rule 45 review of a CA ruling in a labor case. In
question form, the question to ask in the present case is: did the
CA correctly determine that the NLRC did not commit grave abuse
of discretion in ruling on the case?38 We rule that the CA correctly
did.
No substantial distinction between deducting and charging a
facility’s value from the employee’s wage; the legal requirements
for creditability apply to both
To justify its non-compliance with the requirements for the
deductibility of a facility, Our Haus asks us to believe that there is
a substantial distinction between the deduction and the charging of
a facility’s value to the wages. Our Haus explains that in deduction,
the amount of the wage (which may already be below the
minimum) would still be lessened by the facility’s value, thus
needing the employee’s consent. On the other hand, in charging,
there is no reduction of the employee’s wage since the facility’s
value will just be theoretically added to the wage for purposes of
complying with the minimum wage requirement.39
Our Haus’ argument is a vain attempt to circumvent the minimum
wage law by trying to create a distinction where none exists.
In reality, deduction and charging both operate to lessen the actual
take-home pay of an employee; they are two sides of the same
coin. In both, the employee receives a lessened amount because
supposedly, the facility’s value, which is part of his wage, had
already been paid to him in kind. As there is no substantial
distinction between the two, the requirements set by law must
apply to both.
As the CA correctly ruled, these requirements, as summarized in
Mabeza, are the following:
a. proof must be shown thatsuch facilities are customarily
furnished by the trade;
b. the provision of deductiblefacilities must be voluntarily
accepted in writingby the employee; and
c. The facilities must be charged at fair and reasonable
value.40
We examine Our Haus’ compliance with each of these requirements
in seriatim.
a. The facility must be customarily furnished by the trade
In a string of cases, we have concluded that one of the badges to
show that a facility is customarily furnished by the trade is the
existence of a company policy or guideline showing that provisions
for a facility were designated as part of the employees’
salaries.41 To comply with this, Our Haus presented in its motion
for reconsideration with the NLRC the joint sinumpaang salaysayof
four of its alleged employees. These employees averred that they
were recipients of free lodging, electricity and water, as well as
subsidized meals from Our Haus.42
We agree with the NLRC’s finding that the sinumpaang salaysay
statements submitted by Our Haus are self-serving.1âwphi1 For
one, Our Haus only produced the documents when the NLRC had
already earlier determined that Our Haus failed to prove that it was
traditionally giving the respondents their board and lodging. This
document did not state whether these benefits had been
consistently enjoyed by the rest of Our Haus’ employees.
Moreover, the records reveal that the board and lodging were given
on a per project basis. Our Haus did not show if these benefits
were also provided inits other construction projects, thus negating
its claimed customary nature. Even assuming the sinumpaang
salaysay to be true, this document would still work against Our
Haus’ case. If Our Haus really had the practice of freely giving
lodging, electricity and water provisions to its employees, then Our
Haus should not deduct its values from the respondents’ wages.
Otherwise, this will run contrary to the affiants’ claim that these
benefits were traditionally given free of charge.
Apart from company policy, the employer may also prove
compliance with the first requirement by showing the existence of
an industry-wide practice of furnishingthe benefits in question
among enterprises engaged in the same line of business. If it were
customary among construction companies to provide board and
lodging to their workers and treat their values as part of their
wages, we would have more reason to conclude that these benefits
were really facilities.
However, Our Haus could not really be expected to prove
compliance with the first requirement since the living
accommodation of workers in the construction industry is not
simply a matter of business practice. Peculiar to the construction
business are the occupational safety and health (OSH) services
which the law itself mandates employers to provide to their
workers. This isto ensure the humane working conditions of
construction employees despite their constant exposure to
hazardous working environments. Under Section 16 of DOLE
Department Order (DO) No. 13, series of 1998,43 employers
engaged in the construction business are required to providethe
following welfare amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitaryand washing facilities
16.3 Suitable living accommodation for workers, and as
may be applicable, for their families
16.4 Separate sanitary, washing and sleeping facilitiesfor
men and women workers. [emphasis ours]
Moreover, DOLE DO No. 56, series of 2005, which sets out the
guidelines for the implementation ofDOLE DO No. 13, mandates
that the cost of the implementation of the requirements for the
construction safety and health of workers, shall be integrated to
the overall project cost.44 The rationale behind this isto ensure that
the living accommodation of the workers is not substandard and is
strictly compliant with the DOLE’s OSH criteria.
As part of the project cost that construction companies already
charge to their clients, the value of the housing of their workers
cannot be charged again to their employees’ salaries. Our Haus
cannot pass the burden of the OSH costs of its construction
projects to its employees by deducting it as facilities. This is Our
Haus’ obligation under the law.
Lastly, even if a benefit is customarily provided by the trade, it
must still pass the purpose testset by jurisprudence. Under this
test, if a benefit or privilege granted to the employee is clearly for
the employer’s convenience, it will not be considered as a facility
but a supplement.45 Here, careful consideration is given to the
nature of the employer’s business in relation to the work performed
by the employee. This test is used to address inequitable situations
wherein employers consider a benefit deductible from the wages
even if the factual circumstances show that it clearly redounds to
the employers’ greater advantage.
While the rules serve as the initial test in characterizing a benefit
as a facility, the purpose test additionally recognizes that the
employer and the employee do not stand at the same bargaining
positions on benefits that must or must not formpart of an
employee’s wage. In the ultimate analysis, the purpose test seeks
to prevent a circumvention of the minimum wage law.
a1. The purpose test in jurisprudence
Under the law,46 only the value of the facilities may be deducted
from the employees’ wages but not the value of supplements.
Facilities include articles or services for the benefit of the employee
or his family but exclude tools of the trade or articles or services
primarily for the benefit of the employer or necessary to the
conduct of the employer’s business.47
The law also prescribes that the computation of wages shall
exclude whatever benefits, supplementsor allowances given to
employees. Supplements are paid to employees on top of their
basic pay and are free of charge.48 Since it does not form part of
the wage, a supplement’s value may not be includedin the
determination of whether an employer complied with the
prescribed minimum wage rates.
In the present case, the board and lodging provided by Our Haus
cannot be categorized asfacilities but as supplements. In SLL
International Cables Specialist v. National Labor Relations
Commission,49 this Court was confronted with the issue on the
proper characterization of the free board and lodging provided by
the employer. We explained:
The Court, at this point, makes a distinction between "facilities"
and "supplements". It is of the view that the food and lodging, or
the electricity and water allegedly consumed by private
respondents in this case were not facilities but supplements. In the
case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., the two
terms were distinguished from one another in this wise:
"Supplements", therefore, constitute extra remuneration or special
privileges or benefits given to or received by the laborers overand
above their ordinary earnings or wages. "Facilities", on the other
hand, are items of expense necessary for the laborer's and his
family's existence and subsistence so thatby express provision of
law (Sec. 2[g]), they form part of the wage and when furnished by
the employer are deductible therefrom, since if they are not so
furnished, the laborer would spend and pay for them just the
same.
In short, the benefit or privilege given to the employee which
constitutes an extra remuneration above and over his basic or
ordinary earning or wage is supplement; and when said benefit or
privilege is part of the laborers' basic wages, it is a facility. The
distinction lies not so much in the kind of benefit or item (food,
lodging, bonus or sick leave) given, but in the purpose for which it
is given.In the case at bench, the items provided were given freely
by SLLfor the purpose of maintaining the efficiency and health of
its workers while they were working attheir respective projects.50
Ultimately, the real difference lies not on the kind of the benefit but
on the purpose why it was given by the employer. If it is primarily
for the employee’s gain, then the benefit is a facility; if its
provision is mainly for the employer’s advantage, then it is a
supplement. Again, this is to ensure that employees are protected
in circumstances where the employer designates a benefit as
deductible from the wages even though it clearly works to the
employer’s greater convenience or advantage.
Under the purpose test, substantial consideration must be given to
the nature of the employer’s business inrelation to the character or
type of work performed by the employees involved.
Our Haus is engaged in the construction business, a laborintensive
enterprise. The success of its projects is largely a function of the
physical strength, vitality and efficiency of its laborers. Its business
will be jeopardized if its workers are weak, sickly, and lack the
required energy to perform strenuous physical activities. Thus, by
ensuring that the workers are adequately and well fed, the
employer is actually investing on its business.
Unlike in office enterprises where the work is focused on desk jobs,
the construction industry relies heavily and directly on the physical
capacity and endurance of its workers. This is not to say that desk
jobs do not require muscle strength; wesimply emphasize that in
the construction business, bulk of the work performed are
strenuous physical activities.
Moreover, in the construction business, contractors are usually
faced with the problem ofmeeting target deadlines. More often
than not, work is performed continuously, day and night, in order
to finish the project on the designated turn-over date. Thus, it will
be more convenient to the employer if itsworkers are housed near
the construction site to ensure their ready availability during urgent
or emergency circumstances. Also, productivity issues like
tardiness and unexpected absences would be minimized. This
observation strongly bears in the present case since three of the
respondents are not residents of the National Capital Region. The
board and lodging provision might have been a substantial
consideration in their acceptance of employment in a place distant
from their provincial residences.
Based on these considerations, we conclude that even under the
purpose test, the subsidized meals and free lodging provided by
Our Haus are actually supplements. Although they also work to
benefit the respondents, an analysis of the nature of these benefits
in relation to Our Haus’ business shows that they were given
primarily for Our Haus’ greater convenience and advantage. If
weighed on a scale, the balance tilts more towards Our Haus’ side.
Accordingly, their values cannot be considered in computing the
total amount of the respondents’ wages. Under the circumstances,
the dailywages paid to the respondents are clearly below the
prescribed minimum wage rates in the years 2007-2010.
b. The provision of deductible facilities must be voluntarily
accepted in writing by the employee
In Mayon Hotel, we reiterated that a facility may only be deducted
from the wage if the employer was authorized in writingby the
concerned employee.51 As it diminishes the take-home pay of an
employee, the deduction must be with his express consent.
Again, in the motion for reconsideration with the NLRC, Our Haus
belatedly submitted five kasunduans, supposedly executed by the
respondents, containing their conformity to the inclusion of the
values of the meals and housing to their total wages. Oddly, Our
Haus only offered these documents when the NLRC had already
ruled that respondents did not accomplish any written
authorization, to allow deduction from their wages. These five
kasunduans were also undated, making us wonder if they had
reallybeen executed when respondents first assumed their jobs.
Moreover, in the earlier sinumpaang salaysay by Our Haus’ four
employees, it was not mentioned that they also executed a
kasunduanfor their board and lodging benefits. Because of these
surrounding circumstances and the suspicious timing when the five
kasunduanswere submitted as evidence, we agree withthe CA that
the NLRC committed no grave abuse of discretion in disregarding
these documents for being self serving.
c. The facility must be charged at a fair and reasonable value
Our Haus admitted that it deducted the amount of ₱290.00 per
week from each of the respondents for their meals. But it now
submits that it did not actually withhold the entire amount as it did
not figure in the computation the money it expended for the salary
of the cook, the water, and the LPG used for cooking, which
amounts to ₱249.40 per week per person. From these, it appears
that the total meal expense per week for each person is
₱529.40,making Our Haus’ ₱290.00 deduction within the 70%
ceiling prescribed by the rules.
However, Our Haus’ valuation cannotbe plucked out of thin air. The
valuation of a facility must besupported by relevant documents
such as receipts and company records for it to be considered as fair
and reasonable. In Mabeza, we noted:
Curiously, in the case at bench, the only valuations relied upon by
the labor arbiter in his decision were figures furnished by the
private respondent's own accountant, without corroborative
evidence.On the pretext that records prior to the July 16, 1990
earthquake were lost or destroyed, respondent failed to produce
payroll records, receipts and other relevant documents, where he
could have, as has been pointedout in the Solicitor General's
manifestation, "secured certified copies thereof from the nearest
regional office of the Department of Labor, the SSS or the
BIR".52 [emphasis ours]
In the present case, Our Haus never explained how it came up with
the valuesit assigned for the benefits it provided; it merely listed
its supposed expenses without any supporting document. Since
Our Haus is using these additional expenses (cook’s salary, water
and LPG) to support its claim that it did not withhold the full
amount of the meals’ value, Our Haus is burdened to present
evidence to corroborate its claim. The records however, are bereft
of any evidence to support Our Haus’ meal expense computation.
Eventhe value it assigned for the respondents’ living
accommodations was not supported by any documentary evidence.
Without any corroborative evidence, it cannot be said that Our
Haus complied withthis third requisite.
A claim not raised in the pro forma complaint may still beraised in
the position paper.
Our Haus questions the respondents’ entitlement to SIL pay by
pointing out that this claim was not included in the pro forma
complaint filed with the NLRC. However, we agree with the CA that
such omission does not bar the labor tribunals from touching upon
this cause of action since this was raised and discussed inthe
respondents’ position paper. In Samar-Med Distribution v. National
Labor Relations Commission,53 we held:
Firstly, petitioner’s contention that the validity of Gutang’s
dismissal should not be determined because it had not been
included in his complaint before the NLRC is bereft of merit. The
complaint of Gutang was a mere checklist of possible causes of
action that he might have against Roleda. Such manner of
preparing the complaint was obviously designed to facilitate the
filing of complaints by employees and laborers who are thereby
enabled to expediently set forth their grievances in a general
manner. But the non-inclusion in the complaint of the issue on the
dismissal did not necessarily mean that the validity of the dismissal
could not be an issue.The rules of the NLRC require the submission
of verified position papers by the parties should they fail to agree
upon an amicable settlement, and bar the inclusion of any cause of
action not mentioned in the complaint or position paper from the
time of their submission by the parties. In view of this, Gutang’s
cause of action should be ascertained not from a reading of his
complaint alone but also from a consideration and evaluation of
both his complaint and position paper.54
Treasury as trust fund and shall be disbursed for special allowances
of authorized officials and lawyers of the PAO.57
Thus, the respondents are still entitled to attorney's fees. The
attorney's fees awarded to them shall be paid to the PAO. It serves
as a token recompense to the PAO for its provision of free legal
services to litigants who have no means of hiring a private lawyer.

The respondents’ entitlement to the other monetary benefits
Generally a party who alleges payment as a defense has the
burden of proving it.Particularly in labor cases, the burden of
proving payment of monetary claims rests on the employeron the
reasoning that the pertinent personnel files, payrolls, records,
remittances and other similar documents — which will show that
overtime, differentials, service incentive leave and other claims of
workers have been paid — are not in the possession of the worker
but in the custody and absolute control of the employer.55
WHEREFORE, in light of these considerations, we conclude that the
Court of Appeals correctly found that the National Labor Relations
Commission did not abuse its discretion in its decision of July 20,
2011 and Resolution of December 2, 2011.1âwphi1 Consequently
we DENY the petition and AFFIRM the Court of Appeals' decision
dated May 7, 2012 and resolution dated November 27, 2012 in CA-
G.R. SP No. 123273. No costs.
SO ORDERED.

Unfortunately, records will disclose the absence of any credible

document which will show that respondents had been paid their SECOND DIVISION
13th month pay, holiday and SIL pays. Our Haus merely presented  
a handwritten certification from its administrative officer that its  
employees automatically become entitled to five days of service LEPANTO CERAMICS, INC.,   G.R. No. 180866
incentive leave as soon as they pass probation. This certification Petitioner,  
was not even subscribed under oath. Our Haus could have at least    
submitted its payroll or copies of the pay slips of respondents to   Present:
show payment of these benefits. However, it failed to do so.    
  CARPIO, J.,
Respondents are entitled to attorney’s fees. - versus - Chairperson,
  BRION,
  DEL CASTILLO,
Finally, we affirm that respondents are entitled to attorney’s fees.
  ABAD, and
Our Haus’ asserts that respondents’ availment of free legal services
  PEREZ, JJ.
from the PAO disqualifies them from such award. We find this
   
untenable.
LEPANTO CERAMICS  
EMPLOYEES Promulgated:
It is settled that in actions for recovery of wages or where an ASSOCIATION,  
employee was forced to litigate and, thus, incur expenses to Respondent. March 2, 2010
protect his rights and interest, the award of attorney's fees is  
legally and morally justifiable.56 Moreover, under the PAO Law or x-----------------------------------------
Republic Act No. 9406, the costs of the suit, attorney's fees and - - - - - - - - - - - - - - - - - - -x
contingent fees imposed upon the adversary of the PAO clients  
after a successful litigation shall be deposited in the National  
 DECISION
 
 
PEREZ, J.:
 
 
Before this Court is a Petition for Review on Certiorari under
Rule 45[1] of the 1997 Rules of Civil Procedure filed by petitioner
Lepanto Ceramics, Inc. (petitioner), assailing the: (1) Decision[2] of
the Court of Appeals, dated 5 April 2006, in CA-G.R. SP No. 78334
which affirmed in toto the decision of the Voluntary
Arbitrator[3] granting the members of the respondent association a
Christmas Bonus in the amount of Three Thousand Pesos
(P3,000.00), or the balance of Two Thousand Four Hundred Pesos
(P2,400.00) for the year 2002, and the (2) Resolution [4] of the
same court dated 13 December 2007 denying Petitioners Motion
for Reconsideration.
 
The facts are:
 
Petitioner Lepanto Ceramics, Incorporated is a duly
organized corporation existing and operating by virtue of Philippine
Laws. Its business is primarily to manufacture, make, buy and sell,
on wholesale basis, among others, tiles, marbles, mosaics and
other similar products.[5]
 
Respondent Lepanto Ceramics Employees Association
(respondent Association) is a legitimate labor organization duly
registered with the Department of Labor and Employment. It is the
sole and exclusive bargaining agent in the establishment of
petitioner.[6]
In December 1998, petitioner gave a P3,000.00 bonus to its
employees, members of the respondent Association.[7]
 
Subsequently, in September 1999, petitioner and
respondent Association entered into a Collective Bargaining
Agreement (CBA) which provides for, among others, the grant of a
Christmas gift package/bonus to the members of the respondent
Association.[8] The Christmas bonus was one of the enumerated
existing benefit, practice of traditional rights which shall remain in
full force and effect.
 
The text reads:
Section 8. All other existing benefits,
practice of traditional rights consisting of
Christmas Gift package/bonus, reimbursement
of transportation expenses in case of
breakdown of service vehicle and medical
services and safety devices by virtue of
company policies by the UNION and employees
shall remain in full force and effect.
 
Section 1. EFFECTIVITY
 
This agreement shall become effective
on September 1, 1999 and shall remain in full
force and effect without change for a period of
four (4) years or up to August 31, 2004except
as to the representation aspect which shall be
effective for a period of five (5) years. It shall
bind each and every employee in the
bargaining unit including the present and
future officers of the Union.
 
In the succeeding years, 1999, 2000 and 2001, the bonus
was not in cash. Instead, petitioner gave each of the members of
respondent Association Tile Redemption Certificates equivalent
to P3,000.00.[9] The bonus for the year 2002 is the root of the
present dispute. Petitioner gave a year-end cash benefit of Six
Hundred Pesos (P600.00) and offered a cash advance to interested
employees equivalent to one (1) month salary payable in one year.
[10]
 The respondent Association objected to the P600.00 cash
benefit and argued that this was in violation of the CBA it executed
with the petitioner.
The parties failed to amicably settle the dispute. The
respondent Association filed a Notice of Strike with the National
Conciliation Mediation Board, Regional Branch No. IV, alleging the
violation of the CBA. The case was placed under preventive
mediation. The efforts to conciliate failed. The case was then
referred to the Voluntary Arbitrator for resolution where the
Complaint was docketed as Case No. LAG-PM-12-095-02.
 
In support of its claim, respondent Association insisted that it has
been the traditional practice of the company to grant its members
Christmas bonuses during the end of the calendar year, each in the
amount of P3,000.00 as an expression of gratitude to the
employees for their participation in the companys continued
existence in the market. The bonus was either in cash or in the
form of company tiles. In 2002, in a speech during the Christmas
celebration, one of the companys top executives assured the
employees of said bonus. However, the Human Resources
Development Manager informed them that the traditional bonus
would not be given as the companys earnings were intended for
the payment of its bank loans. Respondent Association argued that
this was in violation of their CBA.
 
The petitioner averred that the complaint for nonpayment of
the 2002 Christmas bonus had no basis as the same was not a
demandable and enforceable obligation. It argued that the giving
of extra compensation was based on the companys available
resources for a given year and the workers are not entitled to a
bonus if the company does not make profits. Petitioner adverted to
the fact that it was debt-ridden having incurred net losses for the
years 2001 and 2002 totaling to P1.5 billion; and since 1999, when
the CBA was signed, the companys accumulated losses amounted
to over P2.7 billion. Petitioner further argued that the grant of a
one (1) month salary cash advance was not meant to take the
place of a bonus but was meant to show the companys sincere
desire to help its employees despite its precarious financial
condition. Petitioner also averred that the CBA provision on a
Christmas gift/bonus refers to alternative benefits. Finally,
petitioner emphasized that even if the CBA contained an
unconditional obligation to grant the bonus to the respondent
Association, the present difficult economic times had already
legally released it therefrom pursuant to Article 1267 of the Civil
Code.[11]
 
The Voluntary Arbitrator rendered a Decision dated 2 June
2003, declaring that petitioner is bound to grant each of its
workers a Christmas bonus of P3,000.00 for the reason that the
bonus was given prior to the effectivity of the CBA between the
parties and that the financial losses of the company is not a
sufficient reason to exempt it from granting the same. It stressed
that the CBA is a binding contract and constitutes the law between
the parties. The Voluntary Arbitrator further expounded that since
the employees had already been given P600.00 cash bonus, the
same should be deducted from the claimed amount of P3,000.00,
thus leaving a balance of P2,400.00. The dispositive portion of the
decision states, viz:
Wherefore, in view of the foregoing
respondent LCI is hereby ordered to pay the
members of the complainant union LCEA their
respective Christmas bonus in the amount of three
thousand (P3,000.00) pesos for the year 2002 less
the P600.00 already given or a balance of P2,400.00.
[12]
 
 
Petitioner sought reconsideration but the same was denied
by the Voluntary Arbitrator in an Order dated 27 June 2003, in this
wise:
 
The Motion for Reconsideration filed by the
respondent in the above-entitled case which was
received by the Undersigned on June 26, 2003 is
hereby denied pursuant to Section 7 Rule XIX on
Grievance Machinery and Voluntary Arbitration;
Amending The Implementing Rules of Book V of the
Labor Code of the Philippines; to wit:
 
Section 7. Finality of
Award/Decision − The decision, order,
resolution or award of the voluntary
arbitrator or panel of voluntary
arbitrators shall be final and executory
after ten (10) calendar days from
receipt of the copy of the award or
decision by the parties and it shall not
be subject of a motion for
reconsideration.[13]
 
 
Petitioner elevated the case to the Court of Appeals via a
Petition for Certiorari under Rule 65 of the Rules of Court docketed
as CA-G.R. SP No. 78334.[14] As adverted to earlier, the Court of
Appeals affirmed in toto the decision of the Voluntary Arbitrator.
The appellate court also denied petitioners motion for
reconsideration.
 
In affirming respondent Associations right to the Christmas
bonus, the Court of Appeals held:
 
 In the case at bar, it is indubitable that
petitioner offered private respondent a Christmas
bonus/gift in 1998 or before the execution of the
1999 CBA which incorporated the said benefit as a
traditional right of the employees. Hence, the grant
of said bonus to private respondent can be deemed a
practice as the same has not been given only in the
1999 CBA. Apparently, this is the reason why
petitioner specifically recognized the grant of a
Christmas bonus/gift as a practice or tradition as
stated in the CBA. x x x.
 
xxxx
 
Evidently, the argument of petitioner that the
giving of a Christmas bonus is a management
prerogative holds no water. There were no conditions
specified in the CBA for the grant of said benefit
contrary to the claim of petitioner that the same is
justified only when there are profits earned by the
company. As can be gleaned from the CBA, the
payment of Christmas bonus was not contingent
upon the realization of profits. It does not state that
if the company derives no profits, there are no
bonuses to be given to the employees. In fine, the
payment thereof was not related to the profitability
of business operations.
 
Moreover, it is undisputed that petitioner,
aside from giving the mandated 13th month pay, has
further been giving its employees an additional
Christmas bonus at the end of the year since 1998 or
before the effectivity of the CBA in September
1999. Clearly, the grant of Christmas bonus from
1998 up to 2001, which brought about the filing of
the complaint for alleged non-payment of the 2002
Christmas bonus does not involve the exercise of
management prerogative as the same was given
continuously on or about Christmas time pursuant to
the CBA.Consequently, the giving of said bonus can
no longer be withdrawn by the petitioner as this
would amount to a diminution of the employees
existing benefits.[15]
 
 
Not to be dissuaded, petitioner is now before this Court. The
only issue before us is whether or not the Court of Appeals erred in
affirming the ruling of the voluntary arbitrator that the petitioner is
obliged to give the members of the respondent Association a
Christmas bonus in the amount of P3,000.00 in 2002.[16]
 
We uphold the rulings of the voluntary arbitrator and of the
Court of Appeals. 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. This
is the rule particularly where the findings of both the arbitrator and
the Court of Appeals coincide.[17]
 
As a general proposition, an arbitrator is confined to the
interpretation and application of the CBA. He does not sit to
dispense his own brand of industrial justice: his award is legitimate
only in so far as it draws its essence from the CBA.[18] That was
done in this case.
By definition, a bonus is a gratuity or act of liberality of the
giver. It is something given in addition to what is ordinarily
received by or strictly due the recipient. A bonus is granted and
paid to an employee for his industry and loyalty which contributed
to the success of the employers business and made possible the
realization of profits.[19]
 
A bonus is also granted by an enlightened employer to spur
the employee to greater efforts for the success of the business and
realization of bigger profits.[20]
 
Generally, a bonus is not a demandable and enforceable
obligation. For a bonus to be enforceable, it must have been
promised by the employer and expressly agreed upon by the
parties.[21] Given that the bonus in this case is integrated in the
CBA, the same partakes the nature of a demandable
obligation. Verily, by virtue of its incorporation in the CBA, the
Christmas bonus due to respondent Association has become more
than just an act of generosity on the part of the petitioner but a
contractual obligation it has undertaken.[22]
 
A CBA refers to a negotiated contract between a legitimate labor
organization and the employer, concerning wages, hours of work
and all other terms and conditions of employment in a bargaining
unit. As in all other contracts, the parties to a CBA may establish
such stipulations, clauses, terms and conditions as they may deem
convenient, provided these are not contrary to law, morals, good
customs, public order or public policy.[23]
 
It is a familiar and fundamental doctrine in labor law that
the CBA is the law between the parties and they are obliged to
comply with its provisions.[24] This principle stands strong and true
in the case at bar.
 
A reading of the provision of the CBA reveals that the same
provides for the giving of a Christmas gift package/bonus without
qualification. Terse and clear, the said provision did not state that
the Christmas package shall be made to depend on the petitioners
financial standing. The records are also bereft of any showing that
the petitioner made it clear during CBA negotiations that the bonus
was dependent on any condition. Indeed, if the petitioner and
respondent Association intended that the P3,000.00 bonus would
be dependent on the company earnings, such intention should
have been expressed in the CBA.
 
It is noteworthy that in petitioners 1998 and 1999 Financial
Statements, it took note that the 1997 financial crisis in the Asian
region adversely affected the Philippine economy.[25]
 
From the foregoing, petitioner cannot insist on business
losses as a basis for disregarding its undertaking. It is manifestly
clear that petitioner was very much aware of the imminence and
possibility of business losses owing to the 1997 financial crisis. In
1998, petitioner suffered a net loss of P14,347,548.00.[26] Yet it
gave a P3,000.00 bonus to the members of the respondent
Association. In 1999, when petitioners very own financial
statement reflected that the positive developments in the economy
have yet to favorably affect the operations of the company,[27] and
reported a loss of P346,025,733.00,[28] it entered into the CBA with
the respondent Association whereby it contracted to grant a
Christmas gift package/bonus to the latter. Petitioner supposedly
continued to incur losses in the years 2000[29] and 2001. Still and
all, this did not deter it from honoring the CBA provision on
Christmas bonus as it continued to give P3,000.00 each to the
members of the respondent Association in the years 1999, 2000
and 2001.
All given, business losses are a feeble ground for petitioner
to repudiate its obligation under the CBA. The rule is settled that
any benefit and supplement being enjoyed by the employees
cannot be reduced, diminished, discontinued or eliminated by the
employer. The principle of non-diminution of benefits is founded on
the constitutional mandate to protect the rights of workers and to
promote their welfare and to afford labor full protection.[30]
Hence, absent any proof that petitioners consent was
vitiated by fraud, mistake or duress, it is presumed that it entered
into the CBA voluntarily and had full knowledge of the contents
thereof and was aware of its commitments under the contract.
 
The Court is fully aware that implementation to the letter of
the subject CBA provision may further deplete petitioners
resources. Petitioners remedy though lies not in the Courts
invalidation of the provision but in the parties clarification of the
same in subsequent CBA negotiations. Article 253 of the Labor
Code is relevant:
Art. 253. Duty to bargain collectively
when there exists a collective bargaining
agreement. - When there is a collective
bargaining agreement, the duty to bargain
collectively shall also mean that neither party
shall terminate nor modify such agreement
during its lifetime. However, either party can
serve a written notice to terminate or modify
the agreement at least sixty (60) days prior to
its expiration date. It shall be the duty of both
parties to keep the status quo and to continue
in full force and effect the terms and conditions
of the existing agreement during the sixty
(60)-day period and/or until a new agreement
is reached by the parties.
 
WHEREFORE, Premises considered, the petition
is DENIED for lack of merit. The Decision of the Court of Appeals
dated 5 April 2006 and the Resolution of the same court dated 13
December 2007 in CA-G.R. SP No. 78334 are AFFIRMED.
 
SO ORDERED.
 
Republic of the Philippines
 SUPREME COURT (DOLE) Regional Office No. VII, Cebu City, for illegal deduction,
Manila nonpayment of service incentive leave, 13th month pay, premium
  pay for holiday and rest day and illegal diminution of benefits,
EN BANC delayed payment of wages and noncoverage of SSS, PAG-IBIG and
  Philhealth.[1] After the conduct of summary investigations, and after
  the parties submitted their position papers, the DOLE Regional
PEOPLES BROADCASTING SERVICE   G.R. No. 179652 Director found that private respondent was an employee of
(BOMBO RADYO PHILS., INC.),   petitioner, and was entitled to his money claims.[2] Petitioner
Petitioner, Present: sought reconsideration of the Directors Order, but failed. The
    Acting DOLE Secretary dismissed petitioners appeal on the ground
  CORONA, C.J., that petitioner submitted a Deed of Assignment of Bank Deposit
  CARPIO, instead of posting a cash or surety bond.When the matter was
- versus - VELASCO, JR., brought before the CA, where petitioner claimed that it had been
  LEONARDO-DE CASTRO,
denied due process, it was held that petitioner was accorded due
  BRION, process as it had been given the opportunity to be heard, and that
  PERALTA, the DOLE Secretary had jurisdiction over the matter, as the
THE SECRETARY OF THE BERSAMIN, jurisdictional limitation imposed by Article 129 of the Labor Code
DEPARTMENT OF LABOR AND DEL CASTILLO,* on the power of the DOLE Secretary under Art. 128(b) of the Code
EMPLOYMENT, THE REGIONAL ABAD, had been repealed by Republic Act No. (RA) 7730.[3]
DIRECTOR, DOLE REGION VII, and VILLARAMA, JR.,  
JANDELEON JUEZAN, PEREZ, In the Decision of this Court, the CA Decision was reversed and set
Respondents. MENDOZA, aside, and the complaint against petitioner was dismissed. The
  SERENO, dispositive portion of the Decision reads as follows:
  REYES, and  
PERLAS-BERNABE,  WHEREFORE, the petition is GRANTED. The
  Decision dated 26 October 2006 and the Resolution
Promulgated: dated 26 June 2007 of the Court of Appeals in C.A.
March 6, 2012 G.R. CEB-SP No. 00855 are REVERSED and SET
x-------------------------------------------------------------------------- ASIDE. The Order of the then Acting Secretary of
---------------x the Department of Labor and Employment dated 27
  January 2005 denying petitioners appeal, and the
  Orders of the Director, DOLE Regional Office No. VII,
RESOLUTION dated 24 May 2004 and 27 February 2004,
  respectively, are ANNULLED. The complaint against
VELASCO, JR., J.: petitioner is DISMISSED.[4]
  The Court found that there was no employer-employee
In a Petition for Certiorari under Rule 65, petitioner Peoples relationship between petitioner and private respondent. It was held
Broadcasting Service, Inc. (Bombo Radyo Phils., Inc.) questioned that while the DOLE may make a determination of the existence of
the Decision and Resolution of the Court of Appeals (CA) dated an employer-employee relationship, this function could not be co-
October 26, 2006 and June 26, 2007, respectively, in C.A. G.R. extensive with the visitorial and enforcement power provided in
CEB-SP No. 00855. Art. 128(b) of the Labor Code, as amended by RA 7730. The
  National Labor Relations Commission (NLRC) was held to be the
Private respondent Jandeleon Juezan filed a complaint primary agency in determining the existence of an employer-
against petitioner with the Department of Labor and Employment employee relationship. This was the interpretation of the Court of
the clause in cases where the relationship of employer-employee
still exists in Art. 128(b).[5]
 
From this Decision, the Public Attorneys Office (PAO) filed a
Motion for Clarification of Decision (with Leave of Court). The PAO
sought to clarify as to when the visitorial and enforcement power of
the DOLE be not considered as co-extensive with the power to
determine the existence of an employer-employee relationship.
[6]
 In its Comment,[7] the DOLE sought clarification as well, as to
the extent of its visitorial and enforcement power under the Labor
Code, as amended.
 
The Court treated the Motion for Clarification as a second
motion for reconsideration, granting said motion and reinstating
the petition.[8] It is apparent that there is a need to delineate the
jurisdiction of the DOLE Secretary vis--vis that of the NLRC.
 
Under Art. 129 of the Labor Code, the power of the DOLE
and its duly authorized hearing officers to hear and decide any
matter involving the recovery of wages and other monetary claims
and benefits was qualified by the proviso that the complaint not
include a claim for reinstatement, or that the aggregate money
claims not exceed PhP 5,000. RA 7730, or an Act Further
Strengthening the Visitorial and Enforcement Powers of the
Secretary of Labor, did away with the PhP 5,000 limitation,
allowing the DOLE Secretary to exercise its visitorial and
enforcement power for claims beyond PhP 5,000. The only
qualification to this expanded power of the DOLE was only that
there still be an existing employer-employee relationship.
 
It is conceded that if there is no employer-employee
relationship, whether it has been terminated or it has not existed
from the start, the DOLE has no jurisdiction. Under Art. 128(b) of
the Labor Code, as amended by RA 7730, the first sentence reads,
Notwithstanding the provisions of Articles 129 and 217 of this Code
to the contrary, and in cases where the relationship of employer-
employee still exists, the Secretary of Labor and Employment or
his duly authorized representatives shall have the power to issue
compliance orders to give effect to the labor standards provisions
of this Code and other labor legislation based on the findings of
labor employment and enforcement officers or industrial safety
engineers made in the course of inspection. It is clear and beyond
debate that an employer-employee relationship must exist for the
exercise of the visitorial and enforcement power of the DOLE. The
question now arises, may the DOLE make a determination of
whether or not an employer-employee relationship exists, and if
so, to what extent?
 
The first portion of the question must be answered in the
affirmative.
 
The prior decision of this Court in the present case accepts
such answer, but places a limitation upon the power of the DOLE,
that is, the determination of the existence of an employer-
employee relationship cannot be co-extensive with the visitorial
and enforcement power of the DOLE. But even in conceding the
power of the DOLE to determine the existence of an employer-
employee relationship, the Court held that the determination of the
existence of an employer-employee relationship is still primarily
within the power of the NLRC, that any finding by the DOLE is
merely preliminary.
This conclusion must be revisited.
 
No limitation in the law was placed upon the power of the
DOLE to determine the existence of an employer-employee
relationship. No procedure was laid down where the DOLE would
only make a preliminary finding, that the power was primarily held
by the NLRC. The law did not say that the DOLE would first seek
the NLRCs determination of the existence of an employer-employee
relationship, or that should the existence of the employer-
employee relationship be disputed, the DOLE would refer the
matter to the NLRC. The DOLE must have the power to determine
whether or not an employer-employee relationship exists, and from
there to decide whether or not to issue compliance orders in
accordance with Art. 128(b) of the Labor Code, as amended by RA
7730.
 
The DOLE, in determining the existence of an employer-
employee relationship, has a ready set of guidelines to follow, the
same guide the courts themselves use. The elements to determine
the existence of an employment relationship are: (1) the selection
and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; (4) the employers power to control the
employees conduct.[9] The use of this test is not solely limited to
the NLRC. The DOLE Secretary, or his or her representatives, can
utilize the same test, even in the course of inspection, making use
of the same evidence that would have been presented before the
NLRC.
  
The determination of the existence of an employer-
employee relationship by the DOLE must be respected. The
expanded visitorial and enforcement power of the DOLE granted by
RA 7730 would be rendered nugatory if the alleged employer could,
by the simple expedient of disputing the employer-employee
relationship, force the referral of the matter to the NLRC. The Court
issued the declaration that at least a prima facie showing of the
absence of an employer-employee relationship be made to oust the
DOLE of jurisdiction. But it is precisely the DOLE that will be faced
with that evidence, and it is the DOLE that will weigh it, to see if
the same does successfully refute the existence of an employer-
employee relationship.
If the DOLE makes a finding that there is an existing
employer-employee relationship, it takes cognizance of the matter,
to the exclusion of the NLRC. The DOLE would have no jurisdiction
only if the employer-employee relationship has already been
terminated, or it appears, upon review, that no employer-employee
relationship existed in the first place.
 
The Court, in limiting the power of the DOLE, gave the
rationale that such limitation would eliminate the prospect of
competing conclusions between the DOLE and the NLRC. The
prospect of competing conclusions could just as well have been
eliminated by according respect to the DOLE findings, to the
exclusion of the NLRC, and this We believe is the more prudent
course of action to take.
 
This is not to say that the determination by the DOLE is
beyond question or review. Suffice it to say, there are judicial
remedies such as a petition for certiorari under Rule 65 that may
be availed of, should a party wish to dispute the findings of the
DOLE.
 
It must also be remembered that the power of the DOLE to
determine the existence of an employer-employee relationship
need not necessarily result in an affirmative finding. The DOLE may
well make the determination that no employer-employee
relationship exists, thus divesting itself of jurisdiction over the
case. It must not be precluded from being able to reach its own
conclusions, not by the parties, and certainly not by this Court.
 
Under Art. 128(b) of the Labor Code, as amended by RA
7730, the DOLE is fully empowered to make a determination as to
the existence of an employer-employee relationship in the exercise
of its visitorial and enforcement power, subject to judicial review,
not review by the NLRC.
 
There is a view that despite Art. 128(b) of the Labor Code,
as amended by RA 7730, there is still a threshold amount set by
Arts. 129 and 217 of the Labor Code when money claims are
involved, i.e., that if it is for PhP 5,000 and below, the jurisdiction
is with the regional director of the DOLE, under Art. 129, and if the
amount involved exceeds PhP 5,000, the jurisdiction is with the
labor arbiter, under Art. 217. The view states that despite the
wording of Art. 128(b), this would only apply in the course of
regular inspections undertaken by the DOLE, as differentiated from
cases under Arts. 129 and 217, which originate from
complaints. There are several cases, however, where the Court has
ruled that Art. 128(b) has been amended to expand the powers of
the DOLE Secretary and his duly authorized representatives by RA
7730. In these cases, the Court resolved that the DOLE had the
jurisdiction, despite the amount of the money claims
involved. Furthermore, in these cases, the inspection held by the
DOLE regional director was prompted specifically by a
complaint. Therefore, the initiation of a case through a complaint
does not divest the DOLE Secretary or his duly authorized
representative of jurisdiction under Art. 128(b).
 
To recapitulate, if a complaint is brought before the DOLE to
give effect to the labor standards provisions of the Labor Code or
other labor legislation, and there is a finding by the DOLE that
there is an existing employer-employee relationship, the DOLE
exercises jurisdiction to the exclusion of the NLRC. If the DOLE
finds that there is no employer-employee relationship, the
jurisdiction is properly with the NLRC. If a complaint is filed with
the DOLE, and it is accompanied by a claim for reinstatement, the
jurisdiction is properly with the Labor Arbiter, under Art. 217(3) of
the Labor Code, which provides that the Labor Arbiter has original
and exclusive jurisdiction over those cases involving wages, rates
of pay, hours of work, and other terms and conditions of
employment, if accompanied by a claim for reinstatement. If a
complaint is filed with the NLRC, and there is still an existing
employer-employee relationship, the jurisdiction is properly with
the DOLE. The findings of the DOLE, however, may still be
questioned through a petition for certiorari under Rule 65 of the
Rules of Court.
 
 In the present case, the finding of the DOLE Regional NACHURA,
Director that there was an employer-employee relationship has
been subjected to review by this Court, with the finding being that LEONARDO-DE CASTRO,
there was no employer-employee relationship between petitioner BRION and
and private respondent, based on the evidence presented. Private
respondent presented self-serving allegations as well as self- PERALTA, JJ.
defeating evidence.[10] The findings of the Regional Director were
not based on substantial evidence, and private respondent failed to PHILIPPINE TELEGRAPH AND
prove the existence of an employer-employee relationship. The TELEPHONE COMPANY and
DOLE had no jurisdiction over the case, as there was no employer-
employee relationship present. Thus, the dismissal of the complaint JOSE LUIS SANTIAGO,
against petitioner is proper.
  Respondents. Promulgated:
WHEREFORE, the Decision of this Court in G.R. No.  
179652 is hereby AFFIRMED, with the MODIFICATION that in
the exercise of the DOLEs visitorial and enforcement power, the April 7, 2009
Labor Secretary or the latters authorized representative shall have
x----------------------------------------
the power to determine the existence of an employer-employee
----------x
relationship, to the exclusion of the NLRC.
   
SO ORDERED.
EN BANC DECISION

  CORONA, J.:

FELIX B. PEREZ and G.R. No. 152048  

AMANTE G. DORIA, Petitioners Felix B. Perez and Amante G. Doria were

employed by respondent Philippine Telegraph and Telephone
Petitioners, Company (PT&T) as shipping clerk and supervisor, respectively, in
PT&Ts Shipping Section, Materials Management Group.
Present:
 
PUNO, C.J.,
QUISUMBING, Acting on an alleged unsigned letter regarding anomalous
YNARES- transactions at the Shipping Section, respondents formed a special
SANTIAGO, audit team to investigate the matter. It was discovered that the
CARPIO, Shipping Section jacked up the value of the freight costs for goods
AUSTRIA- shipped and that the duplicates of the shipping documents
MARTINEZ,* allegedly showed traces of tampering, alteration and
- v e r s u s - CORONA, superimposition.
CARPIO
MORALES,  
TINGA,
On September 3, 1993, petitioners were placed on
CHICO-NAZARIO,
preventive suspension for 30 days for their alleged involvement in
VELASCO, JR.,
the anomaly.[1] Their suspension was extended for 15 days twice:
first on October 3, 1993[2] and second on October 18, 1993.[3]
On October 29, 1993, a memorandum with the following
tenor was issued by respondents:
 
In line with the recommendation of the AVP-Audit as
presented in his report of October 15, 1993 (copy
attached) and the subsequent filing of criminal
charges against the parties mentioned therein, [Mr.
Felix Perez and Mr. Amante Doria are] hereby
dismissed from the service for having falsified
company documents.[4] (emphasis supplied)
 
On November 9, 1993, petitioners filed a complaint for
illegal suspension and illegal dismissal.[5] They alleged that they
were dismissed on November 8, 1993, the date they received the
above-mentioned memorandum.
 
The labor arbiter found that the 30-day extension of
petitioners suspension and their subsequent dismissal were both
illegal. He ordered respondents to pay petitioners their salaries
during their 30-day illegal suspension, as well as to reinstate them
with backwages and 13th month pay.
 
The National Labor Relations Commission (NLRC) reversed
the decision of the labor arbiter. It ruled that petitioners were
dismissed for just cause, that they were accorded due process and
that they were illegally suspended for only 15 days (without stating
the reason for the reduction of the period of petitioners illegal
suspension).[6]
 
Petitioners appealed to the Court of Appeals (CA). In its
January 29, 2002 decision,[7] the CA affirmed the NLRC decision
insofar as petitioners illegal suspension for 15 days and dismissal
for just cause were concerned. However, it found that petitioners
were dismissed without due process.
Petitioners now seek a reversal of the CA decision. They
contend that there was no just cause for their dismissal, that they
were not accorded due process and that they were illegally
suspended for 30 days.
We rule in favor of petitioners.
 
 
RESPONDENTS FAILED TO PROVE JUST
CAUSE AND TO OBSERVE DUE PROCESS
 
The CA, in upholding the NLRCs decision, reasoned that
there was sufficient basis for respondents to lose their confidence
in petitioners[8] for allegedly tampering with the shipping
documents. Respondents emphasized the importance of a shipping
order or request, as it was the basis of their liability to a cargo
forwarder.[9]
 
We disagree.
Without undermining the importance of a shipping order or
request, we find respondents evidence insufficient to clearly and
convincingly establish the facts from which the loss of confidence
resulted.[10] Other than their bare allegations and the fact that such
documents came into petitioners hands at some point, respondents
should have provided evidence of petitioners functions, the extent
of their duties, the procedure in the handling and approval of
shipping requests and the fact that no personnel other than
petitioners were involved. There was, therefore, a patent paucity of
proof connecting petitioners to the alleged tampering of shipping
documents.
 The alterations on the shipping documents could not
reasonably be attributed to petitioners because it was never proven
that petitioners alone had control of or access to these documents.
Unless duly proved or sufficiently substantiated otherwise,
impartial tribunals should not rely only on the statement of the
employer that it has lost confidence in its employee.[11]
Willful breach by the employee of the trust reposed in him
by his employer or duly authorized representative is a just cause
for termination.[12] However, in General Bank and Trust Co. v. CA,
[13]
 we said:
[L]oss of confidence should not be simulated. It
should not be used as a subterfuge for causes which
are improper, illegal or unjustified. Loss of
confidence may not be arbitrarily asserted in the face
of overwhelming evidence to the contrary. It must be
genuine, not a mere afterthought to justify an earlier
action taken in bad faith.
The burden of proof rests on the employer to establish that
the dismissal is for cause in view of the security of tenure that
employees enjoy under the Constitution and the Labor Code. The
employers evidence must clearly and convincingly show the facts
on which the loss of confidence in the employee may be fairly
made to rest.[14] It must be adequately proven by substantial
evidence.[15] Respondents failed to discharge this burden.
 
Respondents illegal act of dismissing petitioners was
aggravated by their failure to observe due process. To meet the
requirements of due process in the dismissal of an employee, an
employer must furnish the worker with two written notices: (1) a
written notice specifying the grounds for termination and giving to
said employee a reasonable opportunity to explain his side and (2)
another written notice indicating that, upon due consideration of all
circumstances, grounds have been established to justify the
employer's decision to dismiss the employee.[16]
 
Petitioners were neither apprised of the charges against
them nor given a chance to defend themselves. They were simply
and arbitrarily separated from work and served notices of
termination in total disregard of their rights to due process and
security of tenure. The labor arbiter and the CA correctly found
that respondents failed to comply with the two-notice requirement
for terminating employees.
Petitioners likewise contended that due process was not
observed in the absence of a hearing in which they could have
explained their side and refuted the evidence against them.
There is no need for a hearing or conference. We note a
marked difference in the standards of due process to be followed
as prescribed in the Labor Code and its implementing rules. The
Labor Code, on one hand, provides that an employer must provide
the employee ample opportunity to be heard and to defend
himself with the assistance of his representative if he so desires:
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 and without prejudice to the requirement of
notice under Article 283 of this Code, the employer
shall furnish the worker whose employment is sought
to be terminated a written notice containing a
statement of the causes for termination and shall
afford the latter ample opportunity to be heard
and to defend himself with the assistance of his
representative if he so desires in accordance with
company rules and regulations promulgated
pursuant to 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.
(emphasis supplied)
The omnibus rules implementing the Labor Code, on the
other hand, require a hearing and conference during which the
employee concerned is given the opportunity to respond to the
charge, present his evidence or rebut the evidence presented
against him:[17]
 
Section 2. Security of Tenure. x x x
 
(d) In all cases of termination of employment,
the following standards of due process shall be
substantially observed:
 
For termination of employment based on just
causes as defined in Article 282 of the Labor Code:
 
(i) 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.
(ii) 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.
 
(iii) 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. (emphasis
supplied)
 
Which one should be followed? Is a hearing (or conference)
mandatory in cases involving the dismissal of an employee? Can
the apparent conflict between the law and its IRR be reconciled?
 
At the outset, we reaffirm the time-honored doctrine that, in
case of conflict, the law prevails over the administrative regulations
implementing it.[18] The authority to promulgate implementing rules
proceeds from the law itself. To be valid, a rule or regulation must
conform to and be consistent with the provisions of the enabling
statute.[19] As such, it cannot amend the law either by abridging or
expanding its scope.[20]
 
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.[21] 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
employees 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.[22]
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 employees 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.[23] To be heard does not mean verbal argumentation
alone inasmuch as one may be heard just as effectively through
written explanations, submissions or pleadings.[24] 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 hearing,
although preferred, is not absolutely necessary to satisfy the
employees right to be heard.
 
This Court has consistently ruled that the due process
requirement in cases of termination of employment does not
require an actual or formal hearing. Thus, we categorically declared
in Skippers United Pacific, Inc. v. Maguad:[25]
The Labor Code does not, of course, require a
formal or trial type proceeding before an erring
employee may be dismissed. (emphasis supplied)
 
 
In Autobus Workers Union v. NLRC,[26] we ruled:
The twin requirements of notice and hearing
constitute the essential elements of due process.
Due process of law simply means giving opportunity
to be heard before judgment is rendered. In
fact, there is no violation of due process even if
no hearing was conducted, where the party
was given a chance to explain his side of the
controversy. What is frowned upon is the denial of
the opportunity to be heard.
 
x x x x x x x x x
A formal trial-type hearing is not even
essential to due process. It is enough that the
parties are given a fair and reasonable
opportunity to explain their respective sides of
the controversy and to present supporting
evidence on which a fair decision can be
based. This type of hearing is not even mandatory
in cases of complaints lodged before the Labor
Arbiter. (emphasis supplied)
 
 
In Solid Development Corporation Workers Association v.
Solid Development Corporation,[27] we had the occasion to state:
 
 [W]ell-settled is the dictum that the twin
requirements of notice and hearing constitute the
essential elements of due process in the dismissal of
employees. It is a cardinal rule in our jurisdiction
that the employer must furnish the employee with
two written notices before the termination of
employment can be effected: (1) the first apprises
the employee of the particular acts or omissions for
which his dismissal is sought; and (2) the second
informs the employee of the employers decision to
dismiss him. The requirement of a hearing, on
the other hand, is complied with as long as
there was an opportunity to be heard, and not
necessarily that an actual hearing was
conducted.
In separate infraction reports, petitioners
were both apprised of the particular acts or
omissions constituting the charges against them.
They were also required to submit their written
explanation within 12 hours from receipt of the
reports. Yet, neither of them complied. Had they
found the 12-hour period too short, they should have
requested for an extension of time. Further, notices
of termination were also sent to them informing
them of the basis of their dismissal. In fine,
petitioners were given due process before they were
dismissed. Even if no hearing was conducted,
the requirement of due process had been
met since they were accorded a chance to explain
their side of the controversy. (emphasis supplied)
 
Our holding in National Semiconductor HK Distribution, Ltd.
v. NLRC[28] is of similar import:
 
That the investigations conducted by
petitioner may not be
considered formal or recorded hearings or
investigations is immaterial. A formal or trial
type hearing is not at all times and in all
instances essential to due process, the
requirements of which are satisfied where the parties
are afforded fair and reasonable opportunity to
explain their side of the controversy. It is deemed
sufficient for the employer to follow the natural
sequence of notice, hearing and judgment.
 
The above rulings are a clear recognition that the 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[29] 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.
PETITIONERS WERE ILLEGALLY
SUSPENDED FOR 30 DAYS
An employee may be validly suspended by the employer for
just cause provided by law. Such suspension shall only be for a
period of 30 days, after which the employee shall either be
reinstated or paid his wages during the extended period.[30]
In this case, petitioners contended that they were not paid
during the two 15-day extensions, or a total of 30 days, of their
preventive suspension. Respondents failed to adduce evidence to
the contrary. Thus, we uphold the ruling of the labor arbiter on this
point.
Where the dismissal was without just or authorized cause
and there was no due process, Article 279 of the Labor Code, as
amended, mandates that the employee is entitled to reinstatement
without loss of seniority rights and other privileges and full
backwages, inclusive of allowances, and other benefits or their
monetary equivalent computed from the time the compensation
was not paid up to the time of actual reinstatement.[31] In this case,
however, reinstatement is no longer possible because of the length
of time that has passed from the date of the incident to final
resolution.[32] Fourteen years have transpired from the time
petitioners were wrongfully dismissed. To order reinstatement at
this juncture will no longer serve any prudent or practical purpose.
[33]
 
WHEREFORE, the petition is hereby GRANTED. The
decision of the Court of Appeals dated January 29, 2002 in CA-G.R.
SP No. 50536 finding that petitioners Felix B. Perez and Amante G.
Doria were not illegally dismissed but were not accorded due
process and were illegally suspended for 15 days, is SET ASIDE.
The decision of the labor arbiter dated December 27, 1995 in NLRC
NCR CN. 11-06930-93 is hereby AFFIRMED with
the MODIFICATION that petitioners should be paid their
separation pay in lieu of reinstatement.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 177467               March 9, 2011
PFIZER, INC. AND/OR REY GERARDO BACARRO, AND/OR
FERDINAND CORTES, AND/OR ALFRED MAGALLON, AND/OR
ARISTOTLE ARCE, Petitioners, 
vs.
GERALDINE VELASCO, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
This is a petition for review on certiorari under Rule 45 of the Rules
of Civil Procedure to annul and set aside the Resolution1 dated
October 23, 2006 as well as the Resolution2 dated April 10, 2007
both issued by the Court of Appeals in CA-G.R. SP No. 88987
entitled, "Pfizer, Inc. and/or Rey Gerardo Bacarro, and/or
Ferdinand Cortes, and/or Alfred Magallon, and/or Aristotle Arce v.
National Labor Relations Commission Second Division and
Geraldine Velasco." The October 23, 2006 Resolution modified
upon respondent’s motion for reconsideration the Decision3 dated
November 23, 2005 of the Court of Appeals by requiring PFIZER,
Inc. (PFIZER) to pay respondent’s wages from the date of the
Labor Arbiter’s Decision4 dated December 5, 2003 until it was
eventually reversed and set aside by the Court of Appeals. The
April 10, 2007 Resolution, on the other hand, denied PFIZER’s
motion for partial reconsideration.
The facts of this case, as stated in the Court of Appeals Decision
dated November 23, 2005, are as follows:
Private respondent Geraldine L. Velasco was employed with
petitioner PFIZER, INC. as Professional Health Care Representative
since 1 August 1992. Sometime in April 2003, Velasco had a
medical work up for her high-risk pregnancy and was subsequently
advised bed rest which resulted in her extending her leave of
absence. Velasco filed her sick leave for the period from 26 March
to 18 June 2003, her vacation leave from 19 June to 20 June 2003,
and leave without pay from 23 June to 14 July 2003.
same, the notice also advised her that she was being placed under
"preventive suspension" for 30 days or from that day to 6 August
2003 and consequently ordered to surrender the following
"accountabilities;" 1) Company Car, 2) Samples and Promats, 3)
CRF/ER/VEHICLE/SOA/POSAP/MPOA and other related Company
Forms, 4) Cash Card, 5) Caltex Card, and 6) MPOA/TPOA Revolving
Travel Fund. The following day, petitioner Cortez together with one
Efren Dariano retrieved the above-mentioned "accountabilities"
from Velasco’s residence.
In response, Velasco sent a letter addressed to Cortez dated 28
June 2003 denying the charges. In her letter, Velasco claimed that
the transaction with Mercury Drug, Magsaysay Branch covered by
her check (no. 1072) in the amount of ₱23,980.00 was merely to
accommodate two undisclosed patients of a certain Dr. Renato
Manalo. In support thereto, Velasco attached the Doctor’s letter
and the affidavit of the latter’s secretary.
On 12 July 2003, Velasco received a "Second Show-cause Notice"
informing her of additional developments in their investigation.
According to the notice, a certain Carlito Jomen executed an
affidavit pointing to Velasco as the one who transacted with a
printing shop to print PFIZER discount coupons. Jomen also
presented text messages originating from Velasco’s company
issued cellphone referring to the printing of the said coupons.
Again, Velasco was given 48 hours to submit her written
explanation on the matter. On 16 July 2003, Velasco sent a letter
to PFIZER via Aboitiz courier service asking for additional time to
answer the second Show-cause Notice.

On 26 June 2003, while Velasco was still on leave, PFIZER through

its Area Sales Manager, herein petitioner Ferdinand Cortez,
personally served Velasco a "Show-cause Notice" dated 25 June
2003. Aside from mentioning about an investigation on her
possible violations of company work rules regarding "unauthorized
deals and/or discounts in money or samples and unauthorized
withdrawal and/or pull-out of stocks" and instructing her to submit
her explanation on the matter within 48 hours from receipt of the
That same day, Velasco filed a complaint for illegal suspension with
money claims before the Regional Arbitration Branch. The following
day, 17 July 2003, PFIZER sent her a letter inviting her to a
disciplinary hearing to be held on 22 July 2003. Velasco received it
under protest and informed PFIZER via the receiving copy of the
said letter that she had lodged a complaint against the latter and
that the issues that may be raised in the July 22 hearing "can be
tackled during the hearing of her case" or at the preliminary
conference set for 5 and 8 of August 2003. She likewise opted to
withhold answering the Second Show-cause Notice. On 25 July
2003, Velasco received a "Third Show-cause Notice," together with
copies of the affidavits of two Branch Managers of Mercury Drug,
asking her for her comment within 48 hours. Finally, on 29 July
2003, PFIZER informed Velasco of its "Management Decision"
terminating her employment.
On 5 December 2003, the Labor Arbiter rendered its decision
declaring the dismissal of Velasco illegal, ordering her
reinstatement with backwages and further awarding moral and
exemplary damages with attorney’s fees. On appeal, the NLRC
affirmed the same but deleted the award of moral and exemplary
damages.5
The dispositive portion of the Labor Arbiter’s Decision dated
December 5, 2003 is as follows:
WHEREFORE, judgment is hereby rendered declaring that
complainant was illegally dismissed. Respondents are ordered to
reinstate the complainant to her former position without loss of
seniority rights and with full backwages and to pay the complainant
the following:
1. Full backwages (basic salary,
company benefits, all allowances
as of December 5, 2003 in the amount
of ₱572,780.00);
2. 13th Month Pay, Midyear, Christmas
and performance bonuses
in the amount of ₱105,300.00;
3. Moral damages of ₱50,000.00;
4. Exemplary damages in the amount of ₱30,000.00;
5. Attorney’s Fees of 10% of the award
excluding damages in the
amount of ₱67,808.00.
The total award is in the amount of ₱758,080.00.6
PFIZER appealed to the National Labor Relations Commission
(NLRC) but its appeal was denied via the NLRC Decision7 dated
October 20, 2004, which affirmed the Labor Arbiter’s ruling but
deleted the award for damages, the dispositive portion of which is
as follows:
WHEREFORE, premises considered, the instant appeal and the
motion praying for the deposit in escrow of complainant’s payroll
reinstatement are hereby denied and the Decision of the Labor
Arbiter is affirmed with the modification that the award of moral
and exemplary damages is deleted and attorney’s fees shall be
based on the award of 13th month pay pursuant to Article III of
the Labor Code.8
PFIZER moved for reconsideration but its motion was denied for
lack of merit in a NLRC Resolution9 dated December 14, 2004.
Undaunted, PFIZER filed with the Court of Appeals a special civil
action for the issuance of a writ of certiorari under Rule 65 of the
Rules of Court to annul and set aside the aforementioned NLRC
issuances. In a Decision dated November 23, 2005, the Court of
Appeals upheld the validity of respondent’s dismissal from
employment, the dispositive portion of which reads as follows:
WHEREFORE, the instant petition is GRANTED. The assailed
Decision of the NLRC dated 20 October 2004 as well as its
Resolution of 14 December 2004 is hereby ANNULED and SET
ASIDE. Having found the termination of Geraldine L. Velasco’s
employment in accordance with the two notice rule pursuant to the
due process requirement and with just cause, her complaint for
illegal dismissal is hereby DISMISSED.10
Respondent filed a Motion for Reconsideration which the Court of
Appeals resolved in the assailed Resolution dated October 23, 2006
wherein it affirmed the validity of respondent’s dismissal from
employment but modified its earlier ruling by directing PFIZER to
pay respondent her wages from the date of the Labor Arbiter’s
Decision dated December 5, 2003 up to the Court of Appeals
Decision dated November 23, 2005, to wit:
IN VIEW WHEREOF, the dismissal of private respondent Geraldine
Velasco is AFFIRMED, but petitioner PFIZER, INC. is hereby ordered
to pay her the wages to which she is entitled to from the time the
reinstatement order was issued until November 23, 2005, the date
of promulgation of Our Decision.11
Respondent filed with the Court a petition for review under Rule 45
of the Rules of Civil Procedure, which assailed the Court of Appeals
Decision dated November 23, 2005 and was docketed as G.R. No.
175122. Respondent’s petition, questioning the Court of Appeals’
dismissal of her complaint, was denied by this Court’s Second
Division in a minute Resolution12 dated December 5, 2007, the
pertinent portion of which states:
Considering the allegations, issues and arguments adduced in the
petition for review on certiorari, the Court resolves to DENY the
petition for failure to sufficiently show any reversible error in the
assailed judgment to warrant the exercise of this Court’s
discretionary appellate jurisdiction, and for raising substantially
factual issues.
On the other hand, PFIZER filed the instant petition assailing the
aforementioned Court of Appeals Resolutions and offering for our
resolution a single legal issue, to wit:
Whether or not the Court of Appeals committed a serious but
reversible error when it ordered Pfizer to pay Velasco wages from
the date of the Labor Arbiter’s decision ordering her reinstatement
until November 23, 2005, when the Court of Appeals rendered its
decision declaring Velasco’s dismissal valid.13
The petition is without merit.
PFIZER argues that, contrary to the Court of Appeals’
pronouncement in its assailed Decision dated November 23, 2005,
the ruling in Roquero v. Philippine Airlines, Inc.14 is not applicable
in the case at bar, particularly with regard to the nature and
consequences of an order of reinstatement, to wit:
The order of reinstatement is immediately executory. The
unjustified refusal of the employer to reinstate a dismissed
employee entitles him to payment of his salaries effective from the
time the employer failed to reinstate him despite the issuance of a
writ of execution. Unless there is a restraining order issued, it is
ministerial upon the Labor Arbiter to implement the order of
reinstatement. In the case at bar, no restraining order was
granted. Thus, it was mandatory on PAL to actually reinstate
Roquero or reinstate him in the payroll. Having failed to do so, PAL
must pay Roquero the salary he is entitled to, as if he was
reinstated, from the time of the decision of the NLRC until the
finality of the decision of the Court.15 (Emphases supplied.)
It is PFIZER’s contention in its Memorandum16 that "there was no
unjustified refusal on [its part] to reinstate [respondent] Velasco
during the pendency of the appeal,"17 thus, the pronouncement
in Roquero cannot be made to govern this case. During the
pendency of the case with the Court of Appeals and prior to its
November 23, 2005 Decision, PFIZER claimed that it had already
required respondent to report for work on July 1, 2005. However,
according to PFIZER, it was respondent who refused to return to
work when she wrote PFIZER, through counsel, that she was opting
to receive her separation pay and to avail of PFIZER’s early
retirement program.
In PFIZER’s view, it should no longer be required to pay wages
considering that (1) it had already previously paid an enormous
sum to respondent under the writ of execution issued by the Labor
Arbiter; (2) it was allegedly ready to reinstate respondent as of
July 1, 2005 but it was respondent who unjustifiably refused to
report for work; (3) it would purportedly be tantamount to allowing
respondent to choose "payroll reinstatement" when by law it was
the employer which had the right to choose between actual and
payroll reinstatement; (4) respondent should be deemed to have
"resigned" and therefore not entitled to additional backwages or
separation pay; and (5) this Court should not mechanically apply
Roquero but rather should follow the doctrine in Genuino v.
National Labor Relations Commission18 which was supposedly
"more in accord with the dictates of fairness and justice."19
We do not agree.
At the outset, we note that PFIZER’s previous payment to
respondent of the amount of ₱1,963,855.00 (representing her
wages from December 5, 2003, or the date of the Labor Arbiter
decision, until May 5, 2005) that was successfully garnished under
the Labor Arbiter’s Writ of Execution dated May 26, 2005 cannot be
considered in its favor. Not only was this sum legally due to
respondent under prevailing jurisprudence but also this
circumstance highlighted PFIZER’s unreasonable delay in complying
with the reinstatement order of the Labor Arbiter. A perusal of the
records, including PFIZER’s own submissions, confirmed that it only
required respondent to report for work on July 1, 2005, as shown
by its Letter20 dated June 27, 2005, which is almost two years from
the time the order of reinstatement was handed down in the Labor
Arbiter’s Decision dated December 5, 2003.
As far back as 1997 in the seminal case of Pioneer Texturizing
Corporation v. National Labor Relations Commission,21 the Court
held that an award or order of reinstatement is immediately self-
executory without the need for the issuance of a writ of execution
in accordance with the third paragraph of Article 22322 of the Labor
Code. In that case, we discussed in length the rationale for that
doctrine, to wit:
The provision of Article 223 is clear that an award [by the Labor
Arbiter] for reinstatement shall be immediately executory even
pending appeal and the posting of a bond by the employer shall
not stay the execution for reinstatement. The legislative intent is
quite obvious, i.e., to make an award of reinstatement immediately
enforceable, even pending appeal. To require the application for
and issuance of a writ of execution as prerequisites for the
execution of a reinstatement award would certainly betray and run
counter to the very object and intent of Article 223, i.e., the
immediate execution of a reinstatement order. The reason is
simple. An application for a writ of execution and its issuance could
be delayed for numerous reasons. A mere continuance or
postponement of a scheduled hearing, for instance, or an inaction
on the part of the Labor Arbiter or the NLRC could easily delay the
issuance of the writ thereby setting at naught the strict mandate
and noble purpose envisioned by Article 223. In other words, if the
requirements of Article 224 [including the issuance of a writ of
execution] were to govern, as we so declared in Maranaw, then the
executory nature of a reinstatement order or award contemplated
by Article 223 will be unduly circumscribed and rendered
ineffectual. In enacting the law, the legislature is presumed to have
ordained a valid and sensible law, one which operates no further
than may be necessary to achieve its specific purpose. Statutes, as
a rule, are to be construed in the light of the purpose to be
achieved and the evil sought to be prevented. x x x In introducing
a new rule on the reinstatement aspect of a labor decision under
Republic Act No. 6715, Congress should not be considered to be
indulging in mere semantic exercise. x x x23 (Italics in the original;
emphasis and underscoring supplied.)
In the case at bar, PFIZER did not immediately admit respondent
back to work which, according to the law, should have been done
as soon as an order or award of reinstatement is handed down by
the Labor Arbiter without need for the issuance of a writ of
execution. Thus, respondent was entitled to the wages paid to her
under the aforementioned writ of execution. At most, PFIZER’s
payment of the same can only be deemed partial
compliance/execution of the Court of Appeals Resolution dated
October 23, 2006 and would not bar respondent from being paid
her wages from May 6, 2005 to November 23, 2005.
It would also seem that PFIZER waited for the resolution of its
appeal to the NLRC and, only after it was ordered by the Labor
Arbiter to pay the amount of ₱1,963,855.00 representing
respondent’s full backwages from December 5, 2003 up to May 5,
2005, did PFIZER decide to require respondent to report back to
work via the Letter dated June 27, 2005.
PFIZER makes much of respondent’s non-compliance with its
return- to-work directive by downplaying the reasons forwarded by
respondent as less than sufficient to justify her purported refusal to
be reinstated. In PFIZER’s view, the return-to-work order it sent to
respondent was adequate to satisfy the jurisprudential requisites
concerning the reinstatement of an illegally dismissed employee.
It would be useful to reproduce here the text of PFIZER’s Letter
dated June 27, 2005:
Dear Ms. Velasco:
Please be informed that, pursuant to the resolutions dated 20
October 2004 and 14 December 2004 rendered by the National
Labor Relations Commission and the order dated 24 May 2005
issued by Executive Labor Arbiter Vito C. Bose, you are required to
report for work on 1 July 2005, at 9:00 a.m., at Pfizer’s main office
at the 23rd Floor, Ayala Life–FGU Center, 6811 Ayala Avenue,
Makati City, Metro Manila.
Please report to the undersigned for a briefing on your work
assignments and other responsibilities, including the appropriate
relocation benefits.
For your information and compliance.
Very truly yours,
(Sgd.)
Ma. Eden Grace Sagisi
Labor and Employee Relations Manager24
To reiterate, under Article 223 of the Labor Code, an employee
entitled to reinstatement "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."
It is established in jurisprudence that reinstatement means
restoration to a state or condition from which one had been
removed or separated. The person reinstated assumes the position
he had occupied prior to his dismissal. Reinstatement presupposes
that the previous position from which one had been removed still
exists, or that there is an unfilled position which is substantially
equivalent or of similar nature as the one previously occupied by
the employee.25
Applying the foregoing principle to the case before us, it cannot be
said that with PFIZER’s June 27, 2005 Letter, in belated fulfillment
of the Labor Arbiter’s reinstatement order, it had shown a clear
intent to reinstate respondent to her former position under the
same terms and conditions nor to a substantially equivalent
position. To begin with, the return-to-work order PFIZER sent
respondent is silent with regard to the position or the exact nature
of employment that it wanted respondent to take up as of July 1,
2005. Even if we assume that the job awaiting respondent in the
new location is of the same designation and pay category as what
she had before, it is plain from the text of PFIZER’s June 27, 2005
letter that such reinstatement was not "under the same terms and
conditions" as her previous employment, considering that PFIZER
ordered respondent to report to its main office in Makati City while
knowing fully well that respondent’s previous job had her stationed
in Baguio City (respondent’s place of residence) and it was still
necessary for respondent to be briefed regarding her work
assignments and responsibilities, including her relocation
benefits.
The Court is cognizant of the prerogative of management to
transfer an employee from one office to another within the
business establishment, provided that there is no demotion in rank
or diminution of his salary, benefits and other privileges and the
action is not motivated by discrimination, made in bad faith, or
effected as a form of punishment or demotion without sufficient
cause.26 Likewise, the management prerogative to transfer
personnel must be exercised without grave abuse of discretion and
putting to mind the basic elements of justice and fair play. There
must be no showing that it is unnecessary, inconvenient and
prejudicial to the displaced employee.27
The June 27, 2005 return-to-work directive implying that
respondent was being relocated to PFIZER’s Makati main office
would necessarily cause hardship to respondent, a married woman
with a family to support residing in Baguio City. However, PFIZER,
as the employer, offered no reason or justification for the
relocation such as the filling up of respondent’s former position and
the unavailability of substantially equivalent position in Baguio City.
A transfer of work assignment without any justification therefor,
even if respondent would be presumably doing the same job with
the same pay, cannot be deemed faithful compliance with the
reinstatement order. In other words, in this instance, there was no
real, bona fide reinstatement to speak of prior to the reversal by
the Court of Appeals of the finding of illegal dismissal.
In view of PFIZER’s failure to effect respondent's actual or payroll
reinstatement, it is indubitable that the Roqueroruling is applicable
to the case at bar. The circumstance that respondent opted for
separation pay in lieu of reinstatement as manifested in her
counsel’s Letter28 dated July 18, 2005 is of no moment. We do not
see respondent’s letter as taking away the option from
management to effect actual or payroll reinstatement but, rather
under the factual milieu of this case, where the employer failed to
categorically reinstate the employee to her former or equivalent
position under the same terms, respondent was not obliged to
comply with PFIZER’s ambivalent return-to-work order. To uphold
PFIZER’s view that it was respondent who unjustifiably refused to
work when PFIZER did not reinstate her to her former position, and
worse, required her to report for work under conditions prejudicial
to her, is to open the doors to potential employer abuse.
Foreseeably, an employer may circumvent the immediately
enforceable reinstatement order of the Labor Arbiter by crafting
return-to-work directives that are ambiguous or meant to be
rejected by the employee and then disclaim liability for backwages
due to non-reinstatement by capitalizing on the employee’s
purported refusal to work. In sum, the option of the employer to
effect actual or payroll reinstatement must be exercised in good
faith.
Moreover, while the Court has upheld the employer’s right to
choose between actually reinstating an employee or merely
reinstating him in the payroll, we have also in the past recognized
that reinstatement might no longer be possible under certain
circumstances. In F.F. Marine Corporation v. National Labor
Relations Commission,29 we had the occasion to state:
It is well-settled that when a person is illegally dismissed, he is
entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages. In the event, however, that
reinstatement is no longer feasible, or if the employee decides
not be reinstated, the employer shall pay him separation pay in
lieu of reinstatement. Such a rule is likewise observed in the case
of a strained employer-employee relationship or when the work or
position formerly held by the dismissed employee no longer exists.
In sum, an illegally dismissed employee is entitled to: (1) either
reinstatement if viable or separation pay if reinstatement is no
longer viable, and (2) backwages.30 (Emphasis supplied.)
Similarly, we have previously held that an employee’s demand for
separation pay may be indicative of strained relations that may
justify payment of separation pay in lieu of reinstatement.31 This is
not to say, however, that respondent is entitled to separation pay
in addition to backwages. We stress here that a finding of strained
relations must nonetheless still be supported by substantial
evidence.32
In the case at bar, respondent’s decision to claim separation pay
over reinstatement had no legal effect, not only because there was
no genuine compliance by the employer to the reinstatement order
but also because the employer chose not to act on said claim. If it
was PFIZER’s position that respondent’s act amounted to a
"resignation" it should have informed respondent that it was
accepting her resignation and that in view thereof she was not
entitled to separation pay. PFIZER did not respond to respondent’s
demand at all. As it was, PFIZER’s failure to effect reinstatement
and accept respondent’s offer to terminate her employment
relationship with the company meant that, prior to the Court of
Appeals’ reversal in the November 23, 2005 Decision, PFIZER’s
liability for backwages continued to accrue for the period not
covered by the writ of execution dated May 24, 2005 until
November 23, 2005.
Lastly, PFIZER exhorts the Court to re-examine the application
of Roquero with a view that a mechanical application of the same
would cause injustice since, in the present case, respondent was
able to gain pecuniary benefit notwithstanding the circumstance of
reversal by the Court of Appeals of the rulings of the Labor Arbiter
and the NLRC thereby allowing respondent to profit from the
dishonesty she committed against PFIZER which was the basis for
her termination. In its stead, PFIZER proposes that the Court apply
the ruling in Genuino v. National Labor Relations
Commission33 which it believes to be more in accord with the
dictates of fairness and justice. In that case, we canceled the
award of salaries from the date of the decision of the Labor Arbiter
awarding reinstatement in light of our subsequent ruling finding
that the dismissal is for a legal and valid ground, to wit:
Anent the directive of the NLRC in its September 3, 1994 Decision
ordering Citibank "to pay the salaries due to the complainant from
the date it reinstated complainant in the payroll (computed at
₱60,000.00 a month, as found by the Labor Arbiter) up to and until
the date of this decision," the Court hereby cancels said award in
view of its finding that the dismissal of Genuino is for a legal and
valid ground.
Ordinarily, the employer is required to reinstate the employee
during the pendency of the appeal pursuant to Art. 223, paragraph
3 of the Labor Code, which states:
xxxx
If the decision of the labor arbiter is later reversed on appeal upon
the finding that the ground for dismissal is valid, then the employer
has the right to require the dismissed employee on payroll
reinstatement to refund the salaries s/he received while the case
was pending appeal, or it can be deducted from the accrued
benefits that the dismissed employee was entitled to receive from
his/her employer under existing laws, collective bargaining
agreement provisions, and company practices. However, if the
employee was reinstated to work during the pendency of the
appeal, then the employee is entitled to the compensation received
for actual services rendered without need of refund.
Considering that Genuino was not reinstated to work or placed on
payroll reinstatement, and her dismissal is based on a just cause,
then she is not entitled to be paid the salaries stated in item no. 3
of the fallo of the September 3, 1994 NLRC Decision.34 (Emphases
supplied.)
Thus, PFIZER implores the Court to annul the award of backwages
and separation pay as well as to require respondent to refund the
amount that she was able to collect by way of garnishment from
PFIZER as her accrued salaries.
The contention cannot be given merit since this question has been
settled by the Court en banc.
In the recent milestone case of Garcia v. Philippine Airlines,
Inc.,35 the Court wrote finis to the stray posture
in Genuino requiring the dismissed employee placed on payroll
reinstatement to refund the salaries in case a final decision upholds
the validity of the dismissal. In Garcia, we clarified the principle of
reinstatement pending appeal due to the emergence of differing
rulings on the issue, to wit:
On this score, the Court's attention is drawn to seemingly
divergent decisions concerning reinstatement pending appeal or,
particularly, the option of payroll reinstatement. On the one hand is
the jurisprudential trend as expounded in a line of cases
including Air Philippines Corp. v. Zamora, while on the other is the
recent case of Genuino v. National Labor Relations Commission. At
the core of the seeming divergence is the application of paragraph
3 of Article 223 of the Labor Code x x x.
xxxx
The view as maintained in a number of cases is that:
x x x [E]ven if the order of reinstatement of the Labor
Arbiter is reversed on appeal, it is obligatory on the part of
the employer to reinstate and pay the wages of the
dismissed employee during the period of appeal until
reversal by the higher court. On the other hand, if the employee
has been reinstated during the appeal period and such
reinstatement order is reversed with finality, the employee is not
required to reimburse whatever salary he received for he is entitled
to such, more so if he actually rendered services during the
period. (Emphasis in the original; italics and underscoring supplied)
In other words, a dismissed employee whose case was favorably
decided by the Labor Arbiter is entitled to receive wages pending
appeal upon reinstatement, which is immediately executory. Unless
there is a restraining order, it is ministerial upon the Labor Arbiter
to implement the order of reinstatement and it is mandatory on the
employer to comply therewith.
The opposite view is articulated in Genuino which states:
If the decision of the labor arbiter is later reversed on appeal upon
the finding that the ground for dismissal is valid, then the
employer has the right to require the dismissed
employee on payroll reinstatement to refund the salaries
[he] received while the case was pending appeal, or it can be
deducted from the accrued benefits that the dismissed employee
was entitled to receive from [his] employer under existing laws,
collective bargaining agreement provisions, and company practices.
However, if the employee was reinstated to work during the
pendency of the appeal, then the employee is entitled to the
compensation received for actual services rendered without need of
refund.
Considering that Genuino was not reinstated to work or placed on
payroll reinstatement, and her dismissal is based on a just cause,
then she is not entitled to be paid the salaries stated in item no. 3
of the fallo of the September 3, 1994 NLRC Decision. (Emphasis,
italics and underscoring supplied)
It has thus been advanced that there is no point in releasing the
wages to petitioners since their dismissal was found to be valid,
and to do so would constitute unjust enrichment.
Prior to Genuino, there had been no known similar case containing
a dispositive portion where the employee was required to refund
the salaries received on payroll reinstatement. In fact, in a catena
of cases, the Court did not order the refund of salaries garnished or
received by payroll-reinstated employees despite a subsequent
reversal of the reinstatement order.
The dearth of authority supporting Genuino is not difficult to
fathom for it would otherwise render inutile the rationale of
reinstatement pending appeal.
xxxx
x x x Then, by and pursuant to the same power (police power), the
State may authorize an immediate implementation, pending
appeal, of a decision reinstating a dismissed or separated
employee since that saving act is designed to stop, although
temporarily since the appeal may be decided in favor of the
appellant, a continuing threat or danger to the survival or even the
life of the dismissed or separated employee and his family.36
Furthermore, in Garcia, the Court went on to discuss the illogical
and unjust effects of the "refund doctrine" erroneously espoused
in Genuino:
Even outside the theoretical trappings of the discussion and into
the mundane realities of human experience, the "refund doctrine"
easily demonstrates how a favorable decision by the Labor Arbiter
could harm, more than help, a dismissed employee. The employee,
to make both ends meet, would necessarily have to use up the
salaries received during the pendency of the appeal, only to end up
having to refund the sum in case of a final unfavorable decision. It
is mirage of a stop-gap leading the employee to a risky cliff of
insolvency.1avvphi1
Advisably, the sum is better left unspent. It becomes more logical
and practical for the employee to refuse payroll reinstatement and
simply find work elsewhere in the interim, if any is available.
Notably, the option of payroll reinstatement belongs to the
employer, even if the employee is able and raring to return to
work. Prior to Genuino, it is unthinkable for one to refuse payroll
reinstatement. In the face of the grim possibilities, the rise of
concerned employees declining payroll reinstatement is on the
horizon.
Further, the Genuino ruling not only disregards the social justice
principles behind the rule, but also institutes a scheme unduly
favorable to management. Under such scheme, the salaries
dispensed pendente lite merely serve as a bond posted in
installment by the employer. For in the event of a reversal of the
Labor Arbiter's decision ordering reinstatement, the employer gets
back the same amount without having to spend ordinarily for bond
premiums. This circumvents, if not directly contradicts, the
proscription that the "posting of a bond [even a cash bond] by the
employer shall not stay the execution for reinstatement."
In playing down the stray posture in Genuino requiring the
dismissed employee on payroll reinstatement to refund the salaries
in case a final decision upholds the validity of the dismissal, the
Court realigns the proper course of the prevailing doctrine on
reinstatement pending appeal vis-à-vis the effect of a reversal on
appeal.
xxxx
The Court reaffirms the prevailing principle that even if the
order of reinstatement of the Labor Arbiter is reversed on
appeal, it is obligatory on the part of the employer to
reinstate and pay the wages of the dismissed employee
during the period of appeal until reversal by the higher
court. x x x.37 (Emphasis supplied.)
In sum, the Court reiterates the principle that reinstatement
pending appeal necessitates that it must be immediately self-
executory without need for a writ of execution during the pendency
of the appeal, if the law is to serve its noble purpose, and any
attempt on the part of the employer to evade or delay its execution
should not be allowed. Furthermore, we likewise restate our ruling
that an order for reinstatement entitles an employee to receive his
accrued backwages from the moment the reinstatement order was
issued up to the date when the same was reversed by a higher
court without fear of refunding what he had received. It cannot be
denied that, under our statutory and jurisprudential framework,
respondent is entitled to payment of her wages for the period after
December 5, 2003 until the Court of Appeals Decision dated
November 23, 2005, notwithstanding the finding therein that her
dismissal was legal and for just cause. Thus, the payment of such
wages cannot be deemed as unjust enrichment on respondent’s
part.
WHEREFORE, the petition is DENIED and the assailed Resolution
dated October 23, 2006 as well as the Resolution dated April 10,
2007 both issued by the Court of Appeals in CA-G.R. SP No. 88987
are hereby AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
SECOND DIVISION
G.R. No. 195227               April 21, 2014
FROILAN M. BERGONIO, JR., DEAN G. PELAEZ, CRISANTO O.
GEONGO, WARLITO O. JANAYA, SALVADOR VILLAR, JR.,
RONALDO CAFIRMA, RANDY LUCAR, ALBERTO ALBUERA,
DENNIS NOPUENTE and ALLAN SALVACION, Petitioners,  before the LA a manifestation for their immediate reinstatement.
vs.
SOUTH EAST ASIAN AIRLINES and IRENE
DORNIER, Respondents.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to
the September 30, 2010 decision2 and the January 13, 2011
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 112011.
This CA decision reversed the July 16, 2008 decision 4 of the
National Labor Relations Commission (NLRC), which, in turn,
affirmed the March 13, 2008 order5 of the Labor Arbiter (LA) in
NLRC Case No. 00-04-05469- 2004. The LA granted the Motion
filed by petitioners Froilan M. Bergonio, Jr., Dean G. Pelaez, et.al.,
(collectively, the petitioners) for the release of the garnished
amount to satisfy the petitioners’ accrued wages.
The Factual Antecedents
On April 30, 2004, the petitioners filed before the LA a complaint
for illegal dismissal and illegal suspension with prayer for
reinstatement against respondents South East Asian Airlines
(SEAIR) and Irene Dornier as SEAIR’s President (collectively, the
respondents).
In a decision dated May 31, 2005, the LA found the petitioners
illegally dismissed and ordered the respondents, among others, to
immediately reinstate the petitioners with full backwages. The
respondents received their copy of this decision on July 8, 2005.6
On August 20, 2005, the petitioners filed before the LA a Motion for
issuance of Writ of Execution for their immediate reinstatement.
During the scheduled pre-execution conference held on September
14, 2005, the respondents manifested their option to reinstate the
petitioners in the payroll. The payroll reinstatement, however, did
not materialize. Thus, on September 22, 2005, the petitioners filed
On October 3, 2005, the respondents filed an opposition to the
petitioners’ motion for execution.7 They claimed that the
relationship between them and the petitioners had already been
strained because of the petitioners’ threatening text messages,
thus precluding the latter’s reinstatement.
On October 7, 2005, the LA granted the petitioners’ motion and
issued a writ of execution.8
The respondents moved to quash the writ of execution with a
prayer to hold in abeyance the implementation of the
reinstatement order.9 They maintained that the relationship
between them and the petitioners had been so strained that
reinstatement was no longer possible.
The October 7, 2005 writ of execution was returned unsatisfied. In
response, the petitioners filed a motion for re-computation of
accrued wages, and, on January 25, 2006, a motion for execution
of the re-computed amount. On February 16, 2006, the LA granted
this motion and issued an alias writ of execution.10
On February 21, 2006, the respondents issued a motion; it directed Metrobank-San Lorenzo to release the
Memorandum11 directing the petitioners to report for work on
February 24, 2006. The petitioners failed to report for work on the
appointed date. On February 28, 2006, the respondents moved
before the LA to suspend the order for the petitioners’
reinstatement.12
Meanwhile, the respondents appealed with the NLRC the May 31,
2005 illegal dismissal ruling of the LA.
In an order dated August 15, 2006,13 the NLRC dismissed the
respondents’ appeal for non-perfection. The NLRC likewise denied
the respondents’ motion for reconsideration in its November 29,
2006 resolution, prompting the respondents to file before the CA a
petition for certiorari.
The NLRC issued an Entry of Judgment on February 6, 2007
declaring its November 29, 2006 resolution final and executory.
The petitioners forthwith filed with the LA another motion for the
issuance of a writ of execution, which the LA granted on April 24,
2007. The LA also issued another writ of execution. 14 A Notice of
Garnishment was thereafter issued to the respondents’ depositary
bank – Metrobank-San Lorenzo Village Branch, Makati City – in the
amount of ₱1,900,000.00 on June 6, 2007.
On December 18, 2007, the CA rendered its decision (on the illegal
dismissal ruling of the LA) partly granting the respondents’
petition. The CA declared the petitioners’ dismissal valid and
awarded them ₱30,000.00 as nominal damages for the
respondents’ failure to observe due process.
The records show that the petitioners appealed the December 18,
2007 CA decision with this Court. In a resolution dated August 4,
2008, the Court denied the petition. The Court likewise denied the
petitioners’ subsequent motion for reconsideration, and thereafter
issued an Entry of Judgment certifying that its August 4, 2008
resolution had become final and executory on March 9, 2009.
On January 31, 2008, the petitioners filed with the LA an Urgent
Ex-Parte Motion for the Immediate Release of the Garnished
Amount.
In its March 13, 2008 order,15 the LA granted the petitioners’
₱1,900,000.00 garnished amount. The LA found valid and
meritorious the respondents’ claim for accrued wages in view of the
respondents’ refusal to reinstate the petitioners despite the final
and executory nature of the reinstatement aspect of its (LA’s) May
31, 2005 decision. The LA noted that as of the December 18, 2007
CA decision (that reversed the illegal dismissal findings of the LA),
the petitioners’ accrued wages amounted to ₱3,078,366.33.
In its July 16, 2008 resolution,16 the NLRC affirmed in toto the LA’s
March 13, 2008 order. The NLRC afterwards denied the
respondents’ motion for reconsideration for lack of merit.17
The respondents assailed the July 16, 2008 decision and
September 29, 2009 resolution of the NLRC via a petition for
certiorari filed with the CA.
The CA’s ruling
The CA granted the respondents’ petition.18 It reversed and set
aside the July 16, 2008 decision and the September 29, 2009
resolution of the NLRC and remanded the case to the Computation
and Examination Unit of the NLRC for the proper computation of
the petitioners’ accrued wages, computed up to February 24, 2006.
The CA agreed that the reinstatement aspect of the LA’s decision is
immediately executory even pending appeal, such that the
employer is obliged to reinstate and pay the wages of the
dismissed employee during the period of appeal until the decision
(finding the employee illegally dismissed including the
reinstatement order) is reversed by a higher court. Applying this
principle, the CA noted that the petitioners’ accrued wages could
have been properly computed until December 18, 2007, the date of
the CA’s decision finding the petitioners validly dismissed.
The CA, however, pointed out that when the LA’s decision is
"reversed by a higher tribunal, an employee may be barred from
collecting the accrued wages if shown that the delay in enforcing
the reinstatement pending appeal was without fault" on the
employer’s part. In this case, the CA declared that the delay in the
execution of the reinstatement order was not due to the
respondents’ unjustified act or omission. Rather, the petitioners’
refusal to comply with the February 21, 2006 return-to-work
Memorandum that the respondents issued and personally delivered
to them (the petitioners) prevented the enforcement of the
reinstatement order.
Thus, the CA declared that, given this peculiar circumstance (of the
petitioners’ failure to report for work), the petitioners’ accrued
wages should only be computed until February 24, 2006 when they
were supposed to report for work per the return-to-work
Memorandum. Accordingly, the CA reversed, for grave abuse of
discretion, the NLRC’s July 16, 2008 decision that affirmed the LA’s
order to release the garnished amount.
The Petition
The petitioners argue that the CA gravely erred when it ruled,
contrary to Article 223, paragraph 3 of the Labor Code, that the
computation of their accrued wages stopped when they failed to
report for work on February 24, 2006. They maintain that the
February 21, 2006 Memorandum was merely an afterthought on
the respondents’ part to make it appear that they complied with
the LA’s October 7, 2005 writ of execution. They likewise argue
that had the respondents really intended to have them report for
work to comply with the writ of execution, the respondents could
and should have issued the Memorandum immediately after the LA
issued the first writ of execution. As matters stand, the
respondents issued the Memorandum more than four months after
the issuance of this writ and only after the LA issued the alias writ
of execution on February 16, 2006.
Additionally, the petitioners direct the Court’s attention to the
several pleadings that the respondents filed to prevent the
execution of the reinstatement aspect of the LA’s May 31, 2005
decision, i.e., the Opposition to the Issuance of the Writ of
Execution, the Motion to Quash the Writ of Execution and the
Motion to Suspend the Order of Reinstatement. They also point out
that in all these pleadings, the respondents claimed that strained
relationship barred their (the petitioners’) reinstatement, evidently
confirming the respondents’ lack of intention to reinstate them.
Finally, the petitioners point out that the February 21, 2006
Memorandum directed them to report for work at Clark Field,
Angeles, Pampanga instead of at the NAIA-Domestic Airport in
Pasay City where they had been assigned. They argue that this
directive to report for work at Clark Field violates Article 223,
paragraph 3 of the Labor Code that requires the employee’s
reinstatement to be under the same terms and conditions
prevailing prior to the dismissal. Moreover, they point out that the
respondents handed the Memorandum only to Pelaez, who did not
act in representation of the other petitioners, and only in the
afternoon of February 23, 2006.
Thus, the petitioners claim that the delay in their reinstatement
was in fact due to the respondents’ unjustified acts and that the
respondents never really complied with the LA’s reinstatement
order.
The Case for the Respondents
The respondents counter, in their comment,19 that the issues that
the petitioners raise in this petition are all factual in nature and had
already considered and explained in the CA decision. In any case,
the respondents maintain that the petitioners were validly
dismissed and that they complied with the LA’s reinstatement order
when it directed the petitioners to report back to work, which
directive the petitioners did not heed.
The respondents add that while the reinstatement of an employee
found illegally dismissed is immediately executory, the employer is
nevertheless not prohibited from questioning this rule especially
when the latter has valid and legal reasons to oppose the
employee’s reinstatement. In the petitioners’ case, the respondents
point out that their relationship had been so strained that
reinstatement was no longer possible. Despite this strained
relationship, the respondents point out that they still required the
petitioners to report back to work if only to comply with the LA’s
reinstatement order. Instead of reporting for work as directed, the
petitioners, however, insisted for a payroll reinstatement, which
option the law grants to them (the respondents) as employer. Also,
contrary to the petitioners’ claim, the Memorandum directed them
to report at Clark Field, Pampanga only for a re-orientation of their
respective duties and responsibilities.
Thus, relying on the CA’s ruling, the respondents claim that the
delay in the petitioners’ reinstatement was in fact due to the
latter’s refusal to report for work after the issuance of the February
21, 2006 Memorandum in addition to their strained relationship.
The Court’s Ruling
We GRANT the petition.
Preliminary considerations: jurisdictional
limitations of the Court’s Rule 45 review of
the CA’s Rule 65 decision in labor cases
In a Rule 45 petition for review on certiorari, what we review are
the legal errors that the CA may have committed in the assailed
decision, in contrast with the review for jurisdictional errors that we
undertake in an original certiorari action. In reviewing the legal
correctness of the CA decision in a labor case taken under Rule 65
of the Rules of Court, we examine the CA decision in the context
that it determined the presence or the 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.
Otherwise stated, we proceed from the premise that the CA
undertook a Rule 65 review, not a review on appeal, of the NLRC
decision challenged before it. Within this narrow scope of our Rule
45 review, the question that we ask is: Did the CA correctly
determine whether the NLRC committed grave abuse of discretion
in ruling on the case?20
In addition, the Court’s jurisdiction in a Rule 45 petition for review
on certiorari is limited to resolving only questions of law.
The present petition essentially raises the question – whether the
petitioners may recover the accrued wages prior to the CA’s
reversal of the LA’s May 31, 2005 decision. This is a question of
law that falls well within the Court’s power in a Rule 45 petition.
Resolution of this question of law, however, is inextricably linked
with the largely factual issue of whether the accrued wages should
be computed until December 17, 2008 when the CA reversed the
illegal dismissal findings of the LA or only until February 24, 2006
when the petitioners were supposed to report for work per the
February 21, 2006 Memorandum. In either case, the determination
of this factual issue presupposes another factual issue, i.e.,
whether the delay in the execution of the reinstatement order was
due to the respondents’ fault. As questions of fact, they are
proscribed by our Rule 45 jurisdiction; we generally cannot address
these factual issues except to the extent necessary to determine
whether the CA correctly found the NLRC in grave abuse of
discretion in affirming the release of the garnished amount despite
the respondents’ issuance of and the petitioners’ failure to comply
with the February 21, 2006 return-to-work Memorandum.
The jurisdictional limitations of our Rule 45 review of the CA’s Rule
65 decision in labor cases, notwithstanding, we resolve this
petition’s factual issues for we find legal errors in the CA’s decision.
Our consideration of the facts taken within this narrow scope of our
factual review power convinced us, as our subsequent discussion
will show, that no grave abuse of discretion attended the NLRC
decision.
Nature of the reinstatement aspect of the
LA’s decision on a finding of illegal
dismissal
Article 223 (now Article 229)21 of the Labor Code governs appeals
from, and the execution of, the LA’s decision. Pertinently,
paragraph 3, Article 223 of the Labor Code provides:
Article 223. APPEAL
xxxx
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, 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. [Emphasis and
underscoring supplied]
Under paragraph 3, Article 223 of the Labor Code, the LA’s order
for the reinstatement of an employee found illegally dismissed is
immediately executory even during pendency of the employer’s
appeal from the decision. Under this provision, the employer must
reinstate the employee – either by physically admitting him under
the conditions prevailing prior to his dismissal, and paying his
wages; or, at the employer’s option, merely reinstating the
employee in the payroll until the decision is reversed by the higher
court.22 Failure of the employer to comply with the reinstatement
order, by exercising the options in the alternative, renders him
liable to pay the employee’s salaries.23
Otherwise stated, a dismissed employee whose case was favorably
decided by the LA is entitled to receive wages pending appeal upon
reinstatement, which reinstatement is immediately
executory.24 Unless the appellate tribunal issues a restraining
order, the LA is duty bound to implement the order of
reinstatement and the employer has no option but to comply with
it.25
Moreover, and equally worth emphasizing, is that an order of
reinstatement issued by the LA is self-executory, i.e., the
dismissed employee need not even apply for and the LA need not
even issue a writ of execution to trigger the employer’s duty to
reinstate the dismissed employee.
26
In Pioneer Texturizing Corp. v. NLRC, et. al.,  decided in 1997, the
Court clarified once and for all this self-executory nature of a
reinstatement order. After tracing back the various Court rulings
interpreting the amendments introduced by Republic Act No.
671527 on the reinstatement aspect of a labor decision under Article
223 of the Labor Code, the Court concluded that to otherwise
"require the application for and issuance of a writ of execution as
prerequisites for the execution of a reinstatement award would
certainly betray and run counter to the very object and intent of
Article 223, i.e., the immediate execution of a reinstatement
order."28
In short, therefore, with respect to decisions reinstating
employees, the law itself has determined a sufficiently
overwhelming reason for its immediate and automatic execution
even pending appeal.29 The employer is duty-bound to reinstate the
employee, failing which, the employer is liable instead to pay the
dismissed employee’s salary. The Court’s consistent and prevailing
treatment and interpretation of the reinstatement order as
immediately enforceable, in fact, merely underscores the right to
security of tenure of employees that the Constitution30 protects.
The employer is obliged to pay the
dismissed employee’s salary if he
refuses to reinstate until actual
reinstatement or reversal by a higher
tribunal; circumstances that may bar an
employee from receiving the accrued wages
As we amply discussed above, an employer is obliged to
immediately reinstate the employee upon the LA’s finding of illegal
dismissal; if the employer fails, it is liable to pay the salary of the
dismissed employee. Of course, it is not always the case that the
LA’s finding of illegal dismissal is, on appeal by the employer,
upheld by the appellate court. After the LA’s decision is reversed by
a higher tribunal, the employer’s duty to reinstate the dismissed
employee is effectively terminated. This means that an employer is
no longer obliged to keep the employee in the actual service or in
the payroll. The employee, in turn, is not required to return the
wages that he had received prior to the reversal of the LA’s
decision.31
The reversal by a higher tribunal of the LA’s finding (of illegal
dismissal), notwithstanding, an employer, who, despite the LA’s
order of reinstatement, did not reinstate the employee during the
pendency of the appeal up to the reversal by a higher tribunal may
still be held liable for the accrued wages of the employee, i.e., the
unpaid salary accruing up to the time the higher tribunal reverses
the decision.32 The rule, therefore, is that an employee may still
recover the accrued wages up to and despite the reversal by the
higher tribunal. This entitlement of the employee to the accrued
wages proceeds from the immediate and self-executory nature of
the reinstatement aspect of the LA’s decision.
By way of exception to the above rule, an employee may be barred
from collecting the accrued wages if shown that the delay in
enforcing the reinstatement pending appeal was without fault on
the part of the employer. To determine whether an employee is
thus barred, two tests must be satisfied: (1) actual delay or the
fact that the order of reinstatement pending appeal was not
executed prior to its reversal; and (2) the delay must not be due to
the employer’s unjustified act or omission. Note that under the
second test, the delay must be without the employer’s fault. If the
delay is due to the employer’s unjustified refusal, the employer
may still be required to pay the salaries notwithstanding the
reversal of the LA’s decision.33
Application of the two-fold test; the
petitioners are entitled to receive their
accrued salaries until December 18, 2007
As we earlier pointed out, the core issue to be resolved is whether
the petitioners may recover the accrued wages until the CA’s
reversal of the LA’s decision. An affirmative answer to this question
will lead us to reverse the assailed CA decision for legal errors and
reinstate the NLRC’s decision affirming the release of the garnished
amount. Otherwise, we uphold the CA’s decision to be legally
correct. To resolve this question, we apply the two-fold test.
First, the existence of delay - whether there was actual delay or
whether the order of reinstatement pending appeal was not
executed prior to its reversal? We answer this test in the
affirmative.
To recall, on May 31, 2005, the LA rendered the decision finding
the petitioners illegally dismissed and ordering their immediate
reinstatement. Per the records, the respondents received copy of
this decision on July 8, 2005. On August 20, 2005, the petitioners
filed before the LA a Motion for Issuance of Writ of Execution for
their immediate reinstatement. The LA issued the Writ of Execution
on October 7, 2005. From the time the respondents received copy
of the LA’s decision, and the issuance of the writ of execution, until
the CA reversed this decision on December 17, 2008, the
respondents had not reinstated the petitioners, either by actual
reinstatement or in the payroll. This continued non-execution of
the reinstatement order in fact moved the LA to issue an alias writ
of execution on February 16, 2006 and another writ of execution
on April 24, 2007.
From these facts and without doubt, there was actual delay in the
execution of the reinstatement aspect of the LA’s May 31, 2005
decision before it was reversed in the CA’s decision.
Second, the cause of the delay – whether the delay was not due to
the employer’s unjustified act or omission. We answer this test in
the negative; we find that the delay in the execution of the
reinstatement pending appeal was due to the respondents’
unjustified acts.
In reversing, for grave abuse of discretion, the NLRC’s order
affirming the release of the garnished amount, the CA relied on the
fact of the issuance of the February 21, 2006 Memorandum and of
the petitioners’ failure to comply with its return-to-work directive.
In other words, with the issuance of this Memorandum, the CA
considered the respondents as having sufficiently complied with
their obligation to reinstate the petitioners. And, the subsequent
delay in or the non-execution of the reinstatement order was no
longer the respondents’ fault, but rather of the petitioners who
refused to report back to work despite the directive.
Our careful consideration of the facts and the circumstances that
surrounded the case convinced us that the delay in the
reinstatement pending appeal was due to the respondents’ fault.
For one, the respondents filed several pleadings to suspend the
execution of the LA’s reinstatement order, i.e., the opposition to
the petitioners’ motion for execution filed on October 3, 2005; the
motion to quash the October 7, 2005 writ of execution with prayer
to hold in abeyance the implementation of the reinstatement order;
and the motion to suspend the order for the petitioners’
reinstatement filed on February 28, 2006 after the LA issued the
February 16, 2006 alias writ of execution. These pleadings, to our
mind, show a determined effort on the respondents’ part to
prevent or suspend the execution of the reinstatement pending
appeal.
Another reason is that the respondents, contrary to the CA’s
conclusion, did not sufficiently notify the petitioners of their intent
to actually reinstate them; neither did the respondents give them
ample opportunity to comply with the return-to-work directive. We
note that the respondents delivered the February 21, 2006
Memorandum (requiring the petitioners to report for work on
February 24, 2006) only in the afternoon of February 23, 2006.
Worse, the respondents handed the notice to only one of the
petitioners – Pelaez – who did not act in representation of the
others. Evidently, the petitioners could not reasonably be expected
to comply with a directive that they had no or insufficient notice of.
Lastly, the petitioners continuously and actively pursued the
execution of the reinstatement aspect of the LA’s decision, i.e., by
filing several motions for execution of the reinstatement order, and
motion to cite the respondents in contempt and re-computation of
the accrued wages for the respondents’ continued failure to
reinstate them.
These facts altogether show that the respondents were not at all
sincere in reinstating the petitioners. These facts – when taken
together with the fact of delay – reveal the respondents’ obstinate
resolve and willful disregard of the immediate and self-executory
nature of the reinstatement aspect of the LA’s decision.
A further and final point that we considered in concluding that the
delay was due to the respondents’ fault is the fact that per the
2005 Revised Rules of Procedure of the NLRC (2005 NLRC
Rules),34 employers are required to submit a report of compliance
within ten (10) calendar days from receipt of the LA’s decision,
noncompliance with which signifies a clear refusal to reinstate.
Arguably, the 2005 NLRC Rules took effect only on January 7,
2006; hence, the respondents could not have been reasonably
expected to comply with this duty that was not yet in effect when
the LA rendered its decision (finding illegal dismissal) and issued
the writ of execution in 2005. Nevertheless, when the LA issued
the February 16, 2006 alias writ of execution and the April 24,
2007 writ of execution, the 2005 NLRC Rules was already in place
such that the respondents had become duty-bound to submit the
required compliance report; their noncompliance with this rule all
the more showed a clear and determined refusal to reinstate.
petitioners' accrued salary until the LA decision was reversed by
the CA on December 17, 2008. We, therefore, find that the NLRC,
in affirming the release of the garnished amount, merely
implemented the mandate of Article 223; it simply recognized as
immediate and self-executory the reinstatement aspect of the LA's
decision.
Accordingly, we reverse for legal errors the CA
decision.1âwphi1 We find no grave abuse of discretion attended
the NLRC's July 16, 2008 resolution that affirmed the March 13,
2008 decision of the LA granting the release of the garnished
amount.
WHEREFORE, in light of these considerations, we hereby GRANT
the petition. We REVERSE and SET ASIDE the September 30, 2010
decision and the January 13, 2011 resolution of the Court of
Appeals (CA) in CA-G.R. Sp No. 112011. Accordingly, we
REINSTATE the July 16, 2008 decision of the National Labor
Relations Commission (NLRC) affirming the March 13, 2008 order
of the Labor Arbiter in NLRC Case No. 00-04-05469-2004.
Costs against the respondents South East Asian Airlines and Irene
Dornier.
SO ORDERED.

All told, under the facts and the surrounding circumstances, the
delay was due to the acts of the respondents that we find were
unjustified. We reiterate and emphasize, Article 223, paragraph 3,
of the Labor Code mandates the employer to immediately reinstate
the dismissed employee, either by actually reinstating him/her
under the conditions prevailing prior to the dismissal or, at the
option of the employer, in the payroll. The respondents' failure in
this case to exercise either option rendered them liable for the