G.R. No.

167614               March 24, 2009

ANTONIO M. SERRANO  vs. Gallant MARITIME SERVICES, INC. and MARLOW
NAVIGATION CO., INC.

FACTS:

Antonio Serrano, claims that the 5th paragraph of Section 10, Republic Act (R.A.) No.
8042 violates the OFWs' constitutional rights in that it impairs the terms of their contract,
deprives them of equal protection and denies them due process.
  Section 10, Republic Act (R.A.) No. 8042 provides:Sec. 10. Money Claims. - x x x In case
of termination of overseas employment without just, valid or authorized cause as defined by
law or contract, the workers shall be entitled to the full reimbursement of his placement fee
with interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion
of his employment contract or for three (3) months for every year of the unexpired term,
whichever is less. x x x x (Emphasis and underscoring supplied)

Antonio Serrano (serrano for brevity) was a Filipino sea fairer employed as Chief Officer
by Gallant Maritime Services Inc and Marlow Navigation Co., Inc (respondents for
brevity) under a 12- month contract with Basic Monthly Salary of US$1400. However,
when he departed on March 19. 1998, Serrno was constrained to accept a downgraded
employment of Second Officer with monthly salary of US$1,000 with the assurance that
he would be made Chief Officer by the end of April 1998. However, respondents failed
to keep their promise so Serrano refused to stay as Second Oficer and was repatriated
to the Philippines, having served only 2 months and 7 days of the 12 month contract.

Serrano filed a complaint before the Labor arbiter for constructive dismissal and
payment of money claims (total US$26442.73), moral and exemplary damages, and
attorney’s fees.

LABOR ARBITER: Serrano was declared illegally dismissed and was awarded

monetary benefits, representing Serrano’s salary for three (3) months of the
unexpired portion of his employment contract (total USD8,770) at the exchange rate
of USD45 and attorney’s fees equivalent to 10% of total amount awarded. LA’s basis
was Serrano’s basic pay (USD1,400), fixed overtime pay (USD700), vacation leave pay
(USD490).

Serrano appealed to the NLRC, arguing that he is entitled to his salaries for the
unexpired portion of his contract pursuant to Tripe Intefrated Services Inc vs. NLRC.

NLRC: NLRC modified the monetary awards and ordered respondents to pay only
USD4669 which is equivalent to 3 months salary (USD1400 x 3); Salary differential of
USD45 and 10% attorney’s fees of USD424.5, reasoning that R.A. No. 8042 "does not
provide for the award of overtime pay, which should be proven to have been
actually performed, and for vacation leave pay. Other findings were affirmed.
 Serrano questioned the constitutionality of said provision.

Court of Appeals: The CA affirmed the NLRC’s ruling on the reduction but skirted the
constitutional issue.

Respondents argue that respondent cannot belatedly question the constitutionality of

the said law on appeal.

The Sol Gen (OSG) argues that since the law preceded Serrano’s contract, it
(especially the monetary claims) is deemed incorporated therat sans stipulation. The
OSG further contends that there is a reasonable and valid basis to differentiate OFW
from local workers; and therefore the provision does not violate the equal protection
clause nor sec. 18 Art. II of the Constitution.

ISSUES:

1.    Whether or not the issue of Constitutionality was timely raised by Serrano and
before the proper tribunal

2.     Whether or not Section 10 of Rep. Act No. 8402 is constitutional.

3.     Whether or not Serrano is entitled to salaries equivalent of three months of the

unexpired portion or salaries equivalent of the entire nine months and 23 days
left of his employment contract including overtime pay and holiday pay.

RULING:

1.         The Court may exercise its power of judicial review of acts of a co-equal branch, i.e
Congress, when the following conditions are satisfied:

a.         There is an actual controversy

b.     The constitutional question is raised by proper party and at the earliest opportunity
c.         The constitutional question is the very lis mota of the case.

In ruling that the conditions were met, the Court ruled that:

   There is an actual controversy re the Labor and CA’s computation of Serrano’s

monetary claims.

   The issue on Constitutionality was timely raised when Serrano raised the same before
the Court of Appeals, such court having been vested with the power of judicial review to
declare a law unconstitutional.

   The constitutional issue is critical to the resolution of the monetary claim of Serrano.
2.         On Violation of Non-Impairment Clause (Sec 10, Art II of the Constitution)
  
The provision does not violate the principle of non-impairment of contract (as the law
preceded the contract and laws operate prospectively.

On Violation of Sec 1, Art III; Sec 18, Art II; and Section 3 of Article XIII of the
Constitution

The subject clause VIOLATES the Equal Protection Clause and Right of an

individual to due Process(Sec 1, Art III), recognizing their rights as a protected
Sector (Sec 18, Art II; and Section 3 of Article XIII)

Prior to R.A. 8042, all OFWs who were illegally terminated were subjected to a uniform
rule of monetary benefits computation: basic salary times the entire  unexpired portion
of their employment. However, upon the enactment of R.A. 8042, illegally dismissed
employees with unexpired portion of 1 year or more are singled out and subjected to the
disadvantageous monetary award of 3 months of their unexpired portion; as opposed to
those illegally terminated OFWs with unexpired contracts of less than one year who are
entitled to their salaries for the unexpired period; and illegally dismissed local workers
with fixed-term employment who are not subjected to the 3-cap limitation.

Filipino workers are protected and afforded certain rights under the Constitution subject to
the inherent power of Congress to incorporate a system of classification into its legislation. 

There is a valid classification if the classification is

1.) based on substantial distinction,
2.) germane to the purpose of law,
3) it is not limited to existing conditions; and
4) it applies equally to all members of the class.

There are three levels of scrutiny at which the Court reviews the constitutionality of a
classification embodied in a law:

1.) the deferential or rational basis scrutiny in which the challenged classification needs only
be shown to be rationally related to serving a legitimate state interest
2.) the middle-tier or intermediate scrutiny in which the government must show that the
challenged classification serves an important state interest and that the classification is at
least substantially related to serving that interest; and
3.)) strict judicial scrutiny in which a legislative classification which impermissibly interferes
with the exercise of a fundamental right or operates to the peculiar disadvantage of a
suspect class is presumed unconstitutional, and the burden is upon the government to
prove that the classification is necessary to achieve a compelling state interest and that it
is the least restrictive means to protect such interest

In American jurisprudence, strict scrutiny is triggered by suspect classifications based

on race or gender but not when the classification is drawn along income
 categories. However, foreign decisions, although persuasive, are not per se controlling
in the Philippines. Philippine laws are  to be construed in light of our lawmakers intent
and construed to serve our own public interest.

Imbued with the same sense of "obligation to afford protection to labor," the Court in the
present case also employs the standard of strict judicial scrutiny, for it perceives in the
subject clause a suspect classification prejudicial to OFWs.

In the present case, the Court dug deep into the records but found no compelling state
interest that the subject clause may possibly serve.

The Court ruled that the Government has failed to discharge its burden of proving the
existence of a compelling state interest that would justify the perpetuation of the
discrimination against OFWs under the subject clause.

The Court declared the provision unconstitutional clause VIOLATES the Equal

Protection Clause and Right of an individual to due Process(Sec 1, Art III),
recognizing their rights as a protected Sector (Sec 18, Art II; and Section 3 of Article
XIII).

Note how the Court approaches the issue applying Section 1, Art III and not solely on the
provisions re the Constitution’s state policy on labor.

This is so because Setion 3 of Article XII is not a self-executing provision and it cannot on
its own, be a source of enforceable right. What it does is recognize labor as a protected
sector; otherwise, it will lead to a broad interpretation would suggest a blanket shield in
favor of labor.

In declaring the subject clause unconstitutional, the Court reasoned that since the same
deprived Serrano of property and money benefits without an existing valid and definitive
governmental purpose, it violated not only Serrano’s right to equal protection but as well as
his right to substantive due process under (Section1, Art. III of the Constitution); thus,
entitling Serrano to his salaries for the entire unexpired period.

3.         Serrano is entitled to his salaries for the entire unexpired period, not

including his overtime and leave pay because there is no evidence that he
performed work during those periods.

Salary is understood as the basic wage, exclusive of overtime, leave pay and other
bonuses; whereas overtime pay is compensation for all work "performed" in excess of
the regular eight hours, and holiday pay is compensation for any work "performed" on
designated rest days and holidays.