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)

does not magnify the contributions of overseas Filipino workers (OFWs) to national development, but
exacerbates the hardships borne by them by unduly limiting their entitlement in case of illegal dismissal to
their lump-sum salary either for the unexpired portion of their employment contract "or for three months for
every year of the unexpired term, whichever is less" (subject clause). Petitioner claims that the last clause
violates the OFWs' constitutional rights in that it impairs the terms of their contract, deprives them of equal
protection and denies them due process.

By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the December 8, 2004
Decision3 and April 1, 2005 Resolution4 of the Court of Appeals (CA), which applied the subject clause,
entreating this Court to declare the subject clause unconstitutional.

Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. (respondents) under a
Philippine Overseas Employment Administration (POEA)-approved Contract of Employment with the following
terms and conditions:

Duration of contract 12 months

G.R. No. 167614               March 24, 2009 Position Chief Officer

Basic monthly salary US$1,400.00

ANTONIO M. SERRANO, Petitioner,
vs. Hours of work 48.0 hours per week
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents.
Overtime US$700.00 per month

DECISION Vacation leave with pay 7.00 days per month5

AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families and communities out of poverty. Their
earnings have built houses, provided health care, equipped schools and planted the seeds of businesses.
They have woven together the world by transmitting ideas and knowledge from country to country. They have
provided the dynamic human link between cultures, societies and economies. Yet, only recently have we
begun to understand not only how much international migration impacts development, but how smart public
policies can magnify this effect.
United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 20071
For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of Section 10,
Republic Act (R.A.) No. 8042,2 to wit:
On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded
employment contract for the position of Second Officer with a monthly salary of US$1,000.00, upon the
assurance and representation of respondents that he would be made Chief Officer by the end of April 1998.6
Respondents did not deliver on their promise to make petitioner Chief Officer.7 Hence, petitioner refused to
stay on as Second Officer and was repatriated to the Philippines on May 26, 1998.8
Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to March 19, 1999,
but at the time of his repatriation on May 26, 1998, he had served only two (2) months and seven (7) days of
his contract, leaving an unexpired portion of nine (9) months and twenty-three (23) days.
Petitioner filed with the Labor Arbiter (LA) a Complaint9 against respondents for constructive dismissal and for
payment of his money claims in the total amount of US$26,442.73, broken down as follows:
May 27/31, 1998 (5 days) incl. Leave pay US$ 413.90

LABOR-1 Batch 1 Page 1 of 69

 June 01/30, 1998 2,590.00 complainant’s (petitioner's) claim for attorney’s fees equivalent to ten percent (10%) of the total
amount awarded to the aforesaid employee under this Decision.
July 01/31, 1998 2,590.00
The claims of the complainant for moral and exemplary damages are hereby DISMISSED for lack of
August 01/31, 1998 2,590.00
merit.
Sept. 01/30, 1998 2,590.00
All other claims are hereby DISMISSED.
Oct. 01/31, 1998 2,590.00

Nov. 01/30, 1998 2,590.00 SO ORDERED.13 (Emphasis supplied)

Dec. 01/31, 1998 2,590.00
In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on the
Jan. 01/31, 1999 2,590.00 salary period of three months only -- rather than the entire unexpired portion of nine months and 23
days of petitioner's employment contract - applying the subject clause. However, the LA applied the
Feb. 01/28, 1999 2,590.00 salary rate of US$2,590.00, consisting of petitioner's "[b]asic salary, US$1,400.00/month +
US$700.00/month, fixed overtime pay, + US$490.00/month, vacation leave pay =
Mar. 1/19, 1999 (19 days) incl. leave pay 1,640.00
US$2,590.00/compensation per month."14
  ------------------------------------------
-------------------------------------- Respondents appealed15 to the National Labor Relations Commission (NLRC) to question the finding
of the LA that petitioner was illegally dismissed.
  25,382.23

Amount adjusted to chief mate's salary   Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not applying the ruling
of the Court in Triple Integrated Services, Inc. v. National Labor Relations Commission 17 that in case
(March 19/31, 1998 to April 1/30, 1998) + 1,060.5010 of illegal dismissal, OFWs are entitled to their salaries for the unexpired portion of their contracts.18
  ------------------------------------------
------------------------------------------ In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:
----------
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby ordered to
TOTAL CLAIM US$ 26,442.7311 pay complainant, jointly and severally, in Philippine currency, at the prevailing rate of exchange at
the time of payment the following:
as well as moral and exemplary damages and attorney's fees.
1. Three (3) months salary
The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal and
$1,400 x 3 US$4,200.00
awarding him monetary benefits, to wit:
2. Salary differential 45.00
WHEREFORE, premises considered, judgment is hereby rendered declaring that the dismissal of
US$4,245.00
the complainant (petitioner) by the respondents in the above-entitled case was illegal and the
respondents are hereby ordered to pay the complainant [petitioner], jointly and severally, in 3. 10% Attorney’s fees 424.50
Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount
of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00), TOTAL US$4,669.50
representing the complainant’s salary for three (3) months of the unexpired portion of the
aforesaid contract of employment.1avvphi1
The other findings are affirmed.
The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally, in
Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount of SO ORDERED.19
FORTY FIVE U.S. DOLLARS (US$ 45.00),12 representing the complainant’s claim for a salary
differential. In addition, the respondents are hereby ordered to pay the complainant, jointly and The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by reducing the
severally, in Philippine Currency, at the exchange rate prevailing at the time of payment, the applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042 "does not provide for the

LABOR-1 Batch 1 Page 2 of 69

award of overtime pay, which should be proven to have been actually performed, and for vacation leave
pay."20
Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality of the
subject clause.21 The NLRC denied the motion.22
Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional challenge against the subject
clause.24 After initially dismissing the petition on a technicality, the CA eventually gave due course to it, as
directed by this Court in its Resolution dated August 7, 2003 which granted the petition for certiorari, docketed
as G.R. No. 151833, filed by petitioner.
In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the applicable
salary rate; however, the CA skirted the constitutional issue raised by petitioner.25
His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this Court on
the following grounds:
I to negotiate for and stipulate in their overseas employment contracts a determinate employment period and a
The Court of Appeals and the labor tribunals have decided the case in a way not in accord with applicable
decision of the Supreme Court involving similar issue of granting unto the migrant worker back wages equal to
the unexpired portion of his contract of employment instead of limiting it to three (3) months
II
In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their interpretation
of Section 10 of Republic Act No. 8042, it is submitted that the Court of Appeals gravely erred in law when it
failed to discharge its judicial duty to decide questions of substance not theretofore determined by the
Honorable Supreme Court, particularly, the constitutional issues raised by the petitioner on the
constitutionality of said law, which unreasonably, unfairly and arbitrarily limits payment of the award for back
wages of overseas workers to three (3) months.
III
Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042, the Court of
Appeals gravely erred in law in excluding from petitioner’s award the overtime pay and vacation pay provided
in his contract since under the contract they form part of his salary.28
On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old and sickly, and
he intends to make use of the monetary award for his medical treatment and medication.29 Required to
comment, counsel for petitioner filed a motion, urging the court to allow partial execution of the undisputed
monetary award and, at the same time, praying that the constitutional question be resolved.30
Considering that the parties have filed their respective memoranda, the Court now takes up the full merit of
the petition mindful of the extreme importance of the constitutional question raised therein.
On the first and second issues
LABOR-1 Batch 1
The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not disputed.
Likewise not disputed is the salary differential of US$45.00 awarded to petitioner in all three fora. What
remains disputed is only the computation of the lump-sum salary to be awarded to petitioner by reason of his
illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at the monthly
rate of US$1,400.00 covering the period of three months out of the unexpired portion of nine months and 23
days of his employment contract or a total of US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the US$4,200.00
awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a total of US$25,382.23, equivalent
to his salaries for the entire nine months and 23 days left of his employment contract, computed at the
monthly rate of US$2,590.00.31
The Arguments of Petitioner
Petitioner contends that the subject clause is unconstitutional because it unduly impairs the freedom of OFWs
fixed salary package.32 It also impinges on the equal protection clause, for it treats OFWs differently from local
Filipino workers (local workers) by putting a cap on the amount of lump-sum salary to which OFWs are
entitled in case of illegal dismissal, while setting no limit to the same monetary award for local workers when
their dismissal is declared illegal; that the disparate treatment is not reasonable as there is no substantial
distinction between the two groups;33 and that it defeats Section 18,34 Article II of the Constitution which
guarantees the protection of the rights and welfare of all Filipino workers, whether deployed locally or
overseas.35
Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line with existing
jurisprudence on the issue of money claims of illegally dismissed OFWs. Though there are conflicting rulings
on this, petitioner urges the Court to sort them out for the guidance of affected OFWs.36
Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves no other
purpose but to benefit local placement agencies. He marks the statement made by the Solicitor General in his
Memorandum, viz.:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event
that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its
obligation. Hence, placement agencies that are in good faith and which fulfill their obligations are
unnecessarily penalized for the acts of the foreign employer. To protect them and to promote their continued
helpful contribution in deploying Filipino migrant workers, liability for money claims was reduced under
Section 10 of R.A. No. 8042. 37 (Emphasis supplied)
Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause sacrifices
the well-being of OFWs. Not only that, the provision makes foreign employers better off than local employers
because in cases involving the illegal dismissal of employees, foreign employers are liable for salaries
covering a maximum of only three months of the unexpired employment contract while local employers are
liable for the full lump-sum salaries of their employees. As petitioner puts it:
In terms of practical application, the local employers are not limited to the amount of backwages they have to
give their employees they have illegally dismissed, following well-entrenched and unequivocal jurisprudence
on the matter. On the other hand, foreign employers will only be limited to giving the illegally dismissed
Page 3 of 69
migrant workers the maximum of three (3) months unpaid salaries notwithstanding the unexpired term of the
contract that can be more than three (3) months.38
Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives him of the
salaries and other emoluments he is entitled to under his fixed-period employment contract.39
The Arguments of Respondents
In their Comment and Memorandum, respondents contend that the constitutional issue should not be
entertained, for this was belatedly interposed by petitioner in his appeal before the CA, and not at the earliest
opportunity, which was when he filed an appeal before the NLRC.40
The Arguments of the Solicitor General
The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995, its provisions
could not have impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042 having preceded
petitioner's contract, the provisions thereof are deemed part of the minimum terms of petitioner's employment,
especially on the matter of money claims, as this was not stipulated upon by the parties.42
Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their
employment, such that their rights to monetary benefits must necessarily be treated differently. The OSG
enumerates the essential elements that distinguish OFWs from local workers: first, while local workers
perform their jobs within Philippine territory, OFWs perform their jobs for foreign employers, over whom it is
difficult for our courts to acquire jurisdiction, or against whom it is almost impossible to enforce judgment; and
second, as held in Coyoca v. National Labor Relations Commission43 and Millares v. National Labor Relations
Commission,44 OFWs are contractual employees who can never acquire regular employment status, unlike
local workers who are or can become regular employees. Hence, the OSG posits that there are rights and
privileges exclusive to local workers, but not available to OFWs; that these peculiarities make for a reasonable
and valid basis for the differentiated treatment under the subject clause of the money claims of OFWs who are
illegally dismissed. Thus, the provision does not violate the equal protection clause nor Section 18, Article II of
the Constitution.45
Lastly, the OSG defends the rationale behind the subject clause as a police power measure adopted to
mitigate the solidary liability of placement agencies for this "redounds to the benefit of the migrant workers
whose welfare the government seeks to promote. The survival of legitimate placement agencies helps
[assure] the government that migrant workers are properly deployed and are employed under decent and
humane conditions."46
The Court's Ruling
The Court sustains petitioner on the first and second issues.
When the Court is called upon to exercise its power of judicial review of the acts of its co-equals, such as the
Congress, it does so only when these conditions obtain: (1) that there is an actual case or controversy
involving a conflict of rights susceptible of judicial determination;47 (2) that the constitutional question is raised
by a proper party48 and at the earliest opportunity;49 and (3) that the constitutional question is the very lis mota
of the case,50 otherwise the Court will dismiss the case or decide the same on some other ground.51
LABOR-1 Batch 1
Without a doubt, there exists in this case an actual controversy directly involving petitioner who is personally
aggrieved that the labor tribunals and the CA computed his monetary award based on the salary period of
three months only as provided under the subject clause.
The constitutional challenge is also timely. It should be borne in mind that the requirement that a constitutional
issue be raised at the earliest opportunity entails the interposition of the issue in the pleadings before
a competent court, such that, if the issue is not raised in the pleadings before that competent court, it cannot
be considered at the trial and, if not considered in the trial, it cannot be considered on appeal.52 Records
disclose that the issue on the constitutionality of the subject clause was first raised, not in petitioner's appeal
with the NLRC, but in his Motion for Partial Reconsideration with said labor tribunal,53 and reiterated in his
Petition for Certiorari before the CA.54 Nonetheless, the issue is deemed seasonably raised because it is not
the NLRC but the CA which has the competence to resolve the constitutional issue. The NLRC is a labor
tribunal that merely performs a quasi-judicial function – its function in the present case is limited to
determining questions of fact to which the legislative policy of R.A. No. 8042 is to be applied and to resolving
such questions in accordance with the standards laid down by the law itself;55 thus, its foremost function is to
administer and enforce R.A. No. 8042, and not to inquire into the validity of its provisions. The CA, on the
other hand, is vested with the power of judicial review or the power to declare unconstitutional a law or a
provision thereof, such as the subject clause.56 Petitioner's interposition of the constitutional issue before the
CA was undoubtedly seasonable. The CA was therefore remiss in failing to take up the issue in its decision.
The third condition that the constitutional issue be critical to the resolution of the case likewise obtains
because the monetary claim of petitioner to his lump-sum salary for the entire unexpired portion of his 12-
month employment contract, and not just for a period of three months, strikes at the very core of the subject
clause.
Thus, the stage is all set for the determination of the constitutionality of the subject clause.
Does the subject clause violate Section 10,
Article III of the Constitution on non-impairment
of contracts?
The answer is in the negative.
Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on the term of
his employment and the fixed salary package he will receive57 is not tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws newly enacted have only a prospective
operation,58 and cannot affect acts or contracts already perfected;59 however, as to laws already in existence,
their provisions are read into contracts and deemed a part thereof.60 Thus, the non-impairment clause under
Section 10, Article II is limited in application to laws about to be enacted that would in any way derogate from
existing acts or contracts by enlarging, abridging or in any manner changing the intention of the parties
thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution of the
employment contract between petitioner and respondents in 1998. Hence, it cannot be argued that R.A. No.
Page 4 of 69
8042, particularly the subject clause, impaired the employment contract of the parties. Rather, when the
parties executed their 1998 employment contract, they were deemed to have incorporated into it all the
provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause may not be declared unconstitutional
on the ground that it impinges on the impairment clause, for the law was enacted in the exercise of the police
power of the State to regulate a business, profession or calling, particularly the recruitment and deployment of
OFWs, with the noble end in view of ensuring respect for the dignity and well-being of OFWs wherever they
may be employed.61 Police power legislations adopted by the State to promote the health, morals, peace,
education, good order, safety, and general welfare of the people are generally applicable not only to future
contracts but even to those already in existence, for all private contracts must yield to the superior and
legitimate measures taken by the State to promote public welfare.62
Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due process of law nor shall any person be
denied the equal protection of the law.
Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector, without distinction
as to place of deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to economic
security and parity: all monetary benefits should be equally enjoyed by workers of similar category, while all
monetary obligations should be borne by them in equal degree; none should be denied the protection of the
laws which is enjoyed by, or spared the burden imposed on, others in like circumstances.65
Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it sees fit, a
system of classification into its legislation; however, to be valid, the classification must comply with these
requirements: 1) it is based on substantial distinctions; 2) it is germane to the purposes of the law; 3) it is not
limited to existing conditions only; and 4) it applies equally to all members of the class.66
There are three levels of scrutiny at which the Court reviews the constitutionality of a classification embodied
in a law: a) 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;67 b) 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;68 and c) strict judicial scrutiny69 in
which a legislative classification which impermissibly interferes with the exercise of a fundamental right70 or
operates to the peculiar disadvantage of a suspect class71 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.72
LABOR-1 Batch 1
Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications73 based on
race74 or gender75 but not when the classification is drawn along income categories.76
It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas) Employee
Association, Inc. v. Bangko Sentral ng Pilipinas,77 the constitutionality of a provision in the charter of
the Bangko Sentral ng Pilipinas (BSP), a government financial institution (GFI), was challenged for
maintaining its rank-and-file employees under the Salary Standardization Law (SSL), even when the rank-
and-file employees of other GFIs had been exempted from the SSL by their respective charters. Finding that
the disputed provision contained a suspect classification based on salary grade, the Court deliberately
employed the standard of strict judicial scrutiny in its review of the constitutionality of said provision. More
significantly, it was in this case that the Court revealed the broad outlines of its judicial philosophy, to wit:
Congress retains its wide discretion in providing for a valid classification, and its policies should be accorded
recognition and respect by the courts of justice except when they run afoul of the Constitution. The deference
stops where the classification violates a fundamental right, or prejudices persons accorded special
protection by the Constitution. When these violations arise, this Court must discharge its primary role as
the vanguard of constitutional guaranties, and require a stricter and more exacting adherence to constitutional
limitations. Rational basis should not suffice.
Admittedly, the view that prejudice to persons accorded special protection by the Constitution requires a
stricter judicial scrutiny finds no support in American or English jurisprudence. Nevertheless, these foreign
decisions and authorities are not per se controlling in this jurisdiction. At best, they are persuasive and have
been used to support many of our decisions. We should not place undue and fawning reliance upon them and
regard them as indispensable mental crutches without which we cannot come to our own decisions through
the employment of our own endowments. We live in a different ambience and must decide our own problems
in the light of our own interests and needs, and of our qualities and even idiosyncrasies as a people, and
always with our own concept of law and justice. Our laws must be construed in accordance with the intention
of our own lawmakers and such intent may be deduced from the language of each law and the context of
other local legislation related thereto. More importantly, they must be construed to serve our own public
interest which is the be-all and the end-all of all our laws. And it need not be stressed that our public interest is
distinct and different from others.
xxxx
Further, the quest for a better and more "equal" world calls for the use of equal protection as a tool of effective
judicial intervention.
Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble proclaims
"equality" as an ideal precisely in protest against crushing inequities in Philippine society. The command to
promote social justice in Article II, Section 10, in "all phases of national development," further explicitated in
Article XIII, are clear commands to the State to take affirmative action in the direction of greater equality. x x x
[T]here is thus in the Philippine Constitution no lack of doctrinal support for a more vigorous state effort
towards achieving a reasonable measure of equality.
Our present Constitution has gone further in guaranteeing vital social and economic rights to marginalized
groups of society, including labor. Under the policy of social justice, the law bends over backward to
accommodate the interests of the working class on the humane justification that those with less privilege in life
should have more in law. And the obligation to afford protection to labor is incumbent not only on the
legislative and executive branches but also on the judiciary to translate this pledge into a living reality. Social
justice calls for the humanization of laws and the equalization of social and economic forces by the State so
that justice in its rational and objectively secular conception may at least be approximated.
Page 5 of 69
xxxx
Under most circumstances, the Court will exercise judicial restraint in deciding questions of constitutionality,
recognizing the broad discretion given to Congress in exercising its legislative power. Judicial scrutiny would
be based on the "rational basis" test, and the legislative discretion would be given deferential treatment.
But if the challenge to the statute is premised on the denial of a fundamental right, or the perpetuation of
prejudice against persons favored by the Constitution with special protection, judicial scrutiny ought
to be more strict. A weak and watered down view would call for the abdication of this Court’s solemn duty to
strike down any law repugnant to the Constitution and the rights it enshrines. This is true whether the actor
committing the unconstitutional act is a private person or the government itself or one of its instrumentalities.
Oppressive acts will be struck down regardless of the character or nature of the actor.
xxxx
In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-employee
status. It is akin to a distinction based on economic class and status, with the higher grades as recipients of a
benefit specifically withheld from the lower grades. Officers of the BSP now receive higher compensation
packages that are competitive with the industry, while the poorer, low-salaried employees are limited to the
rates prescribed by the SSL. The implications are quite disturbing: BSP rank-and-file employees are paid the
strictly regimented rates of the SSL while employees higher in rank - possessing higher and better education
and opportunities for career advancement - are given higher compensation packages to entice them to stay.
Considering that majority, if not all, the rank-and-file employees consist of people whose status and rank in life
are less and limited, especially in terms of job marketability, it is they - and not the officers - who have the real
economic and financial need for the adjustment . This is in accord with the policy of the Constitution "to free
the people from poverty, provide adequate social services, extend to them a decent standard of living, and
improve the quality of life for all." Any act of Congress that runs counter to this constitutional desideratum
deserves strict scrutiny by this Court before it can pass muster. (Emphasis supplied)
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.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs. However, a closer
examination reveals that the subject clause has a discriminatory intent against, and an invidious impact on,
OFWs at two levels:
First, OFWs with employment contracts of less than one year vis-à-vis OFWs with employment
contracts of one year or more;
Second, among OFWs with employment contracts of more than one year; and
Third, OFWs vis-à-vis local workers with fixed-period employment;
OFWs with employment contracts of less than one year vis-à-vis OFWs with employment contracts of
one year or more
LABOR-1 Batch 1
As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor Relations
Commission79 (Second Division, 1999) that the Court laid down the following rules on the application of the
periods prescribed under Section 10(5) of R.A. No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally
dismissed overseas contract worker, i.e., whether his salaries for the unexpired portion of his
employment contract or three (3) months’ salary for every year of the unexpired term, whichever is
less, comes into play only when the employment contract concerned has a term of at least one (1)
year or more. This is evident from the words "for every year of the unexpired term" which follows the
words "salaries x x x for three months." To follow petitioners’ thinking that private respondent is entitled to
three (3) months salary only simply because it is the lesser amount is to completely disregard and overlook
some words used in the statute while giving effect to some. This is contrary to the well-established rule in
legal hermeneutics that in interpreting a statute, care should be taken that every part or word thereof be given
effect since the law-making body is presumed to know the meaning of the words employed in the statue and
to have used them advisedly. Ut res magis valeat quam pereat.80 (Emphasis supplied)
In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but was
awarded his salaries for the remaining 8 months and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings on Section
10(5). One was Asian Center for Career and Employment System and Services v. National Labor Relations
Commission (Second Division, October 1998),81 which involved an OFW who was awarded a two-year
employment contract, but was dismissed after working for one year and two months. The LA declared his
dismissal illegal and awarded him SR13,600.00 as lump-sum salary covering eight months, the unexpired
portion of his contract. On appeal, the Court reduced the award to SR3,600.00 equivalent to his three months’
salary, this being the lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just, valid or
authorized cause is entitled to his salary for the unexpired portion of his employment contract or for three (3)
months for every year of the unexpired term, whichever is less.
In the case at bar, the unexpired portion of private respondent’s employment contract is eight (8) months.
Private respondent should therefore be paid his basic salary corresponding to three (3) months or a total of
SR3,600.82
Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third Division,
December 1998),83 which involved an OFW (therein respondent Erlinda Osdana) who was originally granted a
12-month contract, which was deemed renewed for another 12 months. After serving for one year and seven-
and-a-half months, respondent Osdana was illegally dismissed, and the Court awarded her salaries for the
entire unexpired portion of four and one-half months of her contract.
The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:
Case Title Contract Period of Unexpired Period
Period Service Period Applied in
the
Computation
of the
Page 6 of 69
 dismissal, they are entitled to monetary award equivalent to only 3 months of the unexpired portion of their
Monetary
contracts.
Award

Skippers v. 6 months 2 months 4 months 4 months The disparity in the treatment of these two groups cannot be discounted. In Skippers, the respondent OFW
Maguad84 worked for only 2 months out of his 6-month contract, but was awarded his salaries for the remaining 4
months. In contrast, the respondent OFWs in Oriental and PCL who had also worked for about 2 months out
Bahia Shipping v. 9 months 8 months 4 months 4 months of their 12-month contracts were awarded their salaries for only 3 months of the unexpired portion of their
Reynaldo Chua 85 contracts. Even the OFWs involved in Talidano and Univan who had worked for a longer period of 3 months
out of their 12-month contracts before being illegally dismissed were awarded their salaries for only 3 months.
Centennial 9 months 4 months 5 months 5 months
Transmarine v. To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an employment
dela Cruz l86 contract of 10 months at a monthly salary rate of US$1,000.00 and a hypothetical OFW-B with an employment
contract of 15 months with the same monthly salary rate of US$1,000.00. Both commenced work on the same
Talidano v. 12 months 3 months 9 months 3 months day and under the same employer, and were illegally dismissed after one month of work. Under the subject
Falcon87 clause, OFW-A will be entitled to US$9,000.00, equivalent to his salaries for the remaining 9 months of his
contract, whereas OFW-B will be entitled to only US$3,000.00, equivalent to his salaries for 3 months of the
Univan v. CA 88 12 months 3 months 9 months 3 months unexpired portion of his contract, instead of US$14,000.00 for the unexpired portion of 14 months of his
contract, as the US$3,000.00 is the lesser amount.
Oriental v. CA 89 12 months more than 2 10 months 3 months
months The disparity becomes more aggravating when the Court takes into account jurisprudence that, prior to the
effectivity of R.A. No. 8042 on July 14, 1995,97 illegally dismissed OFWs, no matter how long the period of
PCL v. NLRC90 12 months more than 2 more or less 9 3 months their employment contracts, were entitled to their salaries for the entire unexpired portions of their contracts.
months months The matrix below speaks for itself:

Olarte v. Nayona91 12 months 21 days 11 months and 9 3 months

days Case Title Contract Period of Unexpired Period Applied
Period Service Period in the Computation of
JSS v.Ferrer92 12 months 16 days 11 months and 24 3 months the Monetary Award
days
ATCI v. CA, et al.98 2 years 2 months 22 months 22 months
Pentagon v. 12 months 9 months and 7 2 months and 23 2 months and
Adelantar93 days days 23 days Phil. Integrated v. NLRC99 2 years 7 days 23 months and 23 months and
23 days 23 days
Phil. Employ v. 12 months 10 months 2 months Unexpired
JGB v. NLC100 2 years 9 months 15 months 15 months
Paramio, et al.94 portion
Agoy v. NLRC101 2 years 2 months 22 months 22 months
Flourish Maritime 2 years 26 days 23 months and 4 6 months or 3
v. Almanzor 95 days months for EDI v. NLRC, et al.102 2 years 5 months 19 months 19 months
each year of
contract Barros v. NLRC, et al.103 12 months 4 months 8 months 8 months

Athenna 1 year, 10 1 month 1 year, 9 months 6 months or 3 Philippine Transmarine v. 12 months 6 months and 5 months and 18 5 months and 18
Manpower v. months and and 28 days months for Carilla104 22 days days days
Villanos 96 28 days each year of
contract
It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired portions
thereof, were treated alike in terms of the computation of their monetary benefits in case of illegal dismissal.
Their claims were subjected to a uniform rule of computation: their basic salaries multiplied by the entire
As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories. The first
unexpired portion of their employment contracts.
category includes OFWs with fixed-period employment contracts of less than one year; in case of illegal
dismissal, they are entitled to their salaries for the entire unexpired portion of their contract. The second
category consists of OFWs with fixed-period employment contracts of one year or more; in case of illegal

LABOR-1 Batch 1 Page 7 of 69

The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of computation of the
money claims of illegally dismissed OFWs based on their employment periods, in the process singling
out one category whose contracts have an unexpired portion of one year or more and subjecting them to the
peculiar disadvantage of having their monetary awards limited to their salaries for 3 months or for the
unexpired portion thereof, whichever is less, but all the while sparing the other category from such prejudice,
simply because the latter's unexpired contracts fall short of one year.
Among OFWs With Employment Contracts of More Than One Year
Upon closer examination of the terminology employed in the subject clause, the Court now has misgivings on
the accuracy of the Marsaman interpretation.
The Court notes that the subject clause "or for three (3) months for every year of the unexpired
term, whichever is less" contains the qualifying phrases "every year" and "unexpired term." By its ordinary
meaning, the word "term" means a limited or definite extent of time.105 Corollarily, that "every year" is but part
of an "unexpired term" is significant in many ways: first, the unexpired term must be at least one year, for if it
were any shorter, there would be no occasion for such unexpired term to be measured by every year; and
second, the original term must be more than one year, for otherwise, whatever would be the unexpired term
thereof will not reach even a year. Consequently, the more decisive factor in the determination of when the
subject clause "for three (3) months for every year of the unexpired term, whichever is less" shall apply is not
the length of the original contract period as held in Marsaman,106 but the length of the unexpired portion of the
contract period -- the subject clause applies in cases when the unexpired portion of the contract period is at
least one year, which arithmetically requires that the original contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose contract
periods are for more than one year: those who are illegally dismissed with less than one year left in their
contracts shall be entitled to their salaries for the entire unexpired portion thereof, while those who are illegally
dismissed with one year or more remaining in their contracts shall be covered by the subject clause, and their
monetary benefits limited to their salaries for three months only.
To concretely illustrate the application of the foregoing interpretation of the subject clause, the Court assumes
hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary rate of US$1,000.00 per
month. OFW-C is illegally dismissed on the 12th month, and OFW-D, on the 13th month. Considering that
there is at least 12 months remaining in the contract period of OFW-C, the subject clause applies to the
computation of the latter's monetary benefits. Thus, OFW-C will be entitled, not to US$12,000,00 or the latter's
total salaries for the 12 months unexpired portion of the contract, but to the lesser amount of US$3,000.00 or
the latter's salaries for 3 months out of the 12-month unexpired term of the contract. On the other hand, OFW-
D is spared from the effects of the subject clause, for there are only 11 months left in the latter's contract
period. Thus, OFW-D will be entitled to US$11,000.00, which is equivalent to his/her total salaries for the
entire 11-month unexpired portion.
OFWs vis-à-vis Local Workers
With Fixed-Period Employment
As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary awards of
illegally dismissed OFWs was in place. This uniform system was applicable even to local workers with fixed-
term employment.107
The earliest rule prescribing a uniform system of computation was actually Article 299 of the Code of
Commerce (1888),108 to wit:
LABOR-1 Batch 1
Article 299. If the contracts between the merchants and their shop clerks and employees should have been
made of a fixed period, none of the contracting parties, without the consent of the other, may withdraw from
the fulfillment of said contract until the termination of the period agreed upon.
Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the exception of
the provisions contained in the following articles.
In Reyes v. The Compañia Maritima,109 the Court applied the foregoing provision to determine the liability of a
shipping company for the illegal discharge of its managers prior to the expiration of their fixed-term
employment. The Court therein held the shipping company liable for the salaries of its managers for
the remainder of their fixed-term employment.
There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of Commerce which
provides:
Article 605. If the contracts of the captain and members of the crew with the agent should be for a definite
period or voyage, they cannot be discharged until the fulfillment of their contracts, except for reasons of
insubordination in serious matters, robbery, theft, habitual drunkenness, and damage caused to the vessel or
to its cargo by malice or manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,110 in
which the Court held the shipping company liable for the salaries and subsistence allowance of its illegally
dismissed employees for the entire unexpired portion of their employment contracts.
While Article 605 has remained good law up to the present,111 Article 299 of the Code of Commerce was
replaced by Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for a certain
work cannot leave or be dismissed without sufficient cause, before the fulfillment of the contract. (Emphasis
supplied.)
Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as a conjunctive
"and" so as to apply the provision to local workers who are employed for a time certain although for no
particular skill. This interpretation of Article 1586 was reiterated in Garcia Palomar v. Hotel de France
Company.113 And in both Lemoine and Palomar, the Court adopted the general principle that in actions for
wrongful discharge founded on Article 1586, local workers are entitled to recover damages to the extent of the
amount stipulated to be paid to them by the terms of their contract. On the computation of the amount of such
damages, the Court in Aldaz v. Gay114 held:
The doctrine is well-established in American jurisprudence, and nothing has been brought to our attention to
the contrary under Spanish jurisprudence, that when an employee is wrongfully discharged it is his duty to
seek other employment of the same kind in the same community, for the purpose of reducing the damages
resulting from such wrongful discharge. However, while this is the general rule, the burden of showing that he
failed to make an effort to secure other employment of a like nature, and that other employment of a like
nature was obtainable, is upon the defendant. When an employee is wrongfully discharged under a contract
of employment his prima facie damage is the amount which he would be entitled to had he continued in such
employment until the termination of the period. (Howard vs. Daly, 61 N. Y., 362; Allen vs. Whitlark, 99 Mich.,
492; Farrell vs. School District No. 2, 98 Mich., 43.)115 (Emphasis supplied)
Page 8 of 69
On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term employment: Section 2
(Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor) and 3 (Contract for a Piece
of Work), Chapter 3, Title VIII, Book IV.116 Much like Article 1586 of the Civil Code of 1889, the new provisions
of the Civil Code do not expressly provide for the remedies available to a fixed-term worker who is illegally
discharged. However, it is noted that in Mackay Radio & Telegraph Co., Inc. v. Rich,117 the Court carried over
the principles on the payment of damages underlying Article 1586 of the Civil Code of 1889 and applied the
same to a case involving the illegal discharge of a local worker whose fixed-period employment contract was
entered into in 1952, when the new Civil Code was already in effect.118
More significantly, the same principles were applied to cases involving overseas Filipino workers whose fixed-
term employment contracts were illegally terminated, such as in First Asian Trans & Shipping Agency, Inc. v.
Ople,119 involving seafarers who were illegally discharged. In Teknika Skills and Trade Services, Inc. v.
National Labor Relations Commission,120 an OFW who was illegally dismissed prior to the expiration of her
fixed-period employment contract as a baby sitter, was awarded salaries corresponding to the unexpired
portion of her contract. The Court arrived at the same ruling in Anderson v. National Labor Relations
Commission,121 which involved a foreman hired in 1988 in Saudi Arabia for a fixed term of two years, but who
was illegally dismissed after only nine months on the job -- the Court awarded him salaries corresponding to
15 months, the unexpired portion of his contract. In Asia World Recruitment, Inc. v. National Labor Relations
Commission,122 a Filipino working as a security officer in 1989 in Angola was awarded his salaries for the
remaining period of his 12-month contract after he was wrongfully discharged. Finally, in Vinta Maritime Co.,
Inc. v. National Labor Relations Commission,123 an OFW whose 12-month contract was illegally cut short in
the second month was declared entitled to his salaries for the remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were illegally
discharged were treated alike in terms of the computation of their money claims: they were uniformly entitled
to their salaries for the entire unexpired portions of their contracts. But with the enactment of R.A. No. 8042,
specifically the adoption of the subject clause, illegally dismissed OFWs with an unexpired portion of one year
or more in their employment contract have since been differently treated in that their money claims are subject
to a 3-month cap, whereas no such limitation is imposed on local workers with fixed-term employment.
The Court concludes that the subject clause contains a suspect classification in that, in the
computation of the monetary benefits of fixed-term employees who are illegally discharged, it
imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in their
contracts, but none on the claims of other OFWs or local workers with fixed-term employment. The
subject clause singles out one classification of OFWs and burdens it with a peculiar disadvantage.
There being a suspect classification involving a vulnerable sector protected by the Constitution, the Court now
subjects the classification to a strict judicial scrutiny, and determines whether it serves a compelling state
interest through the least restrictive means.
What constitutes compelling state interest is measured by the scale of rights and powers arrayed in the
Constitution and calibrated by history.124 It is akin to the paramount interest of the state125 for which some
individual liberties must give way, such as the public interest in safeguarding health or maintaining medical
standards,126 or in maintaining access to information on matters of public concern.127
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 OSG defends the subject clause as a police power measure "designed to protect the employment of
Filipino seafarers overseas x x x. By limiting the liability to three months [sic], Filipino seafarers have better
LABOR-1 Batch 1
chance of getting hired by foreign employers." The limitation also protects the interest of local placement
agencies, which otherwise may be made to shoulder millions of pesos in "termination pay."128
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event
that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its
obligation. Hence, placement agencies that are in good faith and which fulfill their obligations are
unnecessarily penalized for the acts of the foreign employer. To protect them and to promote their continued
helpful contribution in deploying Filipino migrant workers, liability for money are reduced under Section 10 of
RA 8042.
This measure redounds to the benefit of the migrant workers whose welfare the government seeks to
promote. The survival of legitimate placement agencies helps [assure] the government that migrant workers
are properly deployed and are employed under decent and humane conditions.129 (Emphasis supplied)
However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception of the
state interest sought to be served by the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in sponsorship of
House Bill No. 14314 (HB 14314), from which the law originated;130 but the speech makes no reference to the
underlying reason for the adoption of the subject clause. That is only natural for none of the 29 provisions in
HB 14314 resembles the subject clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit:
Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-
employee relationship or by virtue of the complaint, the claim arising out of an employer-employee relationship
or by virtue of any law or contract involving Filipino workers for overseas employment including claims for
actual, moral, exemplary and other forms of damages.
The liability of the principal and the recruitment/placement agency or any and all claims under this Section
shall be joint and several.
Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of damages
under this Section shall not be less than fifty percent (50%) of such money claims: Provided, That any
installment payments, if applicable, to satisfy any such compromise or voluntary settlement shall not be more
than two (2) months. Any compromise/voluntary agreement in violation of this paragraph shall be null and
void.
Non-compliance with the mandatory period for resolutions of cases provided under this Section shall subject
the responsible officials to any or all of the following penalties:
(1) The salary of any such official who fails to render his decision or resolution within the prescribed
period shall be, or caused to be, withheld until the said official complies therewith;
Page 9 of 69
 (2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any appointive public office for five (5)
years.
Provided, however, That the penalties herein provided shall be without prejudice to any liability which any
such official may have incurred under other existing laws or rules and regulations as a consequence of
violating the provisions of this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of money claims.
A rule on the computation of money claims containing the subject clause was inserted and eventually adopted
as the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined the rationale of the subject clause
in the transcripts of the "Bicameral Conference Committee (Conference Committee) Meetings on the Magna
Carta on OCWs (Disagreeing Provisions of Senate Bill No. 2077 and House Bill No. 14314)." However, the
Court finds no discernible state interest, let alone a compelling one, that is sought to be protected or advanced
by the adoption of the subject clause.
In fine, 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.
Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the employment of
OFWs by mitigating the solidary liability of placement agencies, such callous and cavalier rationale will have
to be rejected. There can never be a justification for any form of government action that alleviates the burden
of one sector, but imposes the same burden on another sector, especially when the favored sector is
composed of private businesses such as placement agencies, while the disadvantaged sector is composed of
OFWs whose protection no less than the Constitution commands. The idea that private business interest can
be elevated to the level of a compelling state interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement
agencies vis-a-vis their foreign principals, there are mechanisms already in place that can be employed to
achieve that purpose without infringing on the constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas
Workers, dated February 4, 2002, imposes administrative disciplinary measures on erring foreign employers
who default on their contractual obligations to migrant workers and/or their Philippine agents. These
disciplinary measures range from temporary disqualification to preventive suspension. The POEA Rules and
Regulations Governing the Recruitment and Employment of Seafarers, dated May 23, 2003, contains similar
administrative disciplinary measures against erring foreign employers.
Resort to these administrative measures is undoubtedly the less restrictive means of aiding local placement
agencies in enforcing the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right of
petitioner and other OFWs to equal protection.1avvphi1
Further, there would be certain misgivings if one is to approach the declaration of the unconstitutionality of the
subject clause from the lone perspective that the clause directly violates state policy on labor under Section
3,131 Article XIII of the Constitution.
LABOR-1 Batch 1
While all the provisions of the 1987 Constitution are presumed self-executing,132 there are some which this
Court has declared not judicially enforceable, Article XIII being one,133 particularly Section 3 thereof, the
nature of which, this Court, in Agabon v. National Labor Relations Commission,134 has described to be not
self-actuating:
Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as self-
executing in the sense that these are automatically acknowledged and observed without need for any
enabling legislation. However, to declare that the constitutional provisions are enough to guarantee the full
exercise of the rights embodied therein, and the realization of ideals therein expressed, would be impractical,
if not unrealistic. The espousal of such view presents the dangerous tendency of being overbroad and
exaggerated. The guarantees of "full protection to labor" and "security of tenure", when examined in isolation,
are facially unqualified, and the broadest interpretation possible suggests a blanket shield in favor of labor
against any form of removal regardless of circumstance. This interpretation implies an unimpeachable right to
continued employment-a utopian notion, doubtless-but still hardly within the contemplation of the framers.
Subsequent legislation is still needed to define the parameters of these guaranteed rights to ensure the
protection and promotion, not only the rights of the labor sector, but of the employers' as well. Without specific
and pertinent legislation, judicial bodies will be at a loss, formulating their own conclusion to approximate at
least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive enforceable
right to stave off the dismissal of an employee for just cause owing to the failure to serve proper notice or
hearing. As manifested by several framers of the 1987 Constitution, the provisions on social justice require
legislative enactments for their enforceability.135 (Emphasis added)
Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable rights, for the
violation of which the questioned clause may be declared unconstitutional. It may unwittingly risk opening the
floodgates of litigation to every worker or union over every conceivable violation of so broad a concept as
social justice for labor.
It must be stressed that Section 3, Article XIII does not directly bestow on the working class any actual
enforceable right, but merely clothes it with the status of a sector for whom the Constitution urges protection
through executive or legislative action and judicial recognition. Its utility is best limited to being an impetus
not just for the executive and legislative departments, but for the judiciary as well, to protect the welfare of the
working class. And it was in fact consistent with that constitutional agenda that the Court in Central Bank (now
Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas, penned by then
Associate Justice now Chief Justice Reynato S. Puno, formulated the judicial precept that when the challenge
to a statute is premised on the perpetuation of prejudice against persons favored by the Constitution with
special protection -- such as the working class or a section thereof -- the Court may recognize the existence of
a suspect classification and subject the same to strict judicial scrutiny.
The view that the concepts of suspect classification and strict judicial scrutiny formulated in Central Bank
Employee Association exaggerate the significance of Section 3, Article XIII is a groundless
apprehension. Central Bank applied Article XIII in conjunction with the equal protection clause. Article XIII, by
itself, without the application of the equal protection clause, has no life or force of its own as elucidated
in Agabon.
Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's right to
substantive due process, for it deprives him of property, consisting of monetary benefits, without any existing
valid governmental purpose.136
Page 10 of 69
The argument of the Solicitor General, that the actual purpose of the subject clause of limiting the entitlement No costs.
of OFWs to their three-month salary in case of illegal dismissal, is to give them a better chance of getting
hired by foreign employers. This is plain speculation. As earlier discussed, there is nothing in the text of the SO ORDERED.
law or the records of the deliberations leading to its enactment or the pleadings of respondent that would
indicate that there is an existing governmental purpose for the subject clause, or even just a pretext of one.

The subject clause does not state or imply any definitive governmental purpose; and it is for that precise
reason that the clause violates not just petitioner's right to equal protection, but also her right to substantive
due process under Section 1,137 Article III of the Constitution.

The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire unexpired period of
nine months and 23 days of his employment contract, pursuant to law and jurisprudence prior to the
enactment of R.A. No. 8042.

On the Third Issue

Petitioner contends that his overtime and leave pay should form part of the salary basis in the computation of
his monetary award, because these are fixed benefits that have been stipulated into his contract.

Petitioner is mistaken.

The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner, G.R. No. 170139               August 5, 2014
DOLE Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in
which salary is understood as the basic wage, exclusive of overtime, leave pay and other bonuses; whereas SAMEER OVERSEAS PLACEMENT AGENCY, INC., Petitioner,
overtime pay is compensation for all work "performed" in excess of the regular eight hours, and holiday pay is vs.
compensation for any work "performed" on designated rest days and holidays. JOY C. CABILES, Respondent.

By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and holiday pay in DECISION
the computation of petitioner's monetary award, unless there is evidence that he performed work during those
periods. As the Court held in Centennial Transmarine, Inc. v. Dela Cruz,138
LEONEN, J.:

However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in Cagampan
This case involves an overseas Filipino worker with shattered dreams. It is our duty, given the facts and the
v. National Labor Relations Commission, to wit:
law, to approximate justice for her.

The rendition of overtime work and the submission of sufficient proof that said was actually performed are
We are asked to decide a petition for review1 on certiorari assailing the Court of Appeals’ decision2 dated June
conditions to be satisfied before a seaman could be entitled to overtime pay which should be computed on the
27, 2005. This decision partially affirmed the National Labor RelationsCommission’s resolution dated March
basis of 30% of the basic monthly salary. In short, the contract provision guarantees the right to overtime pay
31, 2004,3 declaring respondent’s dismissal illegal, directing petitioner to pay respondent’s three-month salary
but the entitlement to such benefit must first be established.
equivalent to New Taiwan Dollar (NT$) 46,080.00, and ordering it to reimburse the NT$3,000.00 withheld from
respondent, and pay her NT$300.00 attorney’s fees.4
In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is unwarranted
since the same is given during the actual service of the seamen.
Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement agency.5 Responding to
an ad it published, respondent, Joy C. Cabiles, submitted her application for a quality control job in Taiwan.6
WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for every year of the
unexpired term, whichever is less" in the 5th paragraph of Section 10 of Republic Act No. 8042
Joy’s application was accepted.7 Joy was later asked to sign a oneyear employment contract for a monthly
is DECLARED UNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005 Resolution of
salary of NT$15,360.00.8 She alleged that Sameer Overseas Agency required her to pay a placement fee of
the Court of Appeals are MODIFIED to the effect that petitioner is AWARDED his salaries for the entire
₱70,000.00 when she signed the employment contract.9
unexpired portion of his employment contract consisting of nine months and 23 days computed at the rate of
US$1,400.00 per month.

LABOR-1 Batch 1 Page 11 of 69

Joy was deployed to work for TaiwanWacoal, Co. Ltd. (Wacoal) on June 26, 1997.10 She alleged that in her
employment contract, she agreed to work as quality control for one year.11 In Taiwan, she was asked to work
as a cutter.12
Sameer Overseas Placement Agencyclaims that on July 14, 1997, a certain Mr. Huwang from Wacoal
informedJoy, without prior notice, that she was terminated and that "she should immediately report to their
office to get her salary and passport."13 She was asked to "prepare for immediate repatriation."14
Joy claims that she was told that from June 26 to July 14, 1997, she only earned a total of
NT$9,000.15 According to her, Wacoal deducted NT$3,000 to cover her plane ticket to Manila.16
On October 15, 1997, Joy filed a complaint17 with the National Labor Relations Commission against petitioner
and Wacoal. She claimed that she was illegally dismissed.18 She asked for the return of her placement fee,
the withheld amount for repatriation costs, payment of her salary for 23 months as well as moral and
exemplary damages.19 She identified Wacoal as Sameer Overseas Placement Agency’s foreign principal.20
Sameer Overseas Placement Agency alleged that respondent's termination was due to her inefficiency,
negligence in her duties, and her "failure to comply with the work requirements [of] her foreign
[employer]."21 The agency also claimed that it did not ask for a placement fee of ₱70,000.00.22 As evidence, it
showedOfficial Receipt No. 14860 dated June 10, 1997, bearing the amount of ₱20,360.00.23 Petitioner added
that Wacoal's accreditation with petitioner had already been transferred to the Pacific Manpower &
Management Services, Inc. (Pacific) as of August 6, 1997.24 Thus, petitioner asserts that it was already
substituted by Pacific Manpower.25
Pacific Manpower moved for the dismissal of petitioner’s claims against it.26 It alleged that there was no
employer-employee relationship between them.27 Therefore, the claims against it were outside the jurisdiction
of the Labor Arbiter.28 Pacific Manpower argued that the employment contract should first be presented so that
the employer’s contractual obligations might be identified.29 It further denied that it assumed liability for
petitioner’s illegal acts.30
On July 29, 1998, the Labor Arbiter dismissed Joy’s complaint.31 Acting Executive Labor Arbiter Pedro
C.Ramos ruled that her complaint was based on mereallegations.32 The Labor Arbiter found that there was no
excess payment of placement fees, based on the official receipt presented by petitioner.33 The Labor Arbiter
found unnecessary a discussion on petitioner’s transfer of obligations to Pacific34 and considered the matter
immaterial in view of the dismissal of respondent’s complaint.35
Joy appealed36 to the National Labor Relations Commission.
In a resolution37 dated March 31, 2004, the National Labor Relations Commission declared that Joy was
illegally dismissed.38 It reiterated the doctrine that the burden of proof to show that the dismissal was based on
a just or valid cause belongs to the employer.39 It found that Sameer Overseas Placement Agency failed to
prove that there were just causes for termination.40 There was no sufficient proofto show that respondent was
inefficient in her work and that she failed to comply with company requirements.41 Furthermore, procedural
dueprocess was not observed in terminating respondent.42
The National Labor Relations Commission did not rule on the issue of reimbursement of placement fees for
lack of jurisdiction.43 It refused to entertain the issue of the alleged transfer of obligations to Pacific.44 It did not
acquire jurisdiction over that issue because Sameer Overseas Placement Agency failed to appeal the Labor
Arbiter’s decision not to rule on the matter.45
LABOR-1 Batch 1
The National Labor Relations Commission awarded respondent only three (3) months worth of salaryin the
amount of NT$46,080, the reimbursement of the NT$3,000 withheld from her, and attorney’s fees of
NT$300.46
The Commission denied the agency’s motion for reconsideration47 dated May 12, 2004 through a
resolution48 dated July 2, 2004.
Aggrieved by the ruling, Sameer Overseas Placement Agency caused the filing of a petition49 for certiorari
with the Court of Appeals assailing the National Labor Relations Commission’s resolutions dated March 31,
2004 and July 2, 2004.
The Court of Appeals50 affirmed the decision of the National Labor Relations Commission with respect to the
finding of illegal dismissal, Joy’s entitlement to the equivalent of three months worth of salary, reimbursement
of withheld repatriation expense, and attorney’s fees.51 The Court of Appeals remanded the case to the
National Labor Relations Commission to address the validity of petitioner's allegations against Pacific.52 The
Court of Appeals held, thus: Although the public respondent found the dismissal of the complainant-
respondent illegal, we should point out that the NLRC merely awarded her three (3) months backwages or the
amount of NT$46,080.00, which was based upon its finding that she was dismissed without due process, a
finding that we uphold, given petitioner’s lack of worthwhile discussion upon the same in the proceedings
below or before us. Likewise we sustain NLRC’s finding in regard to the reimbursement of her fare, which is
squarely based on the law; as well as the award of attorney’s fees.
But we do find it necessary to remand the instant case to the public respondent for further proceedings, for the
purpose of addressing the validity or propriety of petitioner’s third-party complaint against the transferee agent
or the Pacific Manpower & Management Services, Inc. and Lea G. Manabat. We should emphasize that as far
as the decision of the NLRC on the claims of Joy Cabiles, is concerned, the same is hereby affirmed with
finality, and we hold petitioner liable thereon, but without prejudice to further hearings on its third party
complaint against Pacific for reimbursement.
WHEREFORE, premises considered, the assailed Resolutions are hereby partly AFFIRMED in accordance
with the foregoing discussion, but subject to the caveat embodied inthe last sentence. No costs.
SO ORDERED.53
Dissatisfied, Sameer Overseas Placement Agency filed this petition.54
We are asked to determine whether the Court of Appeals erred when it affirmed the ruling of the National
Labor Relations Commission finding respondent illegally dismissed and awarding her three months’ worth of
salary, the reimbursement of the cost ofher repatriation, and attorney’s fees despite the alleged existence of
just causes of termination.
Petitioner reiterates that there was just cause for termination because there was a finding of Wacoal that
respondent was inefficient in her work.55
Therefore, it claims that respondent’s dismissal was valid.56
Petitioner also reiterates that since Wacoal’s accreditation was validly transferred to Pacific at the time
respondent filed her complaint, it should be Pacific that should now assume responsibility for Wacoal’s
contractual obligations to the workers originally recruited by petitioner.57
Page 12 of 69
Sameer Overseas Placement Agency’spetition is without merit. We find for respondent.
I This public policy should be borne in mind in this case because to allow foreign employers to determine for
Sameer Overseas Placement Agency failed to show that there was just cause for causing Joy’s dismissal.
The employer, Wacoal, also failed to accord her due process of law.
58
Indeed, employers have the prerogative to impose productivity and quality standards at work.  They may also
impose reasonable rules to ensure that the employees comply with these standards.59 Failure to comply may
be a just cause for their dismissal.60 Certainly, employers cannot be compelled to retain the services of
anemployee who is guilty of acts that are inimical to the interest of the employer.61 While the law
acknowledges the plight and vulnerability of workers, it does not "authorize the oppression or self-destruction
of the employer."62 Management prerogative is recognized in law and in our jurisprudence.
This prerogative, however, should not be abused. It is "tempered with the employee’s right to security of
tenure."63 Workers are entitled to substantive and procedural due process before termination. They may not
be removed from employment without a validor just cause as determined by law and without going through
the proper procedure.
Security of tenure for labor is guaranteed by our Constitution.64
Employees are not stripped of their security of tenure when they move to work in a different jurisdiction. With
respect to the rights of overseas Filipino workers, we follow the principle of lex loci contractus.Thus, in Triple
Eight Integrated Services, Inc. v. NLRC,65 this court noted:
Petitioner likewise attempts to sidestep the medical certificate requirement by contending that since Osdana
was working in Saudi Arabia, her employment was subject to the laws of the host country. Apparently,
petitioner hopes tomake it appear that the labor laws of Saudi Arabia do not require any certification by a
competent public health authority in the dismissal of employees due to illness.
Again, petitioner’s argument is without merit.
First, established is the rule that lex loci contractus (the law of the place where the contract is made) governs
in this jurisdiction. There is no question that the contract of employment in this case was perfected here in the
Philippines. Therefore, the Labor Code, its implementing rules and regulations, and other laws affecting labor
apply in this case.Furthermore, settled is the rule that the courts of the forum will not enforce any foreign claim
obnoxious to the forum’s public policy. Herein the Philippines, employment agreements are more than
contractual in nature. The Constitution itself, in Article XIII, Section 3, guarantees the special protection of
workers, to wit:
The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to selforganization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to
security of tenure, humane conditions of work, and a living wage. Theyshall also participate in policy and
decision-making processes affecting their rights and benefits as may be provided by law.
LABOR-1 Batch 1
....
and by themselves whether an overseas contract worker may be dismissed on the ground of illness would
encourage illegal or arbitrary pretermination of employment contracts.66 (Emphasis supplied, citation omitted)
Even with respect to fundamental procedural rights, this court emphasized in PCL Shipping Philippines, Inc. v.
NLRC,67 to wit:
Petitioners admit that they did notinform private respondent in writing of the charges against him and that they
failed to conduct a formal investigation to give him opportunity to air his side. However, petitioners contend
that the twin requirements ofnotice and hearing applies strictly only when the employment is within the
Philippines and that these need not be strictly observed in cases of international maritime or overseas
employment.
The Court does not agree. The provisions of the Constitution as well as the Labor Code which afford
protection to labor apply to Filipino employees whether working within the Philippines or abroad. Moreover,
the principle of lex loci contractus (the law of the place where the contract is made) governs in this jurisdiction.
In the present case, it is not disputed that the Contract of Employment entered into by and between petitioners
and private respondent was executed here in the Philippines with the approval of the Philippine Overseas
Employment Administration (POEA). Hence, the Labor Code together with its implementing rules and
regulations and other laws affecting labor apply in this case.68 (Emphasis supplied, citations omitted)
By our laws, overseas Filipino workers (OFWs) may only be terminated for a just or authorized cause and
after compliance with procedural due process requirements.
Article 282 of the Labor Code enumerates the just causes of termination by the employer. Thus:
Art. 282. Termination by employer. An employer may terminate an employment for any of the following
causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer
or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing.
Petitioner’s allegation that respondentwas inefficient in her work and negligent in her duties69 may, therefore,
constitute a just cause for termination under Article 282(b), but only if petitioner was able to prove it.
Page 13 of 69
The burden of proving that there is just cause for termination is on the employer. "The employer must
affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause."70 Failure to
show that there was valid or just cause for termination would necessarily mean that the dismissal was illegal.71
To show that dismissal resulting from inefficiency in work is valid, it must be shown that: 1) the employer has
set standards of conduct and workmanship against which the employee will be judged; 2) the standards of
conduct and workmanship must have been communicated tothe employee; and 3) the communication was
made at a reasonable time prior to the employee’s performance assessment.
This is similar to the law and jurisprudence on probationary employees, which allow termination ofthe
employee only when there is "just cause or when [the probationary employee] fails to qualify as a regular
employee in accordance with reasonable standards made known by the employer to the employee at the time
of his [or her] engagement."72
However, we do not see why the application of that ruling should be limited to probationary employment. That
rule is basic to the idea of security of tenure and due process, which are guaranteed to all employees,
whether their employment is probationary or regular.
The pre-determined standards that the employer sets are the bases for determining the probationary
employee’s fitness, propriety, efficiency, and qualifications as a regular employee. Due process requires that
the probationary employee be informed of such standards at the time of his or her engagement so he or she
can adjusthis or her character or workmanship accordingly. Proper adjustment to fit the standards upon which
the employee’s qualifications will be evaluated will increase one’s chances of being positively assessed for
regularization by his or her employer.
Assessing an employee’s work performance does not stop after regularization. The employer, on a regular
basis, determines if an employee is still qualified and efficient, based on work standards. Based on that
determination, and after complying with the due process requirements of notice and hearing, the employer
may exercise its management prerogative of terminating the employee found unqualified.
The regular employee must constantlyattempt to prove to his or her employer that he or she meets all the
standards for employment. This time, however, the standards to be met are set for the purpose of retaining
employment or promotion. The employee cannot be expected to meet any standard of character or
workmanship if such standards were not communicated to him or her. Courts should remain vigilant on
allegations of the employer’s failure to communicatework standards that would govern one’s employment "if
[these are] to discharge in good faith [their] duty to adjudicate."73
In this case, petitioner merely alleged that respondent failed to comply with her foreign employer’s work
requirements and was inefficient in her work.74 No evidence was shown to support such allegations. Petitioner
did not even bother to specify what requirements were not met, what efficiency standards were violated, or
what particular acts of respondent constituted inefficiency.
There was also no showing that respondent was sufficiently informed of the standards against which her work
efficiency and performance were judged. The parties’ conflict as to the position held by respondent showed
that even the matter as basic as the job title was not clear.
The bare allegations of petitioner are not sufficient to support a claim that there is just cause for termination.
There is no proof that respondent was legally terminated.
LABOR-1 Batch 1
Petitioner failed to comply with
the due process requirements
Respondent’s dismissal less than one year from hiring and her repatriation on the same day show not
onlyfailure on the partof petitioner to comply with the requirement of the existence of just cause for
termination. They patently show that the employersdid not comply with the due process requirement.
A valid dismissal requires both a valid cause and adherence to the valid procedure of dismissal.75 The
employer is required to give the charged employee at least two written notices before termination.76 One of the
written notices must inform the employee of the particular acts that may cause his or her dismissal.77 The
other notice must "[inform] the employee of the employer’s decision."78 Aside from the notice requirement, the
employee must also be given "an opportunity to be heard."79
Petitioner failed to comply with the twin notices and hearing requirements. Respondent started working on
June 26, 1997. She was told that she was terminated on July 14, 1997 effective on the same day and barely a
month from her first workday. She was also repatriated on the same day that she was informed of her
termination. The abruptness of the termination negated any finding that she was properly notified and given
the opportunity to be heard. Her constitutional right to due process of law was violated.
II
Respondent Joy Cabiles, having been illegally dismissed, is entitled to her salary for the unexpired portion
ofthe employment contract that was violated together with attorney’s fees and reimbursement of amounts
withheld from her salary.
Section 10 of Republic Act No. 8042,otherwise known as the Migrant Workers and Overseas Filipinos Act
of1995, states thatoverseas workers who were terminated without just, valid, or authorized cause "shall be
entitled to the full reimbursement of his placement fee with interest of twelve (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."
Sec. 10. MONEY CLAIMS. – Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after filing of the complaint, the claims arising out of an employer-
employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damages.
The liability of the principal/employer and the recruitment/placement agency for any and all claims under this
section shall be joint and several. This provisions [sic] shall be incorporated in the contract for overseas
employment and shall be a condition precedent for its approval. The performance bond to be filed by the
recruitment/placementagency, as provided by law, shall be answerable for all money claims or damages that
may be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate officers
and directors and partners as the case may be, shall themselves be jointly and solidarily liable with the
corporation orpartnership for the aforesaid claims and damages.
Such liabilities shall continue during the entire period or duration of the employment contract and shall not be
affected by any substitution, amendment or modification made locally or in a foreign country of the said
contract.
Page 14 of 69
Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages under
this section shall be paid within four (4) months from the approval of the settlement by the appropriate
authority.
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
(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.
....
(Emphasis supplied)
Section 15 of Republic Act No. 8042 states that "repatriation of the worker and the transport of his [or her]
personal belongings shall be the primary responsibility of the agency which recruited or deployed the worker
overseas." The exception is when "termination of employment is due solely to the fault of the worker,"80 which
as we have established, is not the case. It reads: SEC. 15. REPATRIATION OF WORKERS; EMERGENCY
REPATRIATION FUND. – The repatriation of the worker and the transport of his personal belongings shall be
the primary responsibility of the agency which recruited or deployed the worker overseas. All costs attendant
to repatriation shall be borne by or charged to the agency concerned and/or its principal. Likewise, the
repatriation of remains and transport of the personal belongings of a deceased worker and all costs attendant
thereto shall be borne by the principal and/or local agency. However, in cases where the termination of
employment is due solely to the fault of the worker, the principal/employer or agency shall not in any manner
be responsible for the repatriation of the former and/or his belongings.
....
The Labor Code81 also entitles the employee to 10% of the amount of withheld wages as attorney’s feeswhen
the withholding is unlawful.
The Court of Appeals affirmedthe National Labor Relations Commission’s decision to award respondent
NT$46,080.00 or the threemonth equivalent of her salary, attorney’s fees of NT$300.00, and the
reimbursement of the withheld NT$3,000.00 salary, which answered for her repatriation.
We uphold the finding that respondent is entitled to all of these awards. The award of the three-month
equivalent of respondent’s salary should, however, be increased to the amount equivalent to the unexpired
term of the employment contract.
In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc.,82 this court ruled that the clause
"or for three (3) months for every year of the unexpired term, whichever is less"83 is unconstitutional for
violating the equal protection clause and substantive due process.84
A statute or provision which was declared unconstitutional is not a law. It "confers no rights; it imposes no
duties; it affords no protection; it creates no office; it is inoperative as if it has not been passed at all."85
We are aware that the clause "or for three (3) months for every year of the unexpired term, whichever is
less"was reinstated in Republic Act No. 8042 upon promulgation of Republic Act No. 10022 in 2010. Section 7
of Republic Act No. 10022 provides:
LABOR-1 Batch 1
Section 7.Section 10 of Republic Act No. 8042, as amended, is hereby amended to read as follows:
SEC. 10. Money Claims.– Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-
employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damage. Consistent with this mandate, the
NLRC shall endeavor to update and keep abreast with the developments in the global services industry.
The liability of the principal/employer and the recruitment/placement agency for any and all claims under this
section shall be joint and several. This provision shall be incorporated in the contract for overseas
employment and shall be a condition precedent for its approval. The performance bond to de [sic] filed by the
recruitment/placement agency, as provided by law, shall be answerable for all money claims or damages that
may be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate officers
and directors and partners as the case may be, shall themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and damages.
Such liabilities shall continue during the entire period or duration of the employment contract and shall not be
affected by any substitution, amendment or modification made locally or in a foreign country of the said
contract.
Any compromise/amicable settlement or voluntary agreement on money claims inclusive of damages under
this section shall be paid within thirty (30) days from approval of the settlement by the appropriate authority.
In case of termination of overseas employment without just, valid or authorized cause as defined by law or
contract, or any unauthorized deductions from the migrant worker’s salary, the worker shall be entitled to the
full reimbursement if [sic] his placement fee and the deductions made with interest at 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.
In case of a final and executory judgement against a foreign employer/principal, it shall be automatically
disqualified, without further proceedings, from participating in the Philippine Overseas Employment Program
and from recruiting and hiring Filipino workers until and unless it fully satisfies the judgement award.
Noncompliance with the mandatory periods for resolutions of case providedunder this section shall subject the
responsible officials to any or all of the following penalties:
(a) The salary of any such official who fails to render his decision or resolution within the prescribed
period shall be, or caused to be, withheld until the said official complies therewith;
(b) Suspension for not more than ninety (90) days; or
(c) Dismissal from the service with disqualification to hold any appointive public office for five (5)
years.
Provided, however,That the penalties herein provided shall be without prejudice to any liability which any such
official may have incured [sic] under other existing laws or rules and regulations as a consequence of violating
the provisions of this paragraph. (Emphasis supplied)
Page 15 of 69
Republic Act No. 10022 was promulgated on March 8, 2010. This means that the reinstatement of the clause
in Republic Act No. 8042 was not yet in effect at the time of respondent’s termination from work in
1997.86 Republic Act No. 8042 before it was amended byRepublic Act No. 10022 governs this case.
When a law is passed, this court awaits an actual case that clearly raises adversarial positions in their proper
context before considering a prayer to declare it as unconstitutional.
However, we are confronted with a unique situation. The law passed incorporates the exact clause already
declared as unconstitutional, without any perceived substantial change in the circumstances.
This may cause confusion on the part of the National Labor Relations Commission and the Court of
Appeals.At minimum, the existence of Republic Act No. 10022 may delay the execution of the judgment in this
case, further frustrating remedies to assuage the wrong done to petitioner.
Hence, there is a necessity to decide this constitutional issue.
Moreover, this court is possessed with the constitutional duty to "[p]romulgate rules concerning the protection
and enforcement of constitutional rights."87 When cases become mootand academic, we do not hesitate to
provide for guidance to bench and bar in situations where the same violations are capable of repetition but will
evade review. This is analogous to cases where there are millions of Filipinos working abroad who are bound
to suffer from the lack of protection because of the restoration of an identical clause in a provision previously
declared as unconstitutional.
In the hierarchy of laws, the Constitution is supreme. No branch or office of the government may exercise its
powers in any manner inconsistent with the Constitution, regardless of the existence of any law that supports
such exercise. The Constitution cannot be trumped by any other law. All laws must be read in light of the
Constitution. Any law that is inconsistent with it is a nullity.
Thus, when a law or a provision of law is null because it is inconsistent with the Constitution,the nullity cannot
be cured by reincorporation or reenactment of the same or a similar law or provision. A law or provision of law
that was already declared unconstitutional remains as such unless circumstances have sochanged as to
warrant a reverse conclusion.
We are not convinced by the pleadings submitted by the parties that the situation has so changed so as to
cause us to reverse binding precedent.
Likewise, there are special reasons of judicial efficiency and economy that attend to these cases. The new law
puts our overseas workers in the same vulnerable position as they were prior to Serrano. Failure to reiterate
the very ratio decidendi of that case will result in the same untold economic hardships that our reading of the
Constitution intended to avoid. Obviously, we cannot countenance added expenses for further litigation
thatwill reduce their hardearned wages as well as add to the indignity of having been deprived of the
protection of our laws simply because our precedents have not been followed. There is no constitutional
doctrine that causes injustice in the face of empty procedural niceties. Constitutional interpretation is complex,
but it is never unreasonable.
Thus, in a resolution88 dated October 22, 2013, we ordered the parties and the Office of the Solicitor General
to comment on the constitutionality of the reinstated clause in Republic Act No. 10022.
LABOR-1 Batch 1
In its comment,89 petitioner argued that the clause was constitutional.90 The legislators intended a balance
between the employers’ and the employees’ rights by not unduly burdening the local recruitment
agency.91 Petitioner is also of the view that the clause was already declared as constitutional in Serrano.92
The Office of the Solicitor General also argued that the clause was valid and constitutional.93 However, since
the parties never raised the issue of the constitutionality of the clause asreinstated in Republic Act No. 10022,
its contention is that it is beyond judicial review.94
On the other hand, respondentargued that the clause was unconstitutional because it infringed on workers’
right to contract.95
We observe that the reinstated clause, this time as provided in Republic Act. No. 10022, violates the
constitutional rights to equal protection and due process.96 Petitioner as well as the Solicitor General have
failed to show any compelling changein the circumstances that would warrant us to revisit the precedent.
We reiterate our finding in Serrano v. Gallant Maritime that limiting wages that should be recovered by
anillegally dismissed overseas worker to three months is both a violation of due process and the equal
protection clauses of the Constitution.
Equal protection of the law is a guarantee that persons under like circumstances and falling within the same
class are treated alike, in terms of "privileges conferred and liabilities enforced."97 It is a guarantee against
"undue favor and individual or class privilege, as well as hostile discrimination or the oppression of
inequality."98
In creating laws, the legislature has the power "to make distinctions and classifications."99
In exercising such power, it has a wide discretion.100
The equal protection clause does not infringe on this legislative power.101 A law is void on this basis, only if
classifications are made arbitrarily.102 There is no violation of the equal protection clause if the law applies
equally to persons within the same class and if there are reasonable grounds for distinguishing between those
falling within the class and those who do not fall within the class.103 A law that does not violate the equal
protection clause prescribesa reasonable classification.104
A reasonable classification "(1) must rest on substantial distinctions; (2) must be germane to the purposes of
the law; (3) must not be limited to existing conditions only; and (4) must apply equally to all members of the
same class."105
The reinstated clause does not satisfy the requirement of reasonable classification.
In Serrano, we identified the classifications made by the reinstated clause. It distinguished between fixed-
period overseas workers and fixedperiod local workers.106 It also distinguished between overseas workers with
employment contracts of less than one year and overseas workers with employment contracts of at least one
year.107 Within the class of overseas workers with at least one-year employment contracts, there was a
distinction between those with at least a year left in their contracts and those with less than a year left in their
contracts when they were illegally dismissed.108
Page 16 of 69
The Congress’ classification may be subjected to judicial review. In Serrano, there is a "legislative
classification which impermissibly interferes with the exercise of a fundamental right or operates to the
peculiar disadvantage of a suspect class."109
Under the Constitution, labor is afforded special protection.110 Thus, this court in Serrano, "[i]mbued with the
same sense of ‘obligation to afford protection to labor,’ . . . employ[ed] the standard of strict judicial scrutiny,
for it perceive[d] in the subject clause a suspect classification prejudicial to OFWs."111
We also noted in Serranothat before the passage of Republic Act No. 8042, the money claims of illegally
terminated overseas and local workers with fixed-term employment werecomputed in the same
manner.112 Their money claims were computed based onthe "unexpired portions of their contracts."113 The
adoption of the reinstated clause in Republic Act No. 8042 subjected the money claims of illegally dismissed
overseas workers with an unexpired term of at least a year to a cap of three months worth of their
salary.114 There was no such limitation on the money claims of illegally terminated local workers with fixed-
term employment.115
We observed that illegally dismissed overseas workers whose employment contracts had a term of less than
one year were granted the amount equivalent to the unexpired portion of their employment
contracts.116 Meanwhile, illegally dismissed overseas workers with employment terms of at least a year were
granted a cap equivalent to three months of their salary for the unexpired portions of their contracts.117
Observing the terminologies used inthe clause, we also found that "the subject clause creates a sub-layer of
discrimination among OFWs whose contract periods are for more than one year: those who are illegally
dismissed with less than one year left in their contracts shall be entitled to their salaries for the entire
unexpired portion thereof, while those who are illegally dismissed with one year or more remaining in their
contracts shall be covered by the reinstated clause, and their monetary benefits limited to their salaries for
three months only."118
We do not need strict scrutiny to conclude that these classifications do not rest on any real or substantial
distinctions that would justify different treatments in terms of the computation of money claims resulting from
illegal termination.
Overseas workers regardless of their classifications are entitled to security of tenure, at least for the period
agreed upon in their contracts. This means that they cannot be dismissed before the end of their contract
terms without due process. If they were illegally dismissed, the workers’ right to security of tenure is violated.
The rights violated when, say, a fixed-period local worker is illegally terminated are neither greater than
norless than the rights violated when a fixed-period overseas worker is illegally terminated. It is state policy to
protect the rights of workers withoutqualification as to the place of employment.119 In both cases, the workers
are deprived of their expected salary, which they could have earned had they not been illegally dismissed. For
both workers, this deprivation translates to economic insecurity and disparity.120 The same is true for the
distinctions between overseas workers with an employment contract of less than one year and overseas
workers with at least one year of employment contract, and between overseas workers with at least a year left
in their contracts and overseas workers with less than a year left in their contracts when they were illegally
dismissed.
For this reason, we cannot subscribe to the argument that "[overseas workers] are contractual employeeswho
can never acquire regular employment status, unlike local workers"121 because it already justifies differentiated
treatment in terms ofthe computation of money claims.122
LABOR-1 Batch 1
Likewise, the jurisdictional and enforcement issues on overseas workers’ money claims do not justify a
differentiated treatment in the computation of their money claims.123 If anything, these issues justify an equal, if
not greater protection and assistance to overseas workers who generally are more prone to exploitation given
their physical distance from our government.
We also find that the classificationsare not relevant to the purpose of the law, which is to "establish a higher
standard of protection and promotion of the welfare of migrant workers, their families and overseas Filipinos in
distress, and for other purposes."124 Further, we find specious the argument that reducing the liability of
placement agencies "redounds to the benefit of the [overseas] workers."125
Putting a cap on the money claims of certain overseas workers does not increase the standard of protection
afforded to them. On the other hand, foreign employers are more incentivizedby the reinstated clause to enter
into contracts of at least a year because it gives them more flexibility to violate our overseas workers’ rights.
Their liability for arbitrarily terminating overseas workers is decreased at the expense of the workers whose
rights they violated. Meanwhile, these overseas workers who are impressed with an expectation of a stable
job overseas for the longer contract period disregard other opportunities only to be terminated earlier. They
are left with claims that are less than what others in the same situation would receive. The reinstated clause,
therefore, creates a situation where the law meant to protect them makes violation of rights easier and simply
benign to the violator.
As Justice Brion said in his concurring opinion in Serrano:
Section 10 of R.A. No. 8042 affects these well-laid rules and measures, and in fact provides a hidden twist
affecting the principal/employer’s liability. While intended as an incentive accruing to recruitment/manning
agencies, the law, as worded, simply limits the OFWs’ recovery in wrongfuldismissal situations. Thus, it
redounds to the benefit of whoever may be liable, including the principal/employer – the direct employer
primarily liable for the wrongful dismissal. In this sense, Section 10 – read as a grant of incentives to
recruitment/manning agencies – oversteps what it aims to do by effectively limiting what is otherwise the full
liability of the foreign principals/employers. Section 10, in short, really operates to benefit the wrong party and
allows that party, without justifiable reason, to mitigate its liability for wrongful dismissals. Because of this
hidden twist, the limitation ofliability under Section 10 cannot be an "appropriate" incentive, to borrow the term
that R.A. No. 8042 itself uses to describe the incentive it envisions under its purpose clause.
What worsens the situation is the chosen mode of granting the incentive: instead of a grant that, to encourage
greater efforts at recruitment, is directly related to extra efforts undertaken, the law simply limits their liability
for the wrongful dismissals of already deployed OFWs. This is effectively a legally-imposed partial
condonation of their liability to OFWs, justified solely by the law’s intent to encourage greater deployment
efforts. Thus, the incentive,from a more practical and realistic view, is really part of a scheme to sell Filipino
overseas labor at a bargain for purposes solely of attracting the market. . . .
The so-called incentive is rendered particularly odious by its effect on the OFWs — the benefits accruing to
the recruitment/manning agencies and their principals are takenfrom the pockets of the OFWs to whom the
full salaries for the unexpired portion of the contract rightfully belong. Thus, the principals/employers and the
recruitment/manning agencies even profit from their violation of the security of tenure that an employment
contract embodies. Conversely, lesser protection is afforded the OFW, not only because of the lessened
recovery afforded him or her by operation of law, but also because this same lessened recovery renders a
wrongful dismissal easier and less onerous to undertake; the lesser cost of dismissing a Filipino will always
bea consideration a foreign employer will take into account in termination of employment decisions. . . .126
Further, "[t]here can never be a justification for any form of government action that alleviates the burden of
one sector, but imposes the same burden on another sector, especially when the favored sector is composed
Page 17 of 69
of private businesses suchas placement agencies, while the disadvantaged sector is composed ofOFWs
whose protection no less than the Constitution commands. The idea thatprivate business interest can be
elevated to the level of a compelling state interest is odious."127
Along the same line, we held that the reinstated clause violates due process rights. It is arbitrary as it deprives
overseas workers of their monetary claims without any discernable valid purpose.128
Respondent Joy Cabiles is entitled to her salary for the unexpired portion of her contract, in accordance with
Section 10 of Republic Act No. 8042. The award of the three-month equivalence of respondent’s salary must
be modified accordingly. Since she started working on June 26, 1997 and was terminated on July 14, 1997,
respondent is entitled to her salary from July 15, 1997 to June 25, 1998. "To rule otherwise would be
iniquitous to petitioner and other OFWs, and would,in effect, send a wrong signal that principals/employers
and recruitment/manning agencies may violate an OFW’s security of tenure which an employment contract
embodies and actually profit from such violation based on an unconstitutional provision of law."129
III
On the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of June 21, 2013, which revised the
interest rate for loan or forbearance from 12% to 6% in the absence of stipulation,applies in this case. The
pertinent portions of Circular No. 799, Series of 2013, read: The Monetary Board, in its Resolution No. 796
dated 16 May 2013, approved the following revisions governing the rate of interest in the absence of
stipulation in loan contracts, thereby amending Section 2 of Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed
in judgments, in the absence of an express contract as to such rateof interest, shall be six percent (6%) per
annum.
Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and Sections
4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions are hereby
amended accordingly.
This Circular shall take effect on 1 July 2013.
Through the able ponencia of Justice Diosdado Peralta, we laid down the guidelines in computing legal
interest in Nacar v. Gallery Frames:130
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the
rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the
Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or
LABOR-1 Batch 1
until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of credit.
And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not
be disturbed and shall continue to be implemented applying the rate of interest fixed therein.131
Circular No. 799 is applicable only in loans and forbearance of money, goods, or credits, and in judgments
when there is no stipulation on the applicable interest rate. Further, it is only applicable if the judgment did not
become final and executory before July 1, 2013.132
We add that Circular No. 799 is not applicable when there is a law that states otherwise. While the Bangko
Sentral ng Pilipinas has the power to set or limit interest rates,133 these interest rates do not apply when the
law provides that a different interest rate shall be applied. "[A] Central Bank Circular cannot repeal a law. Only
a law can repeal another law."134
For example, Section 10 of Republic Act No. 8042 provides that unlawfully terminated overseas workers are
entitled to the reimbursement of his or her placement fee with an interest of 12% per annum. Since Bangko
Sentral ng Pilipinas circulars cannotrepeal Republic Act No. 8042, the issuance of Circular No. 799 does not
have the effect of changing the interest on awards for reimbursement of placement fees from 12% to 6%. This
is despite Section 1 of Circular No. 799, which provides that the 6% interest rate applies even to judgments.
Moreover, laws are deemed incorporated in contracts. "The contracting parties need not repeat them. They do
not even have to be referred to. Every contract, thus, contains not only what has been explicitly stipulated, but
the statutory provisions that have any bearing on the matter."135 There is, therefore, an implied stipulation in
contracts between the placement agency and the overseasworker that in case the overseas worker is
adjudged as entitled to reimbursement of his or her placement fees, the amount shall be subject to a 12%
interest per annum. This implied stipulation has the effect of removing awards for reimbursement of placement
fees from Circular No. 799’s coverage.
The same cannot be said for awardsof salary for the unexpired portion of the employment contract under
Republic Act No. 8042. These awards are covered by Circular No. 799 because the law does not provide for a
specific interest rate that should apply.
In sum, if judgment did not become final and executory before July 1, 2013 and there was no stipulation in the
contract providing for a different interest rate, other money claims under Section 10 of Republic Act No. 8042
shall be subject to the 6% interest per annum in accordance with Circular No. 799.
This means that respondent is also entitled to an interest of 6% per annum on her money claims from the
finality of this judgment.
IV
Page 18 of 69
Finally, we clarify the liabilities ofWacoal as principal and petitioner as the employment agency that facilitated
respondent’s overseas employment.
Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides that the foreign employer and
the local employment agency are jointly and severally liable for money claims including claims arising out of
an employer-employee relationship and/or damages. This section also provides that the performance bond
filed by the local agency shall be answerable for such money claims or damages if they were awarded to the
employee.
This provision is in line with the state’s policy of affording protection to labor and alleviating workers’ plight.136
In overseas employment, the filing of money claims against the foreign employer is attended by practical and
legal complications.1âwphi1 The distance of the foreign employer alonemakes it difficult for an overseas
worker to reach it and make it liable for violations of the Labor Code. There are also possible conflict of laws,
jurisdictional issues, and procedural rules that may be raised to frustrate an overseas worker’sattempt to
advance his or her claims.
It may be argued, for instance, that the foreign employer must be impleaded in the complaint as an
indispensable party without which no final determination can be had of an action.137
The provision on joint and several liability in the Migrant Workers and Overseas Filipinos Act of 1995 assures
overseas workers that their rights will not be frustrated with these complications. The fundamental effect of
joint and several liability is that "each of the debtors is liable for the entire obligation."138 A final determination
may, therefore, be achieved even if only oneof the joint and several debtors are impleaded in an action.
Hence, in the case of overseas employment, either the local agency or the foreign employer may be sued for
all claims arising from the foreign employer’s labor law violations. This way, the overseas workers are assured
that someone — the foreign employer’s local agent — may be made to answer for violationsthat the foreign
employer may have committed.
The Migrant Workers and Overseas Filipinos Act of 1995 ensures that overseas workers have recourse in law
despite the circumstances of their employment. By providing that the liability of the foreign employer may be
"enforced to the full extent"139 against the local agent,the overseas worker is assured of immediate and
sufficientpayment of what is due them.140
Corollary to the assurance of immediate recourse in law, the provision on joint and several liability in the
Migrant Workers and Overseas Filipinos Act of 1995 shifts the burden of going after the foreign employer from
the overseas worker to the local employment agency. However, it must be emphasized that the local agency
that is held to answer for the overseas worker’s money claims is not leftwithout remedy. The law does not
preclude it from going after the foreign employer for reimbursement of whatever payment it has made to the
employee to answer for the money claims against the foreign employer.
A further implication of making localagencies jointly and severally liable with the foreign employer is thatan
additional layer of protection is afforded to overseas workers. Local agencies, which are businesses by
nature, are inoculated with interest in being always on the lookout against foreign employers that tend to
violate labor law. Lest they risk their reputation or finances, local agenciesmust already have mechanisms for
guarding against unscrupulous foreign employers even at the level prior to overseas employment applications.
With the present state of the pleadings, it is not possible to determine whether there was indeed a transfer of
obligations from petitioner to Pacific. This should not be an obstacle for the respondent overseas worker to
LABOR-1 Batch 1
proceed with the enforcement of this judgment. Petitioner is possessed with the resources to determine the
proper legal remedies to enforce its rights against Pacific, if any.
V
Many times, this court has spoken on what Filipinos may encounter as they travel into the farthest and
mostdifficult reaches of our planet to provide for their families. In Prieto v. NLRC:141
The Court is not unaware of the many abuses suffered by our overseas workers in the foreign land where they
have ventured, usually with heavy hearts, in pursuit of a more fulfilling future. Breach of contract,
maltreatment, rape, insufficient nourishment, sub-human lodgings, insults and other forms of debasement, are
only a few of the inhumane acts towhich they are subjected by their foreign employers, who probably feel they
can do as they please in their own country. Whilethese workers may indeed have relatively little defense
against exploitation while they are abroad, that disadvantage must not continue to burden them when they
return to their own territory to voice their muted complaint. There is no reason why, in their very own land, the
protection of our own laws cannot be extended to them in full measure for the redress of their grievances.142
But it seems that we have not said enough.
We face a diaspora of Filipinos. Their travails and their heroism can be told a million times over; each of their
stories as real as any other. Overseas Filipino workers brave alien cultures and the heartbreak of families left
behind daily. They would count the minutes, hours, days, months, and years yearning to see their sons and
daughters. We all know of the joy and sadness when they come home to see them all grown up and, being
so, they remember what their work has cost them. Twitter accounts, Facetime, and many other gadgets and
online applications will never substitute for their lost physical presence.
Unknown to them, they keep our economy afloat through the ebb and flow of political and economic crises.
They are our true diplomats, they who show the world the resilience, patience, and creativity of our people.
Indeed, we are a people who contribute much to the provision of material creations of this world.
This government loses its soul if we fail to ensure decent treatment for all Filipinos. We default by limiting the
contractual wages that should be paid to our workers when their contracts are breached by the foreign
employers. While we sit, this court will ensure that our laws will reward our overseas workers with what they
deserve: their dignity.
Inevitably, their dignity is ours as weil.
WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED with modification.
Petitioner Sameer Overseas Placement Agency is ORDERED to pay respondent Joy C. Cabiles the amount
equivalent to her salary for the unexpired portion of her employment contract at an interest of 6% per annum
from the finality of this judgment. Petitioner is also ORDERED to reimburse respondent the withheld
NT$3,000.00 salary and pay respondent attorney's fees of NT$300.00 at an interest of 6% per annum from
the finality of this judgment.
The clause, "or for three (3) months for every year of the unexpired term, whichever is less" in Section 7 of
Republic Act No. 10022 amending Section 10 of Republic Act No. 8042 is declared unconstitutional and,
therefore, null and void.
SO ORDERED.
Page 19 of 69
 REPUBLIC OF THE PHILIPPINES, represented by the HONORABLE EXECUTIVE SECRETARY, the
HONORABLE SECRETARY OF LABOR AND EMPLOYMENT (DOLE), the PHILIPPINE OVERSEAS
EMPLOYMENT ADMINISTRATION (POEA), the OVERSEAS WORKERS WELFARE ADMINISTRATION
(OWWA), the LABOR ARBITERS OF THE NATIONAL LABOR RELATIONS COMMISSION (NLRC), the
HONORABLE SECRETARY OF JUSTICE, the HONORABLE SECRETARY OF FOREIGN AFFAIRS and
the COMMISSION ON AUDIT (COA), Petitioners,
vs.
PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC. (P ASEI), Respondent.

x-----------------------x

G.R. Nos. 182978-79

BECMEN SERVICE EXPORTER AND PROMOTION, INC., Petitioner,

vs.
SPOUSES SIMPLICIO AND MILA CUARESMA (for and in behalf of daughter, Jasmin G. Cuaresma),
WHITE FALCON SERVICES, INC., and JAIME ORTIZ (President of White Falcon Services,
Inc.), Respondents.

x-----------------------x

G.R. No. 152642               November 13, 2012 G.R. Nos. 184298-99

HON. PATRICIA A. STO.TOMAS, ROSALINDA BALDOZ and LUCITA LAZO, Petitioners, SPOUSES SIMPLICIO AND MILA CUARESMA (for and in behalf of deceased daughter, Jasmin G.
vs. Cuaresma), Petitioners,
REY SALAC, WILLIE D. ESPIRITU, MARIO MONTENEGRO, DODGIE BELONIO, LOLIT SALINEL and vs.
BUDDY BONNEVIE, Respondents. WHITE FALCON SERVICES, INC. and BECMEN SERVICES EXPORTER AND PROMOTION,
INC., Respondents.
x-----------------------x
DECISION
G.R. No. 152710
ABAD, J.:
HON. PATRICIA A. STO. TOMAS, in her capacity as Secretary of Department of Labor and
Employment (DOLE), HON. ROSALINDA D. BALDOZ, in her capacity as Administrator, Philippine These consolidated cases pertain to the constitutionality of certain provisions of Republic Act 8042, otherwise
Overseas Employment Administration (POEA), and the PHILIPPINE OVERSEAS EMPLOYMENT known as the Migrant Workers and Overseas Filipinos Act of 1995.
ADMINISTRATION GOVERNING BOARD, Petitioners,
vs.
HON. JOSE G. PANEDA, in his capacity as the Presiding Judge of Branch 220, Quezon City, ASIAN The Facts and the Case
RECRUITMENT COUNCIL PHILIPPINE CHAPTER, INC. (ARCOPHIL), for itself and in behalf of its
members: WORLDCARE PHILIPPINES SERVIZO INTERNATIONALE, INC., STEADFAST On June 7, 1995 Congress enacted Republic Act (R.A.) 8042 or the Migrant Workers and Overseas Filipinos
INTERNATIONAL RECRUITMENT CORP., VERDANT MANPOWER MOBILIZATION CORP., BRENT Act of 1995 that, for among other purposes, sets the Government’s policies on overseas employment and
OVERSEAS PERSONNEL, INC., ARL MANPOWER SERVICES, INC., DAHLZEN INTERNATIONAL establishes a higher standard of protection and promotion of the welfare of migrant workers, their families, and
SERVICES, INC., INTERWORLD PLACEMENT CENTER, INC., LAKAS TAO CONTRACT SERVICES LTD. overseas Filipinos in distress.
CO., SSC MULTI-SERVICES, DMJ INTERNATIONAL, and MIP INTERNATIONAL MANPOWER
SERVICES, represented by its proprietress, MARCELINA I. PAGSIBIGAN, Respondents.
G.R. 152642 and G.R. 152710

x-----------------------x
(Constitutionality of Sections 29 and 30, R.A. 8042)

G.R. No. 167590

LABOR-1 Batch 1 Page 20 of 69
Sections 29 and 30 of the Act1 commanded the Department of Labor and Employment (DOLE) to begin
deregulating within one year of its passage the business of handling the recruitment and migration of
overseas Filipino workers and phase out within five years the regulatory functions of the Philippine Overseas
Employment Administration (POEA).
On January 8, 2002 respondents Rey Salac, Willie D. Espiritu, Mario Montenegro, Dodgie Belonio, Lolit
Salinel, and Buddy Bonnevie (Salac, et al.) filed a petition for certiorari, prohibition and mandamus with
application for temporary restraining order (TRO) and preliminary injunction against petitioners, the DOLE
Secretary, the POEA Administrator, and the Technical Education and Skills Development Authority (TESDA)
Secretary-General before the Regional Trial Court (RTC) of Quezon City, Branch 96.2
Salac, et al. sought to: 1) nullify DOLE Department Order 10 (DOLE DO 10) and POEA Memorandum Circular
15 (POEA MC 15); 2) prohibit the DOLE, POEA, and TESDA from implementing the same and from further
issuing rules and regulations that would regulate the recruitment and placement of overseas Filipino workers
(OFWs); and 3) also enjoin them to comply with the policy of deregulation mandated under Sections 29 and
30 of Republic Act 8042.
On March 20, 2002 the Quezon City RTC granted Salac, et al.’s petition and ordered the government
agencies mentioned to deregulate the recruitment and placement of OFWs.3 The RTC also annulled DOLE
DO 10, POEA MC 15, and all other orders, circulars and issuances that are inconsistent with the policy of
deregulation under R.A. 8042.
Prompted by the RTC’s above actions, the government officials concerned filed the present petition in G.R.
152642 seeking to annul the RTC’s decision and have the same enjoined pending action on the petition.
On April 17, 2002 the Philippine Association of Service Exporters, Inc. intervened in the case before the
Court, claiming that the RTC March 20, 2002 Decision gravely affected them since it paralyzed the
deployment abroad of OFWs and performing artists. The Confederated Association of Licensed Entertainment
Agencies, Incorporated (CALEA) intervened for the same purpose.4
On May 23, 2002 the Court5 issued a TRO in the case, enjoining the Quezon City RTC, Branch 96, from
enforcing its decision.
In a parallel case, on February 12, 2002 respondents Asian Recruitment Council Philippine Chapter, Inc. and
others (Arcophil, et al.) filed a petition for certiorari and prohibition with application for TRO and preliminary
injunction against the DOLE Secretary, the POEA Administrator, and the TESDA Director-General,6 before the
RTC of Quezon City, Branch 220, to enjoin the latter from implementing the 2002 Rules and Regulations
Governing the Recruitment and Employment of Overseas Workers and to cease and desist from issuing other
orders, circulars, and policies that tend to regulate the recruitment and placement of OFWs in violation of the
policy of deregulation provided in Sections 29 and 30 of R.A. 8042.
On March 12, 2002 the Quezon City RTC rendered an Order, granting the petition and enjoining the
government agencies involved from exercising regulatory functions over the recruitment and placement of
OFWs. This prompted the DOLE Secretary, the POEA Administrator, and the TESDA Director-General to file
the present action in G.R. 152710. As in G.R. 152642, the Court issued on May 23, 2002 a TRO enjoining the
Quezon City RTC, Branch 220 from enforcing its decision.
On December 4, 2008, however, the Republic informed7 the Court that on April 10, 2007 former President
Gloria Macapagal-Arroyo signed into law R.A. 94228 which expressly repealed Sections 29 and 30 of R.A.
LABOR-1 Batch 1
8042 and adopted the policy of close government regulation of the recruitment and deployment of OFWs. R.A.
9422 pertinently provides:
xxxx
SEC. 1. Section 23, paragraph (b.1) of Republic Act No. 8042, otherwise known as the "Migrant Workers and
Overseas Filipinos Act of 1995" is hereby amended to read as follows:
(b.1) Philippine Overseas Employment Administration – The Administration shall regulate private sector
participation in the recruitment and overseas placement of workers by setting up a licensing and registration
system. It shall also formulate and implement, in coordination with appropriate entities concerned, when
necessary, a system for promoting and monitoring the overseas employment of Filipino workers taking into
consideration their welfare and the domestic manpower requirements.
In addition to its powers and functions, the administration shall inform migrant workers not only of their rights
as workers but also of their rights as human beings, instruct and guide the workers how to assert their rights
and provide the available mechanism to redress violation of their rights.
In the recruitment and placement of workers to service the requirements for trained and competent Filipino
workers of foreign governments and their instrumentalities, and such other employers as public interests may
require, the administration shall deploy only to countries where the Philippines has concluded bilateral labor
agreements or arrangements: Provided, That such countries shall guarantee to protect the rights of Filipino
migrant workers; and: Provided, further, That such countries shall observe and/or comply with the
international laws and standards for migrant workers.
SEC. 2. Section 29 of the same law is hereby repealed.
SEC. 3. Section 30 of the same law is also hereby repealed.
xxxx
On August 20, 2009 respondents Salac, et al. told the Court in G.R. 152642 that they agree9 with the
Republic’s view that the repeal of Sections 29 and 30 of R.A. 8042 renders the issues they raised by their
action moot and academic. The Court has no reason to disagree. Consequently, the two cases, G.R. 152642
and 152710, should be dismissed for being moot and academic.
G.R. 167590
(Constitutionality of Sections 6, 7, and 9 of R.A. 8042)
On August 21, 1995 respondent Philippine Association of Service Exporters, Inc. (PASEI) filed a petition for
declaratory relief and prohibition with prayer for issuance of TRO and writ of preliminary injunction before the
RTC of Manila, seeking to annul Sections 6, 7, and 9 of R.A. 8042 for being unconstitutional. (PASEI also
sought to annul a portion of Section 10 but the Court will take up this point later together with a related case.)
Section 6 defines the crime of "illegal recruitment" and enumerates the acts constituting the same. Section 7
provides the penalties for prohibited acts. Thus:
Page 21 of 69
SEC. 6. Definition. – For purposes of this Act, illegal recruitment shall mean any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring, procuring workers and includes referring, contract services,
promising or advertising for employment abroad, whether for profit or not, when undertaken by a non-license
or non-holder of authority contemplated under Article 13(f) of Presidential Decree No. 442, as amended,
otherwise known as the Labor Code of the Philippines: Provided, That such non-license or non-holder, who, in
any manner, offers or promises for a fee employment abroad to two or more persons shall be deemed so
engaged. It shall likewise include the following acts, whether committed by any person, whether a non-
licensee, non-holder, licensee or holder of authority:
xxxx
SEC. 7. Penalties. –
(a) Any person found guilty of illegal recruitment shall suffer the penalty of imprisonment of not less
than six (6) years and one (1) day but not more than twelve (12) years and a fine not less than two
hundred thousand pesos (₱200,000.00) nor more than five hundred thousand pesos (₱500,000.00).
(b) The penalty of life imprisonment and a fine of not less than five hundred thousand pesos
(₱500,000.00) nor more than one million pesos (₱1,000,000.00) shall be imposed if illegal
recruitment constitutes economic sabotage as defined herein.
Provided, however, That the maximum penalty shall be imposed if the person illegally recruited is less than
eighteen (18) years of age or committed by a non-licensee or non-holder of authority.10
Finally, Section 9 of R.A. 8042 allowed the filing of criminal actions arising from "illegal recruitment" before the
RTC of the province or city where the offense was committed or where the offended party actually resides at
the time of the commission of the offense.
The RTC of Manila declared Section 6 unconstitutional after hearing on the ground that its definition of "illegal
recruitment" is vague as it fails to distinguish between licensed and non-licensed recruiters11 and for that
reason gives undue advantage to the non-licensed recruiters in violation of the right to equal protection of
those that operate with government licenses or authorities.
But "illegal recruitment" as defined in Section 6 is clear and unambiguous and, contrary to the RTC’s finding,
actually makes a distinction between licensed and non-licensed recruiters. By its terms, persons who engage
in "canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers" without the
appropriate government license or authority are guilty of illegal recruitment whether or not they commit the
wrongful acts enumerated in that section. On the other hand, recruiters who engage in the canvassing,
enlisting, etc. of OFWs, although with the appropriate government license or authority, are guilty of illegal
recruitment only if they commit any of the wrongful acts enumerated in Section 6.
The Manila RTC also declared Section 7 unconstitutional on the ground that its sweeping application of the
penalties failed to make any distinction as to the seriousness of the act committed for the application of the
penalty imposed on such violation. As an example, said the trial court, the mere failure to render a report
under Section 6(h) or obstructing the inspection by the Labor Department under Section 6(g) are penalized by
imprisonment for six years and one day and a minimum fine of ₱200,000.00 but which could unreasonably go
even as high as life imprisonment if committed by at least three persons.
LABOR-1 Batch 1
Apparently, the Manila RTC did not agree that the law can impose such grave penalties upon what it believed
were specific acts that were not as condemnable as the others in the lists. But, in fixing uniform penalties for
each of the enumerated acts under Section 6, Congress was within its prerogative to determine what
individual acts are equally reprehensible, consistent with the State policy of according full protection to labor,
and deserving of the same penalties. It is not within the power of the Court to question the wisdom of this kind
of choice. Notably, this legislative policy has been further stressed in July 2010 with the enactment of R.A.
1002212 which increased even more the duration of the penalties of imprisonment and the amounts of fine for
the commission of the acts listed under Section 7.
Obviously, in fixing such tough penalties, the law considered the unsettling fact that OFWs must work outside
the country’s borders and beyond its immediate protection. The law must, therefore, make an effort to
somehow protect them from conscienceless individuals within its jurisdiction who, fueled by greed, are willing
to ship them out without clear assurance that their contracted principals would treat such OFWs fairly and
humanely.
As the Court held in People v. Ventura,13 the State under its police power "may prescribe such regulations as
in its judgment will secure or tend to secure the general welfare of the people, to protect them against the
consequence of ignorance and incapacity as well as of deception and fraud." Police power is "that inherent
and plenary power of the State which enables it to prohibit all things hurtful to the comfort, safety, and welfare
of society."14
The Manila RTC also invalidated Section 9 of R.A. 8042 on the ground that allowing the offended parties to
file the criminal case in their place of residence would negate the general rule on venue of criminal cases
which is the place where the crime or any of its essential elements were committed. Venue, said the RTC, is
jurisdictional in penal laws and, allowing the filing of criminal actions at the place of residence of the offended
parties violates their right to due process. Section 9 provides:
SEC. 9. Venue. – A criminal action arising from illegal recruitment as defined herein shall be filed with the
Regional Trial Court of the province or city where the offense was committed or where the offended party
actually resides at the time of the commission of the offense: Provided, That the court where the criminal
action is first filed shall acquire jurisdiction to the exclusion of other courts: Provided, however, That the
aforestated provisions shall also apply to those criminal actions that have already been filed in court at the
time of the effectivity of this Act.
But there is nothing arbitrary or unconstitutional in Congress fixing an alternative venue for violations of
Section 6 of R.A. 8042 that differs from the venue established by the Rules on Criminal Procedure. Indeed,
Section 15(a), Rule 110 of the latter Rules allows exceptions provided by laws. Thus:
SEC. 15. Place where action is to be instituted.— (a) Subject to existing laws, the criminal action shall be
instituted and tried in the court of the municipality or territory where the offense was committed or where any
of its essential ingredients occurred. (Emphasis supplied)
xxxx
Section 9 of R.A. 8042, as an exception to the rule on venue of criminal actions is, consistent with that law’s
declared policy15 of providing a criminal justice system that protects and serves the best interests of the victims
of illegal recruitment.
G.R. 167590, G.R. 182978-79,16 and G.R. 184298-9917
Page 22 of 69
(Constitutionality of Section 10, last sentence of 2nd paragraph)
G.R. 182978-79 and G.R. 184298-99 are consolidated cases. Respondent spouses Simplicio and Mila
Cuaresma (the Cuaresmas) filed a claim for death and insurance benefits and damages against petitioners
Becmen Service Exporter and Promotion, Inc. (Becmen) and White Falcon Services, Inc. (White Falcon) for
the death of their daughter Jasmin Cuaresma while working as staff nurse in Riyadh, Saudi Arabia.
The Labor Arbiter (LA) dismissed the claim on the ground that the Cuaresmas had already received insurance
benefits arising from their daughter’s death from the Overseas Workers Welfare Administration (OWWA). The
LA also gave due credence to the findings of the Saudi Arabian authorities that Jasmin committed suicide.
On appeal, however, the National Labor Relations Commission (NLRC) found Becmen and White Falcon
jointly and severally liable for Jasmin’s death and ordered them to pay the Cuaresmas the amount of
US$113,000.00 as actual damages. The NLRC relied on the Cabanatuan City Health Office’s autopsy finding
that Jasmin died of criminal violence and rape.
Becmen and White Falcon appealed the NLRC Decision to the Court of Appeals (CA).18 On June 28, 2006 the
CA held Becmen and White Falcon jointly and severally liable with their Saudi Arabian employer for actual
damages, with Becmen having a right of reimbursement from White Falcon. Becmen and White Falcon
appealed the CA Decision to this Court.
On April 7, 2009 the Court found Jasmin’s death not work-related or work-connected since her rape and death
did not occur while she was on duty at the hospital or doing acts incidental to her employment. The Court
deleted the award of actual damages but ruled that Becmen’s corporate directors and officers are solidarily
liable with their company for its failure to investigate the true nature of her death. Becmen and White Falcon
abandoned their legal, moral, and social duty to assist the Cuaresmas in obtaining justice for their daughter.
Consequently, the Court held the foreign employer Rajab and Silsilah, White Falcon, Becmen, and the latter’s
corporate directors and officers jointly and severally liable to the Cuaresmas for: 1) P2,500,000.00 as moral
damages; 2) P2,500,000.00 as exemplary damages; 3) attorney’s fees of 10% of the total monetary award;
and 4) cost of suit.
On July 16, 2009 the corporate directors and officers of Becmen, namely, Eufrocina Gumabay, Elvira
Taguiam, Lourdes Bonifacio and Eddie De Guzman (Gumabay, et al.) filed a motion for leave to Intervene.
They questioned the constitutionality of the last sentence of the second paragraph of Section 10, R.A. 8042
which holds the corporate directors, officers and partners jointly and solidarily liable with their company for
money claims filed by OFWs against their employers and the recruitment firms. On September 9, 2009 the
Court allowed the intervention and admitted Gumabay, et al.’s motion for reconsideration.
The key issue that Gumabay, et al. present is whether or not the 2nd paragraph of Section 10, R.A. 8042,
which holds the corporate directors, officers, and partners of recruitment and placement agencies jointly and
solidarily liable for money claims and damages that may be adjudged against the latter agencies, is
unconstitutional.
In G.R. 167590 (the PASEI case), the Quezon City RTC held as unconstitutional the last sentence of the 2nd
paragraph of Section 10 of R.A. 8042. It pointed out that, absent sufficient proof that the corporate officers and
directors of the erring company had knowledge of and allowed the illegal recruitment, making them
automatically liable would violate their right to due process of law.
The pertinent portion of Section 10 provides:
LABOR-1 Batch 1
SEC. 10. Money Claims. – x x x
The liability of the principal/employer and the recruitment/placement agency for any and all claims under this
section shall be joint and several. This provision shall be incorporated in the contract for overseas
employment and shall be a condition precedent for its approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be answerable for all money claims or damages that
may be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate officers
and directors and partners as the case may be, shall themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and damages. (Emphasis supplied)
But the Court has already held, pending adjudication of this case, that the liability of corporate directors and
officers is not automatic. To make them jointly and solidarily liable with their company, there must be a finding
that they were remiss in directing the affairs of that company, such as sponsoring or tolerating the conduct of
illegal activities.19 In the case of Becmen and White Falcon,20 while there is evidence that these companies
were at fault in not investigating the cause of Jasmin’s death, there is no mention of any evidence in the case
against them that intervenors Gumabay, et al., Becmen’s corporate officers and directors, were personally
involved in their company’s particular actions or omissions in Jasmin’s case.
As a final note, R.A. 8042 is a police power measure intended to regulate the recruitment and deployment of
OFWs. It aims to curb, if not eliminate, the injustices and abuses suffered by numerous OFWs seeking to
work abroad. The rule is settled that every statute has in its favor the presumption of constitutionality. The
Court cannot inquire into the wisdom or expediency of the laws enacted by the Legislative Department.
Hence, in the absence of a clear and unmistakable case that the statute is unconstitutional, the Court must
uphold its validity.
WHEREFORE, in G.R. 152642 and 152710, the Court DISMISSES the petitions for having become moot and
academic.1âwphi1
In G.R. 167590, the Court SETS ASIDE the Decision of the Regional Trial Court ofManila dated December 8,
2004 and DECLARES Sections 6, 7, and 9 of Republic Act 8042 valid and constitutional.
In G.R. 182978-79 and G.R. 184298-99 as well as in G.R. 167590, the Court HOLDS the last sentence of the
second paragraph of Section 10 of Republic Act 8042 valid and constitutional. The Court, however,
RECONSIDERS and SETS ASIDE the portion of its Decision in G.R. 182978-79 and G.R. 184298-99 that
held intervenors Eufrocina Gumabay, Elvira Taguiam, Lourdes Bonifacio, and Eddie De Guzman jointly and
solidarily liable with respondent Becmen Services Exporter and Promotion, Inc. to spouses Simplicia and Mila
Cuaresma for lack of a finding in those cases that such intervenors had a part in the act or omission imputed
to their corporation.
SO ORDERED.
Page 23 of 69

G.R. No. 154213               August 23, 2012
EASTERN MEDITERRANEAN MARITIME LTD. AND AGEMAR MANNING AGENCY, INC., Petitioners,
vs.
EST ANISLAO SURIO, FREDDIE PALGUIRAN, GRACIANO MORALES, HENRY CASTILLO, ARISTOTLE
ARREOLA, ALEXANDER YGOT, ANRIQUE BA TTUNG, GREGORIO ALDOVINO, NARCISO FRIAS,
VICTOR FLORES, SAMUEL MARCIAL, CARLITO PALGUIRAN, DUQUE VINLUAN, .JESUS
MENDEGORIN, NEIL FLORES, ROMEO MANGALIAG, JOE GARFIN and SALESTINO
SUSA, Respondents.
*PEREZ
DECISION
BERSAMIN, J.:
On appeal is the decision the Court of Appeals (CA) promulgated on December 21, 2001 affirming the
resolution of the National Labor Relations Commission (NLRC) declaring itself to be without appellate
jurisdiction to review the decision of the Philippine Overseas Employment Administration (POEA) involving
petitioners’ complaint for disciplinary action against respondents.1
Respondents were former crewmembers of MT Seadance, a vessel owned by petitioner Eastern
Mediterranean Maritime Ltd. and manned and operated by petitioner Agemar Manning Agency, Inc. While
respondents were still on board the vessel, they experienced delays in the payment of their wages and in the
remittance of allotments, and were not paid for extra work and extra overtime work. They complained about
the vessel’s inadequate equipment, and about the failure of the petitioners to heed their repeated requests for
the improvement of their working conditions. On December 19, 1993, when MT Seadance docked at the port
of Brofjorden, Sweden to discharge oil, representatives of the International Transport Federation (ITF)
boarded the vessel and found the wages of the respondents to be below the prevailing rates. The ensuing
negotiations between the ITF and the vessel owner on the increase in respondents’ wages resulted in the
payment by the vessel owner of wage differentials and the immediate repatriation of respondents to the
Philippines.
Subsequently, on December 23, 1993, the petitioners filed against the newly-repatriated respondents a
complaint for disciplinary action based on breach of discipline and for the reimbursement of the wage
increases in the Workers Assistance and Adjudication Office of the POEA.
During the pendency of the administrative complaint in the POEA, Republic Act No. 8042 (Migrant Workers
and Overseas Filipinos Act of 1995) took effect on July 15, 1995. Section 10 of Republic Act No. 8042 vested
LABOR-1 Batch 1
original and exclusive jurisdiction over all money claims arising out of employer-employee relationships
involving overseas Filipino workers in the Labor Arbiters, to wit:
Section 10. Money Claims. – Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-
employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damages.
The jurisdiction over such claims was previously exercised by the POEA under the POEA Rules and
Regulations of 1991 (1991 POEA Rules).
On May 23, 1996, the POEA dismissed the complaint for disciplinary action. Petitioners received the order of
dismissal on July 24, 1996.2
Relying on Section 1, Rule V, Book VII of the 1991 POEA Rules, petitioners filed a partial appeal on August 2,
1996 in the NLRC, still maintaining that respondents should be administratively sanctioned for their conduct
while they were on board MT Seadance.
On March 21, 1997, the NLRC dismissed petitioners’ appeal for lack of jurisdiction,3 thus:
We dismiss the partial appeal.
The Commission has no jurisdiction to review cases decided by the POEA Administrator involving disciplinary
actions. Under the Migrant Workers and Overseas Filipinos Act of 1995, the Labor Arbiter shall have
jurisdiction over money claims involving employer-employee relationship (sec. 10, R.A. 8042). Said law does
not provide that appeals from decisions arising from complaint for disciplinary action rest in the Commission.
PREMISES CONSIDERED, instant appeal from the Order of May 23, 1996 is hereby DISMISSED for lack of
jurisdiction.
SO ORDERED.
Not satisfied, petitioners moved for reconsideration, but the NLRC denied their motion. They received the
denial on July 8, 1997.4
Petitioners then commenced in this Court a special civil action for certiorari and mandamus. Citing St. Martin
Funeral Homes v. National Labor Relations Commission,5 however, the Court referred the petition to the CA
on November 25, 1998.
Petitioners contended in their petition that:
THE NLRC GRAVELY ABUSED ITS DISCRETION AND/OR GRAVELY ERRED IN DISMISSING
PETITIONERS’ APPEAL AND MOTION FOR RECONSIDERATION WHEN IT REFUSED TO TAKE
COGNIZANCE OF PETITIONERS’ APPEAL DESPITE BEING EMPOWERED TO DO SO UNDER THE
LAW.6
Page 24 of 69
On December 21, 2001, the CA dismissed the petition for certiorari and mandamus, holding that the inclusion
and deletion of overseas contract workers from the POEA blacklist/watchlist were within the exclusive
jurisdiction of the POEA to the exclusion of the NLRC, and that the NLRC had no appellate jurisdiction to
review the matter, viz:
Section 10 of RA 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995,
provides that:
"Money Claims – Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within
ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers for overseas deployment including
claims for actual, moral, exemplary and other forms of damages.
xxxx
Likewise, the Rules and Regulations implementing RA 8042 reiterate the jurisdiction of POEA, thus:
"Section 28. Jurisdiction of the POEA. – The POEA shall exercise original and exclusive jurisdiction to hear
and decide:
a) All cases, which are administrative in character, involving or arising out of violations of rules and regulations
relating to licensing and registration of recruitment and employment agencies or entities; and
b) Disciplinary action cases and other special cases, which are administrative in character, involving
employers, principals, contracting partners and Filipino migrant workers."
Further, Sections 6 and 7 Rule VII, Book VII of the POEA Rules & Regulations (1991) provide:
"Sec. 6. Disqualification of Contract Workers. Contract workers, including seamen, against whom have been
imposed or with pending obligations imposed upon them through an order, decision or resolution shall be
included in the POEA Blacklist Workers shall be disqualified from overseas employment unless properly
cleared by the Administration or until their suspension is served or lifted.
Sec. 7. Delisting of the Contract Worker’s Name from the POEA Watchlist. The name of an overseas worker
may be excluded, deleted and removed from the POEA Watchlist only after disposition of the case by the
Administration."
Thus, it can be concluded from the afore-quoted law and rules that, public respondent has no jurisdiction to
review disciplinary cases decided by the POEA involving contract workers. Clearly, the matter of inclusion and
deletion of overseas contract workers in the POEA Blacklist/Watchlist is within the exclusive jurisdiction of the
POEA to the exclusion of the public respondent. Nor has the latter appellate jurisdiction to review the findings
of the POEA involving such cases.
xxx
LABOR-1 Batch 1
In fine, we find and so hold, that, no grave abuse of discretion can be imputed to the public respondent when
it issued the assailed Decision and Order, dated March 21, 1997 and June 13, 1997, respectively, dismissing
petitioners’ appeal from the decision of the POEA.
WHEREFORE, finding the instant petition not impressed with merit, the same is hereby DENIED DUE
COURSE. Costs against petitioners.
SO ORDERED.7
Issue
Petitioners still appeal, submitting to the Court the sole issue of:
WHETHER OR NOT THE NLRC HAS JURISDICTION TO REVIEW ON APPEAL CASES DECIDED BY THE
POEA ON MATTERS PERTAINING TO DISCIPLINARY ACTIONS AGAINST PRIVATE RESPONDENTS.
They contend that both the CA and the NLRC had no basis to rule that the NLRC had no jurisdiction to
entertain the appeal only because Republic Act No. 8042 had not provided for its retroactive application.
Respondents counter that the appeal should have been filed with the Secretary of Labor who had exclusive
jurisdiction to review cases involving administrative matters decided by the POEA.
Ruling
The petition for review lacks merit.
Petitioners’ adamant insistence that the NLRC should have appellate authority over the POEA’s decision in
the disciplinary action because their complaint against respondents was filed in 1993 was unwarranted.
Although Republic Act No. 8042, through its Section 10, transferred the original and exclusive jurisdiction to
hear and decide money claims involving overseas Filipino workers from the POEA to the Labor Arbiters, the
law did not remove from the POEA the original and exclusive jurisdiction to hear and decide all disciplinary
action cases and other special cases administrative in character involving such workers. The obvious intent of
Republic Act No. 8042 was to have the POEA focus its efforts in resolving all administrative matters affecting
and involving such workers. This intent was even expressly recognized in the Omnibus Rules and
Regulations Implementing the Migrant Workers and Overseas Filipinos Act of 1995 promulgated on February
29, 1996, viz:
Section 28. Jurisdiction of the POEA. – The POEA shall exercise original and exclusive jurisdiction to hear
and decide:
(a) all cases, which are administrative in character, involving or arising out of violations or rules and
regulations relating to licensing and registration of recruitment and employment agencies or entities; and
(b) disciplinary action cases and other special cases, which are administrative in character, involving
employers, principals, contracting partners and Filipino migrant workers.
Section 29. Venue – The cases mentioned in Section 28(a) of this Rule, may be filed with the POEA
Adjudication Office or the DOLE/POEA regional office of the place where the complainant applied or was
Page 25 of 69
recruited, at the option of the complainant. The office with which the complaint was first filed shall take
cognizance of the case.
Disciplinary action cases and other special cases, as mentioned in the preceding Section, shall be filed with
the POEA Adjudication Office.
It is clear to us, therefore, that the NLRC had no appellate jurisdiction to review the decision of the POEA in
disciplinary cases involving overseas contract workers.
Petitioners’ position that Republic Act No. 8042 should not be applied retroactively to the review of the
POEA’s decision dismissing their complaint against respondents has no support in jurisprudence. Although,
as a rule, all laws are prospective in application unless the contrary is expressly provided,8 or unless the law is
procedural or curative in nature,9 there is no serious question about the retroactive applicability of Republic Act
No. 8042 to the appeal of the POEA’s decision on petitioners’ disciplinary action against respondents. In a
way, Republic Act No. 8042 was a procedural law due to its providing or omitting guidelines on appeal. A law
is procedural, according to De Los Santos v. Vda. De Mangubat,10 when it –
commission of acts; review, approve, reverse or modify acts and decisions of subordinate officials or units;
determine priorities in the execution of plans and programs. Unless a different meaning is explicitly provided in
the specific law governing the relationship of particular agencies, the word "control" shall encompass
supervision and control as defined in this paragraph. xxx.
Thus, Section 1, Part VII, Rule V of the 2003 POEA Rules and Regulations specifically provides, as follows:
Section 1. Jurisdiction. – The Secretary shall have the exclusive and original jurisdiction to act on appeals or
petition for review of disciplinary action cases decided by the Administration.
In conclusion, we hold that petitioners should have appealed the adverse decision of the POEA to the
Secretary of Labor instead of to the NLRC. Consequently, the CA, being correct on its conclusions, committed
no error in upholding the NLRC.
WHEREFORE, we AFFIRM the decision promulgated on December 21, 2001 by the Court of Appeals;
and ORDER the petitioners to pay the costs of suit.

Refers to the adjective law which prescribes rules and forms of procedure in order that courts may be able to SO ORDERED.
administer justice. Procedural laws do not come within the legal conception of a retroactive law, or the general
rule against the retroactive operation of statues ― they may be given retroactive effect on actions pending
and undetermined at the time of their passage and this will not violate any right of a person who may feel that
he is adversely affected, insomuch as there are no vested rights in rules of procedure.

Republic Act No. 8042 applies to petitioners’ complaint by virtue of the case being then still pending or
undetermined at the time of the law’s passage, there being no vested rights in rules of procedure.11 They could
not validly insist that the reckoning period to ascertain which law or rule should apply was the time when the
disciplinary complaint was originally filed in the POEA in 1993. Moreover, Republic Act No. 8042 and its
implementing rules and regulations were already in effect when petitioners took their appeal. A statute that
eliminates the right to appeal and considers the judgment rendered final and unappealable only destroys the
right to appeal, but not the right to prosecute an appeal that has been perfected prior to its passage, for, at
that stage, the right to appeal has already vested and cannot be impaired.12 Conversely and by analogy, an
appeal that is perfected when a new statute affecting appellate jurisdiction comes into effect should comply
with the provisions of the new law, unless otherwise provided by the new law. Relevantly, petitioners need to
be reminded that the right to appeal from a decision is a privilege established by positive laws, which, upon
authorizing the taking of the appeal, point out the cases in which it is proper to present the appeal, the
procedure to be observed, and the courts by which the appeal is to be proceeded with and resolved.13 This is
why we consistently hold that the right to appeal is statutory in character, and is available only if granted by
law or statute.14

When Republic Act No. 8042 withheld the appellate jurisdiction of the NLRC in respect of cases decided by
the POEA, the appellate jurisdiction was vested in the Secretary of Labor in accordance with his power of
supervision and control under Section 38(1), Chapter 7, Title II, Book III of the Revised Administrative Code of
1987, to wit: G.R. No. 148130             June 16, 2006

Section 38. Definition of Administrative Relationship. – Unless otherwise expressly stated in the Code or in PETROLEUM SHIPPING LIMITED (formerly ESSO INTERNATIONAL SHIPPING (BAHAMAS) CO., LTD.)
other laws defining the special relationships of particular agencies, administrative relationships shall be and TRANS-GLOBAL MARITIME AGENCY, INC., Petitioners,
categorized and defined as follows: vs.
NATIONAL LABOR RELATIONS COMMISSION and FLORELLO W. TANCHICO, Respondents.
Supervision and Control. – Supervision and control shall include authority to act directly whenever a specific
function is entrusted by law or regulation to a subordinate; direct the performance of duty; restrain the DECISION

LABOR-1 Batch 1 Page 26 of 69

CARPIO, J.:
The Case
Before the Court is a petition for review1 assailing the 25 January 2001 Decision2 and 7 May 2001
Resolution3 of the Court of Appeals in CA-G.R. SP No. 54756.
The Antecedent Facts
On 6 March 1978, Esso International Shipping (Bahamas) Co., Ltd., ("Esso") through Trans-Global Maritime
Agency, Inc. ("Trans-Global") hired Florello W. Tanchico ("Tanchico") as First Assistant Engineer. In 1981,
Tanchico became Chief Engineer. On 13 October 1992, Tanchico returned to the Philippines for a two-month
vacation after completing his eight-month deployment.
On 8 December 1992, Tanchico underwent the required standard medical examination prior to boarding the
vessel. The medical examination revealed that Tanchico was suffering from "Ischemic Heart Disease,
Hypertensive Cardio-Muscular Disease and Diabetes Mellitus." Tanchico took medications for two months and
a subsequent stress test showed a negative result. However, Esso no longer deployed Tanchico. Instead,
Esso offered to pay him benefits under the Career Employment Incentive Plan. Tanchico accepted the offer.
On 26 April 1993, Tanchico filed a complaint against Esso, Trans-Global and Malayan Insurance Co., Inc.
("Malayan") before the Philippine Overseas Employment Administration (POEA) for illegal dismissal with
claims for backwages, separation pay, disability and medical benefits and 13th month pay. In view of the
enactment of Republic Act No. 8042 ("RA 8042")4 transferring to the National Labor Relations Commission
(NLRC) the jurisdiction over money claims of overseas workers, the case was indorsed to the Arbitration
Branch of the National Capital Region. In a Decision5 dated 16 October 1996, Labor Arbiter Jose G. De Vera
("Labor Arbiter De Vera") dismissed the complaint for lack of merit. Tanchico appealed to the NLRC.
The Ruling of the NLRC
In its Resolution6 of 3 September 1998, the NLRC affirmed the Decision of Labor Arbiter De Vera. Tanchico
filed a motion for reconsideration. In a Resolution7 promulgated on 29 March 1999, the NLRC reconsidered its
3 September 1998 Resolution, as follows:
On the claim of illegal dismissal, the same is unavailing as complainant had been declared as one with partial
permanent disability. Thus, he should be entitled to disability benefit of 18 days for every year of credited
service of fourteen (14) years less the amount he already received under the Company’s Disability Plan.
On the claim of 13th month pay, the respondent Agency not falling under the enumerated exempted
employers under P.D. 851 and in the absence of any proof that respondent is already paying its employees a
13th month pay or more in a calendar year, perforce, respondent agency should pay complainant his monthly
pay computed at [sic] the actual month [sic] worked, which is 8 months.
Since complainant was forced to litigate his case, he is hereby awarded 10% of the total award as attorney’s
fees.
SO ORDERED.8
LABOR-1 Batch 1
Esso and Trans-Global moved for the reconsideration of the 29 March 1999 Resolution.9 In its 27 July 1999
Resolution,10 the NLRC denied their motion.
Esso, now using the name Petroleum Shipping Limited ("Petroleum Shipping"), and Trans-Global (collectively
referred to as "petitioners") filed a petition for certiorari before the Court of Appeals assailing the 29 March
1999 and 27 July 1999 Resolutions of the NLRC.
The Ruling of the Court of Appeals
In its Decision promulgated on 25 January 2001, the Court of Appeals affirmed in toto the 29 March 1999
Resolution of the NLRC.
The Court of Appeals ruled that Tanchico was a regular employee of Petroleum Shipping. The Court of
Appeals held that petitioners are not exempt from the coverage of Presidential Decree No. 851, as amended
("PD 851")11 which mandates the payment of 13th month pay to all employees. The Court of Appeals further
ruled that Tanchico is entitled to disability benefits based on his 14 years of tenure with petitioners. The Court
of Appeals stated that the employer-employee relationship subsisted even during the period of Tanchico’s
vacation. The Court of Appeals noted that petitioners were aware of Tanchico’s medical history yet they still
deployed him for 14 years. Finally, the Court of Appeals sustained the award of attorney’s fees.
Petitioners moved for the reconsideration of the Decision. In its 7 May 2001 Resolution, the Court of Appeals
modified its Decision by deducting Tanchico’s vacation from his length of service. Thus:
WHEREFORE, our decision is hereby MODIFIED. The petitioners are ordered to pay to the private
respondent the following: (1) disability wages equivalent to 18 days per year multiplied by 10 years less any
amount already received under the company’s disability plan; prorated 13th month pay corresponding to eight
(8) months of actual work; and attorney’s fee equivalent to 10% of the total award.
SO ORDERED.12
Petitioners went to this Court for relief on the following grounds:
I. The Court of Appeals decided a question of substance not in accord with law, applicable decision
of this Court and International Maritime Law when it ruled that private respondent, a seafarer, was a
regular employee;
II. The Court of Appeals decided a question of substance not in accord with law when it held that the
private respondent was entitled to greater disability benefit than he was [sic];
III. The Court of Appeals decided a question of substance not heretofore determined by this Court
when it ruled that private respondent was entitled to 13th month pay although it was not provided for
in the contract of employment between petitioners and private respondent; and
IV. The Court of Appeals decided a question of substance not in accord with law when it awarded
private respondent attorney’s fees despite the Labor Arbiter’s and the public respondent’s, albeit
initially, dismissal of the complaint.13
The Issues
Page 27 of 69
The issues are as follows:
1. Whether Tanchico is a regular employee of petitioners; and
2. Whether Tanchico is entitled to 13th month pay, disability benefits and attorney’s fees.
The Ruling of This Court
The petition is partly meritorious.
Seafarers are Contractual Employees
The issue on whether seafarers are regular employees is already a settled matter.
14
In Ravago v. Esso Eastern Marine, Ltd.,  the Court traced its ruling in a number of cases that seafarers are
contractual, not regular, employees. Thus, in Brent School, Inc. v. Zamora,15 the Court cited overseas
employment contract as an example of contracts where the concept of regular employment does not apply,
whatever the nature of the engagement and despite the provisions of Article 280 of the Labor Code.
In Coyoca v. NLRC,16 the Court held that the agency is liable for payment of a seaman’s medical and
disability benefits in the event that the principal fails or refuses to pay the benefits or wages due the seaman
although the seaman may not be a regular employee of the agency.
The Court squarely passed upon the issue in Millares v. NLRC17 where one of the issues raised was whether
seafarers are regular or contractual employees whose employment are terminated everytime their contracts of
employment expire. The Court explained:
[I]t is clear that seafarers are considered contractual employees. They can not be considered as regular
employees under Article 280 of the Labor Code. Their employment is governed by the contracts they sign
everytime they are rehired and their employment is terminated when the contract expires. Their employment
is contractually fixed for a certain period of time. They fall under the exception of Article 280 whose
employment has been fixed for a specific project or undertaking the completion or termination of which has
been determined at the time of engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season. We need not depart from the rulings
of the Court in the two aforementioned cases which indeed constitute stare decisis with respect to the
employment status of seafarers.
Petitioners insist that they should be considered regular employees, since they have rendered services which
are usually necessary and desirable to the business of their employer, and that they have rendered more than
twenty (20) years of service. While this may be true, the Brent case has, however, held that there are certain
forms of employment which also require the performance of usual and desirable functions and which exceed
one year but do not necessarily attain regular employment status under Article 280. Overseas workers
including seafarers fall under this type of employment which are governed by the mutual agreements of the
parties.
In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen are governed by the Rules and
Regulations of the POEA. The Standard Employment Contract governing the employment of All Filipino
Seamen on Board Ocean-Going Vessels of the POEA, particularly in Part I, Sec. C specifically provides that
the contract of seamen shall be for a fixed period. And in no case should the contract of seamen be longer
than 12 months. It reads:
LABOR-1 Batch 1
Section C. Duration of Contract
The period of employment shall be for a fixed period but in no case to exceed 12 months and shall be stated
in the Crew Contract. Any extension of the Contract period shall be subject to the mutual consent of the
parties.
Moreover, it is an accepted maritime industry practice that employment of seafarers are for a fixed period
only. Constrained by the nature of their employment which is quite peculiar and unique in itself, it is for the
mutual interest of both the seafarer and the employer why the employment status must be contractual only or
for a certain period of time. Seafarers spend most of their time at sea and understandably, they can not stay
for a long and an indefinite period of time at sea. Limited access to shore society during the employment will
have an adverse impact on the seafarer. The national, cultural and lingual diversity among the crew during the
COE is a reality that necessitates the limitation of its period.
Petitioners make much of the fact that they have been continually re-hired or their contracts renewed before
the contracts expired (which has admittedly been going on for twenty (20) years). By such circumstance they
claim to have acquired regular status with all the rights and benefits appurtenant to it.
Such contention is untenable. Undeniably, this circumstance of continuous re-hiring was dictated by practical
considerations that experienced crew members are more preferred. Petitioners were only given priority or
preference because of their experience and qualifications but this does not detract the fact that herein
petitioners are contractual employees. They can not be considered regular employees. x x x18
The Court reiterated the Millares ruling in Gu-Miro v. Adorable19 where it held that a radio officer on board a
vessel cannot be considered as a regular employee notwithstanding that the work he performs is necessary
and desirable in the business of the company.
Thus, in the present case, the Court of Appeals erred in ruling that Tanchico was a regular employee of
Petroleum Shipping.
On 13th Month Pay
The Court of Appeals premised its grant of 13th month pay on its ruling that Tanchico was a regular
employee. The Court of Appeals also ruled that petitioners are not exempt from the coverage of PD 851 which
requires all employers to pay their employees a 13th month pay.
We do not agree with the Court of Appeals. Again, Tanchico was a contractual, not a regular, employee.
Further, PD 851 does not apply to seafarers. The WHEREAS clauses of PD 851 provides:
WHEREAS, it is necessary to further protect the level of real wages from ravages of world-wide inflation;
WHEREAS, there has been no increase in the legal minimum wage rates since 1970;
WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight of the
working masses so they may properly celebrate Christmas and New Year.
PD 851 contemplates the situation of land-based workers, and not of seafarers who generally earn more than
domestic land-based workers.
Page 28 of 69
Tanchico’s employment is governed by his Contract of Enlistment ("Contract").20 The Contract has been
approved by the POEA in accordance with Title I, Book One of the Labor Code and the POEA Rules
Governing Employment.21 The coverage of the Contract includes Compensation, Overtime, Sundays and
Holidays, Vacations, Living Allowance, Sickness, Injury and Death, Transportation and Travel Expense,
Subsistence and Living Quarters. It does not provide for the payment of 13th month pay. The Contract of
Employment,22 which is the standard employment contract of the POEA, likewise does not provide for the
payment of 13th month pay.
In Coyoca v. NLRC which involves a claim for separation pay, this Court held:
Furthermore, petitioner’s contract did not provide for separation benefits. In this connection, it is important to
note that neither does POEA standard employment contract for Filipino seamen provide for such benefits.
As a Filipino seaman, petitioner is governed by the Rules and Regulations Governing Overseas Employment
and the said Rules do not provide for separation or termination pay. x x x23
Hence, in the absence of any provision in his Contract governing the payment of 13th month pay, Tanchico is
not entitled to the benefit.
On Disability Benefits
Petitioners allege that Tanchico’s Contract ended on 13 October 1992 when he returned to Manila. They
allege that the vacation period is not part of the period of employment.
We cannot accept petitioners’ contention.
The duration of the Contract was for eight months. The Contract also provides:
Article V
VACATIONS
Vacation days shall be earned at the rate of seven and one-half days (7.5) days for each thirty (30) days of
continuous service, calculated from date of departure from Manila and until date of return to Manila. Vacation
begins on the day following arrival in Manila.
Every effort will be made to grant earned vacations promptly after eight (8) months of service; however, the
COMPANY shall have the right to advance or delay vacations to coincide with vessel repairs, for operational
reasons or due to personal requirements. SEAFARER shall receive vacation compensation for each thirty (30)
days of continuous service in accordance with the rates listed in Addendum No. 1, Column (12), to be paid in
Manila. Amounts shall be pro-rated according to the ranks/ratings and period of time in which the SEAFARER
served. For period of less than thirty (30) days service, vacations and compensation shall be reduced
proportionately.
Time off for illness, injury, vacation, leave of absence or stand-by shall not be considered service under the
provisions of this Article.
It is the COMPANY’s intention that each SEAFARER enjoy his full vacation period. Because of urgent fleet
needs, however, it occasionally may be necessary to recall a SEAFARER early from vacation.24
LABOR-1 Batch 1
Since Tanchico received compensation during his vacation, the Contract did not terminate on the day he
returned to Manila. The Contract remained in force during Tanchico’s vacation period.
However, the Court of Appeals erred when it ruled that Tanchico is entitled to disability benefits of 18 days for
every year of service. The Court of Appeals ruled that Tanchico’s employment was continuous and that his
tenure with petitioners was for 14 years. Again, the Court of Appeals assumed that Tanchico was a regular
employee. The Court of Appeals failed to consider that Tanchico’s employment terminated with the end of
each contract.
The Contract provides:
Article VIII
SICKNESS-INJURY/DEATH
A. The COMPANY shall provide, during the period of the Contract, Insurance coverage for the
SEAFARER against loss of life, permanent disability, temporary disability, injury, occupational
illness, hospital and medical expense in such amounts as the COMPANY shall determine but not
lower than what the COMPANY would have to pay under the Philippine Overseas Employment
Administration’s requirements or the vessel’s flag state requirements (whichever is higher).
B. If SEAFARER is removed from a vessel for medical treatment he shall be entitled to receive a
disability benefit equal to his monthly wage rate (or pro-rata thereof) from date of disembarkation
until date of rejoining his vessel, assignment to another vessel or until date of repatriation to Manila if
still disabled. Medical, surgical, hospital, or clinical treatment shall be recommended by a doctor
approved by the COMPANY and SEAFARER must follow all medical advices. SEAFARER will not
be entitled to disability benefit payments for disability resulting from his own misconduct, negligence,
unlawful acts, altercations, vice, etc.
C. After disembarkation from a vessel, the SEAFARER is entitled to one hundred percent (100%) of
his wages until he is declared fit or the degree of permanent disability has been assessed by the
COMPANY’s physician for a maximum period of 120 days commencing on date of such
disembarkation. Upon the expiration of such 120 days and if the SEAFARER is still disabled, the
SEAFARER shall be paid his wages equivalent to 18 days for every year of credited service.
In special instances and at the discretion of the COMPANY, the maximum number of days of
COMPANY benefits may be extended beyond 120 days for a SEAFARER with over 80 months
credited COMPANY service, or in such other case as may be determined by the COMPANY.
Upon expiration of COMPANY benefits and if still disabled, the following amounts shall be paid up to
maximum of 365 days, inclusive of the period of the above benefits.
All Ranks ................................................ US $10 per day
D. If disability should occur while SEAFARER is on vacation, he must, within 3 days from
date thereof, notify the COMPANY’s Agent in the Philippines in order that the latter shall be
able to certify as to his condition. Certification of disability required for payment of any
disability benefits must be approved by a doctor appointed by the COMPANY and
SEAFARER must be disabled seven (7) days or more to be eligible to benefits and sick leave
status, COMPANY benefits shall be limited to a maximum of 18 days.
Page 29 of 69
 Benefits under the COMPANY Disability Plan shall be made only to the extent and in such amounts
as are equal to the differential between any payments which may be due SEAFARER under
COMPANY’s obligation as set forth in the 1st paragraph of this Article VIII and 90 percent of
SEAFARER’s last wage rate.

E. In case of death at sea or at a foreign port, the tradition of the sea and requirements of the laws of
such foreign port will be observed. If practical, every effort will be made on the part of the
COMPANY to return the remains of a deceased SEAFARER to Manila at COMPANY expense.

F. The SEAFARER acknowledges that even without signed receipts, any wage payments made to
him for a period during which he is entitled to benefits under any law by reason of death, temporary
or permanent disability, shall be deemed an advance payment of compensation benefits due to him
under such law, but only to the extent of benefits due for the period of disability during which wages
are paid.

Wages, as set forth in Addendum No. 1, Column (1), shall be the basis for any calculation of benefits due G.R. No. 196036               October 23, 2013
SEAFARER under this Article VIII.25 (Emphasis supplied)
ELIZABETH M. GAGUI, Petitioner,
Indications that Tanchico was suffering from ischemia were detected on 8 December 1992 during Tanchico’s vs.
vacation period. Thus, petitioners paid him disability benefits for 18 days in accordance with the Contract. SIMEON DEJERO and TEODORO R. PERMEJO, Respondents.
Tanchico cannot claim that he only acquired the illness during his last deployment since the Medical
Report26 he submitted to the NLRC showed that he has been hypertensive since 1983 and diabetic since DECISION
1987. In the absence of concrete proof that Tanchico acquired his disability during
SERENO, CJ:
his last deployment and not during his vacation, he is only entitled to disability benefits for 18 days.
This is a Rule 45 Petition1 dated 30 March 2011 assailing the Decision2 and Resolution3 of the Court of
Petitioners claim that they already paid Tanchico his disability benefits for 18 days but he refused to sign the Appeals (CA) in CA-G.R. SP No. 104292, which affirmed the Decision4 of the National Labor Relations
receipt.27 Tanchico alleged that he was only paid under the Career Employment Incentive Plan.28 This is a Commission (NLRC) in NLRC Case No. OCW-RAB-IV-4-392-96-RI, finding petitioner Elizabeth M. Gagui
factual matter which this Court cannot resolve. This matter has to be remanded to the Labor Arbiter for solidarily liable with the placement agency, PRO Agency Manila, Inc., to pay respondents all the money
resolution. claims awarded by virtue of their illegal dismissal.

WHEREFORE, we GRANT the petition. We REVERSE and SET ASIDE the 25 January 2001 Decision and 7
May 2001 Resolution of the Court of Appeals in CA-G.R. SP No. 54756. We REINSTATE the 16 October
1996 Decision of Labor Arbiter Jose G. De Vera dismissing the complaint for illegal dismissal and the claims
for backwages, separation pay and 13th month pay. We REMAND the case to the Labor Arbiter to determine
if Florello Tanchico has been paid his disability benefits for 18 days in accordance with his Contract of
Enlistment. If no payment has been made, the Labor Arbiter is DIRECTED to determine the amount Tanchico
is entitled.
SO ORDERED.
The antecedent facts are as follows:
On 14 December 1993, respondents Simeon Dejero and Teodoro Permejo filed separate Complaints5 for
illegal dismissal, nonpayment of salaries and overtime pay, refund of transportation expenses, damages, and
attorney’s fees against PRO Agency Manila, Inc., and Abdul Rahman Al Mahwes.
After due proceedings, on 7 May 1997, Labor Arbiter Pedro Ramos rendered a Decision,6 the dispositive
portion of which reads:

WHEREFORE, ALL FOREGOING CONSIDERED, judgment is hereby rendered ordering respondents Pro
Agency Manila, Inc., and Abdul Rahman Al Mahwes to jointly and severally pay complainants, as follows:

a) US$4,130.00 each complainant or a total of US$8,260.00, their unpaid salaries from July 31,
1992 up to September 1993, less cash advances of total of SR11,000.00, or its Peso equivalent at
the time of payment;

LABOR-1 Batch 1 Page 30 of 69

 b) US$1,032.00 each complainant for two (2) hours overtime pay for fourteen (14) months of
services rendered or a total of US$2,065.00 or its Peso equivalent at the time of payment;
c) US$2,950.00 each complainant or a total of US$5,900.00 or its Peso equivalent at the time of
payment, representing the unexpired portion of their contract;
d) Refund of plane ticket of complainants Teodoro Parejo and Simeon Dejero from Saudi Arabia to
the Philippines, in the amount of ₱15,642.90 and ₱16,932.00 respectively;
e) Refund of excessive collection of placement fees in the amount of ₱4,000.00 each complainant,
or a total of ₱8,000.00;
f) Moral and exemplary damages in the amount of ₱10,000.00 each complainant, or a total of
₱20,000.00;
g) Attorney’s fees in the amount of ₱48,750.00.
SO ORDERED.
Pursuant to this Decision, Labor Arbiter Ramos issued a Writ of Execution7 on 10 October 1997. When the
writ was returned unsatisfied,8 an Alias Writ of Execution was issued, but was also returned unsatisfied.9
On 30 October 2002, respondents filed a Motion to Implead Respondent Pro Agency Manila, Inc.’s Corporate
Officers and Directors as Judgment Debtors.10 It included petitioner as the Vice-President/Stockholder/Director
of PRO Agency, Manila, Inc.
After due hearing, Executive Labor Arbiter Voltaire A. Balitaan issued an Order11 on 25 April 2003 granting
respondents’ motion, to wit:
WHEREFORE, the motion to implead is hereby granted insofar as Merlita G. Lapuz and Elizabeth M. Gagui
as parties-respondents and accordingly held liable to complainant jointly and solidarily with the original party-
respondent adjudged liable under the Decision of May 7, 1998. Let 2nd Alias Writ of Execution be issued for
the enforcement of the Decision consistent with the foregoing tenor.
SO ORDERED.
On 10 June 2003, a 2nd Alias Writ of Execution was issued,12 which resulted in the garnishment of petitioner’s
bank deposit in the amount of ₱85,430.48.13 However, since the judgment remained unsatisfied, respondents
sought the issuance of a third alias writ of execution on 26 February 2004.14
On 15 December 2004, Executive Labor Arbiter Lita V. Aglibut issued an Order15 granting respondents’ motion
for a third alias writ. Accordingly, the 3rd Alias Writ of Execution16 was issued on 6 June 2005, resulting in the
levying of two parcels of lot owned by petitioner located in San Fernando, Pampanga.17
On 14 September 2005, petitioner filed a Motion to Quash 3rd Alias Writ of Execution;18 and on 29 June 2006,
a Supplemental Motion to Quash Alias Writ of Execution.19 In these motions, petitioner alleged that apart from
not being made aware that she was impleaded as one of the parties to the case,20 the dispositive portion of
the 7 May 1997 Decision (1997 Decision) did not hold her liable in any form whatsoever.21 More importantly,
LABOR-1 Batch 1
impleading her for the purpose of execution was tantamount to modifying a decision that had long become
final and executory.22
On 26 June 2006, Executive Labor Arbiter Lita V. Aglibut issued an Order23 denying petitioner’s motions on
the following grounds: (1) records disclosed that despite having been given sufficient notices to be able to
register an opposition, petitioner refused to do so, effectively waiving her right to be heard;24 and (2) under
Section 10 of Republic Act No. 8042 (R.A. 8042) or the Migrant Workers and Overseas Filipinos Act of 1995,
corporate officers may be held jointly and severally liable with the placement agency for the judgment award.25
Aggrieved, petitioner appealed to the NLRC, which rendered a Decision26 in the following wise:
WHEREFORE, premises considered, the appeal of the respondent Elizabeth M. Gagui is hereby DENIED for
lack of merit. Accordingly, the Order of Labor Arbiter Lita V. Aglibut dated June 26, 2006 is AFFIRMED.
SO ORDERED.
The NLRC ruled that "in so far as overseas migrant workers are concerned, it is R.A. 8042 itself that describes
the nature of the liability of the corporation and its officers and directors. x x x [I]t is not essential that the
individual officers and directors be impleaded as party respondents to the case instituted by the worker. A
finding of liability on the part of the corporation will necessarily mean the liability of the corporate officers or
directors."27
Upon appellate review, the CA affirmed the NLRC in a Decision28 promulgated on 15 November 2010:
From the foregoing, the Court finds no reason to hold the NLRC guilty of grave abuse of discretion amounting
to lack or excess of jurisdiction in affirming the Order of Executive Labor Arbiter Aglibut which held petitioner
solidarily liable with PRO Agency Manila, Inc. and Abdul Rahman Al Mahwes as adjudged in the May 7, 1997
Decision of Labor Arbiter Pedro Ramos.
WHEREFORE, the Petition is DENIED.
SO ORDERED. (Emphasis in the original)
The CA stated that there was "no need for petitioner to be impleaded x x x because by express provision of
the law, she is made solidarily liable with PRO Agency Manila, Inc., for any and all money claims filed by
private respondents."29 The CA further said that this is not a case in which the liability of the corporate officer
must be established because an allegation of malice must be proven. The general rule is that corporate
officers, directors and stockholders are not liable, except when they are made liable for their corporate act by
a specific provision of law, such as R.A. 8042.30
On 8 and 15 December 2010, petitioner filed two Motions for Reconsideration, but both were denied in a
Resolution31 issued by the CA on 25 February 2011.
Hence, this Petition for Review filed on 30 March 2011.
On 1 August 2011, respondents filed their Comment,32 alleging that the petition had been filed 15 days after
the prescriptive period of appeal under Section 2, Rule 45 of the Rules of Court.
Page 31 of 69
On 14 February 2012, petitioner filed a Reply,33 countering that she has a fresh period of 15 days from 16
March 2011 (the date she received the Resolution of the CA) or up to 31 March 2011 to file the Petition.
ISSUES
From the foregoing, we reduce the issues to the following:
1. Whether or not this petition was filed on time; and
2. Whether or not petitioner may be held jointly and severally liable with PRO Agency Manila, Inc. in
accordance with Section 10 of R.A. 8042, despite not having been impleaded in the Complaint and
named in the Decision.
THE COURT’S RULING
Petitioner has a fresh period of 15 days within which to file this petition, in accordance with the Neypes rule.
We first address the procedural issue of this case.
In a misleading attempt to discredit this petition, respondents insist that by opting to file a Motion for
Reconsideration instead of directly appealing the CA Decision, petitioner effectively lost her right to appeal.
Hence, she should have sought an extension of time to file her appeal from the denial of her motion.
This contention, however, deserves scant consideration. We agree with petitioner that starting from the date
she received the Resolution denying her Motion for Reconsideration, she had a "fresh period" of 15 days
within which to appeal to this Court. The matter has already been settled in Neypes v. Court of Appeals,34 as
follows:
To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to appeal their
cases, the Court deems it practical to allow a fresh period of 15 days within which to file the notice of appeal in
the Regional Trial Court, counted from receipt of the order dismissing a motion for a new trial or motion for
reconsideration.
Henceforth, this "fresh period rule" shall also apply to Rule 40 governing appeals from the Municipal Trial
Courts to the Regional Trial Courts; Rule 42 on petitions for review from the Regional Trial Courts to the Court
of Appeals; Rule 43 on appeals from quasi-judicial agencies to the Court of Appeals and Rule 45 governing
appeals by certiorari to the Supreme Court. The new rule aims to regiment or make the appeal period uniform,
to be counted from receipt of the order denying the motion for new trial, motion for reconsideration (whether
full or partial) or any final order or resolution.
Since petitioner received the CA Resolution denying her two Motions for Reconsideration only on 16 March
2011, she had another 15 days within which to file her Petition, or until 31 March 2011. This Petition, filed on
30 March 2011, fell within the prescribed 15-day period.
Petitioner may not be held jointly and severally liable, absent a finding that she was remiss in directing the
affairs of the agency.
LABOR-1 Batch 1
As to the merits of the case, petitioner argues that while it is true that R.A. 8042 and the Corporation Code
provide for solidary liability, this liability must be so stated in the decision sought to be implemented.35 Absent
this express statement, a corporate officer may not be impleaded and made to personally answer for the
liability of the corporation.36 Moreover, the 1997 Decision had already been final and executory for five years
and, as such, can no longer be modified.37 If at all, respondents are clearly guilty of laches for waiting for five
years before taking action against petitioner.38
In disposing the issue, the CA cited Section 10 of R.A. 8042, stating that there was "no need for petitioner to
be impleaded x x x because by express provision of the law, she is made solidarily liable with PRO Agency
Manila, Inc., for any and all money claims filed by private respondents."39
We reverse the CA.
At the outset, we have declared that "R.A. 8042 is a police power measure intended to regulate the
recruitment and deployment of OFWs. It aims to curb, if not eliminate, the injustices and abuses suffered by
numerous OFWs seeking to work abroad."40
The pertinent portion of Section 10, R.A. 8042 reads as follows:
SEC. 10. MONEY CLAIMS. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after filing of the complaint, the claims arising out of an employer-
employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damages.
The liability of the principal/employer and the recruitment/placement agency for any and all claims under this
section shall be joint and several. This provision shall be incorporated in the contract for overseas
employment and shall be a condition precedent for its approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be answerable for all money claims or damages that
may be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate officers
and directors and partners as the case may be, shall themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and damages. (Emphasis supplied)
In Sto. Tomas v. Salac,41 we had the opportunity to pass upon the constitutionality of this provision. We have
thus maintained:
The key issue that Gumabay, et al. present is whether or not the 2nd paragraph of Section 10, R.A. 8042,
which holds the corporate directors, officers, and partners of recruitment and placement agencies jointly and
solidarily liable for money claims and damages that may be adjudged against the latter agencies, is
unconstitutional.
xxxx
Page 32 of 69
But the Court has already held, pending adjudication of this case, that the liability of corporate directors and
officers is not automatic. To make them jointly and solidarily liable with their company, there must be a finding
that they were remiss in directing the affairs of that company, such as sponsoring or tolerating the conduct of
illegal activities. In the case of Becmen and White Falcon, while there is evidence that these companies were
at fault in not investigating the cause of Jasmin’s death, there is no mention of any evidence in the case
against them that intervenors Gumabay, et al., Becmen’s corporate officers and directors, were personally
involved in their company’s particular actions or omissions in Jasmin’s case. (Emphasis supplied)

Hence, for petitioner to be found jointly and solidarily liable, there must be a separate finding that she was
remiss in directing the affairs of the agency, resulting in the illegal dismissal of respondents. Examination of
the records would reveal that there was no finding of neglect on the part of the petitioner in directing the affairs
of the agency. In fact, respondents made no mention of any instance when petitioner allegedly failed to
manage the agency in accordance with law, thereby contributing to their illegal dismissal.

Moreover, petitioner is correct in saying that impleading her for the purpose of execution is tantamount to
modifying a decision that had long become final and executory.42 The fallo of the 1997 Decision by the NLRC
only held "respondents Pro Agency Manila Inc., and Abdul Rahman Al Mahwes to jointly and severally pay
complainants x x x."43 By holding her liable despite not being ordained as such by the decision, both the CA
and NLRC violated the doctrine on immutability of judgments.

In PH Credit Corporation v. Court of Appeals,44 we stressed that "respondent's petitioner’s obligation is based
on the judgment rendered by the trial court. The dispositive portion or the fallo is its decisive resolution and is
G.R. No. 162419             July 10, 2007
thus the subject of execution. x x x. Hence the execution must conform with that which is ordained or decreed
in the dispositive portion of the decision."
PAUL V. SANTIAGO, petitioner,
45 vs.
In JNIMACO v. NLRC,  we a]so held thus:
CF SHARP CREW MANAGEMENT, INC., respondent.

None of the parties in the case before the Labor Arbiter appealed the Decision dated March 10, 1987, hence
the same became final and executory. It was, therefore, removed from the jurisdiction of the Labor Arbiter or
the NLRC to further alter or amend it. Thus, the proceedings held for the purpose of amending or altering the
dispositive portion of the said decision are null and void for lack of jurisdiction. Also, the Alias Writ of
Execution is null and void because it varied the tenor of the judgment in that it sought to enforce the final
judgment against ''Antonio Gonzales/Industrial Management Development Corp. (INIMACO) and/or Filipinas
Carbon and Mining Corp. and Gerardo Sicat, which makes the liability solidary.
In other words, "once a decision or order becomes final and executory, it is removed from. the power or
jurisdiction of the court which rendered it to further alter or amend it. It thereby becomes immutable and
unalterable and any amendment or alteration which substantially affects a final and executory judgment is null
and void for lack of jurisdiction, including the entire proceedings held for that purpose. An order of exen1tion
which varies the tenor of the judgment or exceeds the terms thereof is a nullity."46
While labor laws should be construed liberally in favor of labor, we must be able to balance this with the
equally important right of petitioner to due process. Because the 1997 Decision of Labor Arbiter Ramos was
not appealed, it became final and executory and was therefore removed from his jurisdiction. Modifying the
tenor of the judgment via a motion impleading petitioner and filed only in 2002 runs contrary to settled
jurisprudence, rendering such action a nullity. WHEREFORE, the Petition for Review on Certiorari is hereby
GRANTED The assailed Decision dated 5 November 2010 and Resolution dated 25 February 2011 of the
Court of Appeals in CA-G.R. SP No. 104292 are hereby REVERSED.
DECISION
TINGA, J.:
At the heart of this case involving a contract between a seafarer, on one hand, and the manning agent and the
foreign principal, on the other, is this erstwhile unsettled legal quandary: whether the seafarer, who was
prevented from leaving the port of Manila and refused deployment without valid reason but whose POEA-
approved employment contract provides that the employer-employee relationship shall commence only upon
the seafarer’s actual departure from the port in the point of hire, is entitled to relief?
This treats of the petition for review filed by Paul V. Santiago (petitioner) assailing the Decision and Resolution
of the Court of Appeals dated 16 October 2003 and 19 February 2004, respectively, in CA-G.R. SP No.
68404.1
Petitioner had been working as a seafarer for Smith Bell Management, Inc. (respondent) for about five (5)
years.2 On 3 February 1998, petitioner signed a new contract of employment with respondent, with the
duration of nine (9) months. He was assured of a monthly salary of US$515.00, overtime pay and other
benefits. The following day or on 4 February 1998, the contract was approved by the Philippine Overseas
Employment Administration (POEA). Petitioner was to be deployed on board the "MSV Seaspread" which was
scheduled to leave the port of Manila for Canada on 13 February 1998.

SO ORDERED.
LABOR-1 Batch 1 Page 33 of 69
A week before the scheduled date of departure, Capt. Pacifico Fernandez, respondent’s Vice President, sent
a facsimile message to the captain of "MSV Seaspread," which reads:
I received a phone call today from the wife of Paul Santiago in Masbate asking me not to send her
husband to MSV Seaspread anymore. Other callers who did not reveal their identity gave me some
feedbacks that Paul Santiago this time if allowed to depart will jump ship in Canada like his brother
Christopher Santiago, O/S who jumped ship from the C.S. Nexus in Kita-kyushu, Japan last
December, 1997.
We do not want this to happen again and have the vessel penalized like the C.S. Nexus in Japan.
Forewarned is forearmed like his brother when his brother when he was applying he behaved like a
Saint but in his heart he was a serpent. If you agree with me then we will send his replacement.
Kindly advise.3
To this message the captain of "MSV Seaspread" replied:
Many thanks for your advice concerning P. Santiago, A/B. Please cancel plans for him to return to
Seaspread.4
On 9 February 1998, petitioner was thus told that he would not be leaving for Canada anymore, but he was
reassured that he might be considered for deployment at some future date.
Petitioner filed a complaint for illegal dismissal, damages, and attorney's fees against respondent and its
foreign principal, Cable and Wireless (Marine) Ltd.5 The case was raffled to Labor Arbiter Teresita Castillon-
Lora, who ruled that the employment contract remained valid but had not commenced since petitioner was not
deployed. According to her, respondent violated the rules and regulations governing overseas employment
when it did not deploy petitioner, causing petitioner to suffer actual damages representing lost salary income
for nine (9) months and fixed overtime fee, all amounting to US$7, 209.00.
The labor arbiter held respondent liable. The dispositive portion of her Decision dated 29 January 1999 reads:
WHEREFORE, premises considered, respondent is hereby Ordered to pay complainant actual
damages in the amount of US$7,209.00 plus 10% attorney's fees, payable in Philippine peso at the
rate of exchange prevailing at the time of payment.
All the other claims are hereby DISMISSED for lack of merit.
SO ORDERED.6
On appeal by respondent, the National Labor Relations Commission (NLRC) ruled that there is no employer-
employee relationship between petitioner and respondent because under the Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean Going Vessels (POEA Standard Contract),
the employment contract shall commence upon actual departure of the seafarer from the airport or seaport at
the point of hire and with a POEA-approved contract. In the absence of an employer-employee relationship
between the parties, the claims for illegal dismissal, actual damages, and attorney’s fees should be
LABOR-1 Batch 1
dismissed.7 On the other hand, the NLRC found respondent’s decision not to deploy petitioner to be a valid
exercise of its management prerogative.8 The NLRC disposed of the appeal in this wise:
WHEREFORE, in the light of the foregoing, the assailed Decision dated January 29, 1999 is hereby
AFFIRMED in so far as other claims are concerned and with MODIFICATION by VACATING the
award of actual damages and attorney’s fees as well as excluding Pacifico Fernandez as party
respondent.
SO ORDERED.9
Petitioner moved for the reconsideration of the NLRC’s Decision but his motion was denied for lack of
merit.10 He elevated the case to the Court of Appeals through a petition for certiorari.
In its Decision11 dated 16 October 2003, the Court of Appeals noted that there is an ambiguity in the NLRC’s
Decision when it affirmed with modification the labor arbiter’s Decision, because by the very modification
introduced by the Commission (vacating the award of actual damages and attorney’s fees), there is nothing
more left in the labor arbiter’s Decision to affirm.12
According to the appellate court, petitioner is not entitled to actual damages because damages are not
recoverable by a worker who was not deployed by his agency within the period prescribed in
the POEA Rules.13 It agreed with the NLRC’s finding that petitioner’s non-deployment was a valid exercise of
respondent’s management prerogative.14 It added that since petitioner had not departed from the Port of
Manila, no employer-employee relationship between the parties arose and any claim for damages against the
so-called employer could have no leg to stand on.15
Petitioner’s subsequent motion for reconsideration was denied on 19 February 2004.16
The present petition is anchored on two grounds, to wit:
A. The Honorable Court of Appeals committed a serious error of law when it ignored [S]ection 10 of
Republic Act [R.A.] No. 8042 otherwise known as the Migrant Worker’s Act of 1995 as well as
Section 29 of the Standard Terms and Conditions Governing the Employment of Filipino Seafarers
On-Board Ocean-Going Vessels (which is deemed incorporated under the petitioner’s POEA
approved Employment Contract) that the claims or disputes of the Overseas Filipino Worker by
virtue of a contract fall within the jurisdiction of the Labor Arbiter of the NLRC.
B. The Honorable Court of Appeals committed a serious error when it disregarded the required
quantum of proof in labor cases, which is substantial evidence, thus a total departure from
established jurisprudence on the matter.17
Petitioner maintains that respondent violated the Migrant Workers Act and the POEA Rules when it failed to
deploy him within thirty (30) calendar days without a valid reason. In doing so, it had unilaterally and arbitrarily
prevented the consummation of the POEA- approved contract. Since it prevented his deployment without valid
basis, said deployment being a condition to the consummation of the POEA contract, the contract is deemed
consummated, and therefore he should be awarded actual damages, consisting of the stipulated salary and
fixed overtime pay.18 Petitioner adds that since the contract is deemed consummated, he should be
considered an employee for all intents and purposes, and thus the labor arbiter and/or the NLRC has
jurisdiction to take cognizance of his claims.19
Page 34 of 69
Petitioner additionally claims that he should be considered a regular employee, having worked for five (5)
years on board the same vessel owned by the same principal and manned by the same local agent. He
argues that respondent’s act of not deploying him was a scheme designed to prevent him from attaining the
status of a regular employee.20
Petitioner submits that respondent had no valid and sufficient cause to abandon the employment contract, as
it merely relied upon alleged phone calls from his wife and other unnamed callers in arriving at the conclusion
that he would jump ship like his brother. He points out that his wife had executed an affidavit21 strongly
denying having called respondent, and that the other alleged callers did not even disclose their identities to
respondent.22 Thus, it was error for the Court of Appeals to adopt the unfounded conclusion of the NLRC, as
the same was not based on substantial evidence.23
On the other hand, respondent argues that the Labor Arbiter has no jurisdiction to award petitioner’s monetary
claims. His employment with respondent did not commence because his deployment was withheld for a valid
reason. Consequently, the labor arbiter and/or the NLRC cannot entertain adjudication of petitioner’s case
much less award damages to him. The controversy involves a breach of contractual obligations and as such is
cognizable by civil courts.24 On another matter, respondent claims that the second issue posed by petitioner
involves a recalibration of facts which is outside the jurisdiction of this Court.25
There is some merit in the petition.
There is no question that the parties entered into an employment contract on 3 February 1998, whereby
petitioner was contracted by respondent to render services on board "MSV Seaspread" for the consideration
of US$515.00 per month for nine (9) months, plus overtime pay. However, respondent failed to deploy
petitioner from the port of Manila to Canada. Considering that petitioner was not able to depart from the airport
or seaport in the point of hire, the employment contract did not commence, and no employer-employee
relationship was created between the parties.26
However, a distinction must be made between the perfection of the employment contract and the
commencement of the employer-employee relationship. The perfection of the contract, which in this case
coincided with the date of execution thereof, occurred when petitioner and respondent agreed on the object
and the cause, as well as the rest of the terms and conditions therein. The commencement of the employer-
employee relationship, as earlier discussed, would have taken place had petitioner been actually deployed
from the point of hire. Thus, even before the start of any employer-employee relationship, contemporaneous
with the perfection of the employment contract was the birth of certain rights and obligations, the breach of
which may give rise to a cause of action against the erring party. Thus, if the reverse had happened, that is
the seafarer failed or refused to be deployed as agreed upon, he would be liable for damages.
Moreover, while the POEA Standard Contract must be recognized and respected, neither the manning agent
nor the employer can simply prevent a seafarer from being deployed without a valid reason.
Respondent’s act of preventing petitioner from departing the port of Manila and boarding "MSV Seaspread"
constitutes a breach of contract, giving rise to petitioner’s cause of action. Respondent unilaterally and
unreasonably reneged on its obligation to deploy petitioner and must therefore answer for the actual damages
he suffered.
We take exception to the Court of Appeals’ conclusion that damages are not recoverable by a worker who
was not deployed by his agency. The fact that the POEA Rules27 are silent as to the payment of damages to
the affected seafarer does not mean that the seafarer is precluded from claiming the same. The sanctions
provided for non-deployment do not end with the suspension or cancellation of license or fine and the return of
LABOR-1 Batch 1
all documents at no cost to the worker. They do not forfend a seafarer from instituting an action for damages
against the employer or agency which has failed to deploy him.
The POEA Rules only provide sanctions which the POEA can impose on erring agencies. It does not provide
for damages and money claims recoverable by aggrieved employees because it is not the POEA, but the
NLRC, which has jurisdiction over such matters.
Despite the absence of an employer-employee relationship between petitioner and respondent, the Court
rules that the NLRC has jurisdiction over petitioner’s complaint. The jurisdiction of labor arbiters is not limited
to claims arising from employer-employee relationships. Section 10 of R.A. No. 8042 (Migrant Workers Act),
provides that:
Sec. 10. Money Claims. – Notwithstanding any provision of law to the contrary, the Labor Arbiters of
the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to
hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising
out of an employer-employee relationship or by virtue of any law or contract involving Filipino
workers for overseas deployment including claims for actual, moral, exemplary and other forms of
damages. x x x [Emphasis supplied]
Since the present petition involves the employment contract entered into by petitioner for overseas
employment, his claims are cognizable by the labor arbiters of the NLRC.
Article 2199 of the Civil Code provides that one is entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly proved. Respondent is thus liable to pay petitioner actual
damages in the form of the loss of nine (9) months’ worth of salary as provided in the contract. He is not,
however, entitled to overtime pay. While the contract indicated a fixed overtime pay, it is not a guarantee that
he would receive said amount regardless of whether or not he rendered overtime work. Even though petitioner
was "prevented without valid reason from rendering regular much less overtime service,"28 the fact remains
that there is no certainty that petitioner will perform overtime work had he been allowed to board the vessel.
The amount of US$286.00 stipulated in the contract will be paid only if and when the employee rendered
overtime work. This has been the tenor of our rulings in the case of Stolt-Nielsen Marine Services (Phils.), Inc.
v. National Labor Relations Commission29 where we discussed the matter in this light:
The contract provision means that the fixed overtime pay of 30% would be the basis for computing
the overtime pay if and when overtime work would be rendered. Simply stated, the rendition of
overtime work and the submission of sufficient proof that said work was actually performed are
conditions to be satisfied before a seaman could be entitled to overtime pay which should be
computed on the basis of 30% of the basic monthly salary. In short, the contract provision
guarantees the right to overtime pay but the entitlement to such benefit must first be established.
Realistically speaking, a seaman, by the very nature of his job, stays on board a ship or vessel
beyond the regular eight-hour work schedule. For the employer to give him overtime pay for the
extra hours when he might be sleeping or attending to his personal chores or even just lulling away
his time would be extremely unfair and unreasonable. 30
The Court also holds that petitioner is entitled to attorney’s fees in the concept of damages and expenses of
litigation. Attorney's fees are recoverable when the defendant's act or omission has compelled the plaintiff to
incur expenses to protect his interest.31 We note that respondent’s basis for not deploying petitioner is the
belief that he will jump ship just like his brother, a mere suspicion that is based on alleged phone calls of
several persons whose identities were not even confirmed. Time and again, this Court has upheld
management prerogatives so long as they are exercised in good faith for the advancement of the employer’s
interest and not for the purpose of defeating or circumventing the rights of the employees under special laws
Page 35 of 69
or under valid agreements.32 Respondent’s failure to deploy petitioner is unfounded and unreasonable, forcing
petitioner to institute the suit below. The award of attorney’s fees is thus warranted.
However, moral damages cannot be awarded in this case. While respondent’s failure to deploy petitioner
seems baseless and unreasonable, we cannot qualify such action as being tainted with bad faith, or done
deliberately to defeat petitioner’s rights, as to justify the award of moral damages. At most, respondent was
being overzealous in protecting its interest when it became too hasty in making its conclusion that petitioner
will jump ship like his brother.
We likewise do not see respondent’s failure to deploy petitioner as an act designed to prevent the latter from
attaining the status of a regular employee. Even if petitioner was able to depart the port of Manila, he still
cannot be considered a regular employee, regardless of his previous contracts of employment with
respondent. In Millares v. National Labor Relations Commission,33 the Court ruled that seafarers are
considered contractual employees and cannot be considered as regular employees under the Labor Code.
Their employment is governed by the contracts they sign every time they are rehired and their employment is
terminated when the contract expires. The exigencies of their work necessitates that they be employed on a
contractual basis.34
WHEREFORE, petition is GRANTED IN PART. The Decision dated 16 October 2003 and the Resolution
dated 19 February 2004 of the Court of Appeals are REVERSED and SET ASIDE. The Decision of Labor
Arbiter Teresita D. Castillon-Lora dated 29 January 1999 is REINSTATED with the MODIFICATION that
respondent CF Sharp Crew Management, Inc. is ordered to pay actual or compensatory damages in the
amount of US$4,635.00
representing salary for nine (9) months as stated in the contract, and attorney’s fees at the reasonable rate of
10% of the recoverable amount.
SO ORDERED.
LABOR-1 Batch 1
G.R. No. 179469               February 15, 2012
C.F. SHARP & CO. INC. and JOHN J. ROCHA, Petitioners,
vs.
PIONEER INSURANCE & SURETY CORPORATION, WILFREDO C. AGUSTIN and HERNANDO G.
MINIMO, Respondents.
DECISION
PEREZ, J.:
Whether a local private employment agency may be held liable for breach of contract for failure to deploy a
seafarer, is the bone of contention in this case.
Assailed in this petition for review are the Decision1 dated 30 October 2003 and the 29 August 2007
Resolution of the Court of Appeals in CA-G.R. CV No. 53336 finding petitioners C.F. Sharp Co. Inc. (C.F.
Sharp) and John J. Rocha (Rocha) liable for damages.
Responding to a newspaper advertisement of a job opening for sandblasters and painters in Libya,
respondents Wilfredo C. Agustin and Hernando G. Minimo applied with C.F. Sharp sometime in August 1990.
After passing the interview, they were required to submit their passports, seaman’s book, National Bureau of
Investigation clearance, employment certificates, certificates of seminars attended, and results of medical
examination. Upon submission of the requirements, a Contract of Employment was executed between
respondents and C.F. Sharp. Thereafter, respondents were required to attend various seminars, open a bank
account with the corresponding allotment slips, and attend a pre-departure orientation. They were then
advised to prepare for immediate deployment and to report to C.F. Sharp to ascertain the schedule of their
deployment.
After a month, respondents were yet to be deployed prompting them to request for the release of the
documents they had submitted to C.F. Sharp. C.F. Sharp allegedly refused to surrender the documents which
led to the filing of a complaint by respondents before the Philippine Overseas Employment Administration
(POEA) on 21 January 1991.
On 30 October 1991, POEA issued an Order finding C.F. Sharp guilty of violation of Article 34(k) of the Labor
Code, which makes it unlawful for any entity "to withhold or deny travel documents from applicant workers
before departure for monetary or financial considerations other than those authorized under this Code and its
implementing rules and regulations." Consequently, C.F. Sharp’s license was suspended until the return of the
disputed documents to respondents. POEA likewise declared that it has no jurisdiction to adjudicate the
monetary claims of respondents.
On 10 March 1995, respondents filed a Complaint for breach of contract and damages against C.F. Sharp and
its surety, Pioneer Insurance and Surety Corporation (Pioneer Insurance), before the Regional Trial Court
(RTC) of Pasay City. Respondents claimed that C.F. Sharp falsely assured them of deployment and that its
refusal to release the disputed documents on the ground that they were already bound by reason of the
Contract of Employment, denied respondents of employment opportunities abroad and a guaranteed income.
Respondents also prayed for damages. Pioneer Insurance filed a cross claim against C.F. Sharp and John J.
Rocha, the executive vice-president of C.F. Sharp, based on an Indemnity Agreement which substantially
provides that the duo shall jointly and severally indemnify Pioneer Insurance for damages, losses, and costs
which the latter may incur as surety. The RTC rendered judgment on 27 June 1996 favoring respondents, to
wit:
Page 36 of 69
WHEREFORE, plaintiffs’ causes of action having been proved with a preponderance of evidence, judgment is
hereby ordered as follows:
a. Declaring the non-deployment of plaintiffs and the refusal to release documents as breach of
contract;
b. By way of compensatory damages, awarding $450 per month and $439 overtime per month,
which should have been received by plaintiffs from other employers, making a joint and solidary
obligation on the part of the two defendants – C.F. Sharp and Pioneer for the period covered by the
employment contracts;
c. Ordering each defendant to pay each plaintiff ₱50,000.00 as moral damages and another
₱50,000.00 each as exemplary damages;
d. Ordering defendants to share in the payment to plaintiffs of ₱50,000.00 attorney’s fees;
e. Defendants to pay litigation expenses and costs of suit.2
The trial court ruled that there was a violation of the contract when C.F. Sharp failed to deploy and release the
papers and documents of respondents, hence, they are entitled to damages. The trial court likewise upheld
the cause of action of respondents against Pioneer Insurance, the former being the actual beneficiaries of the
surety bond.
On appeal, C.F. Sharp and Rocha raise a jurisdictional issue — that the RTC has no jurisdiction over the
instant case pursuant to Section 4(a) of Executive Order No. 797 which vests upon the POEA the jurisdiction
over all cases, including money claims, arising out of or by virtue of any contract involving workers for
overseas employment. C.F. Sharp and Rocha refuted the findings of the trial court and maintained that the
perfection and effectivity of the Contract of Employment depend upon the actual deployment of respondents.
The Court of Appeals upheld the jurisdiction of the trial court by ruling that petitioners are now estopped from
raising such question because they have actively participated in the proceedings before the trial court. The
Court of Appeals further held that since there is no perfected employment contract between the parties, it is
the RTC and not the POEA, whose jurisdiction pertains only to claims arising from contracts involving Filipino
seamen, which has jurisdiction over the instant case.
Despite the finding that no contract was perfected between the parties, the Court of Appeals adjudged C.F.
Sharp and Rocha liable for damages, to wit:
WHEREFORE, the Appeal of C.F. Sharp Co Inc. and John J. Rocha is PARTIALLY GRANTED only insofar as
We declare that there is no breach of contract because no contract of employment was perfected. However,
We find appellants C.F. Sharp Co. Inc. and John J. Rocha liable to plaintiff-appellees for damages pursuant to
Article 21 of the Civil Code and award each plaintiff-appellees temperate damages amounting to ₱100,000.00,
and moral damages in the increased amount of ₱100,000.00. The award of exemplary damages and
attorney’s fees amounting to ₱50,000.00, respectively, is hereby affirmed.3
The Court of Appeals limited the liability of Pioneer Insurance to the amount of ₱150,000.00 pursuant to the
Contract of Suretyship between C.F. Sharp and Pioneer Insurance.
LABOR-1 Batch 1
Rocha filed the instant petition on the submission that there is no basis to hold him liable for damages under
Article 21 of the Civil Code because C.F. Sharp has signified its intention to return the documents and had in
fact informed respondents that they may, at any time of the business day, withdraw their documents. Further,
respondents failed to establish the basis for which they are entitled to moral damages. Rocha refuted the
award of exemplary damages because the act of requiring respondents to sign a quitclaim prior to the release
of their documents could not be considered bad faith. Rocha also questions the award of temperate damages
on the ground that the act of withholding respondents’ documents could not be considered "chronic and
continuing."4
Right off, insofar as Pioneer Insurance is concerned, the petition should be dismissed against it because the
ruling of the Court of Appeals limited its liability to ₱150,000.00 was not assailed by Rocha, hence the same
has now attained finality.
Before us, respondents maintain that they are entitled to damages under Article 21 of the Civil Code for C.F.
Sharp’s unjustified refusal to release the documents to them and for requiring them to sign a quitclaim which
would effectively bar them from seeking redress against petitioners. Respondents justify the award of other
damages as they suffered pecuniary losses attributable to petitioner’s malice and bad faith.
In his Reply, Rocha introduced a new argument, i.e., that he should not be held jointly liable with C.F. Sharp
considering that the company has a separate personality. Rocha argues that there is no showing in the
Complaint that he had participated in the malicious act complained. He adds that his liability only stems from
the Indemnity Agreement with Pioneer Insurance and does not extend to respondents.
Records disclose that Rocha was first impleaded in the case by Pioneer Insurance. Pioneer Insurance, as
surety, was sued by respondents together with C.F. Sharp. Pioneer Insurance in turn filed a third party
complaint against Rocha on the basis of an Indemnity Agreement whereby he bound himself to indemnify and
hold harmless Pioneer Insurance from and against any and all damages which the latter may incur in
consequence of having become a surety.5 The third party complaint partakes the nature of a cross-claim.
C.F. Sharp, as defendant-appellant and Rocha, as third-party defendant-appellant, filed only one brief before
the Court of Appeals essentially questioning the declaration of the trial court that non-deployment is
tantamount to breach of contract and the award of damages. The Court of Appeals found them both liable for
damages. Both C.F. Sharp and Rocha sought recourse before this Court via a Motion for Extension of Time
(To File a Petition for Review) on 19 September 2007.6 In the Petition for Review, however, C.F. Sharp was
noticeably dropped as petitioner. Rocha maintains essentially the same argument that he and C.F. Sharp
were wrongfully adjudged liable for damages.
It was only in its Reply dated 25 March 2008 that Rocha, through a new representation, suddenly forwarded
the argument that he should not be held liable as an officer of C.F. Sharp. It is too late in the day for Rocha to
change his theory. It is doctrinal that defenses not pleaded in the answer may not be raised for the first time
on appeal. A party cannot, on appeal, change fundamentally the nature of the issue in the case. When a party
deliberately adopts a certain theory and the case is decided upon that theory in the court below, he will not be
permitted to change the same on appeal, because to permit him to do so would be unfair to the adverse
party.7 More so in this case, where Rocha introduced a new theory at the Reply stage. Disingenuousness may
even be indicated by the sudden exclusion of the name of C.F. Sharp from the main petition even as Rocha
posited arguments not just for himself and also in behalf of C.F. Sharp.
The core issue pertains to damages.
Page 37 of 69
The bases of the lower courts’ award of damages differ. In upholding the perfection of contract between
respondents and C.F. Sharp, the trial court stated that the unjustified failure to deploy and subsequently
release the documents of respondents entitled them to compensatory damages, among others. Differently,
the appellate court found that no contract was perfected between the parties that will give rise to a breach of
contract. Thus, the appellate court deleted the award of actual damages. However, it adjudged other damages
against C.F. Sharp for its unlawful withholding of documents from respondents.
We sustain the trial court’s ruling.
On the issue of whether respondents are entitled to relief for failure to deploy them, the RTC ruled in this wise:
The contract of employment entered into by the plaintiffs and the defendant C.F. Sharp is an actionable
document, the same contract having the essential requisites for its validity. It is worthy to note that there are
three stages of a contract: (1) preparation, conception, or generation which is the period of negotiation and
bargaining ending at the moment of agreement of the parties. (2) Perfection or birth of the contract, which is
the moment when the parties come to agree on the terms of the contract. (3) Consummation or death, which
is the fulfillment or performance of the terms agreed upon in the contract.
Hence, it is imperative to know the stage reached by the contract entered into by the plaintiffs and C.F. sharp.
Based on the testimonies of the witnesses presented in this Court, there was already a perfected contract
between plaintiffs and defendant C.F. Sharp. Under Article 1315 of the New Civil Code of the Philippines, it
states that:
xxxx
Thus, when plaintiffs signed the contract of employment with C.F. Sharp (as agent of the principal WB Slough)
consequently, the latter is under obligation to deploy the plaintiffs, which is the natural effect and consequence
of the contract agreed by them.8
We agree.
As correctly ruled at the trial, contracts undergo three distinct stages, to wit: negotiation; perfection or birth;
and consummation. Negotiation begins from the time the prospective contracting parties manifest their
interest in the contract and ends at the moment of agreement of the parties. Perfection or birth of the contract
takes place when the parties agree upon the essential elements of the contract. Consummation occurs when
the parties fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof.9
Under Article 1315 of the Civil Code, a contract is perfected by mere consent and from that moment the
parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and law.10
An employment contract, like any other contract, is perfected at the moment (1) the parties come to agree
upon its terms; and (2) concur in the essential elements thereof: (a) consent of the contracting parties, (b)
object certain which is the subject matter of the contract and (c) cause of the obligation.11
We have scoured through the Contract of Employment and we hold that it is a perfected contract of
employment. We reproduce below the terms of the Contract of Employment for easy reference:
LABOR-1 Batch 1
WITNESSETH
That the Seafarer shall be employed on board under the following terms and conditions:
1.1 Duration of Contract: 3 month/s
1.2 Position: SANDBLASTER/PAINTER
1.3 Basic Monthly Salary: $450.00 per month
1.4 Living Allowances: $0.00 per month
1.5 Hours of Work: 48 per week
1.6 Overtime Rate: $439.00 per month
1.7 Vacation Leave with Pay: 30.00 day/s per month on board
The terms and conditions of the Revised Employment Contract for seafarers governing the employment of all
Filipino seafarers approved by the POEA/DOLE on July 14, 1989 under Memorandum Circular No. 41 series
of 1989 and amending circulars relative thereto shall be strictly and faithfully observed.
Any alterations or changes, in any part of this Contract shall be evaluated, verified, processed and approved
by the Philippine Overseas Employment Administration (POEA). Upon approval, the same shall be deemed
an integral part of the Standard Employment Contract (SEC) for seafarers.
All claims, complaints or controversies relative to the implementation and interpretation of this overseas
employment contract shall be exclusively resolved through the established Grievance Machinery in the
Revised Employment Contract for seafarers, the adjudication procedures of the Philippine Overseas
Employment Administration and the Philippine Courts of Justice, in that order.
Violations of the terms and conditions of this Contract with its approved addendum shall warrant the
imposition of appropriate disciplinary or administrative sanctions against the erring party.
The Employee hereby certifies that he had received, read or has had explained to him and fully understood
this contract as well as the POEA revised Employment Contract of 1989 and the Collective Bargaining
Agreement (CBA) and/or company terms and conditions of employment covering this vessel and that he is
fully aware of and has head or has had explained to him the terms and conditions including those in the POEA
Employment Contract, the CBA and this contract which constitute his entire agreement with the employer.
The Employee also confirms that no verbal or other written promises other than the terms and conditions of
this Contract as well as the POEA Revised Employment Contract, the CBA and/or company terms and
conditions had been given to the Employee. Therefore, the Employee cannot claim any additional benefits or
wages of any kind except those which have been provided in this Contract Agreement.12
By the contract, C.F. Sharp, on behalf of its principal, International Shipping Management, Inc., hired
respondents as Sandblaster/Painter for a 3-month contract, with a basic monthly salary of US$450.00. Thus,
Page 38 of 69
the object of the contract is the service to be rendered by respondents on board the vessel while the cause of
the contract is the monthly compensation they expect to receive. These terms were embodied in the Contract
of Employment which was executed by the parties. The agreement upon the terms of the contract was
manifested by the consent freely given by both parties through their signatures in the contract. Neither parties
disavow the consent they both voluntarily gave. Thus, there is a perfected contract of employment.
The Court of Appeals agreed with the submission of C.F. Sharp that the perfection and effectivity of the
Contract of Employment depend upon the actual deployment of respondents. It based its conclusion that there
was no perfected contract based on the following rationale:
The commencement of the employer-employee relationship between plaintiffs-appellees and the foreign
employer, as correctly represented by C.F. Sharp requires that conditions under Sec. D be met. The Contract
of Employment was duly "Verified and approved by the POEA." Regrettably, We have painfully scrutinized the
Records and find no evidence that plaintiffs-appellees were cleared for travel and departure to their port of
embarkation overseas by government authorities. Consequently, non-fulfillment of this condition negates the
commencement and existence of employer-employee relationship between the plaintiffs-appellees and C.F.
Sharp. Accordingly, no contract between them was perfected that will give rise to plaintiffs-appellees’ right of
action. There can be no breach of contract when in the first place, there is no effective contract to speak of.
For the same reason, and finding that the award of actual damages has no basis, the same is hereby
deleted.13
The Court of Appeals erred.
The commencement of an employer-employee relationship must be treated separately from the perfection of
an employment contract. Santiago v. CF Sharp Crew Management, Inc.,14 which was promulgated on 10 July
2007, is an instructive precedent on this point. In said case, petitioner was hired by respondent on board
"MSV Seaspread" for US$515.00 per month for nine (9) months, plus overtime pay. Respondent failed to
deploy petitioner from the port of Manila to Canada. We made a distinction between the perfection of the
employment contract and the commencement of the employer-employee relationship, thus:
The perfection of the contract, which in this case coincided with the date of execution thereof, occurred when
petitioner and respondent agreed on the object and the cause, as well as the rest of the terms and conditions
therein. The commencement of the employer-employee relationship, as earlier discussed, would have taken
place had petitioner been actually deployed from the point of hire. Thus, even before the start of any
employer-employee relationship, contemporaneous with the perfection of the employment contract was the
birth of certain rights and obligations, the breach of which may give rise to a cause of action against the erring
party.15
Despite the fact that the employer-employee relationship has not commenced due to the failure to deploy
respondents in this case, respondents are entitled to rights arising from the perfected Contract of
Employment, such as the right to demand performance by C.F. Sharp of its obligation under the contract.
The right to demand performance was a categorical pronouncement in Santiago which ruled that failure to
deploy constitutes breach of contract, thereby entitling the seafarer to damages:
Respondent’s act of preventing petitioner from departing the port of Manila and boarding "MSV Seaspread"
constitutes a breach of contract, giving rise to petitioner’s cause of action. Respondent unilaterally and
unreasonably reneged on its obligation to deploy petitioner and must therefore answer for the actual damages
he suffered.
LABOR-1 Batch 1
We take exception to the Court of Appeals’ conclusion that damages are not recoverable by a worker who
was not deployed by his agency. The fact that the POEA Rules are silent as to the payment of damages to the
affected seafarer does not mean that the seafarer is precluded from claiming the same. The sanctions
provided for non-deployment do not end with the suspension or cancellation of license or fine and the return of
all documents at no cost to the worker. They do not forfend a seafarer from instituting an action for damages
against the employer or agency which has failed to deploy him.16
The appellate court could not be faulted for its failure to adhere to Santiago considering that the Court of
Appeals Decision was promulgated way back in 2003 while Santiago was decided in 2007. We now reiterate
Santiago and, accordingly, decide the case at hand.
We respect the lower courts’ findings that C.F. Sharp unjustifiably refused to return the documents submitted
by respondent. The finding was that C.F. Sharp would only release the documents if respondent would sign a
quitclaim. On this point, the trial court was affirmed by the Court of Appeals. As a consequence, the award by
the trial court of moral damages must likewise be affirmed.
Moral damages may be recovered under Article 2219 of the Civil Code in relation to Article 21.1âwphi1 The
pertinent provisions read:
Art. 2219. Moral damages may be recovered in the following and analogous cases:
xxxx
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
xxxx
Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage.
We agree with the appellate court that C.F. Sharp committed an actionable wrong when it unreasonably
withheld documents, thus preventing respondents from seeking lucrative employment elsewhere. That C.F.
Sharp arbitrarily imposed a condition that the documents would only be released upon signing of a quitclaim is
tantamount to bad faith because it effectively deprived respondents of resort to legal remedies.
Furthermore, we affirm the award of exemplary damages and attorney’s fees. Exemplary damages may be
awarded when a wrongful act is accompanied by bad faith or when the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner which would justify an award of exemplary damages
under Article 2232 of the Civil Code. Since the award of exemplary damages is proper in this case, attorney’s
fees and cost of the suit may also be recovered as provided under Article 2208 of the Civil Code.17
WHEREFORE, the petition is DENIED. The Decision dated 27 June 1996 of the Regional Trial Court of Pasay
City is REINSTATED. Accordingly, the Decision dated 30 October 2003 of the Court of Appeals is MODIFIED.
SO ORDERED.
Page 39 of 69

G.R. No. 161757             January 25, 2006
SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC.Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, Second Division; HON. ERNESTO S. DINOPOL, in his
capacity as Labor Arbiter, NLRC; NCR, Arbitration Branch, Quezon City and DIVINA A.
MONTEHERMOZO, Respondents.
DECISION
CARPIO MORALES, J.:
Petitioner, Sunace International Management Services (Sunace), a corporation duly organized and existing
under the laws of the Philippines, deployed to Taiwan Divina A. Montehermozo (Divina) as a domestic helper
under a 12-month contract effective February 1, 1997.1 The deployment was with the assistance of a
Taiwanese broker, Edmund Wang, President of Jet Crown International Co., Ltd.
After her 12-month contract expired on February 1, 1998, Divina continued working for her Taiwanese
employer, Hang Rui Xiong, for two more years, after which she returned to the Philippines on February 4,
2000.
Shortly after her return or on February 14, 2000, Divina filed a complaint2 before the National Labor Relations
Commission (NLRC) against Sunace, one Adelaide Perez, the Taiwanese broker, and the employer-foreign
principal alleging that she was jailed for three months and that she was underpaid.
The following day or on February 15, 2000, Labor Arbitration Associate Regina T. Gavin issued Summons3 to
the Manager of Sunace, furnishing it with a copy of Divina’s complaint and directing it to appear for mandatory
conference on February 28, 2000.
LABOR-1 Batch 1
The scheduled mandatory conference was reset. It appears to have been concluded, however.
On April 6, 2000, Divina filed her Position Paper4 claiming that under her original one-year contract and the 2-
year extended contract which was with the knowledge and consent of Sunace, the following amounts
representing income tax and savings were deducted:
Year Deduction for Income Tax Deduction for Savings
1997 NT10,450.00 NT23,100.00
1998 NT9,500.00 NT36,000.00
1999 NT13,300.00 NT36,000.00;5
and while the amounts deducted in 1997 were refunded to her, those deducted in 1998 and 1999 were not.
On even date, Sunace, by its Proprietor/General Manager Maria Luisa Olarte, filed its Verified Answer and
Position Paper,6 claiming as follows, quoted verbatim:
COMPLAINANT IS NOT ENTITLED FOR THE REFUND OF HER 24 MONTHS SAVINGS
3. Complainant could not anymore claim nor entitled for the refund of her 24 months savings as she already
took back her saving already last year and the employer did not deduct any money from her salary, in
accordance with a Fascimile Message from the respondent SUNACE’s employer, Jet Crown International
Co. Ltd., a xerographic copy of which is herewith attached as ANNEX "2" hereof;
COMPLAINANT IS NOT ENTITLED TO REFUND OF HER 14 MONTHS TAX AND PAYMENT OF
ATTORNEY’S FEES
4. There is no basis for the grant of tax refund to the complainant as the she finished her one year
contract and hence, was not illegally dismissed by her employer. She could only lay claim over the tax refund
or much more be awarded of damages such as attorney’s fees as said reliefs are available only when the
dismissal of a migrant worker is without just valid or lawful cause as defined by law or contract.
The rationales behind the award of tax refund and payment of attorney’s fees is not to enrich the complainant
but to compensate him for actual injury suffered. Complainant did not suffer injury, hence, does not deserve to
be compensated for whatever kind of damages.
Hence, the complainant has NO cause of action against respondent SUNACE for monetary claims,
considering that she has been totally paid of all the monetary benefits due her under her Employment
Contract to her full satisfaction.
6. Furthermore, the tax deducted from her salary is in compliance with the Taiwanese law, which respondent
SUNACE has no control and complainant has to obey and this Honorable Office has no authority/jurisdiction
to intervene because the power to tax is a sovereign power which the Taiwanese Government is supreme in
its own territory. The sovereign power of taxation of a state is recognized under international law and among
sovereign states.
Page 40 of 69
7. That respondent SUNACE respectfully reserves the right to file supplemental Verified Answer and/or
Position Paper to substantiate its prayer for the dismissal of the above case against the herein respondent.
AND BY WAY OF -
x x x x (Emphasis and underscoring supplied)
Reacting to Divina’s Position Paper, Sunace filed on April 25, 2000 an ". . . answer to complainant’s position
paper"7 alleging that Divina’s 2-year extension of her contract was without its knowledge and consent, hence,
it had no liability attaching to any claim arising therefrom, and Divina in fact executed a Waiver/Quitclaim and
Release of Responsibility and an Affidavit of Desistance, copy of each document was annexed to said ". . .
answer to complainant’s position paper."
To Sunace’s ". . . answer to complainant’s position paper," Divina filed a 2-page reply,8 without, however,
refuting Sunace’s disclaimer of knowledge of the extension of her contract and without saying anything about
the Release, Waiver and Quitclaim and Affidavit of Desistance.
The Labor Arbiter, rejected Sunace’s claim that the extension of Divina’s contract for two more years was
without its knowledge and consent in this wise:
We reject Sunace’s submission that it should not be held responsible for the amount withheld because her
contract was extended for 2 more years without its knowledge and consent because as Annex "B"9 shows,
Sunace and Edmund Wang have not stopped communicating with each other and yet the matter of the
contract’s extension and Sunace’s alleged non-consent thereto has not been categorically established.
What Sunace should have done was to write to POEA about the extension and its objection thereto, copy
furnished the complainant herself, her foreign employer, Hang Rui Xiong and the Taiwanese broker, Edmund
Wang.
And because it did not, it is presumed to have consented to the extension and should be liable for anything
that resulted thereform (sic).10 (Underscoring supplied)
The Labor Arbiter rejected too Sunace’s argument that it is not liable on account of Divina’s execution of a
Waiver and Quitclaim and an Affidavit of Desistance. Observed the Labor Arbiter:
Should the parties arrive at any agreement as to the whole or any part of the dispute, the same shall be
reduced to writing and signed by the parties and their respective counsel (sic), if any, before the Labor Arbiter.
The settlement shall be approved by the Labor Arbiter after being satisfied that it was voluntarily entered into
by the parties and after having explained to them the terms and consequences thereof.
A compromise agreement entered into by the parties not in the presence of the Labor Arbiter before whom the
case is pending shall be approved by him, if after confronting the parties, particularly the complainants, he is
satisfied that they understand the terms and conditions of the settlement and that it was entered into freely
voluntarily (sic) by them and the agreement is not contrary to law, morals, and public policy.
And because no consideration is indicated in the documents, we strike them down as contrary to law, morals,
and public policy.11
LABOR-1 Batch 1
He accordingly decided in favor of Divina, by decision of October 9, 2000,12 the dispositive portion of which
reads:
Wherefore, judgment is hereby rendered ordering respondents SUNACE INTERNATIONAL SERVICES and
its owner ADELAIDA PERGE, both in their personal capacities and as agent of Hang Rui Xiong/Edmund
Wang to jointly and severally pay complainant DIVINA A. MONTEHERMOZO the sum of NT91,950.00 in its
peso equivalent at the date of payment, as refund for the amounts which she is hereby adjudged entitled to as
earlier discussed plus 10% thereof as attorney’s fees since compelled to litigate, complainant had to engage
the services of counsel.
SO ORDERED.13 (Underescoring supplied)
On appeal of Sunace, the NLRC, by Resolution of April 30, 2002,14 affirmed the Labor Arbiter’s decision.
Via petition for certiorari,15 Sunace elevated the case to the Court of Appeals which dismissed it outright by
Resolution of November 12, 2002,16 the full text of which reads:
The petition for certiorari faces outright dismissal.
The petition failed to allege facts constitutive of grave abuse of discretion on the part of the public respondent
amounting to lack of jurisdiction when the NLRC affirmed the Labor Arbiter’s finding that petitioner Sunace
International Management Services impliedly consented to the extension of the contract of private respondent
Divina A. Montehermozo. It is undisputed that petitioner was continually communicating with private
respondent’s foreign employer (sic). As agent of the foreign principal, "petitioner cannot profess ignorance of
such extension as obviously, the act of the principal extending complainant  (sic) employment contract
necessarily bound it." Grave abuse of discretion is not present in the case at bar.
ACCORDINGLY, the petition is hereby DENIED DUE COURSE and DISMISSED.17
SO ORDERED.
(Emphasis on words in capital letters in the original; emphasis on words in small letters and underscoring
supplied)
Its Motion for Reconsideration having been denied by the appellate court by Resolution of January 14,
2004,18 Sunace filed the present petition for review on certiorari.
The Court of Appeals affirmed the Labor Arbiter and NLRC’s finding that Sunace knew of and impliedly
consented to the extension of Divina’s 2-year contract. It went on to state that "It is undisputed that [Sunace]
was continually communicating with [Divina’s] foreign employer." It thus concluded that "[a]s agent of the
foreign principal, ‘petitioner cannot profess ignorance of such extension as obviously, the act of the principal
extending complainant (sic) employment contract necessarily bound it.’"
Contrary to the Court of Appeals finding, the alleged continuous communication was with the
Taiwanese broker Wang, not with the foreign employer Xiong.
The February 21, 2000 telefax message from the Taiwanese broker to Sunace, the only basis of a finding of
continuous communication, reads verbatim:
Page 41 of 69
 xxxx Furthermore, as Sunace correctly points out, there was an implied revocation of its agency relationship with its
foreign principal when, after the termination of the original employment contract, the foreign principal directly
negotiated with Divina and entered into a new and separate employment contract in Taiwan. Article 1924 of
Regarding to Divina, she did not say anything about her saving in police station. As we contact
the New Civil Code reading
with her employer, she took back her saving already last years. And they did not deduct any
money from her salary. Or she will call back her employer to check it again. If her employer said
yes! we will get it back for her. The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly
with third persons.
Thank you and best regards.
thus applies.
(Sgd.)
Edmund Wang In light of the foregoing discussions, consideration of the validity of the Waiver and Affidavit of Desistance
President19 which Divina executed in favor of Sunace is rendered unnecessary.

The finding of the Court of Appeals solely on the basis of the above-quoted telefax message, that Sunace WHEREFORE, the petition is GRANTED. The challenged resolutions of the Court of Appeals are
continually communicated with the foreign "principal" (sic) and therefore was aware of and had consented to hereby REVERSED and SET ASIDE. The complaint of respondent Divina A. Montehermozo against petitioner
the execution of the extension of the contract is misplaced. The message does not provide evidence that is DISMISSED.
Sunace was privy to the new contract executed after the expiration on February 1, 1998 of the original
contract. That Sunace and the Taiwanese broker communicated regarding Divina’s allegedly withheld savings SO ORDERED.
does not necessarily mean that Sunace ratified the extension of the contract. As Sunace points out in its
Reply20 filed before the Court of Appeals,

As can be seen from that letter communication, it was just an information given to the petitioner that the
private respondent had t[aken] already her savings from her foreign employer and that no deduction was
made on her salary. It contains nothing about the extension or the petitioner’s consent thereto.21

Parenthetically, since the telefax message is dated February 21, 2000, it is safe to assume that it was sent to
enlighten Sunace who had been directed, by Summons issued on February 15, 2000, to appear on February
28, 2000 for a mandatory conference following Divina’s filing of the complaint on February 14, 2000.

Respecting the Court of Appeals following dictum:

As agent of its foreign principal, [Sunace] cannot profess ignorance of such an extension as obviously, the act
of its principal extending [Divina’s] employment contract necessarily bound it,22

it too is a misapplication, a misapplication of the theory of imputed knowledge.

The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the principal, employer
Xiong, not the other way around.23 The knowledge of the principal-foreign employer cannot, therefore, be
imputed to its agent Sunace.

There being no substantial proof that Sunace knew of and consented to be bound under the 2-year
employment contract extension, it cannot be said to be privy thereto. As such, it and its "owner" cannot be
held solidarily liable for any of Divina’s claims arising from the 2-year employment extension. As the New Civil G.R. Nos. L-58674-77 July 11, 1990
Code provides,
PEOPLE OF THE PHILIPPINES, petitioner,
Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights and vs.
obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of HON. DOMINGO PANIS, Presiding Judge of the Court of First Instance of Zambales & Olongapo City,
law.24 Branch III and SERAPIO ABUG, respondents.

LABOR-1 Batch 1 Page 42 of 69


CRUZ, J:
The basic issue in this case is the correct interpretation of Article 13(b) of P.D. 442, otherwise known as the
Labor Code, reading as follows:
(b) Recruitment and placement' refers to any act of canvassing, enlisting, contracting,
transporting, hiring, or procuring workers, and includes referrals, contract services,
promising or advertising for employment, locally or abroad, whether for profit or not:
Provided, That any person or entity which, in any manner, offers or promises for a fee
employment to two or more persons shall be deemed engaged in recruitment and
placement.
Four informations were filed on January 9, 1981, in the Court of First Instance of Zambales and Olongapo City
alleging that Serapio Abug, private respondent herein, "without first securing a license from the Ministry of
Labor as a holder of authority to operate a fee-charging employment agency, did then and there wilfully,
unlawfully and criminally operate a private fee charging employment agency by charging fees and expenses
(from) and promising employment in Saudi Arabia" to four separate individuals named therein, in violation of
Article 16 in relation to Article 39 of the Labor Code. 1
Abug filed a motion to quash on the ground that the informations did not charge an offense because he was
accused of illegally recruiting only one person in each of the four informations. Under the proviso in Article
13(b), he claimed, there would be illegal recruitment only "whenever two or more persons are in any manner
promised or offered any employment for a fee. " 2
Denied at first, the motion was reconsidered and finally granted in the Orders of the trial court dated June 24
and September 17, 1981. The prosecution is now before us on certiorari. 3
The posture of the petitioner is that the private respondent is being prosecuted under Article 39 in relation to
Article 16 of the Labor Code; hence, Article 13(b) is not applicable. However, as the first two cited articles
penalize acts of recruitment and placement without proper authority, which is the charge embodied in the
informations, application of the definition of recruitment and placement in Article 13(b) is unavoidable.
The view of the private respondents is that to constitute recruitment and placement, all the acts mentioned in
this article should involve dealings with two or mre persons as an indispensable requirement. On the other
hand, the petitioner argues that the requirement of two or more persons is imposed only where the
recruitment and placement consists of an offer or promise of employment to such persons and always in
consideration of a fee. The other acts mentioned in the body of the article may involve even only one person
and are not necessarily for profit.
Neither interpretation is acceptable. We fail to see why the proviso should speak only of an offer or promise of
employment if the purpose was to apply the requirement of two or more persons to all the acts mentioned in
the basic rule. For its part, the petitioner does not explain why dealings with two or more persons are needed
where the recruitment and placement consists of an offer or promise of employment but not when it is done
through "canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring (of) workers.
As we see it, the proviso was intended neither to impose a condition on the basic rule nor to provide an
exception thereto but merely to create a presumption. The presumption is that the individual or entity is
LABOR-1 Batch 1
engaged in recruitment and placement whenever he or it is dealing with two or more persons to whom, in
consideration of a fee, an offer or promise of employment is made in the course of the "canvassing, enlisting,
contracting, transporting, utilizing, hiring or procuring (of) workers. "
The number of persons dealt with is not an essential ingredient of the act of recruitment and placement of
workers. Any of the acts mentioned in the basic rule in Article 13(b) win constitute recruitment and placement
even if only one prospective worker is involved. The proviso merely lays down a rule of evidence that where a
fee is collected in consideration of a promise or offer of employment to two or more prospective workers, the
individual or entity dealing with them shall be deemed to be engaged in the act of recruitment and placement.
The words "shall be deemed" create that presumption.
This is not unlike the presumption in article 217 of the Revised Penal Code, for example, regarding the failure
of a public officer to produce upon lawful demand funds or property entrusted to his custody. Such failure shall
be prima facie evidence that he has put them to personal use; in other words, he shall be deemed to have
malversed such funds or property. In the instant case, the word "shall be deemed" should by the same token
be given the force of a disputable presumption or of prima facie evidence of engaging in recruitment and
placement. (Klepp vs. Odin Tp., McHenry County 40 ND N.W. 313, 314.)
It is unfortunate that we can only speculate on the meaning of the questioned provision for lack of records of
debates and deliberations that would otherwise have been available if the Labor Code had been enacted as a
statute rather than a presidential decree. The trouble with presidential decrees is that they could be, and
sometimes were, issued without previous public discussion or consultation, the promulgator heeding only his
own counsel or those of his close advisers in their lofty pinnacle of power. The not infrequent results are
rejection, intentional or not, of the interest of the greater number and, as in the instant case, certain esoteric
provisions that one cannot read against the background facts usually reported in the legislative journals.
At any rate, the interpretation here adopted should give more force to the campaign against illegal recruitment
and placement, which has victimized many Filipino workers seeking a better life in a foreign land, and
investing hard- earned savings or even borrowed funds in pursuit of their dream, only to be awakened to the
reality of a cynical deception at the hands of theirown countrymen.
WHEREFORE, the Orders of June 24, 1981, and September 17, 1981, are set aside and the four informations
against the private respondent reinstated. No costs.
SO ORDERED.
Page 43 of 69

G.R. No. 155903             September 14, 2007
C.F. SHARP CREW MANAGEMENT, INC., petitioner,
vs.
HON. UNDERSECRETARY JOSE M. ESPANOL, JR., HON. SECRETARY LEONARDO A. QUISUMBING
and RIZAL INTERNATIONAL SHIPPING SERVICES, respondents.
DECISION
NACHURA, J.:
The petitioner C.F. Sharp Crew Management, Inc. (C.F. Sharp) appeals by certiorari the April 30, 2002
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 53747 and the November 5, 2002
Resolution2 denying its reconsideration.
In 1991, Louis Cruise Lines (LCL), a foreign corporation duly organized and existing under the laws of Cyprus,
entered into a Crewing Agreement3 with Papadopolous Shipping, Ltd. (PAPASHIP). PAPASHIP in turn
appointed private respondent Rizal International Shipping Services (Rizal) as manning agency in the
Philippines, recruiting Filipino seamen for LCL’s vessel.
On October 3, 1996, LCL terminated the Crewing Agreement with PAPASHIP to take effect on December 31,
1996. It then appointed C.F. Sharp as crewing agent in the Philippines. C.F. Sharp requested for accreditation
as the new manning agency of LCL with the Philippine Overseas Employment Administration (POEA), but
Rizal objected on the ground that its accreditation still existed and would only expire on December 31, 1996.
Pending approval of the accreditation, Theodoros Savva and Adrias Tjiakouris of LCL arrived in the
Philippines and conducted a series of interviews for seafarers at C.F. Sharp’s office. Rizal reported LCL’s
recruitment activities to the POEA on December 9, 1996, and requested an ocular inspection of C.F. Sharp’s
premises.
On December 17, 1996, POEA representatives conducted an inspection and found Savva and Tjiakouris at
C.F. Sharp interviewing and recruiting hotel staffs, cooks, and chefs for M/V Cyprus, with scheduled
deployment in January 1997.4 The Inspection Report5 signed by Corazon Aquino of the POEA and
countersigned by Mr. Reynaldo Banawis of C.F. Sharp was thereafter submitted to the POEA.
On January 2, 1997, Rizal filed a complaint6 for illegal recruitment, cancellation or revocation of license, and
blacklisting against LCL and C.F. Sharp with the POEA, docketed as POEA Case No. RV-97-01-004. Then,
on January 31, 1997, Rizal filed a Supplemental Complaint7 adding violation of Section 29 of the Labor Code
of the Philippines, for designating and/or appointing agents, representatives and employees, without prior
approval from the POEA.
LABOR-1 Batch 1
For its part, C.F. Sharp admitted that Savva and Tjiakouris conducted interviews at C.F. Sharp’s office, but
denied that they were for recruitment and selection purposes. According to C.F. Sharp, the interviews were
held for LCL’s ex-crew members who had various complaints against Rizal. It belittled the inspection report of
the POEA inspection team claiming that it simply stated that interviews and recruitment were undertaken,
without reference to who were conducting the interview and for what vessels.8 C.F. Sharp also averred that
Rizal was guilty of forum shopping, and prayed for the dismissal of the complaint on this ground and for its
lack of merit. 9
The POEA Administrator was not persuaded and found C.F. Sharp liable for illegal recruitment. According to
the Administrator, the inspection report of Ms. Aquino established that Savva and Tjiakouris had conducted,
and, at the time of the inspection, had been conducting interviews, selection and hiring for LCL, without any
authority from the POEA. The Administrator also held that C.F. Sharp violated Section 29 of the Labor Code
when it designated officers and agents without prior approval of the POEA. 10
Thus, the Administrator disposed:
WHEREFORE, premises considered, the respondent CF Sharp Agency is as it is hereby ordered
suspended for a period of six (6) months or in lieu thereof, it is ordered to pay a fine of P50,000.00
for violation of Art. 29 of the Labor Code, as amended in relation to Sec. 6(b), Rule II, Book II of the
Rules and Regulations Governing Overseas Employment in accordance with the schedule of
penalties.
Further, the respondent CF Sharp is as it is hereby ordered suspended for another period of
[eighteen] (18) months or to pay the fine of P180,000.00 for committing 9 counts of violation of
Article 29 of the Labor Code as amended in relation to Sec. 2(k), Rule I, Book VI of the Rules and
Regulations governing Overseas Employment.
The period of suspension shall be served cummulatively (sic).
The charges of violation of Sec. 6(b) of RA 8042 are hereby referred to the Anti-Illegal Recruitment
Branch for appropriate action.
SO ORDERED.11
C.F. Sharp elevated the Administrator’s ruling to the Department of Labor and Employment (DOLE). On
December 19, 1997, the then Secretary of Labor, Leonardo A. Quisumbing,12 issued an Order,13 ruling that:
WHEREFORE, except as above MODIFIED, the Order dated March 13, 1997 of the POEA
Administrator is AFFIRMED.
Accordingly, the C.F. Sharp Crew Management, Inc. is hereby found guilty of having violated Sec. 6,
R.A. 8042 in relation to Article 13 (b) and (f), and Article 16 of the Labor Code as amended; Rule II
(jj), Book I and Sec 1 and 6, Rule I, Book II, POEA Rules and Regulations Governing Overseas
Employment, for having conspired and confederated with the [Louis] Cruise Lines, Theodorus Savva
and Andrias (sic) Tjiakouris in the recruitment of seafarers for LCL’s ships, before it was duly
accredited by POEA as the manning agency of LCL, thus a non-holder of authority at the time. The
penalty imposed against it of suspension of its license for six (6) months or in lieu thereof, to pay a
fine of Fifty Thousand Pesos (P50,000.00), is AFFIRMED.
Page 44 of 69
 Further, C.F. Sharp Crew Management, Inc. is hereby found guilty of one (1) count of violation of
Art. 29 of the Labor Code in relation to Sec. 2 (k), Rule I, Book VI of the Rules and Regulations
Governing Overseas Employment, and is imposed the penalty of two (2) months suspension of its
license or in lieu thereof, to pay a fine of P20,000.00.
The penalties of suspension for both violations shall be served cumulatively.
Out of the P230,000.00 cash supersedeas bond posted by the petitioner-appellant, let the amount
of P160,000.00 be released and refunded to it, retaining P70,000.00 to be applied to the payment of
the fines as imposed above, should the petitioner opt to pay the fine instead of undergoing
suspension of its license. However, the suspension shall remain in force until such fine is paid, or in
the event that the petitioner-appellant further appeals this Order.
The charge and finding of violation of Sec. 6 (b) of R.A. 8042 are hereby referred to the Anti-Illegal
Recruitment Branch for appropriate action.
SO ORDERED.14
C.F. Sharp’s motion for reconsideration having been denied on February 5, 1999 by the then Undersecretary,
Jose M. Espanol, Jr.,15 it elevated the case to this Court on petition for certiorari, with the case docketed as
G.R. No. 137573. But, in the June 16, 1999 Resolution, this Court referred the petition to the CA.
In the meantime, on April 15, 1999, C.F. Sharp requested the lifting of the suspension decreed by the
Secretary of Labor in his December 19, 1997 Order,16 which was granted by Deputy Administrator for
Licensing and Adjudication Valentin C. Guanio. C.F. Sharp was allowed to deploy seafarers for its principals.
Consequently, on April 30, 2002, the CA denied C.F. Sharp’s petition for certiorari,17 holding that C.F. Sharp
was already estopped from assailing the Secretary of Labor’s ruling because it had manifested its option to
have the cash bond posted answer for the alternative fines imposed upon it. By paying the adjudged fines,
C.F. Sharp effectively executed the judgment, having acquiesced to, and ratified the execution of the assailed
Orders of the Secretary of Labor. The CA also agreed with the POEA Administrator and the Secretary of
Labor that Savva and Tjiakouris of LCL, along with C.F. Sharp, undertook recruitment activities on December
7, 9 to 12, 1996, sans any authority. Finally, it affirmed both labor officials’ finding that C.F. Sharp violated
Article 29 of the Labor Code and Section 2(k), Rule I, Book VI of the POEA Rules when it appointed Henry
Desiderio as agent, without prior approval from the POEA. Thus, the appellate court declared that the
Secretary of Labor acted well within his discretion in holding C.F. Sharp liable for illegal recruitment.
C.F. Sharp filed a motion for reconsideration,18 but the CA denied it on November 25, 2002.19
Hence, this appeal, positing these issues:
A. WHETHER OR NOT THE COURT OF APPEALS PATENTLY ERRED IN RULING THAT
PETITIONER IS IN ESTOPPEL IN QUESTIONING THE ORDER DATED DECEMBER 19, 1997
AND THE RESOLUTION DATED FEBRUARY 5, 1999.
B. WHETHER OR NOT THE COURT OF APPEALS PATENTLY ERRED WHEN IT RULED THAT
PETITIONER IS LIABLE FOR VIOLATION OF SECTION 6[,] R.A. NO. 8042 IN RELATION TO
ARTICLE 13 (b) and (f) AND ARTICLE 66 (sic) OF THE LABOR CODE AS AMENDED; RULE II (jj)
LABOR-1 Batch 1
BOOK I; AND SECTIONS 1 AND 6, RULE I, BOOK III POEA RULES AND REGULATIONS
GOVERNING OVERSEAS EMPLOYMENT.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT
PETITIONER IS LIABLE FOR VIOLATION OF ARTICLE 29 OF THE LABOR CODE, AS
AMENDED, IN RELATION TO SECTION II (k)[,] RULE I, BOOK VI OF THE RULES AND
REGULATIONS GOVERNING OVERSEAS EMPLOYMENT.20
C.F. Sharp faults the CA for ruling that petitioner is estopped from questioning the resolutions of the Secretary
of Labor. It denied that it voluntarily executed, or acquiesced to, the assailed resolutions of the Secretary.
The general rule is that when a judgment has been satisfied, it passes beyond review, satisfaction being the
last act and the end of the proceedings, and payment or satisfaction of the obligation thereby established
produces permanent and irrevocable discharge; hence, a judgment debtor who acquiesces to and voluntarily
complies with the judgment is estopped from taking an appeal therefrom.21
In holding C.F. Sharp in estoppel, the CA apparently relied on the April 15, 1999 Order of the POEA, and,
thus, declared:
[P]etitioner C.F. Sharp had already manifested its option to have the cash bond posted as an answer
for the alternative fines imposed in the Orders dated December 19, 1997 as stated in the Order
dated April 15, 1999 of the POEA, Adjudication Office x x x. Thus, for voluntary execution of the
Order of the Secretary of DOLE dated December 19, 1997 by paying the adjudged fines, the
petitioner was then estopped from assailing such Order before Us by way of petition for certiorari.
Where a party voluntarily executes, partially or totally a judgment or acquiesces or ratifies the
execution of the same, he is estopped from appealing therefrom. x x x.22
The April 15, 1999 Order of Deputy Commissioner Valentin C. Guanio reads:
Respondent C.F. Sharp Crew Management, Inc., thru counsel having manifested its option to have
the cash bond posted answer for the alternative fines imposed in the above-entitled case; the
alternative suspension imposed in the Order of the Secretary dated December 19, 1997 is hereby
Lifted.
SO ORDERED.23
This Order was issued in response to C.F. Sharp’s request to lift the suspension decree of the Secretary of
Labor. The request stated, viz.:
[W]e write in behalf of our client, C.F. Sharp Crew Management Inc., regarding the Advice To
Operating Units dated April 15, 1999, which arose from the Decision of the Office of the Secretary of
Labor in the case entitled C.F. Sharp Crew Management, Inc. versus Rizal Shipping and docketed
as RV 97-01-004.
In this connection, we would like to express our option to have the cash bond posted by us in the
case entitled C.F. Sharp Crew Management, Inc. versus Rizal Shipping and docketed as RV 97-01-
044 to answer for any fine that the Supreme Court may finally decide that our client should pay in
the Case entitled, C.F. Sharp Crew Management, Inc. vs. Secretary Leonardo Quisumbing and Rizal
International Shipping Services and docketed as G.R. No. 137573.
Page 45 of 69
 Under the circumstances, it is most respectfully requested that the aforesaid advice be RECALLED
and that a clearance be issued in favor of our client, C.F. Sharp Crew Management, Inc.
Hoping for your immediate and favorable action on the matter.24 (Emphasis supplied)
C.F. Sharp’s letter was explicit that the cash bond posted would be answerable for any fine that it may
ultimately be held liable to pay by virtue of a final decision. In fact, on March 25, 1999, prior to the filing of the
above-quoted letter-request, C.F. Sharp had already filed a petition for certiorari assailing the Orders of the
Secretary of Labor. Furthermore, there is no showing that the assailed Order of then Secretary Quisumbing
was indeed executed to warrant the appellate court’s conclusion that C.F. Sharp was estopped from assailing
the said Order. Clearly, there is no basis for the CA to rule that C.F. Sharp voluntarily executed, or acquiesced
to, the execution of the unfavorable ruling of the Secretary of Labor.
The first issue having been settled, we now resolve whether C.F. Sharp is liable for illegal recruitment.
C.F. Sharp denies committing illegal recruitment activities in December 1996. It posits that the interviews
undertaken by Savva and Tjiakouris do not amount to illegal recruitment under Section 6 of Republic Act No.
8042 or the Migrants Workers Act. Further, it contends that the interviews conducted were not for selection
and recruitment purposes, but were in connection with the seamen’s past employment with Rizal, specifically,
their complaints for non-remittance of SSS premiums, withholding of wages, illegal exactions from medical
examinations and delayed allotments. It claims that it was only upon approval of its application for
accreditation that the employment contracts were entered into and actual deployment of the seamen was
made. C.F. Sharp, thus, concludes that it cannot be held liable for illegal recruitment.
The reasoning is specious.
Undoubtedly, in December 1996, LCL had no approved POEA license to recruit. C.F. Sharp’s accreditation as
LCL’s new manning agency was still pending approval at that time. Yet Savva and Tjiakouris, along with C.F.
Sharp, entertained applicants for LCL’s vessels, and conducted preparatory interviews.
Article 13(b) of the Labor Code defines recruitment and placement as:
any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and
includes referrals, contract services, promising or advertising for employment, locally or abroad
whether for profit or not: Provided, That any person or entity which in any manner, offers or promises
for a fee employment to two or more persons shall be deemed engaged in recruitment and
placement.
On the basis of this definition – and contrary to what C.F. Sharp wants to portray - the conduct of preparatory
interviews is a recruitment activity.
The fact that C.F. Sharp did not receive any payment during the interviews is of no moment. From the
language of Article 13(b), the act of recruitment may be "for profit or not." Notably, it is the lack of the
necessary license or authority, not the fact of payment, that renders the recruitment activity of LCL unlawful.
C.F. Sharp’s claim that the interviews were not for selection and recruitment purposes does not impress. As
the Secretary of Labor aptly said:
LABOR-1 Batch 1
This Office cannot conceive of a good reason why LCL/Savva/Tjiakouris should be interested at the
time in unearthing alleged violations committed by Rizal Shipping whose representative status as
manning agency was to be terminated in just a few weeks thereafter, spending valuable time and
money in the process. They stood to gain nothing from such taxing exercise involving several
hundreds of ex-crew members, which could be handled by government agencies like the POEA,
NLRC, SSS. The observation of the POEA Administrator that the complaints of the crewmen were
filed only after Rizal Shipping filed its complaints with the POEA merely to bolster the defense of CF
Sharp/LCL/Savva and Tjiakouris, is telling.
Upon the other hand, it was more to LCL’S gain to interview, select and recruit the disembarking
crewmen previously recruited by Rizal Shipping, using CF Sharp’s facilities, as this would result in
less recruitment time and cost.
Finally, the claim of Savva and Tjiakouris that Savva "talked to the POEA representative during their
visit" about these interviews and the violations which were confirmed, is just an afterthought to
support their defense; there is no entry in the Inspection Report confirming such claim. If such claim
were true, then the "able officer" of CF Sharp (LCL’s Attorney-in fact) who signed his conformity on
the 4th page of the report, and put his initial on the last page of the report containing the handwritten
findings of the inspectors on the selection and recruitment activities of Savva and Tjiakouris, would
have insisted that an entry be made thereon about what Savva told the inspectors, or he could
simply himself have written thereon that the two LCL officials merely conducted interviews on the
violations committed by Rizal Shipping. However, the report is bereft of anything to that effect. More
significant is the fact that the inspectors, in their Memorandum dated December 11, 1996 (the very
same day they conducted the inspection), stated that they "approached said persons" (referring to
Banawis, Savva and Tjiakouris) "and told us that they were doing interview to select applicants… to
complement the crew of a passenger ship for [LOUIS] CRUISE LINES."25
Indeed, it was Savva and Tjiakouris that conducted the interviews, and undertook selection and hiring.
However, C.F. Sharp cannot steer clear of liability for it conspired with LCL in committing illegal recruitment
activities. As the Secretary of Labor had taken pains to demonstrate:
x x x [T]here is substantial evidence on record that as alleged by Rizal Shipping, CF Sharp
conspired with LCL and its officers Savva and Tjiakouris to conduct recruitment activities in its
offices, at a time when LCL was not yet its POEA-accredited principal, in violation of Sec. 6, R.A.
8042 in relation to Article 13(b) and (f) and Article 16 of the Labor Code as amended; Rule II(jj) Book
I, and Sec. 1 and 6, Rule I, Book III, all of the POEA Rules and Regulations Governing Overseas
Employment.
Indeed, C.F. Sharp was aware of these violations when it alleged in its Petition for Review that:
"…in any and all events, the findings relied upon by the Public Respondent show, at best,
that the parties responsible for the alleged acts of illegal recruitment are LCL and its
officers alone, or at worst, LCL and its officers, in conspiracy with petitioner. Yet, it is
petitioner alone, who is severely punished and penalized." (underscoring supplied)
xxxx
The intention, agreement and both common design of both LCL and CF Sharp to engage in
recruitment of crewmen for LCL’s ships had already been made manifest when LCL through Savva
had instructed, in the October 14, 1996 letter to disembarking crewmembers, for the latter to report
Page 46 of 69
 to CF Sharp for processing of their papers. This was followed by the execution by LCL on October
17, 1996 of a Special Power of Attorney in favor of CF Sharp as new manning agent and attorney-in-
fact of LCL, with authority, among others, "to sign, authenticate and deliver all documents necessary
to complete any transaction related to the recruitment and hiring of Filipino seamen including the
necessary steps to facilitate the departure of recruited seamen"; "to assume, on our behalf and for
our account, any liability that may arise in connection with the recruitment of seamen and/or
implementation of the employment contract of said seamen." And on November 8, 1996, CF Sharp
applied for accreditation as manning agent of LCL for the latter’s five named vessels. The discovery
by the POEA inspectors of the selection and recruitment activities undertaken by Savva and
Tjiakouris at CF Sharp’s offices on December 11, 1996, followed. The interviews by Savva and
Tjiakouris at CF Sharp’s offices on December 7, 1996 with around 300 crewmen, as sworn to by 98
crewmen (their affidavits were submitted in evidence by CF Sharp); the interviews for selection and
recruitment from December 9 to 12, 1996 as found by the POEA inspectors; and the immediate
deployment of 154 crewmen for LCL right after [the] POEA approval of accreditation of LCL as
principal of CF Sharp, could not have been undertaken without the assistance and cooperation of
CF Sharp, even before such transfer of accreditation was granted by POEA.
The petitioner-appellant must be reminded that prior to approval of the transfer of accreditation, no
recruitment or deployment may be made by the principal by itself or through the would-be transferee
manning agency, or by the latter, as this would constitute illegal recruitment by a non-holder of
authority under Sec. 6, R.A. 8042 in relation to Article 13(b) and (f) and Article 16 of the Labor Code
as amended; Rule II(jj), Book I, and Sec. 1 and 6, Rule 1, Book III, POEA Rules and Regulations
Governing Overseas Employment.
The petitioner-appellant alleges that "there is no need for a license to enable LCL’s officers to
conduct their alleged activities of interviewing, selecting and hiring crewmen. Indeed, LCL’s officers
could have conducted these activities without a license."
Such claim is without legal basis, as direct hiring by employers of Filipino workers for overseas
employment is banned; they can only do so through, among others, licensed private recruitment and
shipping/mining agencies (Art. 18, Labor Code as amended; Sec. 1, Rule 1, Book II, POEA Rules
and Regulations Governing Overseas Employment).26
We need not say more.
C.F. Sharp also denies violating Article 29 of the Labor Code. It insists that Henry Desiderio was neither an
employee nor an agent of C.F. Sharp. Yet, except for its barefaced denial, no proof was adduced to
substantiate it.
Desiderio’s name does not appear in the list of employees and officials submitted by C.F. Sharp to the POEA.
However, his name appeared as the contact person of the applicants for the position of 2nd and 3rd assistant
engineers and machinist/fitter in C.F Sharp’s advertisement in the February 2, 1997 issue of The Bulletin
Today.27
Article 29 of the Labor Code is explicit, viz.:
Art. 29. NON-TRANSFERABILITY OF LICENSE OR AUTHORITY
No license or authority shall be used directly or indirectly by any person other than the one in whose
favor it was issued or at any place other than that stated in the license or authority, nor may such
LABOR-1 Batch 1
license or authority be transferred, conveyed or assigned to any other person or entity. Any transfer
of business address, appointment or designation of any agent or representative including the
establishment of additional offices anywhere shall be subject to the prior approval of the Department
of Labor. (Emphasis ours)
Thus, Section 2(k), Rule 1, Book VI of the POEA Rules Governing Overseas Employment provides:
Section 2. Grounds for Suspension/Cancellation of License.
xxxx
k. Appointing or designating agents, representatives or employees without prior approval from the
Administration.
The appointment or designation of Desiderio as an employee or agent of C.F. Sharp, without prior approval
from the POEA, warrants administrative sanction. The CA, therefore, correctly rejected C.F. Sharp’s posture.
Apparently, realizing the folly of its defenses, C.F. Sharp assails the admissibility of the Memorandum and
Inspection Report of the POEA. It contends that these are patently inadmissible against C.F. Sharp for it was
not given an opportunity to cross–examine the POEA inspectors regarding the report.
The argument does not deserve even a short shrift. First, C.F. Sharp did not raise it before the POEA and
Secretary of Labor. The issue was raised for the first time in its petition for certiorari with the CA, where the
jurisdiction of the appellate court is limited to issues of jurisdiction and grave abuse of discretion. On
numerous occasions, we have made it clear that to allow fresh issues at this stage of the proceedings is
violative of fair play, justice and due process.28
Second, jurisprudence is replete with rulings that administrative bodies are not bound by the technical niceties
of law and procedure and the rules obtaining in the courts of law.29 Hence, whatever merit C.F. Sharp’s
argument might have in the context of ordinary civil actions, where the rules of evidence apply with greater
rigidity, disappears when adduced in connection with labor cases.
The claim of denial of due process on the part of C.F. Sharp must also be rejected. The essence of due
process lies in the reasonable opportunity afforded a party to be heard and to submit any evidence in support
of its defense. What is vital is not the opportunity to cross-examine an adverse witness, but an opportunity to
be heard.30
In this case, C.F. Sharp was given ample opportunity to be heard, to adduce evidence in support of its version
of the material occurrences, and to controvert Rizal’s allegation and the Inspection Report. It submitted its
position paper with supporting affidavits and documents, and additionally pleaded its causes on appeal before
the Secretary of Labor. Under the circumstances, a claim of denial of due process on C.F. Sharp’s part is
completely unavailing.
C.F. Sharp next impugns the probative value given by the Administrator and the Secretary of Labor to the
Inspection Report. It alleges that the POEA Administrator, the Labor Secretary and the CA relied only on the
Inspection Report and gave very little or no probative value to the affidavits that it submitted in support of its
claim.
Page 47 of 69
C.F. Sharp would have us re-evaluate the factual veracity and probative value of the evidence submitted in
the proceedings a quo. C.F. Sharp may well be reminded that it is not our function to review, examine, and
evaluate or weigh the evidence adduced by the parties. Elementary is the principle that this Court is not a trier
of facts. Judicial review of labor cases does not go beyond the evaluation of the sufficiency of the evidence
upon which the labor officials' findings rest. Hence, where the factual findings of the labor tribunals or
agencies conform to, and are affirmed by, the CA, the same are accorded respect and finality, and are binding
upon this Court. It is only when the findings of the labor agencies and the appellate court are in conflict that
this Court will review the records to determine which findings should be upheld as being more in conformity
with the evidentiary facts. Where the CA affirms the labor agencies on review and there is no showing
whatsoever that said findings are patently erroneous, this Court is bound by the said findings.31
Although the rule admits of several exceptions, none of them are in point in this case. In any event, we have
carefully examined the factual findings of the CA and found the same to be borne out of the record and
sufficiently anchored on the evidence presented.
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP.
No. 53747 are AFFIRMED.
SO ORDERED.
G.R. No. 170834             August 29, 2008
PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
ANTONIO NOGRA, accused-appellant.
LABOR-1 Batch 1
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is an appeal from the Decision1 dated August 31, 2005 of the Court of Appeals (CA) in CA-
G.R. C.R. No. 00244 affirming the Judgment of the Regional Trial Court (RTC), Branch 19, Naga City in
Criminal Case No. 98-7182, convicting Antonio Nogra (appellant) of large scale illegal recruitment under
Section 6(m) in relation to Section 7(b) of Republic Act No. 8042 (R.A. No. 8042),2 otherwise known as the
"Migrant Workers and Overseas Filipinos Act of 1995."3
The inculpatory portion of the Information charging one Lorna G. Orciga and appellant with large scale illegal
recruitment reads as follows:
That sometime during the period of March 1997 to November, 1997 in the City of Naga, Philippines,
and within the jurisdiction of this Honorable Court, the above-named accused, being the General
Manager and Operations Manager of LORAN INTERNATIONAL OVERSEAS RECRUITMENT CO.,
LTD., with office at Concepcion Grande, Naga City, conspiring, confederating together and mutually
helping each other, representing themselves to have the capacity to contract, enlist, hire and
transport Filipino workers for employment abroad, did then and there willfully, unlawfully and
criminally, for a fee, recruit and promise employment/job placement to the herein complaining
witnesses RENATO ALDEN, OLIVER SARMIENTO, FE ZABALLA, TEOFILA LUALHATI, PILIPINA
MENDOZA and KERWIN DONACAO, but failed to actually deploy them without valid reason, as well
as to reimburse their documentation, placement and processing expenses for purposes of
deployment despite their repeated demands for the return of the same, to their damage and
prejudice in the amounts as may be proven in court.
CONTRARY TO LAW.4
Only appellant was brought to the jurisdiction of the trial court since Lorna G. Orciga was then and still is at
large. Arraigned with the assistance of counsel, appellant entered a plea of "NOT GUILTY" to the crime
charged. Thereafter, trial of the case ensued.
Of the six complainants, the prosecution was able to present five of them, namely: Renato Alden, Fe Zaballa,
Teofila Lualhati, Filipina Mendoza and Kerwin Donacao. Anaielyn Sarmiento, wife of complainant Oliver
Sarmiento, also testified for the prosecution.
The facts, as established by the prosecution, are aptly summarized by the Office of the Solicitor General
(OSG), as follows:
Appellant held office at Loran International Overseas Recruitment Co., (Loran) in Concepcion
Grande, Naga City (p. 4, TSN, October 19, 1998). A nameplate on his table prominently displayed
his name and position as operations manager (p. 11, TSN, November 17, 1998; p. 4, TSN, January
12, 1999; p. 21, TSN, November 19, 1998). The license of Loran also indicated appellant as the
operations manager (p. 5, TSN, February 10, 1999). The POEA files also reflect his position as
operations manager of Loran (Exhibit L to L-4, pp. 5-9, TSN, November 19, 1998).
Sometime in December 1996, Renato Alden went to Loran to apply for a job as hotel worker for
Saipan. He was interviewed by appellant, who required Alden to submit an NBI clearance and
medical certificate and to pay the placement fee. Alden paid the amount of P31,000.00. The
Page 48 of 69
 additional amount of P4,000.00 was to be paid prior to his departure to Saipan (pp. 5-6, TSN,
November 17, 1998). Appellant promised Alden that he would leave within a period of three to four
months. After one year of waiting Alden was not able to leave. Alden filed a complaint with the NBI
when he was not able to recover the amount and could no longer talk with appellant (p. 6, TSN,
November 17, 1998).
On April 18, 1997, Teofila Lualhati applied for employment as hotel worker for Saipan with Loran
(pp. 1-3, 10, TSN, November 19, 1998). Appellant required her to submit an NBI clearance and
medical certificate and to pay the processing fee in the amount of P35,000.00 so she could leave
immediately. She paid the amount of P35,000.00 to Loran's secretary in the presence of appellant.
She was promised that within 120 days or 4 months she would be able to leave (pp. 11-13, TSN,
November 19, 1998). Despite repeated follow-ups, Lualhati was unable to work in Saipan. She
demanded the refund of the processing fee. When the amount was not returned to her, she filed a
complaint with the NBI (pp. 14-15, TSN, November 19, 1998).
Sometime in April 1998, Filipina Mendoza went to Loran to apply for employment as hotel worker (p.
4, TSN, July 12, 1999). She paid the amount of P35,000.00 as placement fee. When she was not
able to work abroad, she went to Loran and sought the return of P35,000.00 from appellant (p. 7,
TSN, January 21, 1999).
Sometime in October 1997, Kerwin Donacao went to Loran to apply for employment as purchaser in
Saipan (p. 4, TSN, February 10, 1999). He was required to submit NBI clearance, police clearance,
previous employment certificate and his passport. He paid the placement fee of P35,000.00 (pp.4-5,
TSN, February 10, 1999). After paying the amount, he was told to wait for two to three months.
When he was not able to leave for Saipan, he demanded the return of the placement fee, which was
not refunded (pp. 6-7, TSN, February 10, 1999).
During the first week of November 1997, Annelyn Sarmiento and her husband, Oliver Sarmiento,
applied for overseas employment. For the application of Oliver Sarmiento, they submitted his
medical certificate and certification of previous employment. They were also made to pay the
amount of P27,000.00 as processing fee. Oliver Sarmiento was promised that within 1 month, he
would be able to leave. Initially, Oliver Sarmiento was told that allegedly his visa was yet to be
obtained. When he was not able to leave and what he paid was not refunded, he filed a complaint
with the NBI (pp. 4-6, TSN, April 23, 1999).
Sometime in May 1997, Fe Zaballa applied for overseas employment in Saipan with Loran (p. 4,
TSN, May 21, 1999). She was required to submit her medical certificate, original copy of her birth
certificate, NBI clearance and police clearance. She was also required to pay the amount
of P35,000.00 as placement fee. When she could not be deployed, she sought to recover the
amount she paid, which was not returned (pp. 7-8, TSN, May 2, 1999).5
On the other hand, appellant presented the following evidence:
The defense presented [appellant] Antonio Nogra and the agency's secretary and cashier, Maritess
Mesina.
From their testimonies it was established that LORAN INTERNATIONAL OVERSEAS
RECRUITMENT CO., LTD., (LORAN, for brevity) was owned by accused Lorna Orciga and
Japanese national Kataru Tanaka (TSN, September 30, 2000, p. 7). Sometime in July 1994,
[appellant] Antonio Nogra read from outside the agency's main office at Libertad, Mandaluyong City
LABOR-1 Batch 1
that it was in need of a liaison officer. He applied for the position. The part-owner and co-accused,
Lorna Orciga, hired him instead as Operations Manager as the agency was then still in the process
of completing the list of personnel to be submitted to the POEA. (TSN, January 31, 2001, p. 5).
[Appellant] Nogra started working with LORAN in October 1994. In 1995, he was transferred to Naga
City when the agency opened a branch office thereat. Although he was designated as the
Operations Manager, [appellant] Nogra was a mere employee of the agency. He was receiving a
monthly salary of P5,000.00 and additional P2,000.00 monthly meal allowance. He was in-charge of
the advertisement of the company. He also drove for the company. He fetched from the airport the
agency's visitors and guests and drove them to hotels and other places. (TSN, May 3, 2000, pp. 2-
9).
Although part-owner Lorna Orciga was stationed in Manila, she, however, actually remained in
control of the branch office in Naga City. She conducted the final interview of the applicants and
transacted with the foreign employers. She also controlled the financial matters and assessment
fees of the agency in Naga City (TSN, September 20, 2000, pp. 8-9). The placement and processing
fees collected by the agency in Naga City were all deposited in the bank account of Lorna Orciga
and not a single centavo went to the benefit of [appellant] Nogra (TSN, January 10, 2000, pp. 14-
22).6
On March 26, 2003, the RTC rendered Judgment7 finding appellant guilty beyond reasonable doubt of the
crime charged. The fallo of the decision reads:
WHEREFORE, the Court finds the accused ANTONIO NOGRA guilty beyond reasonable doubt of
the crime of Illegal Recruitment Committed in Large Scale defined under Sections 6(m) and 7(b) of
RA 8042, otherwise known as The Migrant Workers and Overseas Filipinos Act of 1995 and,
accordingly, hereby imposes upon him the penalty of life imprisonment and a fine of Five hundred
thousand pesos (P500,000.00).
SO ORDERED.8
On April 10, 2003, appellant filed a Notice of Appeal.9 The RTC ordered the transmittal of the entire records of
the case to this Court.
Conformably to the ruling in People v. Mateo,10 the case was referred to the CA for intermediate review.11
On August 31, 2005, the CA rendered a Decision12 affirming the decision of the RTC. The CA held that being
an employee is not a valid defense since employees who have knowledge and active participation in the
recruitment activities may be criminally liable for illegal recruitment activities, based upon this Court's ruling
in People v. Chowdury13 and People v. Corpuz;14 that appellant had knowledge of and active participation in
the recruitment activities since all the prosecution witnesses pinpointed appellant as the one whom they
initially approached regarding their plans of working overseas and he was the one who told them about the
fees they had to pay, as well as the papers that they had to submit; that the mere fact that appellant was not
issued special authority to recruit does not exculpate him from any liability but rather strongly suggests his
guilt; that appellant's invocation of non-flight cannot be weighed in his favor since there is no established rule
that non-flight is, in every instance, an indication of innocence.
A Notice of Appeal15 having been timely filed by appellant, the CA forwarded the records of the case to this
Court for further review.
Page 49 of 69
In his Brief, appellant assigns as errors the following:
I does not actually take place without the worker's fault. Illegal recruitment when committed by a
THE TRIAL COURT ERRED IN NOT FINDING THAT THE ACCUSED-APPELLANT WAS A MERE
EMPLOYEE OF THE RECRUITMENT AGENCY DESPITE HIS DESIGNATION AS ITS
OPERATIONS MANAGER.
II
THE TRIAL COURT ERRED IN CONVICTING THE ACCUSED-APPELLANT OF THE OFFENSE-
CHARGED DESPITE THE FACT THAT UNDER THE LAW, HE WAS NOT CRIMINALY LIABLE
FOR HIS AGENCY'S TRANSACTIONS.16
Appellant argues that the agency was under the management and control of Orciga, and that he was a mere
employee; that he could not be held personally liable for illegal recruitment in the absence of any showing that
he was validly issued special authority to recruit workers, which was approved by the Philippine Overseas
Employment Administration (POEA); that his non-flight is indicative of his innocence.
Appellee, through the OSG, counters that appellant is not a mere clerk or secretary of Loran, but its
Operations Manager who directly participated in the recruitment scheme by promising private complainants
work abroad, but failed to deploy them and refused to reimburse the applicants' placement fees when
demanded.
The appeal fails. The CA did not commit any error in affirming the decision of the RTC.
R.A. No. 8042 broadened the concept of illegal recruitment under the
Labor Code17 and provided stiffer penalties, especially those that constitute economic sabotage, i.e., Illegal
Recruitment in Large Scale and Illegal Recruitment Committed by a Syndicate.
Section 6 of R.A. No. 8042 defined when recruitment is illegal:
SEC. 6. Definition. – For purposes of this Act, illegal recruitment shall mean any act of canvassing,
enlisting, contracting, transporting, utilizing, hiring, or procuring workers and includes referring,
contract services, promising or advertising for employment abroad, whether for profit or not, when
undertaken by a non-licensee or non-holder of authority contemplated under Article 13(f) of
Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines:
Provided, That any such non-licensee or non-holder who, in any manner, offers or promises for a fee
employment abroad to two or more persons shall be deemed so engaged. It shall likewise include
the following acts, whether committed by any person, whether a non-licensee, non-holder,
licensee or holder of authority:
xxxx
(l) Failure to actually deploy without valid reason as determined by the Department of Labor
and Employment; and
LABOR-1 Batch 1
(m) Failure to reimburse expenses incurred by the workers in connection with his
documentation and processing for purposes of deployment, in cases where the deployment
syndicate or in large scale shall be considered as offense involving economic sabotage.
Illegal recruitment is deemed committed by a syndicate carried out by a group of three (3) or more
persons conspiring or confederating with one another. It is deemed committed in large scale if
committed against three (3) or more persons individually or as a group.
The persons criminally liable for the above offenses are the principals, accomplices, and
accessories. In case of juridical persons, the officers having control, management or
direction of their business shall be liable. (Emphasis and underscoring supplied)
In the present case, evidence for the prosecution showed that Loran
International Overseas Recruitment Co., Ltd. is a duly licensed recruitment agency with authority to establish
a branch office. However, under R.A. No. 8042, even a licensee or holder of authority can be held liable for
illegal recruitment, should he commit or omit to do any of the acts enumerated in Section 6.
Appellant was charged with illegal recruitment in large scale under Section 6 (l) and (m) of R.A. No. 8042.
Section 6 (l) refers to the failure to actually deploy without valid reason, as determined by the Department of
Labor and Employment (DOLE). Section 6 (m) involves the failure to reimburse expenses incurred by the
worker in connection with his documentation and processing for purposes of deployment, in cases in which
the deployment does not actually take place without the worker’s fault.
A thorough scrutiny of the prosecution's evidence reveals that it failed to prove appellant's liability under
Section 6 (l) of R.A. No. 8042. The law requires not only that the failure to deploy be without valid
reason "as determined by the Department of Labor and Employment." The law envisions that there be
independent evidence from the DOLE to establish the reason for non-deployment, such as the absence of a
proper job order. No document from the DOLE was presented in the present case to establish the reason for
the accused's failure to actually deploy private complainants. Thus, appellant cannot be held liable under
Section 6 (l) of R.A. No. 8042.
As to Section 6 (m) of R.A. No. 8042, the prosecution has proven beyond reasonable doubt that private
complainants made payments to Loran, and appellant failed to reimburse the amounts paid by private
complainants when they were not deployed. The prosecution presented the receipts issued by Loran to
private complainants evidencing payment of placement fees ranging from P27,000.00 to P35,000.00.
Appellant does not dispute that private complainants were not deployed for overseas work, and that the
placement fees they paid were not returned to them despite demand. However, he seeks to exculpate himself
on the ground that he is a mere employee of Loran.
The Court is unswayed by appellant's contention.
The penultimate paragraph of Section 6 of R.A. No. 8042 explicitly states that those criminally liable are the
"principals, accomplices, and accessories. In case of juridical persons, the officers having control,
management or direction of their business shall be liable." Contrary to appellant's claim, the testimonies of the
complaining witnesses and the documentary evidence for the prosecution clearly established that he was not
a mere employee of Loran, but its Operations Manager. The license of Loran, the files of the POEA and the
Page 50 of 69
nameplate prominently displayed on his office desk reflected his position as Operations Manager. As such, he SO ORDERED.
received private complainants' job applications; and interviewed and informed them of the agency’s
requirements prior to their deployment, such as NBI clearance, police clearance, medical certificate, previous
employment certificate and the payment of placement fee. He was also responsible for the radio
advertisements and leaflets, which enticed complaining witnesses to apply for employment with the agency.
Clearly, as Operations Manager, he was in the forefront of the recruitment activities.

The defense of being a mere employee is not a shield against his conviction for large scale illegal recruitment.
In People v. Gasacao18 and People v. Sagayaga,19 the Court reiterated the ruling in People v.
Cabais,20 People v. Chowdury21 and People v. Corpuz22 that an employee of a company or corporation
engaged in illegal recruitment may be held liable as principal by direct participation, together with its employer,
if it is shown that he actively and consciously participated in the recruitment process.

In the present case, it was clearly established that appellant dealt directly with the private complainants. He
interviewed and informed them of the documentary requirements and placement fee. He promised
deployment within a three or four month-period upon payment of the fee, but failed to deploy them and to
reimburse, upon demand, the placement fees paid.

The Court is not persuaded by appellant's argument that his non-flight is indicative of his innocence. Unlike
the flight of an accused, which is competent evidence against him tending to establish his guilt, non-flight is
simply inaction, which may be due to several factors. It may not be construed as an indication of innocence.23

Of marked relevance is the absence of any showing that the private complainants had any ill motive against
appellant other than to bring him to the bar of justice to answer for the crime of illegal recruitment. Besides, for
strangers to conspire and accuse another stranger of a most serious crime just to mollify their hurt feelings
would certainly be against human nature and experience.24 Where there is nothing to show that the witnesses
for the prosecution were actuated by improper motive, their positive and categorical declarations on the G.R. No. 205727
witness stand under the solemnity of an oath deserve full faith and credence.25
RUTCHER T. DAGASDAS, Petitioner,
It is a settled rule that factual findings of the trial courts, including their assessment of the witnesses’ vs.
credibility, are entitled to great weight and respect by the Supreme Court, particularly when the CA affirmed GRAND PLACEMENT AND GENERAL SERVICES CORPORATION, Respondent.
such findings.26 After all, the trial court is in the best position to determine the value and weight of the
testimonies of witnesses.27 The absence of any showing that the trial court plainly overlooked certain facts of DECISION
substance and value that, if considered, might affect the result of the case, or that its assessment was
arbitrary, impels the Court to defer to the trial court’s determination according credibility to the prosecution
evidence. DEL CASTILLO, J.:

Under the last paragraph of Section 6 of R.A. No. 8042, illegal recruitment shall be considered an offense
involving economic sabotage if committed in large scale, viz, committed against three or more persons
individually or as a group. In the present case, five complainants testified against appellant’s acts of illegal
recruitment, thereby rendering his acts tantamount to economic sabotage. Under Section 7 (b) of R.A. No.
8042, the penalty of life imprisonment and a fine of not less than P500,000.00 nor more than P1,000.000.00
shall be imposed if illegal recruitment constitutes economic sabotage.
Thus, the RTC and the CA correctly found appellant guilty beyond reasonable doubt of large scale illegal
recruitment.
WHEREFORE, the appeal is DISMISSED. The Decision dated August 31, 2995 of the Court of Appeals
affirming the conviction of appellant Antonio Nogra for large scale illegal recruitment under Sections 6 (m) and
7 (b) of Republic Act No. 8042 is AFFIRMED.
LABOR-1 Batch 1
Before us is a Petition for Review on Certiorari assailing the September 26, 2012 Decision1 of the Court of
Appeals (CA) in CA-G.R. SP No. 115396, which annulled and set aside the March 29, 20102 and June 2,
20103 Resolutions of the National Labor Relations Commission (NLRC) in NLRC LAC OFW-L-02-000071-10,
and concomitantly reinstated the November 27, 2009 Decision4 of the Labor Arbiter (LA) dismissing the
Complaint for lack of merit.
Also challenged is the January 28, 2013 Resolution5 denying the Motion for Reconsideration filed by Rutcher
T. Dagasdas (Dagasdas ).
Factual Antecedents
Grand Placement and General Services Corp. (GPGS) is a licensed
Page 51 of 69
recruitment or placement agency in the Philippines while Saudi Aramco (Aramco) is its counterpart in Saudi
Arabia. On the other hand, Industrial & Management Technology Methods Co. Ltd. (ITM) is the principal of
GPGS, a company existing in Saudi Arabia. 6
In November 2007, GPGS, for and on behalf of ITM, employed Dagasdas as Network Technician. He was to
be deployed in Saudi Arabia under a one-year contract7 with a monthly salary of Saudi Riyal (SR) 5,112.00.
Before leaving the Philippines, Dagasdas underwent skill training8 and pre-departure orientation as Network
Technician.9 Nonetheless, his Job Offer10 indicated that he was accepted by Aramco and ITM for the position
of "Supt."
Dagasdas contended that although his position under his contract was as a Network Technician, he actually
applied for and was engaged as a Civil Engineer considering that his transcript of records, 11 diploma 12 as well
as his curriculum vitae 13 showed that he had a degree in Civil Engineering, and his work experiences were all
related to this field. Purportedly9 the position of Network Technician was only for the purpose of securing a
visa for Saudi Arabia because ITM could not support visa application for Civil Engineers. 14
On February 8, 2008, Dagasdas arrived in Saudi Arabia.15 Thereafter, he signed with ITM a new employment
contract16 which stipulated that the latter contracted him as Superintendent or in any capacity within the scope
of his abilities with salary of SR5,112.00 and allowance of SR2,045.00 per month. Under this contract,
Dagasdas shall be placed under a three-month probationary period; and, this new contract shall cancel all
contracts prior to its date from any source.
17
On February 11, 2008, Dagasdas reported at ITM's worksite in Khurais, Saudi Arabia.   There, he was
allegedly given tasks suited for a Mechanical Engineer, which were foreign to the job he applied for and to his
work experience. Seeing that he would not be able to perform well in his work, Dagasdas raised his conce1n
to his Supervisor in the Mechanical Engineering Department. Consequently, he was transferred to the Civil
Engineering Department, was temporarily given a position as Civil Construction Engineer, and was issued
anidentification card good for one month. Dagasdas averred that on March 9, 2008, he was directed to exit
the worksite but Rashid H. Siddiqui (Siddiqui), the Site Coordinator Manager, advised him to remain in the
premises, and promised to secure him the position he applied for. However, before Dagasdas' case was
investigated, Siddiqui had severed his employment with ITM. 18
In April 2008, Dagasdas returned to Al-Khobar and stayed at the ITM Office.19 Later, 11M gave him a
termination notice20 indicating that his last day of work was on April 30, 2008, and he was dismissed pursuant
to clause 17.4.3 of his contract, which provided that ITM reserved the right to terminate any employee within
the three-month probationary period without need of any notice to the employee.21
Before his repatriation, Dagasdas signed a Statement of Quitclaim22 with Final Settlement23 stating that ITM
paid him all the salaries and benefits for his services from February 11, 2008 to April 30, 2008 in the total
amow1t of SR7,156.80, and ITM was relieved from all financial obligations due to Dagasdas.
On June 24, 2008, Dagasdas returned to the Philippines.24 Thereafter, he filed an illegal dismissal case
against GPGS, ITM, and Aramco.
Dagasdas accused GPGS, ITM, and Aramco of misrepresentation, which resulted in the mismatch in the work
assigned to him. He contended that such claim was supported by exchanges of electronic mail (e-mail)
establishing that GPGS, ITM, and Aramco were aware of the job 1nismatch that had befallen him. 25 He also
argued that although he was engaged as a project employee, he was still entitled to security of tenure for the
duration of his contract. He maintained that GPGS, ITM, and Aramco merely invented "imaginary cause/s" to
terminate him. Thus, he claimed that he was dismissed without cause and due process of law.26
LABOR-1 Batch 1
GPGS, ITM, and Aramco countered that Dagasdas was legally dismissed. They explained that Dagasdas was
aware that he was employed as Network Technician but he could not perform his work in accordance with the
standards of his employer. They added that Dagasdas was informed of his poor performance, and he
conformed to his termination as evidenced by his quitclaim. 27 They also stressed that Dagasdas was only a
probationary employee since he worked for ITM for less than three months.28
Ruling of the Labor Arbiter
On November 27, 2009, the LA dismissed the case for lack of merit. The LA pointed out that when Dagasdas
signed his new employment contract in Saudi Arabia, he accepted its stipulations, including the fact that he
had to undergo probationary status. She declared that this new contract was more advantageous for
Dagasdas as his position was upgraded to that of a Superintendent, and he was likewise given an allowance
ofSR2,045.00 aside from his salary of SR5,112.00 per month. According to the LA, for being more favorable,
this new contract was not prohibited by law. She also decreed that Dagasdas fell short of the expected work
performance; as such, his employer dismissed him as part of its management prerogative.
Consequently, Dagasdas appealed to the NLRC.
Ruling of the National Labor Relations Commission
On March 29, 2010, the NLRC issued a Resolution finding Dagasdas' dismissal illegal. The decretal portion of
the NLRC Resolution reads:
WHEREFORE, the decision appealed from is hereby REVERSED, and the respondent[s] are hereby ordered
to pay the complainant the salaries corresponding to the unexpired p01tion of his contract amounting to
SR46,008 (SR5112 x 9 months, or from May 1, 2008 to January 31, 2009), plus ten percent (10%) thereof as
attorney's foes. The respondents are jointly and severally liable for the judgment awards, which are payable in
Philippine currency converted on the basis of the exchange rate prevailing at the time of actual payment.
SO ORDERED.29
The NLRC stated that Dagasdas, who was a Civil Engineering graduate, was "recruited on paper" by GPGS
as Network Technician but the real understanding between the parties was to hire him as Superintendent. It
held that GPGS erroneously recruited Dagasdas, and failed to inform him that he was hired as a "Mechanical
Superintendent" meant for a Mechanical Engineer. It declared that while ITM has the prerogative to continue
the employment of individuals only if they were qualified, Dagasdas' dismissal amounted to illegal termination
since the mismatch between his qualifications and the job given him was no fault of his.
The NLRC added that Dagasdas should not be made to suffer the consequences of the miscommunication
between GPGS and ITM considering that the government obligates employment agencies recruiting Filipinos
for overseas work to "select only medically and technically qualified recruits."30
On June 2, 2010, the NLRC denied the Motion for Reconsideration of its Resolution dated March 29, 2010.
Undeterred, GPGS filed a Petition for Certiorari with the CA ascribing grave abuse of discretion on the part of
the NLRC in ruling that Dagasdas was illegally dismissed.
Ruling of the Court of Appeals
Page 52 of 69
On September 26, 2012, the CA set aside the NLRC Resolutions and reinstated the LA Decision dismissing
the case for lack of merit.
The CA could not accede to the conclusion that the real agreement between the parties was to employ
Dagasdas as Superintendent. It stressed that Dagasdas left the Philippines pursuant to his employment
contract indicating that he was to work as a Network Technician; when he arrived in Saudi Arabia and signed
a new contract for the position of a Superintendent, the agreement was with no participation of GPGS, and
said new contract was only between Dagasdas and ITM. It emphasized that after commencing work as
Superintendent, Dagasdas realized that he could not perform his tasks, and "[s]eemingly, it was [Dagasdas]
himself who voluntarily withdrew from his assigned work for lack of competence."31 It faulted the NLRC for
falling to consider that Dagasdas backed out as Superintendent on the excuse that the same required the
skills of a Mechanical Engineer.
In holding that Dagasdas' dismissal was legal, the CA gave credence to Dagasdas' Statement of Quitclaim
and Final Settlement. It ruled that for having voluntarily accepted money from his employer, Dagasdas
accepted his termination and released his employer from future financial obligations arising from his past
employment with it.
On January 28, 2013, the CA denied Dagasdas' Motion for Reconsideration.
Hence, Dagasdas filed this Petition raising these grounds:
[1] THE HONORABLE COURT OF APPEALS COMMITIED A REVERSIBLE ERROR WHEN TT Rt.
VERSED THE FACTUAL FINDINGS OF THE NATIONAL LABOR RELATION’S COMMISSION.32
[2] THE HONORABLE COURT OF APPEALS PATENTLY ERRED WITH ITS FINDINGS THAT THE
CONTRACT SIGNED BY DAGASDAS IN ALKHOBAR IS MORE ADVANTAGEOUS TO THE
LATTER AND THAT IT WAS [H]IS PERSONAL ACT OR DECISION [TO SIGN] THE SAME.33
[3] THE HONORABLE COURT OF APPEALS ALSO GRAVELY ERRED IN FAULTING THE NLRC
FOR ITS FAILURE TO INVALIDATE OR DISCUSS THE FINAL SETTLEMENT AND STATEMENT
OF QUITCLAIM SIGNED BY [DAGASDAS].34
Dagasdas reiterates that he was only recruited "on paper" as a Network Technician but the real agreement
between him and his employer was to engage him as Superintendent in t'1e field of Civil Engineering, he
being a Civil Engineering graduate with vast experience in said field. He stresses that he was terminated
because of a "discipline mismatch" as his employer actually needed a Mechanical (Engineer) Superintendent,
not a Civil Engineer.
In addition, Dagasdas insists that he did not voluntarily back out from his work. If not for the discipline
mismatch, he could have performed his job as was expected of him. He also denies that the new employment
contract he signed while in Saudi Arabia was more advant1geous to him since the basic salary and allowance
stipulated therein are just the same with that in his Job Offer. He argues that the new contract was even
disadvantageous because it was inserted therein that he still had to undergo probationary status for three
months.
Finally, Dagasdas contends that the new contract he signed while in Saudi Arabia was void because it was
not approved by the Philippine Overseas Employment Administration (POEA). He also claims that CA should
have closely examined his quitclaim because he only signed it to afford his plane ticket for his repatriation.
LABOR-1 Batch 1
On the other hand, G PGS maintains that Dagasdas was fully aware that he applied for and was accepted as
Network Technician. It also stresses that it was Dagasdas himself who decided to accept from ITM a new job
offer when he arrived in Saudi Arabia. It further declares that Dagasdas' quitclaim is valid as there is no
showing that he was compelled to sign it.
Issue
Was Dagasdas validly dismissed from work?
Our Ruling
The Petition is with merit.
As a rule, only questions of law may be raised in a petition under Rule 45 of the Rules of Court. However, this
rule allows certain exceptions, including a situation where the findings of fact of the courts or tribunals below
are conflicting.35 In this case, the CA and the NLRC arrived at divergent factual findings anent Dagasdas'
termination. As such, the Court deems it necessary to re-examine these findings and detemline whether the
CA has sufficient basis to annul the NLRC Decision, and set aside its finding that Dagasdas was illegally
dismissed from work.
Moreover, it is well-settled that employers have the prerogative to impose standards on the work quantity and
quality of their employees and provide measures to ensure compliance therewith. Non-compliance with work
standards may thus be a valid cause for dismissing an employee. Nonetheless, to ensure that employers will
not abuse their prerogatives, the same is tempered by security of tenure whereby the employees are
guaranteed substantive and procedural due process before they are dismissed from work. 36
Security of tenure remains even if employees, particularly the overseas Filipino workers (OFW), work in a
different jurisdiction. Since the employment contracts of OFWs are perfected in the Philippines, and following
the principle of lex loci contractus (the law of the place where the contract is made), these contracts are
governed by our laws, prin1arily the Labor Code of the Philippines and its implementing rules and
regulations.37 At the same time, our laws generally apply even to employment contracts of OFWs as our
Constitution explicitly provides that the State shall afford full protection to labor, whether local or
overseas.38 Thus, even if a Filipino is employed abroad, he or she is entitled to security of tenure, among other
constitutional rights.39
In this case, prior to his deployment and while still in the Philippines, Dagasdas was made to sign a POEA-
approved contract with GPGS, on behalf of ITM; and, upon arrival in Saudi Arabia, ITM made him sign a new
employment contract. Nonetheless, this new contract, which was used as basis for dismissing Dagasdas, is
void.
First, Dagasdas' new contract is in clear violation of his right to security of tenure.
Under the Labor Code of the Philippines the following are the just causes for dismissing an employee:
ARTICLE 297. [282] Termination by Employer. - An employer may terminate an employment for any of the
following causes:
Page 53 of 69
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.40
However, per the notice of termination given to Dagasdas, ITM terminated him for violating clause 17.4.3 of
his new contract, viz.:
17.4 The Company reserves the right to terminate this agreement without serving any notice to the Consultant
in the following cases:
xxxx
17.4.3 If the Consultant is terminated by company or its client within the probation period of 3 months.41
Based on the foregoing, there is no clear justification for the dismissal of Dagasdas other than the exercise of
ITM's right to terminate him within the probationary period. While our Civil Code recognizes that parties may
stipulate in their contracts such terms and conditions as they may deem convenient, these terms and
conditions must not be contrary to law, morals, good customs, public order or policy.42 The above-cited clause
is contrary to law because as discussed, our Constitution guarantees that employees, local or overseas, are
entitled to security of tenure. To allow employers to reserve a right to terminate employees without cause is
violative of this guarantee of security of tenure.
Moreover, even assuming that Dagasdas was still a probationary employee when he was terminated, his
dismissal must still be with a valid cause. As regards a probationary employee, his or her dismissal may be
allowed only if there is just cause or such reason to conclude that the employee fails to qualify as regular
employee pursuant to reasonable standards made known to the employee at the time of engagement.43
Here, ITM failed to prove that it informed Dagasdas of any predetermined
standards from which his work will be gauged.44 In the contract he signed while still in the Philippines,
Dagsadas was employed as Network Technician; on the other hand, his new contract indicated that he was
employed as Superintendent. However, no job description - or such duties and responsibilities attached to
either position - was adduced in evidence. It thus means that the job for which Dagasdas was hired was not
definite from the beginning.
Indeed, Dagasdas was not sufficiently informed of the work standards for which his performance will be
measured. Even his position based on the job title given him was not fully explained by his employer. Simply
put, ITM failed to show that it set and communicated work standards for Dagasdas to follow, and on which his
efficiency (or the lack thereof) may be determined.
LABOR-1 Batch 1
Second, the new contract was not shown to have been processed through the POEA. Under our Labor Code,
employers hiring OFWs may only do so through entities authorized by the Secretary of the Department of
Labor and Employment.45 Unless the employment contract of an OFW is processed through the POEA, the
same does not bind the concerned OFW because if the contract is not reviewed by the POEA, certainly the
State has no means of determining the suitability of foreign laws to our overseas workers. 46
This new contract also breached Dagasdas' original contract as it was entered into even before the expiration
of the original contract approved by the POEA. Therefore, it cannot supersede the original contract; its terms
and conditions, including reserving in favor of the employer the right to terminate an employee without notice
during the probationary period, are void.47
Third, under this new contract, Dagasdas was not afforded procedural due process when he was dismissed
from work.
As cited above, a valid dismissal requires substantive and procedural due process. As regards the latter, the
employer must give the concerned employee at least two notices before his or her tem1ination. Specifically,
the employer must inform the employee of the cause or causes for his or her termination, and thereafter, the
employer's decision to dismiss him. Aside from the notice requirement, the employee must be accorded the
opportunity to be heard.48
Here, no prior notice of purported infraction, and such opportunity to explain on any accusation against him
was given to Dagasdas.1âwphi1 He was simply given a notice of termination. In fact, it appears that ITM
intended not to comply with the twin notice requirement. As above-quoted, under the new contract, ITM
reserved in its favor the right to terminate the contract without serving any notice to Dagasdas in specified
cases, which included such situation where the employer decides to dismiss the employee within the
probationary period. Without doubt, ITM violated the due process requirement in dismissing an employee.
Lastly, while it is shown that Dagasdas executed a waiver in favor of his employer, the same does not
preclude him from filing this suit.
Generally, the employee's waiver or quitclaim cannot prevent the employee from demanding benefits to which
he or she is entitled, and from filing an illegal dismissal case. This is because waiver or quitclaim is looked
upon with disfavor, and is frowned upon for being contrary to public policy. Unless it can be established that
the person executing the waiver voluntarily did so, with full understanding of its contents, and with reasonable
and credible consideration, the same is not a valid and binding undertaking. Moreover, the burden to prove
that the waiver or quitclaim was voluntarily executed is with the employer.49
In this case, however, neither did GPGS nor its principal, ITM, successfully discharged its burden. GPGS
and/or ITM failed to show that Dagasdas indeed voluntarily waived his claims against the employer.
Indeed, even if Dagasdas signed a quitclaim, it does not necessarily follow that he freely and voluntarily
agreed to waive all his claims against his employer.1âwphi1 Besides, there was no reasonable consideration
stipulated in said quitclaim considering that it only determined the actual payment due to Dagasdas from
February 11, 2008 to April 30, 2008. Verily, this quitclaim, under the semblance of a final settlement, cannot
absolve GPGS nor ITM from liability arising from the employment contract of Dagasdas.50
All told, the dismissal of Dagasdas was without any valid cause and due process of law. Hence, the NLRC
properly ruled that Dagasdas was illegally dismissed. Evidently, it was an error on the part of the CA to hold
that the NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction when the
NLRC ruled for Dagasdas.
Page 54 of 69
WHEREFORE, the Petition is GRANTED. The Decision dated September 26, 2012 and Resolution dated
January 28, 2013 of the Court of Appeals in CA-G.R. SP No. 115396 are REVERSED and SET
ASIDE. Accordingly, the March 29, 2010 and June 2, 2010 Resolutions of the National Labor Relations
Commission in NLRC LAC OFW-L-02-000071-10 are REINSTATED.
SO ORDERED.
Factual Antecedents
On June 18, 2012, respondent OSM Maritime Services, Inc. (OSM Maritime), the local agent of respondent
DOF OSM Maritime Services A/S, hired petitioner Reynaldo Sunit (Sunit) to work onboard the vessel Skandi
Texel as Able Body Seaman for three (3) months with a monthly salary of $689. Deemed incorporated in the
employment contract is the 2010 Philippine Overseas Employment Agency Standard Employment Contract
(POEA-SEC) and the NIS AMOSUP CBA.

During his employment, petitioner fell from the vessel's tank approximately 4.5 meters high and suffered a
broken right femur. He was immediately brought to a hospital in the Netherlands for treatment and was
eventually repatriated due to medical reason. Upon his arrival in Manila on October 6, 2012, he immediately
underwent a post-employment medical examination and treatment for his injury at the Metropolitan Medical
Center, wherein the company-designated physician diagnosed him to be suffering from a "Fractured, Right
Femur; S/PIntramedullary Nailing, Right Femur."

On January 13, 2013, after 92 days of treatment, the company-designated doctor issued a Medical
Report3 giving petitioner an interim disability Grade of 10.4 Said medical report reads:

MEDICAL REPORT:

Patient's range of motion of the right hip has improved although patient still ambulates with a pair of axillary
crutches.

Pain is at 1-2110 at the right hip.

Based on his present condition, his closest interim assessment is Grade 10 - irregular union of fracture in a
thigh.

Dissatisfied with the company doctor's January 13, 2013 medical report, petitioner sought the opinion of
another doctor, Dr. Venancio P. Garduce (Dr. Garduce ),5 who recommended a disability grade of three (3) in
G.R. No. 223035
his Medical Report dated February 6, 2013.

REYNALDO Y. SUNIT, Petitioner
After further medical treatment, petitioner was assessed with a final disability grade of 10 by the company
vs.
physician of respondent OSM Maritime, Dr. William Chuasuan, Jr. (Dr. Chuasuan), on February 15, 2013.6
OSM MARITIME SERVICES, INC., DOF OSM MARITIME SERVICES A/S, and CAPT. ADONIS B.
DONATO, Respondents
Respondents offered petitioner disability benefit of $30,225 in accordance with the disability Grade 10 that the
company-designated doctor issued. Petitioner, however, refused the offer and filed a claim for a disability
DECISION
benefit of USD$150,000.00 based on the POEA-SEC and NIS AMOSUP CBA.7

VELASCO, JR., J.:
During the pendency of the case with the Labor Arbiter (LA), the parties agreed to consult Dr. Lyndon L.
Bathan (Dr. Bathan) for a third opinion. Dr. Bathan issued a Medical Certificate recommending a Grade 9
Nature of the Case disability pursuant to the Schedule of Disabilities and Impediments under the POEA-SEC. In addition, Dr.
Bathan stated therein that petitioner is "not yet fit to work." Dr. Bathan's certificate states:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the June
10, 2015 Decision1 and February 10, 2016 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. This is to certify that SUNIT, REYNALDO consulted the undersigned on 17 Feb. 2014 at Faculty Medical Arts
138268, which reversed and set aside the August 29, 2014 Decision of the National Labor Relations Building, PGH Compound, Taft Ave., Manila.
Commission (NLRC).
He was diagnosed to have:
LABOR-1 Batch 1 Page 55 of 69
FEMORAL FRACTURE S/PINTRAMEDULLARY NAILING (2012); S/PBONE GRAFTING
Patient is Gr. 9 according to POEA Schedule of disability. Patient is not yet fit to work and should undergo
rehabilitation. 8
Ruling of the LA
Pursuant to the Grade 9 disability issued by Dr. Bathan, the LA awarded petitioner disability benefit in the
amount of $13,060.1âwphi1 The dispositive portion of its Decision9 dated April 28, 2014 reads:
WHEREFORE, respondents OSM Maritime Services, Inc., DOF OSM Maritime Services A/S, [are] hereby
ordered to pay in solidum complaint's disability benefit in the amount of US$13,060.00 or its Philippine Peso
equivalent at the time of payment.
SO ORDERED.
Aggrieved, petitioner appealed to the NLRC.
Ruling of the NLRC
On August 29, 2014, the NLRC rendered a Decision modifying the LA's findings and awarded petitioner
permanent and total disability benefit in the amount of $150,000. The NLRC reasoned that petitioner is
considered as totally and permanently disabled since Dr. Bathan, the third doctor, issued the Grade 9
disability recommendation after the lapse of the 240-day period required for the determination of a seafarer's
fitness to work or degree of disability under the POEA-SEC. The NLRC disposed of the case in this wise:
WHEREFORE, premises considered, the complainant's appeal is hereby GRANTED.
Accordingly, the Decision dated 28 April 2014 of Labor Arbiter Michelle P. Pagtalunan is hereby REVERSED
and SET ASIDE ordering respondents, jointly and severally, to pay complainant Reynaldo Y Sunit, the amount
of ONE HUNDRED FIFTY THOUSAND US DOLLARS ($150,000.00) representing permanent total disability
benefits plus ten percent (10%) thereof as attorney's fees.
All other claims are DISMISSED for lack of merit.
SO ORDERED.
Respondents moved for reconsideration of the decision, but the NLRC denied the same in its Resolution
dated October 22, 2014.
Respondents questioned the NLRC's decision in a petition for certiorari before the CA.
Ruling of the CA
The CA granted the respondents' petition and reinstated the LA's ruling in its Decision dated June 10, 2015,
the dispositive portion of which reads:
LABOR-1 Batch 1
WHEREFORE, the instant Petition for Certiorari is GRANTED. The August 29, 2014 Decision and the
October 22, 2014 Resolution of public respondent National Labor Relations Commission are REVERSED and
SET ASIDE. The April 28, 2014 Decision of the Labor Arbiter is REINSTATED.
SO ORDERED.
In reversing the NLRC, the appellate court held that the 240-day period for assessing the degree of disability
only applies to the company-designated doctor, and not to the third doctor. It is only upon the company-
designated doctor's failure to render a final assessment of petitioner's condition within 240 days from
repatriation that he will be considered permanently and totally disabled and, hence, entitled to maximum
disability benefit. In petitioner's case, the company-designated doctor was able to make a determination of his
disability within the 240-day period; hence, he is not considered as totally and permanently disabled despite
the opinion of the third doctor having been rendered after the lapse of 240 days from repatriation.
The CA further added that the extent of disability, whether total or partial, is determined, not by the number of
days that petitioner could not work, but by the disability grading the doctor recognizes based on his resulting
incapacity to work and earn his wages. Thus, the mere fact that petitioner was incapacitated to work for a
period exceeding 120 days does not automatically entitle him to total and permanent disability benefits.
Concomitantly, the CA stressed that the recommendation of Dr. Bathan of Grade 9 disability and his
determination that the latter's disability is partial and not total are binding on the parties.
Petitioner moved for the reconsideration of the adverted decision, but the CA denied the same in its
Resolution dated February 10, 2016.
Hence, this petition.
Issues
Petitioner anchors his plea for the reversal of the assailed Decision on the following issues:
I.
WHETHER OR NOT THE CA COMMITTED SERIOUS ERROR OF LAW IN AWARDING A PARTIAL
DISABILITY OF GRADE 9 TO PETITIONER; AND
II.
WHETHER OR NOT THE CA ERRED IN DISMISSING PETITIONERS' CLAIMS FOR DAMAGES AND
ATTORNEY'S FEES DESPITE RESPONDENTS' COMMISSION OF BAD FAITH IN THE PERFORMANCE
OF THEIR OBLIGATIONS.
The primordial question to be resolved is whether petitioner is entitled to permanent and total disability
benefits.
The parties do not dispute that petitioner's injury was work-related and that he is entitled to disability
compensation. The disagreement, however, lies on the degree of disability and amount of benefits that
petitioner is entitled.
Page 56 of 69
Petitioner bases his entitlement to total and permanent disability benefits on the failure of the company-
designated doctor to arrive at a definitive assessment of his disability. Petitioner particularly assails Dr.
Chuasuan' s assessment of Grade 10 disability since he still required further medical rehabilitation, as
affirmed by Dr. Bathan, the third doctor.
In addition, petitioner points at the inconsistency between the Grade 9 disability issued by Dr. Bathan in his
certification and the latter's remark therein that petitioner was still "not fit to work and should undergo further
rehabilitation." As noted by the NLRC, petitioner's condition prevented him from acquiring gainful employment
for 499 days reckoned from the time he arrived on October 6, 2012 until Dr. Bathan examined him on
February 17, 2014 .10 Petitioner alleges that he could no longer resume sea service without risk to himself and
to others due to the limited physical exertion brought about by his injury, and is permanently unfit for further
sea duty.
In their Comment, respondents argue that the 240-day rule does not apply to the case since the company-
designated doctor timely assessed petitioner; that the 240-day period only applies to the assessment of the
company-designated doctor, and not to the third doctor's opinion. Even assuming that the 240 days limitation
applies to the third doctor, the parties validly extended the period for assessment since it was at petitioner's
instance that a third doctor was appointed. By seeking this relief, respondents insist that petitioner agreed to
whatever disability grading the third doctor will issue.
In addition, respondents maintain that petitioner's disability should be based on the Schedule of Disability
under Section 32 of the 2010 POEA-SEC and should not be based on the number of days of treatment or the
number of days in which sickness allowance is paid, citing Section 20 (A)(6) of the 2010 POEA-SEC. It is
respondents' position that the amendments therein require the injury or illness to be compensated based
solely on the Schedule of Disability Gradings in Section 32 of the Contract, and that the duration of treatment
or payment of sickness allowance should be discounted when determining the applicable disability grading.
Moreover, respondents refuse to acknowledge that they are liable for 100% disability compensation under the
CBA, arguing that the CBA does not contain a permanent unfitness clause, but merely mandates that the
disability shall be based solely on the disability grading provided under Section 32 of the PO EA-SEC, echoing
Section 20(A)(6).
The Court's Ruling
The Court resolves to grant the petition.
Permanent disability is defined as the inability of a worker to perform his job for more than 120 days (or 240
days, as the case may be), regardless of whether or not he loses the use of any part of his body. Total
disability, meanwhile, means the disablement of an employee to earn wages in the same kind of work of
similar nature that he was trained for, or accustomed to perform, or any kind of work which a person of his
mentality and attainments could do.11
Under Article 192(c)(1) of the Labor Code, disability that is both permanent and total disability is defined
as "temporary total disability lasting continuously for more than one hundred twenty days, except as otherwise
provided in the Rules."12 Similarly, Rule VII, Section 2(b) of the Amended Rules on Employees' Compensation
(AREC) provides:
(b) A disability is total and permanent if as a result of the injury or sickness the employee is unable to
perform any gainful occupation for a continuous period exceeding 120 days, except as otherwise provided for
in Rule X of these Rules. (emphasis supplied)
LABOR-1 Batch 1
The adverted Rule X of the AREC, which implements Book IV of the Labor Code, states in part:
Sec. 2. Period of entitlement. - (a) The income benefit shall be paid beginning on the first day of such
disability. If caused by an injury or sickness it shall not be paid longer than 120 consecutive days except
where such injury or sickness still requires medical attendance beyond 120 days but not to exceed
240 days from onset of disability in which case benefit for temporary total disability shall be paid. However, the
System may declare the total and permanent status at anytime after 120 days of continuous temporary total
disability as may be warranted by the degree of actual loss or impairment of physical or mental functions as
determined by the System. (emphasis supplied)
Section 20 (A)(3) of the POEA-SEC, meanwhile, provides that:
SECTION 20. COMPENSATION AND BENEFITS
COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS
The liabilities of the employer when the seafarer suffers work-related injury or illness during the term of his
contract are as follows:
3. In addition to the above obligation of the employer to provide medical attention, the seafarer shall also
receive sickness allowance from his employer in an amount equivalent to his basic wage computed from the
time he signed off until he is declared fit to work or the degree of disability has been assessed by the
company-designated physician. x xx
The case of Vergara v. Hammonia Maritime Services, Inc.13 harmonized the provisions of the Labor Code and
the AREC with Section 20 (B)(3)14 of the POEA-SEC (now Section 20 [A][3] of the 2010 POEA-SEC).
Synthesizing the abovementioned provisions, Vergara clarifies that the 120- day period given to the employer
to assess the disability of the seafarer may be extended to a maximum of 240 days:
As these provisions operate, the seafarer, upon sign-off from his vessel, must report to the company-
designated physician within three (3) days from arrival for diagnosis and treatment. For the duration of the
treatment but in no case to exceed 120 days, the seaman is on temporary total disability as he is totally
unable to work. He receives his basic wage during this period until he is declared fit to work or his temporary
disability is acknowledged by the company to be permanent, either partially or totally, as his condition is
defined under the POEA Standard Employment Contract and by applicable Philippine laws. If the 120 days
initial period is exceeded and no such declaration is made because the seafarer requires further
medical attention, then the temporary total disability period may be extended up to a maximum of 240
days, subject to the right of the employer to declare within this period that a permanent partial or total
disability already exists. The seaman may of course also be declared fit to work at any time such
declaration is justified by his medical condition.
Tile 1201240-day period in Article
192 (c)(1) and Rule X, Section 2 of
the AREC only applies to tile
company-designated doctor
Page 57 of 69
From the above-cited laws, it is the company-designated doctor who is given the responsibility to make a
conclusive assessment on the degree of the seafarer's disability and his capacity to resume work within
120/240 days. The parties, however, are free to disregard the findings of the company doctor, as well as the
chosen doctor of the seafarer, in case they cannot agree on the disability gradings issued and jointly seek the
opinion of a third-party doctor pursuant to Section 20 (A)(3) of the 2010 POEA-SEC:
SECTION 20. COMPENSATION AND BENEFITS
COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS
The liabilities of the employer when the seafarer suffers work-related injury or illness during the term of his
contract are as follows:
3. x x x
If a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed
jointly between the Employer and the seafarer. The third doctor's decision shall be final and binding on
both parties. (emphasis supplied)
The above-quoted provision clearly does not state a specific period within which the third doctor must render
his or her disability assessment. This is only reasonable since the parties may opt to resort to a third opinion
even during the conciliation and mediation stage to abbreviate the proceedings, which usually transpire way
beyond the 120/240 day period for medical treatment. The CA, thus, correctly held that the 240-day period for
assessing the degree of disability only applies to the company-designated doctor, and not the third doctor.
The third doctor's assessment of the extent
of disability must be definite and conclusive
in order to be binding between the parties
Indeed, the employer and the seafarer are bound by the disability assessment of the third-party physician in
the event that they choose to appoint one. Nonetheless, similar to what is required of the company-designated
doctor, the appointed third-party physician must likewise arrive at a definite and conclusive
assessment of the seafarer's disability or fitness to return to work before his or her opinion can be
valid and binding between the parties.
We point to our discussion in Kestrel Shipping Co., Inc. v. Munar, 15 underscoring that the assessment of the
company-designated physician of the seafarer's fitness to work or permanent disability within the period of
120 or 240 days must be definite, viz:
Moreover, the company-designated physician is expected to arrive at a definite assessment of the
seafarer's fitness to work or permanent disability within the period of 120 or 240 days. That should he
fail to do so and the seafarer's medical condition remains unresolved, the seafarer shall be deemed totally and
permanently disabled. (emphasis supplied)
Jurisprudence is replete with cases bearing similar pronouncements of this Court. In Fil-Star Maritime
Corporation v. Rosete,16 We concluded that the company-designated doctor's certification issued within the
prescribed periods must be a definite assessment of the seafarer's fitness to work or disability:
LABOR-1 Batch 1
For the courts and labor tribunals, determining whether a seafarer's fitness to work despite suffering an
alleged partial injury generally requires resort to the assessment and certification issued within the 120/240-
day period by the company-designated physician. Through such certification, a seafarer's fitness to resume
work or the degree of disability can be known, unless challenged by the seafarer through a second opinion
secured by virtue of his right under the POEA-SEC. Such certification, as held by this Court in numerous
cases, must be a definite assessment of the seafarer's fitness to work or permanent disability. As
stated in Oriental Shipmanagement Co., Inc. v. Bastol, the company-designated doctor must declare the
seaman fit to work or assess the degree of his permanent disability. Without which, the characterization of a
seafarer's condition as permanent and total will ensue because the ability to return to one's accustomed work
before the applicable periods elapse cannot be shown. (emphasis supplied)
In Carcedo v. Maine Marine Phils., Inc.,17 We ruled that the company-designated physician's disability
assessment was not definitive since the seafarer continued to require medical treatments thereafter. Thus,
because the doctor failed to issue a final assessment, the disability of the seafarer therein was declared to be
permanent and total.
In Fil-Pride Shipping Company, Inc. v. Balasta,18 We declared that the company-designated physician must
arrive at a definite assessment of the seafarer's fitness to work or permanent disability within the period of 120
or 240 days pursuant to Article 192 (c)(1) of the Labor Code and Rule X, Section 2 of the AREC. If he fails to
do so and the seafarer's medical condition remains unresolved, the latter shall be deemed totally and
permanently disabled. Thus, We considered the failure of the company doctor to arrive at a definite
assessment of the seafarer's fitness to work or permanent disability within the said period in holding that the
seafarer was totally and permanently disabled.
A final and definite disability assessment is necessary in order to truly reflect the true extent of the
sickness or injuries of the seafarer and his or her capacity to resume work as such. Otherwise, the
corresponding disability benefits awarded might not be commensurate with the prolonged effects of the
injuries suffered.
Due to the abovestated reasons, We see it fit to apply the same prerequisite to the appointed third doctor
before the latter's disability assessment will be binding on the parties.
In the case at bench, despite the disability grading that Dr. Bathan issued, petitioner's medical condition
remained unresolved. For emphasis, Dr. Bathan' s certification is reproduced hereunder:
This is to certify that SUNIT, REYNALDO consulted the undersigned on 17 Feb. 2014 at Faculty Medical Arts
Building, PGH Compound, Taft Ave., Manila.
x x xx
Patient is Gr. 9 according to POEA Schedule of disability. Patient is not yet fit to work and should
undergo rehabilitation.19 (emphasis supplied)
The language of Dr. Bathan' s assessment brooks no argument that no final and definitive assessment was
made concerning petitioner's disability. If it were otherwise, Dr. Bathan would not have recommended that he
undergo further rehabilitation. Dr. Bathan' s assessment of petitioner's degree of disability, therefore, is still
inconclusive and indefinite.
Page 58 of 69
Petitioner's disability is permanent and
total despite the Grade 9 partial disability
that Dr. Bathan issued since his incapacity
to work lasted for more than 240 days from
his repatriation
Petitioner was repatriated on October 6, 2012. After undergoing medical treatment, the company-designated
doctor issued petitioner an interim Grade 10 disability on January 13, 2013. Petitioner was then issued with a
final Grade 10 disability by the company-designated doctor on February 15, 2013.
Prior to the February 15, 2013 assessment, petitioner consulted the opinion of a second doctor, Dr. Garduce,
who recommended a Grade 3 disability.
Both parties then consulted a third doctor to assess petitioner's degree of disability, who assessed petitioner
with a Grade 9 partial disability on February 17, 2014, 499 days from his repatriation. In addition to the
partial disability grading, Dr. Bathan likewise assessed petitioner as unfit to work and recommended him to
undergo further rehabilitation.
While We have ruled that Dr. Bathan is not bound to render his assessment within the 120/240 day period,
and that the said period is inconsequential and has no application on the third doctor, petitioner's disability and
incapacity to resume working clearly continued for more than 240 days. Applying Article 192 (c)(1) of the
Labor Code, petitioner's disability should be considered permanent and total despite the Grade 9 disability
grading.
20
This conclusion is in accordance with Kestrel,  wherein this Court underscored that if partial and permanent
injuries or disabilities would incapacitate a seafarer from performing his usual sea duties for a period of more
than 120 or 240 days, depending on the need for further medical treatment, then he is, under legal
contemplation, totally and permanently disabled:
Indeed, under Section 32 of the POEA-SEC, only those injuries or disabilities that are classified as Grade 1
may be considered as total and permanent. However, if those injuries or disabilities with a disability
grading from 2 to 14, hence, partial and permanent, would incapacitate a seafarer from performing his
usual sea duties for a period of more than 120 or 240 days, depending on the need for further medical
treatment, then he is, under legal contemplation, totally and permanently disabled. In other words, an
impediment should be characterized as partial and permanent not only under the Schedule of Disabilities
found in Section 32 of the POEA-SEC but should be so under the relevant provisions of the Labor Code and
the Amended Rules on Employee Compensation (AREC) implementing Title II, Book IV of the Labor Code.
That while the seafarer is partially injured or disabled, he is not precluded from earning doing the same work
he had before his injury or disability or that he is accustomed or trained to do. Otherwise, if his illness or injury
prevents him from engaging in gainful employment for more than 120 or 240 days, as the case may be, he
shall be deemed totally and permanently disabled. (emphasis supplied)
In determining whether a disability is total or partial, what is crucial is whether the employee who suffered from
disability could still perform his work notwithstanding the disability he met. A permanent partial disability
presupposes a seafarer's fitness to resume sea duties before the end of the 120/240-day medical treatment
period despite the injuries sustained, and works on the premise that such partial injuries did not disable a
seafarer to earn wages in the same kind of work or similar nature for which he was trained.21
To reiterate, the company doctor or the appointed third-party physician must arrive at a definite and
conclusive assessment of the seafarer's disability or fitness to return to work before his or her opinion can be
LABOR-1 Batch 1
valid and binding between the parties. Dr. Bathan, whose opinion should have bound the parties despite the
lapse of the 120/240 day period, did not make such definite and conclusive assessment.
It was likewise proved that petitioner's disability persisted beyond the 240-day period and he was even
declared unfit to work by the third doctor himself. As noted by the NLRC, petitioner failed to have gainful
employment for 499 days reckoned from the time he arrived on October 6, 2012 until Dr. Bathan conducted
his assessment22 due to his injuries. Moreover, Dr. Bathan's inconclusive assessment and petitioner's
prolonged disability only served to underscore that the company-designated doctor himself failed to render a
definitive assessment of petitioner's disability.
As petitioner was actually unable to work even after the expiration of the 240-day period and there was no
final and conclusive disability assessment made by the third doctor on his medical condition, it would be
inconsistent to declare him as merely permanently and partially disabled. It should be stressed that a total
disability does not require that the employee be completely disabled, or totally paralyzed.23 In disability
compensation, it is not the injury which is compensated, but rather it is the incapacity to work
resulting in the impairment of one's earning capacity.24
In view of the foregoing circumstances, petitioner is considered permanently and totally disabled, and should
be awarded the corresponding disability benefits.
At this juncture, it bears to recapitulate the procedural requisites under the rules and established
jurispn1dence where the parties opt to resort to the opinion of a third doctor:
First, according to the POEA-SEC25 and as established by Vergara,26 when a seafarer sustains a work-related
illness or injury while on board the vessel, his fitness or unfitness for work shall be determined by the
company-designated physician.
Second, if the seafarer disagrees with the findings of the company doctor, then he has the right to engage the
services of a doctor of his choice. If the second doctor appointed by the seafarer disagrees with the findings of
the company doctor, and the company likewise disagrees with the findings of the second doctor, then a third
doctor may be agreed jointly between the employer and the seafarer, whose decision shall be final and
binding on both of them.
It must be emphasized that the language of the POEA-SEC is clear in that both the seafarer and the
employer must mutually agree to seek the opinion of a third doctor. In the event of disagreement on the
services of the third doctor, the seafarer has the right to institute a complaint with the LA or NLRC.
Third, despite the binding effect of the third doctor's assessment, a dissatisfied party may institute a complaint
with the LA to contest the same on the ground of evident partiality, corruption of the third doctor, fraud, other
undue means, 27 lack of basis to support the assessment, or being contrary to law or settled jurisprudence.
Petitioner is entitled to attorney's fees
Considering that petitioner was forced to litigate and incur expenses to protect his right and interest, petitioner
is entitled to a reasonable amount of attorney's fees, pursuant to Article 2208(8).28 The Court notes, however,
that respondents have not shown to act in gross and evident bad faith in refusing to satisfy petitioner's
demands, and even offered to pay him disability benefits, although in a reduced amount. Thus, the Court finds
the award of attorney's fees in the amount of $1,000 as reasonable.29
Page 59 of 69
WHEREFORE, premises considered, the petition is GRANTED. The June 10, 2015 Decision and February
10, 2016 Resolution of the Court of Appeals in CA-G.R. SP No. 138268 are REVERSED and SET ASIDE.
Respondents are ordered to jointly and severally pay petitioner Reynaldo Y. Sunit the amount of $150,000 or
its equivalent amount in Philippine currency at the time of payment, representing total and permanent
disability benefits, plus $1,000, or its equivalent in Philippine currency, as attorney's fees.
SO ORDERED.
G.R. No. 205703, March 07, 2016
INDUSTRIAL PERSONNEL & MANAGEMENT SERVICES, INC. (IPAMS), SNC LAVALIN
ENGINEERS & CONTRACTORS, INC. AND ANGELITO C. HERNANDEZ, Petitioners, v. JOSE
G. DE VERA AND ALBERTO B. ARRIOLA, Respondents.
DECISION
MENDOZA, J.:
LABOR-1 Batch 1
When can a foreign law govern an overseas employment contract? This is the fervent question
that the Court shall resolve, once and for all.
This petition for review on certiorari seeks to reverse and set aside the January 24, 2013
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 118869, which modified the November
30, 2010 Decision2 of the National Labor Relations Commission (NLRC) and its February 2, 2011
Resolution,3 in NLRC LAC Case No. 08-000572-10/NLRC Case No. NCR 09-13563-09, a case for
illegal termination of an Overseas Filipino Worker (OFW).
The Facts
Petitioner Industrial Personnel & Management Services, Inc. (IPAMS) is a local placement
agency duly organized and existing under Philippine laws, with petitioner Angelito C. Hernandez
as its president and managing director. Petitioner SNC Lavalin Engineers & Contractors, Inc.
(SNC-Lavalin) is the principal of IPAMS, a Canadian company with business interests in several
countries. On the other hand, respondent Alberto Arriola (Arriola) is a licensed general surgeon
in the Philippines.4
Employee's Position
Arriola was offered by SNC-Lavalin, through its letter,5 dated May 1, 2008, the position of
Safety Officer in its Ambatovy Project site in Madagascar. The position offered had a rate of
CA$32.00 per hour for forty (40) hours a week with overtime pay in excess of forty (40) hours.
It was for a period of nineteen (19) months starting from June 9, 2008 to December 31, 2009.
Arriola was then hired by SNC-Lavalin, through its local manning agency, IPAMS, and his
overseas employment contract was processed with the Philippine Overseas Employment Agency
(POEA)6 In a letter of understanding,7 dated June 5, 2008, SNC-Lavalin confirmed Arriola's
assignment in the Ambatovy Project. According to Arriola, he signed the contract of
employment in the Philippines.8 On June 9, 2008, Arriola started working in Madagascar.
After three months, Arriola received a notice of pre-termination of employment,9 dated
September 9, 2009, from SNC-Lavalin. It stated that his employment would be pre-terminated
effective September 11, 2009 due to diminishing workload in the area of his expertise and the
unavailability of alternative assignments. Consequently, on September 15, 2009, Arriola was
repatriated. SNC-Lavalin deposited in Arriola's bank account his pay amounting to Two
Thousand Six Hundred Thirty Six Dollars and Eight Centavos (CA$2,636.80), based on Canadian
labor law.
Aggrieved, Arriola filed a complaint against the petitioners for illegal dismissal and non-payment
of overtime pay, vacation leave and sick leave pay before the Labor Arbiter (LA). He claimed
that SNC-Lavalin still owed him unpaid salaries equivalent to the three-month unexpired portion
of his contract, amounting to, more or less, One Million Sixty-Two Thousand Nine Hundred
Thirty-Six Pesos (P1,062,936.00). He asserted that SNC-Lavalin never offered any valid reason
for his early termination and that he was not given sufficient notice regarding the same. Arriola
also insisted that the petitioners must prove the applicability of Canadian law before the same
could be applied to his employment contract.
Employer's Position
The petitioners denied the charge of illegal dismissal against them. They claimed that SNC-
Page 60 of 69
Lavalin was greatly affected by the global financial crises during the latter part of 2008. The
economy of Madagascar, where SNC-Lavalin had business sites, also slowed down. As proof of
its looming financial standing, SNC-Lavalin presented a copy of a news item in the Financial
Post,10 dated March 5, 2009, showing the decline of the value of its stocks. Thus, it had no
choice but to minimize its expenditures and operational expenses. It re-organized its Health and
Safety Department at the Ambatovy Project site and Arriola was one of those affected.11
The petitioners also invoked EDI-Staffbuilders International, Inc. v. NLRC12 (EDI-Staffbuilders),
pointing out that particular labor laws of a foreign country incorporated in a contract freely
entered into between an OFW and a foreign employer through the latter's agent was valid. In
the present case, as all of Arriola's employment documents were processed in Canada, not to
mention that SNC-Lavalin's office was in Ontario, the principle of lex loci celebrationis was
applicable. Thus, the petitioners insisted that Canadian laws governed the contract.
The petitioners continued that the pre-termination of Arriola's contract was valid for being
consistent with the provisions of both the Expatriate Policy and laws of Canada. The said foreign
law did not require any ground for early termination of employment, and the only requirement
was the written notice of termination. Even assuming that Philippine laws should apply, Arriola
would still be validly dismissed because domestic law recognized retrenchment and redundancy
as legal grounds for termination.
In their Rejoinder,13 the petitioners presented a copy of the Employment Standards Act (ESA) of
Ontario, which was duly authenticated by the Canadian authorities and certified by the
Philippine Embassy.
The LA Ruling
In a Decision,14 dated May 31, 2010, the LA dismissed Arriola's complaint for lack of merit. The
LA ruled that the rights and obligations among and between the OFW, the local recruiter/agent,
and the foreign employer/principal were governed by the employment contract pursuant to
the EDI-Staffbuilders case. Thus, the provisions on termination of employment found in the
ESA, a foreign law which governed Arriola's employment contract, were applied. Given that
SNC-Lavalin was able to produce the duly authenticated ESA, the LA opined that there was no
other conclusion but to uphold the validity of Arriola's dismissal based on Canadian law.
The fallo of the LA decision reads:
chanRoblesvirtualLawlibrary
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered
dismissing the complaint for lack of merit.
SO ORDERED.15ChanRoblesVirtualawlibrary
Aggrieved, Arriola elevated the LA decision before the NLRC.
The NLRC Ruling
In its decision, dated November 30, 2010, the NLRC reversed the LA decision and ruled that
Arriola was illegally dismissed by the petitioners. Citing PNB v. Cabansag,16 the NLRC stated
that whether employed locally or overseas, all Filipino workers enjoyed the protective mantle of
Philippine labor and social legislation, contract stipulations to the contrary notwithstanding.
Thus, the Labor Code of the Philippines and Republic Act (R.A.) No. 8042, or the Migrant
LABOR-1 Batch 1
Workers Act, as amended, should be applied. Moreover, the NLRC added that the overseas
employment contract of Arriola was processed in the POEA.
Applying the Philippine laws, the NLRC found that there was no substantial evidence presented
by the petitioners to show any just or authorized cause to terminate Arriola. The ground of
financial losses by SNC-Lavalin was not supported by sufficient and credible evidence. The NLRC
concluded that, for being illegally dismissed, Arriola should be awarded CA$81,920.00
representing sixteen (16) months of Arriola's purported unpaid salary, pursuant to the Serrano
v. Gallant17 doctrine. The decretal portion of the NLRC decision states:
chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby rendered finding complainant-appellant
to have been illegally dismissed. Respondents-appellees are hereby ordered to pay
complainant-appellant the amount of CA$81,920.00, or its Philippine Peso equivalent prevailing
at the time of payment. Accordingly, the decision of the Labor Arbiter dated May 31, 2010 is
hereby VACATED and SET ASIDE.
SO ORDERED.18ChanRoblesVirtualawlibrary
The petitioners moved for reconsideration, but their motion was denied by the NLRC in its
resolution, dated February 2, 2011.
Undaunted, the petitioners filed a petition for certiorari before the CA arguing that it should be
the ESA, or the Ontario labor law, that should be applied in Arriola's employment contract. No
temporary restraining order, however, was issued by the CA.
The Execution Proceedings
In the meantime, execution proceedings were commenced before the LA by Arriola. The LA
granted the motion for execution in the Order,19 dated August 8, 2011.
The petitioners appealed the execution order to the NLRC. In its Decision,20 dated May 31,
2012, the NLRC corrected the decretal portion of its November 30, 2010 decision. It decreased
the award of backpay in the amount of CA$26,880.00 or equivalent only to three (3) months
and three (3) weeks pay based on 70-hours per week workload. The NLRC found that when
Arriola was dismissed on September 9, 2009, he only had three (3) months and three (3)
weeks or until December 31, 2009 remaining under his employment contract.
Still not satisfied with the decreased award, IPAMS filed a separate petition for certiorari before
the CA. In its decision, dated July 25, 2013, the CA affirmed the decrease in Arriola's backpay
because the unpaid period in his contract was just three (3) months and three (3) weeks.
Unperturbed, IPAMS appealed before the Court and the case was docketed as G.R. No. 212031.
The appeal, however, was dismissed outright by the Court in its resolution, dated August 8,
2014, because it was belatedly filed and it did not comply with Sections 4 and 5 of Rule 7 of the
Rules of Court. Hence, it was settled in the execution proceedings that the award of backpay to
Arriola should only amount to three (3) months and three (3) weeks of his pay.
The CA Ruling
Returning to the principal case of illegal dismissal, in its assailed January 24, 2013 decision, the
CA affirmed that Arriola was illegally dismissed by the petitioners. The CA explained that even
though an authenticated copy of the ESA was submitted, it did not mean that the said foreign
Page 61 of 69
law automatically applied in this case. Although parties were free to establish stipulations in
their contracts, the same must remain consistent with law, morals, good custom, public order
or public policy. The appellate court wrote that the ESA allowed an employer to disregard the
required notice of termination by simply giving the employee a severance pay. The ESA could
not be made to apply in this case for being contrary to our Constitution, specifically on the right
of due process. Thus, the CA opined that our labor laws should find application.
As the petitioners neither complied with the twin notice-rule nor offered any just or authorized
cause for his termination under the Labor Code, the CA held that Arriola's dismissal was illegal.
Accordingly, it pronounced that Arriola was entitled to his salary for the unexpired portion of his
contract which is three (3) months and three (3) weeks salary. It, however, decreased the
award of backpay to Arriola because the NLRC made a wrong calculation. Based on his
employment contract, the backpay of Arriola should only be computed on a 40-hour per week
workload, or in the amount of CA$19,200.00. The CA disposed the case in this wise:
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WHEREFORE, in view of the foregoing premises, the petition is PARTIALLY GRANTED. The
assailed Order of the National Labor Relations Commission in NLRC LAC No. 08-000572-
10/NLRC Case No. NCR 09-13563-09 is MODIFIED in that private respondent is only entitled to
a monetary judgment equivalent to his unpaid salaries in the amount of CA$19,200.00 or its
Philippine Peso equivalent.
SO ORDERED.21ChanRoblesVirtualawlibrary
Hence, this petition, anchored on the following
ISSUES
I
WHETHER OR NOT RESPONDENT ARRIOLA WAS VALIDLY DISMISSED PURSUANT TO
THE EMPLOYMENT CONTRACT.
II
GRANTING THAT THERE WAS ILLEGAL DISMISSAL IN THE CASE AT BAR, WHETHER OR
NOT THE SIX-WEEK ON, TWO-WEEK OFF SCHEDULE SHOULD BE USED IN THE
COMPUTATION OF ANY MONETARY AWARD.
III
GRANTING THAT THERE WAS ILLEGAL DISMISSAL, WHETHER OR NOT THE AMOUNT
BEING CLAIMED BY RESPONDENTS HAD ALREADY BEEN SATISFIED, OR AT THE VERY
LEAST, WHETHER OR NOT THE AMOUNT OF CA$2,636.80 SHOULD BE DEDUCTED FROM
THE MONETARY AWARD.22ChanRoblesVirtualawlibrary
The petitioners argue that the rights and obligations of the OFW, the local recruiter, and the
foreign employer are governed by the employment contract, citing EDI-Staffbuilders; that the
terms and conditions of Arriola's employment are embodied in the Expatriate Policy, Ambatovy
Project - Site, Long Term, hence, the laws of Canada must be applied; that the ESA, or the
Ontario labor law, does not require any ground for the early termination of employment and it
permits the termination without any notice provided that a severance pay is given; that the ESA
was duly authenticated by the Canadian authorities and certified by the Philippine Embassy;
that the NLRC Sixth Division exhibited bias and bad faith when it made a wrong computation on
LABOR-1 Batch 1
the award of backpay; and that, assuming there was illegal dismissal, the CA$2,636.80, earlier
paid to Arriola, and his home leaves should be deducted from the award of backpay.
In his Comment,23 Arriola countered that foreign laws could not apply to employment contracts
if they were contrary to law, morals, good customs, public order or public policy,
invoking Pakistan International Airlines Corporation v. Ople (Pakistan International);24 that the
ESA was not applicable because it was contrary to his constitutional right to due process; that
the petitioners failed to substantiate an authorized cause to justify his dismissal under Philippine
labor law; and that the petitioners could not anymore claim a deduction of CA$2,636.80 from
the award of backpay because it was raised for the first time on appeal.
In their Reply,25 the petitioners asserted that R.A. No. 8042 recognized the applicability of
foreign laws on labor contracts; that the Pakistan International case was superseded by EDI-
Staffbuilders and other subsequent cases; and that SNC-Lavalin suffering financial losses was
an authorized cause to terminate Arriola's employment.
In his Memorandum,26 Arriola asserted that his employment contract was executed in the
Philippines and that the alleged authorized cause of financial losses by the petitioners was not
substantiated by evidence.
In their Consolidated Memorandum,27 the petitioners reiterated that the ESA was applicable in
the present case and that recent jurisprudence recognized that the parties could agree on the
applicability of foreign laws in their labor contracts.
The Court's Ruling
The petition lacks merit.
Application of foreign laws with labor contracts
At present, Filipino laborers, whether skilled or professional, are enticed to depart from the
motherland in search of greener pastures. There is a distressing reality that the offers of
employment abroad are more lucrative than those found in our own soils. To reap the promises
of the foreign dream, our unsung heroes must endure homesickness, solitude, discrimination,
mental and emotional struggle, at times, physical turmoil, and, worse, death. On the other side
of the table is the growing number of foreign employers attracted in hiring Filipino workers
because of their reasonable compensations and globally-competitive skills and qualifications.
Between the dominant foreign employers and the vulnerable and desperate OFWs, however,
there is an inescapable truth that the latter are in need of greater safeguard and protection.
In order to afford the full protection of labor to our OFWs, the State has vigorously enacted
laws, adopted regulations and policies, and established agencies to ensure that their needs are
satisfied and that they continue to work in a humane living environment outside of the country.
Despite these efforts, there are still issues left unsolved in the realm of overseas employment.
One existing question is posed before the Court -when should an overseas labor contract be
governed by a foreign law? To answer this burning query, a review of the relevant laws and
jurisprudence is warranted.
R.A. No. 8042, or the Migrant Workers Act, was enacted to institute the policies on overseas
employment and to establish a higher standard of protection and promotion of the welfare of
Page 62 of 69
migrant workers.28 It emphasized that while recognizing the significant contribution of Filipino
migrant workers to the national economy through their foreign exchange remittances, the State
does not promote overseas employment as a means to sustain economic growth and achieve
national development.29 Although it acknowledged claims arising out of law or contract involving
Filipino workers,30 it does not categorically provide that foreign laws are absolutely and
automatically applicable in overseas employment contracts.
The issue of applying foreign laws to labor contracts was initially raised before the Court
in Pakistan International. It was stated in the labor contract therein (1) that it would be
governed by the laws of Pakistan, (2) that the employer have the right to terminate the
employee at any time, and (3) that the one-month advance notice in terminating the
employment could be dispensed with by paying the employee an equivalent one-month salary.
Therein, the Court elaborated on the parties' right to stipulate in labor contracts, to wit:
chanRoblesvirtualLawlibrary
A contract freely entered into should, of course, be respected, as PIA argues, since a contract is
the law between the parties. The principle of party autonomy in contracts is not, however, an
absolute principle. The rule in Article 1306, of our Civil Code is that the contracting parties may
establish such stipulations as they may deem convenient, "provided they are not contrary to
law, morals, good customs, public order or public policy." Thus, counterbalancing the
principle of autonomy of contracting parties is the equally general rule that provisions of
applicable law, especially provisions relating to matters affected with public policy, are deemed
written into the contract. Put a little differently, the governing principle is that parties may not
contract away applicable provisions of law especially peremptory provisions dealing with
matters heavily impressed with public interest. The law relating to labor and employment
is clearly such an area and parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by simply contracting with
each other. x x x31
[Emphases Supplied]
In that case, the Court held that the labor relationship between OFW and the foreign employer
is "much affected with public interest and that the otherwise applicable Philippine laws and
regulations cannot be rendered illusory by the parties agreeing upon some other law to govern
their relationship."32 Thus, the Court applied the Philippine laws, instead of the Pakistan laws. It
was also held that the provision in the employment contract, where the employer could
terminate the employee at any time for any ground and it could even disregard the notice of
termination, violates the employee's right to security of tenure under Articles 280 and 281 of
the Labor Code.
In EDI-Staffbuilders, the case heavily relied on by the petitioners, it was reiterated that, "[i]n
formulating the contract, the parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy."33 In that case, the overseas contract specifically stated
that Saudi Labor Laws would govern matters not provided for in the contract. The employer,
however, failed to prove the said foreign law, hence, the doctrine of processual presumption
came into play and the Philippine labor laws were applied. Consequently, the Court did not
discuss any longer whether the Saudi labor laws were contrary to Philippine labor laws.
The case of Becmen Service Exporter and Promotion, Inc. v. Spouses Cuaresma,34 though not
an illegal termination case, elucidated on the effect of foreign laws on employment. It involved
a complaint for insurance benefits and damages arising from the death of a Filipina nurse from
LABOR-1 Batch 1
Saudi Arabia. It was initially found therein that there was no law in Saudi Arabia that provided
for insurance arising from labor accidents. Nevertheless, the Court concluded that the employer
and the recruiter in that case abandoned their legal, moral and social obligation to assist the
victim's family in obtaining justice for her death, and so her family was awarded P5,000,000.00
for moral and exemplary damages.
In ATCI Overseas Corporation v. Echin35 (ATCI Overseas), the private recruitment agency
invoked the defense that the foreign employer was immune from suit and that it did not sign
any document agreeing to be held jointly and solidarily liable. Such defense, however, was
rejected because R.A. No. 8042 precisely afforded the OFWs with a recourse against the local
agency and the foreign employer to assure them of an immediate and sufficient payment of
what was due. Similar to EDI-Staffbuilders, the local agency therein failed to prove the Kuwaiti
law specified in the labor contract, pursuant to Sections 24 and 25 of Rule 132 of the Revised
Rules of Court.
Also, in the recent case of Sameer Overseas Placement Agency, Inc. v. Cabiles 36 (Sameer
Overseas), it was declared that the security of tenure for labor was guaranteed by our
Constitution and employees were not stripped of the same when they moved to work in other
jurisdictions. Citing PCL Shipping Phils., Inc. v. NLRC37 (PCL Shipping), the Court held that the
principle of lex loci contractus (the law of the place where the contract is made) governed in
this jurisdiction. As it was established therein that the overseas labor contract was executed in
the Philippines, the Labor Code and the fundamental procedural rights were observed. It must
be noted that no foreign law was specified in the employment contracts in both cases.
Lastly, in Saudi Arabian Airlines (Saudia) v. Rebesencio38, the employer therein asserted the
doctrine of forum non conveniens because the overseas employment contracts required the
application of the laws of Saudi Arabia, and so, the Philippine courts were not in a position to
hear the case. In striking down such argument, the Court held that while a Philippine tribunal
was called upon to respect the parties' choice of governing law, such respect must not be so
permissive as to lose sight of considerations of law, morals, good customs, public order, or
public policy that underlie the contract central to the controversy. As the dispute in that case
related to the illegal termination of the employees due to their pregnancy, then it involved a
matter of public interest and public policy. Thus, it was ruled that Philippine laws properly found
application and that Philippine tribunals could assume jurisdiction.
Based on the foregoing, the general rule is that Philippine laws apply even to overseas
employment contracts. This rule is rooted in the constitutional provision of Section 3, Article
XIII that the State shall afford full protection to labor, whether local or overseas. Hence, even if
the OFW has his employment abroad, it does not strip him of his rights to security of tenure,
humane conditions of work and a living wage under our Constitution.39
As an exception, the parties may agree that a foreign law shall govern the employment
contract. A synthesis of the existing laws and jurisprudence reveals that this exception is
subject to the following requisites:
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1. That it is expressly stipulated in the overseas employment contract that a specific
foreign law shall govern;
Page 63 of 69
 2. That the foreign law invoked must be proven before the courts pursuant to the
Philippine rules on evidence;
3. That the foreign law stipulated in the overseas employment contract must not be
contrary to law, morals, good customs, public order, or public policy of the Philippines;
and
4. That the overseas employment contract must be processed through the POEA.
The Court is of the view that these four (4) requisites must be complied with before the
employer could invoke the applicability of a foreign law to an overseas employment contract.
With these requisites, the State would be able to abide by its constitutional obligation to ensure
that the rights and well-being of our OFWs are fully protected. These conditions would also
invigorate the policy under R.A. No. 8042 that the State shall, at all times, uphold the dignity of
its citizens whether in country or overseas, in general, and the Filipino migrant workers, in
particular.40 Further, these strict terms are pursuant to the jurisprudential doctrine that "parties
may not contract away applicable provisions of law especially peremptory provisions dealing
with matters heavily impressed with public interest,"41 such as laws relating to labor. At the
same time, foreign employers are not at all helpless to apply their own laws to overseas
employment contracts provided that they faithfully comply with these requisites.
If the first requisite is absent, or that no foreign law was expressly stipulated in the
employment contract which was executed in the Philippines, then the domestic labor laws shall
apply in accordance with the principle of lex loci contractus. This is based on the cases
of Sameer Overseas and PCL Shipping.
If the second requisite is lacking, or that the foreign law was not proven pursuant to Sections
24 and 25 of Rule 132 of the Revised Rules of Court, then the international law doctrine of
processual presumption operates. The said doctrine declares that "[w]here a foreign law is not
pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the same as
ours."42 This was observed in the cases of EDI-Staffbuilders and ATCI Overseas.
If the third requisite is not met, or that the foreign law stipulated is contrary to law, morals,
good customs, public order or public policy, then Philippine laws govern. This finds legal bases
in the Civil Code, specifically: (1) Article 17, which provides that laws which have, for their
object, public order, public policy and good customs shall not be rendered ineffective by laws of
a foreign country; and (2) Article 1306, which states that the stipulations, clauses, terms and
conditions in a contract must not be contrary to law, morals, good customs, public order, or
public policy. The said doctrine was applied in the case of Pakistan International.
Finally, if the fourth requisite is missing, or that the overseas employment contract was not
processed through the POEA, then Article 18 of the Labor Code is violated. Article 18 provides
that no employer may hire a Filipino worker for overseas employment except through the
boards and entities authorized by the Secretary of Labor. In relation thereto, Section 4 of R.A.
No. 8042, as amended, declares that the State shall only allow the deployment of overseas
Filipino workers in countries where the rights of Filipino migrant workers are protected. Thus,
the POEA, through the assistance of the Department of Foreign Affairs, reviews and checks
whether the countries have existing labor and social laws protecting the rights of workers,
including migrant workers.43 Unless processed through the POEA, the State has no effective
means of assessing the suitability of the foreign laws to our migrant workers. Thus, an overseas
LABOR-1 Batch 1
employment contract that was not scrutinized by the POEA definitely cannot be invoked as it is
an unexamined foreign law.
In other words, lacking any one of the four requisites would invalidate the application of the
foreign law, and the Philippine law shall govern the overseas employment contract.
As the requisites of the applicability of foreign laws in overseas labor contract have been
settled, the Court can now discuss the merits of the case at bench.
A judicious scrutiny of the records of the case demonstrates that the petitioners were able to
observe the second requisite, or that the foreign law must be proven before the court pursuant
to the Philippine rules on evidence. The petitioners were able to present the ESA, duly
authenticated by the Canadian authorities and certified by the Philippine Embassy, before the
LA. The fourth requisite was also followed because Arriola's employment contract was processed
through the POEA.44
Unfortunately for the petitioners, those were the only requisites that they complied with. As
correctly held by the CA, even though an authenticated copy of the ESA was submitted, it did
not mean that said foreign law could be automatically applied to this case. The petitioners
miserably failed to adhere to the two other requisites, which shall be discussed in seratim.
The foreign law was not expressly specified in the employment contract
The petitioners failed to comply with the first requisite because no foreign law was expressly
stipulated in the overseas employment contract with Arriola. In its pleadings, the petitioners did
not directly cite any specific provision or stipulation in the said labor contract which indicated
the applicability of the Canadian labor laws or the ESA. They failed to show on the face of the
contract that a foreign law was agreed upon by the parties. Rather, they simply asserted that
the terms and conditions of Arriola's employment were embodied in the Expatriate Policy,
Ambatovy Project - Site, Long Term.45 Then, they emphasized provision 8.20 therein, regarding
interpretation of the contract, which provides that said policy would be governed and construed
with the laws of the country where the applicable SNC-Lavalin, Inc. office was
located.46 Because of this provision, the petitioners insisted that the laws of Canada, not of
Madagascar or the Philippines, should apply. Then, they finally referred to the ESA.
It is apparent that the petitioners were simply attempting to stretch the overseas employment
contract of Arriola, by implication, in order that the alleged foreign law would apply. To sustain
such argument would allow any foreign employer to improperly invoke a foreign law even if it is
not anymore reasonably contemplated by the parties to control the overseas employment. The
OFW, who is susceptible by his desire and desperation to work abroad, would blindly sign the
labor contract even though it is not clearly established on its face which state law shall apply.
Thus, a better rule would be to obligate the foreign employer to expressly declare at the onset
of the labor contract that a foreign law shall govern it. In that manner, the OFW would be
informed of the applicable law before signing the contract.
Further, it was shown that the overseas labor contract was executed by Arriola at his residence
in Batangas and it was processed at the POEA on May 26, 2008.47 Considering that no foreign
law was specified in the contract and the same was executed in the Philippines, the doctrine
of lex loci celebrationis applies and the Philippine laws shall govern the overseas employment of
Arriola.
Page 64 of 69
The foreign law invoked is contrary to the Constitution and the Labor Code dismissal may be considered valid.

Granting arguendo that the labor contract expressly stipulated the applicability of Canadian law,
still, Arriola's employment cannot be governed by such foreign law because the third requisite is
not satisfied. A perusal of the ESA will show that some of its provisions are contrary to the
Constitution and the labor laws of the Philippines.
First, the ESA does not require any ground for the early termination of employment.48 Article 54
thereof only provides that no employer should terminate the employment of an employee
unless a written notice had been given in advance.49 Necessarily, the employer can dismiss any
employee for any ground it so desired. At its own pleasure, the foreign employer is endowed
with the absolute power to end the employment of an employee even on the most whimsical
grounds.
Second, the ESA allows the employer to dispense with the prior notice of termination to an
employee. Article 65(4) thereof indicated that the employer could terminate the employment
without notice by simply paying the employee a severance pay computed on the basis of the
period within which the notice should have been given.50 The employee under the ESA could be
immediately dismissed without giving him the opportunity to explain and defend himself.
Here, the petitioners assert that the economy of Madagascar weakened due to the global
financial crisis. Consequently, SNC-Lavalin's business also slowed down. To prove its sagging
financial standing, SNC-Lavalin presented a copy of a news item in the Financial Post, dated
March 5, 2009. They insist that SNC-Lavalin had no choice but to minimize its expenditures and
operational expenses.58 In addition, the petitioners argued that the government of Madagascar
prioritized the employment of its citizens, and not foreigners. Thus, Arriola was terminated
because there was no more job available for him.59
The Court finds that Arriola was not validly dismissed. The petitioners simply argued that they
were suffering from financial losses and Arriola had to be dismissed. It was not even clear what
specific authorized cause, whether retrenchment or redundancy, was used to justify Arriola's
dismissal. Worse, the petitioners did not even present a single credible evidence to support
their claim of financial loss. They simply offered an unreliable news article which deserves scant
consideration as it is undoubtedly hearsay. Time and again the Court has ruled that in illegal
dismissal cases like the present one, the onus of proving that the employee was dismissed and
that the dismissal was not illegal rests on the employer, and failure to discharge the same
would mean that the dismissal is not justified and, therefore, illegal.60

The provisions of the ESA are patently inconsistent with the right to security of tenure. Both the As to the amount of backpay awarded, the Court finds that the computation of the CA was valid
Constitution51 and the Labor Code52 provide that this right is available to any employee. In a and proper based on the employment contract of Arriola. Also, the issue of whether the
host of cases, the Court has upheld the employee's right to security of tenure in the face of petitioners had made partial payments on the backpay is a matter best addressed during the
oppressive management behavior and management prerogative. Security of tenure is a right execution process.chanrobleslaw
which cannot be denied on mere speculation of any unclear and nebulous basis.53
WHEREFORE, the petition is DENIED. The January 24, 2013 Decision of the Court of Appeals
Not only do these provisions collide with the right to security of tenure, but they also deprive in CA-G.R. SP No. 118869 is AFFIRMED in toto.
the employee of his constitutional right to due process by denying him of any notice of
termination and the opportunity to be heard.54 Glaringly, these disadvantageous provisions SO ORDERED.
under the ESA produce the same evils which the Court vigorously sought to prevent in the
cases of Pakistan International and Sameer Overseas. Thus, the Court concurs with the CA that
the ESA is not applicable in this case as it is against our fundamental and statutory laws.

In fine, as the petitioners failed to meet all the four (4) requisites on the applicability of a
foreign law, then the Philippine labor laws must govern the overseas employment contract of
Arriola.

No authorized cause for dismissal was proven

Article 279 of our Labor Code has construed security of tenure to mean that the employer shall
not terminate the services of an employee except for a just cause or when authorized by
law.55 Concomitant to the employer's right to freely select and engage an employee is the
employer's right to discharge the employee for just and/or authorized causes. To validly effect
terminations of employment, the discharge must be for a valid cause in the manner required by
law. The purpose of these two-pronged qualifications is to protect the working class from the
employer's arbitrary and unreasonable exercise of its right to dismiss.56

Some of the authorized causes to terminate employment under the Labor Code would be
installation of labor-saving devices, redundancy, retrenchment to prevent losses and the closing
or cessation of operation of the establishment or undertaking.57 Each authorized cause has
specific requisites that must be proven by the employer with substantial evidence before a
LABOR-1 Batch 1 Page 65 of 69
G.R. No. 163657               April 18, 2012
INTERNATIONAL MANAGEMENT SERVICES/MARILYN C. PASCUAL, Petitioner,
vs.
ROEL P. LOGARTA, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari assailing the Decision1 dated January 8, 2004 of the Court of Appeals
(CA) in CA-G.R. SP No. 58739, and the Resolution2 dated May 12, 2004 denying petitioner’s motion for
reconsideration.
The factual and procedural antecedents are as follows:
Sometime in 1997, the petitioner recruitment agency, International Management Services (IMS), a single
proprietorship owned and operated by Marilyn C. Pascual, deployed respondent Roel P. Logarta to work for
Petrocon Arabia Limited (Petrocon) in Alkhobar, Kingdom of Saudi Arabia, in connection with general
engineering services of Petrocon for the Saudi Arabian Oil Company (Saudi Aramco). Respondent was
employed for a period of two (2) years, commencing on October 2, 1997, with a monthly salary of eight
hundred US Dollars (US$800.00). In October 1997, respondent started to work for Petrocon as Piping
Designer for works on the projects of Saudi Aramco.
Thereafter, in a letter3 dated December 21, 1997, Saudi Aramco informed Petrocon that for the year 1998, the
former is allotting to the latter a total work load level of 170,850 man-hours, of which 100,000 man-hours will
be allotted for cross-country pipeline projects.
4 
However, in a letter dated April 29, 1998, Saudi Aramco notified Petrocon that due to changes in the general
engineering services work forecast for 1998, the man-hours that were formerly allotted to Petrocon is going to
be reduced by 40%.
Consequently, due to the considerable decrease in the work requirements of Saudi Aramco, Petrocon was
constrained to reduce its personnel that were employed as piping designers, instrument engineers, inside
plant engineers, etc., which totaled to some 73 personnel, one of whom was respondent.
Thus, on June 1, 1998, Petrocon gave respondent a written notice5 informing the latter that due to the lack of
project works related to his expertise, he is given a 30-day notice of termination, and that his last day of work
with Petrocon will be on July 1, 1998. Petrocon also informed respondent that all due benefits in accordance
with the terms and conditions of his employment contract will be paid to respondent, including his ticket back
to the Philippines.
On June 23, 1998, respondent, together with his co-employees, requested Petrocon to issue them a letter of
Intent stating that the latter will issue them a No Objection Certificate once they find another employer before
they leave Saudi Arabia.6 On June 27, 1998, Petrocon granted the request and issued a letter of intent to
respondent.7
LABOR-1 Batch 1
Before his departure from Saudi Arabia, respondent received his final paycheck8 from Petrocon amounting
SR7,488.57.
Upon his return, respondent filed a complaint with the Regional Arbitration Branch VII, National Labor
Relations Commission (NLRC), Cebu City, against petitioner as the recruitment agency which employed him
for employment abroad. In filing the complaint, respondent sought to recover his unearned salaries covering
the unexpired portion of his employment contract with Petrocon on the ground that he was illegally dismissed.
After the parties filed their respective position papers, the Labor Arbiter rendered a Decision9 in favor of the
respondent, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Marilyn C.
Pascual, doing business under the name and style International Management Services, to pay the
complainant Roel Logarta the peso equivalent of US $5,600.00 based on the rate at the time of actual
payment, as payment of his wages for the unexpired portion of his contract of employment.
The other claims are dismissed for lack of merit.
So Ordered.10
Aggrieved, petitioner filed an Appeal11 before the NLRC. On October 29, 1999, the NLRC, Fourth Division,
Cebu City rendered a Decision12 affirming the decision of the Labor Arbiter, but reduced the amount to be paid
by the petitioner, to wit:
WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby AFFIRMED with
MODIFICATION reducing the award to only US $4,800.00 or its peso equivalent at the time of payment.
SO ORDERED.13
Petitioner filed a motion for reconsideration, but it was denied in the Resolution14 dated April 17, 2000.
Not satisfied, petitioner sought recourse before the CA,15 arguing that the NLRC gravely abused its discretion:
(a) in holding that while Petrocon’s retrenchment was justified, Petrocon failed to observe the legal
procedure for a valid retrenchment when, in fact, Petrocon did observe the legal procedural
requirements for a valid implementation of its retrenchment scheme; and
(b) in making an award under Section 10 of R.A. No. 8042 which is premised on a termination of
employment without just, valid or authorized cause as defined by law or contract, notwithstanding
that NLRC itself found Petrocon’s retrenchment to be justified.16
On January 8, 2004, the CA rendered the assailed Decision dismissing the petition, the decretal portion of
which reads:
WHEREFORE, premises considered, the petition is DISMISSED and the impugned Decision dated October
29, 1999 and Resolution dated April 17, 2000 are AFFIRMED. Costs against the petitioner.
Page 66 of 69
SO ORDERED.17
In ruling in favor of the respondent, the CA agreed with the findings of the NLRC that retrenchment could be a
valid cause to terminate respondent’s employment with Petrocon. Considering that there was a considerable
reduction in Petrocon’s work allocation from Saudi Aramco, the reduction of its work personnel was a valid
exercise of management prerogative to reduce the number of its personnel, particularly in those fields affected
by the reduced work allocation from Saudi Aramco. However, although there was a valid ground for
retrenchment, the same was implemented without complying with the requisites of a valid retrenchment. Also,
the CA concluded that although the respondent was given a 30-day notice of his termination, there was no
showing that the Department of Labor and Employment (DOLE) was also sent a copy of the said notice as
required by law. Moreover, the CA found that a perusal of the check payroll details would readily show that
respondent was not paid his separation pay.
Petitioner filed a motion for reconsideration, but it was denied in the Resolution18 dated May 12, 2004.
Hence, the petition assigning the following errors:
I.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT THE 30-DAY
NOTICE TO DOLE PRIOR TO RETRENCHMENT IS NOT APPLICABLE IN THIS CASE.
II.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT
RESPONDENT EMPLOYEE DID NOT CONSENT TO HIS SEPARATION FROM THE PRINCIPAL
COMPANY.
III.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT JARIOL VS.
IMS IS NOT APPLICABLE TO THE INSTANT CASE.
IV.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT
RESPONDENT DID NOT RECEIVE THE SEPARATION PAY REQUIRED BY LAW.19
Petitioner argues that the 30-day notice of termination, as required in Serrano v. NLRC,20 is not applicable in
the case at bar, considering that respondent was in fact given the 30-day notice. More importantly, Republic
Act (R.A.) No. 8042, or the Migrant Workers and Overseas Filipino Act of 1995 nor its Implementing Rules do
not require the sending of notice to the DOLE, 30 days before the effectivity of a retrenchment of an Overseas
Filipino Worker (OFW) based on grounds under Article 283 of the Labor Code.
Petitioner maintains that respondent has consented to his termination, since he raised no objection to his
retrenchment and actually sought another employer during his 30-day notice of termination. Respondent even
requested from Petrocon a No Objection Certificate, which the latter granted to facilitate respondent’s
application to other Saudi Arabian employers.
LABOR-1 Batch 1
Petitioner also posits that the CA should have applied the case of Jariol v. IMS21 even if the said case was only
decided by the NLRC, a quasi-judicial agency. The said case involved similar facts, wherein the NLRC
categorically ruled that employers of OFWs are not required to furnish the DOLE in the Philippines a notice if
they intend to terminate a Filipino employee.
Lastly, petitioner insists that respondent received his separation pay. Moreover, petitioner contends that
Section 10 of R.A. No. 8042 does not apply in the present case, since the termination of respondent was due
to a just, valid or authorized cause. At best, respondent is only entitled to separation pay in accordance with
Article 283 of the Labor Code, i.e., one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher.
On his part, respondent maintains that the CA committed no reversible error in rendering the assailed
decision.
The petition is partly meritorious.
Retrenchment is the reduction of work personnel usually due to poor financial returns, aimed to cut down
costs for operation particularly on salaries and wages.22 It is one of the economic grounds to dismiss
employees and is resorted by an employer primarily to avoid or minimize business losses.23
Retrenchment programs are purely business decisions within the purview of a valid and reasonable exercise
of management prerogative. It is one way of downsizing an employer’s workforce and is often resorted to by
the employer during periods of business recession, industrial depression, or seasonal fluctuations, and during
lulls in production occasioned by lack of orders, shortage of materials, conversion of the plant for a new
production program, or introduction of new methods or more efficient machinery or automation. It is a valid
management prerogative, provided it is done in good faith and the employer faithfully complies with the
substantive and procedural requirements laid down by law and jurisprudence.24
In the case at bar, despite the fact that respondent was employed by Petrocon as an OFW in Saudi Arabia,
still both he and his employer are subject to the provisions of the Labor Code when applicable. The basic
policy in this jurisdiction is that all Filipino workers, whether employed locally or overseas, enjoy the protective
mantle of Philippine labor and social legislations.25 In the case of Royal Crown Internationale v. NLRC,26 this
Court has made the policy pronouncement, thus:
x x x. Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine
labor and social legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in
keeping with the basic public policy of the State to afford protection to labor, promote full employment, ensure
equal work opportunities regardless of sex, race or creed, and regulate the relations between workers and
employers. x x x27
Philippine Law recognizes retrenchment as a valid cause for the dismissal of a migrant or overseas Filipino
worker under Article 283 of the Labor Code, which provides:
Closure of establishment and reduction of personnel. - The employer may also terminate the employment of
any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or
the closing or cessation of operations of the establishment or undertaking unless the closing is for the purpose
of circumventing the provisions of this Title, by serving a written notice on the workers and the Department of
Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to
the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least one (1) month pay or to at least one (1) month pay for every year of
Page 67 of 69
service, whichever is higher. In case of retrenchment to prevent losses and in cases of closure or cessation of
operations of establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to at least one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole
year.
Thus, retrenchment is a valid exercise of management prerogative subject to the strict requirements set by
jurisprudence, to wit:
(1) That the retrenchment is reasonably necessary and likely to prevent business losses which, if
already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only
expected, are reasonably imminent as perceived objectively and in good faith by the employer;
(2) That the employer served written notice both to the employees and to the Department of Labor
and Employment at least one month prior to the intended date of retrenchment;
(3) That the employer pays the retrenched employees separation pay equivalent to one month pay
or at least ½ month pay for every year of service, whichever is higher;
(4) That the employer exercises its prerogative to retrench employees in good faith for the
advancement of its interest and not to defeat or circumvent the employees' right to security of
tenure; and
(5) That the employer used fair and reasonable criteria in ascertaining who would be dismissed and
who would be retained among the employees, such as status, x x x efficiency, seniority, physical
fitness, age, and financial hardship for certain workers.28
Applying the above-stated requisites for a valid retrenchment in the case at bar, it is apparent that the first,
fourth and fifth requirements were complied with by respondent’s employer. However, the second and third
requisites were absent when Petrocon terminated the services of respondent.
As aptly found by the NLRC and justly sustained by the CA, Petrocon exercised its prerogative to retrench its
employees in good faith and the considerable reduction of work allotments of Petrocon by Saudi Aramco was
sufficient basis for Petrocon to reduce the number of its personnel, thus:
Moreover, from the standard form of employment contract relied upon by the Labor Arbiter, it is clear that
unilateral cancellation (sic) may be effected for "legal, just and valid cause or causes." Clearly, contrary to the
Labor Arbiter’s perception, the enumerated causes for employment termination by the employer in the
standard form of employment contract is not exclusive in the same manner that the listed grounds for
termination by the employer is not exclusive. As pointed out above, under Sec. 10 of RA 8042, it is clear that
termination of employment may be for just, valid or authorized cause as defined by law or contract.
Retrenchment being indubitably a legal and authorized cause may be availed of by the respondent.
From the records, it is clearly shown that there was a drastic reduction in Petrocon’s 1998 work allocation
from 250,000 man-hours to only 80,000 man-hours. Under these circumstances over which respondent’s
principal, Petrocon had no control, it was clearly a valid exercise of management prerogative to reduce
personnel particularly those without projects to work on. To force Petrocon to continue maintaining all its
workers even those without projects is tantamount to oppression. "The determination to cease operation is a
prerogative of management which the state does not usually interfere with as no business or undertaking
LABOR-1 Batch 1
must be required to continue at a loss simply because it has to maintain its employees in employment. Such
an act would be tantamount to a taking of property without due process of law. (Industrial Timber Corp. vs.
NLRC, 273 SCRA 200)29
As to complying with the fifth requirement, the CA was correct when it ruled that:
As to the fifth requirement, the NLRC considered the following criteria fair and reasonable in ascertaining who
would be dismissed and who would be retained among the employees; (i) less preferred status; (ii) efficiency
rating; (iii) seniority; and (iv) proof of claimed financial losses.
The primary reason for respondent’s termination is lack of work project specifically related to his expertise as
piping designer. Due to the highly specialized nature of Logarta’s job, we find that the availability of work and
number of allocated man-hours for pipeline projects are sufficient and reasonable criteria in determining who
would be dismissed and who would be retained among the employees. Consequently, we find the criterion of
less preferred status and efficiency rating not applicable.
The list of terminated employees submitted by Petrocon, shows that other employees, with the same
designation as Logarta’s (Piping Designer II), were also dismissed. Terminated, too, were employees
designated as Piping Designer I and Piping Designer. Hence, employees whose job designation involves
pipeline works were without bias terminated.
As to seniority, at the time the notice of termination was given to him, Logarta’s employment was eight (8)
months, clearly, he has not accumulated sufficient years to claim seniority.
As to proof of claimed financial losses, the NLRC itself has recognized the drastic reduction of Petrocon’s
work allocation, thereby necessitating the retrenchment of some of its employees.30
As for the notice requirement, however, contrary to petitioner’s contention, proper notice to the DOLE within
30 days prior to the intended date of retrenchment is necessary and must be complied with despite the fact
that respondent is an overseas Filipino worker. In the present case, although respondent was duly notified of
his termination by Petrocon 30 days before its effectivity, no allegation or proof was advanced by petitioner to
establish that Petrocon ever sent a notice to the DOLE 30 days before the respondent was terminated. Thus,
this requirement of the law was not complied with.
Also, petitioner’s contention that respondent freely consented to his dismissal is unsupported by substantial
evidence. Respondent’s recourse of finding a new employer during the 30-day period prior to the effectivity of
his dismissal and eventual return to the Philippines is but logical and reasonable under the circumstances.
Faced with the eventuality of his termination from employment, it is understandable for respondent to seize
the opportunity to seek for other employment and continue working in Saudi Arabia.
Moreover, petitioner’s insistence that the case of Jariol v. IMS should be applied in the present case is
untenable. Being a mere decision of the NLRC, it could not be considered as a precedent warranting its
application in the case at bar. Suffice it to state that although Article 8 of the Civil Code31 recognizes judicial
decisions, applying or interpreting statutes as part of the legal system of the country, such level of recognition
is not afforded to administrative decisions.32
Anent the proper amount of separation pay to be paid to respondent, petitioner maintains that respondent was
paid the appropriate amount as separation pay. However, a perusal of his Payroll Check Details,33 clearly
reveals that what he received was his compensation for the month prior to his departure, and hence, was
Page 68 of 69
justly due to him as his salary. Furthermore, the amounts which he received as his "End of Contract Benefit"
and "Other Earning/Allowances: for July 1998"34 form part of his wages/salary, as such, cannot be considered
as constituting his separation pay.1âwphi1

Verily, respondent is entitled to the payment of his separation pay. However, this Court disagrees with the
conclusion of the Labor Arbiter, the NLRC and the CA, that respondent should be paid his separation pay in
accordance with the provision of Section 10 of R.A. No. 8042. A plain reading of the said provision clearly
reveals that it applies only to an illegally dismissed overseas contract worker or a worker dismissed from
overseas employment without just, valid or authorized cause, the pertinent portion of which 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, x x x

In the case at bar, notwithstanding the fact that respondent’s termination from his employment was
procedurally infirm, having not complied with the notice requirement, nevertheless the same remains to be for
a just, valid and authorized cause, i.e., retrenchment as a valid exercise of

management prerogative. To stress, despite the employer’s failure to comply with the one-month notice to the
DOLE prior to respondent’s termination, it is only a procedural infirmity which does not render the
retrenchment illegal. In Agabon v. NLRC,35 this Court ruled that when the dismissal is for a just cause, the
absence of proper notice should not nullify the dismissal or render it illegal or ineffectual. Instead, the
employer should indemnify the employee for violation of his statutory rights.36

Consequently, it is Article 283 of the Labor Code and not Section 10 of R.A. No. 8042 that is controlling. Thus,
respondent is entitled to payment of separation pay equivalent to one (1) month pay, or at least one-half (1/2)
month pay for every year of service, whichever is higher. Considering that respondent was employed by
Petrocon for a period of eight (8) months, he is entitled to receive one (1) month pay as separation pay. In
addition, pursuant to current jurisprudence,37 for failure to fully comply with the statutory due process of
sufficient notice, respondent is entitled to nominal damages in the amount ₱50,000.00.

WHEREFORE, premises considered, the petition is DENIED. The Decision dated January 8, 2004 and the
Resolution dated May 12, 2004 of the Court of Appeals are AFFIRMED with MODIFICATIONS. Petitioner
is ORDERED to pay Roel P. Logarta one (1) month salary as separation pay and ₱50,000.00 as nominal
damages.

SO ORDERED.

LABOR-1 Batch 1 Page 69 of 69