Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 71813               July 20, 1987

ROSALINA PEREZ ABELLA/HDA. DANAO-RAMONA, petitioners,

vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, ROMEO QUITCO and RICARDO
DIONELE, SR., respondents.

PARAS, J.:

This is a petition for review on certiorari of the April 8, 1985 Resolution of the Ministry of Labor and Employment
affirming the July 16, 1982 Decision of the Labor Arbiter, which ruled in favor of granting separation pay to private
respondents.

On June 27, 1960, herein petitioner Rosalina Perez Abella leased a farm land in Monteverde, Negros Occidental,
known as Hacienda Danao-Ramona, for a period of ten (10) years, renewable, at her option, for another ten (10)
years (Rollo, pp. 16-20).

On August 13, 1970, she opted to extend the lease contract for another ten (10) years (Ibid, pp. 26-27).

During the existence of the lease, she employed the herein private respondents. Private respondent Ricardo
Dionele, Sr. has been a regular farm worker since 1949 and he was promoted to Cabo in 1963. On the other hand,
private respondent Romeo Quitco started as a regular employee in 1968 and was promoted to Cabo in November
of the same year.

Upon the expiration of her leasehold rights, petitioner dismissed private respondents and turned over the hacienda
to the owners thereof on October 5, 1981, who continued the management, cultivation and operation of the farm
(Rollo, pp. 33; 89).

On November 20, 1981, private respondents filed a complaint against the petitioner at the Ministry of Labor and
Employment, Bacolod City District Office, for overtime pay, illegal dismissal and reinstatement with backwages.
After the parties had presented their respective evidence, Labor Arbiter Manuel M. Lucas, Jr., in a Decision dated
July 16, 1982 (Ibid, pp. 29-31), ruled that the dismissal is warranted by the cessation of business, but granted the
private respondents separation pay. Pertinent portion of the dispositive portion of the Decision reads:

In the instant case, the respondent closed its business operation not by reason of business reverses or
losses. Accordingly, the award of termination pay in complainants' favor is warranted.

WHEREFORE, the respondent is hereby ordered to pay the complainants separation pay at the rate of half-
month salary for every year of service, a fraction of six (6) months being considered one (1) year. (Rollo pp.
29-30)

On appeal on August 11, 1982, the National Labor Relations Commission, in a Resolution dated April 8, 1985 (Ibid,
pp. 3940), affirmed the decision and dismissed the appeal for lack of merit.

On May 22, 1985, petitioner filed a Motion for Reconsideration (Ibid, pp. 41-45), but the same was denied in a
Resolution dated June 10, 1985 (Ibid, p. 46). Hence, the present petition (Ibid, pp. 3-8).

The First Division of this Court, in a Resolution dated September 16, 1985, resolved to require the respondents to
comment (Ibid, p. 58). In compliance therewith, private respondents filed their Comment on October 23, 1985 ( Ibid,
pp. 53-55); and the Solicitor General on December 17, 1985 (Ibid, pp. 71-73-B).

On February 19, 1986, petitioner filed her Consolidated Reply to the Comments of private and public respondents
(Ibid, pp. 80-81).

The First Division of this Court, in a Resolution dated March 31, 1986, resolved to give due course to the petition;
and to require the parties to submit simultaneous memoranda (Ibid., p. 83). In compliance therewith, the Solicitor
General filed his Memorandum on June 18, 1986 (Ibid, pp. 89-94); and petitioner on July 23, 1986 (Ibid, pp. 96-
194).

The petition is devoid of merit.

The sole issue in this case is —

WHETHER OR NOT PRIVATE RESPONDENTS ARE ENTITLED TO SEPARATION PAY.

Petitioner claims that since her lease agreement had already expired, she is not liable for payment of separation
pay. Neither could she reinstate the complainants in the farm as this is a complete cessation or closure of a
business operation, a just cause for employment termination under Article 272 of the Labor Code.

On the other hand, the legal basis of the Labor Arbiter in granting separation pay to the private respondents is
Batas Pambansa Blg. 130, amending the Labor Code, Section 15 of which, specifically provides:

Sec 15 Articles 285 and 284 of the Labor Code are hereby amended to read as follows:

x x x           x x x          x x x

Art. 284. 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 operation of the establisment 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 Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall
be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay
for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of
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 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 one (1) whole year. 1avvphi1

There is no question that Article 284 of the Labor Code as amended by BP 130 is the law applicable in this case.

Article 272 of the same Code invoked by the petitioner pertains to the just causes of termination. The Labor Arbiter
does not argue the justification of the termination of employment but applied Article 284 as amended, which
provides for the rights of the employees under the circumstances of termination.

Petitioner then contends that the aforequoted provision violates the constitutional guarantee against impairment of
obligations and contracts, because when she leased Hacienda Danao-Ramona on June 27, 1960, neither she nor
the lessor contemplated the creation of the obligation to pay separation pay to workers at the end of the lease.

Such contention is untenable.

This issue has been laid to rest in the case of Anucension v. National Labor Union (80 SCRA 368-369 [1977])
where the Supreme Court ruled:

It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not absolute
and unqualified. The prohibition is general, affording a broad outline and requiring construction to fill in the
details. The prohibition is not to read with literal exactness like a mathematical formula for it prohibits
unreasonable impairment only. In spite of the constitutional prohibition the State continues to possess
authority to safeguard the vital interests of its people. Legislation appropriate to safeguard said interest may
modify or abrogate contracts already in effect. For not only are existing laws read into contracts in order to
fix the obligations as between the parties but the reservation of essential attributes of sovereign power is
also read into contracts as a postulate of the legal order. All contracts made with reference to any matter
that is subject to regulation under the police power must be understood as made in reference to the possible
exercise of that power. Otherwise, important and valuable reforms may be precluded by the simple device of
entering into contracts for the purpose of doing that which otherwise maybe prohibited. ...

In order to determine whether legislation unconstitutionally impairs contract of obligations, no unchanging

yardstick, applicable at all times and under all circumstances, by which the validity of each statute may be
measured or determined, has been fashioned, but every case must be determined upon its own
circumstances. Legislation impairing the obligation of contracts can be sustained when it is enacted for the
promotion of the general good of the people, and when the means adopted must be legitimate, i.e. within
the scope of the reserved power of the state construed in harmony with the constitutional limitation of that
power. (Citing Basa vs. Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas
[FOITAF] [L-27113], November 19, 1974; 61 SCRA 93,102-113]).

The purpose of Article 284 as amended is obvious-the protection of the workers whose employment is terminated
because of the closure of establishment and reduction of personnel. Without said law, employees like private
respondents in the case at bar will lose the benefits to which they are entitled — for the thirty three years of service
in the case of Dionele and fourteen years in the case of Quitco. Although they were absorbed by the new
management of the hacienda, in the absence of any showing that the latter has assumed the responsibilities of the
former employer, they will be considered as new employees and the years of service behind them would amount to
nothing.

Moreover, to come under the constitutional prohibition, the law must effect a change in the rights of the parties with
reference to each other and not with reference to non-parties.
As correctly observed by the Solicitor General, Article 284 as amended refers to employment benefits to farm hands
who were not parties to petitioner's lease contract with the owner of Hacienda Danao-Ramona. That contract cannot
have the effect of annulling subsequent legislation designed to protect the interest of the working class.

In any event, it is well-settled that in the implementation and interpretation of the provisions of the Labor Code and
its implementing regulations, the workingman's welfare should be the primordial and paramount consideration.
(Volshel Labor Union v. Bureau of Labor Relations, 137 SCRA 43 [1985]). It is the kind of interpretation which gives
meaning and substance to the liberal and compassionate spirit of the law as provided for in Article 4 of the New
Labor Code which states that "all doubts in the implementation and interpretation of the provisions of this Code
including its implementing rules and regulations shall be resolved in favor of labor." The policy is to extend the
applicability of the decree to a greater number of employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and protection to labor. (Sarmiento v.
Employees Compensation Commission, 144 SCRA 422 [1986] citing Cristobal v. Employees Compensation
Commission, 103 SCRA 329; Acosta v. Employees Compensation Commission, 109 SCRA 209).

PREMISES CONSIDERED, the instant petition is hereby DISMISSED and the July 16, 1982 Decision of the Labor
Arbiter and the April 8, 1985 Resolution of the Ministry of Labor and Employment are hereby AFFIRMED.

SO ORDERED.

Teehankee, C.J., Yap, Fernando, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Feliciano, Gancayco, Padilla,
Bidin, Sarmiento and Cortes, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-50999 March 23, 1990

JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,

vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO AGUAS, and
F.E. ZUELLIG (M), INC., respondents.

Raul E. Espinosa for petitioners.

Lucas Emmanuel B. Canilao for petitioner A. Manuel.

Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.:

This is a petition for certiorari seeking to modify the decision of the National Labor Relations Commission in NLRC
Case No. RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres, Complainants-Appellants, v. F.E. Zuellig
(M), Inc., Respondent-Appellee" and NLRC Case No. RN- IV-20855-78-T entitled, "Amancio Manuel, Complainant-
Appellant, v. F.E. Zuellig (M), Inc., Respondent-Appellee," which dismissed the appeal of petitioners herein and in
effect affirmed the decision of the Labor Arbiter ordering private respondent to pay petitioners separation pay
equivalent to their one month salary (exclusive of commissions, allowances, etc.) for every year of service.

The antecedent facts are as follows:

Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the Department of Labor
(Regional Office No. 4) an application seeking clearance to terminate the services of petitioners Jose Songco,
Romeo Cipres, and Amancio Manuel (hereinafter referred to as petitioners) allegedly on the ground of retrenchment
due to financial losses. This application was seasonably opposed by petitioners alleging that the company is not
suffering from any losses. They alleged further that they are being dismissed because of their membership in the
union. At the last hearing of the case, however, petitioners manifested that they are no longer contesting their
dismissal. The parties then agreed that the sole issue to be resolved is the basis of the separation pay due to
petitioners. Petitioners, who were in the sales force of Zuellig received monthly salaries of at least P40,000. In
addition, they received commissions for every sale they made.

The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees Association, of
which petitioners are members, contains the following provision (p. 71, Rollo):

ARTICLE XIV — Retirement Gratuity

Section l(a)-Any employee, who is separated from employment due to old age, sickness, death or
permanent lay-off not due to the fault of said employee shall receive from the company a retirement
gratuity in an amount equivalent to one (1) month's salary per year of service. One month
of salary as used in this paragraph shall be deemed equivalent to the salary at date of retirement;
years of service shall be deemed equivalent to total service credits, a fraction of at least six months
being considered one year, including probationary employment. (Emphasis supplied)

On the other hand, Article 284 of the Labor Code then prevailing provides:

Art. 284. Reduction of personnel. — The termination of employment of any employee due to the
installation of labor saving-devices, redundancy, retrenchment to prevent losses, and other similar
causes, shall entitle the employee affected thereby to separation pay. In case of termination due to
the installation of labor-saving devices or redundancy, the separation pay shall be equivalent to one
(1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case
of retrenchment to prevent losses and other similar causes, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher.
A fraction of at least six (6) months shall be considered one (1) whole year. (Emphasis supplied)

In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code provide:

xxx
 Sec. 9(b). Where the termination of employment is due to retrechment initiated by the employer to
prevent losses or other similar causes, or where the employee suffers from a disease and his
continued employment is prohibited by law or is prejudicial to his health or to the health of his co-
employees, the employee shall be entitled to termination pay equivalent at least to his one month
salary, or to one-half month pay for every year of service, whichever is higher, a fraction of at least
six (6) months being considered as one whole year.

xxx

Sec. 10. Basis of termination pay. — The computation of the termination pay of an employee as
provided herein shall be based on his latest salary rate, unless the same was reduced by the
employer to defeat the intention of the Code, in which case the basis of computation shall be the
rate before its deduction. (Emphasis supplied)

On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads (p. 78, Rollo):

RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby, ordered to pay the

complainants separation pay equivalent to their one month salary (exclusive of commissions,
allowances, etc.) for every year of service that they have worked with the company.

SO ORDERED.

The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of merit.

Hence, the present petition.

On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and Withdrawal of Petition
dated April 7, 1980 filed by petitioner Romeo Cipres, based on the ground that he wants "to abide by the decision
appealed from" since he had "received, to his full and complete satisfaction, his separation pay," resolved to dismiss
the petition as to him.

The issue is whether or not earned sales commissions and allowances should be included in the monthly salary of
petitioners for the purpose of computation of their separation pay.

The petition is impressed with merit.

Petitioners' position was that in arriving at the correct and legal amount of separation pay due them, whether under
the Labor Code or the CBA, their basic salary, earned sales commissions and allowances should be added
together. They cited Article 97(f) of the Labor Code which includes commission as part on one's salary, to wit;

(f) 'Wage' paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece,
or commission basis, or other method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered, and includes the fair and reasonable value, as determined by
the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to
the employee. 'Fair reasonable value' shall not include any profit to the employer or to any person
affiliated with the employer.

Zuellig argues that if it were really the intention of the Labor Code as well as its implementing rules to include
commission in the computation of separation pay, it could have explicitly said so in clear and unequivocal terms.
Furthermore, in the definition of the term "wage", "commission" is used only as one of the features or designations
attached to the word remuneration or earnings.

Insofar as the issue of whether or not allowances should be included in the monthly salary of petitioners for the
purpose of computation of their separation pay is concerned, this has been settled in the case of Santos v. NLRC,
et al., G.R. No. 76721, September 21, 1987, 154 SCRA 166, where We ruled that "in the computation of backwages
and separation pay, account must be taken not only of the basic salary of petitioner but also of her transportation
and emergency living allowances." This ruling was reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October
27, 1987, 155 SCRA 124 and recently, in Planters Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20,
1989.

We shall concern ourselves now with the issue of whether or not earned sales commission should be included in
the monthly salary of petitioner for the purpose of computation of their separation pay.

Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It has been
repeatedly declared by the courts that where the law speaks in clear and categorical language, there is no room for
interpretation or construction; there is only room for application (Cebu Portland Cement Co. v. Municipality of Naga,
G.R. Nos. 24116-17, August 22, 1968, 24 SCRA 708; Gonzaga v. Court of Appeals, G.R.No. L-2 7455, June
28,1973, 51 SCRA 381). A plain and unambiguous statute speaks for itself, and any attempt to make it clearer is
vain labor and tends only to obscurity. How ever, it may be argued that if We correlate Article 97(f) with Article XIV
of the Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the
Implementing Rules, there appears to be an ambiguity. In this regard, the Labor Arbiter rationalized his decision in
this manner (pp. 74-76, Rollo):

The definition of 'wage' provided in Article 96 (sic) of the Code can be correctly be (sic) stated as a
general definition. It is 'wage ' in its generic sense. A careful perusal of the same does not show any
indication that commission is part of salary. We can say that commission by itself may be
considered a wage. This is not something novel for it cannot be gainsaid that certain types of
employees like agents, field personnel and salesmen do not earn any regular daily, weekly or
monthly salaries, but rely mainly on commission earned.

Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the implementing rules in
conjunction with Articles 273 and 274 (sic) of the Code specifically states that the basis of the
termination pay due to one who is sought to be legally separated from the service is 'his latest salary
rates.

x x x.

Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly salary'.

The above terms found in those Articles and the particular Rules were intentionally used to express
the intent of the framers of the law that for purposes of separation pay they mean to be specifically
referring to salary only.

.... Each particular benefit provided in the Code and other Decrees on Labor has its own pecularities
and nuances and should be interpreted in that light. Thus, for a specific provision, a specific
meaning is attached to simplify matters that may arise there from. The general guidelines in (sic) the
formation of specific rules for particular purpose. Thus, that what should be controlling in matters
concerning termination pay should be the specific provisions of both Book VI of the Code and the
Rules. At any rate, settled is the rule that in matters of conflict between the general provision of law
and that of a particular- or specific provision, the latter should prevail.

On its part, the NLRC ruled (p. 110, Rollo):

From the aforequoted provisions of the law and the implementing rules, it could be deduced that
wage is used in its generic sense and obviously refers to the basic wage rate to be ascertained on a
time, task, piece or commission basis or other method of calculating the same. It does not, however,
mean that commission, allowances or analogous income necessarily forms part of the employee's
salary because to do so would lead to anomalies (sic), if not absurd, construction of the word
"salary." For what will prevent the employee from insisting that emergency living allowance, 13th
month pay, overtime, and premium pay, and other fringe benefits should be added to the
computation of their separation pay. This situation, to our mind, is not the real intent of the Code and
its rules.

We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and Article XIV of the
Collective Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing
Rules, which mention the terms "pay" and "salary", is more apparent than real. Broadly, the word "salary" means a
recompense or consideration made to a person for his pains or industry in another man's business. Whether it be
derived from "salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with it the fundamental
idea of compensation for services rendered. Indeed, there is eminent authority for holding that the words "wages"
and "salary" are in essence synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins vs.
Cromwell, 85 N.Y.S. 839,841,89 App. Div. 481; 38 Am. Jur. 496). "Salary," the etymology of which is the Latin word
"salarium," is often used interchangeably with "wage", the etymology of which is the Middle English word "wagen".
Both words generally refer to one and the same meaning, that is, a reward or recompense for services performed.
Likewise, "pay" is the synonym of "wages" and "salary" (Black's Law Dictionary, 5th Ed.). Inasmuch as the words
"wages", "pay" and "salary" have the same meaning, and commission is included in the definition of "wage", the
logical conclusion, therefore, is, in the computation of the separation pay of petitioners, their salary base should
include also their earned sales commissions.

The aforequoted provisions are not the only consideration for deciding the petition in favor of the petitioners.

We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in the form of
incentives or encouragement, so that the petitioners would be inspired to put a little more industry on the jobs
particularly assigned to them, still these commissions are direct remuneration services rendered which contributed
to the increase of income of Zuellig . Commission is the recompense, compensation or reward of an agent,
salesman, executor, trustees, receiver, factor, broker or bailee, when the same is calculated as a percentage on the
amount of his transactions or on the profit to the principal (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales,
217 Md. 123, 141 A.2d 749, 750). The nature of the work of a salesman and the reason for such type of
remuneration for services rendered demonstrate clearly that commission are part of petitioners' wage or salary. We
take judicial notice of the fact that some salesmen do not receive any basic salary but depend on commissions and
allowances or commissions alone, are part of petitioners' wage or salary. We take judicial notice of the fact that
some salesman do not received any basic salary but depend on commissions and allowances or commissions
alone, although an employer-employee relationship exists. Bearing in mind the preceeding dicussions, if we adopt
the opposite view that commissions, do not form part of wage or salary, then, in effect, We will be saying that this
kind of salesmen do not receive any salary and therefore, not entitled to separation pay in the event of discharge
from employment. Will this not be absurd? This narrow interpretation is not in accord with the liberal spirit of our
labor laws and considering the purpose of separation pay which is, to alleviate the difficulties which confront a
dismissed employee thrown the the streets to face the harsh necessities of life.

Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that should be used in
computing the separation pay, We held that:

The commissions also claimed by petitioner ('override commission' plus 'net deposit incentive') are
not properly includible in such base figure since such commissions must be earned by actual market
transactions attributable to petitioner.

Applying this by analogy, since the commissions in the present case were earned by actual market transactions
attributable to petitioners, these should be included in their separation pay. In the computation thereof, what should
be taken into account is the average commissions earned during their last year of employment.

The final consideration is, in carrying out and interpreting the Labor Code's provisions and its implementing
regulations, the workingman's welfare should be the primordial and paramount consideration. This kind of
interpretation gives meaning and substance to the liberal and compassionate spirit of the law as provided for in
Article 4 of the Labor Code which states that "all doubts in the implementation and interpretation of the provisions of
the Labor Code including its implementing rules and regulations shall be resolved in favor of labor" (Abella v. NLRC,
G.R. No. 71812, July 30,1987,152 SCRA 140; Manila Electric Company v. NLRC, et al., G.R. No. 78763, July
12,1989), and Article 1702 of the Civil Code which provides that "in case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent living for the laborer.

ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent National Labor Relations
Commission is MODIFIED by including allowances and commissions in the separation pay of petitioners Jose
Songco and Amancio Manuel. The case is remanded to the Labor Arbiter for the proper computation of said
separation pay.

SO ORDERED.

Narvasa (Chairman), Cruz, Gancayco and Griño-Aquino, JJ., concur.

 THIRD DIVISION

September 9, 2015

G.R. No. 184397

ROSALINDA G. PAREDES, Petitioner,
vs.
FEED THE CHILDREN PHILIPPINES, INC. and/or DR. VIRGINIA LAO, HERCULES PARADIANG and
BENJAMIN ESCOBIA, Respondents.

DECISION

PERALTA, J.:

For this Court's resolution is a petition for review on certiorari, dated October 23, 2008, of petitioner Rosalinda G.
Paredes, seeking to reverse and set aside the Decision  dated March 25, 2008 and Resolution  dated August 28,
1 2

2008 of the Court of Appeals (CA). The assailed Decision annulled and set aside the rulings of the National Labor
Relations Commission (NLRC) Fourth Division, Cebu City and affirmed the rulings of the Labor Arbiter (LA), which
held that petitioner voluntarily resigned and was not constructively dismissed.

The antecedents are as follows:

Respondent Feed the Children Philippines, Inc. (FTCP) is a nonstock, non-profit, and non-government organization
duly incorporated under the Philippine laws in 1989. Its objective is to provide food, clothing, educational supplies
and other necessities of indigent children worldwide.  Respondents Dr. Virginia Lao, Hercules Paradiang and
3

Benjamin Escobia were members of the FTCP Board of Trustees (Board) and Executive Committee (Execom) of
FTCP. 4

Petitioner Rosalinda Paredes was FTCP's National Director. Her functions and duties include project management,
fund accessing, income generation, financial management, and administration of the organization. She also signed
all the FTCP checks and approved all requisitions and disbursements of FTCP funds.  As per FTCP's By-laws, it
5

was also her duty to execute all resolutions and/or decisions of the Board.6

Petitioner was first hired by FTCP in 1999 as Country Director. Her contract was renewed several times until her
last contract for the period from October 1, 2004 to September 30, 2007. Her initial salary was US$1000.00 and
then later, she was paid 70,000.00 aside from other benefits and allowances. 7

On August 12, 2005, forty-two (42) FTCP employees signed a petition letter addressed to the Board expressing
their complaints against alleged detestable practices of petitioner, to wit: seeking exemption from policies which she
herself had approved; withholding organization funds despite approval of its release; procuring health insurance for
herself without paying her share of the premium; and receiving additional fees contrary to the terms of her contract.
8

The next day, August 13, 2005, the staff of FTCP called Lao to a meeting to submit their petition. They included
Atty. Edgar Chatto, then Chairman of the Board, in the meeting when they realized that it was only her and Escobia
who were present. The group was edgy and demanded for outright solution. However, the three Board members
told them that they should follow a process.9

Petitioner learned from Atty. Chatto that Program Manager Primitivo Fostanes and his co-employees prepared a
petition questioning her leadership and management of FTCP. She filed an administrative complaint against
Fostanes on August 24, 2005, but the same was not acted upon. 10

When the Board convened for a meeting on August 28, 2005, petitioner was not allowed to participate. She was
only allowed to join the meeting after three hours. As ex officio member of the Board and as head of the secretariat,
she was always present in every meeting to discuss her reports, programs and proposals. 11
During the meeting, the Board discussed the animosity between the petitioner and the staff of FTCP and how they
would address the issue since they have inadequate grievance mechanism for issues involving top
management.  According to Lao, petitioner became combative in issuing memos and filing of administrative
12

charges.  Atty. Chatto recounted that when petitioner heard about the protesting senior management and staff, her
13

initial reaction was to resign but then she asked that the complaints be put in writing.  After their discussion, they
14

called the representatives of the complaining staff and petitioner to air their side.

Consequently, the Board decided that: Acting Board Chair Lao will issue a back-to-work memorandum and status
quo to ensure that all the scheduled tasks be accomplished; there will be a Supervisory Team, composing of Lao
and Escobia, that will draw a definite work plan and be compensated; the Supervisory Team will not replace the
functions of the National Director; and FTCP will hire an independent professional management and financial
auditor. 15

Petitioner sent letters to the Board inquiring about the scope of audit. When the Board did not respond, her lawyers
demanded Lao to address petitioner's concerns regarding the management and financial audit and that the manual
of operations be strictly followed.  In another letter, her lawyers informed individual respondents that petitioner
16

raised the legality and propriety of the conduct of the audit, thus, they requested that they desist from conducting
the audit. The letter also indicated that failure to do so would implead them as respondents in a preliminary
injunction case that they would file. 17

While she was at an orientation for local government officials of Surigao del Norte at the Bohol Tropics Resort on
October 24, 2005, petitioner received a phone call from her staff at FTCP that the auditors from SRD & Co. were
already at their office. Lao also called to instruct her that she should meet the auditors and accommodate them. She
refrained from obeying the order and was adamant that she should receive her requested information first. 18

On October 26, 2005, the FTCP management executive committee, headed by petitioner, informed the Board that
they were not afraid of the audit. They wanted due process as provided by the by-laws, manual of operations, and
manual of financial policies and accounting procedures approved by the Board itself. They also inquired about the
meetings and processes of the Execom that they were not aware of. Lastly, they asked for a dialogue to settle their
differences. 19

On the same date, petitioner wrote an electronic mail (e-mail) to Dr. Larry Jones, the founder of Feed the Children
International, Inc. and reported that Paradiang and two members of the Board initiated a surprise and secret audit.
She expressed that the management was upset to the manner of conducting the audit. She also insinuated that
Paradiang was always after her despite steering the organization to development. She intimated that she would
legally protect herself should she be illegally dismissed and that they would seek relief from the harassment by
Paradiang. 20

The Board resolved to suspend petitioner because of her indifferent attitude and unjustified refusal to submit to an
audit.  Before it could be implemented, respondent FTCP received her resignation letter.  In her resignation letter,
21 22

she wrote that she can only serve the organization up to December 31, 2005. She found it no longer tenable to work
with the Board since she had differences with majority of the members regarding resolutions, policies and
procedures. 23

On October 29, 2005, the Board accepted her resignation with the condition that its effectivity be moved to
November 30, 2005. She was not obliged to report for work and FTCP was willing to pay her salary for the month of
November to aid her while she looked for other employment. 24

Petitioner wrote to the members of management and foreign funders informing them that she was no longer
connected with FTCP. She moved out all her belongings and even brought FTCP's documents. 25

On November 2, 2005, petitioner filed a Complaint for illegal dismissal, claiming that she was forced to resign, thus,
was constructively dismissed, and impleaded Lao, Paradiang and Escobia in their personal capacities. 26

Upon failure of the parties to settle amicably, the mandatory conference was terminated.

In her position paper, petitioner alleged that she was not included in the Supervisory Team which performed her
functions and issued memorandum directly to her subordinates. She also alleged that she was excluded from
Execom meetings. 27

Respondents, on the other hand, claimed that petitioner was signatory to all the bank checks of respondent FTCP
and approved all requisitions and disbursements. She received an excess of US$1,000.00 for her salary and did not
return the same. They alleged that petitioner voluntarily resigned from her position and removed all her belongings
from the FTCP. 28

The LA ruled in favor of the respondents, the dispositive portion of the Decision  reads:
29

WHEREFORE, foregoing considered, the case is hereby DISMISSED for lack of merit and judgment is hereby
rendered ordering complainant Rosalinda G. Paredes to pay the following:

1. One Hundred Forty-Three Thousand Six Hundred [F]orty-Six and 73/100 (143,646.73) representing her
accountabilities to respondent FTCP in Philippine Currency;
 2. One Thousand Dollars ($1,000.00) to respondent FTCP representing complainant's accountability in US
Currency;

3. Five Hundred Thousand Pesos (500,000.00) each to respondents Dr. Virginia Lao, Benjamin Escobia and
Hercules Paradiang for moral damages;

4. One Million Pesos (1,000,000.00) to respondent FTCP for damages incurred;

5. One Hundred Thousand Pesos (100,000.00) to respondents collectively for exemplary damages; and

6. Attorney's Fees to 10% of the total award.

SO ORDERED. 30

Undaunted, petitioner appealed the decision to the NLRC. In its Decision  dated March 28, 2007, the NLRC
31

reversed and set aside the decision of the LA and ruled in her favor, the dispositive portion of which states:

WHEREFORE, premises considered, the decision of the Labor Arbiter dated 08 November 2006
is REVERSED and SET aside and a new one is entered, to wit:

1. Ordering respondent Feed the Children Philippines, Inc. to pay the complainant of her salaries and
allowances corresponding to the unexpired portion of her contract in the aggregate amount of One Million
Six Hundred Eighty-Five Thousand Nine Hundred and 00/100 (1,685,900.00), broken down as follows:

a. Salaries corresponding to the unexpired portion of the contract -1,610,000.00

b. Transportation allowances - 29,900.00

c. Representation allowances - 46,000.00

Total -1,685,900.00;

And

2. Ordering respondent Feed the Children Philippines, Inc. to pay complainant of moral damages in the
amount of One Hundred Thousand Pesos (100,000.00); and exemplary damages in the amount of One
Hundred Thousand Pesos (100,000.00).

Respondents Dr. Virginia Lao, Hercules Paradiang and Benjamin Escobia are absolved from any liability for
lack of legal basis.

SO ORDERED. 32

In a Resolution  dated June 14, 2007, the NLRC dismissed the motion for reconsideration of the respondents. Thus,
33

respondents filed before the CA a petition for certiorari. The CA ruled for the respondents. The fallo of said decision
reads:

WHEREFORE, the Decision dated March 28, 2007 and the Resolution dated June 14, 2007, of the National Labor
Relations Commission (NLRC), Fourth Division, Cebu City, in NLRC Case No. V- 000074-2007,
are NULLIFIED and a new one rendered as follows:

1. Declaring private respondent to have voluntarily resigned from her employment/consultancy with FTCP;

2. Directing private respondent to pay FTCP

a. Thirty-four thousand four hundred thirty-eight pesos and 37/100 (P34,438.37) for her unpaid
loans;

b. One hundred nine thousand two hundred eight pesos and 36/100 (109,208.36) respecting her
disbursement and withdrawals from the FTCP Provident Fund.

Costs against private respondent.

SO ORDERED. 34

The CA did not find any valid reason to disturb its decision, hence, it denied petitioner’s Motion for
Reconsideration. 35

In this recourse, petitioner raises the following issues for this Court's consideration:
 I. The CA contravenes the law and jurisprudence when it granted the petition for certiorari that raised
questions factual in nature and when it sweepingly applied the ruling in St. Martin Funeral Homes to justify
its act of delving into the findings of the NLRC which were outside the scope of extraordinary remedy
of certiorari.

II. The CA grossly contradicts the law and jurisprudence on constructive dismissal and ignored,
misunderstood or misinterpreted cogent facts and circumstances which, if considered, would change the
outcome of the case when it ruled that petitioner voluntarily resigned and was not constructively dismissed.

III. The CA effectively reverses the law and jurisprudence on damages and recognized money claims in
labor cases when it condemned petitioner to pay respondents' claims for damages that were not duly
proven by the latter and that clearly did not arise from an employer-employee relationship.

IV. The CA violates the Constitution, the law and the prevailing jurisprudence when it resolved the lingering
doubts that remain in the present case, as those arising from evidence and from interpretation of
agreements and writings, against labor.

The present petition is partly meritorious.

It is elementary that this Court is not a trier of facts, and only errors of law are generally reviewed in petitions for
review on certiorari. Judicial review of labor cases does not go beyond the evaluation of the sufficiency of the
evidence upon which its labor officials' findings rest. As such, the findings of facts and conclusion of the NLRC are
generally accorded not only great weight and respect but even clothed with finality and deemed binding on this
Court as long as they are supported by substantial evidence. 36

However, if the factual findings of the LA and the NLRC are conflicting, as in this case, the reviewing court may
delve into the records and examine for itself the questioned findings.  The exception, rather than the general rule,
37

applies in the present case since the LA and the CA found facts supporting the conclusion that petitioner was not
constructively dismissed, while the NLRC’s factual findings contradicted the LA’s findings.

Under this situation, such conflicting factual findings are not binding on us, and we retain the authority to pass on
the evidence presented and draw conclusions therefrom.

After judicious review on the records of the case, this Court deems it proper to disregard the findings of fact of the
NLRC. This Court finds that the NLRC committed grave abuse of discretion when it ruled for the petitioner without
substantial evidence to support its findings of facts and conclusion.

Petitioner, relying in the principle of finality and conclusiveness of the decisions of labor tribunals, faults the CA for
reversing the findings of the NLRC and affirming the factual findings of the LA that she voluntarily resigned. She
averred that the CA erred when it applied the ruling in the case of St. Martin Funeral Homes v. NLRC  to justify its
38

inquiring into the findings of the NLRC which was outside the scope of extraordinary remedy of certiorari. She
posited that NLRC's findings cannot be delved into without first declaring the decision itself to have been issued with
grave abuse of discretion. 39

Courts generally accord great respect and finality to factual findings of administrative agencies, like labor tribunals,
in the exercise of their quasijudicial function. However, this doctrine espousing comity to administrative findings of
facts are not infallible and cannot preclude the courts from reviewing and, when proper, disregarding these findings
of facts when shown that the administrative body committed grave abuse of discretion. 40

It is settled that in a special civil action for certiorari under Rule 65, the issues are limited to errors of jurisdiction or
grave abuse of discretion. However, in labor cases elevated to it via petition for certiorari, the CA is empowered to
evaluate the materiality and significance of the evidence alleged to have been capriciously, whimsically, or
arbitrarily disregarded by the NLRC in relation to all other evidence on record. 41

The CA can grant this prerogative writ when the factual findings complained of are not supported by the evidence
on record; when it is necessary to prevent a substantial wrong or to do substantial justice; when the findings of the
NLRC contradict those of the LA; and when necessary to arrive at a just decision of the case.  To make this finding,
42

the CA necessarily has to view the evidence if only to determine if the NLRC ruling had basis in evidence. 43

Contrary to petitioner's contention, the CA, by express legal mandate and pursuant to its equity jurisdiction, may
review factual findings and evidence of the parties to determine whether the NLRC gravely abused its discretion in
its findings.  Since this Court finds that the findings of the LA and NLRC contradicting and that the findings of NLRC
44

are not supported by the evidence on record, we rule that it is within the CA’s power to review the factual findings of
the NLRC. Accordingly, this Court does not find erroneous the course that the CA took in resolving that petitioner
was not constructively dismissed.

This Court, in turn, has the same authority to sift through the factual findings of both the CA and the NLRC in the
event of their conflict.  This Court, therefore, is not precluded from reviewing the factual issues when there are
45

conflicting findings by the Labor Arbiter, the NLRC and the Court of Appeals. 46

Since petitioner admittedly resigned, it is incumbent upon her to prove that her resignation was involuntary and that
it was actually a case of constructive dismissal with clear, positive and convincing evidence. 47
Petitioner alleged that she was forced to resign by Lao, Paradiang and Escobia. For her, it was the overbearing and
prejudiced attitude towards her by individual respondents that rendered her continued employment impossible,
unreasonable or unlikely. She maintained that the prevailing working environment compelled her to disassociate
with FTCP. She recounted that the individual respondents deliberately excluded her from important meetings
despite being the chief executive officer and a fixture to all Board meetings.

Petitioner cited the August 28, 2005 Board meeting and a subsequent Execom meeting where she was apparently
banished as proof of respondents' discrimination. She emphasized in all her pleadings that, aside from it being
provided by the by-laws, she believed that her presence at all Board meetings cannot be dispensed with since it
was through her effort that the Board of Trustees became functional. For her, she was isolated and singled out. She
claimed that these circumstances clearly denoted that the actions of the respondents were motivated by
discrimination and made in bad faith.

Case law holds that constructive dismissal occurs when there is cessation of work because continued employment
is rendered impossible, unreasonable or unlikely; when there is a demotion in rank or diminution in pay or both; or
when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to the employee.  The 48

test is whether a reasonable person in the employee's position would have felt compelled to give up his position
under the circumstances. 49

In this case, petitioner cannot be deemed constructively dismissed. She failed to present clear and positive
evidence that respondent FTCP, through its Board of Trustees, committed acts of discrimination, insensibility, or
disdain towards her which rendered her continued employment unbearable or forced her to terminate her
employment from the respondent. As settled, bare allegations of constructive dismissal, when uncorroborated by
the evidence on record, cannot be given credence. 50

It is highly unlikely and incredible for someone of petitioner’s position and educational attainment to so easily
succumb to individual respondents’ alleged harassment without defending herself. In fact, records reveal that she
wrote directly to Jones when her contract was not to be renewed and whenever she felt threatened. She
vehemently opposed the audit and openly disobeyed the Board when she was not informed of the scope. She,
along with other management staff, questioned the meetings of the Execom that they were not informed.  It is also
51

noted that her husband is a lawyer and that she employed lawyers who sent a series of demand letters to the Board
to provide her the details of the audit and even ordered the Board to desist from pursuing the audit.

There was no urgency for petitioner to submit her resignation letter. In fact, the day before it was given, she and
other management staff requested for a dialogue with the Board to address the issue regarding the management
and financial audit.  It is, therefore, improbable that her continued employment is rendered impossible or
52

unreasonable.

Records do not show any demotion in rank or a diminution in pay made against her. Petitioner claimed that the fact
that the Supervisory Team performed her functions and issued memorandum directly to her subordinates, and her
being barred from subsequent Execom meetings constituted constructive dismissal. However, there was no
evidence to corroborate her claim of usurpation. She did not present evidence of the supposed direct memorandum
issued by the Supervisory Team to the staff. Aside from the minutes of the September 29, 2005 meeting of the
Execom, there was no other proof of petitioner's exclusion from other subsequent Execom meetings.

We find that, apart from her self-serving and uncorroborated allegations, petitioner did not present any substantial
evidence of constructive dismissal. She was not able to present a single witness to corroborate her claims of
harassment by Lao, Paradiang and Escobia.

Petitioner supported her claim with the minutes of the August 28, 2005 meeting and another minutes of the meeting
of the Execom that she was excluded. She argued that her sudden exclusion from board meetings despite
established practice constituted grave abuse of managerial rights of the respondent FTCP.

We are not persuaded that her exclusion to the meeting constituted discrimination or harassment. A careful perusal
of the minutes would reveal that the Board convened to deliberate on the solution to the apparent conflict between
petitioner and the staff since they have insufficient grievance mechanism for issues involving top management. She
could not fault the Board to not include her in that particular meeting since she was a party involved and to avoid
possible influence that she could have exerted.

Petitioner presented documents like e-mail correspondences with Paradiang about the non-renewal of her contract
earlier in her employment, e-mail correspondences to Jones about harassment towards her and specifically
mentioning Paradiang, demand letters from her and her lawyers, her resignation letter, and the board resolution
accepting her resignation. These do not verify that respondents committed discrimination or disdain towards her.
Hence, her allegations are self-serving and uncorroborated and should not be given evidentiary weight.

On the other hand, respondent FTCP presented a letter  dated August 28, 2005 written by petitioner addressed to
53

the Board wherein she presented her side about the petition of the employees against her. She also praised the
Board for strengthening the organization, for putting valuable policies in the organization, and for opening the
organization to new partnerships.

In another letter  dated September 6, 2005, she reported that on the same date as the August 28 Board meeting,
54

she and Fostanes met to discuss concerns and apologized for what happened and other members of management
also apologized and accepted the reconciliation that she extended to them.  She also reported that during the
1âwphi1
September 5, 2005 General Staff meeting, the issues were discussed, feelings and sentiments were shared, and
concluded with a firm commitment from everyone to rebuild the good name of FTCP and work together to enhance
its system and maintain its integrity.

The letters did not mention nor hinted that petitioner protested about being excluded from the meeting which she
has considered as a hearing against her. It did not even reveal that there was undue prejudice from individual
respondents. Records are bereft of proof that she even attempted to address the Board about the supposed
discrimination or disdain by individual respondents. It is only upon filing of the illegal dismissal case that she alleged
that she felt that she was discriminated against and treated with disdain by respondents.

Respondents presented an affidavit and a police blotter  attesting that some employees who signed in the August
55

12 letter-petition were intimidated by the secretary of petitioner’s lawyer-husband to sign a recantation. She refuted
the same by alleging that they could have not known that it was recantation when it appeared in the blotter that they
only saw the page they were made to sign. Respondents also presented an affidavit  attesting that petitioner
56

intimidated an employee by telling her that she would file suits against those who defamed her when the employee
refused to recant her signature in the petition against her.

For petitioner, the fact that the effectivity of her resignation was moved to November showed the eagerness of Lao,
Paradiang and Escobia to get rid of her. 57

We held that the act of the employer moving the effectivity of the resignation is not an act of harassment. The 30-
day notice requirement for an employee’s resignation is actually for the benefit of the employer who has the
discretion to waive such period. Its purpose is to afford the employer enough time to hire another employee if
needed and to see to it that there is proper turn-over of the tasks which the resigning employee may be handling. 58

Such rule requiring an employee to stay or complete the 30-day period prior to the effectivity of his resignation
becomes discretionary on the part of management as an employee who intends to resign may be allowed a shorter
period before his resignation becomes effective. 59

Thus, the act of respondents moving the effectivity date of petitioner’s resignation to a date earlier than what she
had stated cannot be deemed malicious. This cannot be viewed as an act of harassment but merely the exercise of
respondent's management prerogative. We cannot expect employers to maintain in their employ employees who
intend to resign, just so the latter can have continuous work as they look for a new source of income.

Petitioner alleged that the CA erred when it ruled that she should pay respondents' claims for damages. She
maintained that they were not duly proven and that they clearly did not arise from an employer-employee
relationship.

This Court held that the "money claims of workers" referred to in Article 217  of the Labor Code embraces money
60

claims which arise out of or in connection with the employer-employee relationship, or some aspect or incident of
such relationship. 61

Applying the rule of noscitur a sociis in clarifying the scope of Article 217, it is evident that paragraphs 1 to 5 refer to
cases or disputes arising out of or in connection with an employer-employee relationship. In other words, the money
claims within the original and exclusive jurisdiction of labor arbiters are those which have some reasonable causal
connection with the employer-employee relationship. 62

This claim is distinguished from cases of actions for damages where the employer-employee relationship is merely
incidental and the cause of action proceeds from a different source of obligation. Thus, the regular courts have
jurisdiction where the damages claimed for were based on: tort, malicious prosecution, or breach of contract, as
when the claimant seeks to recover a debt from a former employee or seeks liquidated damages in the enforcement
of a prior employment contract. 63

By the designating clause "arising from the employer-employee relations," Article 217 applies with equal force to the
claim of an employer for actual damages against its dismissed employee, where the basis for the claim arises from
or is necessarily connected with the fact of termination, and should be entered as a counterclaim in the illegal
dismissal case. 64

In this case, the CA erred in awarding 34,438.37 for petitioner’s unpaid debt to respondents. The claim for recovery
of a debt has no reasonable causal connection with any of the claims provided for in Article 217. The fact that the
transaction happened at the time they were employer and employee did not negate the civil jurisdiction of trial court.
Hence, it is erroneous for the LA and the CA to rule on such claim arising from a different source of obligation and
where the employer-employee relationship was merely incidental.

Likewise, the CA erred in awarding 109,208.36 for the reimbursement of the FTCP Provident Fund allegedly
withdrawn by petitioner. Although it was entered by the respondents in its counterclaim, this claim does not arise
from or is necessarily connected with the fact of termination. It also had no reasonable causal connection with
employer-employee relationship.

Lastly, petitioner maintained that the CA erred when it resolved the lingering doubt in the present case against
labor. She alleged that the CA violated the Constitution, the law, and jurisprudence.
We held that the law and jurisprudence guarantee security of tenure to every employee. However, in protecting the
rights of the workers, the law does not authorize the oppression or self-destruction of the employer. Social justice
does not mean that every labor dispute shall automatically be decided in favor of labor. Thus, the Constitution and
the law equally recognize the employer’s right and prerogative to manage its operation according to reasonable
standards and norms of fair play.65

It is settled that the law serves to equalize the unequal. The labor force is a special class that is constitutionally
protected because of the inequality between capital and labor. This constitutional protection presupposes that the
labor force is weak. However, the level of protection to labor should vary from case to case; otherwise, the state
might appear to be too paternalistic in affording protection to labor.  Petitioner could not expect to have the same
66

level of ardent protection that the laws bestow upon a lowly laborer be given to her, a high ranking officer of
respondent FTCP. As proven, she was considered on equal footing with her employer and even had the occasion to
demand the renewal of her contract by sending an e-mail to the organization’s founder. 67

We cannot subscribe to petitioner's allegation that the CA ruled against labor when it resolved the factual issues of
the case. As discussed, it is well within the powers and jurisdiction of the CA to evaluate the evidence alleged to
have been capriciously, whimsically, or arbitrarily disregarded by the NLRC, or as in the present case, for
considering petitioner's bare allegations without support of substantial evidence. This Court finds that the CA did not
violate the Constitution, the law and jurisprudence. Hence, the resolution of the doubt as to whether petitioner
voluntarily resigned or was constructively dismissed based on the evidence on record was proper and was not
against labor.

WHEREFORE, the petition for review on certiorari, dated October 23, 2008, of petitioner Rosalinda G. Paredes is
hereby PARTLY GRANTED. Accordingly, the ruling of the Court of Appeals in its Decision dated March 25, 2008,
that petitioner was not constructively dismissed, is hereby AFFIRMED. However, the awards of P34,438.37 and
Pl09,208.36 for the unpaid debt of petitioner and reimbursement of the FTCP Provident Fund, respectively, are
hereby SET ASIDE.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

MARTIN S.VILLARAMA, JR. JOSE PORTUGAL PEREZ*

Associate Justice Associate Justice

FRANCIS H. JARDELEZA
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court's Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Court's Division.

MARIA LOURDES P.A. SERENO

Chief Justice
 SECOND DIVISION

August 2, 2017

G.R. No. 221493

STERLING PAPER PRODUCTS ENTERPRISES, INC., Petitioner,

vs.
KMM-KATIPUNAN and RAYMOND Z. ESPONGA, Respondents,

DECISION

MENDOZA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the December 22, 2014 Decision  and 1

October 27, 2015 Resolution  of the Court of Appeals (CA) in CA-G.R. SP No. 124596, which nullified the November
2

15, 2011 Decision  and March 2, 2012 Resolution  of the National Labor Relations Commission (NLRC) in NLRC
3 4

CN. RAB-III-11- 17024-10/ NLRC LAC No. 09-002429-11. The NLRC reversed and set aside the May 5, 2011
Decision  of the Labor Arbiter (LA).
5

The Antecedents

On July 29, 1998,  petitioner Sterling Paper Products Enterprises, Inc. (Sterling) hired respondent Raymond Z.
6

Esponga (Esponga), as machine operator.

In June 2006, Sterling imposed a 20-day suspension on several employees including Esponga, for allegedly
participating in a wildcat strike. The Notice of Disciplinary Action contained a warning that a repetition of a similar
offense would compel the management to impose the maximum penalty of termination of services. 7

Sterling averred that on June 26, 2010, their supervisor Mercy Vinoya (Vinoya), found Esponga and his co-
employees about to take a nap on the sheeter machine. She called their attention and prohibited them from taking a
nap thereon for safety reasons. 8

Esponga and his co-employees then transferred to the mango tree near the staff house. When Vinoya passed by
the staff house, she heard Esponga utter, "Huwag maingay, puro bawal. " She then confronted Esponga, who
responded in a loud and disrespectful tone, "Pura kayo bawal, bakit bawal ba magpahinga.? , 9

When Vinoya turned away, Esponga gave her the "dirty finger" sign in front of his co-employees and said "Wala ka
pala eh, puro ka dakdak. Baka pag ako nagsalita hindi mo kayanin.  " The incident was witnessed by Mylene
Pesimo (Pesimo), who executed a handwritten account thereon.  Later that day, Esponga was found to have been
10

not working as the machine assigned to him was not running from 2:20 to 4:30 in the afternoon.
Instead, he was seen to be having a conversation with his co-employees, Bobby Dolor and Ruel Bertulfo.
Additionally, he failed to submit his daily report from June 21 to June 29, 2010.
11

Hence, a Notice to Explain, dated July 26, 2010, was served on Esponga on July 30, 2010, requiring him to submit
his written explanation and to attend the administrative hearing scheduled on August 9, 2010.

On August 9, 2010, Esponga submitted his written explanation denying the charges against him. He claimed that he
did not argue with Vinoya as he was not in the area where the incident reportedly took place. Esponga further
reasoned that during the time when he was not seen operating the machine assigned to him, he was at the
Engineering Department and then he proceeded to the comfort room.

The July 26, 2010 Notice to Explain, however, indicated a wrong date when the incident allegedly happened. Thus,
an amended Notice to Explain, dated August 16, 2010, was issued to Esponga requiring him to submit his written
explanation and to attend the administrative hearing scheduled on August 23, 2010. Esponga, however, failed to
submit his written explanation and he did not attend the hearing.

In view of Esponga's absence, the administrative hearing was rescheduled. The hearing was reset several more
times because of his failure to appear. The hearing was finally set on October 4, 2010. Esponga and his counsel,
however, still failed to attend.

Having found Esponga guilty of gross and serious misconduct, gross disrespect to superior and habitual
negligence, Sterling sent a termination notice, dated November 15, 2010. This prompted Esponga and
KMMKatipunan (respondents) to file a complaint for illegal dismissal, unfair labor practice, damages, and attorney's
fees against Sterling.

The LA Ruling

In its May 5, 2011 Decision, the LA ruled that Esponga was illegally dismissed. It held that Sterling failed to
discharge the burden of proof for failure to submit in evidence the company's code of conduct, which was used as
basis to dismiss Esponga. The fallo reads:

WHEREFORE, premises considered, respondents are found to have failed to discharge their burden of proof,
therefore, there is illegal dismissal.

Consequently, respondent corporation is hereby ordered to reinstate complainant to his former position without loss
of seniority rights and other privileges, with full backwages initially computed at this time at ₱51,148.36.

The reinstatement aspect of this decision is immediately executory even as respondents are hereby enjoined to
submit a report of compliance therewith within ten (10) days from receipt hereof.

Respondent corporation is likewise assessed 10% attorney's fee in favor of the complaint in the sum of ₱5,114,84.

All other claims are hereby dismissed for lack of merit.

SO ORDERED. 12

Not in conformity, Sterling elevated an appeal before the NLRC.

The NLRC Ruling

In its November 15, 2011 Decision, the NLRC reversed and set aside the LA ruling. It declared that Esponga's
dismissal was valid. The NLRC observed that as a result of the June 26, 2010 incident, Esponga no longer
performed his duties and simply spent the remaining working hours talking with his co-workers. >>

It opined that Esponga intentionally did all these infractions on the same day to show his defiance and displeasure
with Vinoya, who prohibited him from sleeping on the sheeter machine. It concluded that these were all violations of
the Company Code of Conduct and Discipline, and constituted a valid cause for termination of employment under
the Labor Code. The NLRC disposed the case in this wise:

WHEREFORE, premises considered, the appeal is GRANTED. The Decision appealed from is REVERSED and
SET ASIDE, and a new one issued DISMISSING the complaint.

SO ORDERED. 13

Undeterred, respondents filed a motion for reconsideration. In its March 2, 2012 Resolution, the NLRC denied the
same.

Aggrieved, the respondents filed a petition for certiorari with the CA.

The CA Ruling
its assailed December 22, 2014 Decision, the CA reinstated the LA ruling. It held that the utterances and gesture
did not constitute serious misconduct. The CA stated that Esponga may have committed an error of judgment in
uttering disrespectful and provocative words against his superior and in making a lewd gesture, but it could not be
said that his actuations were motivated by a wrongful intent. It adjudged that Esponga's utterances and gesture
sprung from the earlier incident which he perceived as unfairly preventing him from taking a rest from work. As
such, the CA ruled that Esponga's actuations could only be regarded as simple misconduct. The dispositive portion
reads:

WHEREFORE, the Petition is GRANTED. The Decision dated November 15, 2011 and Resolution dated March 2,
2012 of the National Labor Relations Commission are SET ASIDE. The Decision dated May 5, 2011 of Labor
Arbiter Leandro Jose is REINSTATED in full.

SO ORDERED. 14

Sterling moved for reconsideration, but the CA denied its motion in its assailed October 27, 2015 Resolution.

Hence, this petition for review.

ISSUE

WHETHER THE CAUSE OF ESPONGA'S DISMISSAL AMOUNTS TO SERIOUS MISCONDUCT

Sterling argues that Esponga's utterance of foul and abusive language against his supervisor, demonstrating a dirty
finger, and defiance to perform his duties undeniably constitute serious misconduct. It added that Esponga's acts
were not only serious, but they also related to the performance of his duties. Further, Sterling asserts that he was
motivated by wrongful intent.

In his Comment,  dated September 30, 2016, Esponga replied that Sterling failed to establish the validity of his
15

dismissal by clear and convincing evidence. He insisted that if doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the latter because the employer must
affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause.

In its Reply,  dated January 30, 2017, Sterling contended that Esponga's failure to participate in the administrative
16

investigation conducted on his infraction was a clear manifestation of his lack of discipline. It asserted that the
existence of just and valid cause for Esponga's dismissal and its compliance with the due process requirements had
been proven by clear, convincing and substantial evidence on record. Sterling reasoned that an employer has free
rein and enjoys wide latitude of discretion to regulate all aspects of employment, including the prerogative to instil
discipline in its employees and to impose penalties, including dismissal, upon erring employees.

The Court's Ruling

The petition is meritorious.

Pesimo's retraction has noprobative value

In cases of illegal dismissal, the employer bears the burden of proof to prove that the termination was for a valid or
authorized cause.  In support of its allegation, Sterling submitted the handwritten statement of Pesimo who
17

witnessed the incident between Esponga and Vinoya on June 26, 2010. Pesimo, however, recanted her statement.

A recantation does not necessarily cancel an earlier declaration.  The rule is settled that in cases where the
18

previous testimony is retracted and a subsequent different, if not contrary, testimony is made by the same witness,
the test to decide which testimony to believe is one of comparison coupled with the application of the general rules
of evidence. A testimony solemnly given in court should not be set aside and disregarded lightly, and before this
can be done, both the previous testimony and the subsequent one should be carefully compared and juxtaposed,
the circumstances under which each was made, carefully and keenly scrutinized, and the reasons and motives for
the change discriminately analysed. 19

In this case, Pesimo's earlier statement was more credible as there was no proof, much less an allegation, that the
same was made under force or intimidation.  It must be noted that Pesimo's recantation was made only after
1âwphi1

Esponga came to see her.  Nevertheless, in a text message she sent to Vinoya on January 24, 2011, Pesimo did
20

not deny the contents of her earlier statement. She merely expressed concern over Esponga's discovery that she
had executed a sworn statement corroborating Vinoya's narration of the incident.  Thus, her earlier statement
21

prevails over her subsequent recantation.

Dismissal from employment onthe ground of serious misconduct

Under Article 282 (a) of the Labor Code, serious misconduct by the employee justifies the employer in terminating
his or her employment.

Misconduct is defined as an improper or wrong conduct. It is a transgression of some established and definite rule
of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in
judgment. To constitute a valid cause for the dismissal within the text and meaning of Article 282 of the Labor Code,
the employee's misconduct must be serious, i.e., of such grave and aggravated character and not merely trivial or
unimportant.22

Additionally, the misconduct must be related to the performance of the employee's duties showing him to be unfit to
continue working for the employer.  Further, and equally important and required, the act or conduct must have been
23

performed with wrongful intent. 24

To summarize, for misconduct or improper behavior to be a just cause for dismissal, the following elements must
concur: (a) the misconduct must be serious; (b) it must relate to the performance of the employee's duties showing
that the employee has become unfit to continue working for the employer; and (c) it must have been performed with
wrongful intent. 25

In the case at bench, the charge of serious misconduct is duly substantiated by the evidence on record.

Primarily, in a number of cases, the Court has consistently ruled that the utterance of obscene, insulting or offensive
words against a superior is not only destructive of the morale of his co-employees and a violation of the company
rules and regulations, but also constitutes gross misconduct. 26

In de La Cruz v. National Labor Relations Commission,  the dismissed employee shouted, "Sayang ang pagka-
27

professional mo!" and "Putang ina mo" at the company physician when the latter refused to give him a referral slip.

Likewise, inAutobus Workers' Union (AWU) v. National Labor Relations Commission,  the dismissed employee told
28

his supervisor "Gago ka" and taunted the latter by saying, "Bakit anong gusto mo, tang ina mo."

Moreover, in Asian Design and Manufacturing Corporation v. Deputy Minister of Labor,  the dismissed employee
29

made false and malicious statements against the foreman (his superior) by telling his co-employees: "If you don't
give a goat to the foreman, you will be terminated. If you want to remain in this company, you have to give a goat."
The dismissed employee therein likewise posted a notice in the comfort room of the company premises, which read:
"Notice to all Sander -Those who want to remain in this company, you must give anything to your foreman."

In Reynolds Philippines Corporation v. Eslava,  the dismissed employee circulated several letters to the members
30

of the company's board of directors calling the executive vice-president and general manager a "big fool," "anti-
Filipino" and accusing him of "mismanagement, inefficiency, lack of planning and foresight, petty favoritism,
dictatorial policies, one-man rule, contemptuous attitude to labor, anti-Filipino utterances and activities."

Hence, it is well-settled that accusatory and inflammatory language used by an employee towards his employer or
superior can be a ground for dismissal or termination.31

Further, Esponga's assailed conduct was related to his work. Vinoya did not prohibit him from taking a nap.  She 1âwphi1

merely reminded him that he could not do so on the sheeter machine for safety reasons. Esponga's acts reflect an
unwillingness to comply with reasonable management directives. 32

Finally, contrary to the CA' s pronouncement, the Court finds that Esponga was motivated by wrongful intent. To
reiterate, Vinoya prohibited Esponga from sleeping on the sheeter machine. Later on, when Vinoya was passing by,
Esponga uttered "Huwag main gay, puro bawal. " When she confronted him, he retorted "Pura kayo bawal, bakit
bawal ba magpahinga?" Not contented, Esponga gave her supervisor the "dirty finger" sign and said "Wala ka pala
eh, puro ka dakdak. Baka pag ako nagsalita hindi mo kayanin. " It must be noted that he committed all these acts in
front of his co-employees, which evidently showed that he intended to disrespect and humiliate his supervisor.

"An aggrieved employee who wants to unburden himself of his disappointments and frustrations in his job or
relations with his immediate superior would normally approach said superior directly or otherwise ask some other
officer possibly to mediate and discuss the problem with the end in view of settling their differences without causing
ferocious conflicts. No matter how the employee dislikes his employer professionally, and even if he is in a
confrontational disposition, he cannot afford to be disrespectful and dare to talk with an unguarded tongue and/or
with a baleful pen." 33

Time and again, the Court has put emphasis on the right of an employer to exercise its management prerogative in
dealing with its affairs including the right to dismiss its erring employees. It is a general principle of labor law to
discourage interference with an employer's judgment in the conduct of his business. As already noted, even as the
law is solicitous of the welfare of the employees, it also recognizes the employer's exercise of management
prerogatives. As long as the company's exercise of judgment is in good faith to advance its interest and not for the
purpose of defeating or circumventing the rights of employees under the laws or valid agreements, such exercise
will be upheld. 34

WHEREFORE, the petition is GRANTED. The December 22, 2014 Decision and the October 27, 2015 Resolution
of the Court of Appeals in CA-G.R. SP No. 124596 are hereby  REVERSED and SET ASIDE. The November 15,
2011 Decision and the March 2, 2012 Resolution of the National Labor Relations Commission is REINSTATED.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice
WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

MARVIC M.V.F. LEONEN FRANCIS H. JARDELEZA

Associate Justice Associate Justice

SAMUEL R. MARTIRES
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, SECOND Division

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-46853             January 30, 1940

MANILA TRADING and SUPPLY CO., petitioner,

vs.
THE HONORABLE FRANCISCO ZULUETA, JOSE G. GENEROSO, and
LEOPOLDO ROVIRA, Judges of the Court of Industrial Relations, and PHILIPPINE LABOR
UNION, respondents.

Ross, Lawrence, Selph and Carrascoso for petitioner.

Manabat and Fajardo for respondent Philippine Labor Union.

LAUREL, J.:

This is a petition for a writ of certiorari to review the decision of the Court of Industrial Relations promulgated On
August 8, 1929, denying the petitioner's motion for reconsideration of its previous order directing the reinstatement
of laborer Filomeno Ramollo.

On July 7, 1938, the Secretary of Labor apprised the Court of Industrial Relations of a labor dispute existing
between the petitioner company and its employees who were members of the Philippine Labor Union which was
forthwith docketed as case No. 49 and entitled, "Philippine Labor Union vs. Manila Trading and Supply Co." A
preliminary hearing was held after which, on August 6, 1938 the respondent court entered an order requiring the
company, inter alia not to dismiss any of its employees and laborers except for good cause and with its permission.
Subsequently, on June 30, 1939, one of the gatekeepers of the petitioners, Filomeno Ramollo, was suspended for a
breach of duty. The breach consisted in that as gatekeeper of the petitioner he permitted, contrary to instructions,
one of the customers to pass thru the exit gate without paying for the work done on the car. Before this, it is also
alleged that he refused to work in the setting up department of the company when ordered by his superior. The
Philippine Labor Union submitted a petition in case No. 49 requesting the reinstatement of the suspended laborer,
to which an answer was filed by the company. In its order of July 28, 1939, the respondent court found that the
laborer was guilty of the breach imputated to him, but, deciding that his suspension from June 30 to July 28, 1939
was a sufficient punishment, ordered his immediate reinstatement. The petitioner moved for reconsiderations, but
the respondent Court of Industrial Relations, sitting in banc, denied the motion. Hence, this petition for certiorari.

The whole controversy is centered around the right if the Court of Industrial Relations to order the readmission of a
laborer who, it is admitted, had been found derelict in the performance of his duties towards his employer. We
concede that the right of an employer to freely select or discharge his employees, is subject to regulation by the
State basically as we should expend beyond economic orthodoxy, we hold that an employer cannot legally be
compelled to continue with the employment of a person who admittedly was guilty of misfeasance or malfeasance
who admittedly was guilty of misfeasance towards his employer, and whose continuance in the service of the latter
is patently inimical to his interest. The law, in protecting the rights of the laborer, authorizes neither oppression nor
self-destruction of the employer. There may, of course, be cases where the suspension or dismissal of an employee
is whimsical or unjustified or otherwise illegal scrutinized carefully and the proper authorities will go to the core of
the controversy and not close their eyes to the real situation. This is not however the case here.
The writ of certiorari prayed for is hereby granted, and the order of the Court of Industrial Relations appealed from,
reverse without pronouncement regarding costs.

So ordered.

Avanceña, C.J., Villa-Real, Imperial, Diaz and Concepcion, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 55159 December 22, 1989

PHILIPPINE AIRLINES, INC., petitioner

vs.
NATIONAL LABOR RELATIONS COMMISSION and ARMANDO DOLINA, respondents.

Ermitano Manzano & Associates for petitioner.

Solon Garcia collaborating counsel for petitioner.

CORTES, J.:

Petitioner impugns in this petition for certiorari that part of the public respondent National Labor Relations
Commission's (NLRC) decision in NLRC Case No. RB-IV-9319-77 which ordered petitioner to restore private
respondent Dolina to its payroll, and to pay his salaries from 1 April 1979 "until this case is finally resolved" [Rollo, p.
33]. Petitioner contends that public respondent NLRC gravely abused its discretion considering that in the same
decision public respondent affirmed the decision of the Labor Arbiter in toto granting respondent's application for
clearance to dismiss the private respondent.

The pertinent facts are as follows:

Private respondent Dolina was admitted to the Philippine Airlines (PAL) Aviation School for training as a pilot
beginning 16 January 1973. The training agreement bound PAL to provide regular and permanent employment to
Dolina upon completion of the training course. On 25 January 1974, Dolina completed the course, and undertook an
equipment qualification course up to 4 October 1974. On 9 October 1974, the Civil Aeronautics Administration
issued him a license as Commercial Pilot and PAL then extended him a temporary appointment for six (6) months
as Limited First Officer. When his appointment was due to expire on 30 April 1975, Dolina had only logged eighty
four (84) hours and fifty five (55) minutes flying time, short of the minimum 500 flying hours required for
regularization as First Officer. To enable him to complete the requirement, his employment was extended for
another six months which appointment was described as "permanent." On 31 October 1975, when his appointment
was again due to expire, he was still short of the minimum flying time requirement such that his appointment was
again extended up to 30 April 1976. During this third extension of his appointment, Dolina completed the 500 flying
hours requirement, and thus on 31 March 1976 he applied for regularization as First Officer. Pending his physical
examination by the chief Flight Surgeon, his appointment was again extended to 31 October 1976. On 17 August
1976, Dolina took a psychological examination wherein his "Adaptability Rating" was found to be "unacceptable"
[Annex "L" to the Petition. p. 8; Rollo, p. 116]. On 23 September 1976, complainant was again subjected to an
examination and interview by the Pilot Acceptance Qualifications Board as part of the regularization process, which
examination revealed the following:
 xxx xxx xxx

b. Armando Dolina - After thorough evaluation of the candidate's past records, his performance and
the result of his medical examination as submitted by the Medical Sub-Department, the Board finds
Mr. A. Dolina not qualified for regular employment in the Company.

xxx xxx xxx

[NLRC Decision, pp. 3-4; Rollo, pp. 25-26].

Conformably, the Board recommended the termination of the complainant pursuant to which PAL filed a clearance
application [Rollo, p. 34] for Dolina's termination. In the meantime Dolina was placed under preventive suspension
effective 1 October 1976. Dolina countered with a complaint for illegal dismissal on 6 October 1976 [Rollo, 35]. On
26 January 1977 the Officer-in-Charge of the Department of Labor Regional Office No. IV lifted the preventive
suspension, and ordered petitioner to reinstate Dolina to his former position with full backwages from 1 October
1976 up to actual reinstatement. The issue of termination and damages was referred to the Executive Labor Arbiter
for compulsory arbitration [Rollo, p. 71].

Petitioner appealed the order lifting Dolina's suspension to the Secretary of Labor. However, on 2 March 1977,
pending the resolution of petitioner's appeal, the parties signed an agreement before the Undersecretary of Labor,
the terms of which are as follows:

AGREEMENT

The undersigned parties hereby agree to the following:

1 While pending final resolution of the complaint of Mr. Armando Dolina against the Philippine
Airlines, he shall be considered in the payroll effective 1 October 1976.

2 The order of Regional Director Vicente Leogardo for the reinstatement with backwages of Mr.
Dolina is hereby rendered moot and academic.

3 The parties shall consider this arrangement pending final resolution of the case by arbitration.

xxx xxx xxx

Subsequently, on 30 May 1977, the Acting Secretary of Labor issued an order finding that the propriety of the
suspension had been rendered moot and academic by the above agreement and referred the case for compulsory
arbitration to the Executive Labor Arbiter [Annex "J" to the Petition; Rollo, p. 85]. On 23 March 1979, the Labor
Arbiter rendered its decision, the dispositive portion of which reads as follows:

IN VIEW OF ALL THE FOREGOING, it is our considered opinion that there is merit on the
application for clearance, and therefore, the same should be as it is hereby GRANTED.
Consequently, the oppositor's TERMINATION IS IN ORDER.

Since the termination is upheld, perforce the claim for moral damages is denied. Besides pursuant
to P.D. No. 1367 dated May 1, 1978, this office is devoid of jurisdiction to entertain said claim.

SO ORDERED. [Decision of Labor Arbiter, p. 12; Rollo, p. 97].

By virtue of the above decision, PAL removed Dolina from its payroll effective 1 April 1979. Dolina then appealed
the Labor Arbiter's decision to the public respondent NLRC on 29 April 1979 and there filed a motion praying that
PAL be ordered to return him to PAL's payroll, contending that the Labor Arbiter's decision was not yet final
because of his timely appeal. PAL opposed the motion claiming that it was no longer obliged to return Dolina to its
payroll since the decision of the Labor Arbiter dated 23 March 1979 in its favor was a final resolution of the case by
arbitration [Annex "N" to the Petition, p. 1; Rollo, p. 137].

On 8 February 1980, public respondent NLRC rendered its decision containing the assailed portion to wit:

xxx xxx xxx

In fine it is our considered view that the respondent's application for clearance to dismiss the
complainant has sufficiently surmounted the test of validity.

Be that as it may, we are not in accord with the discontinuation of the payment of complainant's
salaries. The agreement of the parties stipulated in no uncertain terms that the complainant [Dolina]
is to be carried in respondent's payroll until this case is finally resolved. As things stand, the main
issue is still being litigated. The complainant, therefore, must be restored to the payroll and paid for
his salaries from 1 April 1979, the date he was dropped from the respondent's payroll.
 WHEREFORE, the Decision appealed from should be as it is hereby affirmed in toto. However the
respondent is ordered to restore the complainant to its payroll and to pay his salaries from 1 April
1979 until this case is finally resolved.

SO ORDERED. [NLRC Decision, pp. 10-11; Rollo, pp. 32-33; Italics supplied]

Hence, this petition, with a prayer for a temporary restraining order. The Court issued a temporary restraining order
on 10 October 1980. Private respondent Dolina failed to file his comment and the Solicitor General submitted his
own Comment supporting the stand of petitioner. Due to the adverse stand of the Solicitor General, public
respondent NLRC submitted its own Comment.

The issue before the Court is whether or not the NLRC committed grave abuse of discretion in holding that private
respondent Dolina was entitled to his salaries from 1 April 1979 "until this case is finally resolved."

PAL contends that inasmuch as the respondent Commission acting en banc had affirmed in toto the decision of the
Labor Arbiter granting petitioner the clearance for the dismissal of private respondent Dolina, it is an act of grave
abuse of discretion amounting to lack of jurisdiction on its part to order petitioner to pay private respondent's
salaries from 1 April 1979 until the case is finally terminated. PAL contends that said stipulation refers only to the
resolution of the case by arbitration and said arbitration of the case was terminated when the Labor Arbiter rendered
its decision dated 23 March 1979. PAL argues that the arbitration of the case is limited to and comprises merely the
proceedings before the Labor Arbiter such that when the latter renders a decision, arbitration of the dispute is
terminated .

Public respondent NLRC on the other hand contends that arbitration is a continuing process from the time the case
is referred by the Secretary of Labor to the Arbitration Branch until the final judgment is had on appeal. Since the
Labor Arbiter's decision in favor of petitioner did not finally resolve the case in view of the timely appeal by private
respondent from said decision, the case was not yet finally terminated by arbitration and Dolina is entitled to be
placed in petitioner's payroll until the complaint is finally resolved.

The above contentions call for the proper interpretation of the agreement between the parties, specifically the third
stipulation containing the clause "pending final resolution of the case by arbitration."

It is a basic rule in interpretation of contracts that the circumstances under which an instrument was made, including
the situation of the subject thereof and the parties to it, may be considered so that the intention of the contracting
parties may be judged correctly [Art. 1371, Civil Code of the Philippines; Section 11, Rule 130, Rules of Court; Lim
v. Court of Appeals, G.R. No. L-40258, September 11, 1980, 99 SCRA 668.] In the instant case, the stipulation in
the 2 March 1977 agreement that Dolina shag be included in the payroll of PAL until final resolution of the case by
arbitration was intended to supersede the order of the Regional Director which, by stipulation of the parties, was
rendered moot and academic. In lieu of reinstatement and the payment of his backwages, private respondent was
included in petitioner's payroll, effective from the time he was preventively suspended until final resolution of the
case by arbitration, without having to perform any work for the petitioner. In entering into the agreement, the parties
could not have intended to include in the clause "final resolution of the case by arbitration" the whole adjudicatory
process, including appeal. For if it were so, even proceedings on certiorari before this Court would be embraced by
the term "arbitration" and private respondent will continue to receive monthly salary without rendering any service to
the petitioner regardless of the outcome of the proceedings before the Labor Arbiter, for as long as one of the
parties appeal to the NLRC and until the case is finally resolved by this Court. This is clearly an absurdity which
could not have been contemplated by the parties.

Neither can proceedings on appeal before the NLRC en banc be considered as part of the arbitration proceeding. In
its broad sense, arbitration is the reference of a dispute to an impartial third person, chosen by the parties or
appointed by statutory authority to hear and decide the case in controversy [Chan Linte v. Law Union and Rock, Ins.
Co., 42 Phil. 548 (1921)]. When the consent of one of the parties is enforced by statutory provisions, the proceeding
is referred to as compulsory arbitration. In labor cases, compulsory arbitration is the process of settlement of labor
disputes by a government agency which has the authority to investigate and to make an award which is binding on
all the parties [See Wood v. Seattle, 23 Wash. 1, 62 P 135, 52 LRA 369 (1920); Amalgamated Association v.
Wisconsin Employees' Relations Board, 340 U.S. 383-410,95 L. Ed. 381 (1951)]. Under the Labor Code, it is the
Labor Arbiter who is clothed with the authority to conduct compulsory arbitration on cases involving termination
disputes [Article 217, Pres. Decree No. 442, as amended]. When the Labor Arbiter renders his decision, compulsory
arbitration is deemed terminated because by then the hearing and determination of the controversy has ended. Any
appeal raised by an aggrieved party from the Labor Arbiter's decision is already beyond the scope of arbitration
since in the appeal stage, the NLRC en banc merely reviews the Labor Arbiter's decision for errors of fact or law
and no longer duplicates the proceedings before the Labor Arbiter. Thus, the clause "pending final resolution of the
case by arbitration" should be understood to be limited only to the proceedings before the Labor Arbiter, such that
when the latter rendered his decision, the case was finally resolved by arbitration.

More important, however, is the fact that the NLRC's order for the continued payment of Dolina's salaries is
inconsistent with its affirmance of the Labor Arbiter's decision upholding the validity of Dolina's dismissal. In
affirming the Labor Arbiter's decision granting the termination clearance, the NLRC held that:

With respect to the issue of whether or not the complainant's [Dolina] dismissal was sufficiently
grounded, we are not persuaded that the respondent [herein petitioner PAL] is under obligation to
employ him as regular employee simply because he was certified physically fit and technically to
proficient by the CAA.
 This is understandable for it concerns the safety of its properties, and above all, the safety of the
lives and properties of its passengers, which by law it is committed to transport safely. In the
absence, therefore, of any showing that its standards are unreasonable and discriminatory, which
we do not find here, We cannot disturb them. We can only say that for exercising extraordinary
diligence in the selection of its pilots, We join the public in commending it.

xxx xxx xxx

In fine, it is Our considered view that the respondent's application for clearance to dismiss the
complainant has sufficiently surmounted the test of validity.

In view of the above finding of valid dismissal, the NLRC had no authority to order the continued payment of
Dolina's salaries from 1 April 1979 until the case is finally resolved. The NLRC's order would result in compensating
Dolina for services no longer rendered and when he is no longer in PAL's employ. This is contrary to the age-old
rule of "a fair day's wage for a fair day's labor" which continues to govern the relation between labor and capital and
remains a basic factor in determining employees' wages [Durabilt Recapping Plant & Co. v. National Labor
Relations Commission, G.R. No. 76746, July 27, 1987, 152 SCRA 328]. So that, if there is no work performed by
the employee there can be no wage or pay unless the laborer was able, willing and ready to work but was
prevented by management or was illegally locked out, suspended or dismissed. Where the employee's dismissal
was for a just cause, it would neither be fair nor just to allow the employee to recover something he has not earned
and could not have earned [Santos v. National Labor Relations Commission, G.R. No. 76721, September 21, 1987,
154 SCRA 166].

Moreover, in ordering the continued payment of Dolina's salaries from 1 April 1979 until the case is finally resolved,
the NLRC in effect ordered the payment of backwages to Dolina notwithstanding its finding of a valid dismissal.

This is clearly untenable.

In the first place, backwages in general are granted on grounds of equity for earnings which a worker or employee
has lost due to his illegal dismissal [New Manila Candy Workers Union (NACONWA-PAFLU) v. Court of Industrial
Relations, G.R. No. L-29728, October 30, 1978, 86 SCRA 37; Durabilt Recapping Plant & Co. v. National Labor
Relations Commission, supra; Chong Guan Trading v. National Labor Relations Commission, G. R. No. 81471,
April 26, 1989; Santos v. National Labor Relations Commission, supra]. Where, as in this case, the dismissal was
for a just cause, there is no factual or legal basis for ordering the payment of backwages. The order of the NLRC for
the continued payment of Dolina's salaries would allow the latter to unjustly enrich himself at the expense of the
petitioner. This Court has reiterated time and again that the law, in protecting the rights of the laborer, authorizes
neither oppression nor self-destruction of the employer [Colgate Palmolive Philippines, Inc. v. Ople, G.R. No.
73681, June 30,1988,163 SCRA 323]. In this case, the NLRC chose not to adhere with fidelity to this doctrine.

Secondly, NLRC's order for continued payment of Dolina's salary from 1 April 1979 up to the final resolution of the
case would place Dolina in a better position than those workers who were found to have been illegally dismissed by
their employer. For in the latter case, the backwages that can be recovered by the worker is limited to three years
[Mercury Drug Co., Inc. v. Court of Industrial Relations, G.R. No. L-23357, April 30, 1974, 56 SCRA 694; Philippine
Airlines, Inc. v. National Labor Relations Commission, G.R. No. 64809, November 29, 1983, 126 SCRA 223;
Madrigal & Co., Inc. v. Zamora, G.R. No. L-48237, Madrigal & Co., Inc. v. Minister of Labor, G.R. No. L-49023, June
30,1987] while Dolina, whose dismissal was found to be valid, can recover approximately ten years backwages,
which corresponds to the period from 1 April 1979 until "final resolution" of the instant case.

Considering the foregoing, the Court holds that respondent NLRC's order for the continued payment of Dolina's
salaries from "l April 1979 until the case is finally resolved" is contrary to law and established jurisprudence and the
NLRC acted in excess of its jurisdiction in issuing the assailed order. In the recent case of Llora Motors, Inc. v.
Drilon, G.R. No. 82895, November 7, 1989 the Court held as an act without or in excess of jurisdiction the portion of
the Labor Arbiter's award, which required the employer to pay to its employee an amount equivalent to a half
month's pay for every year of service as retirement benefits, for being without basis either in law or contract.
Similarly, there is in this case an excess of jurisdiction on the part of the NLRC in ordering the continued payment of
Dolina's salaries "from 1 April 1979 until the case is finally resolved."

WHEREFORE, that part of the dispositive portion of the decision of the National Labor Relations Commission in
NLRC CASE NO. RB-IV-9319-77 requiring petitioner to restore private respondent to its payroll and ordering the
payment of his salaries from 1 April 1979 until the case is finally resolved is hereby declared NULL and VOID and
SET ASIDE. The temporary Restraining Order issued by the Court on 10 October 1980 is made PERMANENT.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.