GSIS FAMILY BANK EMPLOYEES UNION, REPRESENTED BY ITS PRESIDENT

MS. JUDITH JOCELYN MARTINEZ, PETITIONER, V. SEC. CESAR L.

VILLANUEVA (IN HIS CAPACITY AS THE CHAIRMAN OF THE GOVERNANCE
COMMISSION FOR GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS
UNDER THE OFFICE OF THE PRESIDENT), MR. EMMANUEL L. BENITEZ (IN HIS
CAPACITY AS PRESIDENT OF THE GSIS FAMILY BANK), AND ATTY.
GERALDINE MARIE BERBERABE-MARTINEZ (IN HER CAPACITY AS
CHAIRPERSON OF THE BOARD OF DIRECTORS OF THE GSIS FAMILY BANK),
RESPONDENTS.

DECISION
LEONEN, J.:
Officers and employees of government-owned or controlled corporations without original charters are
covered by the Labor Code, not the Civil Service Law. However, non-chartered government-owned or controlled
corporations are limited by law in negotiating economic terms with their employees. This is because the law has
provided the Compensation and Position Classification System, which applies to all government-owned or controlled
corporations, chartered or non-chartered.
This Court resolves a Petition[1] for Certiorari, Prohibition, and Mandamus filed by the GSIS Family Bank
Employees Union (GSIS Union), praying that GSIS Family Bank be declared outside the coverage of Republic Act
No. 10149 and, therefore, be directed to negotiate a new collective bargaining agreement with its employees.
On July 22, 1969, Royal Savings Bank was organized and incorporated as a thrift bank. It began operating on
February 8, 1971, with former Cavite Representative Renato Dragon as its President and Board Chairman.[2]
On June 28, 1984, Royal Savings Bank filed an application with the Central Bank of the Philippines (Central Bank) for
the appointment of a conservator.[3]
On July 6, 1984, the Central Bank denied Royal Savings Bank's application for conservatorship, prohibited it
from doing business, and placed it under receivership.[4]
Royal Savings Bank filed several complaints against the Central Bank for grave abuse of discretion. To amicably
settle the cases, then Central Bank Governor Jose B. Fernandez, Jr. offered to reopen and rehabilitate Royal Savings
Bank if it would drop all its complaints against the Central Bank and transfer all its shares of stock to Commercial
Bank of Manila, a wholly-owned subsidiary of the Government Service Insurance System. [5]
On September 7, 1984, Royal Savings Bank and Commercial Bank of Manila entered into a Memorandum of
Agreement to rehabilitate and infuse capital into Royal Savings Bank. Royal Savings Bank was renamed Comsavings
Bank.[6]
Sometime in December 1987, the Government Service Insurance System transferred its holdings from
Commercial Bank of Manila to Boston Bank. Comsavings Bank was not included in the transfer. Due to Boston
Bank's acquisition of Commercial Bank of Manila, the Government Service Insurance System took over the control
and management of Comsavings Bank.[7]
On July 19, 1993, Comsavings Bank and the Government Service Insurance System executed a
Memorandum of Agreement where the latter committed to infuse an additional capital of P2.5 billion into Comsavings
Bank. After the infusion of funds, the Government Service Insurance System effectively owned 99.55% of
Comsavings Bank's outstanding shares of stock.[8]
Sometime in July 2001, Comsavings Bank changed its name to GSIS Family Bank. [9]
On May 25, 2004,[10] acting on a request for opinion from GSIS Family Bank, the General Counsel of
Bangko Sentral ng Pilipinas opined that GSIS Family Bank could not be categorized as a government bank:
[GSIS Family Bank], when it was still [Royal Savings Bank], was organized as a private stock savings and loan
association organized under the general corporation law. Thus, at its inception, the bank was set up for private
needs. When GSIS invested in the bank, it was the result of a business decision on its part to be an equity owner in a
thrift bank. The case of [GSIS Family Bank] is unlike that of government banks, such as Development Bank of the
Philippines, the Land Bank of the Philippines or Al-Amanah Islamic Development Bank[,] the charters of which were
enacted by the lawmaking authority for the purpose of addressing public needs....
 It is true that P.D. No. 2029 simply defines a GOCC as "a stock or non-stock corporation, whether
performing governmental or proprietary functions, which is charted by special law or if organized under the general
corporation law is owned by the government directly or indirectly through a parent corporation or subsidiary
corporation to the extent of at least a majority of its outstanding capital . . . stock or of its outstanding voting capital
stock". We believe however that this definition, which merely requires ownership by the government for an entity to
qualify as a GOCC, has been qualified by the subsequent promulgation of E.O. No. 292 . . . which requires, in
addition, that the institution was organized to serve public needs.

In view of the foregoing, we find insufficient basis to categorize [GSIS Family Bank] as a government
bank.[11]
On September 8, 2010, then President Benigno S. Aquino III (President Aquino) issued Executive Order No.
7,[12] which placed an indefinite moratorium on increases in salaries and benefits of employees in government-owned
or controlled corporations and government financial institutions. [13]
On June 6, 2011, President Aquino signed into law Republic Act No. 10149, or the GOCC Governance Act
of 2011.[14] The law created the Governance Commission for Government-Owned or Controlled Corporations
(Governance Commission), defined as "a central advisory, monitoring, and oversight body with authority to formulate,
implement[,] and coordinate policies"[15] in its governed sector.
On May 2, 2012, Emmanuel L. Benitez (Benitez), GSIS Family Bank's president, sought opinion from the
Bangko Sentral ng Pilipinas as to whether GSIS Family Bank may be considered as a government-owned or
controlled corporation or government bank under Republic Act No. 10149. [16]
On May 14, 2012, Bangko Sentral ng Pilipinas advised GSIS Family Bank to seek the opinion of the
Governance Commission, the implementing agency of Republic Act No. 10149.[17]
On January 15, 2013, GSIS Family Bank met with representatives of the Governance Commission, which clarified
that GSIS Family Bank was classified as a government financial institution under Republic Act No. 10149. [18]
On February 11, 2013, Benitez wrote[19] the Governance Commission to seek further clarification on several issues,
namely: (1) GSIS Family Bank's impending collective bargaining negotiations with its employees; (2) its authority to
enter into a collective bargaining agreement with the GSIS Union; and (3) its employees' right to strike.[20] Benitez
asked:
Should a CBA be the proper mode of determining the terms and conditions of employment of the rank-and-
file employees, the question as to which matters may be negotiated remains[?]

Did R.A. 10149 effectively amend the provisions of the Labor Code on [collective bargaining agreements]
insofar as compensation is concerned? Under said law, management and labor may no longer voluntarily determine
the compensation the employees would be entitled to as the law provides for the development of a "Compensation
and Position Classification System which shall apply to all officers and employees of the GOCCs whether under the
Salary Standardization Law or exempt therefrom and shall consist of classes of positions grouped into such
categories as the GCG may determine, subject to approval of the President." [21]
On March 8, 2013,[22] the Governance Commission replied that as a government financial institution, GSIS
Family Bank was unauthorized to enter into a collective bargaining agreement with its employees "based on the
principle that the compensation and position classification system is provided for by law and not subject to private
bargaining."[23]
The Governance Commission further clarified that the right to strike of GSIS Family Bank's employees was
not guaranteed by the Constitution, as they were government officers and employees. [24]
On December 20, 2013, counsel for the GSIS Union sent GSIS Family Bank a demand letter [25] for the payment of
Christmas bonus to its members, as stipulated in their Collective Bargaining Agreement. GSIS Union accused GSIS
Family Bank of evading its contractual obligation to its employees by invoking the Governance Commission's opinion
that it was no longer authorized to grant incentives and other benefits to its employees, unless authorized by the
President of the Philippines.[26]
GSIS Union alleged that Republic Act No. 10149 does not apply to GSIS Family Bank, as it was a private
bank created and established under the Corporation Code.[27] It asserted that even if the Government Service
Insurance System owned a majority of GSIS Family Bank's outstanding capital stock, the change in ownership of
shares did not automatically place the bank under the operation of Republic Act No. 10149.[28]
For GSIS Family Bank's refusal to negotiate a new collective bargaining agreement, the GSIS Union filed a Complaint
before the National Conciliation and Mediation Board, and later, a Notice of Strike. [29]
 Some bank employees also filed their own Complaints before the National Labor Relations Commission and
the Department of Labor and Employment. They aimed to compel GSIS Family Bank to abide by the provisions of
their existing Collective Bargaining Agreement.[30]
On January 30, 2014, petitioner GSIS Union filed before this Court a Petition for Certiorari, [31] asserting that
GSIS Family Bank is a private bank; thus, it is not covered by the provisions of Republic Act No. 10149. [32]
Petitioner contends that GSIS Family Bank does not perform functions for public needs since it was created "by
private individuals in their own private capacities pursuant to the provisions of the Corporation Code, to advance their
own private, personal[,] and economic or financial and business needs or interests."[33]
Petitioner argues that despite the Government Service Insurance System owning the majority of GSIS Family Bank's
shares of stock, the bank did not automatically fall within the ambit of Republic Act No. 10149. [34] Further, the law's
enactment did not automatically convert it into a government-owned or controlled corporation or a government
financial institution.[35]
Petitioner cites Phil. National Oil Company-Energy Dev't. Corp. v. Hon. Leogardo,[36] which stated that the
employees of the Philippine National Oil Company-Energy Development Corporation, a government-owned or
controlled corporation incorporated under the Corporation Code, remained subject to the provisions of the Labor
Code.[37]
Finally, petitioner stresses that as a private corporation established under the Corporation Code, GSIS
Family Bank and its employees are covered by the applicable provisions of the Labor Code, not the Civil Service
Law. Thus, the Collective Bargaining Agreement between petitioner and GSIS Family Bank cannot be impaired by
Republic Act No. 10149.[38]
On April 28, 2014, respondents Benitez and Atty. Geraldine Marie Berberabe-Martinez (Atty. Berberabe-
Martinez) filed their Comment.[39] They admit that after the Government Service Insurance System purchased
majority of GSIS Family Bank's shares, the bank continued to operate as a private bank, governed by the Corporation
Code and the Labor Code. However, they point out that with the enactment of Republic Act No. 10149, GSIS Family
Bank's authority to enter into negotiations with its employees was revoked, as confirmed by the Governance
Commission.[40]
Respondents Benitez and Atty. Berberabe-Martinez also point out that the Petition for Certiorari, Prohibition,
and Mandamus was fatally defective since respondents do not exercise judicial or quasi-judicial functions. Further,
they maintain that the Collective Bargaining Agreement provided remedies for the enforcement of rights, of which
petitioner supposedly did not avail. Thus, there was a plain, speedy, and adequate remedy available to it, without
need to directly resort to this Court with a Rule 65 petition. [41]
Nonetheless, respondents Benitez and Atty. Berberabe-Martinez insist that as a government-acquired bank,
GSIS Family Bank is a government owned or controlled corporation under Republic Act No. 10149. [42] They stress
that they merely followed the Governance Commission's directive forbidding them from negotiating the economic
terms of a collective bargaining agreement with petitioner.[43] They likewise contend that GSIS Family Bank, a
government financial institution covered by the Compensation and Position Classification System, is not at liberty to
negotiate economic terms with its employees and cannot set its own salary or compensation scheme.[44]
On May 28, 2014, respondent Secretary Cesar L. Villanueva (Villanueva) filed his Comment, [45] where he brings up
petitioner's failure to implead several indispensable parties. He states that despite the Governance Commission being
a collegial body with five (5) members, only he was impleaded in the Petition as the Governance Commission's chair.
He also stresses that GSIS Family Bank is governed by a Board of Directors, yet petitioner only impleaded its
President and Board Chairman.[46]
Respondent Villanueva likewise states that petitioner availed of the wrong remedy[47] and violated the rule on
judicial hierarchy by directly filing its Petition before this Court. [48]
As for the substantial issues, respondent Villanueva points out that GSIS Family Bank, as a government-owned or
controlled corporation, specifically a government financial institution, falls within the ambit of Republic Act No. 10149
and is subject to the Governance Commission's regulatory jurisdiction. [49]
Respondent Villanueva rejects petitioner's argument that Republic Act No. 10149 only applies to
corporations with original charters. He emphasizes that the law does not distinguish between chartered and non-
chartered corporations:[50]
All GOCCs, whether chartered or non-chartered, are government corporations brought about by the fact that
they are owned and/or controlled by the government. While non-chartered GOCCs are akin to "private corporations"
in the sense that their juridical entity and intra-corporate relationships are primarily governed by the Corporation Code
and fall within the administrative jurisdiction of the [Securities and Exchange Commission], they remain to be
"government corporations" in the sense that they fall within the coverage of GOCCs under the Administrative Code of
1987, and now also under R.A. No. 10149.[51] (Emphasis in the original, citation omitted)
Respondent Villanueva explains that Republic Act No. 10149 aimed to standardize or rationalize the compensation
framework of government-owned or controlled corporations and government financial institutions to remedy the
"severe pay imbalance between personnel of these special entities and the rest of the bureaucracy following the
[Salary Standardization Law]."[52] Under Republic Act No. 10149, the Governance Commission submitted a
Compensation and Position Classification System to President Aquino for his approval. Thus, pending President
Aquino's approval, a moratorium was established on any increase in salaries and benefits, and any salary increase
shall be subject to the President's approval.[53]
Finally, respondent Villanueva declares that this Court, in Galicto v. H.E. President Aquino III, et
al.,[54] recognized the President's power to provide a compensation system for government-owned or controlled
corporations.[55]
On January 12, 2015, petitioner filed its Reply.[56] It avers that respondents Villanueva, Benitez, and Atty.
Berberabe-Martinez were impleaded as the officers of Governance Commission and GSIS Family Bank who issued
and affirmed the assailed directives. Hence, they cannot excuse themselves by "conveniently saying that the rest of
the Board of Directors and/or the institutions they represent have not been impleaded in the petition." [57]
Petitioner also insists that the Governance Commission and GSIS Family Bank are not indispensable
parties.[58] Further, petitioner stresses that the issue at hand was the correct interpretation of Republic Act No. 10149;
thus, the non-inclusion of the Governance Commission and GSIS Family Bank as party respondents was not fatal to
its cause. Nonetheless, petitioner concedes that if this Court declares them to be indispensable parties, it will willingly
implead them with the proper motion.[59]
Petitioner likewise argues that its Petition for Certiorari, Prohibition, and Mandamus was the correct remedy,
as it seeks judicial declaration of the applicability of Republic Act No. 10149 to GSIS Family Bank, and for this Court
to compel respondents Benitez and Atty. Berberabe-Martinez to negotiate a new collective bargaining agreement.[60]
Petitioner then reiterates that GSIS Family Bank remains a private bank, outside the coverage of Republic Act No.
10149.[61]
On May 13, 2016, the Bangko Sentral ng Pilipinas Monetary Board, through MB Resolution
826.A,[62] prohibited GSIS Family Bank from doing business and designated the Philippine Deposit and Insurance
Corporation as its receiver.
The three (3) issues for this Court's resolution are:

First, whether or not the Petition for Certiorari is the correct remedy;

Second, whether or not the closure of GSIS Family Bank has rendered the Petition moot; and

Third, whether or not GSIS Family Bank, a non-chartered government-owned or controlled corporation, can enter into
a collective bargaining agreement with its employees.

I
Judicial power is the court's authority to "settle justiciable controversies or disputes involving rights that are
enforceable and demandable before the courts of justice or the redress of wrongs for violations of such rights." [63]
This Court's judicial power is anchored on Article VIII, Section 1 of the 1987 Constitution, which provides:

SECTION 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be
established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.
Judicial power includes the power to enforce rights conferred by law and determine grave abuse of discretion by any
government branch or instrumentality. Jurisprudence has consistently referred to these two (2) as the court's
traditional and expanded powers of judicial review.[64]
Traditional judicial power is the court's authority to review and settle actual controversies or conflicting rights
between dueling parties and enforce legally demandable rights. An actual case or controversy exists "when the case
presents conflicting or opposite legal rights that may be resolved by the court in a judicial proceeding." [65]
On the other hand, the framers of the 1987 Constitution deliberately expanded this Court's power of judicial review to
prevent courts from seeking refuge behind the political question doctrine and turning a blind eye to abuses committed
by the other branches of government.[66]
This Court's expanded power of judicial review requires a prima facie showing of grave abuse of discretion
by any government branch or instrumentality. This broad grant of power contrasts with the remedy of certiorari under
Rule 65, which is limited to the review of judicial and quasi-judicial acts.[67] Nonetheless, this Court, by its own power
to relax its rules, allowed Rule 65 to be used for petitions invoking the courts' expanded jurisdiction. [68]
Here, petitioner asserts that the Governance Commission committed grave abuse of discretion amounting to lack or
excess of jurisdiction when it prevented respondents Benitez and Atty. Berberabe-Martinez, as the bank's President
and Chairperson of the Board of Directors, respectively, from negotiating the economic provisions of the Collective
Bargaining Agreement between petitioner and the bank.[69]
Petitioner claims that in filing its Petition for Certiorari under Rule 65, it has "no plain, speedy[,] and
adequate remedy in the ordinary course of law which will promptly and immediately relieve them from the injurious
effects of the unconstitutional and patently unwarranted and illegal acts of the Respondents." [70]
Petitioner is mistaken.

Rule 65, Section 1 of the Rules of Civil Procedure reads:

SECTION 1. Petition for Certiorari. — When any tribunal, board or officer exercising judicial or quasi-judicial functions
has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess
of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying
that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such
incidental reliefs as law and justice may require.

The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies
of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non forum shopping as
provided in the third paragraph of Section 3, Rule 46.

Thus, a writ of certiorari may only be issued when the following are alleged in the petition and proven:

(1) the writ is directed against a tribunal, a board[,] or any officer exercising judicial or quasi[-]judicial functions; (2)
such tribunal, board[,] or officer has acted without or in excess of jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy[,] and adequate remedy in
the ordinary course of law.[71] (Citation omitted)
The Governance Commission was created under Republic Act No. 10149. It is attached to the Office of the President
and is the "central advisory, monitoring, and oversight body with authority to formulate, implement[,] and coordinate
policies"[72] relative to government-owned and controlled corporations. It has no judicial or quasi-judicial authority, as
evidenced by its powers and functions[73] under the law. Under its charter, the Governance Commission is
empowered to:
 oversee the selection and nomination of directors/trustees and maintain the quality of Board Governance;
 institutionalize transparency, accountability, financial viability and responsiveness in corporate performance by
monitoring and evaluating GOCCs' performance;
 rationalize the Sector through streamlining, reorganization, merger, as well as recommending to the President of
the Philippines the privatization or abolition of a GOCC; and
 establish compensation standards to ensure reasonable and competitive remuneration schemes that attract and
retain the right talent.[74]
The Governance Commission possesses neither judicial nor quasi judicial powers; thus, it cannot review or settle
actual controversies or conflicting rights between dueling parties and enforce legally demandable rights. It is not a
tribunal or board exercising judicial or quasi-judicial functions that may properly be the subject of a petition for
certiorari.

Petitioner refers to the Governance Commission's February 5, 2013[75] and March 8, 2013[76] letters to
substantiate its claim that the Governance Commission forbade respondents Benitez and Atty. Berberabe-Martinez
from negotiating the economic terms of their Collective Bargaining Agreement. However, a careful review of the
letters convinces this Court that they were merely advisory opinions, rendered in response to the queries of
respondents Atty. Berberabe-Martinez and Benitez.
The February 5, 2013 letter read:

Gentlemen:

We write to formally inform you that pursuant to the terms of Republic Act (R.A.) No. 10149, the Governing Boards
and Managements of all covered GOCCs, GFIs and GCE/GICPs are without legal authority to enter into negotiations
for the economic terms of Collective Bargaining Agreements (CBAs); more so, approving CBAs, whether conditionally
or unconditionally, that cover matters involving compensation, allowances, benefits and incentives.

"Collective Bargaining" covers matters that can be voluntarily agreed upon by the employer and employees.
Presidential Decree (P.D.) No. 1597 and Joint Resolution (J.R.) No. 4 mandate that SSL exempt GOCCs, including
Non-Chartered GOCCs, shall observe the policies, parameters and guidelines governing position classification,
salary rates, categories and rates of allowances, benefits and incentives, prescribed by the President, and
that any increase in the existing salary rates, as well as the grant of new allowances, benefits, and incentives in the
rates thereof shall be subject to the approval of the President.
Executive Order No. 7 (s.2010) likewise provides for a moratorium on increases in the rates of salaries, and the grant
of new allowances, incentives and other benefits, except for salary adjustments pursuant to Executive Order No. 811
(s. 2009) and Executive Order No. 900 (s. 2010), until specifically authorized by the President.

Pursuant to these, compensation matters cannot be voluntarily agreed upon by the Board with the union under a
CBA, since such matters have to be subjected to policies, guidelines and parameters prescribed and approved by the
President.
As you are aware of, Section 8 of R.A. No. 10149 mandates the Commission to develop a Compensation and
Position Classification System (CPCS) that strikes a balance between reasonableness and competitiveness, and
shall apply to ALL GOCCs, whether SSL-covered or SSL-exempt. The task of undertaking the development of a
CPCS for all GOCCs has already commenced and is well underway being already on Phase III of its development.
Pending however the formal promulgation and approval of the CPCS, the authority to approve or deny requests for
any adjustment pertaining to compensation, additional incentives or benefits, remain with His Excellency.

In view of the foregoing, and pursuant to the fiduciary duties of the members of the Board of Directors and Officers,
as well as the principles under R.A. No. 10149, the Commission takes this opportunity to inform Governing Boards
and Management within the GOCC Sector of their lack of authority to enter into any negotiations for the economic
terms of CBAs with their respective unions.[77] (Emphasis in the original, citation omitted)
A careful reading of the March 8, 2013 letter likewise demonstrates its advisory nature with no directive for
respondents to refrain from negotiating with petitioner.

Further, petitioner failed to prove that it had no other "plain, speedy[,] and adequate remedy in the ordinary course of
law"[78] aside from its present Petition. The Governance Commission is an attached agency of the Office of the
President; hence, petitioner could have elevated the advisories to the Office of the President to question the
Governance Commission's legal opinion.
Finally, it has not escaped this Court's attention that petitioner only impleaded respondent Villanueva in his capacity
as chairperson of the Governance Commission, and not the four (4) other members of the Governance Commission.

The Governance Commission is composed of five (5) members. The chairperson, with a rank of Cabinet Secretary,
and two (2) other members, with the rank of Undersecretary, are appointed by the President. The Department of
Budget and Management and the Department of Finance Secretaries sit as ex-officio members.[79]
As a collegial body, all members of the Governance Commission should have been impleaded as indispensable
parties in the Petition, since no final determination of the action can be reached without them. [80] As it is, petitioner's
failure to implead all members of the Governance Commission should lead to the outright dismissal of this Petition as
their non-inclusion is debilitating since this Court cannot exercise its juridical power when an indispensable party is
not impleaded.[81]
II
Nonetheless, even if all the requirements for the issuance of a writ of certiorari were alleged and proven, and even if
all the indispensable parties were impleaded, the closure of GSIS Family Bank has rendered the Petition moot. As
seen in the Petition's prayer,[82] this Court is asked to direct GSIS Family Bank's representatives to perform positive
acts:
WHEREFORE, premises considered, Petitioner humbly prays that the Honorable Court rule in favor of the Petitioner
and that a judgment be rendered:

1. Declaring GSIS Family Bank as a private bank and therefore outside the coverage of RA 10149;

2. Ordering the [Governance Commission] to DESIST from further usurping into matters between the GSIS [Family
Bank] and its employees;

3. Directing GSIS [Family Bank] management to immediate[ly] commence negotiations with the petitioner for a
Collective Bargaining Agreement (CBA) covering the period retroactive January 01, 2012 to December 31, 2015;

4. Ordering respondent GSIS Family Bank to fully comply with the terms and conditions of the existing [Collective
Bargaining Agreement] until a new [collective bargaining agreement] has been negotiated and signed, by
providing the benefits, allowances and incentives and other rightful claims, including the 2013 Christmas bonus,
of the members of the Petitioner union[.][83] (Emphasis supplied)
A case is deemed moot when it ceases to present a justiciable controversy due to a supervening event. The lack of
an actual or justiciable controversy means that the court has nothing to resolve, and will, in effect, only render an
advisory opinion.[84]
Courts generally dismiss cases on the ground of mootness[85] unless any of the following instances are present: (1)
grave constitutional violations; (2) exceptional character of the case; (3) paramount public interest; (4) the case
presents an opportunity to guide the bench, the bar, and the public; or (5) the case is capable of repetition yet
evading review.[86]
Despite GSIS Family Bank's closure, which has effectively rendered the case moot, this Court believes that there is a
need to discuss the substantive issues of the case, as it presents an opportunity to guide the bench and bar on how
to resolve similar issues arising from similarly situated parties.

III
On February 4, 1986, to clarify which of the government entities could be classified as a government-owned or
controlled corporation,[87] then President Ferdinand E. Marcos issued Presidential Decree No. 2029, which defined a
government-owned or controlled corporation as follows:
SECTION 2. Definition. — A government-owned or controlled corporation is a stock or a non-stock corporation,
whether performing governmental or proprietary functions, which is directly chartered by a special law or if organized
under the general corporation law is owned or controlled by the government directly, or indirectly through a parent
corporation or subsidiary corporation, to the extent of at least a majority of its outstanding capital stock or of its
outstanding voting capital stock;
Provided, that a corporation organized under the general corporation law under private ownership at least a majority
of the shares of stock of which were conveyed to a government financial institution, whether by a foreclosure or
otherwise, or a subsidiary corporation of a government corporation organized exclusively to own and manage, or
lease, or operate specific physical assets acquired by a government financial institution in satisfaction of debts
incurred therewith, and which in any case by enunciated policy of the government is required to be disposed of to
private ownership within a specified period of time, shall not be considered a government-owned or controlled
corporation before such disposition and even if the ownership or control thereof is subsequently transferred to
another government-owned or controlled corporation;

Provided, further, that a corporation created by special law which is explicitly intended under that law for ultimate
transfer to private ownership under certain specified conditions shall be considered a government-owned or
controlled corporation, until it is transferred to private ownership; and

Provided, finally, that a corporation that is authorized to be established by special law, but which is still required under
that law to register with the Securities and Exchange Commission in order to acquire a juridical personality, shall not
on the basis of the special law alone be considered a government-owned or controlled corporation.

On July 25, 1987, then President Corazon C. Aquino issued Executive Order No. 292 or the Administrative Code of
1987, which replaced the 1917 colonial period Administrative Code in effect then, and laid out in a "unified document
the major structural, functional[,] and procedural principles and rules of governance[.]" [88] Section 2(13) of Executive
Order No. 292 defined a government-owned or controlled corporation:
SECTION 2. General Terms Defined. — Unless the specific words of the text, or the context as a whole, or a
particular statute, shall require a different meaning:

....

(13) Government-owned or controlled corporation refers to any agency organized as a stock or

non-stock corporation, vested with functions relating to public needs whether governmental
or proprietary in nature, and owned by the Government directly or through its
instrumentalities either wholly, or, where applicable as in the case of stock corporations, to
the extent of at least fifty-one (51) per cent of its capital stock: Provided, That government-
owned or controlled corporations may be further categorized by the Department of the
Budget, the Civil Service Commission, and the Commission on Audit for purposes of the
exercise and discharge of their respective powers, functions and responsibilities with
respect to such corporations.
This definition was echoed in Section 3(o) of Republic Act No. 10149:

SECTION 3. Definition of Terms. —

....

(o) Government-Owned or -Controlled Corporation (GOCC) refers to any agency organized as a stock or nonstock
corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned
by the Government of the Republic of the Philippines directly or through its instrumentalities either wholly or, where
applicable as in the case of stock corporations, to the extent of at least a majority of its outstanding capital stock:
Provided, however, That for purposes of this Act, the term "GOCC" shall include GICP/GCE and GFI as defined
herein.
Thus, a government-owned or controlled corporation is: (1) established by original charter or through the general
corporation law; (2) vested with functions relating to public need whether governmental or proprietary in nature; and
(3) directly owned by the government or by its instrumentality, or where the government owns a majority of the
outstanding capital stock. Possessing all three (3) attributes is necessary to be classified as a government-owned or
controlled corporation.[89]
There is no doubt that GSIS Family Bank is a government-owned or controlled corporation since 99.55% of its
outstanding capital stock is owned and controlled by the Government Service Insurance System.

Petitioner cites this Court's ruling in Phil. National Oil Company-Energy Dev't. Corp.[90] to substantiate its claim that
government-owned and controlled corporations without original charters, or those incorporated under the Corporation
Code, are subject to the provisions of the Labor Code, and are thus free to negotiate economic terms with their
employers.[91]
Petitioner is again mistaken.

Phil. National Oil Company-Energy Dev 't. Corp. involved a decision of the Deputy Minister of Labor upholding his
jurisdiction revoking a clearance to dismiss, earlier issued by the Ministry of Labor's Regional Office. The petitioner,
despite its earlier application for such issuance, contested the Ministry of Labor's jurisdiction on the ground that it was
a government-owned and controlled corporation.
In disposing of the petition, this Court noted that for purposes of coverage under the Civil Service Rules, it was only
government-owned and controlled corporations with original charters that were covered:

Under the laws then in force, employees of government-owned and/or controlled corporations were governed by the
Civil Service Law and not by the Labor Code. Thus,

Article 277 of the Labor Code (PD 442) then provided:

"The terms and conditions of employment of all government employees, including employees of government-owned
and controlled corporations shall be governed by the Civil Service Law, rules and regulations .. "

In turn, the 1973 Constitution provided:

"The Civil Service embraces every branch, agency, subdivision and instrumentality of the government, including
government-owned or controlled corporations."

In National Housing Corporation vs. Juco (L-64313, January 17, 1985, 134 SCRA 172), we laid down the doctrine
that employees of government-owned and/or controlled corporations, whether created by special law or formed as
subsidiaries under the general Corporation Law, are governed by the Civil Service Law and not by the Labor Code.
However, the above doctrine has been supplanted by the present Constitution, which provides:

"The Civil Service embraces all branches, subdivisions, instrumentalities and agencies of the Government, including
government-owned or controlled corporations with original charters." (Article IX-B, Section 2 [1])

Thus, under the present state of the law, the test in determining whether a government-owned or controlled
corporation is subject to the Civil Service Law is the manner of its creation such that government corporations created
by special charter are subject to its provisions while those incorporated under the general Corporation Law are not
within its coverage.[92]
However, what was in issue in Phil. National Oil Company-Energy Dev't. Corp.[93] was jurisdiction in relation to
dismissal of employees. It had nothing to do with the obligation of the government-owned or controlled corporation to
collectively bargain in good faith.
Similarly, Galicto[94] was a petition filed by an employee of the Philippine Health Insurance Corporation (Philhealth)
challenging the validity of an Executive Order issued by the President. The Executive Order imposed a moratorium
on increases in compensation and benefits to be given to employees, including government-owned and controlled
corporations.[95] Unlike the present case, Galicto did not deal with the obligation, if any, of the management of
government-owned or controlled corporations to bargain collectively with its employees in good faith.
Nonetheless, Galicto involved Philhealth, a corporation with an original charter, Republic Act No. 7875. More
importantly, the case was dismissed due to the improper remedy,[96] lack of standing,[97] and procedural errors[98] of
the petitioner. This Court also noted that while the case was pending, Republic Act No. 10149 was promulgated,
providing statutory basis for the President to approve the Compensation and Position Classification System for
government-owned and controlled corporations.[99]
Galicto did not rule on the legality of any provision of Republic Act No. 10149 as it was not raised as an issue.
Further, Galicto dismissed the petition against then President Aquino for being moot.[100]
IV
The right of workers to self-organization, collective bargaining, and negotiations is guaranteed by the Constitution
under Article XIII, Section 3:

SECTION 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and
promote full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers and employers and the preferential
use of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith
to foster industrial peace.

The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share
in the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and
growth.

The right to self-organization is not limited to private employees and encompasses all workers in both the public and
private sectors, as shown by the clear declaration in Article IX(B), Section 2(5) that "the right to self organization shall
not be denied to government employees." Article III, Section 8 of the Bill of Rights likewise states, "[t]he right of the
people, including those employed in the public and private sectors, to form unions, associations, or societies for
purposes not contrary to law shall not be abridged."

While the right to self-organization is absolute, the right of government employees to collective bargaining and
negotiation is subject to limitations.

Collective bargaining is a series of negotiations between an employer and a representative of the employees to
regulate the various aspects of the employer-employee relationship such as working hours, working conditions,
benefits, economic provisions, and others.

Relations between private employers and their employees are subject to the minimum requirements of wage laws,
labor, and welfare legislation. Beyond these requirements, private employers and their employees are at liberty to
establish the terms and conditions of their employment relationship. In contrast with the private sector, the terms and
conditions of employment of government workers are fixed by the legislature; thus, the negotiable matters in the
public sector are limited to terms and conditions of employment that are not fixed by law [101]
Social Security System Employees Association v. Court of Appeals [102] explains that instead of a collective bargaining
agreement or negotiation, government employees must course their petitions for a change in the terms and
conditions of their employment through the Congress for the issuance of new laws, rules, or regulations to that effect:
Government employees may, therefore, through their unions or associations, either petition the Congress for the
betterment of the terms and conditions of employment which are within the ambit of legislation or negotiate with the
appropriate government agencies for the improvement of those which are not fixed by law. [103]
In PCSO v. Chairperson Pulido-Tan, et al.,[104] the Commission on Audit disallowed the monthly cost of living
allowance being received by Philippine Charity Sweepstakes Office's officials and employees.
This Court held that the Philippine Charity Sweepstakes Office's charter does not allow its Board complete liberty to
set the salaries and benefits of its officials and employees. This Court emphasized that as a government-owned and
controlled corporation, the Philippine Charity Sweepstakes Office is covered by the compensation and position
standards issued by the Department of Budget and Management and applicable laws.[105]
PCSO underscored that the power of a government-owned or controlled corporation to fix salaries or allowances of
its employees is subject to and must conform to the compensation and classification standards laid down by
applicable law:
Upon the effectivity of R.A. No. 6758, GOCCs like the PCSO are included in the Compensation and Position
Classification System because Section 16 of the law repeals all laws, decrees, executive orders, corporate charters,
and other issuances or parts thereof, that exempt agencies from the coverage of the System, or that authorize and fix
position classification, salaries, pay rates or allowances of specified positions, or groups of officials and employees or
of agencies, which are inconsistent with the System, including the proviso under Section 2 and Section 16 of P.D. No.
985.[106] (Citation omitted)
Republic Act No. 10149 defines a non-chartered government-owned or controlled corporation as a government-
owned or controlled corporation that was organized and is operating under the Corporation Code.[107] It does not
differentiate between chartered and non-chartered government-owned or controlled corporations; hence, its
provisions apply equally to both:
SECTION 4. Coverage. — This Act shall be applicable to all GOCCs, GICPs/GCEs, and government financial
institutions, including their subsidiaries, but excluding the Bangko Sentral ng Pilipinas, state universities and colleges,
cooperatives, local water districts, economic zone authorities and research institutions: Provided, That in economic
zone authorities and research institutions, the President shall appoint one-third (1/3) of the board members from the
list submitted by the GCG. (Emphasis supplied)
Section 9 of Republic Act No. 10149 also categorically states, "Any law to the contrary notwithstanding, no
[government-owned or controlled corporation] shall be exempt from the coverage of the Compensation and Position
Classification System developed by the [Governance Commission] under this Act."

Furthermore, Republic Act No. 10149 directed the Governance Commission to develop a Compensation and Position
Classification System, to be submitted for the President's approval, which shall apply to all officers and employees of
government-owned or controlled corporations, whether chartered or non-chartered.[108]
On March 22, 2016, President Aquino issued Executive Order No. 203, [109] which approved the compensation and
classification standards and the Index of Occupational Services Framework developed and submitted by the
Governance Commission.
When it comes to collective bargaining agreements and collective negotiation agreements in government-owned or
controlled corporations, Executive Order No. 203 unequivocally stated that while it recognized the right of workers to
organize, bargain, and negotiate with their employers, "the Governing Boards of all covered [government-owned or
controlled corporations], whether Chartered or Non-chartered, may not negotiate with their officers and employees
the economic terms of their [collective bargaining agreements]."[110]
Thus, considering the existing law at the time, GSIS Family Bank could not be faulted for refusing to enter into a new
collective bargaining agreement with petitioner as it lacked the authority to negotiate economic terms with its
employees.[111] Unless directly challenged in the appropriate case and with a proper actual controversy, the
constitutionality and validity of Republic Act No. 10149, as it applies to fully government-owned and controlled non-
chartered corporations, prevail.
WHEREFORE, premises considered, the Petition is DENIED.
SO ORDERED.
 G.R. No. 197763, December 07, 2015

SMART COMMUNICATIONS, INC., MR. NAPOLEON L. NAZARENO, AND MR.

RICKY P. ISLA, Petitioners, v. JOSE LENI Z. SOLIDUM, Respondent.

G.R. No. 197836

JOSE LENI Z. SOLIDUM, Petitioner, v. SMART COMMUNICATIONS, INC., MR.

NAPOLEON L. NAZARENO, AND MR. RICKY P. ISLA, Respondent.

DECISION

VELASCO JR., J.:

The Case

These are consolidated petitions filed under Rule 45 of the Rules of Court assailing
the Decision dated April 4, 20111 and Resolution dated July 14, 20112 of the Court
of Appeals (CA) in CA-G.R. SP No. 109765 entitled Jose Leni Z. Solidum v. National
Labor Relations Commission (First Division), Smart Communications, Inc., Napoleon
L. Nazareno and Ricky P. Isla. The CA Decision affirmed with modification the
Resolution dated January 26, 2009 and Decision dated May 29, 2009 of the
National Labor Relations Commission (NLRC) in NLRC Case No. 00-11-09564-05.

The Facts

The facts as found by the CA are as follows: chanRoblesvi rtu alLaw lib rary

In an Employment Contract dated April 26, 2004,3 Smart Communications, Inc.

(Smart) hired Jose Leni Solidum (Solidum) as Department Head of Smart
Prepaid/Buddy Activations under the Product Marketing Group. Existing company
procedures provide that a department head shall approve project proposals coming
from his marketing assistants and product managers/officers. Once approved, a
finance officer will assign a reference number to the project with a stated budget
allocation. If the Company decides to engage the services of a duly accredited
creative agency, the department head will coordinate with it to discuss the details
of the project. The implementation details and total amount of the project will then
be included in a Cost Estimate (CE) submitted to the Company, routed for approval,
and returned to the selected agency for implementation. After the project is carried
out, the agency will bill the Company by sending the CE with attached invoices and
other supporting documents.

On September 21, 2005, Solidum received a Notice to Explain of even date4 from
the Company charging him with acts of dishonesty and breach of trust and
confidence. In summary, he was charged with violating "various company policies
by misrepresenting and using his position and influence in his grant plot to defraud
Smart by conceptualizing fictitious marketing events, appointing fictitious
advertising agencies to supposedly carry out marketing events and submitting
fictitious documents to make it appear that the marketing events transpired."5 He
was charged with the following infractions: (1) falsification and/or knowingly
submitting falsified contents of reports/documents relative to his duties and
responsibilities; (2) obtaining through fraudulent means materials, goods or
services from the Company; (3) failing or refusing to disclose to the Company any
existing or future dealings, transactions, relationships, etc. posing or would pose
possible conflict of interest; (4) other forms of deceit, fraud, swindling, and
misrepresentation committed by an employee against the company or its
representative; and (5) fraud or willful breach of trust in relation to transactions
covered by Invoice No. 2921 and CE No. 2005-533 as well as CE Nos. 2005-413,
2005-459, 2005-461, 2005-526, 2005-460, 2005-552 and 2005-527 that were
approved/noted by him. Solidum received a copy of the Notice on the same date.
Pending administrative investigation, Solidum was placed under preventive
suspension without pay for a period of thirty (30) days.

In a letter dated September 26, 2005,6 Solidum denied the charges and claimed
that he never defrauded nor deceived the Company in his transactions.

Continued audit investigation, however, revealed that Solidum approved/noted

several CEs covering activities for which payments were made but did not actually
carried out. Unaccredited third parties were also engaged in the implementation of
the projects. Thus, the Company issued another Notice to Explain dated October
21, 20057 to Solidum, this time covering the following additional CEs: 2005-416,
2005-480, 2005-481, 2005-479, 2005-512, 2005-513, and 2005-533. Solidum was
again preventively suspended for another ten (10) days. Further, the Company
scheduled the administrative investigation of the case on October 26, 2005.

Solidum then sent a letter dated October 24, 20058 to the Company requesting
copies of the pertinent documents so he can prepare an intelligible explanation. In
another letter dated October 26, 2005,9 Solidum stated that the investigation is
highly suspicious and his extended suspension imposed undue burden. He also
reserved his right to present evidence. In his last letter dated October 28,
2005,10 Solidum declared that he shall no longer receive or entertain notices or
memorandum, except the final decision resolving the administrative charges
against him.

Thereafter, the Company issued a letter dated November 2, 2005, alleging that
Solidum refused to accept the documents that he had requested. Using this
allegation, the Company imposed an additional preventive suspension often (10)
days on Solidum.

Based on the available evidence, the Company decided to dismiss Solidum for
breach of trust in a Notice of Decision dated November 9, 2005.11 Corollarily, a
Notice of Termination was served on him on November 11, 2005.

Aggrieved, Solidum filed a complaint dated November 19, 2005 for illegal
suspension and dismissal with money claims before the Arbitration Branch of the
NLRC claiming that his extended suspension and subsequent termination were
without just cause and due process.

In a Decision dated July 3, 2006,12 the labor arbiter declared that the extended
period of suspension without pay was illegal and that Solidum was unjustly
dismissed from work without observance of procedural due process. He was
ordered reinstated and was awarded backwages and monetary claims. The labor
arbiter ratiocinated that the ground of breach of trust and confidence is restricted to
managerial employees; however, no substantial evidence was presented to prove
that Solidum has the prerogatives akin to a manager other than his titular
designation as department head.

The Company appealed the adverse decision of the labor arbiter to the NLRC but
was denied for having been filed out of time and/or for non-perfection, thus:
Records show that respondents received a copy of the Decision on "July 10, 2006"
(See Registry Return Receipt, p. 561, Record) However, respondents filed their
appeal only on "July 25, 2006" x x x already beyond the reglementary ten (10)
calendar day period for filing an appeal to the Commission. x x x

Moreover, perusal of the appeal shows that the appeal bond attached to it is not
accompanied by a security deposit or collateral. The CERTIFICATE OF NO
COLLATERAL x x x that was submitted by the bonding company stating that the
bond was issued on (sic) behalf of respondent SMART "without collateral because
they are our valued client" and that "[t]he company declares its commitment to
honor the validity of the foregoing bond notwithstanding the absence of collateral"
does not serve any purpose other than an admission that the security deposit or
collateral requirement under Section 6, Rule VI of the Revised Rules of [Procedure
of the NLRC for perfecting an appeal was not complied with. Needless to state, the
absence of a security deposit or collateral securing the bond renders the appeal
legally infirm.13
ChanRo bles Vi rtua lawlib rary

In its motion for reconsideration, the Company insisted that the appeal was filed
within the reglementary period considering that it received the labor arbiter's
decision only on July 13, 2006 and not July 10, 2006. It presented among others
the Certification from Makati Central Post Office, the pertinent page of the letter
carrier's Registry Book, and the respective affidavit of the letter carrier and the
Company's receiving clerk. It added that in case of conflict between the registry
receipt and the postmaster's certification, the latter should prevail. Likewise, the
Company maintained that the surety bond was secured by its goodwill and the
alleged lack of collateral or security will not render the bond invalid in view of the
surety's unequivocal commitment to pay the monetary award.

Finding merit in the motion, the NLRC issued a Resolution dated January 26,
200914 reversing its earlier ruling and giving due course to the appeal. It upheld the
certification of the postmaster over the registry receipt and found that there was
substantial compliance with the bond requirement, viz:
Given the factual milieu, the Commission rules that respondents' appeal was indeed
filed within the ten (10) day period x x x. Since the Decision [of the Labor Arbiter]
dated July 3, 2006 was received by respondents on July 13, 2006, respondents
have (sic) effectively until July 25, 2006 (considering that July 23 was a Sunday,
and July 24 was a declared nonworking day) x x x.

xxxx

As to the absence of security deposit or collateral, the Commission x x x finds that

respondents were able to comply substantially with the pre-requisite for the
perfection of appeal.

x x x While the appeal bond was posted without security or collateral, the
Certification dated July 20, 2006, issued by the bonding company attests to the
latter's "commitment to honor the validity of the foregoing bond notwithstanding
the absence of collateral." Otherwise stated, the very purpose of a security or
collateral should be deemed served considering the guarantee of the bonding
company to pay the entire amount of the bond in the event respondents suffer an
adverse disposition of their appeal. It matters not that the bond was issued on
behalf of respondents without collateral for after all, the bond is accompanied by a
declaration under oath bearing the bonding company's commitment to honor the
validity of the surety bond and attesting that the surety bond is genuine and shall
be in effect until the final disposition of the case.
The NLRC likewise reversed the labor arbiter's decision. It ruled that the
seriousness of Solidum's infractions justified the additional period of suspension. It
added that the labor arbiter erred in declaring Solidum's dismissal illegal and
without just cause on the basis that he is not a managerial employee. On the
contrary, overwhelming evidence showed that Solidum holds a position of trust and
has violated various company policies. Finally, the NLRC found that Solidum was
accorded procedural due process. The dispositive portion of the Resolution thus
reads:
WHEREFORE, the foregoing considered, the Commission hereby resolves as follows:

1. complainant's Motion to Inhibit dated June 13, 2008 is DENIED for lack
of merit.

2. respondents' Motion for Reconsideration dated July 27, 2007 is

GRANTED and their instant appeal dated July 25, 2006 is given DUE
COURSE.

3. the Commission's Resolution dated July 4, 2007 is SET ASIDE and

VACATED.

4. the appealed Decision a quo dated July 3, 2006 is SET ASIDE and new
one is ENTERED dismissing the complaint below for lack of merit.

SO ORDERED.
Thus, Solidum appealed to the CA. The CA then rendered the assailed Decision
dated April 4, 2011 affirming with modification the Decision of the NLRC. The
dispositive portion of the CA Decision reads:
FOR THESE REASONS, the Court AFFIRMS the NLRC Resolution dated January 26,
2009 with the MODIFICATION that petitioner Jose Leni Solidum be paid his salaries
and benefits which accrued during the period of his extended preventive
suspension.

SO ORDERED.
From such Decision both parties moved for reconsideration. The CA denied such
Motions in a Resolution dated July 14, 2011. From such ruling of the appellate
court, both parties appealed. Hence, the instant petitions.

The Issues

In G.R. No. 197763, Smart raises the following issues:

(A)

The Court of Appeals gravely erred in declaring illegal the second preventive
suspension imposed by petitioner Smart upon the respondent.

(B)

The Court of Appeals gravely erred in declaring that petitioner Smart may not place
the respondent under another preventive suspension after discovery of additional
offenses notwithstanding that the offenses committed by the respondent warrant
another preventive suspension.15 ChanRoble sVirt ualawli bra ry

In G.R. No. 197836, Solidum raises the following issues, to wit:

A.

Whether or not the public respondent Court of Appeal's Decision dated April 4, 2011
and Resolution dated July 14, 2011, ruling that the appeal of private respondent
Smart filed with public respondent NLRC was well taken within the reglementary
period, is in accordance with law, rules and prevailing jurisprudence.

B.

Whether or not the public respondent Court of Appeal's Decision dated April 4, 2011
and Resolution dated July 14, 2011, considering private respondent Smart's appeal
with the NLRC as perfected by upholding the validity of the appeal bond posted by
said private respondent Smart even if there was no security deposit or collateral, is
in accordance with Section 4 and 6, Rule VI of the 2005 NLRC Revised Rules of
Procedure, NLRC Memorandum Circular 1-01, series of 2004, and prevailing
jurisprudence.

C.

Whether or not the public respondent Court of Appeals gravely erred in failing to
consider the evidence petitioner showing that even up to the present, or more than
five (5) years after the expiration of the 10-day reglementary period to file a
perfected appeal with the NLRC on July 20, 2006, private respondent Smart still
fails to provide petitioner with a certified true copy of the surety bond and copy of
the security deposit required for the perfection of the appeal under Section 6, Rule
VI of the 2005 NLRC Revised Rules of Procedure.

D.

Whether or not the public respondent Court of Appeals committed grave abuse of
discretion in upholding the validity of the appeal bond filed by private respondent
Smart despite the fact that both the appeal bond and collateral securing the said
bond had long expired.

E.

Whether or not the public respondent Court of Appeals gravely erred in ruling that
the technical rules are not controlling in any proceeding before the NLRC.

F.

Whether or not the public respondent Court of Appeals gravely erred in affirming
the Resolution of public respondent NLRC dated January 26, 2009 which set aside
the decision of the labor arbiter dated July 3, 2006 declaring that petitioner's
preventive suspension for more than 30 days without pay is illegal and tantamount
to constructive dismissal.

G.

Whether or not the public respondent Court of Appeals gravely erred in finding that
petitioner was afforded procedural due process by private respondent under the
Two-Notice Rule.

H.

Whether or not the public respondent Court of Appeals gravely erred in finding that
those irregularities committed by petitioner were proven by documentary evidence
and testimonies of his product managers and marketing assistants despite the fact
that none of those product managers and marketing assistants appeared and
testified during the hearings and, most importantly, during the hearing for cross-
examination on their submitted affidavits and documentary evidence as scheduled
by the labor arbiter upon specific request and manifestation by the petitioner
invoking his constitutional right to cross-examine.

I.

Whether or not the public respondent Court of Appeals gravely erred in finding that
herein petitioner is a fiduciary employee and is therefore covered by the trust and
confidence rule to a wider latitude.

J.
Whether or not the public respondent Court of Appeals gravely erred in finding that
petitioner is a managerial employee.

K.

Whether or not the public respondent Court of Appeals gravely erred in finding that
there was just and valid cause to terminate the petitioner from the service.16 ChanRoble sVirt ualawli bra ry

The Court's Ruling

The petitions must be denied.

Solidum's 2nd preventive suspension is valid

In G.R. No. 197763, Smart contended:

On the same vein, the respondent was validly placed under second preventive
suspension for the reason that pending investigation of separate and distinct set of
offenses committed by the respondent as contained in the second Notice to Explain
dated 21 October 2005 (Annex F hereof), his continued presence in the company
premises during the investigation poses serious and imminent threat to the life or
property of the employer and co-workers.17 ChanRoblesVirt ualawli bra ry

On the other hand, Solidum claims that his preventive suspension of 20 days is an
extension of his initial 30-day suspension and, hence, illegal and constitutes
constructive dismissal.

Smart's position is impressed with merit.

The relevant provisions regarding preventive suspensions are found in Sections 8

and 9 of Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code
(Omnibus Rules), as amended by Department Order No. 9, Series of 1997, which
read as follows:
Section 8. Preventive suspension. The employer may place the worker concerned
under preventive suspension only if his continued employment poses a serious and
imminent threat to the life or property of the employer or of his co-workers.

Section 9. Period of suspension. No preventive suspension shall last longer

than thirty (30) days. The employer shall thereafter reinstate the worker in his
former or in a substantially equivalent position or the employer may extend the
period of suspension provided that during the period of extension, he pays the
wages and other benefits due to the worker. In such case, the worker shall not be
bound to reimburse the amount paid to him during the extension if the employer
decides, after completion of the hearing, to dismiss the worker, (Emphasis
supplied)
By a preventive suspension an employer protects itself from further harm or losses
because of the erring employee. This concept was explained by the Court
in Gatbonton v. National Labor Relations Commission:18
Preventive suspension is a disciplinary measure for the protection of the
company's property pending investigation of any alleged malfeasance or
misfeasance committed by the employee. The employer may place the worker
concerned under preventive suspension if his continued employment poses a
serious and imminent threat to the life or property of the employer or of his co-
workers. However, when it is determined that there is no sufficient basis lo justify
an employee's preventive suspension, the latter is entitled to the payment of
salaries during the time of preventive suspension. (Emphasis supplied)
Such principle was applied by the Court in Bluer Than Blue Joint Ventures/Mary Ann
Dela Vega v. Esteban,19 where it was ruled:
Preventive suspension is a measure allowed by law and afforded to the employer if
an employee's continued employment poses a serious and imminent threat to the
employer's life or property or of his co-workers. It may be legally imposed against
an employee whose alleged violation is the subject of an investigation.

In this case, the petitioner was acting well within its rights when it imposed a 10-
day preventive suspension on Esteban. While it may be that the acts
complained of were committed by Esteban almost a year before the
investigation was conducted, still, it should be pointed out that Esteban
was performing functions that involve handling of the petitioner's property
and funds, and the petitioner had every right to protect its assets and
operations pending Esteban's investigation. (Emphasis supplied)
While the Omnibus Rules limits the period of preventive suspension to thirty (30)
days, such time frame pertains only to one offense by the employee. For an
offense, it cannot go beyond 30 days. However, if the employee is charged with
another offense, then the employer is entitled to impose a preventive suspension
not to exceed 30 days specifically for the new infraction. Indeed, a fresh preventive
suspension can be imposed for a separate or distinct offense. Thus, an employer is
well within its rights to preventively suspend an employee for other wrongdoings
that may be later discovered while the first investigation is ongoing.

As in this case, Smart was able to uncover other wrongdoings committed by

Solidum during the investigation for the initial charges against him. These newly
discovered transgressions would, thus, require an additional period to investigate.
The first batch of offenses was captured in the September 21, 2005 Notice to
Explain issued by Smart. The notice covers fraud or willful breach of trust in relation
to transactions covered by Invoice No. 2921 and CE No. 2005-533 as well as CE
Nos. 2005-413, 2005-459, 2005-461, 2005-526, 2005-460, 2005-552 and 2005-
527 that were noted by him. For these offenses, Solidum was issued a preventive
suspension without pay for 30 days.

On October 21, 2005, Smart, however, issued another notice to explain to Solidum
this time involving additional CEs: 2005-416, 2005-480, 2005-481, 2005-479,
2005-512, and 2005-513. Solidum was again preventively suspended for twenty
(20) days. The preventive suspension of 20 days is not an extension of the
suspension issued in relation to the September 21, 2005 Notice to Explain but is a
totally separate preventive suspension for the October 21, 2005 Notice to Explain.
As earlier pointed out, the transactions covered by the 30-day preventive
suspension are different from that covered by the 20-day preventive suspension.
Such being the case the court a quo was incorrect when it treated said suspension
as an "extension" and, consequently, it is a miscue to award Solidum the payment
of back salaries and benefits corresponding to the 20-day preventive suspension of
Solidum.

As to the issues raised by Solidum in G.R. No. 197836, the same are bereft of
merit.

Smart's appeal from the Decision of the labor arbiter was filed within the
reglementary period

Solidum contends that Smart's motion for reconsideration of the labor arbiter's
Decision was filed out of time. The issue here is: When did Smart receive a copy of
the Decision? The confusion originated from the date stamped by the receiving
clerk of Smart on the receiving copy of the Decision as July 10, 2006. Smart claims
that the stamped date was erroneous as it actually received a copy of the Decision
only on July 13, 2006. Such claim is supported by the certification from the
postmaster of the Makati Central Post Office, the letter carrier's Registry Book, and
the affidavits of the letter carrier and Smart's receiving clerk. With such
overwhelming evidence, there can be no other conclusion except that Smart
received a copy of the Decision on July 13, 2006 and filed their motion for
reconsideration within the prescribed 10-day period on July 25, 2006, as July 24,
2006 fell on a Sunday. Thus, Smart's Motion was timely filed.

Smart substantially complied with the requirements of an appeal bond

Next, Solidum questions the validity of the appeal bond filed by Smart, pointing out
the lack of a proof of security deposit or collateral necessary to perfect its appeal to
the NLRC. To recall, Section 6, Rule VI of the 2005 NLRC Revised Rules of
Procedure states:
Section 6. Bond. - In case the decision of the Labor Arbiter or the Regional Director
involves a monetary award, an appeal by the employer may be perfected only upon
the posting of a bond, which shall either be in the form of cash deposit or surety
bond equivalent in amount to the monetary award, exclusive of damages and
attorney's fees.

In case of surety bond, the same shall be issued by a reputable bonding company
duly accredited by the Commission or the Supreme Court, and shall be
accompanied by original or certified true copies of the following:
xxxx

c) proof of security deposit or collateral securing the bond: provided, that a

check shall not be considered as an acceptable security. (Emphasis supplied)
Thus, Solidum claims that the lack of proof of security deposit or collateral securing
the bond renders the bond irregular and the appeal legally infirm.
We disagree.

As aptly found by the NLRC, substantial compliance with the rules on appeal bonds
has been repeatedly held by this Court to be sufficient for the perfection of an
appeal:
The perfection of an appeal within the reglementary period and in the manner
prescribed by law is jurisdictional, and noncompliance with such legal requirement
is fatal and effectively renders the judgment final and executory. As provided in
Article 223 of the Labor Code, as amended, in case of a judgment involving a
monetary award, an appeal by the employer may be perfected only upon the
posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Commission in the amount equivalent to the monetary award in
the judgment appealed from.

However, not only in one case has this Court relaxed this requirement in order to
bring about the immediate and appropriate resolution of cases on the merits.
In Quiambao v. National Labor Relations Commission, this Court allowed the
relaxation of the requirement when there is substantial compliance with the rule.
Likewise, in Ong v. Court of Appeals, the Court held that the bond requirement on
appeals may be relaxed when there is substantial compliance with the Rules of
Procedure of the NLRC or when the appellant shows willingness to post a partial
bond. The Court held that "while the bond requirement on appeals involving
monetary awards has been relaxed in certain cases, this can only be done where
there was substantial compliance of the Rules or where the appellants, at the very
least, exhibited willingness to pay by posting a partial bond."20Cha nRobles Vi rtua la wlibra ry

Furthermore, considering that it is the NLRC that has interpreted its own rules on
this matter, the Court is inclined to accept such interpretation. The Court has held,
"By reason of the special knowledge and expertise of administrative agencies over
matters falling under their jurisdiction, they are in a better position to pass
judgment on those matters."21 Moreover, the NLRC properly relaxed the rules on
appeal bonds.

The NLRC has the power and authority to promulgate rules of procedure under
Article 218(a) of the Labor Code. As such, it can suspend the rules if it finds that
the interests of justice will be better served if the strict compliance with the rules
should be relaxed. In short, a substantial compliance may be allowed by the NLRC
especially in this case where the party which submitted the bond is a multibillion
company which can easily pay whatever monetary award may be adjudged against
it. Even if there is no proof of security deposit or collateral, the surety bond issued
by an accredited company is adequate to answer for the liability if any to be
incurred by Smart.

Solidum is not entitled to reinstatement

Next, Solidum claims that due to the extension of his period of preventive
suspension, he must be considered as having been constructively dismissed and
entitled to reinstatement and backwages. To support his claim, Solidum
cites Maricalum Mining Corporation v. Decorion22 Such case, however, is not
factually on all fours with the instant case. In Maricalum, the Court ruled that
Decorion was illegally constructively dismissed, which is why he was entitled to
reinstatement. Here, Solidum was validly dismissed for loss of trust and confidence.
Thus, his reliance on Maricalum is misplaced and will not justify his reinstatement.

As to Solidum's claim of denial of due process, such issues are factual in nature.
This Court, not being a trier of facts, will not pass upon such issues, as ruled
in Nahas v. Olarte:23
The Court is not a trier of facts; factual findings of the labor tribunals when affirmed
by the CA are generally accorded not only respect, but even finality, and are
binding on this Court.
Notably, Solidum's allegation that he was denied his right to counsel was passed
upon the NLRC in this wise:
Similarly, the Commission is not convinced with Labor Arbiter Pati's finding that the
complainant was deprived on his right to counsel when he was not allowed to be
assisted by his counsel at the alleged investigation held on September 21,
2005. Other than his bare claim, there is no evidence on record buttressing
complainant's claim.24 x x x (Emphasis supplied)
Similarly, Solidum contends that he did not receive other documents necessary for
him to be apprised of the charges against him. Such are also issues of fact. The
NLRC ruled on this matter in this wise:
The Commission is likewise not convinced with the finding of Labor Arbiter Pati that
complainant was deprived of due process when he was not furnished copies of the
documents he referred to in his letter dated October 24, 2005 thereby prompting
him not to attend the hearings on October 26 and 28, 2005. There is evidence to
show that respondents furnished copies of the documents requested by
complainant but which the latter refused to received when they were sent
to his residence.25 x x x (Emphasis supplied)
It is not necessary that witnesses be cross-examined by counsel of the
adverse party in proceedings before the labor arbiter

Solidum further alleges that he was denied the right to cross-examine the
witnesses who submitted affidavits in favor of Smart; thus, the affidavits must be
considered hearsay and inadmissible. In support of such contention, Solidum
cites Naguit v. National Labor Relations Commission26

Such contention is misplaced.

The controlling jurisprudence on the matter is the ruling in the more

recent Philippine Long Distance Telephone Company v. Honrado,27 where the Court
ruled:
It is hornbook in employee dismissal cases that "[t]he essence of due process is an
opportunity to be heard, or as applied to administrative proceedings, an opportunity
to explain one's side x x x. A formal or trial type hearing is not at all times and in
all instances essential to due process, the requirements of which are satisfied where
the parties are afforded fair and reasonable opportunity to explain their side of the
controversy." Neither is it necessary that the witnesses be cross-examined
by counsel for the adverse party. (Emphasis supplied)
The Court explained the reason why cross-examination is not required in the
proceedings before the labor arbiter in Reyno v. Manila Electric
Company,28 citing Rabago v. National Labor Relations Commission29 where the
Court ruled:
x x x The argument that the affidavit is hearsay because the affiants were not
presented for cross-examination is not persuasive because the rules of evidence are
not strictly observed in proceedings before administrative bodies like the NLRC
where decisions may be reached on the basis of position papers only. x x x
Clearly, the alleged denial of Solidum's request to cross-examine the witnesses of
Smart does not render their affidavits hearsay. Thus, these pieces of evidence were
properly considered by the labor tribunal.

Solidum was a managerial employee of Smart

Next, Solidum argues that he is not a fiduciary or managerial employee and,

therefore, cannot be legally dismissed on the ground of loss of trust and confidence.
Article 212(m) of the Labor Code defines a Managerial Employee as:
(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire, transfer, suspend, lay-off
recall, discharged, assign or discipline employees. x x x
The NLRC found that Solidum was a managerial employee in this wise:
The facts on hand indubitably show that complainant occupied the position of
Department Mead and held the same with trust and confidence as required him
under his employment contract. As Department Head of the Smart Buddy
Activations and Usage Group, complainant led and directed his subordinates
composed of product managers, product officers, and senior marketing assistants
to achieving the company's marketing goals. Moreover, complainant appears to
have the authority to devise, implement and control strategic and
operational policies of the Department he was then heading. Likewise, it
cannot be denied that complainant's Department has a budget of millions of pesos
over which he exercises the power to allocate to different marketing projects
conceptualized by him and/or his subordinates. The records would also show that
for complainant's services, he received a monthly salary in the hefty amount of
P233,910.00, monthly allowance of P19,000.00, and bonuses and incentives of
more than P7 Million.

Under the foregoing facts, complainant's duties and responsibilities, coupled with
the amount of salaries he is receiving and other benefits he is entitled to, certainly
show that his position of Department Head is managerial in nature.30 (Emphasis
supplied)
Solidum denies that he is a managerial employee by stating that just because he
directed subordinates, he should be considered a managerial employee. He also
argues that just because he had a large salary does not mean that he was a
managerial employee. Finally, Solidum denies having the power to lay down and
execute management policies.

Notably, however, Solidum does not deny having "the authority to devise,
implement and control strategic and operational policies of the Department he was
then heading." This is clearly the authority to lay down and execute management
policies. Consequently, the CA affirmed these findings. Thus, the NLRC and the CA
correctly found that Solidum was a managerial employee. As such, he may be
validly dismissed for loss of trust and confidence.

The rulings of trial court in criminal cases generally do not bind the labor
tribunals

Further, Solidum alleges that he did not commit any dishonesty-related offense that
would justify Smart's loss of confidence in him. He supports such allegation with the
rulings of two (2) trial courts of Makati City that ruled that Solidum did not commit
any fraud in the subject transactions.

Solidum's reliance on the rulings of the trial courts is misplaced. His acquittal before
such courts cannot bind the labor tribunal.

In Amadeo Fishing Corporation v. Nierra,31 the Court ruled that "an acquittal in
criminal prosecution does not have the effect of extinguishing liability for dismissal
on the ground of breach of trust and confidence." While in Vergara v. National
Labor Relations Commission,32 the Court was even more succinct and ruled that the
filing of the complaint by. the public prosecutor is a sufficient ground for a dismissal
of an employee for loss of trust and confidence, to wit:
The Court finds adequate basis for private respondent's loss of trust and confidence
in petitioner, x x x Besides, the evidence supporting the criminal charge,
found after preliminary investigation as sufficient to show prima
facie guilt, constitutes just cause for his termination based on loss of trust
and confidence. To constitute just cause, petitioner's malfeasance did not require
criminal conviction. Verily, petitioner was dismissed not because he was convicted
of theft, but because his dishonest acts were substantially proven, (Emphasis
supplied)
In the instant case, both the NLRC and the CA found Solidum guilty of the alleged
acts that constituted grounds for his dismissal for loss of trust and confidence,
which were summarized by the CA as follows:
First, Solidum noted two versions of CE No. 2005-533 with description "Buy SIM
Download All You Can" but containing different particulars. Specifically, the second
CE included charges from various radio stations which are not found in the first CE.
However, the Company discovered that the only projects with approved radio
components were the "Mindanao Kolek Mo To Promo" which ended on July 15,
2005; the "Visayas Kolek Mo To Promo" which ended on August 15, 2005, and the
"Smart Download and Win" with promo period from August 22 to October 22, 2005.
The "Buy SIM Download All You Can" has no approved radio component. Moreover,
Solidum submitted certificates of performance from various radio stations which are
outside of the promo periods.
Second, in the implementation of several projects, Solidum endorsed unaccredited
third parties, which is already a violation of established company policies. One of
these corporations is M&M Events, Inc., which turned out as a non-existing
corporation. The Smart Senior Product Officer Ma. Luisa Suguitan even testified that
she has not worked with an agency such as M&M Events, Inc. Worse, the said entity
cannot be found in its declared business address and the VAT registration number
appearing on its sales invoice is registered under a different company. Moreover,
Solidum approved CE No. 2005-459 and CE No. 2005-460, pertaining to different
projects, but with attached invoices from M&M Events, Inc. bearing the same date
and amount. Finally, Solidum deviated from the existing company procedures. He
presented CEs to his subordinate product manager for signature with his approval
already affixed. Later, it was discovered that the duly signed CEs were altered
without the knowledge of the product manager. He even dictated to the agency the
title to be used and the details that should be included in the CEs. The CEs were
then forwarded directly to him instead of the Smart marketing point person.
Solidum also charged certain projects against the budget of another approved
program.
Such findings of the NLRC and affirmed by the CA are binding on this Court. Thus,
Solidum's petition must also fail on this point.

WHEREFORE, the petition of Jose Leni Z. Solidum in G.R. No. 197836 is

hereby DENIED. The petition of petitioners Smart Communications, Inc, et al. in
G.R. No. 197763 is PARTIALLY GRANTED. The Court of Appeals Decision dated
April 4, 2011 is hereby AFFIRMED with MODIFICATION that the award of
salaries and benefits that accrued during the period of extended preventive
suspension is DELETED.

No costs.

SO ORDERED. chanroble svirtual lawlib rary

 G.R. No. 178184, January 29, 2014

GRAND ASIAN SHIPPING LINES, INC., EDUARDO P. FRANCISCO AND

WILLIAM HOW, Petitioners, v. WILFREDO GALVEZ, JOEL SALES, CRISTITO
GRUTA, DANILO ARGUELLES, RENATO BATAYOLA, PATRICIO FRESMILLO,*
JOVY NOBLE, EMILIO DOMINICO, BENNY NILMAO, AND JOSE
AUSTRAL, Respondents.

DECISION

DEL CASTILLO, J.:

The employer has broader discretion in dismissing managerial employees on the

ground of loss of trust and confidence than those occupying ordinary ranks. While
plain accusations are not sufficient to justify the dismissal of rank and file
employees, the mere existence of a basis for believing that managerial employees
have breached the trust reposed on them by their employer would suffice to justify
their dismissal.1

Before us is a Petition for Review on Certiorari2 assailing the September 12, 2006
Decision3 of the Court of Appeals (CA) in CA–G.R. SP No. 82379, which annulled the
September 10, 2003 Decision4 and January 14, 2004 Resolution5 of the National
Labor Relations Commission (NLRC), thereby reinstating the August 30, 2001
Decision6 of the Labor Arbiter for having attained finality as a result of petitioners’
failure to post the correct amount of bond in their appeal before the
NLRC. Likewise assailed is the May 23, 2007 Resolution7 of the CA which denied
petitioners’ Motion for Reconsideration.8cralawlaw lib rary

Factual Antecedents

Petitioner Grand Asian Shipping Lines, Inc. (GASLI) is a domestic corporation

engaged in transporting liquified petroleum gas (LPG) from Petron Corporation’s
refinery in Limay, Bataan to Petron’s Plant in Ugong, Pasig and Petron’s Depot in
Rosario, Cavite. Petitioners William How and Eduardo Francisco are its President
and General Manager, respectively. Respondents, on the other hand, are
crewmembers of one of GASLI’s vessels, M/T Dorothy Uno, with the following
designations: Wilfredo Galvez (Galvez) as Captain; Joel Sales (Sales) as Chief
Mate; Cristito Gruta (Gruta) as Chief Engineer; Danilo Arguelles (Arguelles) as
Radio Operator; Renato Batayola (Batayola), Patricio Fresmillo (Fresmillo) and Jovy
Noble (Noble) as Able Seamen; Emilio Dominico (Dominico) and Benny Nilmao
(Nilmao) as Oilers; and Jose Austral (Austral) as 2nd Engineer.

Sometime in January 2000, one of the vessel’s Oilers, Richard Abis (Abis), reported
to GASLI’s Office and Crewing Manager, Elsa Montegrico (Montegrico), an alleged
illegal activity being committed by respondents aboard the vessel. Abis revealed
that after about four to five voyages a week, a substantial volume of fuel oil is
unconsumed and stored in the vessel’s fuel tanks. However, Gruta would
misdeclare it as consumed fuel in the Engineer’s Voyage Reports. Then, the saved
fuel oil is siphoned and sold to other vessels out at sea usually at
nighttime. Respondents would then divide among themselves the proceeds of the
sale. Abis added that he was hesitant at first to report respondents’ illegal activities
for fear for his life.

An investigation on the alleged pilferage was conducted. After audit and

examination of the Engineer’s Voyage Reports, GASLI’s Internal Auditor, Roger de
la Rama (De la Rama), issued a Certification of Overstatement of Fuel Oil
Consumption9 for M/T Dorothy Uno stating that for the period June 30, 1999 to
February 15, 2000 fuel oil consumption was overstated by 6,954.3 liters amounting
to P74,737.86.10

On February 11, 2000, a formal complaint11 for qualified theft was filed with the
Criminal Investigation and Detection Group (CIDG) at Camp Crame against
respondents, with Montegrico’s Complaint–Affidavit12 attached. On February 14,
2000, Abis submitted his Sinumpaang Salaysay,13 attesting to the facts surrounding
respondents’ pilferage of fuel oil while on board the vessel, which he alleged started
in August of 1999. On March 22, 2000, GASLI’s Port Captain, Genaro Bernabe
(Bernabe), and De la Rama submitted a Complaint–Joint Affidavit,14 stating that in
Gruta’s Engineer’s Voyage Reports, particularly for the period June 30, 1999 to
February 15, 2000, he overstated the number of hours the vessel’s main and
auxiliary engines, as well as its generators, were used resulting in the exaggerated
fuel consumption. They also stated that according to independent surveyor Jade
Sea–Land Inspection Services, the normal diesel fuel consumption of M/T Dorothy
Uno for Petron Ugong–Bataan Refinery–Petron Ugong route averaged 1,021 liters
only. Thus, comparing this with the declared amount of fuel consumed by the
vessel when manned by the respondents, Bernabe and De la Rama concluded that
the pilferage was considerable.15 In her Supplementary Complaint
Affidavit,16 Montegrico implicated respondents except Sales, in the illegal
activity. Bernabe, in his Reply–Affidavit,17 further detailed their analysis of the
voyage reports vis–a–vis the report of Jade Sea–Land Inspection Services to
strengthen the accusations.

In their Joint Counter–Affidavit18 and Joint Rejoinder–Affidavit,19 respondents

denied the charge. They alleged that the complaint was based on conflicting and
erroneous computation/estimates of fuel consumption; that the complaint was
fabricated as borne out by its failure to specify the exact time the alleged pilferage
took place; that the allegations that the pilferage has been going on since August
1999 and that Austral and Sales acted as lookouts are not true because both
embarked on the vessel only on December 28, 1999 and January of 2000,
respectively; that four other officers who were on board the vessel much longer
than Austral and Sales were not included in the charge; and, that the complaint
was intended as a mere leverage.

In a letter20 dated April 14, 2000, the CIDG referred the case to the Office of the
City Prosecutor of Manila, which, after finding a prima facie case, filed the
corresponding Information for Qualified Theft21 dated August 18, 2000 with the
Regional Trial Court (RTC) of Manila.

Meanwhile, GASLI placed respondents under preventive suspension. After

conducting administrative hearings, petitioners decided to terminate respondents
from employment. Respondents (except Sales) were thus served with
notices22 informing them of their termination for serious misconduct, willful breach
of trust, and commission of a crime or offense against their employer.

It appears that several other employees and crewmembers of GASLI’s two other
vessels were likewise suspended and terminated from employment. Nine seafarers
of M/T Deborah Uno were charged and terminated for insubordination, defying
orders and refusal to take responsibility of cargo products/fuel.23 For vessel M/T
Coral Song, two crewmembers were dismissed for serious act of sabotage and
grave insubordination.24

Proceedings before the Labor Arbiter

Respondents and the other dismissed crewmembers of M/T Deborah Uno and M/T
Coral Song (complainants) filed with the NLRC separate complaints25 for illegal
suspension and dismissal, underpayment/non–payment of salaries/ wages,
overtime pay, premium pay for holiday and rest day, holiday pay, service incentive
leave pay, hazard pay, tax refunds and indemnities for damages and attorney’s fees
against petitioners. The complaints, docketed as NLRC NCR Case Nos. 00–04–
02026–00, 00–04–02062–00, 00–05–02620–00 and 00–07–03769–00, were
consolidated.

On August 30, 2001, the Labor Arbiter rendered a Decision26 finding the dismissal
of all 21 complainants illegal. As regards the dismissal of herein respondents, the
Labor Arbiter ruled that the filing of a criminal case for qualified theft against them
did not justify their termination from employment. The Labor Arbiter found it
abstruse that the specific date and time the alleged pilferage took place were not
specified and that some crewmembers who boarded the vessel during the same
period the alleged pilferage transpired were not included in the charge. With regard
to the other complainants, petitioners likewise failed to prove the legality of their
dismissal.

The Labor Arbiter ordered petitioners to reinstate complainants with full backwages
and to pay their money claims for unpaid salary, overtime pay, premium pay for
holidays and rest days, holiday and service incentive leave pay, as indicated in the
Computation of Money Claims. Complainants were likewise awarded damages due
to the attending bad faith in effecting their termination, double indemnity
prescribed by Republic Act (RA) No. 818827 in view of violation of the Minimum
Wage Law, as well as 10% attorney’s fee. With respect to the claim for tax refund,
the same was referred to the Bureau of Internal Revenue, while the claim for
hazard pay was dismissed for lack of basis. The Labor Arbiter modified and
recomputed the money claims of respondents, as follows:
1. Wilfredo Galvez – (Dismissed
in Mar. 2000)
Backwages from Mar. 2000 to
May 2001 (P8,658.74 x 14 mos.) ––––––––––– P 121,225.16

13th Month Pay for the period ––––––––––– 8,658.94

Unpaid Salary from Feb 16 to 29,

2000 ––––––––––– 3,985.38

Non–payment of Premium Pay for

Holiday;
Restday and Non–payment of
Holiday Pay;
(limited to 3 years’ only =
P7,372.90 x 3 yrs.) ––––––––––– 22,188.70

Non–payment of (5 days) Service

Incentive
Leave Pay (for every year of
service, but
Limited to 3 years only): =
P1,423.35 x 3 yrs.) ––––––––––– P 4,270.05

Actual Moral Exemplary &

Compensatory
Damages ––––––––––– P 100,000.00
(P260,258.23)
Ten (10%) Percent Attorney’s
Fees P 26,025.82
TOTAL P 286,284.05

2. JOEL SALES – (Dismissed in

Mar. 2000)
Backwages from Mar. 2000 to
May 2001
(P8,274.14 x 14 mos.) ––––––––––– P 115,840.76

13th Month Pay for the period ––––––––––– 8,274.34

Actual, Moral, Exemplary &

Compensatory Damages ––––––––––– P 100,000.00
(P224,115.10)
Ten (10%) Percent Attorney’s
Fees P 22,411.51
 TOTAL P 246,526.61

3. CRISTITO G. GRUTA –
(Dismissed in Mar. 2000)
Backwages from Mar. 200[0] to
May 2001
(P8,274.14 x 14 mos.) ––––––––––– P 115,840.76

13th Month Pay for the period ––––––––––– 8,274.34

Non–payment of Premium Pay for
Holiday; Restday and
Non–payment of Holiday Pay:
(P7,045.57 x 2 yrs.) 14,091.51
Non–payment of (5 days) Service
Incentive Leave Pay
(for every year of service =
P1,360.15 x 2 yrs.) –––––––––– 2,720.30

Actual, Moral, Exemplary &

Compensatory Damages –––––––––– P 100,000.00
(P240,926.91)
Ten (10%) Percent Attorney’s
Fees –––––––––– P 24,092.69
TOTAL P 265,019.60

4. DANILO ARGUELLES –
(Dismissed in Feb. 2000)
Backwages from Mar. 2000 to
May 2001
(P7,340.62 x 15 mos.) –––––––––– [P]110,109.30

13th Month Pay for the period –––––––––– 7,340.62

Unpaid Salary from Feb. 16 to 29,

2000
(P225.00 x 14 days) –––––––––– 3,150.00

Underpayment/Non–payment of
Salary/Wages:
A. From April 98 to Nov. 98 (7
mos.)
Minimum Wage – P198 x
391.5 [/] 12 = P 6,459.75
 Actual Basic Wage for the
period 4,320.00
Difference P 2,139.75
x 7 mos.
P 14,978.25

Double Indemnity prescribed by

Rep. Act 8188, Sec. 4 P 29,956.50
B. From Dec. 98 to Mar. 2000 (16
mos.)
Minimum Wage – P225
391.5 [/] 12 = P 7,340.62
Actual Basic Wage for the
period 6,240.00
Difference P 1,100.62
x 16 mos .
P 17,609.92

Double Indemnity prescribed by

Rep. Act 8188, Sec. 4 P 35,219.84

Underpayment/Non–payment of
Overtime Pay:
A. From Apr. 98 to Nov. 98 (7
mos.)
30% of Minimum Wage –
(P6,459.75 x 30%) P 1,937.92
30% of Salary Actually Paid
–
(P4,320.00 x 30%) 1,872.00
Difference P 641.92
x 7 mos.
P 4,493.44 P 4,493.44

B. From Dec. 98 to Mar. 2000 (16

mos.)
30% of Minimum Wage – 2,202.18
(P7,340.62 x 30%)
30% of Salary Actually Paid
– 1,872.00
(P6,240.00 x 30%) P 330.18
Difference x 16 mos.
P 5,282.88 P 5,282.88
Non–payment of Premium Pay for
Holiday; Restday and P 11,655.00
Non–payment of Holiday Pay
(P5,872.50 x 2 yrs.)
Non–payment of (5 days) Service
Incentive Leave Pay
(for every year of service/but
limited to 2 yrs. only): 2,250.00
= P 1,125.00 x 2 yrs. P 100,000.00
Actual, Moral, Exemplary &
Compensatory Damages
(P309,457.58)
Ten (10%) Percent Attorney’s
Fees P 30,945.75
TOTAL P 340,403.33

5. RENATO BATAYOLA
6. PATRICIO FRESNILLO
7. JOVY NOBLE
8. EMILIO DOMINICO
9. BENNY NILMAO – (All
dismissed in Feb. 2001)

Backwages from Mar. 2000 to

May 2001
(P7,340.62 x 15 mos.) P 110,109.30
13th Month Pay for the period –––––––––– 7,340.62
Unpaid Salary from Feb. 16 to 29,
2000 P 3,150.00
(P225.00 x 14 days)
Underpayment/Non–payment of
Salary/Wages:
A. From Apr. 97 to Jan. 98 ([9]
mos.)
Minimum Wage – P185 x
391.5 [/] 12 = P 6,035.62
Actual Basic Wage for the period 4,098.24
Difference P 1,932.58
x 9 mos.
P 17,436.42

Double Indemnity prescribed by

Rep. Act 8188, Sec. 4 P 34,872.84
B. From Feb. 98 to Nov. 98 (10
mos.)
 Minimum Wage – P198 x
391.5 [/] 12 = P 6,459.75
Actual Basic Wage for the
period 4,098.24
Difference P 2,361.51
x 10 mos.
P 23,615.10

Double Indemnity prescribed by

Rep. Act 8188, Sec. 4 P 47,230.20
C. From Dec. 98 to Mar. 2000 (16
mos.)
Minimum Wage – P225 x
391.5 [/] 12 = 7,340.62
Actual Basic Wage for the
period 6,022.00
Difference P 1,318.62
x 16 mos.
P 21,098.00

Double Indemnity prescribed by

Rep. Act 8188, Sec. 4 P 42,196.00
Underpayment/Non–payment of
Overtime Pay:
A. From Apr. 97 to Jan. 98 (9
mos.)
30% Minimum Wage –
(P6,035.62 x 30%) P 1,810.68
30% of Salary Actually Paid
–
(P4,098.24 x 30%) 1,226.77
Difference P 583.91
x 9 mos.
P 5,255.19 – P 5,255.19

B. From Feb. 98 to Nov. 98 (10

mos.)
30% Minimum Wage –
(P6,459.75 x 30%) P 1,937.92
30% of Salary Actually Paid
–
(P4,098.24 x 30%) 1,226.72
Difference P 711.15
x 10 mos.
P 7,111.70 – P 7,111.70
C. From Dec. 98 to Mar. 2000 (16
mos.)
30% Minimum Wage – P 2,202.18
(P7,340.62 x 30%)
30% of Salary Actually Paid
– P 1,806.75
(P6,022.50 x 30%) P 395.43
Difference x 16 mos.
P 6,326.97 – P 6,326.97

Non–Payment of Premium Pay for

Holiday & Restday; and
Non–Payment of Holiday Pay:
(P5,827.50 x 3 yrs.) P 17,482.50
Non–Payment of (5 days) Service
Incentive Leave Pay
(for every year of service/but
limited to 3 years only)
= P1,125.00 x 3 yrs.) 3,375.00
Actual, Moral, Exemplary &
Compensatory Damages –––––––––– 100,000.00
(P384,450.12)
Ten (10%) Percent Attorney’s
Fees P 38, 445.01
TOTAL (each) P 422,895.13
(Total for 5 above–named
Complainants P2,114,475.00)

10. JOSE AUSTRAL –

(Dismissed in Feb. 2000)
Backwages from Mar. 2000 to
May 2001
(P8,900.00 x 15 mos.) P 133.500.00
th
13 Month Pay for the period 8,900.00
Unpaid Salary from Feb. 16 to 29,
2000
(P8,900.00 x 12 mos. / 365 days =
(P292.60 x 14 days) 4,096.40
Actual, [M]oral, Exemplary &
Compensatory Damages –––––––––– P 100,000.00
(P246,496.40)
Ten (10%) Percent Attorney’s
Fees P 24,679.64
TOTAL P 271, 146.0428
The dispositive portion of the Labor Arbiter’s Decision reads:

WHEREFORE, premises all considered, judgment is hereby rendered finding the

dismissal of all 21 complainants herein as illegal and ordering respondents Grand
Asian Shipping Lines, Inc., Eduardo P. Franscisco and William How to pay, jointly
and severally, each complainant the amounts, as follows, to wit:

A)1. Wilfredo Galvez P 286,284.05

2. Joel Sales 246,526.61
3. Cristito G. Gruta 265,019.60
4. Danilo Arguelles 340,403.33
5. Renato Batayola 422,895.13
6. Patricio Fresnillo 422,895.13
7. Jovy Noble 422,895.13
8. Emilio Dominico 422,895.13
9. Benny Nilmao 422,895.13
10. Jose Austral 271,146.04
11. Nobelito Rivas 281,900.13
12. Elias Facto 259,471.41
13. Jeremias Bonlagua 316,683.53
14. Rannie Canon 391,816.70
15. Fernando Malia 411,355.45
16. Calixto Flores 411,355.45
17. Necito Llanzana 411,355.45
18. Ramie Barrido 411,355.45
19. Albert Faulan 265,982.28
20. Magno Tosalem 419,352.79
21. Rolando Dela Guardia 419,352.79
(Grand Total) P 7,104,483.84

The awards of P100,000.00 each, as indemnity for damages and ten percent (10%) of the
B)
total amount, as attorney’s fees, are included in the above–individual amount so awarded.
Respondents should immediately reinstate all the complainants to their former position
C) without loss of seniority [sic] and other benefits; and to pay them full backwages up to the
time of their actual reinstatement.

All other claims of complainants, not included in the above awards, are hereby
ordered dismissed for lack of merit.

SO ORDERED.29

Proceedings before the National Labor Relations Commission

Petitioners filed a Notice of Appeal With A Very Urgent Motion to Reduce

Bond30 before the NLRC and posted a cash bond in the amount of P500,000.00. In
a Supplemental Motion to Reduce Bond,31 petitioners cited economic depression,
legality of the employees’ termination, compliance with labor standards, and wage
increases as grounds for the reduction of appeal bond.

The NLRC issued an Order32 dated February 20, 2002 denying petitioners’ motion to
reduce bond and directing them to post an additional bond in the amount of
P4,084,736.70 in cash or surety within an unextendible period of 10 days;
otherwise, their appeal would be dismissed. Petitioners failed to comply with the
Order. Thus, on February 3, 2003, complainants moved for the dismissal of the
appeal since petitioners had thus far posted only P1.5 million supersedeas bond and
P500,000.00 cash bond, short of the amount required by the NLRC.33

In a Decision34 dated September 10, 2003, the NLRC, despite its earlier Order
denying petitioners’ motion for the reduction of bond, reduced the amount of
appeal bond to P1.5 million and gave due course to petitioners’ appeal. It also
found the appeal meritorious and ruled that petitioners presented sufficient
evidence to show just causes for terminating complainants’ employment and
compliance with due process. Accordingly, complainants’ dismissal was valid, with
the exception of Sales. The NLRC adjudged petitioners to have illegally dismissed
Sales as there was absence of any record that the latter received any notice of
suspension, administrative hearing, or termination.

The NLRC struck down the monetary awards given by the Labor Arbiter, which, it
ruled, were based merely on the computations unilaterally prepared by the
complainants. It also ruled that Galvez, a ship captain, is considered a managerial
employee not entitled to premium pay for holiday and rest day, holiday pay and
service incentive leave pay. As for the other complainants, the award for premium
pay, holiday pay, rest day pay and overtime pay had no factual basis because no
proof was adduced to show that work was performed on a given holiday or rest day
or beyond the eight hours normal work time. Even then, the NLRC opined that
these claims had already been given since complainants’ salaries were paid on a
365–day basis. Likewise, service incentive leave pay, awards for damages and
double indemnity were deleted. Further, the NLRC sustained respondents’
contention that it is the Secretary of Labor or the Regional Director who has
jurisdiction to impose the penalty of double indemnity for violations of the Minimum
Wage Laws and not the Labor Arbiter. The NLRC disposed of the case as follows:

WHEREFORE, premises considered, the assailed Decision is hereby reversed as to

all complainants but modified with respect to Joel Sales. Respondents are adjudged
not guilty of illegal dismissal with respect to all complainants except complainant
Joel Sales. With the exception of Joel Sales, all the monetary awards to all
complainants are deleted from the decision.

Respondents are ordered to pay, jointly and severally complainant Joel Sales his
backwages in the amount of P124,115.10 as computed in the assailed decision plus
ten (10%) thereof as attorney’s fees.

We also sustain the order to reinstate him to his former position without loss of
seniority rights and other benefits and to pay him backwages up to the time of his
actual reinstatement.

SO ORDERED.35

Complainants filed Motions for Reconsideration while petitioners filed a Motion for
Partial Reconsideration. In a Resolution36 dated January 14, 2004, the NLRC
reconsidered its ruling with respect to Sales, absolving petitioners from the charge
of illegally dismissing him as Sales was neither placed under preventive suspension
nor terminated from the service. The NLRC upheld petitioners’ claim that it was
Sales who abandoned his work by failing to report back for re–assignment. The
dispositive portion of the Resolution reads:

WHEREFORE, premises considered, the Motions for Reconsideration filed by

complainants are denied for lack of merit. The Motion for Partial Reconsideration
filed by respondents is granted. The assailed decision is reconsidered in that
Respondents are likewise adjudged not guilty of illegal dismissal with respect to
complainant Joel Sales. The monetary awards in favor of complainant Joel Sales as
well as the reinstatement order are hereby deleted from the Decision.

SO ORDERED.37

Proceedings before the Court of Appeals

Respondents, excluding the other complainants, filed a Petition for Certiorari38 with
the CA, attributing grave abuse of discretion on the part of the NLRC in entertaining
the appeal despite the insufficiency of petitioners’ appeal bond. Respondents also
assailed the NLRC’s ruling upholding the validity of their dismissal. They posited
that the charge of pilferage is not supported by clear, convincing and concrete
evidence. In fact, the RTC, Branch 15 of Manila already rendered a Decision39 on
December 19, 2003 acquitting them of the crime of qualified theft lodged by the
petitioners. Respondents further prayed for the reinstatement of the Labor
Arbiter’s monetary awards in their favor.

In a Decision40 dated September 12, 2006, the CA set aside the NLRC’s Decision
and Resolution. It held that the NLRC’s act of entertaining the appeal is a
jurisdictional error since petitioners’ failure to post additional bond rendered the
Labor Arbiter’s Decision final, executory and immutable. The CA, nonetheless,
proceeded to discuss the merits of the case insofar as the illegal dismissal charge is
concerned. The CA conformed with the Labor Arbiter’s ruling that petitioners’
evidence was inadequate to support the charge of pilferage and justify respondents’
termination. The CA ruled that Sales was also illegally dismissed, stating that
Sales’ active participation in the labor case against petitioners belies the theory that
he was not terminated from employment. The dispositive portion of the CA
Decision reads:

WHEREFORE, the petition is GRANTED and the assailed September 10, 2003
Decision and January 14, 2003 Resolution are, accordingly, ANNULLED and SET
ASIDE. In lieu thereof, the Labor Arbiter’s August 30, 2001 Decision is ordered
REINSTATED.

SO ORDERED.41
Petitioners filed a Motion for Reconsideration,42 questioning the CA in finding that
respondents were illegally dismissed, in reinstating the monetary awards granted
by the Labor Arbiter without passing upon the merits of these money claims and in
ascribing grave abuse of discretion on the part of the NLRC in taking cognizance of
the appeal before it.

On May 23, 2007, the CA issued a Resolution43 denying petitioners’ Motion for
Reconsideration. Hence, the instant Petition.

Issues

Petitioners assign the following errors:

I.

THE HONORABLE COURT OF APPEALS RULED CONTRARY TO APPLICABLE

JURISPRUDENCE WHEN IT CONCLUDED THAT RESPONDENTS WERE ILLEGALLY
DISMISSED.

A. THIS HONORABLE COURT OF APPEAL[S] OF APPEALS [sic]

DISREGARDED THE FACT THAT THE OFFICE OF THE CITY
PROSECUTOR OF MANILA DETERMINED THAT THERE WAS A PRIMA
FACIE CASE FOR QUALIFIED THEFT AGAINST PETITIONERS,
CONTRARY TO DECISIONS THIS MOST HONORABLE COURT OF
APPEAL[S] HAS HELD WHERE SIMILAR FINDINGS OF THE
INVESTIGATING PUBLIC PROSECUTOR HAD BEEN CONSIDERED
SUBSTANTIAL EVIDENCE TO JUSTIFY TERMINATION OF EMPLOYMENT
BASED ON LOSS OF TRUST AND CONFIDENCE.

B. THIS HONORABLE COURT OF APPEAL[S] GRIEVOUSLY ERRED IN

DISCREDITING PRIVATE RESPONDENTS’ EVIDENCE ONE BY ONE
WHEN, TAKEN TOGETHER, SUCH EVIDENCE PROVIDED ADEQUATE
BASIS FOR THE DISMISSAL OF PETITIONERS IN ACCORDANCE WITH
RELEVANT SUPREME COURT OF APPEAL [sic] DECISIONS.

C. IN SUM, PETITIONERS WERE NOT ILLEGALLY DISMISSED SINCE THE

SUBSTANTIVE AND PROCEDURAL REQUIREMENTS FOR THE
TERMINATION OF THEIR EMPLOYMENT WERE SATISFIED IN THIS
CASE.

D. THIS HONORABLE COURT OF APPEAL[S] GRIEVOUSLY ERRED IN

RULING THAT PETITIONER JOEL SALES WAS ILLEGALLY DISMISSED.
 II.

THE HONORABLE COURT OF APPEALS RULED CONTRARY TO APPLICABLE

JURISPRUDENCE WHEN IT CONCLUDED THAT PETITIONERS WERE NOT ABLE TO
VALIDLY PERFECT [THEIR] APPEAL OF THE LABOR ARBITER’S DECISION.44

Petitioners claim that the NLRC properly took cognizance of their appeal and
properly granted their motion for reduction of the appeal bond, explaining that
strict implementation of the rules may be relaxed in certain cases so as to avoid a
miscarriage of justice. Petitioners also claim that there was adequate basis to
render respondents’ dismissal from service valid, as correctly ruled by the NLRC.

Our Ruling

The assailed CA Decision must be vacated and set aside.

There was substantial compliance with

the rules on appeal bonds.

In order to perfect an appeal from the Decision of the Labor Arbiter granting
monetary award, the Labor Code requires the posting of a bond, either in cash or
surety bond, in an amount equivalent to the monetary award. Article 223 of the
Labor Code provides:

ART. 223. Appeal. – Decisions, awards, or orders of the Labor Arbiter are final and
executory unless appealed to the Commission by any or both parties within ten (10)
calendar days from receipt of such decisions, awards, or orders. x x x

xxx

In case of a judgment involving a monetary award, an appeal by the employer

[may] be perfected only upon the posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the Commission in the amount
equivalent to the monetary award in the judgment appealed from.

Nonetheless, we have consistently held that rules should not be applied in a very
rigid and strict sense.45 This is especially true in labor cases wherein the
substantial merits of the case must accordingly be decided upon to serve the
interest of justice.46 When there has been substantial compliance, relaxation of
the Rules is warranted.47

In Mendoza v. HMS Credit Corporation,48 we held that the posting of an appeal

bond in the amount of P650,000.00 instead of P1,025,081.82 award stated in the
Decision of the Labor Arbiter is substantial compliance with the requirement under
Article 223. Likewise, in Pasig Cylinder Mfg. Corp. v. Rollo,[49 we ruled that the
filing of a reduced appeal bond of P100,000.00 is not fatal in an appeal from the
labor arbiter’s ruling awarding P3,132,335.57 to the dismissed employees.
In Rosewood Processing, Inc. v. National Labor Relations Commission,50 we allowed
the filing of a reduced bond of P50,000.00, accompanied with a motion, in an
appeal from the Labor Arbiter’s award of P789,154.39.

In the case at bench, petitioners appealed from the Decision of the Labor Arbiter
awarding to crewmembers the amount of P7,104,483.84 by filing a Notice of Appeal
with a Very Urgent Motion to Reduce Bond and posting a cash bond in the amount
of P500,000.00 and a supersedeas bond in the amount of P1.5 million. We find this
to be in substantial compliance with Article 223 of the Labor Code. It is true that
the NLRC initially denied the request for reduction of the appeal bond. However, it
eventually allowed its reduction and entertained petitioners’ appeal. We disagree
with the CA in holding that the NLRC acted with grave abuse of discretion as the
granting of a motion to reduce appeal bond lies within the sound discretion of the
NLRC upon showing of the reasonableness of the bond tendered and the merits of
the grounds relied upon.51 Hence, the NLRC did not err or commit grave abuse of
discretion in taking cognizance of petitioners’ appeal before it.

Galvez and Gruta were validly dismissed

on the ground of loss of trust and
confidence; there were no valid grounds
for the dismissal of Arguelles, Batayola,
Fresnillo, Noble, Dominico, Nilmao and
Austral .

We do not, however, agree with the findings of the NLRC that all respondents were
dismissed for just causes. In termination disputes, the burden of proving that the
dismissal is for a just or valid cause rests on the employers. Failure on their part to
discharge such burden will render the dismissal illegal.52

As specified in the termination notice, respondents were dismissed on the grounds

of (i) serious misconduct, particularly in engaging in pilferage while navigating at
sea, (ii) willful breach of the trust reposed by the company, and (iii) commission of
a crime or offense against their employer. Petitioners claim that based on the
sworn statement of Abis, joint affidavit of Bernabe and De la Rama, letter of
petitioner Francisco requesting assistance from the CIDG, formal complaint sheet,
complaint and supplementary complaint affidavit of Montegrico, CIDG’s letter
referring respondents’ case to the Office of the City Prosecutor of Manila, resolution
of the City Prosecutor finding a prima facie case of qualified theft, and the
Information for qualified theft, there is a reasonable ground to believe that
respondents were responsible for the pilferage of diesel fuel oil at M/T Dorothy Uno,
which renders them unworthy of the trust and confidence reposed on them.

After examination of the evidence presented, however, we find that petitioners

failed to substantiate adequately the charges of pilferage against
respondents. “[T]he quantum of proof which the employer must discharge is
substantial evidence. x x x Substantial evidence is that amount of relevant
evidence as a reasonable mind might accept as adequate to support a conclusion,
even if other minds, equally reasonable, might conceivably opine
otherwise.”53 Here, the mere filing of a formal charge, to our mind, does not
automatically make the dismissal valid. Evidence submitted to support the charge
should be evaluated to see if the degree of proof is met to justify respondents’
termination. The affidavit executed by Montegrico simply contained the accusations
of Abis that respondents committed pilferage, which allegations remain
uncorroborated. “Unsubstantiated suspicions, accusations, and conclusions of
employers do not provide for legal justification for dismissing employees.”54 The
other bits of evidence were also inadequate to support the charge of pilferage. The
findings made by GASLI’s port captain and internal auditor and the resulting
certification executed by De la Rama merely showed an overstatement of fuel
consumption as revealed in the Engineer’s Voyage Reports. The report of Jade Sea
Land Inspection Services only declares the actual usage and amount of fuel
consumed for a particular voyage. There are no other sufficient evidence to show
that respondents participated in the commission of a serious misconduct or an
offense against their employer.

As for the second ground for respondents’ termination, which is loss of trust and
confidence, distinction should be made between managerial and rank and file
employees. “[W]ith respect to rank–and–file personnel, loss of trust and
confidence, as ground for valid dismissal, requires proof of involvement in the
alleged events x x x [while for] managerial employees, the mere existence of a
basis for believing that such employee has breached the trust of his employer
would suffice for his dismissal.”55

In the case before us, Galvez, as the ship captain, is considered a managerial
employee since his duties involve the governance, care and management of the
vessel.56 Gruta, as chief engineer, is also a managerial employee for he is tasked
to take complete charge of the technical operations of the vessel.57 As captain and
as chief engineer, Galvez and Gruta perform functions vested with authority to
execute management policies and thereby hold positions of responsibility over the
activities in the vessel. Indeed, their position requires the full trust and confidence
of their employer for they are entrusted with the custody, handling and care of
company property and exercise authority over it.

Thus, we find that there is some basis for the loss of confidence reposed on Galvez
and Gruta. The certification issued by De la Rama stated that there is an
overstatement of fuel consumption. Notably, while respondents made self–serving
allegations that the computation made therein is erroneous, they never questioned
the competence of De la Rama to make such certification. Neither did they
question the authenticity and validity of the certification. Thus, the fact that there
was an overstatement of fuel consumption and that there was loss of a considerable
amount of diesel fuel oil remained unrefuted. Their failure to account for this loss
of company property betrays the trust reposed and expected of them. They had
violated petitioners’ trust and for which their dismissal is justified on the ground of
breach of confidence.

As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral, proof of
involvement in the loss of the vessel’s fuel as well as their participation in the
alleged theft is required for they are ordinary rank and file employees. And as
discussed above, no substantial evidence exists in the records that would establish
their participation in the offense charged. This renders their dismissal illegal, thus,
entitling them to reinstatement plus full backwages, inclusive of allowances and
other benefits, computed from the time of their dismissal up to the time of actual
reinstatement.

No evidence of Sales’ dismissal from

employment.

The rule that the employer bears the burden of proof in illegal dismissal cases finds
no application when the employer denies having dismissed the employee.58 The
employee must first establish by substantial evidence the fact of dismissal59 before
shifting to the employer the burden of proving the validity of such dismissal.

We give credence to petitioners’ claim that Sales was not dismissed from
employment. Unlike the other respondents, we find no evidence in the records to
show that Sales was preventively suspended, that he was summoned and subjected
to any administrative hearing and that he was given termination notice. From the
records, it appears Sales was not among those preventively suspended on February
26, 2000. To bolster this fact, petitioners presented the Payroll Journal Register for
the period March 1–15, 200060 showing that Sales was still included in the payroll
and was not among those who were charged with an offense to warrant
suspension. In fact, Sales’ signature in the Semi–Monthly Attendance Report for
February 26, 2000 to March 10, 200061 proves that he continued to work as Chief
Mate for the vessel M/T Dorothy Uno along with a new set of crewmembers. It is
likewise worth noting that in the Supplemental Complaint Affidavit of Montegrico,
Sales was not included in the list of those employees who were accused of having
knowledge of the alleged pilferage. This only shows that he was never subjected to
any accusation or investigation as a prelude to termination. Hence, it would be
pointless to determine the legality or illegality of his dismissal because, in the first
place, he was not dismissed from employment.

Respondents are not entitled to their

money claims except 13th month pay for
the period of their illegal dismissal,
unpaid salaries, salary differentials,
double indemnity for violation of the
Minimum Wage Law and attorney’s fees.

As for the money claims of respondents, we note that petitioners did not bring this
issue before us or assign it as error in this Petition. It was raised by the petitioners
only in their Memorandum of Appeal filed with the NLRC and in their Motion for
Reconsideration of the CA’s Decision reinstating the Labor Arbiter’s
award. Nonetheless, in order to arrive at a complete adjudication of the case and
avoid piecemeal dispensation of justice, we deem it necessary to resolve the
validity of respondents’ money claims and to discuss the propriety of the Labor
Arbiter’s award.
Galvez and Gruta, as managerial employees, are not entitled to their claims for
holiday pay, service incentive leave pay and premium pay for holiday and
restday. Article 82 of the Labor Code specifically excludes managerial employees
from the coverage of the law regarding conditions of employment which include
hours of work, weekly rest periods, holidays, service incentive leaves and service
charges.62

As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral, we

cannot sustain the argument that they are classified as field personnel under Article
82 of the Labor Code who are likewise excluded. Article 82 defines field personnel
as referring to “non–agricultural employees who regularly perform their duties away
from the principal place of business or branch office of the employer and whose
actual hours of work in the field cannot be determined with reasonable
certainty.” They are those who perform functions which “cannot be effectively
monitored by the employer or his representative.”63 Here, respondents, during the
entire course of their voyage, remain on board the vessel. They are not field
personnel inasmuch as they were constantly supervised and under the effective
control of the petitioners through the vessel’s ship captain.

Nevertheless, we cannot grant them their claims for holiday pay, premium pay for
holiday and restday, overtime pay and service incentive leave pay. Respondents do
not dispute petitioners’ assertion that in computing respondents’ salaries,
petitioners use 365 days as divisor. In fact, this was the same divisor respondents
used in computing their money claims against petitioners. Hence, they are paid all
the days of the month, which already include the benefits they claim.64 As for
overtime pay and premium pay for holidays and restdays, no evidence was
presented to prove that they rendered work in excess of the regular eight working
hours a day or worked during holidays and restdays. In the absence of such proof,
there could be no basis to award these benefits.65

For the claim of service incentive leave pay, respondents did not specify what year
they were not paid such benefit. In addition, records show that they were paid
their vacation leave benefits.66 Thus, in accordance with Article 95 of the Labor
Code,67 respondents can no longer claim service incentive leave pay.

On the other hand, for failure to effectively refute the awards for 13th month pay
for the period that respondents were illegally dismissed, unpaid salaries and salary
differentials,68 we affirm the grant thereof as computed by the Labor
Arbiter. Petitioners’ evidence which consist of a mere tabulation69 of the amount of
actual benefits paid and given to respondents is self–serving as it does not bear the
signatures of the employees to prove that they had actually received the amounts
stated therein.

Next, we come to the legitimacy of the Labor Arbiter’s authority to impose the
penalty of double indemnity for violations of the Minimum Wage Law. Petitioners
argue that the authority to issue compliance orders in relation to underpayment of
wages is vested exclusively on the Secretary of Labor or the Regional Director and
that the Labor Arbiter has no jurisdiction thereover. They cite Section 12 of RA
6727,70 as amended by RA 8188, which provides:

Sec. 12. Any person, corporation, trust, firm, partnership, association or entity
which refuses or fails to pay any of the prescribed increases or adjustments in the
wage rates made in accordance with this Act shall be punished by a fine [of] not
less than Twenty–five thousand pesos (P25,000) nor more than One hundred
thousand pesos (P100,000) or imprisonment of not less than two (2) years nor
more than four (4) years or both such fine and imprisonment at the discretion of
the court: Provided, That any person convicted under this Act shall not be entitled
to the benefits provided for under the Probation Law.

The employer concerned shall be ordered to pay an amount equivalent to double

the unpaid benefits owing to the employees: Provided, That payment of indemnity
shall not absolve the employer from the criminal liability under this Act.

If the violation is committed by a corporation, trust or firm, partnership, association

or any other entity, the penalty of imprisonment shall be imposed upon the entity’s
responsible officers including but not limited to, the president, vice president, chief
executive officer, general manager, managing director or partner.

Petitioners’ contention is untenable. First, there is no provision in RA 6727 or RA

8188 which precludes the Labor Arbiter from imposing the penalty of double
indemnity against employers. Second, Article 217 of the Labor Code gives the
Labor Arbiter jurisdiction over cases of termination disputes and those cases
accompanied with a claim for reinstatement. Thus, in Bay Haven, Inc. v.
Abuan71 the Court held that an allegation of illegal dismissal deprives the Secretary
of Labor of jurisdiction over claims to enforce compliance with labor standards
law. This was also pronounced in People’s Broadcasting Service (Bombo Radyo
Phils., Inc.) v. Secretary of the Department of Labor and Employment,72 wherein we
stated that the Secretary of Labor has no jurisdiction in cases where employer–
employee relationship has been terminated. We thus sustain the Labor Arbiter’s
award of double indemnity.

We also sustain the award of attorney’s fees since respondents were compelled to
file a complaint for the recovery of wages and were forced to litigate and incur
expenses.73

The Labor Arbiter’s grant of actual/compensatory, moral and exemplary damages in

the amount of P100,000.00 is, however, incorrect. In order to recover actual or
compensatory damages, it must be capable of proof and must be necessarily
proved with a reasonable degree of certainty.74 While moral damages is given to a
dismissed employee when the dismissal is attended by bad faith or fraud or
constitutes an act oppressive to labor, or is done in a manner contrary to good
morals, good customs or public policy. Exemplary damages, on the other hand, is
given if the dismissal is effected in a wanton, oppressive or malevolent
manner.75 Here, the Labor Arbiter erred in awarding the damages by lumping
actual, moral and exemplary damages. Said damages rest on different jural
foundations and, hence, must be independently identified and justified.76 Also,
there are no competent evidence of actual expenses incurred that would justify the
award of actual damages. Lastly, respondents were terminated after being accused
of the charge of pilferage of the vessel’s fuel oil after examination of the report
made by the vessel’s chief engineer which showed a considerable amount of fuel
lost. Although the dismissal of Arguelles, Batayola, Fresnillo, Noble, Dominico,
Nilmao and Austral is illegal, based on the circumstances surrounding their
dismissal, petitioners could not have been motivated by bad faith in deciding to
terminate their services.

Lastly, this Court exculpates petitioners Francisco and How from being jointly and
severally liable with GASLI for the illegal dismissal and payment of money claims of
herein respondents. In order to hold them liable, it must first be shown by
competent proof that they have acted with malice and bad faith in directing the
corporate affairs.77 For want of such proof, Francisco and How should not be held
liable for the corporate obligations of GASLI.

WHEREFORE, the Court of Appeals’ Decision dated September 12, 2006 and the
Resolution dated May 23, 2007 in CA–G.R. SP No. 82379 are ANNULLED and SET
ASIDE. Respondents Wilfredo Galvez and Cristito Gruta are
hereby DECLARED dismissed from employment for just cause while respondent
Joel Sales was not dismissed from employment. Respondents Danilo Arguelles,
Renato Batayola, Patricio Fresmillo, Jovy Noble, Emilio Dominico, Benny Nilmao,
and Jose Austral are DECLARED to have been illegally dismissed; hence,
petitioners are ordered to reinstate them to their former position or its equivalent
without loss of seniority rights and to pay them full backwages, inclusive of
allowances and other benefits, computed from the time of dismissal up to the time
of actual reinstatement, as well as 13th month pay for the period of their illegal
dismissal.

Petitioner Grand Asian Shipping Lines, Inc. is also ordered to pay respondents
Wilfredo Galvez, Danilo Arguelles, Renato Batayola, Patricio Fresnillo, Jovy Noble,
Emilio Dominico, Benny Nilmao and Jose Austral unpaid salaries from February 16
to 29, 2000, as computed by the Labor Arbiter; and to pay respondents Danilo
Arguelles, Renato Batayola, Patricio Fresmillo, Jovy Noble, Emilio Dominico and
Benny Nilmao salary differentials plus double indemnity, as computed by the Labor
Arbiter. Ten percent (10%) of the monetary award should be added as and by way
of attorney’s fees. Interest at the rate of six percent (6%) per annum shall be
imposed on all monetary awards from date of finality of this Decision until full
payment pursuant to Nacar v. Gallery Frames.78

Petitioners Eduardo P. Francisco and William How are absolved from the liability
adjudged against petitioner Grand Asian Shipping Lines, Inc. ChanRoble sVirtualawl ibra ry

SO ORDERED.
G.R. No. 101761. March 24, 1993.

NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP, respondents.

Jose Mario C. Bunag for petitioner.

The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.

Zoilo V. de la Cruz for private respondent.

DECISION

REGALADO, J p:

The main issue presented for resolution in this original petition for certiorari is whether supervisory
employees, as defined in Article 212 (m), Book V of the Labor Code, should be considered as
officers or members of the managerial staff under Article 82, Book III of the same Code, and hence
are not entitled to overtime rest day and holiday pay.

Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned
and controlled by the Government, operates three (3) sugar refineries located at Bukidnon, Iloilo and
Batangas. The Batangas refinery was privatized on April 11, 1992 pursuant to Proclamation No. 50.
1 Private respondent union represents the former supervisors of the NASUREFCO Batangas Sugar
Refinery, namely, the Technical Assistant to the Refinery Operations Manager, Shift Sugar
Warehouse Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost Accountant,
Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler Supervisor,, Shift Operations
Chemist, Shift Electrical Supervisor, General Services Supervisor, Instrumentation Supervisor,
Community Development Officer, Employment and Training Supervisor, Assistant Safety and
Security Officer, Head and Personnel Services, Head Nurse, Property Warehouse Supervisor, Head
of Inventory Control Section, Shift Process Supervisor, Day Maintenance Supervisor and Motorpool
Supervisor.

On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees,
from rank-and-file to department heads. The JE Program was designed to rationalized the duties
and functions of all positions, reestablish levels of responsibility, and recognize both wage and
operational structures. Jobs were ranked according to effort, responsibility, training and working
conditions and relative worth of the job. As a result, all positions were re-evaluated, and all
employees including the members of respondent union were granted salary adjustments and
increases in benefits commensurate to their actual duties and functions.

We glean from the records that for about ten years prior to the JE Program, the members of
respondent union were treated in the same manner as rank-and file employees. As such, they used
to be paid overtime, rest day and holiday pay pursuant to the provisions of Articles 87, 93 and 94 of
the Labor Code as amended. With the implementation of the JE Program, the following adjustments
were made: (1) the members of respondent union were re-classified under levels S-5 to S-8 which
are considered managerial staff for purposes of compensation and benefits; (2) there was an
increase in basic pay of the average of 50% of their basic pay prior to the JE Program, with the
union members now enjoying a wide gap (P1,269.00 per month) in basic pay compared to the
highest paid rank-and-file employee; (3) longevity pay was increased on top of alignment
adjustments; (4) they were entitled to increased company COLA of P225.00 per month; (5) there
was a grant of P100.00 allowance for rest day/holiday work.
On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which was
organized pursuant to Republic Act NO. 6715 allowing supervisory employees to form their own
unions, as the bargaining representative of all the supervisory employees at the NASUREFCO
Batangas Sugar Refinery.

Two years after the implementation of the JE Program, specifically on June 20, 1990, the members
of herein respondent union filed a complainant with the executive labor arbiter for non-payment of
overtime, rest day and holiday pay allegedly in violation of Article 100 of the Labor Code.

On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2 disposing as
follows:

"WHEREFORE, premises considered, respondent National Sugar refineries Corporation is hereby

directed to —

1. pay the individual members of complainant union the usual overtime pay, rest day pay and holiday
pay enjoyed by them instead of the P100.00 special allowance which was implemented on June 11,
1988; and

2. pay the individual members of complainant union the difference in money value between the
P100.00 special allowance and the overtime pay, rest day pay and holiday pay that they ought to
have received from June 1, 1988.

All other claims are hereby dismissed for lack of merit.

SO ORDERED."

In finding for the members therein respondent union, the labor ruled that the along span of time
during which the benefits were being paid to the supervisors has accused the payment thereof to
ripen into contractual obligation; at the complainants cannot be estopped from questioning the
validity of the new compensation package despite the fact that they have been receiving the benefits
therefrom, considering that respondent union was formed only a year after the implementation of the
Job Evaluation Program, hence there was no way for the individual supervisors to express their
collective response thereto prior to the formation of the union; and the comparative computations
presented by the private respondent union showed that the P100.00 special allowance given
NASUREFCO fell short of what the supervisors ought to receive had the overtime pay rest day pay
and holiday pay not been discontinued, which arrangement, therefore, amounted to a diminution of
benefits.

On appeal, in a decision promulgated on July 19, 1991 by its Third Division, respondent National
Labor Relations Commission (NLRC) affirmed the decision of the labor arbiter on the ground that the
members of respondent union are not managerial employees, as defined under Article 212 (m) of
the Labor Code and, therefore, they are entitled to overtime, rest day and holiday pay. Respondent
NLRC declared that these supervisory employees are merely exercising recommendatory powers
subject to the evaluation, review and final action by their department heads; their responsibilities do
not require the exercise of discretion and independent judgment; they do not participate in the
formulation of management policies nor in the hiring or firing of employees; and their main function is
to carry out the ready policies and plans of the corporation. 3 Reconsideration of said decision was
denied in a resolution of public respondent dated August 30, 1991. 4

Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public respondent
commission committed a grave abuse of discretion in refusing to recognized the fact that the
members of respondent union are members of the managerial staff who are not entitled to overtime,
rest day and holiday pay; and in making petitioner assume the "double burden" of giving the benefits
due to rank-and-file employees together with those due to supervisors under the JE Program.

We find creditable merit in the petition and that the extraordinary writ of certiorari shall accordingly
issue.

The primordial issue to be resolved herein is whether the members of respondent union are entitled
to overtime, rest day and holiday pay. Before this can be resolved, however it must of necessity be
ascertained first whether or not the union members, as supervisory employees, are to be considered
as officers or members of the managerial staff who are exempt from the coverage of Article 82 of the
Labor Code.

It is not disputed that the members of respondent union are supervisory employees, as defined
employees, as defined under Article 212(m), Book V of the Labor Code on Labor Relations, which
reads:

"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharged, assign or
discipline employees. Supervisory employees are those who, in the interest of the employer
effectively recommend such managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent judgment. All employees not falling
within any of those above definitions are considered rank-and-file employees of this Book."

Respondent NLRC, in holding that the union members are entitled to overtime, rest day and holiday
pay, and in ruling that the latter are not managerial employees, adopted the definition stated in the
aforequoted statutory provision.

Petitioner, however, avers that for purposes of determining whether or not the members of
respondent union are entitled to overtime, rest day and holiday pay, said employees should be
considered as "officers or members of the managerial staff" as defined under Article 82, Book III of
the Labor Code on "Working Conditions and Rest Periods" and amplified in Section 2, Rule I, Book
III of the Rules to Implement the Labor Code, to wit:

"Art. 82 Coverage. — The provisions of this title shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees,
field personnel, members of the family of the employer who are dependent on him for support,
domestic helpers, persons in the personal service of another, and workers who are paid by results
as determined by the Secretary of Labor in Appropriate regulations.

"As used herein, 'managerial employees' refer to those whose primary duty consists of the
management of the establishment in which they are employed or of a department or subdivision
thereof, and to other officers or members of the managerial staff." (Emphasis supplied.)

xxx xxx xxx

'Sec. 2. Exemption. — The provisions of this rule shall not apply to the following persons if they
qualify for exemption under the condition set forth herein:

xxx xxx xxx

(b) Managerial employees, if they meet all of the following conditions, namely:

(1) Their primary duty consists of the management of the establishment in which they are employed
or of a department or subdivision thereof:

(2) They customarily and regularly direct the work of two or more employees therein:

(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the promotion or any other change of status of
other employees are given particular weight.

(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:

(1) The primary duty consists of the performance of work directly related to management policies of
their employer;

(2) Customarily and regularly exercise discretion and independent judgment;

(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty
consists of the management of the establishment in which he is employed or subdivision thereof; or
(ii) execute under general supervision work along specialized or technical lines requiring special
training, experience, or knowledge; or (iii) execute under general supervision special assignments
and tasks; and

(4) Who do not devote more 20 percent of their hours worked in a work-week to activities which are
not directly and closely related to the performance of the work described in paragraphs (1), (2), and
above."

It is the submission of petitioner that while the members of respondent union, as supervisors, may
not be occupying managerial positions, they are clearly officers or members of the managerial staff
because they meet all the conditions prescribed by law and, hence, they are not entitled to overtime,
rest day and supervisory employees under Article 212 (m) should be made to apply only to the
provisions on Labor Relations, while the right of said employees to the questioned benefits should
be considered in the light of the meaning of a managerial employee and of the officers or members
of the managerial staff, as contemplated under Article 82 of the Code and Section 2, Rule I Book III
of the implementing rules. In other words, for purposes of forming and joining unions, certification
elections, collective bargaining, and so forth, the union members are supervisory employees. In
terms of working conditions and rest periods and entitlement to the questioned benefits, however,
they are officers or members of the managerial staff, hence they are not entitled thereto.

While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every labor dispute will be automatically decided in favor of
labor. Management also has its own rights which, as such, are entitled to respect and enforcement
in the interest of simple fair play. Out of its concern for those with less privileges in life, this Court
has inclined more often than not toward the worker and upheld his cause in his conflicts with the
employer. Such favoritism, however, has not blinded us to the rule that justice is in every case for
the deserving, to be dispensed in the light of the established facts and the applicable law and
doctrine. 5

This is one such case where we are inclined to tip the scales of justice in favor of the employer.
The question whether a given employee is exempt from the benefits of the law is a factual one
dependent on the circumstances of the particular case, In determining whether an employee is
within the terms of the statutes, the criterion is the character of the work performed, rather than the
title of the employee's position. 6

Consequently, while generally this Court is not supposed to review the factual findings of respondent
commission, substantial justice and the peculiar circumstances obtaining herein mandate a deviation
from the rule.

A cursory perusal of the Job Value Contribution Statements 7 of the union members will readily
show that these supervisory employees are under the direct supervision of their respective
department superintendents and that generally they assist the latter in planning, organizing, staffing,
directing, controlling communicating and in making decisions in attaining the company's set goals
and objectives. These supervisory employees are likewise responsible for the effective and efficient
operation of their respective departments. More specifically, their duties and functions include,
among others, the following operations whereby the employee:

1) assists the department superintendent in the following:

a) planning of systems and procedures relative to department activities;

b) organizing and scheduling of work activities of the department, which includes employee shifting
scheduled and manning complement;

c) decision making by providing relevant information data and other inputs;

d) attaining the company's set goals and objectives by giving his full support;

e) selecting the appropriate man to handle the job in the department; and

f) preparing annual departmental budget;

2) observes, follows and implements company policies at all times and recommends disciplinary
action on erring subordinates;

3) trains and guides subordinates on how to assume responsibilities and become more productive;

4) conducts semi-annual performance evaluation of his subordinates and recommends necessary

action for their development/advancement;

5) represents the superintendent or the department when appointed and authorized by the former;

6) coordinates and communicates with other inter and intra department supervisors when necessary;

7) recommends disciplinary actions/promotions;

8) recommends measures to improve work methods, equipment performance, quality of service and
working conditions;
9) sees to it that safety rules and regulations and procedure and are implemented and followed by all
NASUREFCO employees, recommends revisions or modifications to said rules when deemed
necessary, and initiates and prepares reports for any observed abnormality within the refinery;

10) supervises the activities of all personnel under him and goes to it that instructions to
subordinates are properly implemented; and

11) performs other related tasks as may be assigned by his immediate superior.

From the foregoing, it is apparent that the members of respondent union discharge duties and
responsibilities which ineluctably qualify them as officers or members of the managerial staff, as
defined in Section 2, Rule I Book III of the aforestated Rules to Implement the Labor Code, viz.: (1)
their primary duty consists of the performance of work directly related to management policies of
their employer; (2) they customarily and regularly exercise discretion and independent judgment; (3)
they regularly and directly assist the managerial employee whose primary duty consist of the
management of a department of the establishment in which they are employed (4) they execute,
under general supervision, work along specialized or technical lines requiring special training,
experience, or knowledge; (5) they execute, under general supervision, special assignments and
tasks; and (6) they do not devote more than 20% of their hours worked in a work-week to activities
which are not directly and clearly related to the performance of their work hereinbefore described.

Under the facts obtaining in this case, we are constrained to agree with petitioner that the union
members should be considered as officers and members of the managerial staff and are, therefore,
exempt from the coverage of Article 82. Perforce, they are not entitled to overtime, rest day and
holiday.

The distinction made by respondent NLRC on the basis of whether or not the union members are
managerial employees, to determine the latter's entitlement to the questioned benefits, is misplaced
and inappropriate. It is admitted that these union members are supervisory employees and this is
one instance where the nomenclatures or titles of their jobs conform with the nature of their
functions. Hence, to distinguish them from a managerial employee, as defined either under Articles
82 or 212 (m) of the Labor Code, is puerile and in efficacious. The controversy actually involved here
seeks a determination of whether or not these supervisory employees ought to be considered as
officers or members of the managerial staff. The distinction, therefore, should have been made along
that line and its corresponding conceptual criteria.

II. We likewise no not subscribe to the finding of the labor arbiter that the payment of the questioned
benefits to the union members has ripened into a contractual obligation.

A. Prior to the JE Program, the union members, while being supervisors, received benefits similar to
the rank-and-file employees such as overtime, rest day and holiday pay, simply because they were
treated in the same manner as rank-and-file employees, and their basic pay was nearly on the same
level as those of the latter, aside from the fact that their specific functions and duties then as
supervisors had not been properly defined and delineated from those of the rank-and-file. Such fact
is apparent from the clarification made by petitioner in its motion for reconsideration 8 filed with
respondent commission in NLRC Case No. CA No. I-000058, dated August 16, 1991, wherein, it
lucidly explained:

"But, complainants no longer occupy the same positions they held before the JE Program. Those
positions formerly classified as 'supervisory' and found after the JE Program to be rank-and-file were
classified correctly and continue to receive overtime, holiday and restday pay. As to them, the
practice subsists.
"However, those whose duties confirmed them to be supervisory, were re-evaluated, their duties re-
defined and in most cases their organizational positions re-designated to confirm their superior rank
and duties. Thus, after the JE program, complainants cannot be said to occupy the same positions."
9

It bears mention that this positional submission was never refuted nor controverted by respondent
union in any of its pleadings filed before herein public respondent or with this Court. Hence, it can be
safely concluded therefrom that the members of respondent union were paid the questioned benefits
for the reason that, at that time, they were rightfully entitled thereto. Prior to the JE Program, they
could not be categorically classified as members or officers of the managerial staff considering that
they were then treated merely on the same level as rank-and-file. Consequently, the payment
thereof could not be construed as constitutive of voluntary employer practice, which cannot be now
be unilaterally withdrawn by petitioner. To be considered as such, it should have been practiced over
a long period of time, and must be shown to have been consistent and deliberate. 10

The test or rationale of this rule on long practice requires an indubitable showing that the employer
agreed to continue giving the benefits knowingly fully well that said employees are not covered by
the law requiring payment thereof. 11 In the case at bar, respondent union failed to sufficiently
establish that petitioner has been motivated or is wont to give these benefits out of pure generosity.

B. It remains undisputed that the implementation of the JE Program, the members of private
respondent union were re-classified under levels S-5 S-8 which were considered under the program
as managerial staff purposes of compensation and benefits, that they occupied re-evaluated
positions, and that their basic pay was increased by an average of 50% of their basic salary prior to
the JE Program. In other words, after the JE Program there was an ascent in position, rank and
salary. This in essence is a promotion which is defined as the advancement from one position to
another with an increase in duties and responsibilities as authorized by law, and usually
accompanied by an increase in salary. 12

Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits
which attach and pertain exclusively to their positions. Entitlement to the benefits provided for by law
requires prior compliance with the conditions set forth therein. With the promotion of the members of
respondent union, they occupied positions which no longer met the requirements imposed by law.
Their assumption of these positions removed them from the coverage of the law, ergo, their
exemption therefrom.

As correctly pointed out by petitioner, if the union members really wanted to continue receiving the
benefits which attach to their former positions, there was nothing to prevent them from refusing to
accept their promotions and their corresponding benefits. As the sating goes by, they cannot have
their cake and eat it too or, as petitioner suggests, they could not, as a simple matter of law and
fairness, get the best of both worlds at the expense of NASUREFCO.

Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of

management, provided it is done in good faith. In the case at bar, private respondent union has
miserably failed to convince this Court that the petitioner acted implementing the JE Program. There
is no showing that the JE Program was intended to circumvent the law and deprive the members of
respondent union of the benefits they used to receive.

Not so long ago, on this particular score, we had the occasion to hold that:

". . . it is the prerogative of the management to regulate, according to its discretion and judgment, all
aspects of employment. This flows from the established rule that labor law does not authorize the
substitution of the judgment of the employer in the conduct of its business. Such management
prerogative may be availed of without fear of any liability so long as it is exercised in good faith for
the advancement of the employer's interest and not for the purpose of defeating on circumventing
the rights of employees under special laws or valid agreement and are not exercised in a malicious,
harsh, oppressive, vindictive or wanton manner or out of malice or spite." 13

WHEREFORE, the impugned decision and resolution of respondent National Labor Relations
Commission promulgated on July 19, 1991 and August 30, 1991, respectively, are hereby
ANNULLED and SET ASIDE for having been rendered and adopted with grave abuse of discretion,
and the basic complaint of private respondent union is DISMISSED.
 [G.R. No. 186070, April 11 : 2011]

CLIENTLOGIC PHILPPINES, INC. (NOW KNOWN AS SITEL), JOSEPH

VELASQUEZ, IRENE ROA AND RODNEY SPIRES, PETITIONERS, VS.
BENEDICT CASTRO, RESPONDENT.

DECISION

NACHURA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
assailing the September 1, 2008 Decision[1] and the January 7, 2009 Resolution[2] of
the Court of Appeals (CA), affirming with modification the November 29, 2007
resolution[3] of the National Labor Relations Commission (NLRC), which held that
respondent Benedict Castro was not illegally dismissed. The CA, however, awarded
respondent’s money claims, viz.:

WHEREFORE, premises considered, the instant Petition is PARTLY GRANTED. The

Resolutions dated 29 November 2007 and 23 January 2008 of the National Labor
Relations Commission (Third Division) in NLRC CN. RAB-CAR-02-0091-07 LAC NO.
08-002207-07 are AFFIRMED with MODIFICATION in that the monetary awards
of Executive Labor Arbiter Vito C. Bose in his Decision dated 29 June 2007, as
computed in Annex “A― thereof, ONLY for holiday premiums of Php
16,913.35; service incentive leave pay of Php 8,456.65; overtime pay of Php
578,753.10; and rest day pay of Php 26,384.80 which [petitioners] shall jointly and
solidarily pay to petitioner, are hereby REINSTATED. No pronouncement as to
costs.

SO ORDERED.[4]

The second assailed issuance of the CA denied petitioners’ motion for

reconsideration.

The facts:

Respondent was employed by petitioner ClientLogic Philippines, Inc. (now known as

shall hereafter be referred to as SITEL on February 14, 2005 as a call center agent
for its Bell South Account. After six (6) months, he was promoted to the
“Mentor― position, and thereafter to the “Coach― position. A
“Coach― is a team supervisor who is in charge of dealing with customer
complaints which could not be resolved by call center agents. In June 2006, he was
transferred to the Green Dot Account.

During respondent’s stint at the Dot Green Account, respondent noticed that
some of the call center agents under his helm would often make excuses to leave
their work stations. Their most common excuse was that they would visit the
company’s medical clinic. To verify that they were not using the clinic as an alibi
to cut their work hours, respondent sent an e-mail to the clinic’s personnel
requesting for the details of the agents who sought medical consultation. His
request was denied on the ground that medical records of employees are highly
confidential and can only be disclosed in cases of health issues, and not to be used
to build any disciplinary case against them.

On October 11, 2006, respondent received a notice requiring him to explain why he
should not be penalized for: (1) violating Green Dot Company’s Policy and
Procedure for Direct Deposit Bank Info Request when he accessed a customer’s
online account and then gave the latter’s routing and reference numbers for
direct deposit; and (2) gravely abusing his discretion when he requested for the
medical records of his team members. Respondent did not deny the infractions
imputed against him. He, however, justified his actuations by explaining that the
customer begged him to access the account because she did not have a computer
or an internet access and that he merely requested for a patient tracker, not
medical records.

In November 2006, a poster showing SITEL’s organizational chart was posted

on the company’s bulletin board, but respondent’s name and picture were
conspicuously missing, and the name and photo of another employee appeared in
the position which respondent was supposedly occupying.

On January 22, 2007, SITEL posted a notice of vacancy for respondent’s

position, and on February 12, 2007, he received a Notice of Termination. These
events prompted him to file a complaint for illegal dismissal; non-payment of
overtime pay, rest day pay, holiday pay, service incentive leave pay; full
backwages; damages; and attorney’s fees before the Labor Arbiter (LA) against
herein petitioners SITEL and its officers, Joseph Velasquez, Irene Roa, and Rodney
Spires.[5]

In their position paper,[6] petitioners averred that respondent was dismissed on

account of valid and justifiable causes. He acted with serious misconduct which
breached the trust and confidence reposed in him by the company. He was duly
furnished with the twin notices required by the Labor Code and further, he is not
entitled to overtime pay, rest day pay, night shift differential, holiday pay, and
service incentive leave pay because he was a supervisor, hence, a member of the
managerial staff.

In a decision dated June 29, 2007,[7] the LA ruled in favor of respondent by

declaring him illegally dismissed and ordering petitioners to pay his full backwages
and, in lieu of reinstatement, his separation pay. The LA further awarded
respondents money claims upon finding that he was not occupying a managerial
position. The decretal portion of the decision reads:

WHEREFORE, all premises duly considered, [petitioners] are hereby found guilty of
illegally dismissing [respondent]. As such, [petitioners] shall be jointly and
solidarily liable to pay [respondent] his full backwages from the date of his
dismissal to the finality of this decision, computed as of today at One Hundred
Thirty Eight Thousand Seven Hundred Fifty Nine Pesos and 80/100
(P138,759.80) plus, Seven Hundred Sixty Three Thousand Two Hundred Forty
Eight Pesos and 67/100 (P763,248.67) representing his separation pay at one
month pay for every year of service, holiday pay and service incentive leave pay for
the three years prior to the filing of this case, overtime pay for six(6) hours daily,
rest day pay and ten percent (10%) as attorney’s fees.

All other claims are hereby dismissed for lack of evidence.

The computation of the foregoing monetary claims is hereto attached and made an
integral part hereof as Annex “A.―

SO ORDERED.[8]

Aggrieved, petitioners appealed to the NLRC which, in its November 29, 2007
resolution,[9] reversed and set aside the decision of the LA by dismissing the
complaint for lack of merit on the ground that respondent’s employment was
terminated for a just cause. The NLRC failed to discuss the money claims.

On September 1, 2008, the CA affirmed the NLRC’s finding that there was no
illegal dismissal. Anent the money claims, the CA concurred with the LA’s
ruling.[10]

Petitioners and respondent respectively moved for partial reconsideration, but their
motions were denied in the CA Resolution dated January 7, 2009.[11] From the said
denial, only petitioners resorted to this Court through the petition at bar.
Respondent’s failure to partially appeal the CA’s Decision finding him not
illegally dismissed has now rendered the same final and executory; hence, the
instant petition shall traverse only the issue on money claims.

Petitioners argue in the main[12] that, as a team supervisor, respondent was a

member of the managerial staff; hence, he is not entitled to overtime pay, rest day
pay, holiday pay, and service incentive leave pay.

We deny the petition.

The petition hinges on the question of whether the duties and responsibilities
performed by respondent qualify him as a member of petitioners’ managerial
staff. This is clearly a question of fact, the determination of which entails an
evaluation of the evidence on record.

The alleged errors of the CA lengthily enumerated in the petition[13] are essentially
factual in nature and, therefore, outside the ambit of a petition for review
on certiorari under Rule 45 of the Rules of Civil Procedure. The Court does not try
facts since such statutory duty is devolved upon the labor. It is not for this Court to
weigh and calibrate pieces of evidence otherwise adequately passed upon by the
labor tribunals especially when affirmed by the appellate court.[14]
Petitioners claim exception to the foregoing rule and assert that the factual findings
of the LA and the NLRC were conflicting. This is not true. The labor tribunals’
decisions were at odds only with respect to the issue of illegal dismissal. Anent, the
money claims issue, it cannot be said that their rulings were contradictory because
the NLRC, disappointingly, did not make any finding thereon and it erroneously
construed that the resolution of the money claims was intertwined with the
determination of the legality of respondent’s dismissal. Nonetheless, the CA has
already rectified such lapse when it made a definitive review of the LA’s factual
findings on respondent’s money claims. Agreeing with the LA, the CA held:

Article 82 of the Labor Code states that the provisions of the Labor Code on working
conditions and rest periods shall not apply to managerial employees. Generally,
managerial employees are not entitled to overtime pay for services rendered in
excess of eight hours a day.

Article 212(m) of the Labor Code defines a managerial employee as “one who is
vested with powers or prerogatives to lay down and execute management policies
and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees, or to effectively recommend such managerial actions.―

In his Position Paper, [respondent] states that he worked from 8:00 p.m. to 10:00
a.m. or 4 p.m. to 12:00 p.m. of the following day; he was also required to work
during his restdays and during holidays but he was not paid; he was also not paid
overtime pay, night shift differentials, and service incentive leave. He was
employed as call center agent on 14 February 2005, then promoted as
“Mentor― in August 2005, and again promoted to “Coach― position in
September 2005, which was the position he had when he was terminated. A
“coach― is a team supervisor who is in charge of dealing with customer
complaints which could not be dealt with by call center agents, and if a call center
agent could not meet the needs of a customer, he passes the customer’s call to
the “coach.― Clearly, [respondent] is not a managerial employee as defined
by law. Thus, he is entitled to [his] money claims.

As correctly found by Executive Labor Arbiter Bose: “Employees are considered

occupying managerial positions if they meet all of the following conditions, namely:

“1) Their primary duty consists of management of the establishment in which

they are employed or of a department or subdivision thereof;

“2) They customarily and regularly direct the work of two or more employees
therein;

“3) They have the authority to hire or fire other employees of lower rank; or
their suggestions and recommendations as to the hiring and firing and as to the
promotion or any other change of status of other employees are given particular
weight.
“They are considered as officers or members of a managerial staff if they
perform the following duties and responsibilities:

“1) The primary duty consists of the performance of work directly related to
management policies of their employer;

“2) Customarily and regularly exercise discretion and independent judgment;

“3) (i) Regularly and directly assist a proprietor or a managerial employee

whose primary duty consists of management of the establishment in which he is
employed or subdivision thereof; or (ii) execute under general supervision work
along specialized or technical lines requiring special training, experience, or
knowledge; or (iii) execute, under general supervision, special assignment and
tasks x x x.

“[Respondent’s] duties do not fall under any of the categories enumerated

above. His work is not directly related to management policies. Even the
circumstances shown by the instant case reveal that [respondent] does not
regularly exercise discretion and independent judgment. [Petitioners] submitted a
list of the responsibilities of ‘HR Manager/Supervisor’ and ‘Division
Manager/Department Manager/Supervisors’ but these do not pertain to
[respondent] who does not have any of the said positions. He was just a team
Supervisor and not [an] HR or Department Supervisor.―[15]

We find no reversible error in the above ruling. The test of “supervisory― or

“managerial status― depends on whether a person possesses authority to act
in the interest of his employer and whether such authority is not merely routinary
or clerical in nature, but requires the use of independent judgment.[16] The position
held by respondent and its concomitant duties failed to hurdle this test.

As a coach or team supervisor respondent’s main duty was to deal with

customer complaints which could not be handled or solved by call center agents. If
the members of his team could not meet the needs of a customer, they passed the
customer’s call to respondent.

This job description does not indicate that respondent can exercise the powers and
prerogatives to effectively recommend such managerial actions which require the
customary use of independent judgment. There is no showing that he was actually
conferred or actually exercising the following duties attributable to a “member
of the managerial staff,― viz.:

1) The primary duty consists of the performance of work directly related to

management of policies of their employer;

2) Customarily and regularly exercise discretion and independent judgment;

3) (i) Regularly and directly assist a proprietor or a managerial employee whose
primary duty consists of management of the establishment in which he is employed
or subdivision thereof; or (ii) execute under general supervision work along
specialized or technical lines requiring special training, experience, or knowledge;
or (iii) execute, under general supervision, special assignment and tasks; and

4) Who do not devote more than 20 percent of their hours worked in a work week
to activities which are not directly and closely related to the performance of the
work described in paragraphs (1), (2), and (3) above.[17]

According to petitioners, respondent also performed the following duties, as shown

in the company’s Statement of Policy of Discipline:

a. Know and understand in full the Policy on Discipline including their

underlying reasons.
b. Implement strictly and consistently the Policy on Discipline.
c. Ensure that the said Policy on Discipline is communicated to and
understood by all employees.
d. Monitor compliance by employees with the said Policy.
e. Advise HR Manager on the state of discipline in their respective
departments; problems, if any, and recommend solution(s) and
corrective action(s).

As correctly observed by the CA and the LA, these duties clearly pertained to
“Division Managers/Department Managers/ Supervisors,― which respondent
was not as he was merely a team supervisor. Petitioners themselves described
respondent as “the superior of a call center agent; he heads and guides a
specific number of agents, who form a team.―[18]

From the foregoing, respondent is thus entitled to his claims for holiday pay,
service incentive leave pay, overtime pay and rest day pay, pursuant to Book Three
of the Labor Code, specifically Article 82,[19] in relation to Articles 87,[20] 93,[21] and
95[22] thereof.

WHEREFORE, premises considered, the Petition is hereby DENIED. The

September 1, 2008 Decision and the January 7, 2009 Resolution of the Court of
Appeals are AFFIRMED.

SO ORDERED.
 G.R. No. 195466, July 02, 2014

ARIEL L. DAVID, DOING BUSINESS UNDER THE NAME AND STYLE “YIELS
HOG DEALER,” PETITIONER, VS. JOHN G. MACASIO, Respondent.

DECISION

BRION, J.:

We resolve in this petition for review on certiorari1 the challenge to the November
22, 2010 decision2 and the January 31, 2011 resolution3 of the Court of
Appeals (CA) in CA-G.R. SP No. 116003. The CA decision annulled and set aside
the May 26, 2010 decision4 of the National Labor Relations
Commission (NLRC)5 which, in turn, affirmed the April 30, 2009 decision6 of the
Labor Arbiter (LA). The LA’s decision dismissed respondent John G. Macasio’s
monetary claims.

The Factual Antecedents

In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L.
David, doing business under the name and style “Yiels Hog Dealer,” for non-
payment of overtime pay, holiday pay and 13th month pay. He also claimed
payment for moral and exemplary damages and attorney’s fees. Macasio also
claimed payment for service incentive leave (SIL).8

Macasio alleged9 before the LA that he had been working as a butcher for David
since January 6, 1995. Macasio claimed that David exercised effective control and
supervision over his work, pointing out that David: (1) set the work day, reporting
time and hogs to be chopped, as well as the manner by which he was to perform
his work; (2) daily paid his salary of P700.00, which was increased from P600.00 in
2007, P500.00 in 2006 and P400.00 in 2005; and (3) approved and disapproved his
leaves. Macasio added that David owned the hogs delivered for chopping, as well
as the work tools and implements; the latter also rented the workplace. Macasio
further claimed that David employs about twenty-five (25) butchers and delivery
drivers.

In his defense,10 David claimed that he started his hog dealer business in 2005 and
that he only has ten employees. He alleged that he hired Macasio as a butcher or
chopper on “pakyaw” or task basis who is, therefore, not entitled to overtime pay,
holiday pay and 13th month pay pursuant to the provisions of the Implementing
Rules and Regulations (IRR) of the Labor Code. David pointed out that Macasio:
(1) usually starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day
or earlier, depending on the volume of the delivered hogs; (2) received the fixed
amount of P700.00 per engagement, regardless of the actual number of hours that
he spent chopping the delivered hogs; and (3) was not engaged to report for work
and, accordingly, did not receive any fee when no hogs were delivered.

Macasio disputed David’s allegations.11 He argued that, first, David did not start his
business only in 2005. He pointed to the Certificate of Employment12 that David
issued in his favor which placed the date of his employment, albeit erroneously, in
January 2000. Second, he reported for work every day which the payroll or time
record could have easily proved had David submitted them in evidence.

Refuting Macasio’s submissions,13 David claims that Macasio was not his employee
as he hired the latter on “pakyaw” or task basis. He also claimed that he issued the
Certificate of Employment, upon Macasio’s request, only for overseas employment
purposes. He pointed to the “Pinagsamang Sinumpaang Salaysay,”14 executed by
Presbitero Solano and Christopher (Antonio Macasio’s co-butchers), to corroborate
his claims.

In the April 30, 2009 decision,15 the LA dismissed Macasio’s complaint for lack of
merit. The LA gave credence to David’s claim that he engaged Macasio on
“pakyaw” or task basis. The LA noted the following facts to support this finding: (1)
Macasio received the fixed amount of P700.00 for every work done, regardless of
the number of hours that he spent in completing the task and of the volume or
number of hogs that he had to chop per engagement; (2) Macasio usually worked
for only four hours, beginning from 10:00 p.m. up to 2:00 a.m. of the following
day; and (3) the P700.00 fixed wage far exceeds the then prevailing daily minimum
wage of P382.00. The LA added that the nature of David’s business as hog dealer
supports this “pakyaw” or task basis arrangement.

The LA concluded that as Macasio was engaged on “pakyaw” or task basis, he is not
entitled to overtime, holiday, SIL and 13th month pay.

The NLRC’s Ruling

In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC
observed that David did not require Macasio to observe an eight-hour work
schedule to earn the fixed P700.00 wage; and that Macasio had been performing a
non-time work, pointing out that Macasio was paid a fixed amount for the
completion of the assigned task, irrespective of the time consumed in its
performance. Since Macasio was paid by result and not in terms of the time that he
spent in the workplace, Macasio is not covered by the Labor Standards laws on
overtime, SIL and holiday pay, and 13th month pay under the Rules and Regulations
Implementing the 13th month pay law.18

Macasio moved for reconsideration19 but the NLRC denied his motion in its August
11, 2010 resolution,20 prompting Macasio to elevate his case to the CA via a
petition for certiorari.21

The CA’s Ruling

In its November 22, 2010 decision,22 the CA partly granted

Macasio’s certiorari petition and reversed the NLRC’s ruling for having been
rendered with grave abuse of discretion.
While the CA agreed with the LA and the NLRC that Macasio was a task basis
employee, it nevertheless found Macasio entitled to his monetary claims following
the doctrine laid down in Serrano v. Severino Santos Transit.23 The CA explained
that as a task basis employee, Macasio is excluded from the coverage of holiday,
SIL and 13th month pay only if he is likewise a “field personnel.” As defined by the
Labor Code, a “field personnel” is one who performs the work away from the office
or place of work and whose regular work hours cannot be determined with
reasonable certainty. In Macasio’s case, the elements that characterize a “field
personnel” are evidently lacking as he had been working as a butcher at David’s
“Yiels Hog Dealer” business in Sta. Mesa, Manila under David’s supervision and
control, and for a fixed working schedule that starts at 10:00 p.m.

Accordingly, the CA awarded Macasio’s claim for holiday, SIL and 13th month pay
for three years, with 10% attorney’s fees on the total monetary award. The CA,
however, denied Macasio’s claim for moral and exemplary damages for lack of
basis.

David filed the present petition after the CA denied his motion for
reconsideration24 in the CA’s January 31, 2011 resolution.25

The Petition

In this petition,26 David maintains that Macasio’s engagement was on a “pakyaw” or

task basis. Hence, the latter is excluded from the coverage of holiday, SIL and
13th month pay.

David reiterates his submissions before the lower tribunals27 and adds that he never
had any control over the manner by which Macasio performed his work and he
simply looked on to the “end-result.” He also contends that he never compelled
Macasio to report for work and that under their arrangement, Macasio was at liberty
to choose whether to report for work or not as other butchers could carry out his
tasks. He points out that Solano and Antonio had, in fact, attested to their (David
and Macasio’s) established “pakyawan” arrangement that rendered a written
contract unnecessary. In as much as Macasio is a task basis employee – who is paid
the fixed amount of P700.00 per engagement regardless of the time consumed in
the performance – David argues that Macasio is not entitled to the benefits he
claims. Also, he posits that because he engaged Macasio on “pakyaw” or task basis
then no employer-employee relationship exists between them.

Finally, David argues that factual findings of the LA, when affirmed by the NLRC,
attain finality especially when, as in this case, they are supported by substantial
evidence. Hence, David posits that the CA erred in reversing the labor tribunals’
findings and granting the prayed monetary claims.

The Case for the Respondent

Macasio counters that he was not a task basis employee or a “field personnel” as
David would have this Court believe.28 He reiterates his arguments before the lower
tribunals and adds that, contrary to David’s position, the P700.00 fee that he was
paid for each day that he reported for work does not indicate a “pakyaw” or task
basis employment as this amount was paid daily, regardless of the number or
pieces of hogs that he had to chop. Rather, it indicates a daily-wage method of
payment and affirms his regular employment status. He points out that David did
not allege or present any evidence as regards the quota or number of hogs that he
had to chop as basis for the “pakyaw” or task basis payment; neither did David
present the time record or payroll to prove that he worked for less than eight hours
each day. Moreover, David did not present any contract to prove that his
employment was on task basis. As David failed to prove the alleged task basis or
“pakyawan” agreement, Macasio concludes that he was David’s employee.

Procedurally, Macasio points out that David’s submissions in the present petition
raise purely factual issues that are not proper for a petition for review
on certiorari. These issues – whether he (Macasio) was paid by result or on
“pakyaw” basis; whether he was a “field personnel”; whether an employer-
employee relationship existed between him and David; and whether David
exercised control and supervision over his work – are all factual in nature and are,
therefore, proscribed in a Rule 45 petition. He argues that the CA’s factual findings
bind this Court, absent a showing that such findings are not supported by the
evidence or the CA’s judgment was based on a misapprehension of facts. He adds
that the issue of whether an employer-employee relationship existed between him
and David had already been settled by the LA29 and the NLRC30 (as well as by the
CA per Macasio’s manifestation before this Court dated November 15, 2012),31 in
his favor, in the separate illegal case that he filed against David.

The Issue

The issue revolves around the proper application and interpretation of the labor law
provisions on holiday, SIL and 13th month pay to a worker engaged on “pakyaw” or
task basis. In the context of the Rule 65 petition before the CA, the issue is
whether the CA correctly found the NLRC in grave abuse of discretion in ruling that
Macasio is entitled to these labor standards benefits.

The Court’s Ruling

We partially grant the petition.

Preliminary considerations: the

Montoya ruling and the factual-
issue-bar rule

In this Rule 45 petition for review on certiorari of the CA’s decision rendered under
a Rule 65 proceeding, this Court’s power of review is limited to resolving matters
pertaining to any perceived legal errors that the CA may have committed in issuing
the assailed decision. This is in contrast with the review for jurisdictional errors,
which we undertake in an original certiorari action. In reviewing the legal
correctness of the CA decision, we examine the CA decision based on how it
determined the presence or absence of grave abuse of discretion in the NLRC
decision before it and not on the basis of whether the NLRC decision on the merits
of the case was correct.32 In other words, we have to be keenly aware that the CA
undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it.33

Moreover, the Court’s power in a Rule 45 petition limits us to a review of questions

of law raised against the assailed CA decision.34

In this petition, David essentially asks the question – whether Macasio is entitled to
holiday, SIL and 13th month pay. This one is a question of law. The determination of
this question of law however is intertwined with the largely factual issue of whether
Macasio falls within the rule on entitlement to these claims or within the exception.
In either case, the resolution of this factual issue presupposes another factual
matter, that is, the presence of an employer-employee relationship between David
and Macasio.

In insisting before this Court that Macasio was not his employee, David argues that
he engaged the latter on “pakyaw” or task basis. Very noticeably, David confuses
engagement on “pakyaw” or task basis with the lack of employment relationship.
Impliedly, David asserts that their “pakyawan” or task basis arrangement negates
the existence of employment relationship.

At the outset, we reject this assertion of the petitioner. Engagement on “pakyaw” or

task basis does not characterize the relationship that may exist between the
parties, i.e., whether one of employment or independent contractorship. Article
97(6) of the Labor Code defines wages as “xxx 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[.]”35 In relation to Article
97(6), Article 10136 of the Labor Code speaks of workers paid by results or those
whose pay is calculated in terms of the quantity or quality of their work output
which includes “pakyaw” work and other non-time work.

More importantly, by implicitly arguing that his engagement of Macasio on

“pakyaw” or task basis negates employer-employee relationship, David would want
the Court to engage on a factual appellate review of the entire case to determine
the presence or existence of that relationship. This approach however is not
authorized under a Rule 45 petition for review of the CA decision rendered under a
Rule 65 proceeding.

First, the LA and the NLRC denied Macasio’s claim not because of the absence of an
employer-employee but because of its finding that since Macasio is paid
on pakyaw or task basis, then he is not entitled to SIL, holiday and 13th month
pay. Second, we consider it crucial, that in the separate illegal dismissal case
Macasio filed with the LA, the LA, the NLRC and the CA uniformly found the
existence of an employer-employee relationship.37

In other words, aside from being factual in nature, the existence of an employer-
employee relationship is in fact a non-issue in this case. To reiterate, in deciding a
Rule 45 petition for review of a labor decision rendered by the CA under 65, the
narrow scope of inquiry is whether the CA correctly determined the presence or
absence of grave abuse of discretion on the part of the NLRC. In concrete question
form, “did the NLRC gravely abuse its discretion in denying Macasio’s claims simply
because he is paid on a non-time basis?”

At any rate, even if we indulge the petitioner, we find his claim that no employer-
employee relationship exists baseless. Employing the control test,38 we find that
such a relationship exist in the present case.

Even a factual review shows that

Macasio is David’s employee

To determine the existence of an employer-employee relationship, four elements

generally need to be considered, namely: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
power to control the employee’s conduct. These elements or indicators comprise
the so-called “four-fold” test of employment relationship. Macasio’s relationship
with David satisfies this test.

First, David engaged the services of Macasio, thus satisfying the element of
“selection and engagement of the employee.” David categorically confirmed this
fact when, in his “Sinumpaang Salaysay,” he stated that “nag apply po siya sa akin
at kinuha ko siya na chopper[.]”39 Also, Solano and Antonio stated in their
“Pinagsamang Sinumpaang Salaysay”40 that “[k]ami po ay nagtratrabaho sa
Yiels xxx na pag-aari ni Ariel David bilang butcher” and “kilala namin si xxx Macasio
na isa ring butcher xxx ni xxx David at kasama namin siya sa aming trabaho.”

Second, David paid Macasio’s wages. Both David and Macasio categorically stated
in their respective pleadings before the lower tribunals and even before this Court
that the former had been paying the latter P700.00 each day after the latter had
finished the day’s task. Solano and Antonio also confirmed this fact of wage
payment in their “Pinagsamang Sinumpaang Salaysay.”41 This satisfies the element
of “payment of wages.”

Third, David had been setting the day and time when Macasio should report for
work. This power to determine the work schedule obviously implies power of
control. By having the power to control Macasio’s work schedule, David could
regulate Macasio’s work and could even refuse to give him any assignment, thereby
effectively dismissing him.

And fourth, David had the right and power to control and supervise Macasio’s work
as to the means and methods of performing it. In addition to setting the day and
time when Macasio should report for work, the established facts show that David
rents the place where Macasio had been performing his tasks. Moreover, Macasio
would leave the workplace only after he had finished chopping all of the hog meats
given to him for the day’s task. Also, David would still engage Macasio’s services
and have him report for work even during the days when only few hogs were
delivered for butchering.

Under this overall setup, all those working for David, including Macasio, could
naturally be expected to observe certain rules and requirements and David would
necessarily exercise some degree of control as the chopping of the hog meats
would be subject to his specifications. Also, since Macasio performed his tasks at
David’s workplace, David could easily exercise control and supervision over the
former. Accordingly, whether or not David actually exercised this right or power to
control is beside the point as the law simply requires the existence of this power to
control 4243 or, as in this case, the existence of the right and opportunity to control
and supervise Macasio.44

In sum, the totality of the surrounding circumstances of the present case

sufficiently points to an employer-employee relationship existing between David
and Macasio.

Macasio is engaged on “pakyaw” or task basis

At this point, we note that all three tribunals – the LA, the NLRC and the CA – found
that Macasio was engaged or paid on “pakyaw” or task basis. This factual finding
binds the Court under the rule that factual findings of labor tribunals when
supported by the established facts and in accord with the laws, especially when
affirmed by the CA, is binding on this Court.

A distinguishing characteristic of “pakyaw” or task basis engagement, as opposed to

straight-hour wage payment, is the non-consideration of the time spent in working.
In a task-basis work, the emphasis is on the task itself, in the sense that payment
is reckoned in terms of completion of the work, not in terms of the number of time
spent in the completion of work.45 Once the work or task is completed, the worker
receives a fixed amount as wage, without regard to the standard measurements of
time generally used in pay computation.

In Macasio’s case, the established facts show that he would usually start his work at
10:00 p.m. Thereafter, regardless of the total hours that he spent at the workplace
or of the total number of the hogs assigned to him for chopping, Macasio would
receive the fixed amount of P700.00 once he had completed his task. Clearly,
these circumstances show a “pakyaw” or task basis engagement that all three
tribunals uniformly found.

In sum, the existence of employment relationship between the parties is

determined by applying the “four-fold” test; engagement on “pakyaw” or task basis
does not determine the parties’ relationship as it is simply a method of pay
computation. Accordingly, Macasio is David’s employee, albeit engaged on
“pakyaw” or task basis.
As an employee of David paid on pakyaw or task basis, we now go to the core issue
of whether Macasio is entitled to holiday, 13th month, and SIL pay.

On the issue of Macasio’s

entitlement to holiday, SIL
and 13th month pay

The LA dismissed Macasio’s claims pursuant to Article 94 of the Labor Code in

relation to Section 1, Rule IV of the IRR of the Labor Code, and Article 95 of the
Labor Code, as well as Presidential Decree (PD) No. 851. The NLRC, on the other
hand, relied on Article 82 of the Labor Code and the Rules and Regulations
Implementing PD No. 851. Uniformly, these provisions exempt workers paid on
“pakyaw” or task basis from the coverage of holiday, SIL and 13th month pay.

In reversing the labor tribunals’ rulings, the CA similarly relied on these provisions,
as well as on Section 1, Rule V of the IRR of the Labor Code and the Court’s ruling
in Serrano v. Severino Santos Transit.46 These labor law provisions, when read
together with the Serrano ruling, exempt those engaged on “pakyaw” or task basis
only if they qualify as “field personnel.”

In other words, what we have before us is largely a question of law regarding the
correct interpretation of these labor code provisions and the implementing rules;
although, to conclude that the worker is exempted or covered depends on the facts
and in this sense, is a question of fact: first, whether Macasio is a “field personnel”;
and second, whether those engaged on “pakyaw” or task basis, but who are not
“field personnel,” are exempted from the coverage of holiday, SIL and 13th month
pay.

To put our discussion within the perspective of a Rule 45 petition for review of a CA
decision rendered under Rule 65 and framed in question form, the legal question is
whether the CA correctly ruled that it was grave abuse of discretion on the part of
the NLRC to deny Macasio’s monetary claims simply because he is paid on a non-
time basis without determining whether he is a field personnel or not.

To resolve these issues, we need to re-visit the provisions involved.

Provisions governing SIL and holiday pay

Article 82 of the Labor Code provides the exclusions from the coverage of Title I,
Book III of the Labor Code - provisions governing working conditions and rest
periods.

Art. 82. Coverage. — The provisions of [Title I] shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as
determined by the Secretary of Labor in appropriate regulations.

xxxx

“Field personnel” shall refer to non-agricultural employees who regularly perform

their duties away from the principal place of business or branch office of the
employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. [emphases and underscores ours]

Among the Title I provisions are the provisions on holiday pay (under Article 94 of
the Labor Code) and SIL pay (under Article 95 of the Labor Code). Under Article 82,
“field personnel” on one hand and “workers who are paid by results” on the other
hand, are not covered by the Title I provisions. The wordings of Article 82 of the
Labor Code additionally categorize workers “paid by results” and “field personnel”
as separate and distinct types of employees who are exempted from the Title I
provisions of the Labor Code.

The pertinent portion of Article 94 of the Labor Code and its corresponding
provision in the IRR47 reads:chanroble svirtual lawlib rary

Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage
during regular holidays, except in retail and service establishments regularly
employing less than (10) workers[.] [emphasis ours]

xxxx

SECTION 1. Coverage. – This Rule shall apply to all employees except:

xxxx

(e) Field personnel and other employees whose time and performance is
unsupervised by the employer including those who are engaged on task or
contract basis, purely commission basis, or those who are paid a fixed amount for
performing work irrespective of the time consumed in the performance
thereof. [emphases ours]

On the other hand, Article 95 of the Labor Code and its corresponding provision in
the IRR48 pertinently provides: chan roble svirtual lawlib rary

Art. 95. Right to service incentive. (a) Every employee who has rendered at least
one year of service shall be entitled to a yearly service incentive leave of five days
with pay.

(b) This provision shall not apply to those who are already enjoying the benefit
herein provided, those enjoying vacation leave with pay of at least five days and
those employed in establishments regularly employing less than ten employees or
in establishments exempted from granting this benefit by the Secretary of Labor
and Employment after considering the viability or financial condition of such
establishment. [emphases ours]

xxxx

Section 1. Coverage. – This rule shall apply to all employees except:

xxxx

(e) Field personnel and other employees whose performance is

unsupervised by the employer including those who are engaged on task or
contract basis, purely commission basis, or those who are paid a fixed amount
for performing work irrespective of the time consumed in the performance
thereof. [emphasis ours]

Under these provisions, the general rule is that holiday and SIL pay provisions
cover all employees. To be excluded from their coverage, an employee must be one
of those that these provisions expressly exempt, strictly in accordance with the
exemption.

Under the IRR, exemption from the coverage of holiday and SIL pay refer to “field
personnel and other employees whose time and performance is unsupervised by
the employer including those who are engaged on task or contract basis[.]” Note
that unlike Article 82 of the Labor Code, the IRR on holiday and SIL pay do not
exclude employees “engaged on task basis” as a separate and distinct category
from employees classified as “field personnel.” Rather, these employees are
altogether merged into one classification of exempted employees.

Because of this difference, it may be argued that the Labor Code may be
interpreted to mean that those who are engaged on task basis, per se, are excluded
from the SIL and holiday payment since this is what the Labor Code provisions, in
contrast with the IRR, strongly suggest. The arguable interpretation of this rule
may be conceded to be within the discretion granted to the LA and NLRC as the
quasi-judicial bodies with expertise on labor matters.

However, as early as 1987 in the case of Cebu Institute of Technology v. Ople49 the
phrase “those who are engaged on task or contract basis” in the rule has already
been interpreted to mean as follows: chan roblesv irtuallaw lib rary

[the phrase] should however, be related with "field personnel" applying the rule
on ejusdem generis that general and unlimited terms are restrained and limited by
the particular terms that they follow xxx Clearly, petitioner's teaching personnel
cannot be deemed field personnel which refers "to non-agricultural employees who
regularly perform their duties away from the principal place of business or branch
office of the employer and whose actual hours of work in the field cannot be
determined with reasonable certainty. [Par. 3, Article 82, Labor Code of the
Philippines]. Petitioner's claim that private respondents are not entitled to the
service incentive leave benefit cannot therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient
to exclude one from the coverage of SIL and holiday pay. They are exempted from
the coverage of Title I (including the holiday and SIL pay) only if they qualify as
“field personnel.” The IRR therefore validly qualifies and limits the general
exclusion of “workers paid by results” found in Article 82 from the coverage of
holiday and SIL pay. This is the only reasonable interpretation since the
determination of excluded workers who are paid by results from the coverage of
Title I is “determined by the Secretary of Labor in appropriate regulations.”

The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport
Systems, Inc., v. Bautista: chanro blesvi rtua llawli bra ry

A careful perusal of said provisions of law will result in the conclusion that the grant
of service incentive leave has been delimited by the Implementing Rules and
Regulations of the Labor Code to apply only to those employees not explicitly
excluded by Section 1 of Rule V. According to the Implementing Rules, Service
Incentive Leave shall not apply to employees classified as “field personnel.” The
phrase “other employees whose performance is unsupervised by the employer”
must not be understood as a separate classification of employees to which service
incentive leave shall not be granted. Rather, it serves as an amplification of the
interpretation of the definition of field personnel under the Labor Code as those
“whose actual hours of work in the field cannot be determined with reasonable
certainty.”

The same is true with respect to the phrase “those who are engaged on task or
contract basis, purely commission basis.” Said phrase should be related with “field
personnel,” applying the rule on ejusdem generis that general and unlimited terms
are restrained and limited by the particular terms that they follow.

The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA
cited in support of granting Macasio’s petition.

In Serrano, the Court, applying the rule on ejusdem generis50 declared

that “employees engaged on task or contract basis xxx are not
automatically exempted from the grant of service incentive leave, unless,
they fall under the classification of field personnel.”51 The Court explained
that the phrase “including those who are engaged on task or contract basis, purely
commission basis” found in Section 1(d), Rule V of Book III of the IRR should not
be understood as a separate classification of employees to which SIL shall not be
granted. Rather, as with its preceding phrase - “other employees whose
performance is unsupervised by the employer” - the phrase “including those who
are engaged on task or contract basis” serves to amplify the interpretation of the
Labor Code definition of “field personnel” as those “whose actual hours of work in
the field cannot be determined with reasonable certainty.”

In contrast and in clear departure from settled case law, the LA and the NLRC still
interpreted the Labor Code provisions and the IRR as exempting an employee from
the coverage of Title I of the Labor Code based simply and solely on the mode of
payment of an employee. The NLRC’s utter disregard of this consistent
jurisprudential ruling is a clear act of grave abuse of discretion.52 In other
words, by dismissing Macasio’s complaint without considering whether Macasio was
a “field personnel” or not, the NLRC proceeded based on a significantly
incomplete consideration of the case. This action clearly smacks of grave abuse
of discretion.

Entitlement to holiday pay

Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the
NLRC had only taken counsel from Serrano and earlier cases, they would have
correctly reached a similar conclusion regarding the payment of holiday pay since
the rule exempting “field personnel” from the grant of holiday pay is identically
worded with the rule exempting “field personnel” from the grant of SIL pay. To be
clear, the phrase “employees engaged on task or contract basis” found in the IRR
on both SIL pay and holiday pay should be read together with the exemption of
“field personnel.”

In short, in determining whether workers engaged on “pakyaw” or task basis” is

entitled to holiday and SIL pay, the presence (or absence) of employer supervision
as regards the worker’s time and performance is the key: if the worker is simply
engaged on pakyaw or task basis, then the general rule is that he is entitled to a
holiday pay and SIL pay unless exempted from the exceptions specifically provided
under Article 94 (holiday pay) and Article 95 (SIL pay) of the Labor Code. However,
if the worker engaged on pakyaw or task basis also falls within the meaning of
“field personnel” under the law, then he is not entitled to these monetary benefits.

Macasio does not fall under the

classification of “field personnel”

Based on the definition of field personnel under Article 82, we agree with the CA
that Macasio does not fall under the definition of “field personnel.” The CA’s finding
in this regard is supported by the established facts of this case: first, Macasio
regularly performed his duties at David’s principal place of business; second, his
actual hours of work could be determined with reasonable certainty; and, third,
David supervised his time and performance of duties. Since Macasio cannot be
considered a “field personnel,” then he is not exempted from the grant of holiday,
SIL pay even as he was engaged on “pakyaw” or task basis.

Not being a “field personnel,” we find the CA to be legally correct when it reversed
the NLRC’s ruling dismissing Macasio’s complaint for holiday and SIL pay for having
been rendered with grave abuse of discretion.

Entitlement to 13th month pay

With respect to the payment of 13th month pay however, we find that the CA legally
erred in finding that the NLRC gravely abused its discretion in denying this benefit
to Macasio.

The governing law on 13th month pay is PD No. 851.53 As with holiday and SIL pay,
13th month pay benefits generally cover all employees; an employee must be one of
those expressly enumerated to be exempted. Section 3 of the Rules and
Regulations Implementing P.D. No. 85154 enumerates the exemptions from the
coverage of 13th month pay benefits. Under Section 3(e), “employers of those who
are paid on xxx task basis, and those who are paid a fixed amount for
performing a specific work, irrespective of the time consumed in the
performance thereof”55 are exempted.

Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of
the Rules and Regulations Implementing PD No. 851 exempts employees “paid on
task basis” without any reference to “field personnel.” This could only mean that
insofar as payment of the 13th month pay is concerned, the law did not intend to
qualify the exemption from its coverage with the requirement that the task worker
be a “field personnel” at the same time.

WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the

petition insofar as the payment of 13th month pay to respondent is concerned. In all
other aspects, we AFFIRM the decision dated November 22, 2010 and the
resolution dated January 31, 2011 of the Court of Appeals in CA-G.R. SP No.
116003.

SO ORDERED.
 ULTRA VILLA FOOD HAUS, and/or ROSIE TIO, Petitioners, v. RENATO
GENISTON, NATIONAL LABOR RELATIONS COMMISSION PRESIDING
COMMISSIONER (4th DIVISION), Respondents.

DECISION

KAPUNAN, J.:

This special civil action for certiorari stems from a complaint for illegal dismissal
filed by Renato Geniston, private respondent herein, against the Ultra Villa Food
Haus restaurant and/or its alleged owner Rosie Tio. Private respondent alleged that
he was employed as a "do it all guy," acting as waiter, driver, and maintenance
man, in said restaurant. His employment therein spanned from March 1, 1989 until
he was dismissed on May 13, 1992. For his services, private respondent was paid
P60.00 in 1989, P70.00 in 1990, P80.00 in 1991 and P90.00 when he was
dismissed in 1992. cha nrob les vi rtua l lawlib rary

During the elections of May 11, 1992, private respondent acted as a Poll Watcher
for the National Union of Christian Democrats. The counting of votes lasted until
3:00 p.m. the next day, May 12. Private respondent did not report for work on both
days on account of his poll-watching.

Upon arriving home on May 12, private respondent discovered that Tio had phoned
his mother that morning. Tio allegedly gave his mother "an inscrutable verbal
lashing," and informed the latter that private respondent was dismissed from work.
On May 13, 1992, private respondent went to Tio’s residence to plead his case only
to be subjected to a "brow beating" by Tio who even attempted to force him to sign
a resignation letter.

Private respondent prayed that the Labor Arbiter order petitioner Tio to pay him
overtime pay, premium pay, holiday pay, service incentive leave pay, salary
differential and 13th month pay. He likewise prayed for reinstatement plus
backwages or, in the alternative, separation pay, as well as moral damages,
exemplary damages and attorney’s fees.

Petitioner Rosie Tio, on the other hand, maintained that private respondent was her
personal driver, not an employee of the Ultra Villa Food Haus. As petitioner’s
personal driver, private respondent was required to report for work at 7:00 a.m. to
drive petitioner to Mandaue City where petitioner worked as the Manager of the
CFC Corporation. Accordingly, private respondent was paid P65.00 a day in 1989
which was gradually increased to P70.00 then to P90.00. Private respondent was
likewise given free meals as well as 13th month pay at the end of the year.
Petitioner denied dismissing private respondent whom she claimed abandoned his
job.
Though well aware that May 12, 1992 was a holiday, petitioner called up private
respondent that day to ask him to report for work as she had some important
matters to attend to. Private respondent’s wife, however, coldly told petitioner that
private respondent was helping in the counting of ballots. Petitioner was thus forced
to hire another driver to replace private Respondent. Private respondent came back
a week after but only to collect his salary.

The Labor Arbiter found that private respondent was indeed petitioner’s personal
driver. Private respondent’s claim that he was an employee of the Ultra Villa Food
Haus was deemed by the Labor Arbiter to be a mere afterthought, considering
that:chanro b1es vi rt ual 1aw li bra ry

. . . In his verified complaint, complainant states that the nature of his work
position was a driver. If it [were] true that he was made to perform these functions
as a waiter, it would be incongruous with the position of a driver. The nature of the
position of a waiter is one that requires him to be at the place of work at all times
while that of a driver, complainant had to be away from the restaurant at all times.
At any rate, an admission is made that he was only a personal driver of the
individual Respondent. 1

The "admission" referred to above is contained in the mandatory conference order

issued by the Labor Arbiter on January 10, 1994, to wit: cha nrob 1es vi rtual 1aw lib rary

Also on this date, the following matters were threshed out: chanrob1es vi rtua l 1aw lib ra ry

That complainant started his employment with the individual respondent as the
latter’s personal driver on March 1, 1989 and the last day of his service was on May
13, 1992; 2

The Labor Arbiter concluded that private respondent, being a personal driver, was
not entitled to overtime pay, premium pay, service incentive leave pay and 13th
month pay. Private respondent’s claim for salary differential was likewise denied
since he "received a daily salary of P90.00 which is more than that set by law." 3

Neither was private respondent awarded separation pay. While the hiring of a
substitute driver amounted to a constructive dismissal, the Labor Arbiter ruled that
the same was justified in view of petitioner’s "dire need" for the services of a driver.

The Labor Arbiter, however, noted that petitioner failed to comply with procedural
due process in dismissing private respondent and thus ordered the former to
indemnify the latter the amount of P1,000.00. The dispositive portion of the Labor
Arbiter’s decision states: chanrob1es vi rt ual 1aw li bra ry

WHEREFORE, in the light of the foregoing premises, judgment is rendered finding

complainant’s dismissal for a valid cause. Complaint is hereby ordered dismissed.
However, respondent is directed to indemnify complainant the amount of P1,000.00
for failure to observe the due process requirement before dismissing the
complainant.

SO ORDERED. 4

Both parties appealed the decision of the Labor Arbiter to the National Labor
Relations Commission (NLRC).

Petitioner questioned the Labor Arbiter’s decision insofar as it required her to pay
private respondent the amount of P1,000.00. Petitioner maintained that private
respondent abandoned his job, and was not constructively dismissed as found by
the Labor Arbiter. Petitioner concluded that she could not be held liable for failing to
observe procedural due process in dismissing private respondent, there being no
dismissal to speak of.

On the other hand, private respondent denied admitting that he was employed as
petitioner’s personal driver. He alleged that what was admitted during the
mandatory conference was that he was made to drive for the manager and his wife
(petitioner) on top of his other duties which were necessary and desirable to
petitioner’s business. Private respondent likewise maintained his claim that he was
unjustly dismissed, contending that his absence on May 11 and 12, 1992 did not
warrant dismissal since those days were official holidays.

The NLRC found private respondent’s arguments meritorious, and ordered

petitioner to reinstate private respondent and to pay him the sum of P45,311.55 in
backwages, overtime pay, premium pay for holiday and rest days, 13th month pay,
and service incentive pay. Thus: chanro b1es vi rtua l 1aw li bra ry

WHEREFORE, the respondents are hereby ordered to reinstate the complainant with
backwages fixed for 6 months as he delayed in filing this case.

The respondents are likewise ordered to pay the complainant his overtime pay,
holiday pay, premium pay for holiday and rest day, 13th month pay, and service
incentive leave covering the period from October 28, 1990 to May 10, 1992. c han roblesv irt ualawli bra ry

Complainant’s backwages up to the time of this Decision and his other monetary
claims as computed by Nazarina C. Cabahug, Fiscal Examiner II of the Commission
are the following:cha nrob 1es vi rtua l 1aw lib rary

x x x

SUMMARY

1) Backwages P14,130.00

2) Overtime Pay P22,060.00

3) Holiday Pay; Premium Pay for Holiday P1,554.00

4) Premium Pay for Rest Day P1,683.00

5) 13th Month Pay P5,484.55

6) Service Incentive Leave P 400.00

——————

TOTAL P45,311.55

SO ORDERED. 5

Acting on the parties’ respective motions for reconsideration, the NLRC granted
private respondent separation pay in lieu of reinstatement on account of the
establishment’s closure but denied his prayer for moral, actual and exemplary
damages, and attorney’s fees. The NLRC also denied petitioner’s motion, reiterating
its earlier ruling that private respondent was an employee of the Ultra Villa Food
Haus.

Two issues are thus presented before this Court: chanrob 1es vi rtual 1aw lib rary

(1) Whether private respondent was an employee of the Ultra Villa Food Haus or
the personal driver of petitioner; and

(2) Whether private respondent was illegally dismissed from employment.

The Solicitor General, in his "Manifestation and Motion In Lieu of Comment," agrees
with petitioner’s submission that private respondent was her personal driver. 6

We find that private respondent was indeed the personal driver of petitioner, and
not an employee of the Ultra Villa Food Haus. There is substantial evidence to
support such conclusion, namely: c han rob1es v irt ual 1aw l ibra ry

(1) Private respondent’s admission during the mandatory conference that he was
petitioner’s personal driver. 7

(2) Copies of the Ultra Villa Food Haus payroll which do not contain private
respondent’s name. 8

(3) Affidavits of Ultra Villa Food Haus employees attesting that private respondent
was never an employee of said establishment. 9

(4) Petitioner Tio’s undisputed allegation that she works as the branch manager of
the CFC Corporation whose office is located in Mandaue City. This would support
the Labor Arbiter’s observation that private respondents’ position as driver would be
"incongruous" with his functions as a waiter of Ultra Villa Food Haus. 10

(5) The Joint Affidavit of the warehouseman and warehouse checker of the CFC
Corporation stating that: chanro b1es vi rtua l 1aw lib ra ry

Renato Geniston usually drive[s] Mrs. Tio from her residence to the office.
Thereafter, Mr. Geniston will wait for Mrs. Tio in her car. Most of the time, Renato
Geniston slept in the car of Mrs. Tio and will be awakened only when the latter will
leave the office for lunch.

Mr. Geniston will again drive Mrs. Tio to the office at around 2:00 o’clock in the
afternoon and thereafter the former will again wait for Mrs. Tio at the latter’s car
until Mrs. Tio will again leave the office to make her rounds at our branch office at
the downtown area. 11

In contrast, private respondent has not presented any evidence other than his self-
serving allegation to show that he was employed in the Ultra Villa Food Haus. On
this issue, therefore, the evidence weighs heavily in petitioner’s favor. The Labor
Arbiter thus correctly ruled that private respondent was petitioner’s personal driver
and not an employee of the subject establishment.

Accordingly, the terms and conditions of private respondent’s employment are

governed by Chapter III, Title III, Book III of the Labor Code 12 as well as by the
pertinent provisions of the Civil Code. 13 Thus, Article 141 of the Labor Code
provides:chan rob1e s virtual 1 aw lib rary

ARTICLE 141. Coverage. — This Chapter shall apply to all persons rendering
services in households for compensation.

"Domestic or household service" shall mean services in the employers home which
is usually necessary or desirable for the maintenance and enjoyment thereof and
includes ministering to the personal comfort and convenience of the members of
the employers household, including services of family drivers. (Emphasis supplied.)

Chapter III, Title III, Book III, however, is silent on the grant of overtime pay,
holiday pay, premium pay and service incentive leave to those engaged in the
domestic or household service.

Moreover, the specific provisions mandating these benefits are found in Book III,
Title I of the Labor Code, 14 and Article 82, which defines the scope of the
application of these provisions, expressly excludes domestic helpers from its
coverage: chanrob1es vi rtua l 1aw lib ra ry

ARTICLE 82. Coverage. — The provision of this title shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by
the Secretary of Labor in appropriate regulations. (Emphasis supplied.)

The limitations set out in the above article are echoed in Book III of the Omnibus
Rules Implementing the Labor Code. 15

Clearly then, petitioner is not obliged by law to grant private respondent any of
these benefits.chan roble s.com.p h : virt ual law li bra ry

Employing the same line of analysis, it would seem that private respondent is not
entitled to 13th month pay. The Revised Guidelines on the Implementation of the
13th Month Pay Law also excludes employers of household helpers from the
coverage of Presidential Decree No. 851, thus: chanrob1e s virtual 1aw lib rary

2. Exempted Employers

The following employers are still not covered by P.D. No. 851: cha nrob 1es vi rtua l 1aw l ibra ry

a. . . .;

b. Employers of household helpers . . .;

c. . . .;

d. . . .

Nevertheless, we deem it just to award private respondent 13th month pay in view
of petitioner’s practice of according private respondent such benefit. Indeed,
petitioner admitted that she gave private respondent 13th month pay every
December. 16

II

We come now to the issue of private respondent’s dismissal. Petitioner submits that
private respondent abandoned his job, preferring to work as an election watcher
instead.

We do not agree. To constitute abandonment, two requisites must concur: (1) the
failure to report to work or absence without valid or justifiable reason, and (2) a
clear intention to sever the employer-employee relationship as manifested by some
overt acts, with the second requisite as the more determinative factor. 17 The
burden of proving abandonment as a just cause for dismissal is on the employer. 18
Petitioner failed to discharge this burden. The only evidence adduced by petitioner
to prove abandonment is her affidavit, the pertinent portion of which states: chan rob1e s virtual 1aw l ibra ry

On May 12, 1992, a day after the election, complainant was again absent. Since it
was a holiday and I have no work on that day, I just did not bother to call up
complainant. Although the following day was still a holiday, I called up complainant
to inform him that he has to report for work as I will report to the office to do some
important things there. Unfortunately, complainant’s wife instead coldly told me
that complainant was fetched by the latter’s uncle to help in the counting of ballots.
I then told his wife to let complainant choose between his job with me or that of
election watcher. The following day, I was informed again by complainant’s wife
that he is no longer interested to work with me as he is earning more as election
watcher. I was really disenchanted to know his respon[se] as all of a sudden, I
have no driver to drive me to my place of work. Nevertheless, I have no other
choice to accept it as I can not also forced him to continue working with me. Hence,
I was really inconvenience for about a week due to the absence of a driver.

Complainant then collected his salary after one week’s absence. 19

It is quite unbelievable that private respondent would leave a stable and relatively
well paying job as petitioner’s family driver to work as an election watcher. Though
the latter may pay more in a day, elections in this country are so far in between
that it is unlikely that any person would abandon his job to embark on a career as
an election watcher, the functions of which are seasonal and temporary in nature.
Consequently, we do not find private respondent to have abandoned his job. His
dismissal from petitioner’s employ being unjust, petitioner is entitled to an
indemnity under Article 149 of the Labor Code: 20

ARTICLE 149. Indemnity for unjust termination of services. — If the period of

household service is fixed, neither the employer nor the househelper may terminate
the contract before the expiration of the term, except for a just cause. If the
househelper is unjustly dismissed, he or she shall be paid the compensation already
earned plus that for fifteen (15) days by way of indemnity.

If the househelper leaves without justifiable reason he or she shall forfeit any
unpaid salary due him or her not exceeding fifteen (15) days. (Emphasis supplied.)

Petitioner likewise concedes that she failed to comply with due process in
dismissing private respondent since private respondent had already abandoned his
job. 21 As we have shown earlier however, petitioner’s theory of abandonment has
no leg to stand on, and with it, her attempts to justify her failure to accord due
process must also fall. Accordingly, private respondent is ordered to pay private
respondent the sum of P1,000.00. 22

WHEREFORE, the decision of the National Labor Relations Commission is hereby

REVERSED and a new one entered declaring: chanrob 1es vi rtua l 1aw lib rary

(1) Private respondent Renato Geniston, the personal driver of petitioner Rosie Tio,
and not an employee of the Ultra Villa Food Haus;

(2) The dismissal of private respondent to be without a valid cause and without due
process. Accordingly, petitioner Rosie Tio is ordered to pay private respondent: chanrob1es vi rtual 1aw lib rary
(a) Thirteenth Month Pay to be computed in accordance with the Rules and
Regulations, and the Revised Guidelines, Implementing Presidential Decree No.
851;

(b) Indemnity equal to 15 days of his salary as personal driver at the time of his
unjust dismissal; and

(c) Indemnity in the sum of P1,000.00.

SO ORDERED. chanroble s lawlib rary : rednad

 [G.R. NO. 153511 - July 18, 2012]

LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, and/or,

NELSON NAPUD, in his capacity as the President of Petitioner
Corporation, Petitioner, v. HERNANI S. REALUYO, also known as JOEY
ROA, Respondent.

DECISION

BERSAMIN, J.:

This labor case for illegal dismissal involves a pianist employed to perform in the
restaurant of a hotel. On August 9, 1999, respondent, whose stage name was Joey
R. Roa, filed a complaint for alleged unfair labor practice, constructive illegal
dismissal, and the underpayment/nonpayment of his premium pay for holidays,
separation pay, service incentive leave pay, and 13111 month pay. He prayed for
attorney's fees, moral damages off P100,000.00 and exemplary damages for
P100,000.00.1 ς rνll

Respondent averred that he had worked as a pianist at the Legend Hotel s Tanglaw
Restaurant from September 1992 with an initial rate of P400.00/night that was
given to him after each night s performance; that his rate had increased to
P750.00/night; and that during his employment, he could not choose the time of
performance, which had been fixed from 7:00 pm to 10:00 pm for three to six
times/week. He added that the Legend Hotel s restaurant manager had required
him to conform with the venue s motif; that he had been subjected to the rules on
employees representation checks and chits, a privilege granted to other employees;
that on July 9, 1999, the management had notified him that as a cost-cutting
measure his services as a pianist would no longer be required effective July 30,
1999; that he disputed the excuse, insisting that Legend Hotel had been lucratively
operating as of the filing of his complaint; and that the loss of his employment
made him bring his complaint.2 ςrνl l

In its defense, petitioner denied the existence of an employer-employee

relationship with respondent, insisting that he had been only a talent engaged to
provide live music at Legend Hotel s Madison Coffee Shop for three hours/day on
two days each week; and stated that the economic crisis that had hit the country
constrained management to dispense with his services.

On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of
merit upon finding that the parties had no employer-employee relationship.3 The LA
explained thusly: ς rαl αω

xxx

On the pivotal issue of whether or not there existed an employer-employee

relationship between the parties, our finding is in the negative. The finding finds
support in the service contract dated September 1, 1992 xxx. crvll
 xxx

Even if we grant the initial non-existence of the service contract, as complainant

suggests in his reply (third paragraph, page 4), the picture would not change
because of the admission by complainant in his letter dated October 8, 1996
(Annex "C") that what he was receiving was talent fee and not salary.

This is reinforced by the undisputed fact that complainant received his talent fee
nightly, unlike the regular employees of the hotel who are paid by monthly xxx.
crvll

xxx

And thus, absent the power to control with respect to the means and methods by
which his work was to be accomplished, there is no employer-employee relationship
between the parties xxx.

xxx

WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.

SO ORDERED.4 ςrν ll

Respondent appealed, but the National Labor Relations Commission (NLRC)

affirmed the LA on May 31, 2001.5 ςrν ll

Respondent assailed the decision of the NLRC in the Court of Appeals (CA)
on certiorari .

On February 11, 2002, the CA set aside the decision of the NLRC,6 holding:

xxx

Applying the above-enumerated elements of the employee-employer relationship in

this case, the question to be asked is, are those elements present in this case? chan roble svirtualawl ibra ry

The answer to this question is in the affirmative.

xxx

Well settled is the rule that of the four (4) elements of employer-employee
relationship, it is the power of control that is more decisive.

In this regard, public respondent failed to take into consideration that in petitioner s
line of work, he was supervised and controlled by respondent s restaurant manager
who at certain times would require him to perform only tagalog songs or music, or
wear barong tagalog to conform with Filipiniana motif of the place and the time of
his performance is fixed by the respondents from 7:00 pm to 10:00 pm, three to
six times a week. Petitioner could not choose the time of his performance. xxx. crvll

As to the status of petitioner, he is considered a regular employee of private

respondents since the job of the petitioner was in furtherance of the restaurant
business of respondent hotel. Granting that petitioner was initially a contractual
employee, by the sheer length of service he had rendered for private respondents,
he had been converted into a regular employee xxx. crvll

xxx

xxx In other words, the dismissal was due to retrenchment in order to avoid or
minimize business losses, which is recognized by law under Article 283 of the Labor
Code, xxx. crvll

xxx

WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx.7 ςrν ll

Issues

In this appeal, petitioner contends that the CA erred: ςηα ñrοb lε š ν ιr†υ αl l αω lιbrαrÿ

I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYER-EMPLOYEE

RELATIONSHIP BETWEEN THE PETITIONER HOTEL AND RESPONDENT ROA.

II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE
TERMINATION OF HIS SERVICES WAS ILLEGAL. THE CA LIKEWISE ERRED WHEN IT
DECLARED THE REINSTATEMENT OF ROA TO HIS FORMER POSITION OR BE GIVEN
A SEPARATION PAY EQUIVALENT TO ONE MONTH FOR EVERY YEAR OF SERVICE
FROM SEPTEMBER 1999 UNTIL JULY 30, 1999 CONSIDERING THE ABSENCE OF AN
EMPLOYMENT RELATIONSHIP BETWEEN THE PARTIES.

III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES, SERVICE

INCENTIVE LEAVE AND OTHER BENEFITS CONSIDERING THAT THERE IS NO
EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES.

IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC NCR CA
NO. 023404-2000 OF THE NLRC AS WELL AS ITS RESOLUTION DATED JUNE 29,
2001 IN FAVOR OF HEREIN PETITIONER HOTEL WHEN HEREIN RESPONDENT ROA
FAILED TO SHOW PROOF THAT THE NLRC AND THE LABOR ARBITER HAVE
COMMITTED GRAVE ABUSE OF DISCRETION OR LACK OF JURISDICTION IN THEIR
RESPECTIVE DECISIONS.

V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH ROA FILED
IS IMPROPER SINCE IT RAISED QUESTIONS OF FACT.
VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA WHEN IT IS
CLEARLY IMPROPER AND SHOULD HAVE BEEN DISMISSED OUTRIGHT
CONSIDERING THAT A PETITION FOR CERTIORARI UNDER RULE 65 IS LIMITED
ONLY TO QUESTIONS OR ISSUES OF GRAVE ABUSE OF DISCRETION OR LACK OF
JURISDICTION COMMITTED BY THE NLRC OR THE LABOR ARBITER, WHICH ISSUES
ARE NOT PRESENT IN THE CASE AT BAR.
chanrobles vi rt ual law li bra ry

The assigned errors are divided into the procedural issue of whether or not the
petition for certiorari filed in the CA was the proper recourse; and into two
substantive issues, namely: (a) whether or not respondent was an employee of
petitioner; and (b) if respondent was petitioner s employee, whether he was validly
terminated.

Ruling

The appeal fails.

Procedural Issue:

Certiorari was a proper recourse

Petitioner contends that respondent s petition for certiorari was improper as a

remedy against the NLRC due to its raising mainly questions of fact and because it
did not demonstrate that the NLRC was guilty of grave abuse of discretion.

The contention is unwarranted. There is no longer any doubt that a petition

for certiorari brought to assail the decision of the NLRC may raise factual issues,
and the CA may then review the decision of the NLRC and pass upon such factual
issues in the process.8 The power of the CA to review factual issues in the exercise
of its original jurisdiction to issue writs of certiorari is based on Section 9 of Batas
Pambansa Blg. 129, which pertinently provides that the CA "shall have the power to
try cases and conduct hearings, receive evidence and perform any and all acts
necessary to resolve factual issues raised in cases falling within its original and
appellate jurisdiction, including the power to grant and conduct new trials or further
proceedings."

Substantive Issue No. 1:

Employer-employee relationship existed between the parties

We next ascertain if the CA correctly found that an employer-employee relationship

existed between the parties.

The issue of whether or not an employer-employee relationship existed between

petitioner and respondent is essentially a question of fact.9 The factors that
determine the issue include who has the power to select the employee, who pays
the employee s wages, who has the power to dismiss the employee, and who
exercises control of the methods and results by which the work of the employee is
accomplished.10 Although no particular form of evidence is required to prove the
existence of the relationship, and any competent and relevant evidence to prove
the relationship may be admitted,11 a finding that the relationship exists must
nonetheless rest on substantial evidence, which is that amount of relevant evidence
that a reasonable mind might accept as adequate to justify a conclusion.12 ςrνl l

Generally, the Court does not review factual questions, primarily because the Court
is not a trier of facts. However, where, like here, there is a conflict between the
factual findings of the Labor Arbiter and the NLRC, on the one hand, and those of
the CA, on the other hand, it becomes proper for the Court, in the exercise of its
equity jurisdiction, to review and re-evaluate the factual issues and to look into the
records of the case and re-examine the questioned findings.13 ς rν ll

A review of the circumstances reveals that respondent was, indeed, petitioner s

employee. He was undeniably employed as a pianist in petitioner s Madison Coffee
Shop/Tanglaw Restaurant from September 1992 until his services were terminated
on July 9, 1999.

First of all, petitioner actually wielded the power of selection at the time it entered
into the service contract dated September 1, 1992 with respondent. This is true,
notwithstanding petitioner s insistence that respondent had only offered his services
to provide live music at petitioner s Tanglaw Restaurant, and despite petitioner s
position that what had really transpired was a negotiation of his rate and time of
availability. The power of selection was firmly evidenced by, among others, the
express written recommendation dated January 12, 1998 by Christine Velazco,
petitioner s restaurant manager, for the increase of his remuneration.14 ς rνll

Petitioner could not seek refuge behind the service contract entered into with
respondent. It is the law that defines and governs an employment relationship,
whose terms are not restricted to those fixed in the written contract, for other
factors, like the nature of the work the employee has been called upon to perform,
are also considered. The law affords protection to an employee, and does not
countenance any attempt to subvert its spirit and intent. Any stipulation in writing
can be ignored when the employer utilizes the stipulation to deprive the employee
of his security of tenure. The inequality that characterizes employer-employee
relations generally tips the scales in favor of the employer, such that the employee
is often scarcely provided real and better options.15
ς rν ll

Secondly, petitioner argues that whatever remuneration was given to respondent

were only his talent fees that were not included in the definition of wage under the
Labor Code; and that such talent fees were but the consideration for the service
contract entered into between them.

The argument is baseless.

Respondent was paid P400.00 per three hours of performance from 7:00 pm to
10:00 pm, three to six nights a week. Such rate of remuneration was later
increased to P750.00 upon restaurant manager Velazco s recommendation. There is
no denying that the remuneration denominated as talent fees was fixed on the
basis of his talent and skill and the quality of the music he played during the hours
of performance each night, taking into account the prevailing rate for similar talents
in the entertainment industry.16ςrνl l

Respondent s remuneration, albeit denominated as talent fees, was still considered

as included in the term wage in the sense and context of the Labor Code,
regardless of how petitioner chose to designate the remuneration. Anent this,
Article 97(f) of the Labor Code clearly states:
ςrαl αω

xxx 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.

Clearly, respondent received compensation for the services he rendered as a pianist

in petitioner s hotel. Petitioner cannot use the service contract to rid itself of the
consequences of its employment of respondent. There is no denying that whatever
amounts he received for his performance, howsoever designated by petitioner,
were his wages.

It is notable that under the Rules Implementing the Labor Code and as held in Tan
v. Lagrama,17 every employer is required to pay his employees by means of a
payroll, which should show in each case, among others, the employee s rate of pay,
deductions made from such pay, and the amounts actually paid to the employee.
Yet, petitioner did not present the payroll of its employees to bolster its insistence
of respondent not being its employee.

That respondent worked for less than eight hours/day was of no consequence and
did not detract from the CA s finding on the existence of the employer-employee
relationship. In providing that the " normal hours of work of any employee shall not
exceed eight (8) hours a day," Article 83 of the Labor Code only set a maximum of
number of hours as "normal hours of work" but did not prohibit work of less than
eight hours.

Thirdly, the power of the employer to control the work of the employee is
considered the most significant determinant of the existence of an employer-
employee relationship.18 This is the so-called control test, and is premised on
whether the person for whom the services are performed reserves the right to
control both the end achieved and the manner and means used to achieve that
end.19ς rν ll
Petitioner submits that it did not exercise the power of control over respondent and
cites the following to buttress its submission, namely: (a) respondent could beg off
from his nightly performances in the restaurant for other engagements; (b) he had
the sole prerogative to play and perform any musical arrangements that he wished;
(c) although petitioner, through its manager, required him to play at certain times a
particular music or song, the music, songs, or arrangements, including the beat or
tempo, were under his discretion, control and direction; (d) the requirement for him
to wear barong Tagalog to conform with the Filipiniana motif of the venue whenever
he performed was by no means evidence of control; (e) petitioner could not require
him to do any other work in the restaurant or to play the piano in any other places,
areas, or establishments, whether or not owned or operated by petitioner, during
the three hour period from 7:00 pm to 10:00 pm, three to six times a week; and (f)
respondent could not be required to sing, dance or play another musical
instrument.

A review of the records shows, however, that respondent performed his work as a
pianist under petitioner s supervision and control. Specifically, petitioner s control of
both the end achieved and the manner and means used to achieve that end was
demonstrated by the following, to wit: ς ηα ñrοblεš ν ιr†υαl l αω lιb rα rÿ

A. He could not choose the time of his performance, which petitioners had fixed
from 7:00 pm to 10:00 pm, three to six times a week;

b. He could not choose the place of his performance;

c. The restaurant s manager required him at certain times to perform only Tagalog
songs or music, or to wear barong Tagalog to conform to the Filipiniana motif; and cralawl ib rary

d. He was subjected to the rules on employees representation check and chits, a

privilege granted to other employees.
chanrobles vi rt ual law li bra ry

Relevantly, it is worth remembering that the employer need not actually supervise
the performance of duties by the employee, for it sufficed that the employer has
the right to wield that power.

Lastly, petitioner claims that it had no power to dismiss respondent due to his not
being even subject to its Code of Discipline, and that the power to terminate the
working relationship was mutually vested in the parties, in that either party might
terminate at will, with or without cause.

The claim is contrary to the records. Indeed, the memorandum informing

respondent of the discontinuance of his service because of the present business or
financial condition of petitioner20 showed that the latter had the power to dismiss
him from employment.21 ς rνll

Substantive Issue No. 2:

Validity of the Termination

Having established that respondent was an employee whom petitioner terminated

to prevent losses, the conclusion that his termination was by reason of
retrenchment due to an authorized cause under the Labor Code is inevitable.

Retrenchment is one of the authorized causes for the dismissal of employees

recognized by the Labor Code. It is a management prerogative resorted to by
employers to avoid or to minimize business losses. On this matter, Article 283 of
the Labor Code states: ςrα lαω

Article 283. 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 establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice
on the workers and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof. xxx. In case of retrenchment to prevent losses
and in cases of closures or cessation of operations of establishment or undertaking
not due to serious business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.

The Court has laid down the following standards that an employer should meet to
justify retrenchment and to foil abuse, namely: ςη αñ rοbl ε š νιr†υαl l αω l ιb rα rÿ

(a) The expected losses should be substantial and not merely de minimis in extent;

(b) The substantial losses apprehended must be reasonably imminent;

(c) The retrenchment must be reasonably necessary and likely to effectively

prevent the expected losses; and cralawli bra ry

(d) The alleged losses, if already incurred, and the expected imminent losses
sought to be forestalled must be proved by sufficient and convincing evidence.22 ςrνl l

chanrobles vi rt ual law li bra ry

Anent the last standard of sufficient and convincing evidence, it ought to be pointed
out that a less exacting standard of proof would render too easy the abuse of
retrenchment as a ground for termination of services of employees.23 ςrνll

Was the retrenchment of respondent valid? cha nroble svirtualawl ibra ry

In termination cases, the burden of proving that the dismissal was for a valid or
authorized cause rests upon the employer. Here, petitioner did not submit evidence
of the losses to its business operations and the economic havoc it would thereby
imminently sustain. It only claimed that respondent s termination was due to its
"present business/financial condition." This bare statement fell short of the norm to
show a valid retrenchment. Hence, we hold that there was no valid cause for the
retrenchment of respondent.

Indeed, not every loss incurred or expected to be incurred by an employer can

justify retrenchment. The employer must prove, among others, that the losses are
substantial and that the retrenchment is reasonably necessary to avert such losses.
Thus, by its failure to present sufficient and convincing evidence to prove that
retrenchment was necessary, respondent s termination due to retrenchment is not
allowed.

The Court realizes that the lapse of time since the retrenchment might have
rendered respondent's reinstatement to his former job no longer feasible. If that
should be true, then petitioner should instead pay to him separation pay at the rate
of one. month pay for every year of service computed from September 1992 (when
he commenced to work for the petitioners) until the finality of this decision, and full
backwages from the time his compensation was withheld until the finality of this
decision.

WHEREFORE, we DENY the Petition for Review on Certiorari, and AFFIRM the
decision of the Court of Appeals promulgated on February 11, 2002, subject to the
modification that should reinstatement be no longer feasible, petitioner shall pay to
respondent separation pay of one month for every year of service computed from
September 1992 until the finality of this decision, and full backwages from the time
his compensation was withheld until the finality of this decision.

Costs of suit to be paid by the petitioners.

SO ORDERED.
 [G.R. No. 185556, March 28 : 2011]

SUPREME STEEL CORPORATION, PETITIONER, VS. NAGKAKAISANG

MANGGAGAWA NG SUPREME INDEPENDENT UNION (NMS-IND-APL),
RESPONDENT.

DECISION

NACHURA, J.:

This petition for review on certiorari assails the Court of Appeals (CA)
Decision[1] dated September 30, 2008, and Resolution dated December 4, 2008,
which affirmed the finding of the National Labor Relations Commission (NLRC) that
petitioner violated certain provisions of the Collective Bargaining Agreement (CBA).

Petitioner Supreme Steel Pipe Corporation is a domestic corporation engaged in the

business of manufacturing steel pipes for domestic and foreign markets.
Respondent Nagkakaisang Manggagawa ng Supreme Independent Union is the
certified bargaining agent of petitioner's rank-and-file employees. The CBA[2] in
question was executed by the parties to cover the period from June 1, 2003 to May
31, 2008.

The Case

On July 27, 2005, respondent filed a notice of strike with the National Conciliation
and Mediation Board (NCMB) on the ground that petitioner violated certain
provisions of the CBA. The parties failed to settle their dispute. Consequently, the
Secretary of Labor certified the case to the NLRC for compulsory arbitration
pursuant to Article 263(g) of the Labor Code.

Respondent alleged eleven CBA violations, delineated as follows:

A. Denial to four employees of the CBA- provided wage increase

Article XII, Section 1 of the CBA provides:

Section 1. The COMPANY shall grant a general wage increase, over and above to
all employees, according to the following schedule:

A. Effective June 1, 2003 P14.00 per working day;

B. Effective June 1, 2004 P12.00 per working day; and
C. Effective June 1, 2005 P12.00 per working day.[3]

Respondent alleged that petitioner has repeatedly denied the annual CBA increases
to at least four individuals: Juan Niño, Reynaldo Acosta, Rommel Talavera, and
Eddie Dalagon. According to respondent, petitioner gives an anniversary increase to
its employees upon reaching their first year of employment. The four employees
received their respective anniversary increases and petitioner used such
anniversary increase to justify the denial of their CBA increase for the year.[4]

Petitioner explained that it has been the company's long standing practice that
upon reaching one year of service, a wage adjustment is granted, and, once wages
are adjusted, the increase provided for in the CBA for that year is no longer
implemented. Petitioner claimed that this practice was not objected to by
respondent as evidenced by the employees' pay slips.[5]

Respondent countered that petitioner failed to prove that, as a matter of company

practice, the anniversary increase took the place of the CBA increase. It contended
that all employees should receive the CBA stipulated increase for the years 2003 to
2005.[6]

B. Contracting-out labor

Article II, Section 6 of the CBA provides:

Section 6. Prohibition of Contracting Out of Work of Members of Bargaining

Unit. Thirty (30) days from the signing of this CBA, contractual employees in all
departments, except Warehouse and Packing Section, shall be phased out. Those
contractual employees who are presently in the workforce of the COMPANY shall no
longer be allowed to work after the expiration of their contracts without prejudice to
being hired as probationary employees of the COMPANY.[7]

Respondent claimed that, contrary to this provision, petitioner hired temporary

workers for five months based on uniformly worded employment contracts,
renewable for five months, and assigned them to almost all of the

departments in the company. It pointed out that, under the CBA, temporary
workers are allowed only in the Warehouse and Packing Section; consequently,
employment of contractual employees outside this section, whether direct or
agency-hired, was absolutely prohibited. Worse, petitioner never regularized them
even if the position they occupied and the services they performed were necessary
and desirable to its business. Upon the expiration of their contracts, these workers
would be replaced with other workers with the same employment status. This
scheme is a clear circumvention of the laws on regular employment. [8]

Respondent argued that the right to self-organization goes beyond the maintenance
of union membership. It emphasized that the CBA maintains a union shop clause
which gives the regular employees 30 days within which to join respondent as a
condition for their continued employment. Respondent maintained that petitioner's
persistent refusal to grant regular status to its employees, such as Dindo Buella,
who is assigned in the Galvanizing Department, violates the employees' right to
self-organization in two ways: (1) they are deprived of a representative for
collective bargaining purposes; and (2) respondent is deprived the right to expand
its membership. Respondent contended that a union's strength lies in its number,
which becomes crucial especially during negotiations; after all, an employer will not
bargain seriously with a union whose membership constitutes a minority of the total
workforce of the company. According to respondent, out of the 500 employees of
the company, only 147 are union members, and at least 60 employees would have
been eligible for union membership had they been recognized as regular
employees.[9]

For its part, petitioner admitted that it hired temporary workers. It purportedly did
so to cope with the seasonal increase of the job orders from abroad. In order to
comply with the job orders, petitioner hired the temporary workers to help the
regular workers in the production of steel pipes. Petitioner maintained that these
workers do not affect respondent's membership. Petitioner claimed that it agreed to
terminate these temporary employees on the condition that the regular employees
would have to perform the work that these employees were performing, but
respondent refused. Respondent's refusal allegedly proved that petitioner was not
contracting out the services being performed by union members. Finally, petitioner
insisted that the hiring of temporary workers is a management prerogative.[10]

C. Failure to provide shuttle service

Petitioner has allegedly reneged on its obligation to provide shuttle service for its
employees pursuant to Article XIV, Section 7 of the CBA, which provides:

Section 7. Shuttle Service. As per company practice, once the company vehicle
used for the purpose has been reconditioned.[11]

Respondent claimed that the company vehicle which would be used as shuttle
service for its employees has not been reconditioned by petitioner since the signing
of the CBA on February 26, 2004.[12] Petitioner explained that it is difficult to
implement this provision and simply denied that it has reneged on its obligation.[13]

D. Refusal to answer for the medical

expenses incurred by three employees

Respondent asserted that petitioner is liable for the expenses incurred by three
employees who were injured while in the company premises. This liability allegedly
stems from Article VIII, Section 4 of the CBA which provides:

Section 4. The COMPANY agrees to provide first aid medicine and first aid service
and consultation free of charge to all its employees.[14]

According to respondent, petitioner's definition of what constitutes first aid service

is limited to the bare minimum of treating injured employees while still within the
company premises and referring the injured employee to the Chinese General
Hospital for treatment, but the travel expense in going to the hospital is charged to
the employee. Thus, when Alberto Guevarra and Job Canizares, union members,
were injured, they had to pay P90.00 each for transportation expenses in going to
the hospital for treatment and going back to the company thereafter. In the case of
Rodrigo Solitario, petitioner did not even shoulder the cost of the first aid medicine,
amounting to P2,113.00, even if he was injured during the company sportsfest, but
the amount was deducted, instead, from his salary. Respondent insisted that this
violates the above cited provision of the CBA.[15]

Petitioner insisted that it provided medicine and first aid assistance to Rodrigo
Solitario. It alleged that the latter cannot claim hospitalization

benefits under Article VIII, Section 1[16] of the CBA because he was not confined in
a hospital.[17]

E. Failure to comply with the

time-off with pay provision

Article II, Section 8 of the CBA provides:

Section 8. Time-Off with Pay. The COMPANY shall grant to the UNION's duly
authorized representative/s or to any employee who are on duty, if summoned by
the UNION to testify, if his/her presence is necessary, a paid time-off for the
handling of grievances, cases, investigations, labor-management conferences
provided that if the venue of the case is outside Company premises involving [the]
implementation and interpretation of the CBA, two (2) representatives of the
UNION who will attend the said hearing shall be considered time-off with pay. If an
employee on a night shift attends grievance on labor-related cases and could not
report for work due to physical condition, he may avail of union leave without need
of the two (2) days prior notice.[18]

Respondent contended that under the said provision, petitioner was obliged to
grant a paid time-off to respondent's duly authorized representative or to any
employee who was on duty, when summoned by respondent to testify or when the
employee's presence was necessary in the grievance hearings, meetings, or
investigations.[19]

Petitioner admitted that it did not honor the claim for wages of the union officers
who attended the grievance meetings because these meetings were initiated
by respondent itself. It argued that since the union officers

were performing their functions as such, and not as employees of the company, the
latter should not be liable. Petitioner further asserted that it is not liable to pay the
wages of the union officers when the meetings are held beyond company time
(3:00 p.m.). It claimed that time-off with pay is allowed only if the venue of the
meeting is outside company premises and the meeting involves the implementation
and interpretation of the CBA.[20]

In reply, respondent averred that the above quoted provision does not make a
qualification that the meetings should be held during office hours (7:00 a.m. to
3:00 p.m.); hence, for as long as the presence of the employee is needed, time
spent during the grievance meeting should be paid.[21]
F. Visitors' free access to
company premises

Respondent charged petitioner with violation of Article II, Section 7 of the CBA
which provides:

Section 7. Free Access to Company Premises. Local Union and Federation

officers (subject to company's security measure) shall be allowed during working
hours to enter the COMPANY premises for the following reasons:

a. To investigate grievances that have arisen;

b. To interview Union Officers, Stewards and members during reasonable hours;
and
c. To attend to any meeting called by the Management or the UNION.[22]
G. Failure to comply with reporting
time-off provision

Respondent maintained that a brownout is covered by Article XII, Section 3 of the

CBA which states:

Section 3. Reporting Time-Off. The employees who have reported for work but
are unable to continue working because of emergencies such as typhoons, flood,
earthquake, transportation strike, where the COMPANY is affected and in case of
fire which occurs in the block where the home of the employee is situated and not
just across the street and serious illness of an immediate member of the family of
the employee living with him/her and no one in the house can bring the sick family
member to the hospital, shall be paid as follows:

a. At least half day if the work stoppage occurs within the first four (4) hours of
work; and
b. A whole day if the work stoppage occurs after four (4) hours of work.[23]

Respondent averred that petitioner paid the employees' salaries for one hour only
of the four-hour brownout that occurred on July 25, 2005 and refused to pay for the
remaining three hours. In defense, petitioner simply insisted that brownouts are
not included in the above list of emergencies.[24]

Respondent rejoined that, under the principle of ejusdem generis, brownouts or

power outages come within the "emergencies" contemplated by the CBA provision.
Although brownouts were not specifically identified as one of the emergencies listed
in the said CBA provision, it cannot be denied that brownouts fall within the same
kind or class of the enumerated emergencies. Respondent maintained that the
intention of the provision was to compensate the employees for occurrences which
are beyond their control, and power outage is one of such occurrences. It insisted
that the list of emergencies is not an exhaustive list but merely gives an idea as to
what constitutes an actual emergency that is beyond the control of the
employee.[25]
H. Dismissal of Diosdado Madayag

Diosdado Madayag was employed as welder by petitioner. He was served a Notice

of Termination dated March 14, 2005 which read:

Please consider this as a Notice of Termination of employment effective March 14,

2005 under Art. 284 of the Labor Code and its Implementing Rules.

This is based on the medical certificate submitted by your attending physician, Lucy
Anne E. Mamba, M.D., Jose R. Reyes Memorial Medical Center dated March 7, 2005
with the following diagnosis:

`Diabetes Mellitus Type 2'

Please be guided accordingly.[26]

Respondent contended that Madayag's dismissal from employment is illegal

because petitioner failed to obtain a certification from a competent public authority
that his disease is of such nature or at such stage that it cannot be cured within six
months even after proper medical treatment. Petitioner also failed to prove that
Madayag's continued employment was prejudicial to his health or that of his
colleagues.[27]

Petitioner, on the other hand, alleged that Madayag was validly terminated under
Art. 284[28] of the Labor Code and that his leg was amputated by reason of
diabetes, which disease is not work-related. Petitioner claimed that it was willing to
pay Madayag 13 days for every year of service but respondent was asking for
additional benefits.[29]

I. Denial of paternity leave

benefit to two employees

Article XV, Section 2 of the CBA provides:

Section 2. Paternity Leave. As per law[,] [t]he Company shall, as much as

possible, pay paternity leave within 2 weeks from submission of documents.[30]

Petitioner admitted that it denied this benefit to the claimants for failure to observe
the requirement provided in the Implementing Rules and Regulations of Republic
Act No. 8187 (Paternity Leave Act of 1995), that is, to notify the employer of the
pregnancy of their wives and the expected date of delivery.[31]

Respondent argued that petitioner is relying on technicalities by insisting that the

denial was due to the two employees' failure to notify it of the pregnancy of their
respective spouses. It maintained that the notification requirement runs counter to
the spirit of the law. Respondent averred that, on grounds of social justice, the
oversight to notify petitioner should not be dealt with severely by denying the two
claimants this benefit.[32]
J. Discrimination and
harassment

According to respondent, petitioner was contemptuous over union officers for

protecting the rights of union members. In an affidavit executed by Chito
Guadaña, union secretary, he narrated that Alfred Navarro, Officer-in-Charge of
the Packing Department, had been harsh in dealing with his fellow employees and
would even challenge some workers to a fight. He averred that Navarro had an
overbearing attitude during work and grievance meetings. In November 2004,
Navarro removed Guadaña, a foreman, from his position and installed another
foreman from another section. The action was allegedly brought about by earlier
grievances against Navarro's abuse. Petitioner confirmed his transfer to another
section in violation of Article VI, Section 6 of the CBA,[33] which states in part:

Section 6. Transfer of Employment. - No permanent positional transfer outside

can be effected by the COMPANY without discussing the grounds before the
Grievance Committee. All transfer shall be with advance notice of two (2) weeks.
No transfer shall interfere with the employee's exercise of the right to self-
organization.[34]

Respondent also alleged that Ariel Marigondon, union president, was also penalized
for working for his fellow employees. One time, Marigondon inquired from
management about matters concerning tax discrepancies because it appeared that
non-taxable items were included as part of taxable income. Thereafter, Marigondon
was transferred from one area of operation to another until he was allegedly forced
to accept menial jobs of putting control tags on steel pipes, a kind of job which did
not require his 16 years of expertise in examining steel pipes.[35]

Edgardo Masangcay, respondent's Second Vice President, executed an affidavit

wherein he cited three instances when his salary was withheld by petitioner. The
first incident happened on May 28, 2005 when petitioner refused to give his salary
to his wife despite presentation of a proof of identification (ID) and letter of
authorization. On June 18, 2005, petitioner also refused to release his salary to
Pascual Lazaro despite submission of a letter of authority and his ID and, as a
result, he was unable to buy medicine for his child who was suffering from asthma
attack. The third instance happened on June 25, 2005 when his salary was short of
P450.00; this amount was however released the following week.[36]

Petitioner explained that the transfer of the employee from one department to
another was the result of downsizing the Warehouse Department, which is a valid
exercise of management prerogative. In Guadaña's case, Navarro denied that he
was being harsh but claimed that he merely wanted to stress some points.
Petitioner explained that Guadaña was transferred when the section where he was
assigned was phased out due to the installation of new machines. Petitioner pointed
out that the other workers assigned in said section were also transferred.[37]

For the petitioner, Emmanuel Mendiola, Production Superintendent, also executed

an affidavit attesting that the allegation of Ariel Marigondon, that he was harassed
and was a victim of discrimination for being respondent's President, had no basis.
Marigondon pointed out that after the job order was completed, he was reassigned
to his original shift and group.[38]

Petitioner also submitted the affidavits of Elizabeth Llaneta Aguilar, disbursement

clerk and hiring staff, and Romeo T. Sy, Assistant Personnel Manager. Aguilar
explained that she did not mean to harass Masangcay, but she merely wanted to
make sure that he would receive his salary. Affiant Sy admitted that he refused to
release Masangcay's salary to a woman who presented herself as his (Masangcay's)
wife since nobody could attest to it. He claimed that such is not an act of
harassment but a precautionary measure to protect Masangcay's interest.[39]

K. Non-implementation of COLA in
Wage Order Nos. RBIII-10 and 11

Respondent posited that any form of wage increase granted through the CBA
should not be treated as compliance with the wage increase given through the
wage boards. Respondent claimed that, for a number of years, petitioner has
complied with Article XII, Section 2 of the CBA which provides:

Section 2. All salary increase granted by the COMPANY shall not be credited to any
future contractual or legislated wage increases. Both increases shall be
implemented separate and distinct from the increases stated in this Agreement. It
should be understood by both parties that contractual salary increase are separate
and distinct from legislated wage increases, thus the increase brought by the latter
shall be enjoyed also by all covered employees.[40]

Respondent maintained that for every wage order that was issued in Region 3,
petitioner never hesitated to comply and grant a similar increase. Specifically,
respondent cited petitioner's compliance with Wage Order No. RBIII-10 and grant of
the mandated P15.00 cost of living allowance (COLA) to all its employees.
Petitioner, however, stopped implementing it to non-minimum wage earners on July
24, 2005. It contended that this violates Article 100 of the Labor Code which
prohibits the diminution of benefits already enjoyed by the workers and that such
grant of benefits had already ripened into a company practice.[41]

Petitioner explained that the COLA provided under Wage Order No. RBIII-10 applies
to minimum wage earners only and that, by mistake, it implemented the same
across the board or to all its employees. After realizing its mistake, it stopped
integrating the COLA to the basic pay of the workers who were earning above the
minimum wage.[42]

The NLRC's Ruling

Out of the eleven issues raised by respondent, eight were decided in its favor; two
(denial of paternity leave benefit and discrimination of union members) were
decided in favor of petitioner; while the issue on visitor's free access to company
premises was deemed settled during the mandatory conference. The dispositive
portion of the NLRC Decision dated March 30, 2007 reads:

WHEREFORE, Supreme Steel Pipe Corporation (the Company) is hereby ordered to:

1) implement general wage increase to Juan Niño, Eddie Dalagon and Rommel
Talavera pursuant to the CBA in June 2003, 2004 and 2005;

2) regularize workers Dindo Buella and 60 other workers and to respect CBA
provision on contracting-out labor;

3) recondition the company vehicle pursuant to the CBA;

4) answer for expenses involved in providing first aid services including

transportation expenses for this purpose, as well as to reimburse Rodrigo Solitario
the sum of P2,113.00;

5) pay wages of union members/officers who attended grievance meetings as

follows:

1) D. Serenilla - P115.24375
2) D. Miralpes - P115.80625
3) E. Mallari - P108.7625
4) C. Cruz - P114.65313
5) J. Patalbo - P161.0625
6) J.J. Muñoz - P111.19375
7) C. Guadaña - P56.94375
8) J. Patalbo - P161.0625
9) E. Mallari - P108.7625
10) C. Guadaña - P113.8875
11) A. Marigondon - P170.30625
12) A. Marigondon - P181.66
13) A. Marigondon - P181.66
14) E. Masangcay - P175.75
15) A. Marigondon - P181.66
16) E. Masangcay - P175.75
17) A. Marigondon - P181.66
18) F. Servano - P174.02
19) R. Estrella - P181.50
20) A. Marigondon - P181.66

6) pay workers their salary for the 3 hours of the 4 hour brownout as follows:

1) Alagon, Jr., Pedro - P130.0875

2) Aliwalas, Cristeto - P108.5625
3) Baltazar, Roderick - P 90.1875
4) Bañez, Oliver - P 90.9375
5) Prucal, Eduardo - P126.015
6) Calimquin, Rodillo
7) Clave, Arturo
8) Cadavero, Rey
9) De Leon, Romulo
10) Lactao, Noli
11) Layco, Jr., Dandino
12) Legaspi, Melencio
13) Quiachon, Rogelio
14) Sacmar, Roberto
15) Tagle, Farian
16) Villavicencio, Victor
17) Agra, Romale
18) Basabe, Luis
19) Bornasal, Joel
20) Casitas, Santiago
21) Celajes, Bonifacio
22) Avenido, Jerry
23) Gagarin, Alfredo
24) Layson, Paulo
25) Lledo, Asalem
26) Marigondon, Ariel
27) Orcena, Sonnie
28) Servano, Fernando
29) Versola, Rodrigo
- P131.0362
- P125.64
- P108.5625
- P124.35
- P126.015
- P130.5375
- P127.63
- P130.5525
- P108.9375
- P129.3375
- P126.015
- P126.015
- P128.5575
- P127.53
- P128.5575
- P128.1825
- P133.2487
- P108.9375
- P131.745
- P128.5575
- P131.745
- P126.015
- P126.015
- P126.015

7) reinstate Diosdado Madayag to his former position without loss of seniority rights
and to pay full backwages and other benefits from 14 March 2005, date of
dismissal, until the date of this Decision; if reinstatement is impossible[,] to pay
separation pay of one month pay for every year of service in addition to
backwages;

8) dismiss the claim for paternity leave for failure of claimants to observe the
requirements;

9) dismiss the charge of harassment and discrimination for lack of merit; and to

10) continue to implement COLA under Wage Order Nos. [RBIII]-10 & 11 across
the board.

The issue on Visitors' Free Access to Company Premises is dismissed for being moot
and academic after it was settled during the scheduled conferences.

SO ORDERED.[43]

Forthwith, petitioner elevated the case to the CA, reiterating its arguments on the
eight issues resolved by the NLRC in respondent's favor.

The CA's Ruling

On September 30, 2008, the CA rendered a decision dismissing the petition, thus:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE

COURSE and accordingly DISMISSED, for lack of merit. The assailed Decision dated
March 30, 2007 and Resolution dated April 28, 2008 of the National Labor Relations
Commission in NLRC NCR CC No. 000305-05 are hereby AFFIRMED.

With costs against the petitioner.

SO ORDERED.[44]

According to the CA, petitioner failed to show that the NLRC committed grave abuse
of discretion in finding that it violated certain provisions of the CBA. The NLRC
correctly held that every employee is entitled to the wage increase under the CBA
despite receipt of an anniversary increase. The CA concluded that, based on the
wording of the CBA, which uses the words "general increase" and "over and above,"
it cannot be said that the parties have intended the anniversary increase to be
given in lieu of the CBA wage increase.[45]

The CA declared that the withdrawal of the COLA under Wage Order No. RBIII-10
from the employees who were not minimum wage earners amounted to a
diminution of benefits because such grant has already ripened into a company
practice. It pointed out that there was no ambiguity or doubt as to who were
covered by the wage order. Petitioner, therefore, may not invoke error or mistake
in extending the COLA to all employees and such act can only be construed as "as a
voluntary act on the part of the employer."[46] The CA opined that, considering the
foregoing, the ruling in Globe Mackay Cable and Radio Corp. v. NLRC[47] clearly did
not apply as there was no doubtful or difficult question involved in the present
case.[48]

The CA sustained the NLRC's interpretation of Art. VIII, Section 4 of the CBA as
including the expenses for first aid medicine and transportation cost in going to the
hospital. The CA stressed that the CBA should be construed liberally rather than
narrowly and technically, and the courts must place a practical and realistic
construction upon it, giving due consideration to the context in which it was
negotiated and the purpose which it intended to serve.[49]

Based on the principle of liberal construction of the CBA, the CA likewise sustained
the NLRC's rulings on the issues pertaining to the shuttle service, time-off for
attendance in grievance meetings/hearings, and time-off due to brownouts.[50]

The CA further held that management prerogative is not unlimited: it is subject to

limitations found in law, a CBA, or the general principles of fair play and justice. It
stressed that the CBA provided such limitation on management prerogative to
contract-out labor, and compliance with the CBA is mandated by the express policy
of the law.[51]
Finally, the CA affirmed the NLRC's finding that Madayag's dismissal was illegal. It
emphasized that the burden to prove that the employee's disease is of such nature
or at such stage that it cannot be cured within a period of six months rests on the
employer. Petitioner failed to submit a certification from a competent public
authority attesting to such fact; hence, Madayag's dismissal is illegal.[52]

Petitioner moved for a reconsideration of the CA's decision. On December 4, 2008,

the CA denied the motion for lack of merit.[53]

Dissatisfied, petitioner filed this petition for review on certiorari, contending that the
CA erred in finding that it violated certain provisions of the CBA.

The Court's Ruling

The petition is partly meritorious.

It is a familiar and fundamental doctrine in labor law that the CBA is the law
between the parties and compliance therewith is mandated by the express policy of
the law. If the terms of a CBA are clear and there is no doubt as to the intention of
the contracting parties, the literal meaning of its stipulation shall
prevail.[54] Moreover, the CBA must be construed liberally rather than narrowly and
technically and the Court must place a practical and realistic construction upon
it.[55] Any doubt in the interpretation of any law or provision affecting labor should
be resolved in favor of labor.[56]

Upon these well-established precepts, we sustain the CA's findings and conclusions
on all the issues, except the issue pertaining to the denial of the COLA under Wage
Order No. RBIII-10 and 11 to the employees who are not minimum wage earners.

The wording of the CBA on general wage increase cannot be interpreted any other
way: The CBA increase should be given to all employees "over and above" the
amount they are receiving, even if that amount already includes an anniversary
increase. Stipulations in a contract must be read together, not in isolation from one
another.[57] Consideration of Article XIII, Section 2 (non-crediting provision),
bolsters such interpretation. Section 2 states that "[a]ll salary increase granted by
the company shall not be credited to any future contractual or legislated wage
increases." Clearly then, even if petitioner had already awarded an anniversary
increase to its employees, such increase cannot be credited to the "contractual"
increase as provided in the CBA, which is considered "separate and distinct."

Petitioner claims that it has been the company practice to offset the anniversary
increase with the CBA increase. It however failed to prove such material fact.
Company practice, just like any other fact, habits, customs, usage or patterns of
conduct must be proven. The offering party must allege and prove specific,
repetitive conduct that might constitute evidence of habit,[58] or company practice.
Evidently, the pay slips of the four employees do not serve as sufficient proof.

Petitioner's excuse in not providing a shuttle service to its employees is

unacceptable. In fact, it can hardly be considered as an excuse. Petitioner simply
says that it is difficult to implement the provision. It relies on the fact that "no time
element [is] explicitly stated [in the CBA] within which to fulfill the undertaking."
We cannot allow petitioner to dillydally in complying with its obligation and take
undue advantage of the fact that no period is provided in the CBA. Petitioner should
recondition the company vehicle at once, lest it be charged with and found guilty of
unfair labor practice.

Petitioner gave a narrow construction to the wording of the CBA when it denied (a)
reimbursement for the first-aid medicines taken by Rodrigo Solitario when he was
injured during the company sportsfest and the transportation cost incurred by
Alberto Guevara and Job Canizares in going to the hospital, (b) payment of the
wages of certain employees during the time they spent at the grievance meetings,
and (c) payment of the employees' wages during the brownout that occurred on
July 25, 2002. As previously stated, the CBA must be construed liberally rather
than narrowly and technically. It is the duty of the courts to place a practical and
realistic construction upon the CBA, giving due consideration to the context in which
it is negotiated and the purpose which it is intended to serve. Absurd and illogical
interpretations should be avoided.[59] A CBA, like any other contract, must be
interpreted according to the intention of the parties.[60]

The CA was correct in pointing out that the concerned employees were not seeking
hospitalization benefits under Article VIII, Section 1 of the CBA, but under Section 4
thereof; hence, confinement in a hospital is not a prerequisite for the claim.
Petitioner should reimburse Solitario for the first aid medicines; after all, it is the
duty of the employer to maintain first- aid medicines in its premises.[61] Similarly,
Guevara and Canizares should also be reimbursed for the transportation cost
incurred in going to the hospital. The Omnibus Rules Implementing the Labor Code
provides that, where the employer does not have an emergency hospital in its
premises, the employer is obliged to transport an employee to the nearest hospital
or clinic in case of emergency.[62]

We likewise agree with the CA on the issue of nonpayment of the time-off for
attending grievance meetings. The intention of the parties is obviously to
compensate the employees for the time that they spend in a grievance meeting as
the CBA provision categorically states that the company will pay the employee "a
paid time-off for handling of grievances, investigations, labor-management
conferences." It does not make a qualification that such meeting should be held
during office hours or within the company premises.

The employees should also be compensated for the time they were prevented from
working due to the brownout. The CBA enumerates some of the instances
considered as "emergencies" and these are "typhoons, flood earthquake,
transportation strike." As correctly argued by respondent, the CBA does not
exclusively enumerate the situations which are considered "emergencies."
Obviously, the key element of the provision is that employees "who have reported
for work are unable to continue working" because of the incident. It is therefore
reasonable to conclude that brownout or power outage is considered an
"emergency" situation.

Again, on the issue of contracting-out labor, we sustain the CA. Petitioner, in effect,
admits having hired "temporary" employees, but it maintains that it was an
exercise of management prerogative, necessitated by the increase in demand for its
product.

Indeed, jurisprudence recognizes the right to exercise management prerogative.

Labor laws also discourage interference with an employer's judgment in the conduct
of its business. For this reason, the Court often declines to interfere in legitimate
business decisions of employers. The law must protect not only the welfare of
employees, but also the right of employers.[63] However, the exercise of
management prerogative is not unlimited. Managerial prerogatives are subject to
limitations provided by law, collective bargaining agreements, and general
principles of fair play and justice.[64] The CBA is the norm of conduct between the
parties and, as previously stated, compliance therewith is mandated by the express
policy of the law.[65]

The CBA is clear in providing that temporary employees will no longer be allowed in
the company except in the Warehouse and Packing Section. Petitioner is bound by
this provision. It cannot exempt itself from compliance by invoking management
prerogative. Management prerogative must take a backseat when faced with a CBA
provision. If petitioner needed additional personnel to meet the increase in demand,
it could have taken measures without violating the CBA.

Respondent claims that the temporary employees were hired on five-month

contracts, renewable for another five months. After the expiration of the contracts,
petitioner would hire other persons for the same work, with the same employment
status.

Plainly, petitioner's scheme seeks to prevent employees from acquiring the status
of regular employees. But the Court has already held that, where from the
circumstances it is apparent that the periods of employment have been imposed to
preclude acquisition of security of tenure by the employee, they should be struck
down or disregarded as contrary to public policy and morals.[66] The primary
standard to determine a regular employment is the reasonable connection between
the particular activity performed by the employee in relation to the business or
trade of the employer. The test is whether the former is usually necessary or
desirable in the usual business or trade of the employer. If the employee has been
performing the job for at least one year, even if the performance is not continuous
or merely intermittent, the law deems the repeated and continuing need for its
performance as sufficient evidence of the necessity, if not indispensability, of that
activity to the business of the employer. Hence, the employment is also considered
regular, but only with respect to such activity and while such activity exists.[67]

We also uphold the CA's finding that Madayag's dismissal was illegal. It is already
settled that the burden to prove the validity of the dismissal rests upon the
employer. Dismissal based on Article 284 of the Labor Code is no different, thus:
The law is unequivocal: the employer, before it can legally dismiss its employee on
the ground of disease, must adduce a certification from a competent public
authority that the disease of which its employee is suffering is of such nature or at
such a stage that it cannot be cured within a period of six months even with proper
treatment.

xxxx

In Triple Eight Integrated Services, Inc. v. NLRC, the Court explains why the
submission of the requisite medical certificate is for the employer's compliance,
thus:
The requirement for a medical certificate under Article 284 of the Labor Code
cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary
determination by the employer of the gravity or extent of the employee's illness
and thus defeat the public policy on the protection of labor.

x x x x[68]

However, with respect to the issue of whether the COLA under Wage Order Nos.
RBIII-10 and 11 should be implemented across the board, we hold a different view
from that of the CA. No diminution of benefits would result if the wage orders are
not implemented across the board, as no such company practice has been
established.

Diminution of benefits is the unilateral withdrawal by the employer of benefits

already enjoyed by the employees. There is diminution of benefits when it is shown
that: (1) the grant or benefit is founded on a policy or has ripened into a practice
over a long period of time; (2) the practice is consistent and deliberate; (3) the
practice is not due to error in the construction or application of a doubtful or
difficult question of law; and (4) the diminution or discontinuance is done
unilaterally by the employer.[69]

To recall, the CA arrived at its ruling by relying on the fact that there was no
ambiguity in the wording of the wage order as to the employees covered by it.
From this, the CA concluded that petitioner actually made no error or mistake, but
acted voluntarily, in granting the COLA to all its employees. It therefore took
exception to the Globe Mackay case which, according to it, applies only when there
is a doubtful or difficult question involved.

The CA failed to note that Globe Mackay primarily emphasized that, for the grant of
the benefit to be considered voluntary, "it should have been practiced over a long
period of time, and must be shown to have been consistent and deliberate."[70] The
fact that the practice must not have been due to error in the construction or
application of a doubtful or difficult question of law is a distinct requirement.

The implementation of the COLA under Wage Order No. RBIII-10 across the board,
which only lasted for less than a year, cannot be considered as having been
practiced "over a long period of time." While it is true that jurisprudence has not
laid down any rule requiring a specific minimum number of years in order for a
practice to be considered as a voluntary act of the employer, under existing
jurisprudence on this matter, an act carried out within less than a year would
certainly not qualify as such. Hence, the withdrawal of the COLA Wage Order No.
RBIII-10 from the salaries of non-minimum wage earners did not amount to a
"diminution of benefits" under the law.

There is also no basis in enjoining petitioner to implement Wage Order No. RBIII-11
across the board. Similarly, no proof was presented showing that the
implementation of wage orders across the board has ripened into a company
practice. In the same way that we required petitioner to prove the existence of a
company practice when it alleged the same as defense, at this instance, we also
require respondent to show proof of the company practice as it is now the party
claiming its existence. Absent any proof of specific, repetitive conduct that might
constitute evidence of the practice, we cannot give credence to respondent's
claim. The isolated act of implementing a wage order across the board can hardly
be considered a company practice,[71] more so when such implementation was
erroneously made.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The CA

Decision September 30, 2008 and Resolution dated December 4, 2008
are AFFIRMED with MODIFICATION that the order for petitioner to continue
implementing Wage Order No. RBIII-10 and 11 across the board is SET ASIDE.
Accordingly, item 10 of the NLRC Decision dated March 30, 2007 is modified to read
"dismiss the claim for implementation of Wage Order Nos. RBIII-10 and 11 to the
employees who are not minimum wage earners."

SO ORDERED.
 [G.R. No. 126383. November 28, 1997.]

SAN JUAN DE DIOS HOSPITAL EMPLOYEES ASSOCIATION-AFW/MA.

CONSUELO MAQUILING, LEONARDO MARTINEZ, DOMINGO ELA, JR.,
RODOLFO CALUCIN, JR., PERLA MENDOZA, REX RAPHAEL REYES, ROGELIO
BELMONTE, AND 375 OTHER EMPLOYEE-UNION MEMBERS, Petitioners, v.
NATIONAL LABOR RELATIONS COMMISSION, and SAN JUAN DE DIOS
HOSPITAL, Respondents.

Edgar B. Martir, for Petitioners.

Padilla Law Office for public Respondent.

Quiason Makalintal Barrot Torres and Ibarra for St. Anthony

College.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; REPUBLIC ACT NO. 5901 (AN ACT
PRESCRIBING FORTY HOURS A WEEK OF LABOR FOR GOVERNMENT AND PRIVATE
HOSPITALS OR CLINIC PERSONNEL); REPEALED WITH THE PASSAGE OF THE
LABOR CODE ON MAY 1, 1974. — Policy Instruction No. 54 relies and purports to
implement Republic Act No. 5901, otherwise known as "An Act Prescribing Forty
Hours A Week of Labor For Government And Private Hospitals Or Clinic Personnel",
enacted on June 21, 1969. Reliance on Republic Act No. 5901, however is
misplaced for the said statute, as correctly ruled by respondent NLRC, has long
been repealed with the passage of the Labor Code on May 1, 1974, Article 302 of
which explicitly provides: "All labor laws not adopted as part of this Code either
directly or by reference are repealed. All provisions of existing laws, orders,
decrees, rules and regulations inconsistent herewith are likewise repealed."c ralaw vi rtua 1aw lib rary

2. ID.; LABOR CODE; ARTICLE 83 THEREOF CONSTRUED; ADMINISTRATIVE

INTERPRETATION; THE COURT MAY STRIKE DOWN INTERPRETATION THAT
DEVIATES FROM THE PROVISION OF THE STATUTE. — Only Article 83 of the Labor
Code which appears to have substantially incorporated or reproduced the basic
provisions of Republic Act No. 5901 may support Policy Instructions No. 54 on
which the latter’s validity may be gauged. A cursory reading of Article 83 of the
Labor Code betrays petitioners’ position that "hospital employees" are entitled to "a
full weekly salary with paid two (2) days’ off if they have completed the 40-
hours/5-day work week." What Article 83 merely provides are: (1) the regular
office hour of eight hours a day, five days per week for health personnel, and (2)
where the exigencies of service require that health personnel work for six days or
forty-eight hours then such health personnel shall be entitled to an additional
compensation of at least thirty percent of their regular wage for work on the sixth
day. There is nothing in the law that supports then Secretary of Labor’s assertion
that "personnel in subject hospitals and clinics are entitled to a full weekly wage for
seven (7) days if they have completed the 40-hours/5-day workweek in any given
workweek." Needless to say, the Secretary of Labor exceeded his authority by
including a two days off with pay in contravention of the clear mandate of the
statute. Such act the Court shall not countenance. Administrative interpretation of
the law is at best merely advisory, and the Court will not hesitate to strike down an
administrative interpretation that deviates from the provision of the statute.

3. ID.; SECRETARY OF LABOR’S POLICY INSTRUCTIONS NO. 54; DECLARED VOID

BY THE COURT; RATIONALE. — Even if the Court was to subscribe with petitioner’s
erroneous assertion that Republic Act No. 5901 has neither been amended nor
repealed by the Labor Code, we nevertheless find Policy Instructions No. 54 invalid.
A perusal of Republic Act No. 5901 reveals nothing therein that gives two days off
with pay for health personnel who complete a 40 or 5-day workweek. In fact, the
Explanatory Note of House Bill No. 16630 (later passed into law as Republic Act No.
5901) explicitly states that the bill’s sole purpose is to shorten the working hours of
health personnel and not to dole out a two-days off with pay. Further, petitioners’
position is also negated by the very rules and regulations promulgated by the
Bureau of Labor Standards which implement Republic Act No. 5901. If petitioners
are entitled to two days off with pay, then there appears to be no sense at all why
Section 15 of the implementing rules grants additional compensation equivalent to
the regular rate plus at least twenty-five percent thereof for work performed on
Sunday to health personnel, or an "additional straight-time pay which must be
equivalent at least to the regular rate" "[f]or work performed in excess of forty
hours a week . . . Policy Instructions No. 54 to the Court’s mind unduly extended
the statute. The Secretary of Labor moreover erred in invoking the "spirit and
intent" of Republic Act No. 5901 and Article 83 of the Labor Code for it is an
elementary rule of statutory construction that when the language of the law is clear
and unequivocal, the law must be taken to mean exactly what it says. No additions
or revisions may be permitted. Policy Instructions No. 54 being inconsistent with
and repugnant to the provisions of Article 83 of the Labor Code, as well as to
Republic Act No. 5901, should be, as it is hereby; declared void.

DECISION

FRANCISCO, J.:

Petitioners, the rank-and-file employee-union officers and members of San Juan De

Dios Hospital Employees Association, sent on July 08, 1991, a "four (4)- page letter
with attached support signatures . . . requesting and pleading for the expeditious
implementation and payment by respondent" Juan De Dios Hospital "of the ‘40-
HOURS/5-DAY WORKWEEK’ with compensable weekly two (2) days off provided for
by Republic Act 5901 as clarified for enforcement by the Secretary of Labor’s Policy
Instructions No. 54 dated April 12, 1988." 1 Respondent hospital failed to give a
favorable response; thus, petitioners filed a complaint regarding their "claims for
statutory benefits under the above-cited law and policy issuance" 2 , docketed as
NLRC NCR Case No. 00-08-04815-91. On February 26, 1992, the Labor Arbiter 3
dismissed the complaint. Petitioners appealed before public respondent National
Labor Relations Commission 4 (NLRC), docketed as NLRC NCR CA 003028-92,
which affirmed the Labor Arbiter’s decision. Petitioners’ subsequent motion for
reconsideration was denied; hence, this petition under Rule 65 of the Rules of Court
ascribing grave abuse of discretion on the part of NLRC in concluding that Policy
Instructions No. 54 "proceeds from a wrong interpretation of RA 5901" 5 and Article
83 of the Labor Code. cha nroble s virtualawl ibra ry cha nro bles.c om:chan roble s.com.p h

As the Court sees it, the core issue is whether Policy Instructions No. 54 issued by
then Labor Secretary (now Senator) Franklin M. Drilon is valid or not.

The policy instruction in question provides in full as follows: jgc:chan roble s.com. ph

"Policy Instruction No. 54

"To: All Concerned

"Subject: Working Hours and Compensation of Hospital/Clinic Personnel

"This issuance clarifies the enforcement policy of this Department on the working
hours and compensation of personnel employed by hospitals/clinics with a bed
capacity of 100 or more and those located in cities and municipalities with a
population of one million or more.

"Republic Act 5901 took effect on 21 June 1969 prescribes a 40-hour/5 day work
week for hospital/clinic personnel. At the same time, the Act prohibits the
diminution of the compensation of these workers who would suffer a reduction in
their weekly wage by reason of the shortened workweek prescribed by the Act. In
effect, RA 5901 requires that the covered hospital workers who used to work seven
(7) days a week should be paid for such number of days for working only 5 days or
40 hours a week. cha nrob les vi rtua l lawlib rary

"The evident intention of RA 5901 is to reduce the number of hospital personnel,

considering the nature of their work and at the same time guarantee the payment
to them of a full weekly wage for seven (7) days. This is quite clear in the
Exemplary Note of RA 5901 which states: chanro b1es vi rtua l 1aw lib rary

‘As compared with the other employees and laborers, these hospital and health
clinic personnel are over-worked despite the fact that their duties are more delicate
in nature. If we offer them better working conditions, it is believed that the "brain
drain", that our country suffers nowadays as far as these personnel are concerned
will be considerably lessened. The fact that these hospitals and health clinics
personnel perform duties which are directly concerned with the health and lives of
our people does not mean that they should work for a longer period than most
employees and laborers. They are also entitled to as much rest as other workers.
Making them work longer than is necessary may endanger, rather than protect the
health of their patients. Besides, they are not receiving better pay than the other
workers. Therefore, it is just and fair that they may be made to enjoy the privileges
of equal working hours with other workers except those excepted by law. (Sixth
Congress of the Republic of the Philippines, Third Session, House of
Representatives, H. No. 16630)’

"The Labor Code in its Article 83 adopts and incorporates the basic provisions of RA
5901 and retains its spirit and intent which is to shorten the workweek of covered
hospital personnel and at the same time assure them of a full weekly wage.

"Consistent with such spirit and intent, it is the position of the Department that
personnel in subject hospital and clinics are entitled to a full weekly wage for seven
(7) days if they have completed the 40-hour/5-day workweek in any given
workweek.

"All enforcement and adjudicatory agencies of this Department shall be guided by

this issuance in the disposition of cases involving the personnel of covered hospitals
and clinics.

"Done in the City of Manila, this 12th day of April, 1988.

"(Sgd.) FRANKLIN M. DRILON

Secretary"

(Emphasis Added)

We note that Policy Instruction No. 54 relies and purports to implement Republic
Act No. 5901, otherwise known as "An Act Prescribing Forty Hours A Week Of Labor
For Government and Private Hospitals Or Clinic Personnel", enacted on June 21,
1969. Reliance on Republic Act No. 5901, however, is misplaced for the said
statute, as correctly ruled by respondent NLRC, has long been repealed with the
passage of the Labor Code on May 1, 1974, Article 302 of which explicitly provides:
"All labor laws not adopted as part of this Code either directly or by reference are
hereby repealed. All provisions of existing laws, orders, decrees, rules and
regulations inconsistent herewith are likewise repealed." Accordingly, only Article 83
of the Labor Code which appears to have substantially incorporated or reproduced
the basic provisions of Republic Act No. 5901 may support Policy Instructions No.
54 on which the latter’s validity may be gauged. Article 83 of the Labor Code
states:jgc:chanroble s.com.p h

"Art. 83. Normal Hours of Work. — The normal hours of work of any employee shall
not exceed eight (8) hours a day.

"Health personnel in cities and municipalities with a population of at least one

million (1,000,000) or in hospitals and clinics with a bed capacity of at least one
hundred (100) shall hold regular office hours for eight (8) hours a day, for five (5)
days a week, exclusive of time for meals, except where the exigencies of the
service require that such personnel work for six (6) days or forty-eight (48) hours,
in which case they shall be entitled to an additional compensation of at least thirty
per cent (30%) of their regular wage for work on the sixth day. For purposes of this
Article, "health personnel" shall include: resident physicians, nurses, nutritionists,
dietitians, pharmacists, social workers, laboratory technicians, paramedical
technicians, psychologists, midwives, attendants and all other hospital or clinic
personnel." (Emphasis supplied)

A cursory reading of Article 83 of the Labor Code betrays petitioners’ position that
"hospital employees" are entitled to "a full weekly salary with paid two (2) days’ off
if they have completed the 40-hour/5-day workweek." 6 What Article 83 merely
provides are: (1) the regular office hour of eight hours a day, five days per week
for health personnel, and (2) where the exigencies of service require that health
personnel work for six days or forty-eight hours then such health personnel shall be
entitled to an additional compensation of at least thirty percent of their regular
wage for work on the sixth day. There is nothing in the law that supports then
Secretary of Labor’s assertion that "personnel in subject hospitals and clinics are
entitled to a full weekly wage for seven (7) days if they have completed the 40-
hour/5-day workweek in any given workweek." Needless to say, the Secretary of
Labor exceeded his authority by including a two days off with pay in contravention
of the clear mandate of the statute. Such act the Court shall not countenance.
Administrative interpretation of the law, we reiterate, is at best merely advisory, 7
and the Court will not hesitate to strike down an administrative interpretation that
deviates from the provision of the statute.

Indeed, even if we were to subscribe with petitioners’ erroneous assertion that

Republic Act No. 5901 has neither been amended nor repealed by the Labor Code,
we nevertheless find Policy Instructions No. 54 invalid. A perusal of Republic Act
No. 5901 8 reveals nothing therein that gives two days off with pay for health
personnel who complete a 40-hour work or 5-day workweek. In fact, the
Explanatory Note of House Bill No. 16630 (later passed into law as Republic Act No.
5901) explicitly states that the bill’s sole purpose is to shorten the working hours of
health personnel and not to dole out a two days off with pay. Hence: jgc:chanrobles .com.p h

"The accompanying bill seeks to grant resident physicians, staff nurses,

nutritionists, midwives, attendants and other hospital and health clinic personnel of
public and private hospitals and clinics, the privilege of enjoying the eight hours a
week exclusive of time for lunch granted by law to all government employees and
workers except those employed in schools and in courts. At present those hospitals
and health clinic personnel including those employed in private hospitals and clinics,
work six days a week, 8 hours a day or 48 hours a week.

"As compared with the other employees and laborers, these hospital and health
clinic personnel are over-worked despite the fact that their duties are more delicate
in nature. If we offer them better working conditions, it is believed that the ‘brain
drain’, that our country suffers nowadays as far as these personnel are concerned
will be considerably lessened. The fact that these hospitals and health clinic
personnel perform duties which are directly concerned with the health and lives of
our people does not mean that they should work for a longer period than most
employees and laborers. They are also entitled to as much rest as other workers.
Making them work longer than is necessary may endanger, rather than protect, the
health of their patients. Besides, they are not receiving better pay than the other
workers. Therefore, it is just and fair that they be made to enjoy the privileges of
equal working hours with other workers except those excepted by law.

"In the light of the foregoing, approval of this bill is strongly recommended.

"(SGD.) SERGIO H. LOYOLA

"Congressman, 3rd District

Manila" (Annex "F" of petition, Emphasis supplied)

Further, petitioners’ position is also negated by the very rules and regulations
promulgated by the Bureau of Labor Standards which implement Republic Act No.
5901. Pertinent portions of the implementing rules provide: jgc:chan robles. com.ph

"RULES AND REGULATIONS IMPLEMENTING

REPUBLIC ACT NO. 5901

"By virtue of Section 79 of the Revised Administrative Code, as modified by section

18 of Implementation Report for Reorganization Plan No. 20-A on Labor, vesting in
the Bureau of Labor Standards the authority to promulgate rules and regulations to
implement wage and hour laws, the following rules and regulations are hereby
issued for the implementation of Republic Act No. 5901. chan roble s.com:c ralaw:re d

"CHAPTER I — Coverage

"Section 1. General Statement on Coverage. — Republic Act No. 5901, hereinafter

referred to as the Act, shall apply to: chanro b1es vi rtu al 1aw li bra ry

‘(a) All hospitals and clinics, including those with a bed capacity of less than one
hundred, which are situated in cities or municipalities with a population of one
million or more; and to

‘(b) All hospitals and clinics with a bed capacity of at least one hundred, irrespective
of the size of population of the city or municipality where they may be situated.’

x x x

"Section 7. Regular Working Day. — The regular working days of covered

employees shall be not more than five days in a workweek. The workweek may
begin at any hour and on any day, including Saturday or Sunday, designated by the
employer.

"Employers are not precluded from changing the time at which the workday or
workweek begins, provided that the change is not intended to evade the
requirements of these regulations on the payment of additional compensation." c ralaw virtua1aw l ibra ry

x x x

"Section 15. Additional Pay Under the Act and C. A. No. 444. — (a) Employees of
covered hospitals and clinics who are entitled to the benefits provided under the
Eight-Hour Labor Law, as amended, shall be paid an additional compensation
equivalent to their regular rate plus at least twenty-five percent thereof for work
performed on Sunday and Holidays, not exceeding eight hours, such employees
shall be entitled to an additional compensation of at least 25% of their regular rate.

"(b) For work performed in excess of forty hours a week, excluding those rendered
in excess of eight hours a day during the week, employees covered by the Eight-
Hour Labor Law shall be entitled to an additional straight-time pay which must be
equivalent at least to their regular rate."
c ralaw vi rtua 1aw lib rary

If petitioners are entitled to two days off with pay, then there appears to be no
sense at all why Section 15 of the implementing rules grants additional
compensation equivalent to the regular rate plus at least twenty-five percent
thereof for work performed on Sunday to health personnel, or an "additional
straight-time pay which must be equivalent at least to the regular rate" "[f]or work
performed in excess of forty hours a week . . . Policy Instructions No. 54 to our
mind unduly extended the statute. The Secretary of Labor moreover erred in
invoking the "spirit and intent" of Republic Act No. 5901 and Article 83 of the Labor
Code for it is an elementary rule of statutory construction that when the language
of the law is clear and unequivocal, the law must be taken to mean exactly what it
says. 9 No additions or revisions may be permitted. Policy Instructions No. 54 being
inconsistent with and repugnant to the provision of Article 83 of the Labor Code, as
well as to Republic Act No. 5901, should be, as it is hereby, declared void.

WHEREFORE, the decision appealed from is AFFIRMED. No costs.

SO ORDERED.
 G.R. No. 156367 May 16, 2005

AUTO BUS TRANSPORT SYSTEMS, INC., petitioner,

vs.
ANTONIO BAUTISTA, respondent.

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari assailing the Decision1 and Resolution2 of the Court
of Appeals affirming the Decision3 of the National Labor Relations Commission (NLRC). The NLRC
ruling modified the Decision of the Labor Arbiter (finding respondent entitled to the award of
13th month pay and service incentive leave pay) by deleting the award of 13th month pay to
respondent.

THE FACTS

Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus
Transport Systems, Inc. (Autobus), as driver-conductor with travel routes Manila-Tuguegarao via
Baguio, Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was paid on
commission basis, seven percent (7%) of the total gross income per travel, on a twice a month
basis.

On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya,
the bus he was driving accidentally bumped the rear portion of Autobus No. 124, as the latter vehicle
suddenly stopped at a sharp curve without giving any warning.

Respondent averred that the accident happened because he was compelled by the management to
go back to Roxas, Isabela, although he had not slept for almost twenty-four (24) hours, as he had
just arrived in Manila from Roxas, Isabela. Respondent further alleged that he was not allowed to
work until he fully paid the amount of P75,551.50, representing thirty percent (30%) of the cost of
repair of the damaged buses and that despite respondent’s pleas for reconsideration, the same was
ignored by management. After a month, management sent him a letter of termination.

Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money
Claims for nonpayment of 13th month pay and service incentive leave pay against Autobus.

Petitioner, on the other hand, maintained that respondent’s employment was replete with offenses
involving reckless imprudence, gross negligence, and dishonesty. To support its claim, petitioner
presented copies of letters, memos, irregularity reports, and warrants of arrest pertaining to several
incidents wherein respondent was involved.

Furthermore, petitioner avers that in the exercise of its management prerogative, respondent’s
employment was terminated only after the latter was provided with an opportunity to explain his side
regarding the accident on 03 January 2000.

On 29 September 2000, based on the pleadings and supporting evidence presented by the parties,
Labor Arbiter Monroe C. Tabingan promulgated a Decision,4 the dispositive portion of which reads:
 WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal
Dismissal has no leg to stand on. It is hereby ordered DISMISSED, as it is hereby
DISMISSED.

However, still based on the above-discussed premises, the respondent must pay to the
complainant the following:

a. his 13th month pay from the date of his hiring to the date of his dismissal, presently
computed at P78,117.87;

b. his service incentive leave pay for all the years he had been in service with the
respondent, presently computed at P13,788.05.

All other claims of both complainant and respondent are hereby dismissed for lack of merit.5

Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the NLRC
which rendered its decision on 28 September 2001, the decretal portion of which reads:

[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3
provides:

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

xxx xxx xxx

e) employers of those who are paid on purely commission, boundary, or task basis,
performing a specific work, irrespective of the time consumed in the performance
thereof. xxx."

Records show that complainant, in his position paper, admitted that he was paid on a
commission basis.

In view of the foregoing, we deem it just and equitable to modify the assailed Decision by
deleting the award of 13th month pay to the complainant.

WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award
of 13th month pay. The other findings are AFFIRMED.6

In other words, the award of service incentive leave pay was maintained. Petitioner thus sought a
reconsideration of this aspect, which was subsequently denied in a Resolution by the NLRC dated
31 October 2001.

Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of said
decision with the Court of Appeals which was subsequently denied by the appellate court in a
Decision dated 06 May 2002, the dispositive portion of which reads:

WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and the
assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000 is hereby
AFFIRMED in toto. No costs.7
Hence, the instant petition.

ISSUES

1. Whether or not respondent is entitled to service incentive leave;

2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor
Code, as amended, is applicable to respondent’s claim of service incentive leave pay.

RULING OF THE COURT

The disposition of the first issue revolves around the proper interpretation of Article 95 of the Labor
Code vis-à-vis Section 1(D), Rule V, Book III of the Implementing Rules and Regulations of the
Labor Code which provides:

Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE

(a) Every employee who has rendered at least one year of service shall be entitled to
a yearly service incentive leave of five days with pay.

Book III, Rule V: SERVICE INCENTIVE LEAVE

SECTION 1. Coverage. – This rule shall apply to all employees except:

(d) Field personnel and other employees whose performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely
commission basis, or those who are paid in a fixed amount for performing work
irrespective of the time consumed in the performance thereof; . . .

A careful perusal of said provisions of law will result in the conclusion that the grant of service
incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to
apply only to those employees not explicitly excluded by Section 1 of Rule V. According to the
Implementing Rules, Service Incentive Leave shall not apply to employees classified as "field
personnel." The phrase "other employees whose performance is unsupervised by the employer"
must not be understood as a separate classification of employees to which service incentive leave
shall not be granted. Rather, it serves as an amplification of the interpretation of the definition of field
personnel under the Labor Code as those "whose actual hours of work in the field cannot be
determined with reasonable certainty."8

The same is true with respect to the phrase "those who are engaged on task or contract basis,
purely commission basis." Said phrase should be related with "field personnel," applying the rule
on ejusdem generis that general and unlimited terms are restrained and limited by the particular
terms that they follow.9 Hence, employees engaged on task or contract basis or paid on purely
commission basis are not automatically exempted from the grant of service incentive leave, unless,
they fall under the classification of field personnel.

Therefore, petitioner’s contention that respondent is not entitled to the grant of service incentive
leave just because he was paid on purely commission basis is misplaced. What must be ascertained
in order to resolve the issue of propriety of the grant of service incentive leave to respondent is
whether or not he is a field personnel.

According to Article 82 of the Labor Code, "field personnel" shall refer to non-agricultural employees
who regularly perform their duties away from the principal place of business or branch office of the
employer and whose actual hours of work in the field cannot be determined with reasonable
certainty. This definition is further elaborated in the Bureau of Working Conditions (BWC), Advisory
Opinion to Philippine Technical-Clerical Commercial Employees Association10 which states that:

As a general rule, [field personnel] are those whose performance of their job/service is not
supervised by the employer or his representative, the workplace being away from the
principal office and whose hours and days of work cannot be determined with reasonable
certainty; hence, they are paid specific amount for rendering specific service or performing
specific work. If required to be at specific places at specific times, employees including
drivers cannot be said to be field personnel despite the fact that they are performing work
away from the principal office of the employee. [Emphasis ours]

To this discussion by the BWC, the petitioner differs and postulates that under said advisory opinion,
no employee would ever be considered a field personnel because every employer, in one way or
another, exercises control over his employees. Petitioner further argues that the only criterion that
should be considered is the nature of work of the employee in that, if the employee’s job requires
that he works away from the principal office like that of a messenger or a bus driver, then he is
inevitably a field personnel.

We are not persuaded. At this point, it is necessary to stress that the definition of a "field personnel"
is not merely concerned with the location where the employee regularly performs his duties but also
with the fact that the employee’s performance is unsupervised by the employer. As discussed above,
field personnel are those who regularly perform their duties away from the principal place of
business of the employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. Thus, in order to conclude whether an employee is a field employee, it is also
necessary to ascertain if actual hours of work in the field can be determined with reasonable
certainty by the employer. In so doing, an inquiry must be made as to whether or not the employee’s
time and performance are constantly supervised by the employer.

As observed by the Labor Arbiter and concurred in by the Court of Appeals:

It is of judicial notice that along the routes that are plied by these bus companies, there are
its inspectors assigned at strategic places who board the bus and inspect the passengers,
the punched tickets, and the conductor’s reports. There is also the mandatory once-a-week
car barn or shop day, where the bus is regularly checked as to its mechanical, electrical, and
hydraulic aspects, whether or not there are problems thereon as reported by the driver
and/or conductor. They too, must be at specific place as [sic] specified time, as they
generally observe prompt departure and arrival from their point of origin to their point of
destination. In each and every depot, there is always the Dispatcher whose function is
precisely to see to it that the bus and its crew leave the premises at specific times and arrive
at the estimated proper time. These, are present in the case at bar. The driver, the
complainant herein, was therefore under constant supervision while in the performance of
this work. He cannot be considered a field personnel.11

We agree in the above disquisition. Therefore, as correctly concluded by the appellate court,
respondent is not a field personnel but a regular employee who performs tasks usually necessary
and desirable to the usual trade of petitioner’s business. Accordingly, respondent is entitled to the
grant of service incentive leave.

The question now that must be addressed is up to what amount of service incentive leave pay
respondent is entitled to.

The response to this query inevitably leads us to the correlative issue of whether or not the three (3)-
year prescriptive period under Article 291 of the Labor Code is applicable to respondent’s claim of
service incentive leave pay.

Article 291 of the Labor Code states that all money claims arising from employer-employee
relationship shall be filed within three (3) years from the time the cause of action accrued; otherwise,
they shall be forever barred.

In the application of this section of the Labor Code, the pivotal question to be answered is when
does the cause of action for money claims accrue in order to determine the reckoning date of the
three-year prescriptive period.

It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the
part of the named defendant to respect or not to violate such right; and (3) an act or omission on the
part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of
the defendant to the plaintiff.12

To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the
third element of a cause of action transpired. Stated differently, in the computation of the three-year
prescriptive period, a determination must be made as to the period when the act constituting a
violation of the workers’ right to the benefits being claimed was committed. For if the cause of action
accrued more than three (3) years before the filing of the money claim, said cause of action has
already prescribed in accordance with Article 291.13

Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is established

that the benefits being claimed have been withheld from the employee for a period longer than three
(3) years, the amount pertaining to the period beyond the three-year prescriptive period is therefore
barred by prescription. The amount that can only be demanded by the aggrieved employee shall be
limited to the amount of the benefits withheld within three (3) years before the filing of the
complaint.14

It is essential at this point, however, to recognize that the service incentive leave is a curious animal
in relation to other benefits granted by the law to every employee. In the case of service incentive
leave, the employee may choose to either use his leave credits or commute it to its monetary
equivalent if not exhausted at the end of the year.15 Furthermore, if the employee entitled to service
incentive leave does not use or commute the same, he is entitled upon his resignation or separation
from work to the commutation of his accrued service incentive leave. As enunciated by the Court
in Fernandez v. NLRC:16

The clear policy of the Labor Code is to grant service incentive leave pay to workers in all
establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing
Rules and Regulations provides that "[e]very employee who has rendered at least one year
of service shall be entitled to a yearly service incentive leave of five days with pay." Service
incentive leave is a right which accrues to every employee who has served "within 12
months, whether continuous or broken reckoned from the date the employee started
 working, including authorized absences and paid regular holidays unless the working days in
the establishment as a matter of practice or policy, or that provided in the employment
contracts, is less than 12 months, in which case said period shall be considered as one
year." It is also "commutable to its money equivalent if not used or exhausted at the end of
the year." In other words, an employee who has served for one year is entitled to it. He may
use it as leave days or he may collect its monetary value. To limit the award to three years,
as the solicitor general recommends, is to unduly restrict such right.17 [Italics supplied]

Correspondingly, it can be conscientiously deduced that the cause of action of an entitled employee
to claim his service incentive leave pay accrues from the moment the employer refuses to
remunerate its monetary equivalent if the employee did not make use of said leave credits but
instead chose to avail of its commutation. Accordingly, if the employee wishes to accumulate his
leave credits and opts for its commutation upon his resignation or separation from employment, his
cause of action to claim the whole amount of his accumulated service incentive leave shall arise
when the employer fails to pay such amount at the time of his resignation or separation from
employment.

Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave, we
can conclude that the three (3)-year prescriptive period commences, not at the end of the year when
the employee becomes entitled to the commutation of his service incentive leave, but from the time
when the employer refuses to pay its monetary equivalent after demand of commutation or upon
termination of the employee’s services, as the case may be.

The above construal of Art. 291, vis-à-vis the rules on service incentive leave, is in keeping with the
rudimentary principle 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.18 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.19

In the case at bar, respondent had not made use of his service incentive leave nor demanded for its
commutation until his employment was terminated by petitioner. Neither did petitioner compensate
his accumulated service incentive leave pay at the time of his dismissal. It was only upon his filing of
a complaint for illegal dismissal, one month from the time of his dismissal, that respondent
demanded from his former employer commutation of his accumulated leave credits. His cause of
action to claim the payment of his accumulated service incentive leave thus accrued from the time
when his employer dismissed him and failed to pay his accumulated leave credits.

Therefore, the prescriptive period with respect to his claim for service incentive leave pay only
commenced from the time the employer failed to compensate his accumulated service incentive
leave pay at the time of his dismissal. Since respondent had filed his money claim after only one
month from the time of his dismissal, necessarily, his money claim was filed within the prescriptive
period provided for by Article 291 of the Labor Code.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed Decision
of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.

SO ORDERED.