THIRD DIVISION

January 17, 2018

G.R. No. 219435

ALLIED BANKING CORPORATION, now merged with PHILIPPINE NATIONAL BANK, Petitioner

vs.
REYNOLD CALUMPANG, Respondent

DECISION

VELASCO, J.:

The Case

Before the Court is a Petition for Review on Certiorari filed under Rule 45 of the Rules of Court for the reversal
and setting aside of the Decision1 dated September 12, 2014 and the Resolution2 dated June 9, 2015 of the Court of
Appeals (CA) - Cebu City in CA-G.R. CEB SP No. 02906, which affirmed the findings of the National Labor
Relations Commission (NLRC) and of the Labor Arbiter, declaring respondent to have been illegally dismissed by
petitioner.

The Facts

Petitioner Allied Banking Corporation3 ("Bank") and Race Cleaners, Inc. ("RCI"), a corporation engaged in the
business of janitorial and manpower services, had entered into a Service Agreement whereby the latter provided
the former with messengerial, janitorial, communication, and maintenance services and the personnel therefor.4

On September 28, 2003, respondent Reynold Calumpang was hired as a janitor by RCI and was assigned at the
Bank's Tanjay City Branch ("the Branch"). He was tasked to perform janitorial work and messengerial/errand
services. His job required him to be out of the Branch at times to nm errands such as delivering statements and
checks for clearing, mailing letters, among others.5

Petitioner, however, observed that whenever respondent went out on errands, it takes a long time for him to return
to the Branch. It was eventually discovered that during these times, respondent was also plying his pedicab and
ferrying passengers. Petitioner also found out through several clients of the Branch who informed the Bank
Manager, Mr. Oscar Infante, that respondent had been borrowing money from them. Because of these acts, Mr.
Infante informed respondent that his services would no longer be required at the Branch.6

Disgruntled, respondent thereafter filed a complaint for illegal dismissal and underpayment of wages against
petitioner before the NLRC,7 which was docketed as RAB VII-07-0094-2005-D.8

In his position paper, respondent asserted that the four-fold test of employer-employee relationship is present
between him and the Bank.9 First, he averred that he was a regular employee of the Bank assigned as a Janitor of
the Branch with a salary of ₱4,200 payable every 15 days each month, and assigned such other tasks essential and
necessary for the Bank's business.10

He alleged that petitioner engaged his services and exercised direct control and supervision over him through the
Branch Head, Oscar Infante, not only as to the results of his work but also as to the means and methods by which
the same was to be accomplished. According to respondent, Infante gives the direct orders on the work to be done
and accomplished during working days, such as "m[o]pping, cleaning the comfort room of the [B]ank, arrang[ing]
furniture and fixture, bank documents, throw[ing] garbage/waste disposal, cleaning the windows, tables and teller
cage" as well as directing him to "do messengerial/errand services such as mailing of letters, delivery of bank
statements and deliver[ing] checks for clearing."11

As regards the payment of salary, respondent claimed that it was the Branch that directly paid his salaries and
wages every "quincina."12 As for the power of dismissal, respondent further alleged that it was petitioner Bank,
through its Branch Head, who terminated his services.13

For its part, petitioner alleged that respondent was not its employee, but that of RCI, with which it had entered into
a Service Agreement to provide "messengerial, janitorial, communications and maintenance services and the
personnel therefor."14 It claimed that while respondent was required to be out of the Branch at times to accomplish
his tasks, it was observed that whenever he went out on these errands, he would take a long time to return to the
Branch. Petitioner eventually discovered that during these times, respondent was "also plying his pedicab and
ferrying passengers." Aside from this, petitioner averred that several clients of the Branch informed Infante that
respondent had been borrowing money from them "owing to his familiarity with said clients." Upon discovering
these incidents, petitioner "had no choice but to have complainant relieved and replaced." Accordingly, Infante
informed respondent that his services would no longer be required by the Branch.15

Petitioner denied the existence of any employer-employee relationship between itself and respondent. It asserted
that respondent was clearly an employee of RCI by virtue of the Service Agreement which clearly indicated in
Article XI thereof that there would be no employer-employee relationship between RCI's employees and the
Bank.16 It further averred that RCI is a qualified job contractor because of its capitalization and the fact that it
exercised control and supervision over its employees deployed at the branches of the petitioner in accordance with
Rule VIII-A, Sec. 4, pars. (d) and (e) of the Omnibus Rules Implementing the Labor Code.17

Furthermore, petitioner argued that it was merely exercising its prerogative under the Service Agreement to seek
the replacement or relief of any personnel assigned by RCI when the Branch Head informed respondent that his
services would no longer be required at the Branch. According to petitioner, this decision to replace respondent
was not equivalent to termination of employment, especially since it was neither whimsical nor arbitrary.18 Thus,
petitioner concludes that, in the absence of any employer-employee relationship between the parties, respondent
had no cause of action against petitioner for illegal dismissal, damages and other claims.19

Ruling of the Labor Arbiter

In its Decision20 dated March 28, 2006, the Labor Arbiter ruled in favor of respondent, the dispositive portion of
which reads:

WHEREFORE, foregoing considered, complainant is hereby declared to be an employee of

respondent Allied Banking Corporation. It is declared further that complainant has been illegally
dismissed. Respondent Allied Banking Corporation is hereby ordered to reinstate complainant to
his former position without loss of seniority rights or privileges, with full backwages from the time
his salary was withheld until his actual reinstatement, which is tentatively computed in the amount
of ₱37,800.00. Should reinstatement be unfeasible for valid reasons, respondent is ordered to pay
the complainant separation pay of one month salary per year of service, a fraction of six months is
considered as one year which is computed in the amount of ₱46,200.

SO ORDERED.21

The Labor Arbiter held that there was an employer-employee relationship between petitioner and respondent,
based on the following findings: (a) Respondent rendered services to petitioner for eleven (11) unbroken years; (b)
There was no evidence of a Service Agreement between petitioner and RCI; (c) There was no evidence of a
request for replacement of respondent made by petitioner with RCI; (d) Respondent was directly paid by petitioner
and not through RCI; (e) Respondent's work was directly controlled and supervised by petitioner; (f) It was
petitioner who terminated the services of respondent with no participation of RCI whatsoever; and (g) RCI
disowned any employment relationship with respondent.22

Considering its finding of the existence of an employer-employee relationship between petitioner and respondent,
the Labor Arbiter further ruled that the reason and manner by which respondent was terminated fell short of the
requirements of the law since due process was not observed. Accordingly, respondent was declared to have been
illegally dismissed and ordered to be reinstated without loss of seniority or privileges, with full backwages.23
Aggrieved, petitioner immediately filed a Notice of Appeal and Memorandum of Appeal with the NLRC, which
was docketed as NLRC Case No. V-000628-2006.24

Ruling of the National Labor Relations Commission

The NLRC affirmed the decision of the Labor Arbiter in its Decision dated February 16, 2007, to wit:

WHEREFORE, premises considered, the appeal of respondent Allied Banking Corporation is

hereby DISMISSED for lack of merit and the appealed Decision is AFFIRMED.

SO ORDERED.25

Agreeing with the Labor Arbiter's findings, the NLRC ruled that petitioner exercised all the elements of an
employer-employee relationship through the payment of wages, control and supervision over complainant's work
and the power of dismissal.26 The NLRC discredited petitioner's argument that it merely exercised its prerogative
to seek for a replacement or relief of any personnel assigned by RCI absent any evidence that it sought
respondent's relief from RCI.27

Petitioner moved for the reconsideration of the NLRC Decision,28 but the same was denied in a Resolution dated
May 17, 2007.29 Thus, petitioner elevated the matter to the CA in a petition which was docketed as CA-G.R. SP
No. 02906.30

Ruling of the Court of Appeals

In the assailed Decision dated September 12, 2014, the CA denied the petition and upheld the rulings of the Labor
Arbiter and the NLRC. The dispositive portion of the assailed Decision reads:

WHEREFORE, premises considered, the petition is hereby DENIED. The NLRC Decision dated 16
February 2007 and the Resolution dated 17 May 2007, in RAB VII Case No. 07-0094-2005-D, is
AFFIRMED.

The Labor Arbiter is hereby ordered to re-compute the award of backwages and separation pay in
accordance with the above disquisitions.

SO ORDERED.31

The CA ruled that RCI is a labor-only contractor. It applied the test of independent contractorship that "whether
one claiming to be an independent contractor has contracted to do work according to his own methods and without
being subject to the control of the employer, except only as to the results of the work" in determining that RCI
merely served as an agent of petitioner bank and that respondent was truly an employee of petitioner.32

As to the issue of the propriety of respondent's dismissal, the CA affirmed the findings of the Labor Arbiter and
the NLRC that petitioner Bank failed to give respondent ample opportunity to contest the legality of his dismissal
since no notice of termination was given to him. Consequently, the CA affirmed the award of reinstatement
without loss of seniority rights and other privileges, and his full backwages inclusive of allowances and other
benefits or their monetary equivalent, computed from the time his compensation was withheld up to the time of his
actual reinstatement.

Nevertheless, finding that there were strained relations between petitioner bank and respondent, the CA ordered
the award of separation pay in lieu of reinstatement, equivalent to one (1) month salary for every year of service,
with a fraction of a year of at least six (6) months to be considered as one (1) whole year, to be computed from the
date he was hired until the finality of the decision, earning a legal interest at the rate of six percent (6%) per
annum until full satisfaction.

Petitioner filed a Motion for Reconsideration (of the Decision Dated 12 September 2014) with Entry of
Appearance and Motion for Substitution of Party dated October 16, 2014,33 but it was denied in the assailed
Resolution dated June 9, 2015.

Hence, this petition.

 The Petition

Petitioner asserts that the CA erred in declaring RCI as a labor-only contractor. It claims that RCI carried an
independent business as reflected in the Service Agreement that petitioner bank entered with RCI. Aside from the
substantial capitalization of RCI, petitioner bank avers that RCI exercises control and supervision over its
personnel deployed at its branches. Petitioner bank further argues that even assuming that respondent's work is
related to its business, such work is not necessary in the conduct of the bank's principal business. Finally,
petitioner contends that it does not have the power to dismiss respondent and control his work based on the Service
Agreement with RCI.

Nevertheless, petitioner bank defends its right to ask for respondent's replacement under Article IV of the Service
Agreement. Petitioner reiterates that respondent's acts of borrowing money from the bank's clients and
plying/ferrying passengers for a fee during his hour of duty constitute conduct which is prejudicial to the interest
of petitioner. Thus, in accordance with the Service Agreement, petitioner bank merely exercised its right to change
or have respondent replaced instead of imposing disciplinary measures on him. According to petitioner, this act
was erroneously construed by the CA as an exercise of the power of control over or of dismissal of respondent.

In a Resolution34 dated September 28, 2015, We required respondent to comment on the petition within ten (10)
days from notice. However, respondent has failed to file any comment thereon to date. Accordingly, respondent is
deemed to have waived his right to comment on the petition and the Court shall now proceed to rule on its merits.

The Issues

Petitioner raises the following issues:

1. Whether or not the CA erred in declaring that RCI is a laboronly contractor.

2. Whether or not the CA erred in declaring that there exists an employer-employee relationship between the Bank
and respondent.

3. Whether or not the CA erred in (i) declaring that respondent had been illegally dismissed, and (ii) granting his
monetary claims.

Essentially, the principal issue is whether the CA erred in affirming the NLRC Decision which declared that RCI
is a labor-only contractor, and in ordering the Labor Arbiter to re-compute the award of backwages and separation
pay.

The Court's Ruling

The petition is partly meritorious.

RCI is a labor-only contractor

Article 106 of the Labor Code provides the relations which may arise between an employer, a contractor, and the
contractors' employees, thus:

ART. 106. Contractor or subcontracting. - Whenever an employer enters into a contract with

another person for the performance of the former's work, the employees of the contractor and of the
latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of workers established under the Code. In so
prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and
job contracting as well as differentiations within these types of contracting and determine who
 among the parties involved shall be considered the employer for purposes of this Code, to prevent
any violation or circumvention of any provision of this Code.

There is labor-only contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises,
among others, and the workers recruited and placed by such person are performing activities which
are directly related to the principal business of such employer. In such cases, the person or
intermediary shall be considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him.

Permissible job contracting or subcontracting has been distinguished from labor-only contracting such that
permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or
farm out to a contractor or subcontractor the performance or completion of a specific job, work or service within a
definite or predetermined period, regardless of whether such job, work or service is to be performed or completed
within or outside the premises of the principal, while labor-only contracting, on the other hand, pertains to an
arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job,
work or service for a principal.35

These distinctions were laid out in the Omnibus Rules Implementing the Labor Code thus:

SECTION 8. Job Contracting. - There is job contracting permissible under the Code if the
following conditions are met:

(a) The contractor carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all matters connected with the performance of
the work except as to the results thereof; and

(b) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of his business.

SECTION 9. Labor-only contracting. - (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries,
work premises and other materials; and

(2) The workers recruited and placed by such person are performing activities which are directly
related to the principal business or operations of the employer in which workers are habitually
employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as
contractor shall be considered merely as an agent or intermediary of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed by
him.

(c) For cases not falling under this Rule, the Secretary of Labor and Employment shall determine
through appropriate orders whether or not the contracting out of labor is permissible in the light of
the circumstances of each case and after considering the operating needs of the employer and the
rights of the workers involved. In such case, he may prescribe conditions and restrictions to insure
the protection and welfare of the workers.

As a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor overcomes the
burden of proving that it has the substantial capital, investment, tools and the like.36

In the present case, petitioner failed to establish that RCI is a legitimate labor contractor as contemplated under the
Labor Code. Except for the bare allegation of petitioner that RCI had substantial capitalization, it presented no
supporting evidence to show the same. Petitioner never submitted financial statements from RCI. Even the Service
Agreement allegedly entered into between petitioner and RCI, upon which petitioner relied to show that RCI was
an independent contractor, had lapsed in August 2005, as admitted by petitioner in its Position Paper.37 Notably,
petitioner failed to allege when the Service Agreement was executed, thus, making its claim that respondent was
hired by RCI and assigned to petitioner in 2003 even more ambiguous.

Aside from this, petitioner's claim that RCI exercised control and supervision over respondent is belied by the fact
that petitioner admitted that its own Branch Manager had informed respondent that his services would no longer be
required at the Branch.38 This overt act shows that petitioner had direct control over respondent while he was
assigned at the Branch. Moreover, the CA is correct in finding that respondent's work is related to petitioner's
business and is characterized as part of or in pursuit of its banking operations.

An employer-employee relationship exists between petitioner and respondent

A finding that a contractor is a labor-only contractor, as opposed to permissible job contracting, is equivalent to
declaring that there is an employer-employee relationship between the principal and the employees of the
supposed contractor, and the labor-only contractor is considered as a mere agent of the principal, the real
employer.39

In this case, petitioner bank is the principal employer and RCI is the labor-only contractor. Accordingly, petitioner
and RCI are solidarily liable for the rightful claims of respondent.

Petitioner had valid grounds to dismiss respondent

It is an established principle that the dismissal of an employee is justified where there was a just cause and the
employee was afforded due process prior to dismissal.40 The burden of proof to establish these twin requirements
is on the employer, who must present clear, accurate, consistent, and convincing evidence to that effect.41

The Labor Arbiter haphazardly declared that respondent was illegally dismissed when it ruled that respondent's
misconduct was not established since due process was not observed. 42 The NLRC also ruled in a similar manner
and failed to address the grounds for termination raised by petitioner, specifically respondent's
transgressions.43 While the CA addressed the aspect of substantive due process, it simply disregarded the grounds
raised by petitioner and concluded that petitioner failed to discharge the burden of proof that valid or authorized
causes under the Labor Code exist.44

We, however, find that petitioner's basis for terminating respondent rests on valid and legal grounds. At the very
first instance, petitioner had already stressed in its position paper that respondent was found committing conduct
prejudicial to the interests of the Branch when it was discovered that 1) respondent was plying his pedicab and
ferrying passengers during his work hours and 2) he had been borrowing money from several clients of the
Branch.

Nowhere in the records was it shown that respondent denied these imputations against him.1âwphi1 Absent any
denial on the part of respondent, the Court is constrained to believe that respondent's silence can be construed as an
admission of these accusations against him.

The very nature of the actions imputed against respondent is serious and detrimental to the Bank's operations and
reputation. Thus, petitioner's decision to relieve respondent from his employment is justified.

Respondent's right to procedural due process was violated

Nevertheless, We agree with the findings of the appellate court that there were procedural lapses in the dismissal
of respondent.

The importance of procedural due process was expounded by this Court in King of Kings Transport, Inc. v.
Mamac, thus:

(1) The first written notice to be served on the employees should contain the specific causes or
grounds for termination against them, and a directive that the employees are given the opportunity
to submit their written explanation within a reasonable period. Reasonable opportunity under the
Omnibus Rules means every kind of assistance that management must accord to the employees to
enable them to prepare adequately for their defense. This should be construed as a period of at least
five calendar days from receipt of the notice x x x. Moreover, in order to enable the employees to
intelligently prepare their explanation and defenses, the notice should contain a detailed narration of
 the facts and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 288 [of the Labor
Code] is being charged against the employees.

(2) After serving the first notice, the employees should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to (1) explain and clarify their
defenses to the charge against them; (2) present evidence in support of their defenses; and (3) rebut
the evidence presented against them by the management. During the hearing or conference, the
employees are given the chance to defend themselves personally, with the assistance of a
representative or counsel of their choice x x x.

(3) After determining that termination is justified, the employer shall serve the employees a written
notice of termination indicating that:

(1) all the circumstances involving the charge against the employees have been considered; and (2)
grounds have been established to justify the severance of their employment. 45 (emphasis in the
original)

In the present case, it is uncontested that petitioner failed to give respondent ample opportunity to contest the
legality of his dismissal since he was neither given a notice to explain nor a notice of termination. The first and
second notice requirements have not been properly observed; thus, respondent's dismissal, albeit with valid
grounds, is tainted with illegality.

The award of backwages and separation pay is deleted but respondent is entitled to nominal damages

Considering that there were valid and substantive grounds to terminate respondent's employment, the award of
backwages and separation pay is deleted. However, petitioner's violation of respondent's right to statutory
procedural due process warrants the payment of indemnity in the form of nominal damages.

Nominal damages may be awarded to a plaintiff whose right has been violated or invaded by the defendant, for the
purpose of vindicating or recognizing that right, and not for indemnifying the plaintiff for any loss suffered by
him. Its award is thus not for the purpose of indemnification for a loss but for the recognition and vindication of a
right.46

In fixing the amount of nominal damages whose determination is addressed to our sound discretion, the Court
should take into account several factors surrounding the case, such as: (1) the employer's financial, medical, and/or
moral assistance to the sick employee; (2) the flexibility and leeway that the employer allowed the sick employee
in performing his duties while attending to his medical needs; (3) the employer's grant of other termination
benefits in favor of the employee; and (4) whether there was a bona fide attempt on the part of the employer to
comply with the twin-notice requirement as opposed to giving no notice at all.47

Based on the factual considerations of the present case, We deem it appropriate to award nominal damages in the
amount of Thirty Thousand Pesos (₱30,000) in favor of respondent as a result of petitioner's act of violating his
right to procedural due process.

WHEREFORE, the petition is hereby PARTIALLY GRANTED. The Decision dated September 12, 2014 and
the Resolution dated June 9, 2015 of the Court of Appeals-Cebu City in CA-G.R. CEB SP No. 02906 are
hereby AFFIRMED with MODIFICATION. Since Race Cleaners Inc. is a labor-only contractor, petitioner
Allied Banking Corporation now merged with Philippine National Bank is declared to be the employer of
respondent Reynold Calumpang, whose dismissal is declared to be substantively valid for being based on
sufficient and valid grounds. However, he was denied his right to procedural due process for lack of the required
twin notices to explain and of dismissal.

Consequently, petitioner is ordered to pay respondent nominal damages in the amount of ₱30,000 for its non-
compliance with procedural due process.

SO ORDERED.
 FIRST DIVISION
[ G.R. No. 205688, July 04, 2018 ]
VALENTINO S. LINGAT AND APRONIANO ALTOVEROS, PETITIONERS, V. COCA-COLA BOTTLERS
PHILIPPINES, INC., MONTE DAPPLES TRADING, AND DAVID LYONS,[*] RESPONDENTS.

DECISION
DEL CASTILLO, J.:[**]

This Petition for Review on Certiorari assails the July 4, 2012 Decision[1] of the Court of Appeals (CA) in CA-
G.R SP No. 112829, which modified the July 7, 2009 Decision[2] of the National Labor Relations Commission
(NLRC) in NLRC LAC No. 03-000855-09. Also challenged is the January 16, 2013 CA Resolution [3] which
denied petitioners Valentino S. Lingat (Lingat) and Aproniano Altoveros' (Altoveros) (petitioners) Motion for
Reconsideration.
Factual Antecedents

On May 5, 2008, petitioners filed a Complaint[4] for illegal dismissal, moral and exemplary damages, and
attorney's fees against Coca-Cola Bottlers Phils., Inc. (CCBPI), Monte Dapples Trading Corp. (MDTC), and David
Lyons (Lyons) (respondents).

Petitioners averred in their Position Paper[5] and Reply[6] that, in August 1993 and January 1996, CCBPI employed
Lingat and Altoveros as plant driver and forklift operator, and segregator/mixer respectively. They added that they
had continually worked for CCBPI until their illegal dismissal in April 2005 (Lingat) and December 2005
(Altoveros).

According to petitioners, they were regular employees of CCBPI because it engaged them to perform tasks
necessary and desirable in its business or trade. They explained that CCBPI made them part of its operations, and
without them its products would not reach its clients. They asserted that their work was the link between CCBPI
and its sales force.

Petitioners alleged that CCBPI engaged Lingat primarily as a plant driver but he also worked as forklift operator.
In particular, he drove CCBPI's truck loaded with softdrinks and its other products, and thereafter, returned the
empty bottles as well as the unsold softdrinks back to the plant of CCBPI. On the other hand, as segregator/mixer
of softdrinks, Altoveros was required to segregate softdrinks based on the orders of the customers. Altoveros
declared, that when a customer needed cases of softdrinks, such need was relayed to him since no sales personnel
was allowed in the loading area.

Petitioners further stated, that after becoming regular employees (as they had been employed for more than a year),
and by way of a modus operandi, CCBPI transferred them from one agency to another. These agencies included
Lipercon Services, Inc., People Services, Inc., Interserve Management and Manpower Resources, Inc. The latest
agency to where they were transferred was MDTC. They claimed that such transfer was a scheme to avoid their
regularization in CCBPI.

In addition, petitioners stressed that the aforesaid agencies were labor-only contractors which did not have any
equipment, machinery, and work premises for warehousing purposes. They insisted that CCBPI owned the
warehouse where they worked; the supervisors thereat were CCBPI’s employees; and petitioners themselves
worked for CCBPI, not for any agency. In fine, they maintained that they were regular employees of CCBPI
because:

[Petitioners] worked within the premises of [CCBPI,] use the equipment, the facilities, cater on [its]
products, [and served] the Sales Forces x x x. In other words, while at work, [petitioners] were
under the direction, control and supervision of respondent Coca-Cola's regular employees. The
situation calls for the over-all control of the operations by Coca-Cola employees as [petitioners]
perform[ed] their work with x x x Coca-Cola and [its] premises. x x x[7]

Finally, petitioners argued that CCBPI dismissed them after it found out that they were "overstaying." As such,
they posited that they were illegally dismissed as their termination was without cause and due process of law.

For their part, CCBPI and Lyons, its President/Chief Executive Officer, countered in their Position Paper [8] and
Reply[9] that this case must be dismissed because the Labor Arbiter (LA) lacked jurisdiction, there being no
employer-employee relationship between the parties.
CCBPI and Lyons declared that CCBPI was engaged in the business of manufacturing, distributing, and marketing
of softdrinks and other beverage products. By reason of its business, CCBPI entered into a Warehousing
Management Agreement[10] with MDTC for the latter to perform warehousing and inventory functions for the
former.

CCBPI and Lyons insisted that MDTC was a legitimate and independent contractor, which only assigned
petitioners at CCBPI's plant in Otis, Manila. They posited that MDTC carried on a distinct and independent
business; catered to other clients, aside from CCBPI; and possessed sufficient capital and investment in machinery
and equipment for the conduct of its business as well as an office building.

CCBPI and Lyons likewise stressed that petitioners were employees of MDTC, not CCBPI. They averred that
MDTC was the one who engaged petitioners and paid their salaries. They also claimed that CCBPI only
coordinated with the Operations Manager of MDTC in order to monitor the end results of the services rendered by
the employees of MDTC. They added that it was MDTC which imposed corrective action upon its employees
when disciplinary matters arose.

Finally, CCBPI and Lyons averred that when the Warehousing Management Agreement between CCBPI and
MDTC expired, the parties no longer renewed the same. Consequently, it came as a surprise to CCBPI that
petitioners filed this complaint considering that CCBPI was not their employer, but MDTC.

Meanwhile, LA Catalino R. Laderas declared that despite notice, MDTC failed to file its position paper on this
case.[11]

Ruling of the Labor Arbiter

On December 9, 2008, the LA ruled for the petitioners, the dispositive portion of his Decision reads:

WHEREFORE, premised on the foregoing considerations[,] judgment is hereby rendered declaring

that complainants were ILLEGALLY DISMISSED from their employment.

Respondent CCBPI is hereby ordered, viz.:

1. To reinstate complainants to their former positions without loss of seniority rights and privileges
and to pay complainants backwages from the time they were illegally dismissed up to the time of
this decision.

The computation unit of this Office is hereby directed to compute the monetary award of the
complainant[s] which forms part of this decision.

Other claims are DISMISSED for lack of merit

SO ORDERED.[12]

The LA ruled that respondents failed to refute that petitioners were employees of CCBPI and the latter undermined
their regular status by transferring them to an agency. The LA decreed that, per the identification cards (IDs) of
petitioners, CCBPI hired Lingat in 1993, and Altoveros in 1996. Moreover, as plant driver, and segregator/mixer,
petitioners performed activities necessary in the usual business or trade of CCBPI; and, their continued
employment for more than one year proved that they were regular employees of CCBPI.

The LA likewise ratiocinated that the contracts of employment which petitioners may have entered with CCBPI's
contractors could not undermine their (petitioners) tenure arising from their regular status with CCBPI.

In sum, the LA decreed that, since respondents failed to debunk the allegations raised by petitioners, then
judgment must be rendered in favor of petitioners.

Ruling of the National Labor Relations Commission

On appeal, the NLRC dismissed the illegal dismissal case. It, nonetheless, ordered MDTC to pay Altoveros
separation pay amounting to P10,725.00.
 According to the NLRC, Lingat stated that CCBPI illegally dismissed him in April2005. However, he only filed
his complaint for illegal dismissal on May 5, 2008, which was beyond three years from his dismissal. Thus,
Lingat's complaint must be dismissed on the ground of prescription.

Also, the NLRC decreed that the complaint of Altoveros was bereft of merit. It explained that per Altoveros' ID,
CCBPI employed him in January 1996 until September 19, 1996; thereafter, he was employed by Genesis
Logistics and Warehouse Corporation; and, on April 7, 2003, MDTC hired him and assigned him as loader/mixer
at CCBPI's warehouse in Paco, Manila until December 2005 when MDTC's contract with CCBPI expired.

In ruling that Altoveros was an employee of MDTC, the NLRC gave credence to the Warehousing Management
Agreement between MDTC and CCBPI as well as to MDTC's Amended Articles of Incorporation. It held that
MDTC did not appear to be a mere agent of CCBPI but was one that provided stock handling and storage services
to CCBPI. It held that, considering MDTC was the employer of Altoveros, then it must pay him separation pay of
1/2 month pay for every year of his service.

On November 4, 2009, the NLRC denied[13] petitioners' Motion for Reconsideration prompting them to file a
Petition for Certiorari with the CA.

Ruling of the Court of Appeals

On July 4, 2012, the CA modified the NLRC Decision in that it ordered MDTC to pay separation pay to both
petitioners.

Contrary to the finding of the NLRC, the CA found that the illegal dismissal case filed by Lingat had not yet
prescribed. It held that, aside from money claims, Lingat prayed for reinstatement, as such, pursuant to Article
1146 of the Civil Code, Lingat had four years within which to file his case. It noted that Lingat filed this suit on
May 5, 2008 or only three years and one day from his alleged illegal dismissal; thus, he timely filed his case
against respondents.

Nevertheless, the CA agreed with the NLRC that MDTC was an independent contractor and the employer of
petitioners. It gave weight to petitioners' latest IDs, which were issued by MDTC as well as to the Articles of
Incorporation of MDTC, which indicated that its secondary purpose was "to engage in the business of land
transportation" and "the business of warehousing services." It further ruled that MDTC had substantial capital
stock, as well as properties and equipment, which supported the conclusion that MDTC was a legitimate labor
contractor.

On January 16,2 013, the CA denied the Motion for Reconsideration on the assailed Decision.

Issues

Undaunted, petitioners filed this Petition raising these issues:

1. Whether or not there exists [an] employer-employ[ee] relationship between Petitioners and Respondent
CCBPI;
2. Whether or not Petitioner Lingat's complaint is barred by prescription;
3. Whether or not the Court of Appeals gravely erred in declaring [that] Petitioners [were] not regular
employees of Respondent CCBPI;
4. Whether or not Petitioners were dismissed without cause and due process;
5. Whether or not moral and exemplary damages lie; and
6. Whether or not the Petitioners are entitled to attorney's fees.[14]
Petitioners maintain that they were regular employees of CCBPI. They insist that their engagement by CCBPI in
1993 (Lingat) and 1996 (Altoveros) proved that they were its employees from the beginning. They also aver that
they worked at CCBPI's warehouse, wore its uniforms, operated its machinery, and were under the direct control
and supervision of CCBPI. They likewise contend that CCBPI illegally dismissed them from work. On this, they
insist that respondents themselves admitted that petitioners' employment contract expired; and thereafter, they
were no longer given any new assignments. They remain firm that such termination of contract was not a valid
cause for their dismissal from work.

CCBPI and Lyons, for their part, counter that this Petition was not a proper recourse because petitioners seek a
recalibration of facts and evidence which is not within the scope of the Petition because only pure questions of law
may be raised herein. They add that MDTC was a legitimate and independent job contractor and was the employer
of petitioners, not CCBPI.
 Our Ruling

The Petition is impressed with merit.

As a rule, the determination of whether an employer-employee relationship exists between the parties involves
factual matters that are generally beyond the ambit of this Petition as only questions of law may be raised in a
petition for review on certiorari. However, this rule allows certain exceptions, which include an instance where the
factual findings of the courts or tribunals below are conflicting. Given the situation here where the factual findings
of the NLRC and the CA are divergent from those of the LA, the Court deems it proper to re-assess and review
these findings in order to arrive at a just resolution of the issues on hand.[15]

Moreover, pursuant to Article 295 of the Labor Code, as amended and renumbered, a regular employee is a) one
that has been engaged to perform tasks usually necessary or desirable in the employer's usual business or trade –
without falling within the category of either a fixed or a project or a seasonal employee; or b) one that has been
engaged for a least one year, whether his or her service is continuous or not, with respect to such activity he or she
is engaged, and the work of the employee remains while such activity exists.

In this case, petitioners described their respective duties at CCBPI in this manner:

x x x I, V. Lingat, x x x was also engaged as forklift operator [but] my main work as plant driver
[required me] to take out truck loaded with softdrinks/Coca-Cola products after the same has been
checked by the checker area; [I also] drive back Coca-Cola trucks loaded with empty bottles or
sometimes x x x unsold softdrinks x x x This represented [my] daily chores while employed at
Coca-Cola[.]

x x x I, A. Altoveros, was with the latest work as segregator/mixer of softdrinks according to the
demands of the customers, that is, when a customer needed ten (10) cases of Royal Tru-Orange or
five (5) cases of Coke Sakto, the same is relayed to me in the loading area (as no sales personnel is
allowed therein)[.] I have to segregate softdrinks accordingly to fill up the order of [the] customer.
[16]

To ascertain if one is a regular employee, it is primordial to determine the reasonable connection between the
activity he or she performs and its relation to the trade or business of the supposed employer.[17]

Relating petitioners' tasks to the nature of the business of CCBPI – which involved the manufacture, distribution,
and sale of soft drinks and other beverages – it cannot be denied that mixing and segregating as well as loading
and bringing of CCBPI's products to its customers involved distribution and sale of these items. Simply put,
petitioners' duties were reasonably connected to the very business of CCBPI. They were indispensable to such
business because without them the products of CCBPI would not reach its customers.

Interestingly, in Coca-Cola Bottlers Philippines, Inc. v. Agito,[18] the Court held that respondents salesmen therein
were regular employees of CCBPI as their work constituted distribution and sale of its products. The Court also
stressed in Agito that the repeated rehiring of those salesmen bolstered the indispensability of their work to the
business of CCBPI.

Similarly, herein petitioners have worked for CCBPI since 1993 (Lingat) and 1996 (Altoveros) until the non-
renewal of their contracts in 2005. Aside from the fact that their work involved the distribution and sale of the
products of CCBPI, they remained to be working for CCBPI despite having been transferred from one agency to
another. Hence, such repeated re-hiring of petitioners, and the performance of the same tasks for CCBPI
established the necessity and the indispensability of their activities in its business.

In addition, in Pacquing v. Coca-Cola Philippines, Inc.,[19] the Court ruled that the sales route helpers of CCBPI
were its regular employees. In this case, petitioners had similarly undertook to bring CCBPI's products to its
customers at their delivery points. In Pacquing, it was even stated that therein sales route helpers "were part of a
complement of three personnel comprised of a driver, a salesman and a regular route helper, for every delivery
truck."[20] As such, it would be absurd for the Court to hold those helpers as regular employees of CCBPI without
giving the same status to its plant driver, including its segregator of softdrinks, whose work also had reasonable
connection to CCBPI's business of distribution and sale of soft drinks and other beverage products.

Furthermore, in Quintanar v. Coca-Cola Bottlers, Philippines, Inc.,[21] therein route helpers, like petitioners, were
tasked to distribute CCBPI's products and were likewise successively transferred to agencies after having been
initially employed by CCBPI. The Court decreed therein that said helpers were regular employees of CCBPI
notwithstanding the fact that they were transferred to agencies while working for CCBPI. In the same vein, the
transfer of herein petitioners from one agency to another did not adversely affect their regular employment status.
Such was the case because they continued to perform the same tasks for CCBPI even if they were placed under
certain agencies, the last of which was MDTC.

Moreover, CCBPI and Lyons' contention that MDTC was a legitimate labor contractor and was the actual
employer of petitioners does not hold water.

A labor-only contractor is one who enters into an agreement with the principal employer to act as the agent in the
recruitment, supply, or placement of workers for the latter. A labor-only contractor 1) does not have substantial
capital or investment in tools, equipment, work premises, among others, and the recruited employees perform tasks
necessary to the main business of the principal; or 2) does not exercise any right of control anent the performance
of the contractual employee. In such case, where a labor-only contracting exists, the principal shall be deemed the
employer of the contractual employee; and the principal and the labor-only contractor shall be solidarily liable for
any violation of the Labor Code. On the other hand, a legitimate job contractor enters into an agreement with the
employer for the supply of workers for the latter but the "employer-employee relationship between the employer
and the contractor's employees [is] only for a limited purpose, i.e., to ensure that the employees are paid their
wages."[22]

In Diamond Farms, Inc. v. Southern Philippines Federation of Labor (SPFL)-Workers Solidarity of

DARBMUPCO/Diamond-SPFL,[23] the Court distinguished a labor-only contractor and a legitimate job contractor
in this wise:

The Omnibus Rules Implementing the Labor Code distinguishes between permissible job
contracting (or independent contractorship) and labor-only contracting. Job contracting is
permissible under the Code if the following conditions are met:

(a) The contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own manner
and method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results thereof;
and

(b) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in
the conduct of his business.

In contrast, job contracting shall be deemed as labor-only contracting, an arrangement prohibited by

law, if a person who undertakes to supply workers to an employer:

(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and

(2) The workers recruited and placed by such person are performing activities which
are directly related to the principal business or operations of the employer in which
workers are habitually employed.

Here, based on their Warehousing Management Agreement, CCBPI hired MDTC to perform warehousing
management services, which it claimed did not directly relate to its (CCBPI's) manufacturing operations.
[24]
 However, it must be stressed that CCBPI's business not only involved the manufacture of its products but also
included their distribution and sale. Thus, CCBPI's argument that petitioners were employees of MDTC because
they performed tasks directly related to "warehousing management services," lacks merit. On the contrary, records
show that petitioners were performing tasks directly related to CCBPI's distribution and sale aspects of its
business.

To reiterate, CCBPI is engaged in the manufacture, distribution, and sale of its products; in turn, as plant driver
and segregator/mixer of soft drinks, petitioners were engaged to perform tasks relevant to the distribution and sale
of CCBPI's products, which relate to the core business of CCBPI, not to the supposed warehousing service being
rendered by MDTC to CCBPI. Petitioners' work were directly connected to the achievement of the purposes for
which CCBPI was incorporated. Certainly, they were regular employees of CCBPI.
Moreover, we disagree with the CA when it heavily relied on MDTC's alleged substantial capital in order to
conclude that it was an independent labor contractor.

To note, in Quintanar v. Coca-Cola Bottlers, Philippines, Inc.,[25] the Court ruled that "the possession of
substantial capital is only one element." [26] To determine whether a person or entity is indeed a legitimate labor
contractor, it is necessary to prove not only substantial capital or investment in tools, equipment, work premises,
among others, but also that the work of the employee is directly related to the work that contractor is required to
perform for the principal.[27] Evidently, the latter requirement is wanting in the case at bench.

Finally, as regular employees, petitioners may be dismissed only for cause and with due process. These
requirements were not complied with here.

It was not disputed that petitioners ceased to perform their work when they were no longer given any new
assignment upon the alleged termination of the Warehousing Management Agreement between CCBPI and
MDTC. However, this is not a just or authorized cause to terminate petitioners' services. Otherwise stated, the
contract expiration was not a valid basis to dismiss petitioners from service. At the same time, there was no clear
showing that petitioners were afforded due process when they were terminated. Therefore, their dismissal was
without valid cause and due process of law; as such, the same was illegal.

Considering that petitioners were illegally terminated, CCBPI and MDTC are solidarily liable for the rightful
claims of petitioners.[28]

Moreover, by reason of the lapse of more than 10 years since the inception of this case on May 5, 2008, the Court
deems it more practical and would serve the best interest of the parties to award separation pay to petitioners, in
lieu of reinstatement.[29] Finally, since petitioners were compelled to litigate to protect their rights and interests,
attorney's fees of 10% of the monetary award is given them. The legal interest of 6% per annum shall be imposed
on all the monetary grants from the finality of the Decision until paid in full.[30]

WHEREFORE, the Petition is GRANTED. The July 4, 2012 Decision and January 16, 2013 Resolution of the
Court of Appeals in CA-G.R. SP No. 112829 are REVERSED and SET ASIDE. Accordingly, the December 9,
2008 Decision of the Labor Arbiter is REINSTATED WITH MODIFICATIONS in that separation pay, in lieu
of reinstatement, and attorney's fees equivalent to 10% of the monetary grants are awarded to petitioners. All
monetary awards shall earn interest at the legal rate of 6% per annum from the finality of this Decision until fully
paid.

SO ORDERED.
 FIRST DIVISION
[ G.R. No. 206800, July 02, 2018 ]
STRADCOM CORPORATION AND JOSE A. CHUA, PETITIONERS, V. JOYCE ANNABELLE L.
ORPILLA, RESPONDENT.

DECISION
TIJAM, J.:

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by petitioners Stradcom
Corporation (Stradcom) and Jose A. Chua (Chua) (collectively referred to as petitioners), assailing the
Decision[1] dated September 28, 2012 and Resolution[2] dated April 17, 2013 of the Court of Appeals (CA) in CA-
G.R. SP No. 91150, which reversed the National Labor Relations Commission (NLRC) Decision[3] dated July 30,
2004 and Resolution[4] dated April 20, 2005 and reinstated the Labor Arbiter's (LA's) ruling[5] dated September 30,
2003.
The Procedural and Factual Antecedents

The Version of Respondent Joyce Anabelle L. Orpilla

On November 15, 2001, Joyce Anabelle L. Orpilla (respondent) was employed by Stradcom as Human Resources
Administration Department (HRAD) Head, under a probationary status for six months, with a monthly salary of
P60,000.[6] Her duties included administrative and training matters.[7]

On January 2, 2003, Chua, the President and Chief Executive Officer (CEO) of Stradcom, issued a Memorandum
addressed to the Chief Operating Officer (COO), Ramon G. Reyes (Reyes), and Chief Financial Officer (CPO),
Raul C. Pagdanganan (Pagdanganan), announcing the reorganization of the HRAD.[8] The pertinent portions of the
memorandum provides:

1. The Training Section of the Department shall be spinned off and will form part of the Business
Operations. x x x (The Training Section shall be called Human Resources Training and
Development).

xxxx

3. Under the said reorganization, new sections shall be reporting to the following:

The Human Resources Training and Development shall be reporting to Mr. Ramon G. Reyes, COO.
The Personnel and Administration shall be reporting to Mr. Raul Pagdangan, CFO.
Ms. Joyce Anabelle L. Orpilla and the Training Section will be reporting directly to the COO. x x
x[9]
After the turn-over of the documents and equipment of HRAD, respondent inquired from Chua as to her status in
the light of the said reorganization. Chua, on the other hand, replied that the management has lost its trust and
confidence in her and it would be better if she resigned. Respondent protested the resignation and insisted that if
there were charges against her, she was open for formal investigation. Chua, however, was not able to come up
with any charges.[10]

On January 9, 2003, a meeting was held wherein, Atty. Eric Gene Pilapil (Atty. Pilapil), the Chief Legal Officer
(CLO) offered a settlement to respondent in exchange for her employment, otherwise, respondent would have to
undergo the burden of litigation in pursuing the retention of her employment. [11] Atty. Pilapil set another meeting
on January 13, 2003 with respondent, and told her to take a leave in the meantime to think about the settlement
offer. Atty. Pilapil also assured respondent that she would continue to receive her salary.[12]

On January 13, 2003, per advice of Atty. Pilapil, respondent reported for work but the guards refused her entry and
advised her to take a leave of absence.[13]

Respondent claimed that she was informed by Accounting Manager, Mr. Arnold C. Ocampo, that her January 15,
2003 salary was already deposited in her bank account which included the proportionate 13th month pay for the
year 2003 and was her last and final pay. After such, respondent no longer received any kind of payment from
petitioners.[14] Respondent claimed that she was constructively dismissed on January 2, 2003 and turned into an
actual dismissal on January 15, 2003, when she received her last pay.[15]
On June 29, 2003, respondent filed a complaint for constructive dismissal with monetary claims of backwages,
attorney's fees and damages.[16]

The Version of Petitioners Stradcom Corporation and Jose A. Chua

On November 15, 2001, respondent was employed by Stradcom as HRAD Head, a managerial position with a
monthly salary of P60,000.[17] As HRAD Head, respondent's duties and responsibilities included administration
and personnel, and training matters.[18]

Sometime in December 2002, Pagdanganan gave instructions to respondent to commence preparations for
Stradcom's 2002 Christmas party. Chua also gave instructions to respondent to include the Land Registration
Systems, Inc. (Lares) officers and employees, an affiliate of Stradcom in the Christmas party, to foster camaraderie
and working relations between the two companies.[19]

Contrary to Chua's instruction, respondent then called a staff lunch meeting for Stradcom's 2002 Christmas party,
wherein respondent conveyed her intention of easing out Lares' employees from the party.[20]

Later, it had come to Stradcom's attention that respondent was not comfortable with the idea to include Lares in the
Christmas party, as respondent appeared evasive on the queries about the event made by Ms. May Marcelo, the
Head Personnel and Administration of Lares.[21] This matter was brought to the attention of Chua, who decided to
strip respondent of any responsibility in organizing the Christmas party and transferred the same to another
committee. As part of the turnover, respondent furnished the committee with a copy of the initial budget which
included the catering services from G&W Catering Services at P250 per head.[22]

On December 16, 2002, Ms. Rowena Q. Samson (Samson) and Mr. Saturnino S. Galgana (Galgana), members of
the new Christmas party committee went to see Mrs. Myrna G. Sese (Sese), the proprietress of the G&W Catering
Services.[23] They were surprised to find out that the price of the food was actually P200 per head and not P250 per
head as represented by respondent. Suspicious about the correct pricing, Samson and Galgana reported the matter
to the Stradcom's management. Stradcom began its investigation and interviewed some employees regarding the
conduct of respondent.[24]

After the investigation, Stradcom also discovered that respondent required her staff to prepare presentation/training
materials/manuals using company resources for purposes not related to the affairs of the company, on overtime
and on Sundays.[25]

Subsequently, Pagdanganan called for a conference with respondent, and discussed respondent's non-inclusion of
Lares in Stradcom's Christmas party, the overpricing of the food, and her moonlighting. Respondent made a bare
deniat.[26]

On January 3, 2003, Chua notified his employees about the reorganization of the HRAD and the Business
Operations Department.[27] On the same date and as part of routine procedure, respondent turned-over the
necessary documents and equipment.[28] Respondent reported to Reyes, her new immediate superior and secured
the latter's approval for her leave of absence on the dates of January 3 in the afternoon up to January 6, 2003, due
to personal reasons. Reyes approved her leave.[29]

However, before respondent's scheduled leave, she approached Chua to discuss the reorganization and her
previous conference with Pagdanganan regarding her said infractions. Chua told respondent that the management
has lost its trust and confidence in her due to her willful disobedience in excluding the employees of Lares in the
Stradcom's Christmas party and for willful breach of trust in connection with the canvassing of the caterer.[30]

Respondent explained her side and asked Chua for his advice. Chua replied that considering her position is one
that requires the trust and confidence of the management, it would be difficult to force herself on the management.
Thus, respondent conveyed her willingness to resign. In view of this, Stradcom's officers agreed that any formal
investigation on respondent was unnecessary in view of her willingness to resign.[31]

However, on January 7, 2003, respondent reported for work and suprisedly informed Stradcom that she would not
resign. When Chua found out about the respondent's retraction of her statement to resign, he instructed Atty.
Pilapil to talk things through with respondent.[32]

On January 9, 2003, Atty. Pilapil invited respondent for dinner outside the company premises. Respondent was
given another chance regarding her said infractions. Respondent then requested for four days leave to think things
through and Atty. Pilapil adhered to request and assured her that she will receive her pay while on leave. They
likewise agreed that they would meet again on January 13, 2003, outside the office to discuss respondent's final
decision.[33]

Petitioners were shocked when they found out that respondent had filed a complaint for constructive dismissal
with monetary claims of backwages, attorney's fees and damages on January 29, 2003.[34]

Petitioners contended that the dismissal of respondent was for just cause on the ground of loss of trust and
confidence and the same was in compliance with the due process requirements.[35] Petitioners further contended
that the acts that caused the loss of trust and confidence of the petitioners in the respondent were her mishandling
of Stradcom's 2002 Christmas party, dishonesty in preparing the budget thereof, misrepresentation in her
application for employment, and using company personnel and resources for purposes not beneficial to the interest
of Stradcom.[36]

The Ruling of the LA

On September 30, 2003, the LA rendered a Decision, which ruled that respondent was illegally dismissed and
Chua is solidarily liable with Stradcom for the payment of the monetary awards to respondent.[37] The dispositive
portion of the LA Decision, provides:

WHEREFORE, decision is hereby rendered, as follows:

1. Declaring that the complainant was illegally dismissed;

2. Declaring that the dismissal was effected in violation of the due process and
notice requirements; and
3. Ordering respondents Stradcom Corporation and Jose A. Chua to pay
complainant, jointly and severally, the total amount of EIGHT HUNDRED FORTY
SEVEN THOUSAND PESOS (P847,000.00) representing her separation pay,
backwages, moral and exemplary damages and attorney fees.

The awards for separation pay, backwages and the corresponding 10% attorney's fees shall be
subject to further computation until the decision in this case becomes final and executory.

The other claims are denied for lack of merit.

SO ORDERED.[38]

Aggrieved, petitioners seasonably filed a memorandum of appeal before the NLRC.

The Ruling of the NLRC

On July 30, 2004, the NLRC issued its Decision. It partially granted the appeal filed by petitioners and modified
the Decision of the LA. The NLRC ruled that respondent was validly dismissed on the ground of loss and trust
confidence, due to her mishandling of the 2002 budget for the Christmas party. The NLRC awarded respondent
her unpaid salary for the period of January 16 to April 16, 2003, the date when she was formally advised of her
disengagement from service. Attorney's fees were also awarded.[39] The decretal portion of the NLRC Decision
thus, reads:

WHEREFORE, in view of the foregoing considerations, the appeal is hereby PARTIALLY GRANTED. The
dispositive portion of the appealed Decision is hereby MODIFIED and another one entered:

1. Declaring that Appellee, Joyce Anabelle L. Orpilla was validly dismissed and;
2. Ordering appellant corporation to pay her the following:

Withheld wages from January 16 to

a) April 16, 2003 (P60,000.00 x 3 plus   P195,000.00
1/12 thereof as 13th month pay)
b) attorney's fees   P 19,500.00
    --------
  Total Award  P214,500.00
[40]
SO ORDERED.
Respondent sought to reconsider the above-mentioned Decision but it was denied by the NLRC in its
Resolution[41] dated April 20, 2005, for lack of merit.

Dismayed, respondent filed a petition for review on certiorari under Rule 65 with the CA.

The Ruling of the CA

On September 28, 2012, the CA reversed and set aside the NLRC and ruled that respondent was illegally
dismissed.[42] The fallo of the CA Decision provides:

IN VIEW OF ALL THESE, the Petition is GRANTED. The assailed Decision and Resolution of
public respondent NLRC are SET ASIDE. The Decision of the Labor Arbiter dated September 30,
2003 is REINSTATED.

SO ORDERED.[43]

Petitioners promptly filed a Motion for Reconsideration but it was denied by the CA in its Resolution dated April
17, 2013.[44]

Hence, the present petition.

The Issues

A. WHETHER OR NOT THE COURT OF APPEALS HAS COMMITTED SERIOUS AND

REVERSIBLE ERRORS IN REVERSING THE DECISION OF THE NATIONAL LABOR
RELATIONS COMMISSION AND FAULTING THE SAME WITH GRAVE ABUSE OF
DISCRETION BY FINDING THAT PETITIONERS HAS ILLEGALLY DISMISSED
RESPONDENT FROM HER EMPLOYMENT AS HEAD OF THE HUMAN RESOURCE
DEPARTMENT?

A.1 WHETHER OR NOT RESPONDENT HAS WILLFULLY DISOBEYED PETITIONERS'

LAWFUL AND REASONABLE INSTRUCTIONS?

A.2 WHETHER OR NOT RESPONDENT HAS COMMITTED FRAUD,

MISREPRESENTATION, DISHONESTY AND OTHER ACTS INIMICAL TO THE INTEREST
OF THE PETITIONERS WHILE BEING EMPLOYED BY THE PETITIONER?

A.3 WHETHER OR NOT REPONDENT HAS ENGAGED IN MOONLIGHTING ACTIVITIES

AND USED COMPANY PERSONNEL AND RESOURCES NOT IN LINE WITH THE
BUSINESS OF STRADCOM.

B. WHETHER OR NOT THE COURT OF APPEALS HAS COMMITTED SERIOUS AND

REVERSIBLE ERRORS IN REVERSING THE DECISION OF THE NATIONAL LABOR
RELATIONS COMMISSION AND FAULTING THE SAME WITH GRAVE ABUSE OF
DISCRETION BY FINDING THAT RESPONDENT WAS DEMOTED BY THE PETITIONERS
AND THE LATTER DID NOT ACCORD THE FORMER DUE PROCESS?

B.1 WHETHER OR NOT THE REORGANIZATION OF THE HUMAN RESOURCE AND

ADMINISTRATION (HRA) DEPARTMENT WAS A VALID EXERCISE OF MANAGEMENT
PREROGATIVE?

B.2 WHETHER OR NOT RESPONDENT WAS DENIED DUE PROCESS?

B.3 WHETHER OR NOT RESPONDENT VOLUNTARILY RESIGNED [FROM] HER

EMPLOYMENT WITH STRADCOM.

C. WHETHER OR NOT THE RESPONDENT IS ENTITLED TO BACKWAGES,

REINSTATEMENT OR SEPARATION PAY?

D. WHETHER OR NOT THE RESPONDENT IS ENTITLED MORAL AND EXEMPLARY

DAMAGES?
 E. WHETHER OR NOT PETITIONER CHUA MAY BE HELD JOINTLY AND SEVERALLY
LIABLE WITH CO-PETITIONER STRADCOM FOR THE PAYMENT OF WHATEVER
MONETARY AWARD IN FAVOR OF RESPONDENT?[45]

The pivotal issue for Our resolution is whether or not respondent was validly dismissed from employment on the
ground of loss of trust and confidence.

The Court's Ruling

The petition is meritorious.

Generally, only errors of law are revived in petitions for review for certiorari, since this Court is not a trier of facts.
As such, the findings of facts and conclusion of the NLRC are generally accorded not only great weight and
respect but even clothed with finality and deemed binding on this Court as long as they are supported by
substantial evidence.[46] However, if the factual findings of the LA and the NLRC are conflicting, as in this case,
the reviewing court may delve into the records and examine for itself the questioned findings. [47] The exception,
rather than the general rule, applies in the present case since the LA and the CA found facts supporting the
conclusion that respondent was illegally dismissed, while the NLRC's factual findings contradicted the LA's
findings.

Under this situation, such conflicting factual findings are not binding on Us, and We retain the authority to pass on
the evidence presented and draw conclusions therefrom.[48]

After judicious review on the records of the case, this Court finds that the petitioners proved that respondent was
dismissed for a just cause.

The dismissal of respondent was founded on just cause -

loss of trust and confidence
Among the just causes for termination is the employer's loss of trust and confidence in its employee. Article 297
(c) [formerly Article 282] of the Labor Code provides that an employer may terminate the services of an employee
for fraud or willful breach of the trust reposed in him/her.[49] Article 297, provides:

Article 297. TERMINATION BY EMPLOYER.—An employer may terminate an employment for

any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders
of his employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representative; and
(e) Other causes analogous to the foregoing. (Emphasis ours)

In order for the said cause to be properly invoked, however, certain requirements must be complied with, namely:
(1) the employee concerned must be holding a position of trust and confidence; and (2) there must be an act that
would justify the loss of trust and confidence.[50]

The two classes of positions of trust were enunciated in the case of Alaska Milk Corporation, et al. v. Ponce:[51]

(1) managerial employees whose primary duty consists of the management of the establishment in
which they are employed or of a department or a subdivision thereof, and to other officers or
members of the managerial staff; and (2) fiduciary rank-and-file employees, such as cashiers,
auditors, property custodians, or those who, in the normal exercise of their functions, regularly
handle significant amounts of money or property. These employees, though rank-and-file, are
routinely charged with the care and custody of the employer's money or property, and are, thus,
classified as occupying positions of trust and confidence.[52]

As regards a managerial employee, the mere existence of a basis for believing that such employee
has breached the trust of his employer would suffice for his dismissal. Hence, in the case of
managerial employees, proof beyond reasonable doubt is not required, it being sufficient that there
 is some basis for such loss of confidence, such as when the employer has reasonable ground to
believe that the employee concerned is responsible for the purported misconduct, and the nature of
his participation therein renders him unworthy of the trust and confidence demanded by his
position.[53]

It is undisputed that at the time of respondent's dismissal, she was holding a managerial position, which was
HRAD Head of Stradcom and directly reported to the President, herein Chua and other high ranking officials of
Stradcom. Likewise, respondent performed key and sensitive functions, as her duties and responsibilities included
the administration, personnel and training matters of the company. Respondent held a trust and critical position
which required the conscientious observance of the company rules and procedures.

The presence of the first requisite is thus certain. Anent to the second requisite, the Court finds that the petitioners
meet their burden of proving that the respondent's dismissal was for a just cause.

The acts alleged to have caused the loss of trust and confidence of the petitioners in the respondent was her
mishandling of Stradcom's 2002 Christmas party, dishonesty in preparing the budget thereof, misrepresentation in
her application for employment, and using company personnel and resources for purposes not beneficial to the
interest of Stradcom. The evidence on record support Stradcom's claims.

There was substantial evidence to support that respondent overpriced the food for the 2002 Christmas party. The
overpricing was discovered by the new committee which took over the preparations for the said party. It is
undisputed that respondent was the one who initially negotiated with G&W Catering Services. Respondent was
also the one who prepared the budget for the approval of the President, herein Chua. G&W billed Stradcom for
food at the rate of Two Hundred Pesos (P200) per head only, contrary to the Two Hundred Fifty (P250) per head
quoted by respondent, and the rental for chairs at Twenty-Eight Pesos (P28), in the aggregate amount of Sixty-
Three Thousand Eight Hundred Forty Pesos (P63,840) as evidenced by the Affidavit of Sese, the proprietress of
the G&W Catering Services. Clearly, the overpricing amounted to dishonesty.

Also, respondent's overpricing of P250 per head for the Christmas party was corroborated by Ms. Rowena
Samson,[54] Chua's Secretary of the President and CEO and Mr. Saturnino S. Galgana,[55] Stradcom's Purchasing
Assistant, as evidenced by their affidavits dated March 18, 2003.

Furthermore, respondent was proven to have engaged in moonlighting activities and used company personnel and
resources for purposes not in line with the business interest of Stradcom. In fact, respondent admitted that she
actually took home some of the training materials owned by the company without the latter's prior clearance and
without disclosed purpose.

Such dishonesty on the part of the respondent in carrying out her duties is prejudicial to the interest of Stradcom
and constitutes just cause to terminate her employment.

Considering the foregoing, this Court agrees with the findings of the NLRC that there was a just cause for the
respondent's dismissal. We emphasize that dismissal of a dishonest employee is to the best interest not only of the
management but also of labor.[56] Stradcom, as an employer in the exercise of self-protection, cannot be compelled
to continue employing an employee who is guilty of acts inimical to its interest.

Respondent is entitled to nominal damages for violation

of her right to statutory procedural due process
We note however that even if there is a just cause to terminate respondent's employment, her right to due process
was not satisfied.

On the matter of procedural due process, it is well-settled that the employer must furnish the employee with two
written notices before termination of employment can be legally effected. [57] The first apprises the employee of the
particular acts or omissions for which dismissal is sought.[58] The second informs the employee of the employer's
decision to dismiss him.[59]

The case of Libcap Marketing Corp, et. al. v. Baquial[60] explains:

The law and jurisprudence, on the other hand, allow the award of nominal damages in favor of an
employee in a case where a valid cause for dismissal exists but the employer fails to observe due
process in dismissing the employee. Financial assistance is granted as a measure of equity or social
justice, and is in the nature or takes the place of severance compensation.
 On the other hand, nominal damages "may be awarded to a plaintiff whose right has been violated
or invaded by the defendant, for the purpose of vindicating or recognizing that right, and not for
indemnifying the plaintiff for any loss suffered by him. Its award is thus not for the purpose of
indemnification for a loss but for the recognition and vindication of a right." The amount of
nominal damages to be awarded the employee is addressed to the sound discretion of the court,
taking into consideration the relevant circumstances. (Citations omitted)[61]

As discussed above, the Court is given the latitude to determine the amount of nominal damages to be awarded to
an employee who was validly dismissed but whose due process rights were violated. The two causes for a valid
dismissal in the Labor Code are under Article 282, due to just causes and Article 283, based on authorized causes.
These were differentiated in the case of Jaka Food Processing Corp. v. Pacot,[62] to wit:

A dismissal for just cause under Article 282 implies that the employee concerned has committed, or
is guilty of, some violation against the employer, i.e. the employee has committed some serious
misconduct, is guilty of some fraud against the employer, or, as in Agabon, he has neglected his
duties. Thus, it can be said that the employee himself initiated the dismissal process.

On another breath, a dismissal for an authorized cause under Article 283 does not necessarily imply
delinquency or culpability on the part of the employee. Instead, the dismissal process is initiated by
the employer's exercise of his management prerogative, i.e. when the employer opts to install labor
saving devices, when he decides to cease business operations or when, as in this case, he undertakes
to implement a retrenchment program.

xxxx

Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282
but the employer failed to comply with the notice requirement, the sanction to be imposed upon him
should be tempered because the dismissal process was, in effect, initiated by an act imputable to the
employee; and (2) if the dismissal is based on an authorized cause under Article 283 but the
employer failed to comply with the notice requirement, the sanction should be stiffer because the
dismissal process was initiated by the employer's exercise of his management prerogative.[63]

Here, the cause for termination was loss of trust and confidence, thus due to the employee or respondent's fault,
but Stradcom failed to comply with the twin-notice requirement, thus, as a measure of equity, We order Stradcom
to pay respondent nominal damages in the amount of P30,000.

The solidary liability of Chua as a corporate officer is

not proper and must be recalled
It is well-settled that a corporation has its own legal personality separate and distinct from those of its
stockholders, directors or officers.[64] Absence of any evidence that a corporate officer and/or director has exceeded
their authority, or their acts are tainted with malice or bad faith, they cannot be held personally liable for their
official acts. Here, there was neither any proof that Chua acted without or in excess of his authority nor was
motivated by personal ill-will towards respondent to be solidarily liable with the company. We quote with
affirmation the NLRC's pronouncement, viz:

Finally, on the issue of whether or not the Labor Arbiter committed manifest error in ordering
appellant Chua solidarily liable with appellant corporation, we have to rule in the affirmative.
Appellant Chua cannot be made solidarily liable with appellant corporation for any award in favor
of appellee. Appellant corporation is separate and distinct from Appellant Chua.

xxxx

Appellant Chua's acts were official acts, done in his capacity as an officer of appellant corporation
on its behalf. There is no showing of any act, or that he acted without or in excess of his authority
or was motivated by personal ill-will toward appellee. Stated simply, appellant Chua was merely
doing his job. In fact, he even tried to save appelle from undue embarrassment.[65]

Respondent is not entitled to backwages separation pay,

moral and exemplary damages, as well as attorney's fees
With the sad reality that the respondent was not illegally dismissed, she is not entitled to backwages. Backwages
may be granted only when there is a finding that the dismissal is illegal. [66] Respondent's monetary claims for
backwages, separation pay, moral and exemplary damages, as well as attorney's fees must necessarily fail as a
consequence of Our finding that her dismissal was for a just cause and that the petitioners acted in good faith when
they terminated her services.[67]

WHEREFORE, premises considered, the petition is GRANTED. The assailed Court of Appeals Decision dated
September 28, 2012 and Resolution dated April17, 2013, are hereby REVERSED and SET ASIDE, and the
Decision of the National Labor Relations Commission dated July 30, 2004, is REINSTATED but MODIFIED to
the effect that backwages and attorney's fees are hereby DELETED, and that Stradcom Corporation is liable to
pay respondent Joyce Anabelle L. Orpilla nominal damages in the amount of P30,000.

SO ORDERED.
 SECOND DIVISION
[ G.R. No. 225125, June 06, 2018 ]
MARLON L. ARCILLA, PETITIONER, VS. ZULISIBS, INC., PIANDRE SALON, AND ROSALINDA
FRANCISCO, RESPONDENTS.

RESOLUTION
CARPIO, J.:

The Case

This is a petition for review to set aside the 10 February 2016  Decision[1] of the Court of Appeals in CA-G.R. SP
No. 141953 which affirmed with modifications the Resolutions dated 30 April 2015[2] and 26 June 2015[3] of the
National Labor Relations Commission (NLRC), Third Division, in NLRC LAC No. 04-001028-15/NLRC NCR
No. 10-12582-14.
The Facts

Respondent Zulisibs, Inc. (Zulisibs) is a corporation organized and existing under Philippine laws with respondent
Rosalinda Francisco (Francisco) as its President and Chief Executive Officer. Zulisibs operates respondent Piandre
Salon (Piandre), an establishment engaged in the operation of beauty salons.

Petitioner Marlon L. Arcilla (Marlon) was hired by Piandre on 8 February 2000 and was assigned to the Alabang,
Muntinlupa City branch. Maricel Arcilla (Maricel), Marlon's wife, was hired on 12 November 2000 and was
assigned to the Salcedo Village, Makati City branch. After several years, both Marlon and Maricel were promoted
as senior hair stylists earning a monthly salary of P11,672.00 plus commissions from customers and sale of
products.

Sometime in September 2014, Zulisibs, through its officers, received information that Marlon was establishing a
beauty salon somewhere in Daang Hari, Alabang, Muntinlupa City, near the Piandre Salon where Marlon was
working.

On 6 September 2014, Marlon received a notice from Piandre and Francisco placing Marlon under preventive
suspension from 6 to 14 September 2014 and requiring him to appear on 12 September 2014 at Francisco's office
in Sta. Ana, Manila.

During the 12 September 2014 investigative hearing, Marlon was accused of, among other things, being involved
in the opening of a salon near Piandre Alabang. Marlon denied that he had an agreement or contract with the
owner of the salon along Daang Hari, Alabang. However, he admitted the following: (1) that he extended help to
the salon owner who happens to be his brother-in-law; (2) that he called up two former employees of Piandre and
recommended them to his brother-in-law; and (3) that he gave P50,000.00 to the salon owner which amount was a
portion of the P250,000.00 loan he borrowed from the employees' cooperative of Piandre.[4]

Further investigation revealed that Marlon was often absent from work and whenever he was working, he would
entertain phone calls, thus, disrupting his work. He would be absent on days when he would be the only stylist
available. Francisco and other supervisors of Piandre verified the existence of a new salon along Daang Hari,
Alabang and alleged that "the interiors of said salon, already with equipment, mirrors and chairs, [sic] all set to
operate, with towels folded and presented the 'Piandre' way."[5] They also learned from neighboring establishments
that the salon was set to open on 8 September 2014.

On 11 September 2014, Maricel received a notice from Piandre and Francisco, asking her to explain her alleged
involvement with her husband, Marlon, in setting up a salon along Daang Hari, Alabang and requiring her to
appear on 13 September 2014 at the Sta. Ana office. On 14 September 2014, Maricel received a notice placing her
under preventive suspension from 14 September to 13 October 2014.

Marlon received a copy of his notice of termination on 14 September 2014. Maricel received her notice of
termination on 26 September 2014. Both were found guilty of violating Piandre's Code of Discipline 3F No.
2: Pagkawala ng tiwala dahil sa ginawang masama.
Subsequently, Marlon and Maricel filed two separate complaints[6] for illegal dismissal, underpayment of wages,
non-payment of overtime pay, service incentive leave, 13th month pay, Emergency Cost of Living Allowance, and
separation pay, and illegal suspension, with prayer for moral and exemplary damages, and attorney's fees.

The Ruling of the Labor Arbiter

On 9 March 2015, the Labor Arbiter rendered a Decision[7] dismissing Marlon and Maricel's complaints for lack of
merit. The Labor Arbiter held that:

WHEREFORE, the complaint[s] for illegal dismissal and x x x money claims [are] DISMISSED
for lack of merit.[8]

The Ruling of the NLRC

On 30 April 2015, the NLRC denied Marlon and Maricel's appeal and affirmed the Labor Arbiter's decision. The
NLRC held that:

WHEREFORE, premises considered, Complainants-Appellants' appeal is hereby DENIED. The

March 9, 2015 Decision of Labor Arbiter Gaudencio P. Demaisip, Jr. is hereby AFFIRMED.[9]

On 26 June 2015, Marlon and Maricel's Motion for Reconsideration [10] was denied by the NLRC for lack of merit,
holding that "The resolution of [the] Commission dated April 30, 2015 STANDS undisturbed."[11]

The Ruling of the Court of Appeals

On 10 February 2016, Marlon and Maricel's petition for certiorari under Rule 65 was partially granted. Marlon's
termination was held to be valid. As to Maricel, the Court of Appeals held that the NLRC and the Labor Arbiter
erred in upholding the legality of her dismissal. The dispositive portion of the Decision[12] reads:

WHEREFORE, the petition is PARTIALLY GRANTED. The Resolutions dated April 30, 2015
and June 26, 2015 of public respondent National Labor Relations Commission, Third Division, in
NLRC LAC No. 04-001028-15/NLRC NCR No. 10-12582-14 are hereby AFFIRMED with
MODIFICATIONS, in that the private respondents are ORDERED to pay MARICEL ARCILLA
the following:

1) Backwages and all other benefits from September 26, 2014 until finality of this Decision;
2) Separation pay equivalent to one (1) month salary for every year of service;
3) Moral and exemplary damages in the amount of Php 50,000.00
4) Attorney's fees equivalent to ten percent (10%) of the total monetary award; and
Legal interest of six percent (6%) per annum  on the total monetary awards from the finality of this Decision
5)
until full payment thereof.

The appropriate Computation Division of the National Labor

Relations Commission is hereby ordered to COMPUTE and
UPDATE the award as herein determined WITH DISPATCH.

All other aspects of the assailed Resolutions STAND.

SO ORDERED.[13]

The Issues

Marlon presents the following issues:

1. Whether the Court of Appeals erred in upholding the two resolutions of the NLRC, finding Marlon's dismissal
to be valid and for just cause, and effected after due notice and hearing; and

2. Whether the Court of Appeals gravely erred in upholding the two resolutions of the NLRC, finding that Marlon
was not entitled to his money claims.

The Ruling of this Court

We deny the petition.

Dismissals under the Labor Code have two facets: the legality of the act of dismissal, which constitutes substantive
due process; and the legality of the manner of dismissal, which constitutes procedural due process.[14]

In this case, we do not dispute the findings of the Labor Arbiter, the NLRC, and the Court of Appeals that the
manner of Marlon's dismissal was legal and in accordance with law.[15] The requirement of procedural due process
was met when Marlon was served with a first written notice containing the specific causes or grounds for his
termination, when Marlon was called to attend an investigative hearing to explain his side, and when Marlon was
served with a second written notice containing the justification for his termination.

Thus, the only issue to be resolved is the legality of the act of dismissal by re-examining the facts and evidence on
record. Given that this Court is not a trier of facts, and the scope of its authority under Rule 45 of the Rules of
Court is confined only to errors of law and does not extend to questions of fact, which are for labor tribunals to
resolve, one of the recognized exceptions to the rule is when the factual findings and conclusion of the labor
tribunals are contradictory or inconsistent with those of the Court of Appeals.[16] In this case, however, the factual
findings and conclusion of the labor tribunals and the Court of Appeals regarding Marlon's dismissal are consistent
and one. As to Maricel, the decision in her favor was not appealed to us anymore. Thus, the decision of the Court
of Appeals insofar as Maricel is concerned is final and executory.

Respondents Zulisibs, Francisco, and Piandre alleged that Marlon committed serious misconduct or willful
disobedience of the company's lawful orders, and of fraud or willful breach of the trust reposed in him by the
company when he helped his brother-in-law open a salon along Daang Hari, Alabang. They justified Marlon's
dismissal by citing paragraphs (a) and (c), Article 297 of the Labor Code.[17] The provision reads:

Article 297. TERMINATION BY EMPLOYER. An employer may terminate an employee for any of

the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work.

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative.

The Labor Arbiter, the NLRC, and the Court of Appeals all held that the respondents presented substantial
evidence to justify Marlon's dismissal. We affirm all the rulings. We adopt in toto the Court of Appeals' decision
with regard to Marlon's dismissal. It held:

From the facts and circumstances obtaining with respect to petitioner Marlon Arcilla, there exists a
valid cause in terminating his employment. It was clearly stated in paragraph 8 of the Agreement
or "Kasunduan"  signed by petitioners that they are prohibited from setting up or being involved in a
business similar to that of private respondents' during the course of their employment. Considering
that the petitioners have neither controverted nor denied the existence of the Kasunduan, they are
therefore bound by the terms and conditions thereof. Petitioners cannot likewise deny the existence
of the Code of Discipline and feign ignorance of the offense they committed and its corresponding
penalty by holding that the private respondents did not present a copy of said Code in the
proceedings below. They are deemed to have acknowledged the existence of said Code and
presumed to have understood the provisions contained therein when they signed
the Kasunduan and agreed to abide by the Code of Discipline and the rules and regulations of the
company in paragraph 2 of their agreement. As private respondents' trusted Senior Hairstylists
for quite a number of years, it is incumbent upon them to have read and understood its
 provisions and be fully aware of the prohibitions and penalties imposed upon erring
employees.

Collorarily, as briefly summed up by the public respondent, petitioners were later discovered to be
involved in setting up another salon near the private respondents' salon in Alabang, albeit the
involvement was only indirect by means of extending a Php50,000.00 financial assistance to the
owner of the new salon who happens to be the brother-in-law of Marlon or his wife Maricel's
brother. We agree with public respondent that it is immaterial whether the new salon was under the
petitioners' name or not, or that they established a salon of their own. The important fact remains
that petitioner Marlon made an admission that he gave funds to his brother-in-law for the
new salon in Alabang which directly competes with the business of his employer. It is not
disputed that the new beauty salon is located less than a kilometer away from Piandre Salon
in Alabang.

Furthermore, Marlon's admission susbtantially proves two things: 1) that a new salon has indeed
been established; and 2) that he willfully disobeyed his contract of employment with the private
respondents. His involvement in setting up a competing salon, which albeit indirect, constitutes
serious misconduct because of his blatant disregard [of] the terms and conditions of his
contract/agreement with the private respondents. His act of allowing himself to be involved
with his brother-in-law's business displays an act of disloyalty to the company which is
likewise sufficient to warrant his dismissal for loss of trust and confidence. To our mind, his
apology in his written letter to private respondent Francisco [was] a mere afterthought after
realizing the gravity of his offense after he became the subject of an investigation by the private
respondents. Substantial proof, and not clear and convincing evidence or proof beyond reasonable
doubt, is a sufficient basis for the imposition of any disciplinary action upon the employee. The
standard of substantial evidence is satisfied where the employer has reasonable ground to believe
that the employee is responsible for the misconduct that renders the latter unworthy of the trust and
confidence demanded by his or her position.[18] (Emphasis supplied)

All told, there is sufficient basis to dismiss Marlon on the grounds of serious misconduct or willful disobedience of
the company's lawful orders, and of fraud or willful breach of the trust reposed in him by the company when he
helped his brother-in-law open a salon along Daang Hari, Alabang. The Court of Appeals acted in accordance with
the evidence on record and case law when it affirmed and upheld the resolutions of the NLRC.

WHEREFORE, the petition is DENIED for lack of merit.

SO ORDERED.
 THIRD DIVISION
[ G.R. No. 209085, June 06, 2018 ]
NICANOR F. MALCABA, CHRISTIAN C. NEPOMUCENO, AND LAURA MAE FATIMA F. PALIT-ANG,
PETITIONERS, V. PROHEALTH PHARMA PHILIPPINES, INC., GENEROSO R. DEL CASTILLO, JR.,
AND DANTE M. BUSTO, RESPONDENTS.

DECISION
LEONEN, J.:

This case involves fundamental principles in labor cases.

First, in appeals of illegal dismissal cases, employers are strictly mandated to file an appeal bond to perfect their
appeals. Substantial compliance, however, may merit liberality in its application.

Second, before any labor tribunal takes cognizance of termination disputes, it must first have jurisdiction over the
action. The Labor Arbiter and the National Labor Relations Commission only exercise jurisdiction over
termination disputes between an employer and an employee. They do not exercise jurisdiction over termination
disputes between a corporation and a corporate officer.

Third, while this Court recognizes the inherent right of employers to discipline their employees, the penalties
imposed must be commensurate to the infractions committed. Dismissal of employees for minor and negligible
offenses may be considered as illegal dismissal.

This is a Petition for Review on Certiorari[1] assailing the Court of Appeals February 19, 2013 Decision[2] and
September 10, 2013 Resolution[3] in CA-G.R. SP No. 119093, which reversed the judgments of the Labor Arbiter
and of the National Labor Relations Commission. The Court of Appeals found that Nicanor F. Malcaba (Malcaba),
a corporate officer, should have questioned his dismissal before the Regional Trial Court, not before the Labor
Arbiter. It likewise held that Christian C. Nepomuceno (Nepomuceno) and Laura Mae Fatima F. Palit-Ang (Palit-
Ang) were validly dismissed from service for loss of trust and confidence, and insubordination, respective1y.

ProHealth Pharma Philippines, Inc. (ProHealth) is a corporation engaged in the sale of pharmaceutical products
and health food on a wholesale and retail basis. Generoso Del Castillo (Del Castillo) is the Chair of the Board of
Directors and Chief Executive Officer while Dante Busto (Busto) is the Executive Vice President. Malcaba,
Tomas Adona, Jr. (Adona), Nepomuceno, and Palit-Ang were employed as its President, Marketing Manager,
Business Manager, and Finance Officer, respectively. [4]

Malcaba had been employed with ProHealth since it started in 1997. He was one of its incorporators together with
Del Castillo and Busto, and they were all members of the Board of Directors in 2004. He held 1,000,000 shares in
the corporation. He was initially the Vice President for Sales then became President in 2005.[5]

Malcaba alleged that Del Castillo did acts that made his job difficult. He asked to take a leave on October 23,
2007. When he attempted to return on November 5, 2007, Del Castillo insisted that he had already resigned and
had his things removed from his office. He attested that he was paid a lower salary in December 2007 and his
benefits were withheld.[6] On January 7, 2008, Malcaba tendered his resignation effective February 1, 2008.[7]

Nepomuceno, for his part, alleged that he was initially hired as a medical representative in 1999 but was eventually
promoted to District Business Manager for South Luzon. On March 24, 2008, he applied for vacation leave for the
dates April 24, 25, and 28, 2008, which Busto approved. When he left for Malaysia on April 23, 2008, ProHealth
sent him a Memorandum dated April 24, 2008 asking him to explain his absence. He replied through email that he
tried to call ProHealth to inform them that his flight was on April 22, 2008 at 9:00p.m. and not on April 23, 2008
but was unable to connect on the phone. He tried to explain again on May 2, 2008 and requested for a personal
dialogue with Del Castillo.[8]

On May 7, 2008, Nepomuceno was given a notice of termination, which was effective May 5, 2008, on the ground
of fraud and willful breach of trust.[9]

Palit-Ang, on the other hand, was hired to join ProHealth's audit team in 2007. She was later promoted to Finance
Officer.[10] On November 26, 2007, Del Castillo instructed Palit-Ang to give P3,000.00 from the training funds to
Johnmer Gamboa (Gamboa), a District Business Manager, to serve as cash advance. [11]
On November 27, 2007, Busto issued a show cause memorandum for Palit-Ang's failure to release the cash
advance. Palit-Ang was also relieved of her duties and reassigned to the Office of the Personnel and
Administration Manager. [12]

In her explanation, Palit-Ang alleged that when Gamboa saw that she was busy receiving cash sales from another
District Business Manager, he told her that he would just return the next day to collect his cash advance. [13] When
he told her that the cash advance was for car repairs, Palit-Ang told him to get the cash from his revolving fund,
which she would reimburse after the repairs were done. Del Castillo was dissatisfied with her explanation and
transferred her to another office.[14]

On December 3, 2007, Palit-Ang was invited to a fact-finding investigation, [15] which was held on December 10,
2007, where Palit-Ang was again asked to explain her actions.[16]

On December 17, 2007, she was handed a notice of termination effective December 31, 2007, for disobeying the
order of ProHealth's highest official.[17]

Malcaba, Nepomuceno, Palit-Ang, and Adona separately filed Complaints[18] before the Labor Arbiter for illegal
dismissal, nonpayment of salaries and 13th month pay, damages, and attorney's fees.

The Labor Arbiter found that Malcaba was constructively dismissed. He found that ProHealth never controverted
the allegation that Del Castillo made it difficult for Malcaba to effectively fulfill his duties. He likewise ruled that
ProHealth's insistence that Malcaba's leave of absence in October 2007 was an act of resignation was false since
Malcaba continued to perform his duties as President through December 2007.[19]

The Labor Arbiter declared that Nepomuceno's failure to state the actual date of his flight was an excusable
mistake on his part, considering that this was his first infraction in his nine (9) years of service. He noted that no
administrative proceedings were conducted before Nepomuceno's dismissal, thereby violating his right to due
process.[20]

Palit-Ang's dismissal was also found to have been illegal as delay in complying with a lawful order was not
tantamount to disobedience. The Labor Arbiter further noted that delay in giving a cash advance for car
maintenance would not have affected the company's operations. He declared that Palit-Ang's dismissal was too
harsh of a penalty.[21]

The dispositive portion of the Labor Arbiter's April 5, 2009 Decision[22] read:

WHEREFORE, premises considered, judgment is hereby rendered declaring that complainants

were illegally dismissed by respondents. Accordingly, respondents are directed solidarily to pay
complainants the following:

1. Complainant Nicanor F. Malcaba:

1. Separation pay of P1,800,000.00;

2. Full backwages from the time of his illegal dismissal [o]n 11 November 2007
until the finality of this decision, which as of this date amounts to P2,810,795.40;
3. 13th month pay for the years 2007 and 2008 amounting to P126,625.00;

2. Complainant Christian C. Nepomuceno:

1. Separation pay of P190,000.00;

2. Full backwages from the time of his illegal dismissal [i]n May 2007 until the
finality of this decision, which as of this date amounts to P568,827.45;
3. 13th month pay for 2008 amounting to P6,333.33;

3. Complainant Laura Mae Fatima F. Palit-Ang:

1. Separation pay of P30,000.00;

2. Full backwages from the time of her illegal dismissal on 1 January 2008 until the
finality of this decision, which as of [t]his date amounts to P266,694.63;
3. 13th month pay for 2008 of P18,000.00; and

4. Complainant Tomas C. Adona, Jr.:

 1. Separation pay of P75,000.00;
2. Full backwages from time of his illegal dismissal [i]n June 2007 until the finality
of this decision, which as of this date amounts to P609,832.37;
3. 13th month pay for 2008 of P10,416.66.

Complainants are further awarded moral damages of Php100,000.00 each and exemplary damages
of Php100,000.00 each.

Finally, respondents are assessed the sum equivalent to ten percent (10%) of the total monetary
award as and for attorney's fees.

All other claims are dismissed for lack of merit.

SO ORDERED.[23]

ProHealth appealed to the National Labor Relations Commission.[24] On September 29, 2010, the National Labor
Relations Commission rendered its Decision,[25] affirming the Labor Arbiter's April 5, 2009 Decision with
modifications. The dispositive portion of this Decision read:

WHEREFORE, premises considered, the appeal is partially granted. The assailed Decision is
modified in that: a) complainant Adona is declared to have voluntarily resigned and is entitled only
to his 13th month pay; b) the award of moral and, exemplary damages in favor of complainants
Nepomuceno and Palit-Ang are deleted; and c) respondents del Castillo and Busto are held jointly
and severally liable with ProHealth for the claims of complainant Malcaba.

All dispositions not affected by the modifications stay.

SO ORDERED.[26]

ProHealth moved for reconsideration[27] but was denied by the National Labor Relations Commission in its January
31, 2011 Resolution.[28] Thus, ProHealth, Del Castillo, and Busto filed a Petition for Certiorari[29] before the Court
of Appeals.

On February 19, 2013, the Court of Appeals rendered its Decision[30] reversing and setting aside the National Labor
Relations Commission September 29, 2010 Decision.

On the procedural issues, the Court of Appeals found that ProHealth substantially complied with the requirement
of an appeal bond despite it not appearing in the records of the surety company since ProHealth believed in good
faith that the bond it secured was genuine.[31]

On the substantive issues, the Court of Appeals held that there was no employer-employee relationship between
Malcaba and ProHealth since he was a corporate officer. Thus, he should have filed his complaint with the
Regional Trial Court, not with the Labor Arbiter, since his dismissal from service was an intra-corporate dispute.
[32]

The Court of Appeals likewise concluded that ProHealth was justified in dismissing Nepomuceno and Palit-Ang
since both were given opportunities to fully explain their sides. [33] It found that Nepomuceno's failure to diligently
check the true schedule of his flight abroad and his subsequent lack of effort to inform his superiors were enough
for his employer to lose its trust and confidence in him.[34] It likewise found that Palit-Ang displayed "arrogance
and hostility" when she defied the lawful orders of the company's highest ranking officer; thus, her insubordination
was just cause to terminate her services.[35]

While the Court of Appeals ordered the return of the amounts given to Malcaba, it allowed Nepomuceno and Palit-
Ang to keep the amounts given considering that even if the finding of illegal dismissal were reversed on appeal,
the employer was still obliged to reinstate and pay the wages of a dismissed employee during the period of appeal.
[36]
 The dispositive portion of the Court of Appeals February 19, 2013 Decision read:

WHEREFORE, premises considered, it is hereby ruled:

that the September 29, 2010 Decision and January 31, 2011 Resolution of the National Labor Relations
(a)
Commission are REVERSED and SET ASIDE for being issued with grave abuse of discretion;
 that Our Decision is without prejudice to Mr. Nicanor F. Malcaba's available recourse for relief through the
(b)
appropriate remedy in the proper forum;
   
that all the amounts released in favor of Mr. Nicanor F. Malcaba amounting to Four Million Nine Hundred
(c) Thirty[-]Seven Thousand Four Hundred Twenty pesos and 40/100 (P4,937,420.[40]) be RETURNED to
herein petitioners;
   
that NO REFUND will be ordered by this Court against Mr. Christian Nepomuceno and Ms. Laura Mae
(d)
Fatima Palit-Ang.
SO ORDERED.[37]

Malcaba, Nepomuceno, and Palit-Ang moved for reconsideration but were denied in a Resolution [38] dated
September 10, 2013. Hence, this Petition[39] was filed before this Court.

Petitioners argue that the Court of Appeals should have dismissed outright the Petition for Certiorari since
respondents failed to post a genuine appeal bond before the National Labor Relations Commission. They allege
that when Sheriff Ramon Nonato P. Dayao attempted to enforce the judgment award against the appeal bond, he
was informed that the appeal bond procured by respondents did not appear in the records of Alpha Insurance and
Surety Company, Inc. (Alpha Insurance). They also claim that respondents were notified by the National Labor
Relations Commission four (4) times that their appeal bond was not genuine, showing that respondents did not
comply with the requirement in good faith.[40]

Petitioners contend that petitioner Malcaba properly filed his Complaint before the Labor Arbiter since he was an
employee of respondent ProHealth, albeit a high-ranking one. They argue that respondents merely alleged that
petitioner Malcaba is a corporate officer but failed to substantiate this allegation.[41] They maintain that petitioner
Malcaba did not resign on September 24, 2007 considering that the General Information Sheet for 2007 submitted
on October 11, 2007 listed him as respondent ProHealth's President. They submit that respondent Del Castillo's
action took a toll on petitioner Malcaba's well-being; hence, the latter merely took a leave of absence and returned
to work in November 2007. They claim that respondents made it difficult for petitioner Malcaba to continue his
work upon his return, resulting in his resignation in January 2008. Thus, they argue that petitioner Malcaba was
constructively dismissed.[42]

Petitioners likewise argue that petitioners Nepomuceno and Palit-Ang were illegally dismissed. They claim that
petitioner Nepomuceno committed an "honest and negligible mistake"[43] that should not have warranted dismissal
considering his loyal service for nine (9) years. They contend that petitioner Nepomuceno's absence did not injure
respondent ProHealth's business since he turned over all pending work to a reliever before he left and even
surpassed his sales quota for the month.[44] They likewise claim that his dismissal was done in violation of his right
to due process since he was not given any opportunity to explain his side and was only given a notice of
termination two (2) days after he was actually dismissed.[45]

Petitioners maintain that petitioner Palit-Ang believed in good faith that Gamboa would just claim his cash
advance the day after he tried to claim it and that there was nothing in her actions that would prove that she
intended to disobey or defy respondent Del Castillo's instructions. They insist that delay in complying with orders
is not tantamount to disobedience and would not constitute just cause for petitioner Palit-Ang's dismissal. They
likewise submit that while petitioner Palit-Ang was subjected to a fact-finding investigation, respondents failed to
inform her of her right to be assisted by counsel.[46]

Respondents, on the other hand, counter that a liberal application of the procedural rules was necessary in their
case since they acted in good faith in posting their appeal bond.[47] They likewise contend that the issue should
have already been considered moot since petitioners "were able to garnish and collect the amounts allegedly due to
them."[48]

Respondents likewise insist that petitioner Malcaba was a corporate officer considering that he was not only an
incorporator and stockholder, but also an elected Director and President of respondent ProHealth. [49] They also
point out that he filed his labor complaint seven (7) months after his resignation and that his voluntary resignation
already disproves his claim of constructive dismissal.[50]

Respondents argue that they were justified in dismissing petitioners Nepomuceno and Palit-Ang. They contend
that petitioner Nepomuceno's abandonment of his duties at a critical sales period and his failure to immediately
advise his superiors of his whereabouts was ground for respondents to lose their trust and confidence in him.
[51]
 They likewise maintain that petitioner Palit-Ang was correctly found by the Court of Appeals to have defied the
lawful instructions of respondent Del Castillo and illustrated her "grave disrespect towards authority."[52]

From the arguments and allegations of the parties, it is clear that this case involves three (3) different illegal
dismissal complaints, with three (3) different complainants in three (3) different factual situations during three (3)
different time periods. The only commonality is that they involve the same respondents.

While this Court commends the economy by which the National Labor Relations Commission resolved these
cases, the three (3) complaints should have been resolved separately since the three (3) petitioners raise vastly
different substantive issues. This leaves this Court with the predicament of having to resolve three (3) different
cases of illegal dismissal in one (1) Petition for Review. Thus, each petitioner's case will have to be resolved
separately within this Decision. This Court's ruling over one (1) petitioner may not necessarily affect the other co-
petitioners. The National Labor Relations Commission's zeal for economy and convenience should never prejudice
the individual rights of each party. The National Labor Relations Commission should know the rule that joinder of
parties[53] or causes of action[54] applies suppletorily in appeals[55] and for good reason.[56]

Petitioners raise the common procedural issue of whether or not respondents failed to perfect their appeal when it
was discovered that their appeal bond was a forged bond, which this Court will address before proceeding with the
substantive issues. The substantive issues raised, however, are dependent on the factual circumstances applicable
to each petitioner. This Court tackles these substantive issues in order:

First, whether or not the Labor Arbiter and National Labor Relations Commission had jurisdiction over petitioner
Nicanor F. Malcaba's termination dispute considering the allegation that he was a corporate officer, and not a mere
employee;

Second, whether or not petitioner Christian C. Nepomuceno was validly dismissed for willful breach of trust when
he failed to inform respondents ProHealth Pharma Philippines, Inc., Generoso R. Del Castillo, Jr., and Dante M.
Busto of the actual dates of his vacation leave; and

Finally, whether or not petitioner Laura Mae Fatima F. Palit-Ang was validly dismissed for willful disobedience
when she failed to immediately comply with an order of her superior.

Appeal is not a matter of right.[57] Courts and tribunals have the discretion whether to give due course to an appeal
or to dismiss it outright. The perfection of an appeal is, thus, jurisdictional. Non-compliance with the manner in
which to file an appeal renders the judgment final and executory.[58]

In labor cases, an appeal by an employer is perfected only by filing a bond equivalent to the monetary award.
Thus, Article 229 [223][59] of the Labor Code provides:

Article 229. [223] Appeal.

...

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.

This requirement is again repeated m the 2011 National Labor Relations Commission Rules of Procedure:

Section 4. Requisites for Perfection of Appeal. — (a) The appeal shall be:
....
(5) accompanied by:
....
(ii) posting of a cash or surety bond as provided in Section 6 of this Rule[.]

....

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 the 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 and shall be accompanied by original or certified true copies of the following:

(a) a joint declaration under oath by the employer, his/her counsel, and the bonding
company, attesting that the bond posted is genuine, and shall be in effect until final
disposition of the case;

(b) an indemnity agreement between the employer appellant and bonding company;

(c) proof of security deposit or collateral securing the bond: provided, that a check
shall not be considered as an acceptable security; and,

(d) notarized board resolution or secretary's certificate from the bonding company
showing its authorized signatories and their specimen signatures.

The Commission through the Chairman may on justifiable grounds blacklist an accredited bonding
company.

A cash or surety bond shall be valid and effective from the date of deposit or posting, until the case
is finally decided, resolved or terminated, or the award satisfied. This condition shall be deemed
incorporated in the terms and conditions of the surety bond, and shall be binding on the appellants
and the bonding company.

The appellant shall furnish the appellee with a certified true copy of the said surety bond with all
the above-mentioned supporting documents. The appellee shall verify the regularity and
genuineness thereof and immediately report any irregularity to the Commission.

Upon verification by the Commission that the bond is irregular or not genuine, the Commission
shall cause the immediate dismissal of the appeal, and censure the responsible parties and their
counsels, or subject them to reasonable fine or penalty, and the bonding company may be
blacklisted.

No motion to reduce bond shall be entertained except on meritorious grounds, and only upon the
posting of a bond in a reasonable amount in relation to the monetary award.

The mere filing of a motion to reduce bond without complying with the requisites in the preceding
paragraphs shall not stop the running of the period to perfect an appeal.[60]

The purpose of requiring an appeal bond is "to guarantee the payment of valid and legal claims against the
employer."[61] It is a measure of financial security granted to an illegally dismissed employee since the resolution
of the employer's appeal may take an indeterminable amount of time. In particular:

The requirement that the employer post a cash or surety bond to perfect its/his appeal is apparently
intended to assure the workers that if they prevail in the case, they will receive the money judgment
in their favor upon the dismissal of the employer's appeal. It was intended to discourage employers
from using an appeal to delay, or even evade, their obligation to satisfy their employees' just and
lawful claims.[62]

Procedural rules require that the appeal bond filed be "genuine." An appeal bond determined by the National Labor
Relations Commission to be "irregular or not genuine" shall cause the immediate dismissal of the appeal.[63]

In this case, petitioners allege that respondents' appeal should not have been given due course by the National
Labor Relations Commission since the appeal bond they filed "[did] not appear in the records of [Alpha
Insurance]"[64] and was, therefore, not genuine. As evidence, they presented a certification from Alpha Insurance,
which read:

This is to certify that the bond being presented by MR. JOSEPH D. DE JESUS is allegedly a Surety
Bond filed with the NATIONAL LABOR RELATIONS COMMISSION, identified as Bond No.
 G(16)00358/2009 on an alleged case NLRC NCR Case No. 08-12090-08, is a faked and forged
bond, and it was not issued by ALPHA INSURANCE & SURETY COMPANY, INC.[65]

This Court in Navarro v. National Labor Relations Commission[66] found that an employer failed to perfect its
appeal as it submitted an appeal bond that was "bogus[,] having been issued by an officer no longer connected for
a long time with the bonding company."[67] The mere fictitiousness of the bond, however, was not the only factor
taken into consideration. This Court likewise took note of the employer's failure to sufficiently explain this
irregularity and its failure to file the bond within the reglementary period.

In Quiambao v. National Labor Relations Commission,[68] this Court held that the mandatory and jurisdictional
requirement of the filing of an appeal bond could be relaxed if there was substantial
compliance. Quiambao proceeded to outline situations that could be considered as substantial compliance, such as
late payment, failure of the Labor Arbiter to state the exact amount of money judgment due, and reliance on a
notice of judgment that failed to state that a bond must first be filed in order to appeal. [69] Rosewood Processing v.
National Labor Relations Commission[70] likewise enumerated other instances where there would be a liberal
application of the procedural rules:

Some of these cases include: (a) counsel's reliance on the footnote of the notice of the decision of
the labor arbiter that the aggrieved party may appeal . . . within ten (10) working days; (b)
fundamental consideration of substantial justice; (c) prevention of miscarriage of justice or of unjust
enrichment, as where the tardy appeal is from a decision granting separation pay which was already
granted in an earlier final decision; and (d) special circumstances of the case combined with its
legal merits or the amount and the issue involved.[71]

Thus, while the procedural rules strictly require the employer to submit a genuine bond, an appeal could still be
perfected if there was substantial compliance with the requirement.

In this instance, the National Labor Relations Commission certified that respondents filed a security deposit in the
amount of P6,512,524.84 under Security Bank check no. 0000045245,[72] showing that the premium for the appeal
bond was duly paid and that there was willingness to post it.[73] Respondents likewise attached documents proving
that Alpha Insurance was a legitimate and accredited bonding company.[74]

Despite their failure to collect on the appeal bond, petitioners do not deny that they were eventually able to garnish
the amount from respondents' bank deposits.[75] This fulfills the purpose of the bond, that is, "to guarantee the
payment of valid and legal claims against the employer[.]" [76] Respondents are considered to have substantially
complied with the requirements on the posting of an appeal bond.

II

Under the Labor Code, the Labor Arbiter exercises original and exclusive jurisdiction over termination disputes
between an employer and an employee while the National Labor Relations Commission exercises exclusive
appellate jurisdiction over these cases:

Article 224. [217] Jurisdiction of the Labor Arbiters and the Commission. — (a) Except as otherwise
provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear
and decide, within thirty (30) calendar days after the submission of the case by the parties for
decision without extension, even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural:
...

(2) Termination disputes;

...

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters.[77]

The presumption under this provision is that the parties have an employer-employee relationship. Otherwise, the
case would be cognizable in different tribunals even if the action involves a termination dispute.

Petitioner Malcaba alleges that the Court of Appeals erred m dismissing his complaint for lack of jurisdiction,
insisting that he was an employee of respondent, not a corporate officer.
At the time of his alleged dismissal, petitioner Malcaba was the President of respondent corporation. Strangely,
this same petitioner disputes this position as respondents' bare assertion,[78] yet he also insists that his name appears
as President in the corporation's General Information Sheet for 2007.[79]

Under Section 25 of the Corporation Code,[80] the President of a corporation is considered a corporate officer. The
dismissal of a corporate officer is considered an intra-corporate dispute, not a labor dispute. Thus, in Tabang v.
National Labor Relations Commission:[81]

A corporate officer's dismissal is always a corporate act, or an intra-corporate controversy, and the
nature is not altered by the reason or wisdom with which the Board of Directors may have in taking
such action. Also, an intra-corporate controversy is one which arises between a stockholder and. the
corporation. There is no distinction, qualification, nor any exemption whatsoever. The provision is
broad and covers all kinds of controversies between stockholders and corporations.[82]

Further, in Matling Industrial and Commercial Corporation v. Coros,[83] this Court stated that jurisdiction over
intra-corporate disputes involving the illegal dismissal of corporate officers was with the Regional Trial Court, not
with the Labor Arbiter:

Where the complaint for illegal dismissal concerns a corporate officer, however, the controversy
falls under the jurisdiction of the Securities and Exchange Commission (SEC), because the
controversy arises out of intra-corporate or partnership relations between and among stockholders,
members, or associates, or between any or all of them and the corporation, partnership, or
association of which they are stockholders, members, or associates, respectively; and between such
corporation, partnership, or association and the State insofar as the controversy concerns their
individual franchise or right to exist as such entity; or because the controversy involves the election
or appointment of a director, trustee, officer, or manager of such corporation, partnership, or
association. Such controversy, among others, is known as an intra-corporate dispute.

Effective on August 8, 2000, upon the passage of Republic Act No. 8799, otherwise known as The
Securities Regulation Code, the SEC's jurisdiction over all intra-corporate disputes was transferred
to the RTC, pursuant to Section 5.2 of RA No. 8799, to wit:

5.2. The Commission's jurisdiction over all cases enumerated under Section 5 of
Presidential Decree No. 902-A is hereby transferred to the Courts of general
jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme
Court in the exercise of its authority may designate the Regional Trial Court
branches that shall exercise jurisdiction over these cases. The Commission shall
retain jurisdiction over pending cases involving intra-corporate disputes submitted
for final resolution which should be resolved within one (1) year from the enactment
of this Code. The Commission shall retain jurisdiction over pending suspension of
payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.[84]

The mere designation as a high-ranking employee, however, is not enough to consider one as a corporate officer.
In Tabang, this Court discussed the distinction between an employee and a corporate officer, regardless of
designation:

The president, vice-president, secretary and treasurer are commonly regarded as the principal or
executive officers of a corporation, and modern corporation statutes usually designate them as the
officers of the corporation. However, other offices are sometimes created by the charter or by-laws
of a corporation, or the board of directors may be empowered under the by-laws of a corporation to
create additional offices as may be necessary.

It has been held that an "office" is created by the charter of the corporation and the officer is elected
by the directors or stockholders. On the other hand, an "employee" usually occupies no office and
generally is employed not by action of the directors or stockholders but by the managing officer of
the corporation who also determines the compensation to be paid to such employee.[85]

The clear weight of jurisprudence clarifies that to be considered a corporate officer, first, the office must be created
by the charter of the corporation, and second, the officer must be elected by the board of directors or by the
stockholders.
Petitioner Malcaba was an incorporator of the corporation and a member of the Board of Directors.[86] Respondent
corporation's By-Laws creates the office of the President. That foundational document also states that the President
is elected by the Board of Directors:

ARTICLE IV
OFFICER

Section 1. Election/Appointment — Immediately after their election, the Board of Directors shall
formally organize by electing the President, the Vice President, the Treasurer, and the Secretary at
said meeting.[87]

This case is similar to Locsin v. Nissan Lease Philippines:[88]

Locsin was undeniably Chairman and President, and was elected to these positions by the Nissan
board pursuant to its By-laws. As such, he was a corporate officer, not an employee. The CA
reached this conclusion by relying on the submitted facts and on Presidential Decree 902-A, which
defines corporate officers as "those officers of a corporation who are given that character either by
the Corporation Code or by the corporation's by-laws." Likewise, Section 25 of Batas Pambansa
Blg. 69, or the Corporation Code of the Philippines (Corporation Code) provides that corporate
officers are the president, secretary, treasurer and such other officers as may be provided for in
the by-laws.[89] (Emphasis in the original)

Petitioners cite Prudential Bank and Trust Company v. Reyes[90] as basis that even high-ranking officers may be
considered regular employees, not corporate officers.[91] Prudential Bank, however, is not applicable to this case.

In Prudential Bank, an employer was considered estopped from raising the argument of an intra-corporate dispute
since this was only raised when the case was filed with this Court. This Court also noted that an employee rose
from the ranks and was regularly performing tasks integral to the business of the employer throughout the length
of her tenure, thus:

It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963.
From that position she rose to become supervisor. Then in 1982, she was appointed Assistant Vice-
President which she occupied until her illegal dismissal on July 19, 1991. The bank's contention
that she merely holds an elective position and that in effect she is not a regular employee is belied
by the nature of her work and her length of service with the Bank. As earlier stated, she rose from
the ranks and has been employed with the Bank since 1963 until the termination of her employment
in 1991. As Assistant Vice President of the foreign department of the Bank, she is tasked, among
others, to collect checks drawn against overseas banks payable in foreign currency and to ensure the
collection of foreign bills or checks purchased, including the signing of transmittal letters covering
the same. It has been stated that "the primary standard of determining regular employment is the
reasonable connection between the particular activity performed by the employee in relation to the
usual trade or business of the employer.["] Additionally, "an employee is regular because of the
nature of work and the length of service, not because of the mode or even the reason for hiring
them." As Assistant Vice-President of the Foreign Department of the Bank she performs tasks
integral to the operations of the bank and her length of service with the bank totaling 28 years
speaks volumes of her status as a regular employee of the bank. In fine, as a regular employee, she
is entitled to security of tenure; that is, her services may be terminated only for a just or authorized
cause. This being in truth a case of illegal dismissal, it is no wonder then that the Bank endeavored
to the very end to establish loss of trust and confidence and serious misconduct on the part of
private respondent but, as will be discussed later, to no avail.[92]

An "Assistant Vice President" is not among the officers stated in Section 25 of the Corporation Code.[93] A
corporation's President, however, is explicitly stated as a corporate officer.

Finding that petitioner Malcaba is the President of respondent corporation and a corporate officer, any issue on his
alleged dismissal is beyond the jurisdiction of the Labor Arbiter or the National Labor Relations Commission.
Their adjudication on his money claims is void for lack of jurisdiction. As a matter of equity, petitioner Malcaba
must, therefore, return all amounts received as judgment award pending final adjudication of his claims. This
Court's dismissal of petitioner Malcaba's claims, however, is without prejudice to his filing of the appropriate case
in the proper forum.
 III

Article 294 [279]] of the Labor Code provides that an employer may terminate the services of an employee only
upon just or authorized causes.[94] Article 297 [282] enumerates the just causes for termination, among which is
"[f]raud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative[.]"

Loss of trust and confidence is a just cause to terminate either managerial employees or rank-and-file employees
who regularly handle large amounts of money or property in the regular exercise of their functions.[95]

For an act to be considered a loss of trust and confidence, it must be first, work-related, and second, founded on
clearly established facts:

The complained act must be work related such as would show the employee concerned to be unfit
to continue working for the employer and it must be based on a willful breach of trust and founded
on clearly established facts. The basis for the dismissal must be clearly and convincingly
established but proof beyond reasonable doubt is not necessary.[96]

The breach of trust must likewise be willful, that is, "it is done intentionally, knowingly and purposely, without
justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently."[97]

Petitioner Nepomuceno alleges that he was illegally dismissed merely for his failure to inform his superiors of the
actual dates of his vacation leave. Respondents, however, contend that as District Business Manager, petitioner
Nepomuceno lost the corporation's trust and confidence by failing to report for work during a crucial sales period.

As found by the National Labor Relations Commission, petitioner Nepomuceno had filed for leave, which was
approved, for April 24, 25, and 28, 2008 to go on vacation in Malaysia. However, he left for Malaysia on the
evening of April 22, 2008, and thus, failed to report for work on April 23, 2008.

Petitioner Nepomuceno claims that he only knew that his flight was for the evening of April 22, 2008 on the day of
his flight. Respondents, however, insist that he "deliberately concealed the actual date of departure as he knows
that he would be out of the country on a crucial period of sales generation and bookings . . . [and] therefore knew
that his application for leave would be denied."[98] Otherwise stated, respondents contend that his dismissal was a
valid exercise of their management prerogative to discipline and dismiss managerial employees unworthy of their
trust and confidence.

The concept of a management prerogative was already passed upon by this Court in San Miguel Brewery Sales
Force Union v. Ople:[99]

Except as limited by special laws, an employer is free to regulate, according to his

own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, tools to be used,
processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay-off of workers and the discipline, dismissal and
recall of work. . . .

Every business enterprise endeavors to increase its profits. In the process, it may adopt or devise
means designed towards that goal. In Abott Laboratories vs. NLRC, . . . We ruled:

. . . Even as the law is solicitous of the welfare of the employees, it must also protect
the right of an employer to exercise what are clearly management prerogatives. The
free will of management to conduct its own business affairs to achieve its purpose
cannot be denied.

So long as a company's management prerogatives are exercised in good faith for the advancement
of the employer's interest and not for the purpose of defeating or circumventing the rights of the
employees under special laws or under valid agreements, this Court will uphold them.[100]

While an employer is free to regulate all aspects of employment, the exercise of management prerogatives must be
in good faith and must not defeat or circumvent the rights of its employees.
In industries that mainly rely on sales, employers are free to discipline errant employees who deliberately fail to
report for work during a crucial sales period. It would have been reasonable for respondents to discipline petitioner
Nepomuceno had he been a problematic employee who unceremoniously refused to do his work.

However, as found by the Labor Arbiter and the National Labor Relations Commission, petitioner Nepomuceno
turned over all of his pending work to a reliever before he left for Malaysia. He was able to reach his sales quota
and surpass his sales target even before taking his vacation leave. Respondents did not suffer any financial damage
as a result of his absence. This was also petitioner Nepomuceno's first infraction in his nine (9) years of service
with respondents.[101] None of these circumstances constitutes a willful breach of trust on his part. The penalty of
dismissal, thus, was too severe for this kind of infraction.

The manner of petitioner Nepomuceno's dismissal was likewise suspicious. In all cases of employment
termination, the employee must be granted due process. The manner by which this is accomplished is stated in
Book V, Rule XXIII, Section 2 of the Rules Implementing the Labor Code:

Section 2. Standard of due process: requirements of notice.

— In all cases of termination of employment, the following standards of due process shall be
substantially observed.

I. For termination of employment based on just causes as defined in Article 282 of the Code:

(a) A written notice served on the employee specifying the ground or grounds for termination, and
giving to said employee reasonable opportunity within which to explain his side;

(b) A hearing or conference during which the employee concerned, with the assistance of counsel if
the employee so desires, is given opportunity to respond to the charge, present his evidence or rebut
the evidence presented against him; and

(c) A written notice of termination served on the employee indicating that upon due consideration
of all the circumstance, grounds have been established to justify his termination.

Here, petitioner Nepomuceno received a memorandum on April 23, 2008, asking him to explain why no
administrative investigation should be held against him. He submitted an explanation on the same day and another
explanation on May 2, 2008. On May 7, 2008, he was given his notice of termination, which had already taken
effect two (2) days earlier, or on May 5, 2008.[102]

It is true that "[t]he essence of due process is simply an opportunity to be heard."[103] Petitioner Nepomuceno had
two (2) opportunities within which to explain his actions. This would have been sufficient to satisfy the
requirement. The delay in handing him his notice of termination, however, appears to have been an afterthought.
While strictly not a violation of procedural due process, respondents should have been more circumspect in
complying with the due process requirements under the law.

Considering that petitioner Nepomuceno's dismissal was done without just cause, he is entitled to reinstatement
and full backwages.[104] If reinstatement is not possible due to strained relations between the parties, he shall be
awarded separation pay at the rate of one (1) month for every year of service. [105]

IV

Under Article 297 [282] of the Labor Code, an employer may terminate the services of an employee who commits
willful disobedience of the lawful orders of the employer:

Article 297. [282] Termination by Employer. — An employer may terminate an employment for
any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work[.]

For disobedience to be considered as just cause for termination, two (2) requisites must concur: first, "the
employee's assailed conduct must have been wilful or intentional," and second, "the order violated must have been
reasonable, lawful, made known to the employee and must pertain to the duties which he [or she] had been
engaged to discharge."[106] For disobedience to be willful, it must be "characterized by a wrongful and perverse
mental attitude rendering the employee's act inconsistent with proper subordination."[107]

The conduct complained of must also constitute "harmful behavior against the business interest or person of his [or
her] employer."[108] Thus, it is implied in every case of willful disobedience that "the erring employee obtains
undue advantage detrimental to the business interest of the employer."[109]

Petitioner Palit-Ang, as Finance Officer, was instructed by respondent Del Castillo to give a cash advance of
P3,000.00 to District Branch Manager Gamboa on November 26, 2007. This order was reasonable, lawful, made
known to petitioner Palit-Ang, and pertains to her duties. [110] What is left to be determined, therefore, is whether
petitioner Palit-Ang intentionally and willfully violated it as to amount to insubordination.

When Gamboa went to collect the money from petitioner Palit-Ang, he was told to return the next day as she was
still busy. When petitioner Palit-Ang found out that the money was to be used for a car tune-up, she suggested to
Gamboa to just get the money from his mobilization fund and that she just would reimburse it after. [111] The Court
of Appeals found that these circumstances characterized petitioner Palit-Ang's "arrogance and hostility,"[112] in
failing to comply with respondent Del Castillo's order, and thus, warranted her dismissal.

On the contrary, there was no ill will between Gamboa and petitioner Palit-Ang. Petitioner Palit-Ang's failure to
immediately give the money to Gamboa was not the result of a perverse mental attitude but was merely because
she was busy at the time. Neither did she profit from her failure to immediately give the cash advance for the car
tune-up nor did respondents suffer financial damage by her failure to comply. The severe penalty of dismissal was
not commensurate to her infraction. In Dongon v. Rapid Movers and Forwarders:[113]

To us, dismissal should only be a last resort, a penalty to be meted only after all the relevant
circumstances have been appreciated and evaluated with the goal of ensuring that the ground for
dismissal was not only serious but true. The cause of termination, to be lawful, must be a serious
and grave malfeasance to justify the deprivation of a means of livelihood. This requirement is in
keeping with the spirit of our Constitution and laws to lean over backwards in favor of the working
class, and with the mandate that every doubt must be resolved in their favor.

Although we recognize the inherent right of the employer to discipline its employees, we should
still ensure that the employer exercises the prerogative to discipline humanely and considerately,
and that the sanction imposed is commensurate to the offense involved and to the degree of the
infraction. The discipline exacted by the employer should further consider the employee's length of
service and the number of infractions during his employment. The employer should never forget
that always at stake in disciplining its employee are not only his position but also his livelihood, and
that he may also have a family entirely dependent on his earnings.[114]

Petitioner Palit-Ang likewise assails the failure of respondents to inform her of her right to counsel when she was
being investigated for her infraction. As previously discussed, "[t]he essence of due process is simply an
opportunity to be heard,"[115] not that the employee must be accompanied by counsel at all times. A hearing was
conducted and she was furnished a notice of termination explaining the grounds for her dismissa1.[116] She was not
denied due process.

Petitioner Palit-Ang, nonetheless, is considered to have been illegally dismissed, her penalty not having been
proportionate to the infraction committed. Thus, she is entitled to reinstatement and full backwages.[117] If
reinstatement is not possible due to strained relations between the parties, she shall be awarded separation pay at
the rate of one (1) month for every year of service.[118]

WHEREFORE, the Petition is PARTIALLY GRANTED. Petitioner Christian C. Nepomuceno and petitioner
Laura Mae Fatima F. Palit-Ang are DECLARED to have been illegally dismissed. They are, therefore, entitled to
reinstatement without loss of seniority rights, or in lieu thereof, separation pay; and the payment of backwages
from the filing of their Complaints until finality of this Decision.

The Court of Appeals February 19, 2013 Decision and September 10, 2013 Resolution in CA-G.R. SP No.
119093, finding that the National Labor Relations Commission had no jurisdiction to adjudicate petitioner Nicanor
F. Malcaba's claims is SUSTAINED. Petitioner Malcaba is further ordered to RETURN the amount of
P4,937,420.40 to respondents for having been erroneously awarded. This shall be without prejudice to the filing of
petitioner Malcaba's claims in the proper forum.
This case is hereby REMANDED to the Labor Arbiter for the proper computation of petitioners Christian C.
Nepomuceno's and Laura Mae Fatima F. Palit-Ang's money claims.

SO ORDERED.
 THIRD DIVISION
[ G.R. No. 207354, January 10, 2018 ]
CHARLIE HUBILLA, JOEL NAYRE, NENITA A. TAN, PEDRO MAGALLANES, JR., ARNEL YUSON,
JANICE CABATBAT, JUDY PAPINA, VANESSA ESPIRITU, NOEMI YALUNG, GENALYN
RESCOBILLO, FIDEL ZAQUITA, NYL B. CALINGASAN, JANICE MIRADORA, EVANGELINE CHUA,
ROSCHELLE MISSION, MELANIE BALLESTEROS, MARILYN BACALSO, RENALYN ALCANTARA,
FEDERICO B. VIERNES, CHRISTOPHER B. YARES, ANA MARY R. AGUILAR, MELANIE SAN
MARCOS, EMERLOVE MONTE, CHONALYN LUCAS, THERESA MALICOSIO, MA. FE CERCARES,
RUBELYN R. CLARO, JONALYN M. YALUNG, MARY ANN V. MACANAG, RESLYN L. FLORES,
CRISTEL C. ROQUE, TERESA G. MUNAR, SUSAN A. DELA CRUZ, SHEENA KAY P. DE VERA,
ARLENE R. ANES, GINA B. BINIBINI, CHERINE V. ZORILLA, MA. CRISTINE MAGTOTO, FRANCIS
MARIE O. DE CASTRO, VANESSA R. ESPIRITU, RACHELLE V. QUISTORIA, JULIE ANN ILAN,
ANGELIE F. PANOTES, ANABEL PAYOS, MELISSA M. PERLAS, MELANIE B. BERSES, BARVI ROSE
PERALTA, RESIE AQUE, ROWENA RIVERA, MELANIE M. DY, CHERYLYN CORO, RANELYN
SUBONG, ANGELA SUBILLAGA, THELMA BARTOLABAC, MICHELLE C. ILAGAN, PRECIOUS MAE
DE GUZMAN, MARY CAROLINE COLINA, FRELYN HIPOLITO, MYLINE A. CALLOS, JANETH B.
SEMBILLO, LEA LYN F. FERRANCO, MAY C. SANTOS, ROSELLE A. NOBLE, JENNIFER D. SUYOM,
WARREN PETCHIE C. CAJES, ROWELYN F. CATALAN, RIEZEL ANN A. ALEGRE, DEMETRIA B.
PEREZ, GENALYN OSOC, JUVILYN N. NERI, JOY B. PIMENTEL, AIRENE LAYON, MARY JOY
TURQUEZA, MARY ANN VALENTIN, ROSIE L. NIEBRES, MELCA MALLORCA, JOY CAGATCAGAT,
DIANA CAMARO, MARIVEL DIJUMO, SHEILA DELA CRUZ, ELIZABETH ARINGO, JENALYN G.
DISMAYA, MELANIE G. TRIA, GRETCHEN D. MEJOS, AND JANELIE R. JIMENEZ, PETITIONERS, V.
HSY MARKETING LTD., CO., WANTOFREE ORIENTAL TRADING, INC., COEN FASHION HOUSE
AND GENERAL MERCHANDISE, ASIA CONSUMER VALUE TRADING, INC., FABULOUS JEANS &
SHIRT & GENERAL MERCHANDISE, LSG MANUFACTURING CORPORATION, UNITE GENERAL
MERCHANDISE, ROSARIO Q. CO, LUCIA PUN LING YEUNG, AND ALEXANDER ARQUEZA,
RESPONDENTS.

DECISION
LEONEN, J.:

When the evidence in labor cases is in equipoise, doubt is resolved in favor of the employee.
This is a Petition for Review on Certiorari [1] assailing the February 25, 2013 Decision[2] and May 30, 2013
Resolution[3] of the Court of Appeals in CA-GR. SP No. 126522, which upheld the Labor Arbiter's finding that the
employees voluntarily terminated their employment. The assailed judgments also set aside the National Labor
Relations Commission's application of the principle of equipoise on the ground that the employees failed to
present any evidence in their favor.

HSY Marketing Ltd., Co., Wantofree Oriental Trading, Inc., Coen Fashion House and General Merchandise, Asia
Consumer Value Trading, Inc., Fabulous Jeans & Shirt & General Merchandise, LSG Manufacturing Corporation,
Unite General Merchandise, Rosario Q. Co, Lucia Pun Lin Yeung, and Alexander Arqueza (respondents) are
engaged in manufacturing and selling goods under the brand Novo Jeans & Shirt & General Merchandise (Novo
Jeans).[4]

Sometime in May 2010 and June 2010, several Novo Jeans employees [5] went to Raffy Tulfo's radio program to air
their grievances against their employers for alleged labor violations. They were referred to the Department of
Labor and Employment Camanava Regional Office.[6]

These employees claimed that on June 7, 2010, they were not allowed to enter the Novo Jeans branches they were
employed in. They further averred that while Novo Jeans sent them a show cause letter the next day, they were in
truth already dismissed from employment. They sent a demand letter on July 19, 2010 to amicably settle the case
before the Department of Labor and Employment but no settlement was reached. They alleged that upon learning
that the Department of Labor and Employment was not the proper forum to address their grievances, they decided
to file a notice of withdrawal and file their complaint with the Labor Arbiter.[7]

On the other hand, Novo Jeans claimed that these employees voluntarily severed their employment but that they
filed complaints later with the Department of Labor and Employment. They alleged that the employees' notice of
withdrawal was not actually granted by the Department of Labor and Employment but that the employees
nonetheless filed their complaints before the Labor Arbiter.[8]
On May 31, 2011, Labor Arbiter Arden S. Anni rendered a Decision[9] dismissing the complaints. He found that
other than the employees' bare allegations that they were dismissed from June 6 to 9, 2010, they did not present
any other evidence showing that their employment was terminated or that they were prevented from reporting for
work.[10] The Labor Arbiter likewise ruled that the employees voluntarily severed their employment since the
airing of their grievances on Raffy Tulfo's radio program "[was] enough reason for them not to report for work,
simply because of a possible disciplinary action by [Novo Jeans]."[11] The dispositive portion of the Labor Arbiter
Decision read:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered DISMISSING the

above-captioned consolidated cases for utter lack of merit and for forum-shopping.

SO ORDERED.[12]

The employees appealed to the National Labor Relations Commission.[13]

On June 25, 2012, the National Labor Relations Commission rendered a Decision [14] reversing that of the Labor
Arbiter and finding that the employees were illegally dismissed. It ruled that the allegations of both parties "were
unsubstantiated and thus [were] equipoised" and that "if doubt exists between the evidence presented by the
employer and that by the employee, the scales of justice must be tilted in favor of the latter." [15] The dispositive
portion of the National Labor Relations Commission Decision read:

WHEREFORE, premises considered, judgment is hereby rendered finding the appeal meritorious
with respect to the issue of illegal dismissal. Complainants-appellants' respective employers are
hereby found liable, jointly and severally, to pay complainants-appellants their backwages and
separation pay plus ten percent thereof as attorney's fees. Accordingly, the decision of the Labor
Arbiter dated May 31, 2011 is hereby MODIFIED. All other dispositions STANDS (sic)
undisturbed.

The computation of the aforesaid awards is as follows:

....

TOTAL
Php30,969,426.00
AWARD
SO ORDERED.[16]

Novo Jeans moved for partial reconsideration[17] but was denied by the National Labor Relations Commission in its
August 24, 2012 Resolution.[18] Thus, it filed a Petition for Certiorari[19] with the Court of Appeals.

On February 25, 2013, the Court of Appeals rendered a Decision[20] reversing the Decision of the National Labor
Relations Commission and reinstating the Labor Arbiter Decision. The Court of Appeals found that Novo Jeans'
counsel, as the affiant, substantially complied with the verification requirement even if his personal knowledge
was based on facts relayed to him by his clients and on authentic records since he was not privy to the antecedents
of the case.[21]

The Court of Appeals stated that while the employees merely alleged that they were no longer allowed to report to
work on a particular day, Novo Jeans was able to present the First Notice of Termination of Employment sent to
them, asking them to explain their sudden absence from work without proper authorization. It likewise found that
the Notices of Termination of Employment (Notices) did not indicate that the employees were dismissed or that
they were prevented from entering the stores.[22]

According to the Court of Appeals, the equipoise rule was inapplicable in this case since it only applied when the
evidence between the parties was equally balanced. Considering that only Novo Jeans was able to present proof of
its claims, the Court of Appeals was inclined to rule in its favor. [23] Thus, the Court of Appeals concluded that the
case involved voluntary termination of employment, not illegal dismissal. [24] The dispositive portion of its Decision
read:

WHEREFORE, in view of the foregoing, the instant Petition is hereby GRANTED. The assailed
Decision dated June 25, 2012 and Resolution dated August 24, 2012 rendered by the National
Labor Relations Commission in NLRC LAC No. 07-001930-11/NLRC NCR Cases No. 08-10645-
10, 08-10649-10, 08-10655-10, 08-10660-10, 08-10662-10, 08-10666-10 and 08-10670-10 are
 hereby REVERSED and SET ASIDE. Corollarily, the Decision dated May 31, 2011 rendered by
the Labor Arbiter is hereby REINSTATED.

SO ORDERED.[25]

The employees filed a Motion for Reconsideration [26] but it was denied in the Court of Appeals May 30, 2013
Resolution.[27] Hence, this Petition[28] was filed before this Court.

Petitioners point out that the Court of Appeals erred in not finding grave abuse of discretion, considering that the
petition filed before it was a special civil action for certiorari. They aver that the Court of Appeals should not have
used the special remedy of certiorari merely to re-evaluate the findings of a quasi-judicial body absent any finding
of grave abuse of discretion.[29]

Petitioners likewise argue that respondents were unable to substantially comply with the verification requirement
before the Court of Appeals. They submit that respondents' counsel would have been privy to the antecedents of
the case so as to have personal knowledge and not merely knowledge as relayed by his clients. [30] They add that
respondents "deliberately withheld the Annexes of the Position Paper of the Petitioners submitted to the Labor
Arbiter[;] hence, said Position Paper cannot be considered authentic."[31]

Petitioners assert that the Court of Appeals had no factual basis to rule in respondents' favor since there was no
evidence to prove that the Notices were sent to petitioners at their last known addresses. The evidence on record
merely showed sample letters of the Notices.[32] Petitioners maintain that this is a situation where the employees
allege that they were prevented from entering their work place and the employer alleges otherwise. They insist that
if doubt exists between the evidence presented by the employer and the evidence presented by the employees, the
doubt must be resolved in favor of the employees, consistent with the Labor Code's policy to afford protection to
labor.[33]

On the other hand, respondents argue that a defect in the verification will not necessarily cause the dismissal of the
pleading and that they had sufficiently complied with the requirement when the affiant attested that the petition
was based on facts relayed by his clients and on authentic records. [34] They also point out that only relevant and
pertinent documents should be attached to their pleadings before the courts; thus, the annexes of petitioner, not
being relevant or pertinent, need not be attached to their pleadings.[35]

Respondents contend that the Court of Appeals recognized that the issue in their Petition for Certiorari concerned
the alleged grave abuse of discretion of the National Labor Relations Commission and thoroughly discussed the
issue in the assailed judgment.[36] They likewise submit that the Court of Appeals may review factual findings of
the National Labor Relations Commission since the finding of grave abuse of discretion requires a re-examination
of the sufficiency or absence of evidence.[37]

Respondents maintain that the receipt of the Notices was admitted and recognized by the parties before the Labor
Arbiter and was never brought as an issue until the National Labor Relations Commission made a finding that the
Notices were never received.[38] According to respondents, petitioners were estopped from questioning the receipt
of the Notices when they already admitted to their receipt before the Labor Arbiter. [39] They argue that the Labor
Arbiter and the Court of Appeals did not err in finding that the termination of employment was voluntary since
petitioners failed to present evidence of the fact of their dismissal.[40]

The main issue before this Court is whether or not petitioners were illegally dismissed by respondents. However,
there are certain procedural issues that must first be addressed, in particular: (1) whether or not the Court of
Appeals may, in a petition for certiorari, review and re-assess the factual findings of the National Labor Relations
Commission; and (2) whether or not verification based on facts relayed to the affiant by his clients is valid.

Before discussing the merits of the case, this Court takes this opportunity to clarify certain doctrines regarding the
review of factual findings by the Court of Appeals.

Factual findings of labor officials exercising quasi-judicial functions are accorded great respect and even finality
by the courts when the findings are supported by substantial evidence.[41] Substantial evidence is "the amount of
relevant evidence which a reasonable mind might accept as adequate to support a conclusion." [42] Thus, in labor
cases, the issues in petitions for certiorari before the Court of Appeals are limited only to whether the National
Labor Relations Commission committed grave abuse of discretion.
However, this does not mean that the Court of Appeals is conclusively bound by the findings of the National Labor
Relations Commission. If the findings are arrived at arbitrarily, without resort to any substantial evidence, the
National Labor Relations Commission is deemed to have gravely abused its discretion:

On this matter, the settled rule is that factual findings of labor officials, who are deemed to have
acquired expertise in matters within their jurisdiction, are generally accorded not only respect but
even finality by the courts when supported by substantial evidence, i.e., the amount of relevant
evidence which a reasonable mind might accept as adequate to support a conclusion. We
emphasize, nonetheless, that these findings are not infallible. When there is a showing that they
were arrived at arbitrarily or in disregard of the evidence on record, they may be examined by the
courts. The [Court of Appeals] can then grant a petition for certiorari if it finds that the [National
Labor Relations Commission], in its assailed decision or resolution, has made a factual finding that
is not supported by substantial evidence. It is within the jurisdiction of the [Court of Appeals],
whose jurisdiction over labor cases has been expanded to review the findings of the [National Labor
Relations Commission].[43]

The Court of Appeals may also review factual findings if quasi judicial agencies' findings are contradictory to its
own findings.[44] Thus, it must re-examine the records to determine which tribunal's findings were supported by the
evidence.

In this instance, the Labor Arbiter and the National Labor Relations Commission made contradictory factual
findings. Thus, it was incumbent on the Court of Appeals to re-examine their findings to resolve the issues before
it. The Court of Appeals also found that the findings of the National Labor Relations Commission were not
supported by substantial evidence, and therefore, were rendered in grave abuse of discretion.

Thus, in the determination of whether the National Labor Relations Commission committed grave abuse of
discretion, the Court of Appeals may re-examine facts and re-assess the evidence. However, its findings may still
be subject to review by this Court.

This Court notes that in cases when the Court of Appeals acts as an appellate court, it is still a trier of facts.
Questions of fact may still be raised by the parties. If the parties raise pure questions of law, they may directly file
with this Court. Moreover, contradictory factual findings between the National Labor Relations Commission and
the Court of Appeals do not automatically justify this Court's review of the factual findings. They merely present a
prima facie basis to pursue the action before this Court. The need to review the Court of Appeals' factual findings
must still be pleaded, proved, and substantiated by the party alleging their inaccuracy. This Court likewise retains
its full discretion to review the factual findings.

II

All petitions for certiorari are required to be verified upon filing. [45] The contents of verification are stated under
Rule 7, Section 4 of the Rules of Court:

Section 4. Verification. Except when otherwise specifically required by law or rule, pleadings need
not be under oath, verified or accompanied by affidavit.

A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations
therein are true and correct of his personal knowledge or based on authentic records.

A pleading required to be verified which contains a verification based on "information and belief",
or upon "knowledge, information and belief," or lacks a proper verification, shall be treated as an
unsigned pleading.

Thus, for a pleading to be verified, the affiant must attest that he or she has read the pleading and that the
allegations are true and correct based on his or her personal knowledge or on authentic records. Otherwise, the
pleading is treated as an unsigned pleading.

Shipside Incorporation v. Court of Appeals[46] required that the assurance should "not [be] the product of the
imagination or a matter of speculation, and that the pleading is filed in good faith."[47] However, verification is
merely a formal, not jurisdictional, requirement. It will not result in the outright dismissal of the case since courts
may simply order the correction of a defective verification.[48]
Petitioners argue that respondents' verification was invalid since it was not based on authentic records, alleging
that respondents' failure to attach petitioners' position paper annexes to their Petition for Certiorari before the
Court of Appeals made their records inauthentic.[49]

A pleading may be verified by attesting that the allegations are based either on personal knowledge and on
authentic records, or on personal knowledge or on authentic records. The use of either, however, is not subject to
the affiant's whim but rather on the nature of the allegations being attested to. Circumstances may require that the
affiant attest that the allegations are based only on personal knowledge or only on authentic records. Certainly,
there can be situations where the affiant must attest to the allegations being based on both personal knowledge and
on authentic records, thus:

A reading of the above-quoted Section 4 of Rule 7 indicates that a pleading may be verified under
either of the two given modes or under both. The veracity of the allegations in a pleading may be
affirmed based on either one's own personal knowledge or on authentic records, or both, as
warranted. The use of the [conjunction] "or" connotes that either source qualifies as a sufficient
basis for verification and, needless to state, the concurrence of both sources is more than sufficient.
Bearing both a disjunctive and conjunctive sense, this parallel legal signification avoids a
construction that will exclude the combination of the alternatives or bar the efficacy of any one of
the alternatives standing alone.

Contrary to petitioner's position, the range of permutation is not left to the pleader's liking, but is
dependent on the surrounding nature of the allegations which may warrant that a verification be
based either purely on personal knowledge, or entirely on authentic records, or on both sources.[50]

Authentic records may be the basis of verification if a substantial portion of the allegations in the pleading is based
on prior court proceedings.[51] Here, the annexes that respondents allegedly failed to attach are employee
information, supporting documents, and work-related documents proving that petitioners were employed by
respondents.[52] The fact of petitioners' employment, however, has not been disputed by respondents. These
documents would not have been the "relevant and pertinent"[53] documents contemplated by the rules.

Petitioners likewise contend that respondents' Petition for Certiorari[54] before the Court of Appeals should not have
been given due course since the verification[55] signed by respondents' counsel, Atty. Eller Roel I. Daclan (Atty.
Daclan), attested that:

2. I caused the preparation of the foregoing petition and attest that, based upon facts relayed to me
by my clients and upon authentic records made available, all the allegations contained therein are
true and correct[.][56]

Thus, the issue on verification centers on whether the phrase "based upon facts relayed to me by my clients" may
be considered sufficient compliance. To resolve this issue, this Court must first address whether respondents'
counsel may sign the verification on their behalf.

The rules on compliance with the requirement of the verification and certification of non-forum shopping were
already sufficiently outlined in Altres v. Empleo,[57] where this Court stated:

For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential
pronouncements already reflected above respecting non-compliance with the requirements on, or
submission of defective, verification and certification against forum shopping:

1) A distinction must be made between non-compliance with the requirement on or submission of

defective verification, and non compliance with the requirement on or submission of defective
certification against forum shopping.

2) As to verification, non-compliance therewith or a defect therein does not necessarily render the
pleading fatally defective. The court may order its submission or correction or act on the pleading if
the attending circumstances are such that strict compliance with the Rule may be dispensed with in
order that the ends of justice may be served thereby.

3) Verification is deemed substantially complied with when one who has ample knowledge to swear
to the truth of the allegations in the complaint or petition signs the verification, and when matters
alleged in the petition have been made in good faith or are true and correct.
 4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike
in verification, is generally not curable by its subsequent submission or correction thereof, unless
there is a need to relax the Rule on the ground of "substantial compliance" or presence of "special
circumstances or compelling reasons".

5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a
case; otherwise, those who did not sign will be dropped as parties to the case. Under reasonable or
justifiable circumstances, however, as when all the plaintiffs or petitioners share a common interest
and invoke a common cause of action or defense, the signature of only one of them in the
certification against forum shopping substantially complies with the Rule.

6) Finally, the certification against forum shopping must be executed by the party-pleader, not by
his counsel. If, however, for reasonable or justifiable reasons, the party-pleader is unable to sign, he
must execute a Special Power of Attorney designating his counsel of record to sign on his behalf.[58]

The policy behind the requirement of verification is to guard against the filing of fraudulent pleadings. Litigants
run the risk of perjury[59] if they sign the verification despite knowledge that the stated allegations are not true or
are products of mere speculation:

Verification is not an empty ritual or a meaningless formality. Its import must never be sacrificed in
the name of mere expedience or sheer caprice. For what is at stake is the matter of verity attested by
the sanctity of an oath to secure an assurance that the allegations in the pleading have been made in
good faith, or are true and correct and not merely speculative.[60]

Thus, for verification to be valid, the affiant must have "ample knowledge to swear to the truth of the allegations in
the complaint or petition."[61] Facts relayed to the counsel by the client would be insufficient for counsel to swear
to the truth of the allegations in a pleading. Otherwise, counsel would be able to disclaim liability for any
misrepresentation by the simple expediency of stating that he or she was merely relaying facts with which he or
she had no competency to attest to. For this reason, the Rules of Court require no less than personal knowledge of
the facts to sufficiently verify a pleading.

Respondents' counsel, not having sufficient personal knowledge to attest to the allegations of the pleading, was not
able to validly verify the facts as stated. Therefore, respondents' Petition for Certiorari before the Court of Appeals
should have been considered as an unsigned pleading.

Respondents' certification of non-forum shopping is likewise defective. The certification of non-forum shopping
must be signed by the litigant, not his or her counsel. The litigant may, for justifiable reasons, execute a special
power of attorney to authorize his or her counsel to sign on his or her behalf.[62] In this instance, the verification
and certification against forum shopping[63] was contained in one (1) document and was signed by respondents'
counsel, Atty. Daclan.

Corporations, not being natural persons, may authorize their lawyers through a Secretary's Certificate to execute
physical acts. Among these acts is the signing of documents, such as the certification against forum shopping. A
corporation's inability to perform physical acts is considered as a justifiable reason to allow a person other than the
litigant to sign the certification against forum shopping.[64] By the same reasoning, partnerships, being artificial
entities, may also authorize an agent to sign the certification on their behalf.

Respondents include three (3) corporations, one (1) partnership, and three (3) sole proprietorships. Respondents
LSG Manufacturing Corporation, Asia Consumer Value Trading, Inc., and Wantofree Oriental Trading, Inc.
submitted Secretary's Certificates[65] authorizing Atty. Daclan to sign on their behalf. On the other hand,
respondent HSY Marketing Ltd., Co. submitted a Partnership Certification.[66] Meanwhile, respondents Alexander
Arqueza (Arqueza), proprietor of Fabulous Jeans and Shirt and General Merchandise, Rosario Q. Co (Co),
proprietor of Unite General Merchandise, and Lucia Pun Ling Yeung (Yeung), proprietor of Coen Fashion House
& General Merchandise, submitted Special Powers of Attorney[67] on their behalf.

However, sole proprietorships, unlike corporations, have no separate legal personality from their proprietors.
[68]
 They cannot claim the inability to do physical acts as a justifiable circumstance to authorize their counsel to
sign on their behalf. Since there was no other reason given for authorizing their counsel to sign on their behalf,
respondents Arqueza, Co, and Yeung's certification against forum shopping is invalid.

While courts may simply order the resubmission of the verification or its subsequent correction,[69] a defect in the
certification of non-forum shopping is not curable[70] unless there are substantial merits to the case.[71]
However, respondents' Petition for Certiorari before the Court of Appeals was unmeritorious. Thus, its defective
verification and certification of non-forum shopping should have merited its outright dismissal.

III

When the evidence of the employer and the employee are in equipoise, doubts are resolved in favor of labor.
[72]
 This is in line with the policy of the State to afford greater protection to labor.[73]

Petitioners allege that they were illegally dismissed from service when they were prevented from entering their
work premises a day after airing their grievance in a radio show. On the other hand, respondents deny this
allegation and state that petitioners were never dismissed from employment.

In illegal dismissal cases, the burden of proof is on the employer to prove that the employee was dismissed for a
valid cause and that the employee was afforded due process prior to the dismissal.[74]

Respondents allege that there was no dismissal since they sent petitioners a First Notice of Termination of
Employment, asking them to show cause why they should not be dismissed for their continued absence from work.
However, petitioners argue that this evidence should not be given weight since there is no proof that they received
this Notice.

Indeed, no evidence has been presented proving that each and every petitioner received a copy of the First Notice
of Termination of Employment. There are no receiving copies or acknowledgement receipts. What respondents
presented were "Sample Letters of Respondents"[75] and not the actual Notices that were allegedly sent out.

While petitioners admitted that the Notices may have been sent, they have never actually admitted to receiving any
of them. In their Position Paper before the Labor Arbiter and in their Memorandum of Appeal before the National
Labor Relations Commission:

On June 7, 2010, all employees who went to complain against the respondent[s] were not allowed
to enter the stores of respondent[s]. The next day, respondent[s] sent letter[s] to the employees
purporting to be a show cause letter but the truth of the matter is that all employees who went to the
office of Tulfo to complain against the respondent[s] were already terminated[.][76]

The lack of evidence of petitioners' receipts suggests that the Notices were an afterthought, designed to free
respondents from any liability without having to validly dismiss petitioners.

There is likewise no proof that petitioners abandoned their employment. To constitute abandonment, the employer
must prove that "first, the employee must have failed to report for work or must have been absent without valid or
justifiable reason; and second, [that] there must have been a clear intention on the part of the employee to sever the
employer-employee relationship manifested by some overt act."[77]

Abandonment is essentially a matter of intent. It cannot be presumed from the occurrence of certain equivocal acts.
[78]
 There must be a positive and overt act signifying an employee's deliberate intent to sever his or her
employment. Thus, mere absence from work, even after a notice to return, is insufficient to prove abandonment.
[79]
 The employer must show that the employee unjustifiably refused to report for work and that the employee
deliberately intended to sever the employer-employee relation. Furthermore, there must be a concurrence of these
two (2) elements.[80] Absent this concurrence, there can be no abandonment.

Respondents have not presented any proof that petitioners intended to abandon their employment. They merely
alleged that petitioners have already voluntarily terminated their employment due to their continued refusal to
report for work. However, this is insufficient to prove abandonment.

Where both parties in a labor case have not presented substantial evidence to prove their allegations, the evidence
is considered to be in equipoise. In such a case, the scales of justice are tilted in favor of labor. Thus, petitioners
are hereby considered to have been illegally dismissed.

This Court notes that had petitioners been able to substantially prove their dismissal, it would have been rendered
invalid not only for having been made without just cause[81] but also for being in violation of their constitutional
rights. A laborer does not lose his or her right to freedom of expression upon employment. [82] This is "[a] political
[right] essential to man's enjoyment of his [or her] life, to his [or her] happiness, and to his [or her] full and
complete fulfillment."[83] While the Constitution and the courts recognize that employers have property rights that
must also be protected, the human rights of laborers are given primacy over these rights. Property rights may
prescribe. Human rights do not.[84]

When laborers air out their grievances regarding their employment in a public forum, they do so in the exercise of
their right to free expression. They are "fighting for their very survival, utilizing only the weapons afforded them
by the Constitution—the untrammelled enjoyment of their basic human rights."[85] Freedom and social justice
afford them these rights and it is the courts' duty to uphold and protect their free exercise. Thus, dismissing
employees merely on the basis that they complained about their employer in a radio show is not only invalid, it is
unconstitutional.

However, there not being sufficient proof that the dismissal was meant to suppress petitioners' constitutional
rights, this Court is constrained to limit its conclusions to that of illegal dismissal under the Labor Code.

Petitioners were not dismissed under any of the causes mentioned in Article 279 [282][86] of the Labor Code. They
were not validly informed of the causes of their dismissal. Thus, their dismissal was illegal.

An employee who is found to have been illegally dismissed is entitled to reinstatement without loss of seniority
rights and other privileges.[87] If reinstatement proves to be impossible due to the strained relations between the
parties, the illegally dismissed employee is entitled instead to separation pay.[88]

WHEREFORE, the Petition is GRANTED. The February 25, 2013 Decision and May 30, 2013 Resolution of the
Court of Appeals in CA-GR. SP No. 126522 are SET ASIDE. Respondents are DIRECTED to reinstate
petitioners to their former positions without loss of seniority rights or other privileges.

SO ORDERED.
 SECOND DIVISION

G.R. No. 207252, January 24, 2018

PHILIPPINE GEOTHERMAL, INC. EMPLOYEES UNION (PGIEU), Petitioner, v. CHEVRON

GEOTHERMAL PHILS. HOLDINGS, INC., Respondent.

DECISION

REYES, JR., J.:

This is a Petition for Review on Certiorari1 pursuant to Rule 45 of the Rules of Court, as amended, seeking to
reverse and set aside the Decision2 dated November 5, 2012 of the Court of Appeals (CA) in CA-G.R. SP. No.
115796, dismissing the Petition for Review entitled "Philippine Geothermal, Inc. Employees Union (PGIEU) vs.
Chevron Geothermal Phils. Holdings, Inc.'' as well as the Resolution3 dated May 17, 2013 denying Philippine
Geothermal, Inc. Employees Union's (petitioner) Motion4 for Reconsideration dated November 27, 2012.

The Facts

Petitioner is a legitimate labor organization and the certified bargaining agent of the rank-and-file employees of
Chevron Geothermal Phils. Holdings, Inc. (respondent).5

On July 31, 2008, the petitioner and respondent formally executed a Collective Bargaining Agreement (CBA)
which was made effective for the period from November 1, 2007 until October 31, 2012. Under Article VII,
Section 1 thereof, there is a stipulation governing salary increases of the respondent's rank-and-file employees, as
follows:

Section 1. WAGE INCREASE

The COMPANY will grant the following:

- Effective Nov. 1, 2007, P260,000.00 - lump sum payment for the 1st year of this agreement
(taxable).
- Effective Nov. 1, 2008, across the board increase on the monthly salary in the amount of
P1,500.00.
- Effective Nov. 1, 2009, across the board increase on the monthly salary in the amount of
P1,500.00.6

In implementing the foregoing provision, the parties agreed on the following guidelines appended as Annex D of
said CBA, viz.:

Employment Status P260K P1500 P1500

  Lump Sum (Nov. 1, 2008) (Nov. 1, 2009)
Regularized on or before April 30, 2008 / / /
Regularized between May 1, 2008 and October 31, 2008 X / /
Regularized on or before April 30, 2009 X / /
Regularized between May 1, 2009 and October 31, 2009 X X /
Regularized on or before April 30, 2010 X X /
On October 6, 2009, a letter dated September 20, 2009 was sent by the petitioner's President to respondent
expressing, on behalf of its members, the concern that the aforesaid CBA provision and implementing rules were
not being implemented properly pursuant to the guidelines and that, if not addressed, might result to a salary
distortion among union members.7

On even date, respondent responded by letter denying any occurrence of salary distortion among union members
and reiterating its remuneration philosophy of having "similar values for similar jobs", which means that
employees in similarly-valued jobs would have similar salary rates. It explained that to attain such objective, it
made annual reviews and necessary adjustments of the employees' salaries and hiring rates based on the computed
values for each job.8

Finding the explanation not satisfactory, petitioner, with respondent's approval, referred the subject dispute to the
Voluntary Arbitration of the National Conciliation and Mediation Board (NCMB). It averred that respondent
breached their CBA provision on worker's wage increase because it granted salary increase even to probationary
employees in contravention of the express mandate of that particular CBA article and implementing guidelines that
salary increases were to be given only to regular employees.9

To cite an example, petitioner alleged that respondent granted salary increases of One Thousand Five Hundred
Pesos (P1,500.00) each to then probationary employees Sherwin Lanao (Lanao) and Jonel Cordovales
(Cordovales) at a time when they have not yet attained regular status. They (Lanao and Cordovales) were
regularized only on January 1, 2010 and April 16, 2010, respectively, yet they were given salary increase for
November 1, 2008. As a consequence of their accelerated increases, wages of said probationary workers equated
the wage rates of the regular employees, thereby obliterating the wage rates distinction based on merit, skills and
length of service. Therefore, the petitioner insisted that its members' salaries must necessarily be increased so as to
maintain the higher strata of their salaries from those of the probationary employees who were given the said
premature salary increases.10

On the other hand, respondent maintained that it did not commit any violation of that CBA provision and its
implementing guidelines; in fact, it complied therewith. It reasoned that the questioned increases given to Lanao
and Cordovales' salaries were granted, not during their probationary employment, but after they were already
regularized. It further asseverated that there was actually no salary distortion in this case since the disparity or
difference of salaries between Lanao and Cordovales with that of the other company employees were merely a
result of their being hired on different dates, regularization at different occasions, and differences in their hiring
rates at the time of their employment.11

After due proceedings, the Voluntary Arbitrator rendered a Decision12 dated August 16, 2010 in favor of
respondent, ruling that petitioner failed to duly substantiate its allegations that the former prematurely gave salary
increases to its probationary employees and that there was a resultant distortion in the salary scale of its regular
employees.13

Thereafter, a Petition14 for Review under Rule 65 was filed with the CA on September 22, 2010.

On November 5, 2012, the CA rendered its Decision.15 It dismissed the petition for review and sustained the
Voluntary Arbitrator's decision. The pertinent and dispositive portion of the assailed decision reads as follows:

In fine, We hold that the Voluntary Arbitrator of NCMB did not commit grave abuse of discretion
in dismissing petitioner union's complaint against respondent company. Settled is the rule that
factual findings of labor officials who are deemed to have acquired expertise in matters within their
jurisdiction, are generally accorded not only respect but even finality, and they are binding when
supported by substantial evidence. In this case, these findings are supported by competent and
convincing evidence.

WHEREFORE, premises considered, the instant petition is DISMISSED. The Decision dated 16
August 2010 of the Voluntary Arbitrator of the NCMB Regional Branch No. IV is SUSTAINED.

SO ORDERED.16

On November 28, 2012, petitioner filed its Motion17 for Reconsideration. This was, however, denied by the CA in
its Resolution18 dated May 17, 2013.
Hence, this petition.

The Issues

I.

WHETHER OR NOT THE CA GRAVELY ERRED IN HOLDING THAT RESPONDENT DID

NOT VIOLATE THE CBA IN GRANTING WAGE INCREASE OF P1,500.00 TO LANAO AND
CORDOVALES AT A TIME WHEN THEY HAD NOT YET ATTAINED REGULAR STATUS

II.

WHETHER OR NOT THE CA GRAVELY ERRED IN HOLDING THAT THE GRANT OF

WAGE INCREASE TO LANAO AND CORDOVALES IS A VALID EXERCISE OF
MANAGEMENT PREROGATIVES BY RESPONDENT

III.

WHETHER OR NOT THE CA ERRED IN NOT ORDERING RESPONDENT TO LIKEWISE

INCREASE THE RATES OF OTHER REGULAR EMPLOYEES IN ORDER TO MAINTAIN
THE DIFFERENCE BETWEEN THEIR RATES AND THOSE OF THE EMPLOYEES WHO
WERE ALLEGEDLY GRANTED PREMATURE WAGE INCREASES

Ruling of the Court

The petition is devoid of merit.

Petitioner and respondent entered into an agreement whereby employees will be granted a wage increase
depending on the date of their regularization, viz.:

Employment Status P260K P1500 P1500

  Lump Sum (Nov. 1, 2008) (Nov. 1, 2009)
Regularized on or before April 30, 2008 / / /
Regularized between May 1, 2008 and October 31, 2008 X / /
Regularized on or before April 30, 2009 X / /
Regularized between May 1, 2009 and October 31, 2009 X X /
Regularized on or before April 30, 2010 X X /

Petitioner claims that Lanao and Cordovales having been regularized only on January 1, 2010 and April 16, 2010,
respectively, are not covered by the P260,000.00 lump sum and the initial P1500.00 wage increase effective on
Nov. 1, 2008. It appears, however, that based on the actual pay slips of union members, Lanao and Cordovales
both received wage increase in the amount of P1500.00 effective Nov. 1, 2008 and that such increase was
immediately granted to them at the time of their hiring which resulted to the increase of their salaries to
P36,500.00 per month.

It is further stressed by petitioner that the increase granted by respondent to Lanao and Cordovales are violative of
the terms of the CBA, specifically Section 1, Article VII and Annex D, for the reason that these employees have
not yet attained "Regular" status at the time they were granted a wage increase and thus resulting to a salary/wage
distortion.

Respondent, for its part, claims that the alleged "increase" in the wages of these employees was not due to
application of the provisions of Article VII and Annex D of the CBA, rather it was brought about by the increase
in the hiring rates at the time these employees were hired. As a matter of fact, a careful scrutiny of the records
reveals that respondent have complied with the terms agreed upon in the CBA.
Notably, respondent's reply to the petitioner's letter accusing them of violation of the terms of the CBA and
holding them responsible for the alleged wage distortion, clarified the ambiguity with regard to the hiring
rates, viz.:

As for the perceived salary distortion among Union members resulting from the non-
implementation of the guidelines on Article VH-Salaries and Allowances, Section 1 - Wage
Increase, Annex D of the CBA 2007-2012, we would like to reiterate our discussion during the
recent NLMC meeting of September 16, on Chevron's remuneration philosophy of having "similar
value for similar jobs" which simply states that employees in similarly valued jobs will have similar
salary rates. Salaries and hiring rates are reviewed annually and adjusted as necessary based on the
computed values of each job, an employee's tenure or seniority in his/her current position will not
influence the value of the job.19 (Underlining Ours)

Clearly then, the increase in the salaries of Lanao and Cordovales was not pursuant to the wage increase agreed
upon in CBA 2007-2012 rather it was the result of the increase in hiring rates at the time they were hired.

To illustrate, in its Reply,20 respondent discussed the difference in the hiring rates of employees Lanao and Robert
Gawat, viz.:

Mr. Robert Gawat was regularized on April 16, 2007 having been hired on October 16, 2007 while
Mr. Lanao as shown in the Company's position paper was regularized on January 1, 2010, having
been hired only on July 1, 2009. At the time of Mr. Gawat's hiring, the hiring rate for Pay
Grade 12 was P31,800.00. On April 16, 2007, Mr. Gawat was given a CBA salary increase under
the 2002-2007 CBA of P1,700.00 per month which increased his pay to P33,500.00 per month. He
received another CBA salary increase of P1,500.00 under the 2007-2012 CBA on November 1,
2008, thus increasing his pay to P35,000.00. On November 1, 2009, he received another salary
increase of P1,500.00 under the 2007-2012 CBA which further increased his pay to P36,500.00 per
month until the present.

On the other hand, when Mr. Lanao was hired on July 9, 2009, the hiring rate at the time for
employees falling under Pay Grade 12 was already P35,000.00, having been adjusted by the
company in accordance with market and industry practice. On January 1, 2010, Mr. Lanao was
regularized and as dictated by the CBA, he was given a CBA salary increase of P1,500.00 per
month effective January 1, 2010 which increased his monthly pay at the present to
P36,500.00.21 (Emphasis and underlining Ours)

As shown above, the respondent never violated the CBA and in fact, complied with it to the letter. Clearly, the
petitioner only used the respondent's alleged violation of the CBA when its true gripe is related to the respondent's
prerogative of setting the hiring rate of the employees over which the petitioner neither has the personality nor the
privilege to meddle or interfere with.22

The second and third issue, being interrelated, shall be discussed jointly.

Upon the enactment of Republic Act (R.A.) No. 6727 (Wage Rationalization Act, amending among others, Article
124 of the Labor Code) on June 9, 1989, the term "Wage Distortion" was explicitly defined as "a situation where
an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative
differences in wage or salary rate between and among employee groups an establishment as to effectively
obliterate the distinctions embodied in such wage structure based on skills, length of service or other logical bases
of differentiation."23

Contrary to petitioner's claim of alleged "wage distortion", Article 124 of the Labor Code of the Philippines only
cover wage adjustments and increases due to a prescribed law or wage order, viz.:

Article 124. Standards/Criteria for Minimum Wage Fixing.

xxxx

Where the application of any prescribed wage increase by virtue of a law or Wage Order issued
by any Regional Board results in distortions of the wage structure within an establishment, the
employer and union shall negotiate to correct the distortions. Any dispute arising from the wage
 distortions shall be resolved through the grievance procedure under their collective bargaining
agreement and, if it remains unresolved, through voluntary arbitration.24 (Emphasis Ours)

Prubankers Association v. Prudential Bank and Trust Company 25 laid down the four elements of wage distortion,
to wit: (1) an existing hierarchy of positions with corresponding salary rates; (2) a significant change in the salary
rate of a lower pay class without a concomitant increase in the salary rate of a higher one; (3) the elimination of the
distinction between the two levels; and (4) the existence of the distortion in the same region of the country.

The apparent increase in Lanao and Cordovales' salaries as compared to the other company workers who also have
the same salary/pay grade with them should not be interpreted to mean that they were given a premature increase
for November 1, 2008, thus resulting to a wage distortion. The alleged increase in their salaries was not a result of
the erroneous application of Article VII and Annex D of the CBA, rather, it was because when they were hired by
respondent in 2009, when the hiring rates were relatively higher as compared to those of the previous years.
Verily, the setting and implementation of such various engagement rates were purely an exercise of the
respondent's business prerogative in order to attract or lure the best possible applicants in the market and which
We will not interfere with, absent any showing that it was exercised in bad faith.

Management prerogative gives an employer freedom to regulate according to their discretion and best judgment,
all aspects of employment including work assignment, working methods, the processes to be followed, working
regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of
workers.26 This right is tempered only by these limitations: that it must be exercised in good faith and with due
regard to the rights of the employees.27

Petitioner claims that the wages of other employees should also be increased in order to maintain the difference
between their salaries and those of employees granted a "premature" wage increase. Such a situation may be
remedied if it falls under the concept of a wage distortion as defined by Article 124 of the Labor Code of the
Philippines. However, as already discussed, there is no wage distortion in the case at bench. Not all increases in
salary which obliterate the salary differences of certain employees should be perceived as wage distortion.

In the case of Bankard Employees Union-Workers Alliance Trade Unions v. National Labor Relations
Commission,28 the Court discussed the possible implication of an expanded interpretation of the concept of Wage
Distortion, to wit:

If the compulsory mandate under Article 124 to correct "wage distortion" is applied to voluntary
and unilateral increases by the employer in fixing hiring rates which is inherently a business
judgment prerogative, then the hands of the employer would be completely tied even in cases where
an increase in wages of a particular group is justified due to a re-evaluation of the high productivity
of a particular group, or as in the present case, the need to increase the competitiveness of Bankard's
hiring rate. An employer would be discouraged from adjusting the salary rates of a particular group
of employees for fear that it would result to a demand by all employees for a similar increase,
especially if the financial conditions the business cannot address an across-the-board increase.29

The Court's ruling in the case of Bankard seek to address and resolve conflicting opinions regarding the true
concept of a wage distortion like the one presented in this case whereby a legitimate exercise by an employer of its
management prerogative is being taken against it in the guise of an allegation that it is circumventing labor laws.
An employer should not be held hostage by the whims and caprices of its employees especially when it has
faithfully complied with and executed the terms of the CBA.

It is the prerogative of 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 or circumventing the rights of the employees under special laws or agreements and are
not exercised in a malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite.30

On a final note, the Court has ruled time and again that factual findings of labor officials, who are deemed to have
acquired expertise in matters within their jurisdiction, are generally accorded not only respect but even finality by
the courts when supported by substantial evidence and affirmed by the CA, in the exercise of its expanded
jurisdiction to review findings of the National Labor Relations Commission.
WHEREFORE, premises considered, the petition is DENIED. The Decision dated November 5, 2012 of the
Court of Appeals in CA-G.R. SP No. 115796 is hereby AFFIRMED.

SO ORDERED.
 SECOND DIVISION
[ G.R. No. 218984, January 24, 2018 ]
ARMANDO M. TOLENTINO (DECEASED), HEREIN REPRESENTED BY HIS SURVIVING SPOUSE
MERLA F. TOLENTINO AND CHILDREN NAMELY: MARIENELA, ALYSSA, ALEXA, AND AZALEA,
ALL SURNAMED TOLENTINO, PETITIONERS, VS. PHILIPPINE AIRLINES, INC., RESPONDENT.

DECISION
CARPIO, J.:

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court. Petitioners [1] Merla F. Tolentino, as
the surviving spouse of Armando M. Tolentino (Tolentino), and Marienela, Alyssa, Alexa and Azalea, all
surnamed Tolentino, as the children of Tolentino, challenge the  30 September 2014 Decision[2] and 10 June 2015
Reso1ution[3] of the Court of  Appeals (CA) in CA-G.R. SP No. 132519 which affirmed the 28 June 2013 
Decision[4] and 27 August 2013 Resolution[5] of the National Labor Relations  Commission (NLRC) and the 14
March 2013 Decision[6] of the Labor Arbiter.
The Facts

Tolentino was hired by respondent Philippine Airlines, Inc. (PAL) as a flight engineer on 22 October 1971. By 16
July 1999, Tolentino had the rank of A340/A330 Captain. As a pilot, Tolentino was a member of the Airline Pilots
Association of the Philippines (ALPAP), which had a collective bargaining agreement (CBA) with PAL.

On 5 June 1998, ALPAP members went on strike. On 7 June 1998, the Secretary of Labor issued an Order
requiring all striking officers and members of ALPAP to return to work within 24 hours from receipt of the Order
and requiring PAL management to accept them under the same terms and conditions of employment prior to the
strike. On 8 June 1998, the Secretary of Labor served the Order on the officers of ALPAP. While the union
officers and members had until 9 June 1998 to comply with the directive of the Secretary of Labor, some pilots –
including Tolentino – continued to participate in the strike.

On 26 June 1998, when Tolentino and other striking pilots returned to work, PAL refused to readmit these
returning pilots. Thus, they filed a complaint for illegal lockout against PAL. On 20 July 1998, Tolentino reapplied
for employment with PAL as a newly hired pilot, and thus voluntarily underwent the six months probationary
period. After less than a year, Tolentino tendered his resignation effective 16 July 1999.

Meanwhile, on 1 June 1999, the Secretary of Labor issued a Resolution declaring the strike conducted by ALPAP
on 5 June 1998 illegal for being procedurally infirm and in open defiance of the return-to-work order of 7 June
1998. Members and officers of ALPAP who participated in the strike in defiance of the 7 June 1998 return-to-
work order were declared to have lost their employment status. This resolution was affirmed by this Court on 10
April 2002.

Tolentino worked for a foreign airline, and thereafter returned to the Philippines. Upon his return, he informed
PAL of his intention of collecting his separation and/or retirement benefits under the CBA. PAL refused to pay
Tolentino the separation and/or retirement benefits as stated in the CBA. Tolentino filed his complaint against
PAL for non-payment of holiday pay, rest day pay, separation pay, and retirement benefits with prayer for the
payment of damages and attorney's fees.

The Ruling of the Labor Arbiter

On 14 March 2013, the Labor Arbiter rendered his Decision dismissing the complaint of Tolentino. The Labor
Arbiter found that Tolentino was not entitled to separation pay and other benefits as he was not illegally dismissed,
having participated in the illegal strike and defied the return-to-work order of the Secretary of Labor. The Labor
Arbiter also denied the claim for retirement benefits because Tolentino resigned from work less than a year after
he was rehired by PAL. The Decision states in part:

Since it is admitted that complainant participated in a strike prohibited by the law and the Secretary
of Labor's. Return To Work Order, he was validly dismissed and is therefore not entitled to
 separation pay. As for his claims for holiday pay and rest day pay, it should be emphasized that he
was considered a new hire when he rejoined Philippine Airlines in July 1998. Complainant
underwent the probationary period which ended only on January 25, 1999. Six [6] months later, he
tendered his resignation effective July 16, 1999. Given these, complainant cannot tuck [sic] in
whatever seniority or benefits he had prior to the cessation of his employment on June 9, 1998.[7]

On 4 April 2013, petitioners appealed the Decision of the Labor Arbiter to the NLRC.[8]

The Ruling of the NLRC

On 28 June 2013, the NLRC affirmed the Decision of the Labor Arbiter, finding that Tolentino was not entitled to
holiday pay, rest day pay, separation pay, retirement benefits, and moral and exemplary damages. [9] The NLRC
found that (1) the severance of Tolentino's employment was not due to any of the authorized causes under the
Labor Code of the Philippines; (2) Tolentino was validly terminated from employment because of his participation
in the illegal strike; and (3) when he resigned after he reapplied with PAL, he was not able to complete the
required period of five years of continuous service under the CBA.

The Motion for Reconsideration[10] was denied by the NLRC in its Resolution dated 27 August 2013.[11] Thereafter,
petitioners filed a petition for certiorari under Rule 65 before the CA on 4 November 2013.[12]

The Ruling of the CA

In a Decision dated 30 September 2014, the CA affirmed, with modification, the 28 June 2013 Decision and 27
August 2013 Resolution of the NLRC. The CA found that under the CBA, Tolentino was entitled to the payment
of his vacation time and days off earned but not taken. The CA held:

Considering the foregoing provisions, Tolentino's separation from work entitles him to payment of
his vacation time and days off earned but not taken. Tolentino has rendered 25 continuous years of
service to respondent company, hence, he is entitled to 27 calendar days of paid annual vacation
leave. Furthermore, considering that the CBA only mentions separation from the company to justify
the claim for vacation pay, but is silent on the forfeiture of the benefit upon valid tern1ination of an
employee from the service, we are constrained to grant the same, in light of the rule that in case of
doubt, labor contracts shall be construed in favor of the worker.

WHEREFORE, the June 28, 2013 Decision and August 27, 2013 Resolution of the NLRC are
AFFIRMED, with MODIFICATION, ordering private respondent Philippine Airlines, Inc. to pay
Tolentino's accrued vacation leave equivalent to 27 calendar days of his salary.[13]

Petitioners filed a Motion for Partial Reconsideration dated 1 November 2014 alleging that Tolentino was entitled
to (1) the retirement benefits under the CBA; (2) the return of his equity in the retirement fund under the PAL
Pilots' Retirement Benefit Plan; and (3) the payment of moral and exemplary damages and attorney's fees.[14]

On the other hand, PAL filed its Motion for Partial Reconsideration dated 3 November 2014. In its Motion, PAL
argued that Tolentino was not entitled to his supposed accrued vacation leave pay considering that (1) the payment
of his alleged benefits had already been dismissed by this Court; (2) he had never prayed for the payment of his
vacation leave pay; and (3) the company's policy on forfeiture of benefits and privileges upon the dismissal of an
employee prevails over the CBA.[15]

In a Resolution dated 10 June 2015,[16] the CA denied the Motion for Partial Reconsideration filed by petitioners.
Hence, this petition.

The Issues

Petitioners seek a partial reversal of the decision of the CA and raise the following arguments:
 [A.] The Honorable Court of Appeals seriously erred and committed grave abuse of discretion
when it did not rule that petitioner-heirs are entitled to receive Capt. Tolentino's retirement benefits
under the Collective Bargaining Agreement with respondent;

[B.] The Honorable Court of Appeals seriously erred and committed grave abuse of discretion when
it failed to rule that petitioner-heirs are entitled to the return of Capt. Tolentino's equity in the
retirement fund under the PAL Pilot[s'] Retirement Benefit Plan; and

[C.] The Honorable Court of Appeals seriously erred and committed grave abuse of discretion when
it failed to award petitioner-heirs with payment for damages and attorney's fees.[17]

The Ruling of the Court

We deny the petition.

An employee who knowingly defies a return-to-work order issued by the Secretary of Labor is deemed to have
committed an illegal act which is a just cause to dismiss the employee under Article 282 of the Labor Code.
In PAL, Inc. v. Acting Secretary of Labor,[18] we held:

A strike that is undertaken despite the issuance by the Secretary of Labor of an assumption and/or
certification is a prohibited activity and thus illegal. The union officers and members, as a result,
are deemed to have lost their employment status for having knowingly participated in an illegal act.
Stated differently, from the moment a worker defies a return-to-work order, he is deemed to have
abandoned his job. The loss of employment status results from the striking employees' own act
— an act which is illegal, an act in violation of the law and in defiance of authority. (Emphasis
supplied)

In fact, it has already been settled that those who participated in the 5 June 1998 strike of ALPAP are deemed to
have lost their employment status with PAL.[19] In Rodriguez v. Philippine Airlines, Inc.,[20] we held:

In the 1st ALPAP case, the Court upheld the DOLE Secretary's Resolution dated June 1, 1999
declaring that the strike of June 5, 1998 was illegal and all ALPAP officers and members who
participated therein had lost their employment status. The Court in the 2nd ALPAP case ruled
that even though the dispositive portion of the DOLE Secretary's Resolution did not specifically
enumerate the names of those who actually participated in the illegal strike, such omission cannot
prevent the effective execution of the decision in the 1st ALPAP case. The Court referred to the
records of the Strike and Illegal Lockout Cases, particularly, the logbook, which it unequivocally
pronounced as a "crucial and vital piece of evidence." In the words of the Court in the 2nd ALPAP
case, "[t]he logbook with the heading 'Return-To-Work Compliance/Returnees' bears their
individual signature[s] signifying their conformity that they were among those workers who
returned to work only on June 26, 1998 or after the deadline imposed by DOLE. x x x In fine, only
those returning pilots, irrespective of whether they comprise the entire membership of ALPAP, are
bound by the June 1, 1999 DOLE Resolution." (Emphasis supplied)

Thus, Tolentino, who did not deny his participation in the strike and his failure to promptly comply with the
return-to-work order of the Secretary of Labor, could not claim any retirement benefits because he did not retire –
he simply lost his employment status.

Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer and the
employe whereby the latter, after reaching a certain age, agrees to sever his or her employment with the former.
[21]
 It is clear, therefore, Tolentino had not retired from PAL – it was not a result of a voluntary agreement.
Tolentino lost his employment status because of his own actions.

Admittedly, Tolentino was hired again by PAL on 20 July 1998. [22] This was after he reapplied with the company.
He also voluntarily completed the probationary period of six months. It was made clear to Tolentino, and he
certainly admitted, that he was rehired on the condition that his employment would be as a new hire.
[23]
 Reemployment, on the condition that the employee will be treated as a new employee, is a valid exercise of the
employer's prerogative, as long as it is not done with anti-union motivation. In Enriquez v. Zamora,[24] this Court
held:

Enriquez and Ecarma were, therefore, new employees with entirely new seniority rankings when
they were readmitted by PAL on January 18, 1971 and January 12, 1971, respectively. Certainly,
PAL was merely exercising its prerogative as an employer when it imposed two conditions for the
reemployment of petitioners inasmuch as hiring or rehiring policies are matters for the company's
management to determine in the absence of an anti-union motivation.[25]

On 16 July 1999, or less than one year after he was rehired as a new pilot, Tolentino resigned from PAL. In this
instance, Tolentino had voluntarily resigned from work. However, the act of resignation alone does not entitle him
to retirement benefits which he claimed under the PAL-ALPAP Retirement Plan. Article VII of the PAL-ALPAP
Retirement Plan Rules and Regulations provides:

ARTICLE VII
Retirement Benefits

Section 1. Normal Retirement. (a) Any member who completes twenty (20) years of
service as a pilot for PAL or has flown 20,000 hours for PAL shall be eligible for
normal retirement. The normal retirement date is the date on which he completes
twenty (20) years of service or on which he logs his 20,000 hours as a pilot for PAL.
The Member who retires on his normal retirement shall be entitled either (a) to a
lump sum payment of P100,000.00 or (b) to such termination pay benefits to which
he may be entitled under existing laws, whichever is the greater amount.

Section 2. Late Retirement. Any Member who remains in the service of the

Company after his normal retirement date may retire either at his option or at the
option of the Company, and when so retired he shall be entitled either (a) to a lump
sum payment of P5,000.00 for each completed year of service rendered as a pilot, or
(b) to such termination pay benefits to which he may [sic] entitled under existing
laws, whichever is the greater amount.

Section 3. Resignation Benefit. Any Member who completes five (5) years of

continuous service with the Company may retire a[t] his option. In such event, he
shall only be entitled to the following percentage or P5,000.00 for each completed
year of service as a pilot, multiplied by the applicable percentage as shown below:

x x x x[26]

Based on the foregoing, Tolentino is not entitled to any of the retirement benefits under the PAL-ALPAP
Retirement Plan. He had not completed even one year of his new employment with PAL. The Rules and
Regulations of the PAL-ALPAP Retirement Plan provide that the member-pilot must have completed at least five
years of continuous service with PAL to be entitled to the resignation benefit. His resignation in July 1999, which
was only about a year from when he was rehired by the company, did not qualify him for such resignation benefit.

Petitioners argue that Tolentino had been a pilot for PAL for more than 20 years since his employment on 22
October 1971, and thus he was qualified for normal retirement under the first section of Article VII of the PAL-
ALPAP Retirement Plan.

We disagree.

For purposes of the retirement plan, the computation of Tolentino's length of service to the company should be
reckoned from the date he was rehired after his own voluntary application as a new pilot. His services from
October 1971 to June 1998 cannot be tacked to his new employment starting in July 1998 because the first
employment had already been finally terminated – not due to his voluntary resignation or retirement, but because
of termination due to just causes. Tolentino joined an illegal strike and defied the return-to-work order of the
Secretary of Labor. At this point, he had already lost his employment status with PAL.
Petitioners cannot rely on the case of Enriquez v. Zamora[27] to argue that once a pilot meets the requirements
under the CBA, the payment of the retirement benefits "ipso facto accrues and may be demanded when the
employment relationship is severed, regardless of the reason therefor"[28] because first,  there was no such
declaration in the cited case; second,  the issue in the case was about the seniority of the returning pilots;
and third, the case has an entirely different factual milieu from the case at bar. In Enriquez v. Zamora,[29] the pilots
tendered their mass resignation while in the present case, no resignation was tendered – Tolentino and the others
were terminated because of their participation in an illegal strike and their subsequent non-compliance with the
return-to-work order. The Court held that Enriquez was entitled to the retirement benefits because precisely, he
retired – he voluntarily severed his employment with PAL. While Enriquez argued that he did not genuinely desire
to terminate his employment and that the resignation was tendered as a matter of protest, the fact remained that a
resignation was tendered, and PAL had accepted it. On the other hand, in the present case, when Tolentino was
first separated from PAL, there was no resignation to speak of – nothing was tendered to PAL for it to accept.

The requirements under the PAL-ALPAP Retirement Plan must be present at the time the employee resigns or
retires from PAL. Unfortunately for Tolentino, when he finally tendered his resignation with PAL, he was no
longer compliant with the requirements for the retirement benefit – as a new hire, he only completed less than one
year of service. Therefore, he is not entitled to any retirement or resignation benefits under the PAL-ALPAP
Retirement Plan.

Retirement benefits, especially those which are given before the mandatory retirement age, are given as a form of
reward for the services rendered by the employee to the employer.[30] Thus, it would be contrary to the rationale of
retirement benefits to reward an employee who was terminated due to just cause, or who committed an act that was
enough to merit his dismissal.

Additionally, petitioners argue that Tolentino is also entitled to the equity in the retirement fund under the PAL
Pilots' Retirement Benefit Plan, which is separate from the retirement benefits under the PAL-ALPAP Retirement
Plan.

While we recognize that the two benefits are indeed separate and distinct from each other, we find that Tolentino is
entitled to neither.

The PAL Pilots' Retirement Benefit Plan is a retirement fund raised exclusively from the contributions of PAL.
[31]
 Contrary to petitioners' claim that the retirement fund comes from salary deductions, [32] we find that it is non-
contributory and there is no financial burden on the pilots for the establishment of this fund. The PAL Pilots'
Retirement Benefit Plan specifically provides:

2.9 "Retirement Fund" shall mean the company's contributions to the Trust Fund established
under or in connexion [sic] with this Plan in the Participant[s'] behalf plus/minus earnings/losses
and less expenses charged to the Fund and benefit payments previously made. The Retirement Fund
shall consist of the participants' equity and the forfeitures.

xxxx

6.1 The Plan will be wholly financed by the Company. No contributions will be required from
the participants of the Plan. The funding of the Plan and payment of the benefits hereunder shall
be provided for through the medium of a Retirement Fund held by a trustee under an appropriate
trust agreement. All contributions made by the Company to the Retirement Fund shall be solely and
exclusively for the benefit of the participants or their beneficiaries, and no part of said contributions
or its income shall be used for or diverted to purposes other than the exclusive benefit of such
employees and their beneficiaries. None whatsoever shall revert to the Company.[33] (Emphasis
supplied)

In Philippine Airlines, Inc. v. Airline Pilots Association of the Philippines,[34] this Court held:

The PAL Pilots' Retirement Benefit Plan is a retirement fund raised from contributions
exclusively from petitioner of amounts equivalent to 20% of each pilot's gross monthly pay. Upon
retirement, each pilot stands to receive the full amount of the contribution. In sum, therefore,
the pilot gets an amount equivalent to 240% of his gross monthly income for every year of service
 he rendered to petitioner. This is in addition to the amount of not less than P100,000.00 that he shall
receive under the 1967 Retirement Plan. (Boldfacing and underscoring supplied)

Again, similar to the retirement benefits under the PAL-ALPAP Retirement Plan, it is clear that the pilot must
have retired first before he receives the full amount of the contribution or the equity of the retirement fund. As
earlier established, Tolentino never retired. When he was first separated from work, it was not due to resignation
or retirement – he simply lost his employment status as a result of his participation in the illegal strike and failure
to promptly comply with the return-to-work order of the Secretary of Labor. When he resigned from work after
subsequently being rehired by PAL, it could not be said that he retired as he barely completed one year of service.
Simply put, he was not able to satisfy the retirement requirements. As Tolentino was not a retiring pilot, he was
not entitled to receive the return of equity in the retirement fund. Only pilots who are retiring – who have
satisfactorily met the requisites for retirement – are entitled to the full equity of the contribution. Moreover, since
the contribution to the fund was exclusively from PAL, with no participation from the employees, Tolentino is not
entitled to any amount from the PAL Pilots' Retirement Benefit Plan.

Further, we find that PAL's Personnel Policies and Procedures Manual,[35] which provides that generally, a
dismissed employee forfeits all his entitlements to the company benefits and privileges, is a valid employer policy
which is applicable to Tolentino. PAL's assertion that the loss of employment of Tolentino carried with it the
forfeiture of his benefits and privileges, which include retirement benefits under the PAL-ALPAP Retirement Plan
and the equity in the retirement fund under the PAL Pilots' Retirement Benefit Plan, is meritorious.

We also find no reversible error in the denial of Tolentino's claim for damages and attorney's fees. Based on the
foregoing, there is no basis to grant any of the damages claimed. Finally, we note that PAL did not question the
order for the payment of Tolentino's accrued vacation leave. Thus, this Court will not review the same.

WHEREFORE, the petition is DENIED. The assailed 30 September 2014 Decision and 10 June 2015 Resolution
of the Court of Appeals in CA-G.R. SP No. 132519 are AFFIRMED.

SO ORDERED.