CHAPTER 12 2.
Formulation of policies affecting its administration and
COMPULSORY ARBITRATION
THE NATIONAL LABOR RELATIONS COMMISSION
 The National Labor Relations Commission (NLRC) is a
24 man tripartite body composed of representatives from
the public sector, workers' sector and employers sector.
 It has eight division each composed of three members
of the eight divisions, the first. second, third, fourth,
fifth and sixth divisions handle cases coming from
Luzon, while the seventh division handles cases from
Visayas and the eighth division handles cases from
Mindanao.
 The NLRC exercises its quasi-judicial powers through its
divisions. The presence of at least two Commissioners of
a Division shall constitute a quorum.
 The concurrence of two Commissioners of a Division
is necessary for the pronouncement of a judgment or
resolution.
 Whenever the required membership in a division is not
complete and the concurrence of two commissioners
to arrive at a judgment or resolution cannot be
obtained, the Chairman can designate a
Commissioner from other divisions.
 The NLRC sits en banc only when exercising the following
functions
1. Promulgation of rules governing the hearing and
disposition of cases,
operations, and
3. Granting of temporary authorization for a particular
division to hear and decide cases of another division.
 When the NLRC ta en banc, the presence of majority of all
its members is necessary to constitute a quorum.
 The vote or concurrence of majority of the members
constituting a quorum shall be the decision or
resolution en banc.
 To qualify as an NLRC Commissioner, a person must
meet the following criterin
1. Member of the Philippine Bar
2. At least 15 years in the practice of law
3. At least five years experience in the field of labor
management relations
4. Preferably s resident of the region where they shall hold
office.
 NLRC Commissioners hold office until the age of 65 years,
extendible up to the maximum age of 70 upon the
recommendation of the NLRC en banc.
 The NLRC Chairman and the Commissioners have the
same rank, salary and allowances, retirement and benefit
those of the Presiding Justice and Associate Justices of
the Court of Appeals, respectively.
Jurisdiction of the NLRC
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 1. Original and Exclusive Jurisdiction:
a. Cases certified to it by the Secretary of Labor and
Employment pursuant to Article 278) of the Labor Cod
and
b. Injunction cases under Article 226 and 270 of the Labor
Code.
2. Appellate Jurisdiction
a. Cases decided by the Labor Arbiters.
b. Cases decided by the DOL Regional Director under
Article 129 of the Labor Code.
THE REGIONAL ARBITRATION BRANCHES
 The NLRC has regional arbitration branches which handle
the compulsory arbitration of cases.
 These regional arbitration branches are manned by
Labor Arbiters and headed by an Executive Labor
Arbiter.
 To qualify as a Labor Arbiter, a person must meet the
following criteria:
1. Member of the Philippine Bar,
2. Engaged in the practice of law at least 10 years
3. At least five years experience in the field of labor
management relations.
 Labor Arbiters hold office until the age of 65 years,
extendible up to the maximum age of 70 upon the
recommendation of the NLRC en banc.
 Labor Arbiters have the same rank, annual salary,
allowances, retirement and other benefits and privileges
as those of judges of the Regional Trial Courts
Jurisdiction of Labor Arbiters
 Labor Arbiters have original and exclusive jurisdiction to
hear and decide the following cases involving all workers,
whether agricultural or non-agricultural
1. Unfair labor practice canes
2. Termination disputes,
3. Money claims of workers (regardless of amount) if
there is a prayer for reinstatement,
4. Money claims of workers exceeding P5,000.00 (even
without prayer for reinstatement):
5. Claims for damages arising from employer employee
relations’
6. Violation of Article 279 of the Code, including legality
of strikes and lockouts and
7. All other claims arising from employer-employee
relations, except claims for employees compensation,
social security, medicare, and maternity benefits.
The Unifying Element
 The unifying element in the jurisdictional grant is
"employer- employee relationship.
 Without this critical element of employment
relationship, the Labor Arbiter and the NLRC cannot
acquire jurisdiction over a dispute.
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The Reasonable Causal Connection Doctrine
 For the Labor Arbiter to acquire jurisdiction, the claim
must have a reasonable causal connection with employer
employee relationship.
 A claim is said to have a reasonable causal connection
with employer employee relationship if the principal
relief sought can be resolved only by reference to the
Labor Code or other labor laws and not by the general
civil law.
 Applying this doctrine, the Labor Arbiter cannot take
cognizance over a complaint filed by the employer
against the employee for sum of money arising from a
loan.
 The reason is because the complaint is not a labor
dispute but a civil controversy as it involves debtor
creditor relations, rather than employer-employee
relation.
 Similarly, an action filed by the employer for recovery of
car that was issued to the employee pursuant to the car
plan policy of the company is also beyond the jurisdiction
of the Labor Arbiter because recovery of car is not a
labor but a civil dispute as it does not involve employer
employee relationship but debtor creditor relationship.
 A complaint for separation pay of its security guards, filed
by a security agency against its principal, does not fall
under the jurisdiction of the Labor Arbiter because there
is no employer employee relation between security
agency its security guards, on the one hand, and the
principal, on the other hand.
 Along the same line, a cross-claim (pleaded in the
labor case) by a principal against the security agency,
for reimbursement of unpaid wages that may be
awarded to the security guards, falls beyond the
jurisdiction of the Labor Arbiter because there is no
employer employee relationship between the security
agency and the principal.
 The cross claim is a civil dispute (not a labor dispute)
between the security agency and the principal.
Exceptional Cases That Fall Beyond the Jurisdiction
of Labor Arbiters
 By express provision of Article 224 36 of the Labor Code,
the following claims are excluded from the jurisdiction of
the Labor Arbiter
1. claims for employees compensation benefits:
2. claims for social security benefits, including maternity
benefits:
3. claims for PhilHealth benefits
4. pure money claims of employees not exceeding
P5,000.00.
 While Article 224 of the Labor Code peak of original and
exclusive jurisdiction of Labor Arbiters over all claims
arising from employer-employee relations, the Labor
Code allows certain agencies to take cognizance over
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 certain matters that fall within the original and exclusive
jurisdiction of the Labor Arbiter.
 Thus
 Under Article 27 of the Labor Code, voluntary
arbitrators can and decide unfair labor practices and all
other labor disputes, upon agreement of the parties"
 Under Article 27 of the Labor Code the Secretary of
Labor and Employment is authorized to assume
jurisdiction over a labor dispute causing or likely to
cause a strike or lockout in an industry indispensable to
national interest.
 This authority embraces all questions and
controversies arising therefrom, such as unfair labor
practices, legality of strike and other cases falling
within the exclusive jurisdiction of labor arbiters.
Unfair Labor Practice Cases
 The allegation in the complaint will determine whether the
suit is an unfair labor practice case.
 If the complaint alleges any of the unfair labor practice
acts enumerated in Articles 259 and 260 of the Labor
Code, the case will fall under the jurisdiction of the
Labor Arbiter.
Termination Disputes
 The jurisdiction of Labor Arbiters over termination
disputes does not cover
1. Termination disputes arising from interpretation or
implementation of collective bargaining agreement or
company personnel policies, an
2. Termination disputes involving corporate officers.
Termination Disputes Arising From Implementation of
CBA or Personnel Policies
 Labor Arbiters do not have jurisdiction over termination
disputes arising from interpretation or implementation of
CBA or company personnel policies.
 Under Article 274 of the Labor Code, the jurisdiction
over termination disputes arising from interpretation or
implementation of CBA or company personnel policies
is vested with voluntary arbitrators.
 Disciplinary rules are different from personnel policies in
the sense that personnel policies are non-punitive, while
disciplinary rules and regulations are punitive in
character, dealing as it does, with employee discipline.
 Termination of employment resulting from enforcement
of disciplinary rules falls within the original and
exclusive jurisdiction of the Labor Arbiter.
 In the case of Maneja v. NLRC the employee was
dismissed from her employment for falsifying official
documents.
 She filed a complaint for illegal dismissal with the
Labor Arbiter.
 The employer challenged the jurisdiction of the Labor
Arbiter on the ground that the case pertains to
interpretation or implementation of company personnel
policies which falls within the jurisdictional ambit of
voluntary arbitration.
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  The Supreme Court held that the Labor Arbiter has
jurisdiction.
 The dismissal of the employee does not pertain to
interpretation or enforcement of company personnel
policies -- it pertains to enforcement of disciplinary
rules.
The Delineation of Jurisdiction
 If the termination dispute is just in the interpretation or
implementation stage, the matter is cognizable by the
voluntary arbitrator.
 Here, the issue is whether the employee can be
validly dismissed under the terms of the CBA or
company policy.
 On the other hand, if there is already an actual
termination the dispute is cognizable by the Labor
Arbiter.
 Here, the issue is whether the dismissal is valid.
 In the case of Sanyo Philippines Workers Union v
Canizares, the Union which had a CBA containing a
union security stipulation, expelled 12 of its members
because of anti-union activities, for which reason, it
recommended to the employer the dismissal of the said
members.
 The employer approved the recommendation and
consequently dismissed the said union members.
 The dismissed union members filed a complaint for
illegal dismissal with the Labor Arbiter.
 The Union challenged the jurisdiction of the Labor
Arbiter on the round that the matter pertains to
interpretation or implementation of the union security
stipulation in the CBA, the jurisdiction of which is
vested with voluntary arbitrators. The Supreme Court
held that the Labor Arbiter has jurisdiction over the
case.
 Although the dismissal of the employee concerned
was made pursuant to the union security stipulation
in the CBA, there is no dispute between Union and
the employer about the interpretation or
implementation of the said provision, because both
the Union and the employer are in agreement that
the employees concerned could be validly dismissed
under the union security provision of the CBA.
 In the case of Pantranco North Express, Inc. v NLRC
union member was retired by the employer pursuant to
the retirement provision in the CBA.
 The union member filed with the Labor Arbiter a
complaint for illegal dismissal.
 The employer challenged the jurisdiction of the
Labor Arbiter on the ground that the dispute
concerns interpretation of a provision of the
retirement provision of the CBA, the jurisdiction of
which falls under the voluntary arbitrator.
 The Supreme Court held that the Labor Arbiter has
jurisdiction over the case, because there is no
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 dispute between the Union and the employer about
implementation or interpretation of the retirement
provision of the CBA.
 It was only the employee (on his own) who
questioned the compulsory retirement
Termination Disputes Involving Corporate Officers
 Corporate officers refer to the president vice president,
secretary, treasurer and other offices created by the
charter, by-laws or by the board of directors.
 Labor Arbiters do not have jurisdiction over termination of
corporate officers because dismissal of corporate officers
is not a labor dispute but an intra-corporate controversy.
 Cases involving termination of corporate officers fall
under the jurisdiction of the Regional Trial Court
 In the case of Espino v. NLRC the Executive Vice
President Chief Operating Officer was elected as such by
the Board of Directors for a term of one year and until his
successor is elected and qualified.
 After serving for almost three years, the Board of
Directors considered him as resigned from service for
loss of confidence.
 As a result, he filed with the Labor Arbiter a complaint
for illegal dismissal with prayer for reinstatement,
backwages and damages.
 The Supreme Court held that the Labor Arbiter has no
jurisdiction, because the position of Executive Vice
President/Chief Operating Officer is a corporate office
under the Amended By Laws of the Company.
 Although the claims may appear to fall under the
jurisdiction of the Labor Arbiter, a close examination
reveals that they are part of the perquisites of his
corporate position, hence, intimately linked with his
relations with the corporation
 In the case of Tabang v NLRC, the Medical
Director/Hospital Administrator was appointed as such by
the Board of Trustees.
 Under the by laws of the Company, the medical
director and hospital administrator are corporate
officers.
 After the lapse of three years, the Board of Trustees
relieved the Medical Director Hospital Administrator,
prompting him to file with the Labor Arbiter a complaint
for illegal dismissal.
 The Supreme Court held that the Labor Arbiter has no
jurisdiction because the matter involved termination of
a corporate officer.
Termination Disputes in Electric Cooperatives
 Termination disputes involving employees of electric
cooperatives fall under the jurisdiction of Labor Arbiters
and not with the National Electrification Administration.
 The National Electrification Decree does not confer
upon the National Electrification Administration the
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 power to hear and decide termination cases filed by
employees of electric cooperatives - it merely confers
upon it the power of supervision and control over
electric cooperatives.
Money Claims of Corporate Officers
 In determining which judicial body has jurisdiction over
money claims of corporate officers, the controversy
should be tested along the reasonable causal connection
doctrine, i.e, reasonable causal connection with
employer-employee relations.
 Thus
 If the money claim pertains to perquisites of the
corporate position, the Labor Arbiter has no
jurisdiction, because, there is no reasonable causal
connection with employer employee relations.
 If the claim pertains to the corporate officer's
compensation or benefits as an employee, the Labor
Arbiter has jurisdiction because of its reasonable
causal connection with employment relations.
 In the case of Mainland Construction v. Movilla," the
Certified Public Accountant of the Company was
designated as Administrative Manager and member of
the Board of Directors.
 When the DOLE conducted a routine inspection of the
Company violations of labor standards were
discovered such as, underpayment of salaries and
benefits.
 Because of the said finding, the DOLE ordered the
Company to pay all its employees, including the
Certified Public Accountant/Administrative Manager,
their salary differentials and other unpaid benefits.
 The Company paid all its employees, except the
Certified Public Accountant/Administrative Manager
prompting him to file with the Labor Arbiter a complaint
for unpaid salary differentials and other benefits.
 The Company challenged the jurisdiction of the Labor
Arbiter on the ground that the matter is an intra
corporate controversy.
 The Supreme Court held that the Labor Arbiter has
jurisdiction because the claim pertains to
compensation or benefits as an employee, hence, it is
a labor dispute and not an intra-corporate controversy.
 It is true that a director of a corporation is not an
employee, but a director may become an employee if
so designated, or if he accepts duties that make him
also an employee, as in this case where the Certified
Public Accountant was designated as Administrative
Manager.
 In the case of Cagayan de Oro Coliseum v. MOLE, the
majority stockholder of the Company was designated a
president of the corporation with a monthly compensation
and per diem for attendance in board meetings.
 For failure on the part of Cagayan de Oro Coliseum to
pay his compensation, the president filed with the
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 Labor Arbiter a complaint for unpaid salaries and other
remunerations.
 The Supreme Court held that the Labor Arbiter does
not have jurisdiction because the claim pertains to
perquisites of his corporate position.
 Although the reliefs sought appear to fall under the
jurisdiction of the Labor Arbiter as they are claims for
unpaid salaries and other remunerations for service
rendered, a scrutiny thereof shows that said claims are
part of the perquisites of his position in, and therefore
interlinked with his relationship with the corporation.
 Hence, the dispute is between a stockholder and the
corporation of which he holds stocks, and therefore, an
intra corporate controversy beyond the jurisdiction of
the Labor Arbiter.
 In the case of Apodaca v NLRC, the President and
General Manager of the Corporation who resigned, was
not given his last salary because it was applied to his
unpaid stock subscription.
 The President and General Manager questioned the
set-off, but the NLRC upheld the validity of the set-off
because a stockholder who fails to pay his unpaid
subscription on call becomes a debtor of the
corporation.
 The Supreme Court held that the NLRC has no
jurisdiction because the matter of unpaid subscription
is an intra corporate dispute.ie, between the
stockholder and the corporation.
Money Claims of Employees
 With regard to money claims of employees, the
jurisdiction of Labor Arbiters will depend on the following
situations:
1. If the complaint prays for reinstatement - the jurisdiction
will fall under the Labor Arbiter, regardless of the
amount involved.
2. If the complaint does not pray for reinstatement the
jurisdiction will be determined by the amount involved,
to wit:
a. If the aggregate money claim of each employee is
P5,000.00 and below - the jurisdiction will fall under
the DOLE Regional Director
b. If the aggregate money claim of each employee is
more than P5,000.00 – the jurisdiction will fall under
the Labor Arbiter.
 However, to fall within the jurisdiction of the Labor
Arbiter, the money claim should have a reasonable
causal connection with employer employee relationship.
 In the case of Santos v. Servier Phils.," the employee
was terminated on the ground of disease.
 The total separation package of the employee
amounted to P1,063,841.76
 However, only P701,454.89 was released because the
balance was withheld for tax purposes
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  The employee then filed a complaint for illegal
deduction before the Labor Arbiter.
 The employer questioned the jurisdiction of the Labor
Arbiter on the ground that the matter of legality of the
deduction could be addressed by filing a tax refund with
the Bureau of Internal Revenue.
 The Supreme Court held that the complaint for illegal
deduction falls within the jurisdiction of the Labor
Arbiter.
 The issue of deduction for tax purposes is intertwined
with the main issue of whether the benefits have been
fully given to the employee.
 It is therefore, a money claim arising from employer
employee relationship, which falls within the jurisdiction
of the Labor Arbiter.
 In the case of Air Material Wing v. NLRC the notarial
and legal counsel of the company filed with the Labor
Arbiter a complaint for unpaid notarial fees.
 The Supreme Court held that the Labor Arbiter has
jurisdiction because the claim is based on his
employment as notarial officer, hence, it has a
reasonable connection with the employer-employee
relationship.
 In the case of Sentinel Insurance v. Bautista," the in-
house legal officer (whom the company dismissed for
gross negligence) filed with the Labor Arbiter a complaint
for unpaid attorney's fees.
 The Supreme Court held that the Labor Arbiter his
jurisdiction because the claim arose out of an employer
employee relationship, considering that "attorney's fees"
in part of the terms and conditions of the legal officer's
employment.
Money Claims of Employers
 Labor Arbiters can validly take cognizance of a money
claim or counterclaim filed by an employer against his
employee, if the claim has a reasonable causal
connection with employer employee relationship.
 Without a reasonable causal connection with employer
employee relationship, the employer's claim against the
employee will not fall under the jurisdiction of Labor
Arbiters because it is a civil controversy.
 A complaint filed by an employer against and employee
for recovery of car (acquired under the car loan policy of
the company) is not a labor dispute -- it in a civil dispute
because it does not involve employer employee
relationship but debtor creditor relationship hence,
beyond the jurisdiction of Labor Arbiters.
 Similarly, a complaint filed by an employer against his
employee for summon money arising from an unpaid
loan is beyond the jurisdiction of Labor Arbiters because
the matter is a civil controversy, considering that it
involves a debtor creditor relations, rather than
employer employee relations.
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  The cause of action falls within the purview of civil laws,
as it does not breach any provision of the Labor Code or
the contract of employment."
Money Claims of Overseas Filipino Workers
 Labor Arbiters have original and exclusive jurisdiction
over claims of migrant workers arising from employer
employee relationship, including claims for actual, moral,
exemplary and other forms of damages.
 Section 10 of the Migrant Workers and Overseas
Filipinos Act of 1995 as amended, expressly provides
as follow:
SEC. 10. Money Claims- Notwithstanding any
provision of law to the contrary, the Labor Arbiters
of the National Labor Relations Commission
(NLRC) shall have the original and exclusive
jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint the
claims arising out of an employer employee
relationship or by virtue of any law or contract
involving Pilipino workers for overseas deployment
including claims for s al moral, exemplary and
ether formula of damages.
Claims for Damages
 The claim for damages contemplated in Article 224(a) of
the Labor Code does not necessarily refer to those filed
by employees against their employer - it includes claims
or counterclaims filed by employers against employees,
provided that the claim or counterclaim has a reasonable
causal connection with employer employee relations.
 As long as the claim for damages arises from
employer employee relations or at least has a
reasonable causal connection with employer-
employee relationship, case will fall under the
jurisdiction of the Labor Arbiter.
 Thus, Labor Arbiters cannot take cognizance over a
complaint for damages filed by an employee against his
employer because of the employer's slanderous remarks
against the employee.
 The reason is because the claim does not arise from
employer employee relations.
 It is a claim arising from the tortious acts committed by
the employer.
 In the case of Pepsi Cola Distributors v. Gal-lang" the
Supreme Court held that a complaint for damages filed
by an employee against his employer because of
malicious prosecution is beyond the jurisdiction of the
Labor Arbiter because the claim has no reasonable
causal connection with the relations of the parties as
employer and employee.
 In the case of Ocheda v. Court of Appeals the Supreme
Court held that Labor Arbiters cannot take cognizance
over a complaint for damages arising from the negligence
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 of a co-worker because the claim does not arise from
employer-emplovee relations.
 It is a claim arising from quasi-delict, and therefore, it
has no reasonable causal connection with any of the
claims provided for in Article 224 of the Labor Code.
 A complaint for damages by an employer against an
employee for breach of contract of employment falls
within the realm of Civil Law, and therefore, jurisdiction
over the controversy belongs to the regular courts.
 In the case of Darchi Electronics v. Villarama, the
contract of employment stipulated that for a period of two
years after termination of employment, the employee
shall not in any manner be connected, emploved, or be a
consultant with any firm engaged in a similar business.
 Within the two-year period from his resignation, the
employee got employed with a corporation engaged in
the same line of business as that of his former
employer.
 This prompted his former employer to file with the
Regional Trial Court a complaint for damages against
his employee for breach of contract.
 The Regional Trial Court dismissed the complaint on
the ground of lack of jurisdiction allegedly because the
claim for damages rose from employer-employee
relations.
 The Supreme Court held that the Regional Trial Court
is not correct because the claim for damages did not
arise from employer employee relations.
 The former employer seeks to recover damages for
breach of his obligation under the Contract of
Employment.
 The stipulation that was breached refers to post-
employment relations of the parties. Such cause of
action is within the realm of Civil Law, and jurisdiction
over the controversy belongs to the regular courts.
 Likewise, a complaint for damages by an employer
against an employee for breach of training agreement
falls within the realm of Civil Law, and therefore,
jurisdiction belongs to the regular courts
 In the case of Singapore Airlines v. Pano, a training
agreement was executed between the employer and
the employee which stipulated, among others, that the
employee shall remain in the service for five years and
if he leaves the service within the five- year period, he
shall pay Singapore Airlines liquidated damages.
 Without waiting for the five-year period to expire, the
employee left his employment, hence, the employer
filed with the Regional Trial Court a complaint for
liquidated damages.
 The employee moved for the dismissal of the case on
the ground that the subject matter of the nuit arose
from employer-employee relationship, and therefore,
beyond the jurisdiction of the Regional Trial Court.
 The Supreme Court held that the Regional Trial Court
has jurisdiction over the matter.
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  While seemingly the claim for damages arises from
employer employee relations, in essence, the claim is
grounded on the averment that the employee
"maliciously and with bad faith violated the terms and
conditions of the training agreement.
 This remove the controversy from the coverage of the
Labor Code and brings it within the purview of Civil
Law.
 The employer seeks protection under civil laws and
claims no benefits under the Labor Code.
 The primary relief sought is for liquidated damages for
breach of a contractual obligation.
Cases Arising From Violation of Article 279 of the
Labor Code
 Labor Arbiters are vested with original and exclusive
jurisdiction over cases arising from violation of Article 279
of the Labor Code, which includes controversies on
validity of strikes or lockouts.
 One of the prohibited activities under Article 279 is
obstruction of the free ingress to and egress from the
employer's premises during a strike.
 This act will make the strike illegal hence, the
jurisdiction to rule on the legality of the strike falls under
the jurisdiction of Labor Arbiters.
 However, if the employer would want the obstructions
removed, it must file a separate petition for injunction
with the NLRC, considering that the power to issue
injunction in labor disputes seems to have been
withheld from Labor Arbiters by virtue of Article 225(e)
of the Labor Code.
Wage Distortion Disputes
 Wage distortion disputes will fall under jurisdiction of
Labor Arbiters only when the establishment is
unorganized Article 124 of the Labor Code, provides that:
ART. 124. Standards/Criteria for Minimum Wage xx
- Where the application of any prescribed wage
increase by virtue of a law or Wage Order issued by
any Regional Board results in distortion of the
wage structure within an establishment, the
employer and the union shall negotiate to correct
the distortions xxx
In cases where there are no collective agreements
or recognized labor unions, the employers and
workers shall endeavor to correct such distortion
Any dispute arising therefrom shall be settled
through the National Conciliation and Mediation
Board and if it remains unresolved after ten (10)
calendar days of conciliation, shall be referred to
the appropriate branch of the National Labor
Relations Commission (NLRC). It shall be
mandatory for the NLRC to conduct continuous
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 hearings and decide the dispute within twenty (20)
calendar days from the time said dispute is
submitted for compulsory arbitration.
Claims Against International Organizations
 Labor Arbiters do not have jurisdiction over disputes
between an international organization and its employees,
because international agencies enjoy diplomatic
immunity, hence, they are beyond the jurisdiction of the
courts or local agencies of the Philippine Government.
 The term "international organization" is generally used
to de scribe an organization set up by agreement
between two or more states.
 Examples are: International Rice Research Institute
International Catholic Migration Commission and
Southeast Asian Fisheries Development Center
PRE-ARBITRATION CONCILIATION/MEDIATION
Prerequisite to Compulsory Arbitration
 Before filing a formal complaint with the arbitration
branch of the NLRC, the dispute must first undergo
conciliation or mediation under the Single-Entry
Approach (SENA) system.
 This is mandatory
 Article 234(a) of the Labor Code provides as follows:
Art. 234. Mandatory Conciliation and Endorsement
of Cases - (a) Except as provided in Title VII-A,
Book V of this Code, as amended, or as may be
excepted by the Secretary of Labor and
Employment, all issues arising from labor and
employment shall be subject to mandatory
conciliation mediation.
The labor arbiter or the appropriate DOLE agency
or office that has jurisdiction over the dispute shall
entertain only endorsed or referred cases by the
duly authorized officer
 The opening phrase of Article 234 states: Except an
provided in Title VII-A, Book of the Code. This means
that the pre arbitration conciliation mediation is not a pre
to voluntary arbitration.
 Disputes falling under the jurisdiction of voluntary
arbitrators, such as those arising from interpretation or
implementation of a collective bargaining agreement
(CBA) or personnel policies need not under pre
arbitration conciliation mediation Settlement of said
disputes should be threshed out in the grievance
machinery of the CBA.
Submission of the Dispute Before the Lupong
Tagapayapa Not a Prerequisite
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 The provisions of Presidential Decree No. 1508 requiring
the submission of disputes before the barangay Lupong
Tagapamayapa prior to the filing with the court or other
government offices are not applicable to labor cases.
 To require the conciliation of labor disputes before the
barangay courts would defeat the very salutary
purposes of the law.
 Instead of simplifying labor proceeding designed at
expeditious settlement, bringing the dispute to the
Lupong Tagapayapa would only duplicate the
conciliation proceedings and unduly delay the
disposition of the case, because the aggrieved
employee would have to undergo conciliation before the
Lupong Tagapayapa and before the Department of
Labor and Employment."
Compromise
 Pre-Arbitration conciliation or mediation is required
because compromise as a mode of settling labor
disputes is encouraged by law.
 The policy of the State is to promote the settlement of
differences between labor and management by
amicable settlement.
 Thus, the parties can validly enter into a compromise
not only on controversies involving labor standards, but
also on other labor disputes, such as claims for
emergency cost of living allowances, unfair labor
practice or illegal dismissal, subject to the limitation
imposed by Article 6 of the Civil Code which provides
that:
Art. 6. Right may be waived, unless the waiver is
contrary to law, public order, public policy, morals
or good customs or prejudicial to a third person
with a right recognized by law.
 An employee, therefore, cannot waive his right to be paid
the statutory benefits, such as minimum wage, overtime
pay, night shift differential, premium pay, holiday pay,
service incentive leave, etc., because that would be
contrary to law and public policy.
 But unpaid statutory benefits, can be waived because
what is being waived is not the right (future) but the
unpaid (past) benefits.
 The law does not limit compromises to cases about to be
filed or to cases already pending in court.
 The parties can still enter into a compromise even if a
final judgment has already been rendered or even if the
case is already in the process of execution.
 This is impliedly authorized by Article 2040 of the Civil
Code
 A compromise agreement is valid, conclusive and binding
even if not submitted for judicial approval" or even if
executed without the assistance of labor officials, as long
as it is not tainted by the vices of consent or forgery.
 The conclusiveness of a compromise is clearly ord sined
by Article 233 of the Labor Code which provides that:
ART. 233. Compromise Agreements - Any
14
compromise settlement, including those involving
labor standard laws voluntarily agreed upon by the
parties with the assistance of the Bureau or the
regional office of the Department of Labor, shall be
final and binding upon the parties. The National
Labor Relations Commission or any court shall not
assume jurisdiction over issues involved therein
except in case of non-compliance thereof or if there
is prima facie evidence that the settlement was
obtained through fraud, misrepresentation, or
coercion.
 In the case of Olaybar v. NLRC, 10 employees were
terminated by the Company on the ground of
retrenchment.
 Contesting the legality of their retrenchment, the 10
employees lodged a complaint for illegal dismissal with
the Regional Arbitration Branch of the NLRC.
 The Labor Arbiter rendered a decision ordering the
Company to pay the 10 employees their respective
separation pay.
 Unsatisfied the 10 employees appealed to the NLRC
During the pendency of the appeal, the Company and
the 10 employees entered into an amicable settlement
whereby the 10 employees were paid their separation
pay an decreed in the decision of the Labor Arbiter
 Accordingly, they executed separate affidavits stating
that they are withdrawing their appeal. Said affidavits
were subscribed and worn to before the Labor Arbiter
who decided the case.
 However, the affidavits were not submitted to the NLRC
for some inexplicable reason. Unaware of the
settlement, the NLRC rendered a decision in favor of
the 10 employees by ordering their reinstatement with
back wages.
 When the NLRC decision became final and executory,
the 10 employees moved for the execution of the NLRC
decision.
 The NLRC denied the motion for execution on the
ground that the 10 employees were deemed to have
accepted the Labor Arbiter decision when they
voluntarily received their respective separation pay
 The Supreme Court held that the NLRC was correct in
denying the motion for execution.
 It is true that the NLRC reversed the Labor Arbiter's
decision on appeal, but when the NLRC rendered its
decision, it unknowingly adjudicated a case which, for
all intents and purposes had already been closed and
terminated by the parties themselves when they agreed
on a settlement.
 This is the clear import of the rule that compromises and
settlements have the effect and conclusiveness of res
judicata upon the parties.
 A compromise in governed by the basic principle that
obligations arising from contracts have the force and
effect of law between the parties.
 Thus, a compromise cannot later be disowned or net
aside merely because a party has changed his mind.
15
  Neither can a compromise be set aside on the ground
that the employee was constrained to sign the same
because of "extreme necessity"
 Dire necessity is not an acceptable ground for annulling
a compromise especially when there is no showing that
the employee had been forced to enter into such
compromise/
 However, if the consideration for the compromise was
very much less than the amount which the employee
was entitled, it may be set aside for being contrary to
law, morals or public policy.
 But only the employee, not his counsel, can impugn the
consideration of the compromise as being
unconscionable.
 In the case of Principe Philippine v Singapore
Transport Services, the claimant, who was entitled to
$100,800, agreed to settle her claim for P7,000.00
 The Supreme Court nullified the compromise agreement
for being contrary to public policy.
 In the case of Unicane Workers Union v NLRC the 36
employees, who were entitled, by virtue of a final and
executory judgment, to more than P2,000,000.00, agreed
to a settlement of P100,000.00.
 The Supreme Court held that the quitclaim and release
is contrary to law, public policy and public order, and
therefore not valid and binding.
 In the case of Malinao v NLRC, the employee was
entitled to P174,379.52, but agreed to settle for
P20,000.00.
 The Supreme Court held that the compromise
agreement is shocking to the mind, unconscionable and
contrary to public policy.
 Waiver of claims is a personal right which must be
exercised personally by the employees themselves.
 Where the compromise agreement was signed by only
three out of five employees, the non-signatories are not
bound by that amicable settlement.
 In the case of Jag & Haggar Jeans and Sportswear
Corp . NLRC"a decision Was rendered by the NLRC
ordering the reinstatement of 114 employees The
Company filed a motion for reconsideration During the
pendeney of the motion for reconsideration, the
Company and the Union entered into a compromise
agreement whereby the Company and the Union agreed
that the affected employees will just be paid separation
pay. Of the 114 affected employees, 102 availed of the
benefits provided for under the Compromise Agreement.
The 12 remaining employees moved for the execution of
the NLRC decision Opposing the motion for execution,
the Company contended that the Compromise
Agreement was deemed ratified by the union members
considering that majority (102 out of the 114) of affected
employees already availed of and received the benefits
under said agreement. The Supreme Court held that the
16
 Compromise Agreement is not binding upon the 12
employees because they neither signed the compromise
Quitclaim
agreement nor availed of its benefits
 A quitclaim is a document whereby a person relinquishes
You sent Today at 9:46 AM to another a claim to a right or property.
 A quitclaim is a valid and binding compromise
A union cannot enter into a compromise on money claim
agreement. Once an employee executes
without the specific individual consent of each employee
 A quitclaim in favor of the employer, he in thereby
concerned. The union can only assist them but cannot decide
estopped from filing any further claim against his
for them
employer arising from his employment.

 The current doctrinal policy is that "not all waivers and

Similarly, a lawyer cannot enter into a compromise agreement
with the opposing party without a special power of attorney or
express consent of the client.
The fact that the compromise agreement reduced the award
of attorney's fees is not a ground for the disapproval of the
agreement The right of a lawyer to attorney's fees cannot
have a higher standing than the right of the client himself.
Lawyer's rights may not be invoked as a ground for
disapproving a compromise. The lawyer affected can always
enforce his right in a proper proceeding but said right may not
be used to prevent the approval of the compromise
If the compromise agreement is violated, the aggrieved party
can rescind the compromise and pursue his original claims or
file a motion to enforce the compromise
quitclaims are invalid as against public policy.
 If the agreement was voluntarily entered and represents
a reasonable settlement, it is binding on the parties and
may not be later disowned simply because of a change
of mind.
 Only when there is clear proof that the waiver was
wangled from an unsuspecting or gullible person, or
when the terms of the settlement are unconscionable on
its face, that the quitelaim will be annulled.
 Where the person making the waiver did so voluntarily
with full understanding of what he was doing, and the
consideration for the quiteclaim is credible and
reasonable, the transaction will be recognized as a valid
and binding undertaking.
 For instance, an employee who is a graduate of the
University of the Philippines with a Bachelor of Arts
degree in Economics surely knows the nature and legal

17
 effect of the deed of release and quitclaim that he
executed.
 For a quitclaim to be valid the following requisites must
be present
1. There was no fraud or deceit on the part of the parties
2. The consideration for the quitclaim is credible and
reasonable, and
3. It is not contrary to law, public order, public policy
morals, good customs, or prejudicial to a third person
with a right recognized by law.
 Conformity of the employee's counsel is not essential to
the validity of quitclaims.
 There is nothing in the Labor Code which requires such
conformity in order to make the quitelaim valid.
THE COMPULSORY ARBITRATION PROCESS
Scope of Compulsory Arbitration
 Compulsory arbitration does not embrace the whole
adjudicatory process.
 It is confined to the proceeding before the Labor Arbiter.
 Therefore, when a Labor Arbiter renders a decision,
compulsory arbitration is terminated because by then
the hearing and determination of the controversy has
ended.
 Any appeal raised by an aggrieved party from the Labor
Arbiter's decision is no longer considered as arbitration
because in the appellate stage, the NLRC merely
review the Labor Arbiter's decision for errors of fact or
law and no longer duplicates the proceedings before the
Labor Arbiter
 Thus, an agreement which stipulates that the employee
shall be reinstated in the payroll pending resolution of
the case by arbitration should be understood to be
limited to the proceedings before the Labor Arbiter, such
that when the latter rendered his decision, the employee
can already be removed from the payroll.
Nature of Proceedings Before the Labor Arbiter
 The proceedings before the Labor Arbiter are non-
litigious in nature. The technicalities of law and procedure
and the rules obtaining in the courts of law are not strictly
observed.
 The spirit and intention of the Labor Code is for the
Labor Arbiters and the NLRC to use all reasonable
means to ascertain the facts in each case speedily and
objectively without regard to technicalities of low or
procedure.
ART. 227. Technical Rules Not Binding and Prime
Resort to Amicable Settlement in any proceeding
before the Commission or any of the Labor
Arbiters, the rules of evidence prevailing in the
courts of law or equity shall not be controlling and
it is the spirit and intention of this Code that the
Commission and its members and the Labor
18
Arbiter shall use every and all reasonable means to
ascertain the facts in each case speedily and
objectively and without regard to technicalities of
law or procedure all in the interest of due process.
xxx
Procedural Due Process Must Be Observed
 Although speedy disposition of labor cases in the policy
of the law, speed alone is not the chief objective.
 More important than a race to end the trial, is the careful
and deliberate consideration for the administration of
justice which includes a genuine respect for the rights of
all parties and the requirements of procedural due
process.
 The mere fact that the NLRC and Labor Arbiters are not
bound by the technical rules of evidence and procedure
does not mean that they can ignore the fundamental
requirements of due process.
 They are still obliged to respect the cardinal primary
rights of a party, to wit:
1. The right to a hearing which includes the right of a
party interested or affected to present his own case
and submit evidence in support thereof.
2. The evidence presented must be considered
because the right to adduce evidence, without the
corresponding duty to consider it is worthless and
futile if the person to whom the evidence is presented
can thrust it aside without notice or consideration
3. The decision must have something to support it.
otherwise, it is a nullity.
4. The supporting evidence must be substantial, which
means such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion.
 The Labor Arbiter or the NLRC cannot require
proof higher than substantial evidence.
 However, it is imperative that the evidence must at
least have a modicum of admissibility for it to be
given some probative value Uncorroborated
hearsay or rumor will not suffice.
5. The decision must be rendered based on the
evidence presented at the hearing, or at least
contained in the records and disclosed to the parties
affected.
6. The tribunal must act on its own independent
consideration of the law and the facts of the
controversy and not simply accept the views of a
subordinate in arriving at a decision.
7. The tribunal should in all controversial questions
render its decision in a manner that the parties to the
proceeding can know of the various issues involved
and the reason or reasons for the decisions
rendered.
Filing of Complaint
 Compulsory arbitration starts with the filing of a
complaint.
 All cases falling within the jurisdiction of Labor Arbiters
may be filed in the Regional Arbitration Branch
19
 having jurisdiction over the workplace of the
complainant.
 Where two or more Regional Arbitration Branches have
jurisdiction over the workplace, the Arbitration Branch
that first acquires jurisdiction over the case shall
exclude the others
 Cases involving Overseas Filipino Workers may be
filed before the Regional Arbitration Branch having
jurisdiction over the place where the complainant resides
or where the principal office of the respondents is
situated, at the option of the complainant.
Issuance of Summons
 Within two days from receipt of a complaint or amended
complaint, the Labor Arbiter shall issue the required
summons, attaching thereto a copy of the complaint or
amended complaint and its annexes, if any. The
summons shall specify the date, time and place of the
mandatory conciliation and mediation conference in two
settings.
 Valid service of summons is necessary for the Labor
Arbiter to acquire jurisdiction over the person of the
respondent.
 In the absence of a valid service of summons or a valid
waiver thereof, the hearings and judgment rendered by
the Labor Arbiter are null and void, even if the
respondent was served with a notice of hearing
because notice of hearing is not summons.
Appearances
 Generally, only lawyers can appear before the Labor
Arbiter or NLRC because public policy demands that
parties-litigants should be represented only by those who
possess treated qualifications and by those who are
sworn to observe the rules and ethics of the profession.
 A non-lawyer may be allowed to appear before the Labor
Arbiter or NLRC only
1. when he represents himself as party to the case: or
2. when he represents the union or members thereof.
The appearance of non-lawyers is allowed only in the
aforementioned situations. It cannot be supplanted by an
agreement, non-objection, or waiver."
If a non-lawyer will appear on behalf of a party, he should
present the following documents:
(1) For non-lawyers who represent a union:
(a) Certificate of Registration of the union to prove that the
union is a legitimate labor organization;
(b) Authority to represent, certified under oath by the union
secretary and attested to by the union president;
(c) Board Resolution approving the authority to represent.
(2) For non-lawyers who represent a union member:
20
 (a) Affidavit attesting that he has been authorized by the
member to represent him;
(b) Certification under oath by the secretary of the union
attested to by its president that he is representing a
member of their union that exists in the establishment.
(3) For non-lawyers who appear as a duly-accredited
member of any legal aid office duly recognized by the
Department of Justice or the Integrated Bar of the
Philippines:
(a) proof of his accreditation; and
(b) authority to represent a party to the case;
(4) For non-lawyers who appear as owner or president of
a corporation or establishment which is a party to the
case:
(a) Certification under oath attesting that he is authorized
to represent the corporation or establishment.
(b) Board Resolution issued by said establishment,
granting him such authority.
If a non-lawyer appears without written proof that he is
authorized to appear, his statements and declarations cannot
bind the client.
The permission for non-lawyers to represent a party litigant
does not entitle him to attorney's fees. The reason is because
attorney's fees presuppose the existence of attorney-client
relationship. Such relationship, however, cannot exist unless
the client's representative is a lawyer.
Mandatory Conciliation and Mediation
After the filing of the complaint, Labor Arbiter will set the case
for mandatory conciliation and mediation conference for the
purpose of:
(1) exploring the possibility of amicable settlement;
(2) determining the real party-in-interest;
(3) determining the necessity of amending the complaint;
(4) defining and simplification of issues;
(5) entering into admissions and stipulation of facts; and
(6) threshing out all other preliminary matters.
Submission of Position Papers
 If no amicable settlement is arrived at during the mandatory
conciliation and mediation conference, the parties will be
ordered to simultaneously file their respective verified
position papers.
 The position papers shall cover only those claims and
causes of action raised in the complaint and accompanied
by all supporting documents including the affidavits of their
respective witnesses which shall take the place of the
latter's direct testimony.
 After the filing of position paper, the complaint can no
longer be amended without leave of the Labor Arbiter.
 A reply may be filed by any party within 10 calendar
days from receipt of the position paper of the adverse
party.
21
Prohibited Pleadings
The following pleadings are not allowed in the proceedings
before the Labor Arbiter:
1. Motion for a bill of particulars;
2. Motion to declare respondent in default;
3. Motion to dismiss, except on the ground of:
(a) lack of jurisdiction over the subject matter;
(b) improper venue;
(c) res adjudicata;
(d) prescription; and
(e) forum shopping.
4. Motion for new trial;
5. Petition for relief from judgment;
6. Motion for reconsideration;
Determination of Necessity of Hearing
 Immediately after the submission by the parties of their
position paper and reply, the Labor Arbiter shall motu
proprio determine whether there is need for a hearing.
 Whether a formal hearing should be conducted or not,
is a matter that depends upon the sound discretion of
the Labor Arbiter. It cannot be demanded as a matter
of right by the parties. Article 227 of the Labor Code
expressly provides that:
"Art. 227. Technical Rules Not Binding and Prior Resort to
Amicable Settlement — xxx In any proceeding before the
Commission or any Labor Arbiter, the parties may be
represented by legal counsel but it shall be the duty of the
Chairman, any Presiding Commissioner or any Labor Arbiter
to exercise complete control of the proceedings at all stages."
[emphasis supplied]
 Trial-type proceedings are not required.
 The Labor Arbiter can decide a case on the basis of
position papers.
 Resolution of the case on the basis of position papers,
affidavits and/or documentary evidence is not violative
of due process.
 Thus, a party cannot validly contend that the affidavit is
hearsay simply because the affiants were not
presented for cross-examination.
 The rules of evidence are not strictly observed in labor
proceedings.
 The significance of this is that the mere admission of a
matter which would be deemed incompetent in a
judicial proceeding will not necessarily invalidate a
judgment as long as it is supported by substantial
evidence
 Thus, the mere fact that the Labor Arbiter did not
conduct any formal hearing does not constitute grave
abuse of discretion.
 Formal hearing or actual adversarial proceeding
becomes necessary only for clarification or when there
is need to propound searching questions to unclear
witnesses — a matter which the parties must ask for.
 If hearing or clarificatory conference is deemed
necessary, the Labor Arbiter may determine the order
of presentation of evidence, examine the parties and
22
 their witnesses, ask questions for clarifying points of
law or fact involved in the case, and limit the
presentation of evidence to matters relevant and
necessary for a just and speedy disposition of the case.
 Thereafter, the case will be deemed submitted for
decision
Period to Decide Cases
(1) For complaints filed by locally employed workers. Labor
Arbiters are required to render a decision within 30 calendar
days after the case is submitted for decision. Article 224 of the
Labor Code provides that:
"ART. 224. Jurisdiction of 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 cases 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: xxx" [emphasis supplied]
(2) For complaints filed by overseas Filipino workers, Labor
Arbiters are required to render a decision within 90 calendar
days after filing of the complaint. Section 10 of the Migrant
Workers Act provides that:
SEC. 10. Money Claims. — Notwithstanding any provision of
law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue
of any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary, and
other forms of damages, xxx" [emphasis supplied]
The prescribed period within which to decide a case is
mandatory. This is expressly provided for in Article 292(i) of
the Labor Code which reads as follows:
ART. 292. Miscellaneous Provisions — xxx (i) To ensure
speedy labor justice, the periods provided in this Code within
which decisions or resolutions of labor relations cases or
matters should be rendered shall be mandatory. For this
purpose, a case or matter shall be deemed submitted for
decision or resolution upon the filing of the last pleading or
memorandum required by the rules of the Commission or by
the Commission itself, or the Labor Arbiter, or the Director of
the Bureau of Labor Relations or Med-Arbiter, or the Regional
Director/
[emphasis supplied]
While the law declares the period to decide cases to be
mandatory, it does not mean that decisions rendered after the
prescribed period are invalid. Decisions rendered after the
prescribed period are still valid, but the Labor Arbiter
concerned may be subjected to administrative sanctions.
Remedy from Adverse Decision of Labor Arbiter
23
  The proper remedy from an adverse decision of the
Labor Arbiter is not a motion for reconsideration but
appeal to the NLRC.
Egypt Air Local Employees Association v. NLRC
 the Labor Arbiter rendered a Decision ordering the
reinstatement of the employees who were illegally
dismissed. Instead of filing an appeal, the Company
filed a motion to correct the decision because the
Company has already closed its Philippine office.
 The Supreme Court held that the filing of the motion to
correct was not proper because it is in effect, a motion
for reconsideration of the Labor Arbiter's decision. The
only remedy which the losing party can avail of from an
adverse decision of the Labor Arbiter is to appeal to the
NLRC.
Remedy for Orders That Are Not Appealable
 For orders issued by the Labor Arbiter that are not
appealable, specifically, interlocutory orders, the
remedy is to file with the NLRC a petition for annulment
of Order under the Extraordinary Remedies established
by Rule XII of the 2011 NLRC Rules of Procedure.
Decision of Labor Arbiter Ordering Reinstatement —
Immediately Executory
 The decision of the Labor Arbiter ordering the
reinstatement of an illegally dismissed employee is
immediately executory, even pending appeal. This
means that the employer must comply with the
reinstatement order with or without writ of execution
"ART. 229. Appeal. — xxx In any event, the decision of the
Labor Arbiter reinstating a dismissed or separated employee,
insofar as the reinstatement aspect is concerned, shall
immediately be executory, even pending appeal. xxx"
[emphasis supplied]
Manner of Compliance
 Compliance with the reinstatement order of the Labor
Arbiter may be in the form of:
(1) Physical reinstatement, which means that the
employee will be admitted back to work under the
same terms and conditions prevailing prior to his
dismissal; or
(2) Payroll reinstatement, which means that although
not physically admitted back to work, the
employee would be receiving his salary.
Right of Choice
 The employer alone has the right to choose on whether
the employee should be physically reinstated or merely
reinstated on payroll.
 Neither the Labor Arbiter nor the NLRC can exercise
this option on behalf of the employer.
"ART. 229. Appeal. — xxx The employee shall either be
admitted back to work under the same terms and conditions
prevailing prior to his dismissal or separation, or at the option
24
of the employer, merely reinstated in the payroll, xxx"
[emphasis supplied]
Bond — Not a Substitute for Reinstatement
 Compliance with the reinstatement aspect of the Labor
Arbiter's decision during the ] by posting a bond. This is
clear from Article 229 of the Labor Code, the pertinent
portion of which reads as follows:
"ART. 229. Appeal. — xxx The posting of a bond^by^
employer shall not stay the execution for reinstatement provic
herein." [emphasis supplied]
Effect of Reversal of Reinstatement Order on Appeal
 If the reinstatement order of the Labor Arbiter is
reversed on appeal, the following are the effects:
(1) If the reinstatement was carried out (whether physical
or in the payroll), the employer can put an end to such
reinstatement once the judgment of the NLRC
becomes final and executory.
(2) If the reinstatement order was not carried out, the legal
effects will depend upon the following circumstances:
(a) If the reinstatement order was not enforced
because of the employer's refusal to comply with
the reinstate order without justifiable reason, the
employer is liable to pay the salaries of the
employee reckoned from the date when the
employer (through counsel) received the Labor
Arbiter's decision until the finality of the judgment
of the NLRC.
(b) If the reinstatement order was not carried out
because of the employee's refusal to report for
work after being directed to do so by the
employer, the employer is not liable to pay any
salary because the employee is deemed to have
waived his right to reinstatement.
(c) If the reinstatement order was not carried out
because the employee did not vigorously pursue
his reinstatement, i.e., did not do anything to
compel the employer to reinstate him during the
pendency of the appeal (despite the readiness
and willingness of the employer to comply), the
employer is not liable to pay any salary because
the employee is deemed to have forfeited his
right to reinstatement through waiver or laches.
The test is two-fold:
(i) the order of reinstatement was not
executed prior to its reversal on appeal;
and
(ii) the failure to execute was not due
to the employer's unjustified act or
omission.
EXAMPLE: In a complaint for illegal dismissal, the Labor
Arbiter rendered a decision, declaring the dismissal illegal and
ordering the employer to reinstate the employee, which the
25
 employer appealed to the NLRC. Upon receipt of the
Decision, the employer sent a letter
to the employee requiring him to report for work (or advising
him that he will be reinstated in the payroll). The letter was
sent to the employee's address as stated m the complaint, but
the letter was returned to sender because the employee has
transferred to another place without informing the employer or
the Labor Arbiter about the change of address. The employee
did not present himself for reinstatement despite his
knowledge of the Labor Arbiter s decision. Neither did he file a
motion for issuance of writ of execution. Five months later, the
NLRC rendered a decision upholding the validity of the
dismissal, thereby reversing the Labor Arbiter's decision. After
receiving the NLRC decision, the employee filed a motion for
issuance of writ of execution to compel the employer to pay
his salaries during the pendency of the appeal. Under such a
situation, the authors submit that the employer cannot be
obliged to pay the salaries of the employee during the
pendency of the appeal because:
(1) There was no unjustified refusal on the part of the employer
to comply with the reinstatement order. The mere fact that
the employer sent a letter to the employee requiring him to
report for work (or advising him that he will be reinstated in
the payroll) is clearly indicative of the readiness and
willingness of the employer to comply with the reinstatement
order. If ever the letter was returned to sender, it was
because of the employee's failure to inform the Labor Arbiter
or the employer about the change of address. The non-
reinstatement of the employee during the pendency of the
appeal was due to his own act or omission.
(2) The employee is guilty of laches because he knew about the
reinstatement order, but he did not bother to present himself
for reinstatement. Although he filed a motion or issuance of
writ of execution, it was too late the NLRC has already
reversed the reinstatement order. The reversal of the
reinstatement order has : justification for the reinstatement
pending appeal.
d) If the reinstatement order was not enforced because the
Labor Arbiter did not act on the employee’s motion for
issuance of writ of execution, the employer is still obliged to
pay the salaries of the employee during the pendency of the
appeal. The reason is because the reinstatement order of the
Labor Arbiter does not need a writ of execution, as it is self-
executory. In the case of International Container v.NLRC,123
the Labor Arbiter rendered a decision ordering the
reinstatement of the employee with backwages.
The employee immediately filed a motion for issuance of writ
of execution, but the Labor Arbiter did not act on the said
motion. In the meantime, the employer appealed the Labor
Arbiter's decision to the NLRC. The NLRC reversed the Labor
Arbiter's decision and upheld the validity of the employee's
dismissal, but ordered the employer to pay the employee his
salaries during the pendency of the appeal.
The Supreme Court held that notwithstanding the fact that the
Labor Arbiter did not act on the motion for issuance of writ of
26
execution, the order to pay the reinstatement salaries during
the pendency of the appeal is correct because the employer
was duty-bound to comply with the reinstatement order of the
Labor Arbiter, with or without a writ of execution, considering
that reinstatement orders of Labor Arbiters are self-executory
and does not need writs of execution.
(e) If the reinstatement order was not enforced because of
supervening events, such as when the position of the
employee has ceased to exist by reason of its abolition,
drastic reduction of personnel, closure of the department
where the employee used to work, closure of the entire
establishment, or when the employee has become physically
incapacitated to work, the employer is not liable to pay any
salary during the pendency of the appeal, because
reinstatement has been rendered impossible.
(f) If the reinstatement order was not enforced because the
corporation was placed under rehabilitation receivership, the
employer is not liable to pay any salary during the pendency
of the appeal, because the failure of the employer to pay the
reinstatement salaries was justified by the exigencies of the
corporate rehabilitation.
Philippine Airlines v. Paz
 the company was placed under rehabilitation because
of financial reverses brought about by the strikes
staged by the pilots and ground personnel. One of the
pilots filed a complaint for illegal dismissal, allegedly
because he was dismissed notwithstanding the fact
that he was not among those who participated in the
strike. The Labor Arbiter rendered a decision declaring
the dismissal illegal and ordering the reinstatement of
the pilot. The Company appealed the Labor Arbiter's
decision to the NLRC. During the pendency of the
appeal, the pilot moved for the execution of the
reinstatement aspect of the Labor arbiter's decision, but
the reinstatement order cannot be enforced because
the company was placed under rehabilitation
receivership. Acting on the appeal, the NLRC reversed
the Labor Arbiter's decision and upheld the validity of
his dismissal. Notwithstanding such reversal, the pilot
still insisted in the enforcement of his reinstatement
salaries during the pendency of the appeal.
Will the employee be entitled to collect the reinstatement
salaries after the termination of the corporate
rehabilitation?
Garcia v. PAL
 the Supreme Court held that the employee is still not
entitled to his reinstatement salaries, because the
peculiar nature of corporate rehabilitation rendered it
impossible for the Company to comply with the
reinstatement order pending appeal.
 While reinstatement pending appeal aims to avert the
continuing threat or danger to the survival of the
dismissed employee and his family, it does not
contemplate the period when the employee-corporation
itself is similarly in a "judicially monitored" state of
being resuscitated in order to survive.
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Refund of Salaries Receive While on Payroll
Reinstatement

If the reinstatement order is reversed on appeal (because

the NLRC adjudged the dismissal to be valid), is the
employee (who was reinstated in the payroll) obliged to
refund the salaries that he received during the pendency
of the appeal?
Genuine v. NLRC
 the Supreme Court held in the affirmative.

College of the Immaculate Conception v. NLRC

 the Supreme Court held that reversal (on appeal) of
the reinstatement order of the Labor Arbiter does not
oblige the employee to refund the salaries that he
received while on payroll reinstatement during the
pendency of the appeal.

Constitutionality
 The provision of Article 229 of the Labor Code which
states that the decision of the Labor Arbiter reinstating
a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately
be executory, even pending appeal," is not
unconstitutional. It is a valid exercise of police power.
 Considering that the right to appeal is not a right, but a
mere statutory privilege, the law can validly prescribe
limitations or qualifications thereto or provide relief to
the prevailing party in the event an appeal is interposed
by the losing party.128

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 APPEAL TO THE NLRC
Appellate Jurisdiction of the NLRC
The NLRC has exclusive appellate jurisdiction over:
(1) Cases decided by Labor Arbiters;129 and
(2) Cases decided by the DOLE Regional Director under
Article 129 of the Labor Code.
Period to Appeal to the NLRC
(1) Ten (10) calendar days — for decisions or orders
rendered by the Labor Arbiter.
ART. 229. Appeal. — Decisions, awards, or orders of the
Labor Arbiter are final and executory unless appealed to the
Commission by any or both parties within ten (10) calendar
days from receipt of such decisions, awards, or orders, xxx"
(2) Five (5) calendar days — for decisions or orders
rendered by the DOLE Regional Director under Article 129
of the Labor Code.
"ART. 129. Recovery of Wages, Simple Money Claims and
Other Benefits — xxx Any decision or resolution of the
Regional Director or hearing officer pursuant to this provision
may be appealed on the same grounds provided in Article
223 (now Article 229) of this Code, within five (5) calendar
days from receipt of a copy of said decision or resolution, to
the National Labor Relations Commission which shall resolve
the appeal within ten (10) calendar days from the submission
of the last pleading required or allowed under its rules."
[emphasis supplied]
If the last day for filing falls on a Saturday, Sunday, or holiday,
the appeal can be filed on the next working day
Reckoning Period
 The reglementary period to appeal is reckoned not
from the date of receipt of the decision by the losing
party but from the date of receipt by the counsel or
representative on record.
Period to Appeal — Non-Extendible
 The reglementary period is non-extendible.
 If the appeal was filed beyond the reglementary
period, the judgment becomes final and executory by
operation of law, and the NLRC would be deprived of
jurisdiction to entertain such appeal.
 In such a situation, the prevailing party is entitled as a
matter of right to a writ of execution and the issuance of
such writ of execution is a ministerial duty compellable
by mandamus.
Requisites for Perfection of Appeal
To perfect an appeal to the NLRC, the following requisites
niust be complied with:
(1) Memorandum of appeal;
(2) Appeal fee;
29
 (3) Appeal bond (if the appellant is the employer); and
(4) Proof of service to the adverse party.
 These requirements must be complied with within the
reglementary period to appeal.
 A mere notice of appeal without complying with the
other requisites for perfection of appeal does not stop
the running of the period for perfecting an appeal.
Memorandum of Appeal
The memorandum of appeal should contain the following:
(1) Statement of the date when the appellant received the
Decision.
[Although the rules require the appellant to state in the
memorandum of appeal, the date when it received the
decision, failure to do so is not jurisdictional defect. It is a
mere procedural lapse that is addressed to the sound
discretion of the NLRC.]
(2) Grounds for appeal and the arguments in support
thereof.
[Article 229 of the Labor Code specifies the following grounds
for appeal:
(a) Prima facie evidence of abuse of discretion;
(b) Fraud, coercion, including graft and corruption in
obtaining the decision;
(c) Pure questions of law; or
(d) Serious errors in the findings of fact are raised
which, if not corrected, would cause grave or
irreparable damage or injury to the appellant.]
(3) Relief prayed for.
(4) Verification by the appellant himself.
[Failure to put the memorandum of appeal under oath is not a
fatal defect. It is not a jurisdictional requisite but a condition
that simply affects the form of the pleading. The defect can
easily be corrected by requiring an oath.140 If there is no
allegation of fact, verification would be useless and
superfluous.141]
(5) Certification of non-forum shopping.
[The certification of non-forum shopping should be signed by
the appellant or any of the principal parties and not by the
legal counsel, unless the legal counsel is clothed with special
power of attorney. Certification of non-forum shopping by in-
house counsel who is also the counsel of record is sufficient
compliance with the rules.143]
A mere letter expressing disappointment over the judgment of
the Labor Arbiter cannot be considered as a memorandum of
appeal.
Garcia u. NLR
 a decision adverse to the Company was rendered by
the Labor Arbiter.
30
  Thereafter, the Company through its president wrote a
letter to the Labor Arbiter expressing surprise and
disappointment over an allegedly erroneous decision.
 The NLRC treated the letter as an appeal.
 The Supreme Court held that the letter of the Company
cannot be treated as an appeal from the Labor Arbiter's
decision.
 The letter is not a memorandum of appeal but a mere
expression of disappointment over what was perceived
as an appalling judgment of the Labor Arbiter.
 It is not even under oath, much less did it ask for
affirmative relief.
 Worse, there is no indication that the other party was
furnished with a copy of the said letter.
 Likewise, there is no proof that the required appeal fee
and cash or surety bond was paid and/or posted at the
time the letter was received by the Labor Arbiter.
Appeal Fee
 The requirement on appeal fee is not a technicality of
law or procedure — it is an essential requirement for
perfection of an appeal to the NLRC.
 If the appellant does not pay the appeal fee, the
decision appealed from becomes final and executory
as if no appeal was filed at all. The same holds true if
the appeal fee is paid beyond the reglementary period
to appeal.
Luna v. NLRC
 the appeal fee was paid nine days after the expiration
of the reglementary period to appeal.
 The Supreme Court held that the appeal was not
perfected.
Appeal Bond
 Appeal bond is required only when an employer
appeals a monetary award of the Labor Arbiter, other
than an award of damages. This could be gleaned from
Article 229 of the Labor Code the pertinent portion of
which reads as follows:
"ART. 229. Appeal. — xxx In case of a judgment involving a
monetary award, an appeal by the employer may be
perfected only upon the posting of a cash, or surety bond
issued by a reputable bonding company duly accredited by
the Commission in the amount equivalent to the monetary
award in the judgment appealed from." [emphasis supplied]
 The appeal bond must be posted within the
reglementary period to appeal, otherwise, the appeal
will not be perfected.
 Hence, even if the memorandum of appeal was filed
within the reglementary period, the appeal must be
dismissed if the employer did not post an appeal bond.
When Appeal Bond Is Not Required
Appeal bond is not required under the following
circumstances:
31
 (1) If the appeal questions only the award of damages or
attorney's fees;
(2) If there is no monetary award
(3) If the decision does not state the amount of the award.
Form of Appeal Bond
 The appeal bond may be in the form of cash or surety
bond.
 A pleading entitled "Appeal Bond/Undertaking" wherein
the employer merely undertook to pay the judgment,
cannot be considered as substantial compliance with
the bond requirements of Article 229 of the Labor
Code.
 The reason is because it cannot assure satisfaction of
the monetary award if the employer becomes insolvent
during the pendency of the appeal.
 But a real property bond has been held as substantial
compliance with the requirement of Article 229 of the
Labor Code in line with the liberal interpretation
accorded to the law.
 The reason is because the real property bond will
sufficiently protect the interests of the employees
should they finally prevail.
UERM-Memorial Medical Center u. NLRC
 the Labor Arbiter rendered a Decision ordering the
employer to pay salary differentials to its employees in
the total amount of P17,082,448.56.
 Within the reglementary period, the employer appealed
the decision to the NLRC. Instead of posting a cash or
surety bond, the employer posted a Real Estate Bond
consisting of land and various improvements therein
worth P102,345,650.00 for the reason that it is not in a
viable financial condition to post a cash or surety bond
nor to pay the annual premium of P700,000.00 for
surety bond.
 The Supreme Court held that the Real Estate Bond
substantially complies with the requirements of Article
229 of the Labor Code because it sufficiently protects
the interest of the employees should they finally prevail.
 The real property offered by the employer is worth
P102,345,650.00.
 The judgment in favor of the employees is only a little
more than Pl 7 million.
 Article 229 of the Labor Code should be given a liberal
interpretation, considering the importance of deciding
cases on the basis of their substantive merit and not on
strict technical rules.
 The provision of Article 229 of the Labor Code
regarding the appeal bond must be given liberal
interpretation in line with the desired objective of
resolving controversies on the merits rather than on
technicalities
32
  The requirement may be relaxed in the interest of
substantial justice, particularly when there was
substantial compliance with the rule.
 For example, if the Joint Declaration attached as
supporting document to the appeal bond lacks the
signature of the lawyer but was signed by the bonding
company and the employer, the appeal should not be
dismissed because an appeal bond has in fact been
posted.
 The Joint Declaration which is a mere supporting
document to the appeal bond is not a requirement for
perfection of appeal — it is merely intended to ensure
that the bond posted is genuine. The signature of the
lawyer will not make the bond genuine. Neither will the
absence of the lawyer's signature make it less genuine.
The signatures of the employer and the bonding
company already guarantee the genuineness of the
bond.
The Bonding Company Must be Accredited by the NLRC
 The surety bond must be issued by a reputable
bonding company duly accredited by the NLRC.
 Thus, a surety bond issued by a blacklisted bonding
company is not valid, hence, it does not perfect the
appeal. The subsequent lifting of the blacklisting will
not validate the bond.
 The surety bond must be genuine, otherwise, the
appeal will be dismissed because a fake or expired
bond is in legal contemplation a mere scrap of paper.
Supporting Documents of Surety Bond
(1) Joint declaration under oath by the employer, his
counsel and the bonding company, attesting that the
bond posted is genuine and it shall be in effect until
final disposition of the case;
(2) Indemnity agreement between the employer-appellant
and bonding company;
(3) Proof of security deposit or collateral securing the
bond;
(4) Certificate of registration from the Insurance
Commission:
(5) Certificate of registration from the Securities and
Exchange Commission;
(6) Certificate of authority to transact business from the
Office of the President;
(7) Certificate of accreditation and authority from the
Supreme Court; and
(8) Notarized board resolution or secretary's certificate
from the bonding company showing its authorized
signatories and their specimen signatures.
Computation of Appeal Bond
 In the computation of appeal bond, moral and
exemplary damages and attorney's fees are excluded.
 It is true that Article 229 of the Labor Code does not
provide for such exclusion, but the rules of the
NLRC162 expressly exclude moral and exemplary
damages and attorney's fees in the computation of the
appeal bond.
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  There is no conflict between the two provisions. Article
229 of the Labor Code lays down the requirement that
an appeal bond should be filed, whereas. Rules of
Procedure of the NLRC explains how the appeal bond
should be computed.163
Reduction of Appeal Bond
If the employer would want to have the appeal bond reduced,
it should:
(1) File a Motion to Reduce Appeal Bond within the
reglementary period to appeal;
(2) Cite a meritorious ground for reduction; and
(3) Post a provisional bond equivalent to 10% of the
monetary award.
 If the NLRC denies the motion to reduce bond, or
requires a bond that exceeds the amount of the
provisional bond, the employer shall be given a fresh
period of 10 days (from notice of the NLRC order
within) which to perfect the appeal by posting the
required appeal bond.
Meritorious Grounds for Reduction of Appeal Bond
The following circumstances have been held to be meritorious
grounds for reduction of the appeal bond:
(1) lack of financial capability to pay the full amount of the
bond;
(2) when the complaint is patently not meritorious, as when
there is lack of employer-employee relationship; or when
the claim has prescribed.
Not Considered as Meritorious Grounds for Reduction of
Appeal Bond
 Substantial monetary award, even if it runs into
millions, is not a meritorious ground for reduction of
appeal bond.
Calabash Garments v. NLRC
 the decision of the Labor Arbiter ordered the company
to pay backwages and separation pay to employees
who were locked out, in the total amount of
P8,053,500.
 The company appealed the decision to the NLRC.
Concomitantly, the Company filed a Motion to Reduce
Appeal Bond on the ground that the amount of appeal
bond, i.e., P8,053,500.00 is substantial and enormous.
 The company argued that for the premium alone, it has
to shell out no less than P800,000.00 at the prevailing
rate of 10% which it could no longer recover, plus the
fact that it has to put up a collateral, either in real estate
mortgage or cash or time deposit with the bonding
company.
 The Supreme Court held that the ground interposed by
the Company is not meritorious. A substantial monetary
award, even if it runs into millions, does not necessarily
give the employer-appellant a "meritorious case" and
does not automatically warrant a reduction of the
appeal bond. Monetary award that exceeds the
authorized capital stock is also not a meritorious
ground for reduction of appeal bond.
34

Biogenerics v. NLRC
 Labor Arbiter awarded P2.2M to the illegally dismissed
employees. Together with its appeal, the Company
filed a Motion to Reduce Appeal Bond on the ground
that the authorized capital stock of the corporation is
very much less than the amount awarded, hence it Will
put the corporation in serious and precarious financial
condition.
 The Supreme Court held that the justification advanced
by the Company is not meritorious, because if the
Company will post a surety bond, it will have to pay
only a moderate and reasonable amount for premium
of such bond.
Validity of Appeal Bond
The cash or surety bond shall be valid and effective from the
date of posting, until the case is finally decided or the award
satisfied.
Proof of Service
In all cases, the appellant should furnish the other party:
(1) a copy of the memorandum of appeal;1
(2) a certified true copy of the surety bond.
However, the failure of the appellant to furnish the adverse
party with a copy of the memorandum of appeal is not a fatal
defect but a mere formal lapse.174 If there is no proof of
service to the adverse party, the NLRC must inform the
adverse party of the appeal m order to give him an opportunity
to be heard, otherwise, there would be a violation of due
process.
Frivolous or Dilatory Appeals
 A frivolous or dilatory appeal could be exemplified by
an appeal from a judgment awarding backwages which
the employer deliberately filed without an appeal bond.
 The deliberate non-filing of an appeal bond is an
indication that the employer is not sincere in perfecting
his appeal and is intended only to delay the
proceedings.
 To discourage frivolous or dilatory appeals, the NLRC
or the
 Labor Arbiter can impose reasonable penalty, including
fines or censures, upon the erring parties.
Motion for Reconsideration of NLRC Decision
 Unlike decisions of the Labor Arbiter, decisions of the
NLRC may be the subject of a motion for
reconsideration.
 Filing of motion for reconsideration is in fact a condition
sine qua non for the filing of a special civil action for
certiorari
 Only one motion for reconsideration from the same
party shall be entertained
 The motion for reconsideration shall be under oath and
filed within 10 calendar days from receipt of order,
resolution, or decision with proof that a copy thereof
35
 has been furnished the adverse party within the
reglementary period.

Judicial Review of NLRC Decisions

 Decisions of the NLRC are subject to judicial review by
means of a special civil action for certiorari, which may
be filed not later than 60 days from notice of judgment,
order or resolution to be assailed.
 The petition for certiorari should be filed with of courts.

36