PEPSI v.

GAL-LANG the claim asserted and employee-employer relations to put the case under the provisions of Article
217.—It must be stressed that not every controversy involving workers and their employers can be
resolved only by the labor arbiters. This will be so only if there is a “reasonable causal connection”
Facts: between the claim asserted and employee-employer relations to put the case under the provisions
The private respondents were employees of the petitioner who were suspected of complicity in the of Article 217. Absent such a link, the complaint will be cognizable by the regular courts of justice
irregular disposition of empty Pepsi Cola bottles. On July 16, 1987, the petitioners filed a criminal in the exercise of their civil and criminal jurisdiction.
complaint for theft against them but this was later withdrawn and substituted with a criminal
complaint for falsification of private documents. On November 26, 1987, after a preliminary Same; Same; Same; Same; Although a controversy is between an employer and an employee, the
investigation conducted by the Municipal Trial Court, the complaint was dismissed. The dismissal Labor Arbiters have no jurisdiction if the Labor Code is not involved.—ln Molave Motor Sales, Inc. v.
was affirmed by the Office of the Provincial Prosecutor. Laron, the same Justice held for the Court that the claim of the plaintiff against its sales manager
for payment of certain accounts pertaining to his purchase of vehicles and automotive parts, repairs
Meantime, allegedly after an administrative investigation, the private respondents were dismissed of such vehicles, and cash advances from the corporation was properly cognizable by the Regional
by the petitioner company on November 23, 1987. As a result, they filed a complaint for illegal Trial Court of Dagupan City and not the labor arbiter, because “although a controversy is between
dismissal before the Labor Arbiter, and demanded reinstatement with damages. They also filed a an employer and an employee, the Labor Arbiters have no jurisdiction if the Labor Code is not
separate civil complaint against the petitioners for damages arising from what they claimed to be involved.”
their malicious prosecution before the RTC.
The petitioners moved to dismiss the civil complaint on the ground that the trial court had no Same; Same; Same; Same; No reasonable causal connection between the complaint and the
jurisdiction over the case because it involved employee-employer relations that were exclusively relations of the parties as employer and employees in the case at bar.—The case now before the
cognizable by the labor arbiter. Court involves a complaint for damages for malicious prosecution which was filed with the Regional
Trial Court of Leyte by the employees of the defendant company. It does not appear that there is a
The motion was granted. However, the respondent judge, acting on the motion for reconsideration, “reasonable causal connection” between the complaint and the relations of the parties as employer
reinstated the complaint, saying it was “distinct from the labor case for damages now pending and employees. The complaint did not arise from such relations and in fact could have arisen
before the labor courts.” independently of an employment relationship between the parties. No such relationship or any
Issue: unfair labor practice is asserted. What the employees are alleging is that the petitioners acted with
bad faith when they filed the criminal complaint which the Municipal Trial Court said was intended
Whether the trial court has jurisdiction over the case. “to harass the poor employees” and the dismissal of which was affirmed by the Provincial
Held: Prosecutor “for’ lack of evidence to establish even a slightest probability that all the respondents
herein have committed the crime imputed against them.” This is a matter which the labor arbiter
Yes. The trial court has jurisdiction over the case. has no competence to resolve as the applicable law is not the Labor Code but the Revised Penal
The petitioners invoke Article 217 of the Labor Code and a number of decisions of this Court to Code.
support their position that the private respondents’ civil complaint for damages falls under the
jurisdiction of the labor arbiter. The Court held at the outset that the case is not in point because
what was involved there was a claim arising from the alleged illegal dismissal of an employee, who
chose to complain to the regular court and not to the labor arbiter.
It must be stressed that not every controversy involving workers and their employers can be
resolved only by the labor arbiters. This will be so only if there is a “reasonable causal connection”
between the claim asserted and employee-employer relations to put the case under the provisions
of Article 217. Absent such a link, the complaint will be cognizable by the regular courts of justice
in the exercise of their civil and criminal jurisdiction.
The case at bar involves a complaint for damages for malicious prosecution which was filed with the
Regional Trial Court by the employees of the defendant company. It does not appear that there is a
“reasonable causal connection” between the complaint and the relations of the parties as employer
and employees. The complaint did not arise from such relations. What the employees are alleging is
that the petitioners acted with bad faith when they filed the criminal complaint. This is a matter
which the labor arbiter has no competence to resolve as the applicable law is not the Labor Code
but the Revised Penal Code.
_______________________________________________________________________
Civil Law; Labor Law; Jurisdiction; Not every controversy involving workers and their employers
can be resolved only by the labor arbiters; There must be a reasonable causal connection between
MOLAVE v. LARON 4. Cases involving household services; and
5. CASES ARISING FROM ANY VIOLATION OF ARTICLE 265 OF THIS CODE, INCLUDING QUESTIONS
Facts:
INVOLVING THE LEGALITY OF STRIKES AND LOCKOUTS.
Petitioner is a corporation engaged in the sale and repair of motor vehicles. Private respondent is
the sales manager of PLAINTIFF. At the pre-trial conference, the DEFENDANT raised the 6. All other claims arising from employer-employee relations, unless expressly excluded by this Code].
question of jurisdiction of the Court stating that PLAINTIFF's complaint arose out of (Italics and bracketed portions indicate the deletions, while the amendments introduced are
employer-employee relationship, and he subsequently moved for dismissal. Such complaint was capitalized).
dismissed by the judge because it must be the jurisdiction of the LA and NLRC to decide cases on
The dismissal of the case below on the ground that the sum of money and damages sued upon arose from employer-
ER-EE relationship. However, although a controversy is between an employer and an employee, the
employee relationship was erroneous. Claims arising from employer-employee relations are now limited to those
Labor Arbiters have no jurisdiction if the Labor Code is not involved. In this case, PLAINTIFF had
mentioned in paragraphs 2 and 3 of Article 217. There is no difficulty on our part in stating that those in the case below
sued for monies loaned to DEFENDANT, the cost of repair jobs made on his personal cars, and for
should not be faulted for not being aware of the last amendment to the frequently changing Labor Code.
the purchase price of vehicles and parts sold to him. Those accounts have no relevance to the
Labor Code. hence, the civil has the juris over the matter. The claim of DEFENDANT that he should still be considered an employee of PLAINTIFF, because the latter has not sought
clearance for his separation from the service, will not affect the jurisdiction of respondent Judge to resolve the complaint
Issue: of PLAINTIFF. DEFENDANT could still be liable to PLAINTIFF for payment of the accounts sued for even if he remains an
Whether or not there was still a relationship of employer and employee between the parties. employee of PLAINTIFF.
_______________________________________________________________________
Held:
The dismissal of the case below on the ground that the sum of money and damages sued upon Labor Law; Jurisdiction; Civil Courts, not the Labor Arbiter and the NLRC, have jurisdiction over
arose from employer-employee relationship was erroneous. Claims arising from employer- accounts for monies loaned by employer to employee for cost of repair jobs made on an
employee relations are now limited to those mentioned in paragraphs 2 and 3 of Article 217. There employee’s personal cars, and for purchase price of vehicles and parts sold to employee.—In the
is no difficulty in stating that those in the case below should not be faulted for not being aware of case below, PLAINTIFF had sued for monies loaned to DEFENDANT, the cost of repair jobs made on
the last amendment to the frequently changing Labor Code. his personal cars, and for the purchase price of vehicles and parts sold to him. Those accounts have
no relevance to the Labor Code. The cause of action was one under the civil laws, and it does not
The claim of DEFENDANT that he should still be considered an employee of PLAINTIFF, because the breach any provision of the Labor Code or the contract of employment of DEFENDANT. Hence, the
latter has not sought clearance for his separation from the service, will not affect the jurisdiction of civil courts, not the Labor Arbiters and the NLRC, should have jurisdiction.
respondent Judge to resolve the complaint of PLAINTIFF. DEFENDANT could still be liable to
Same; Same; Same; Claims arising from employer-employee relations limited only to paragraph 2
PLAINTIFF for payment of the accounts sued for even if he remains an employee of PLAINTIFF.
(involving wages, hours of work and other terms and conditions of employment) and paragraph 3
(all money claims of workers) of Art 217 of the Labor Code.—The dismissal of the case below on
Issue:
the ground that the sum of money and damages sued upon arose from employer-employee
WON the RTC has jurisdiction over the case? YES.
relationship was erroneous. Claims arising from employer-employee relations are now limited to
those mentioned in paragraphs 2 and 3 of Article 217. There is no difficulty on our part in stating
Held:
that those in the case below should not be faulted for not being aware of the last amendment to
In the case below, PLAINTIFF had sued for monies loaned to DEFENDANT, the cost of repair jobs made on his personal the frequently changing Labor Code.
cars, and for the purchase price of vehicles and parts sold to him. Those accounts have no relevance to the Labor Code.
The cause of action was one under the civil laws, and it does not breach any provision of the Labor Code or the contract
of employment of DEFENDANT. Hence, the civil courts, not the Labor Arbiters and the NLRC, should have jurisdiction.
BP Blg. 227 has amended Article 217 of the Labor Code to read as follows:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) The Labor Arbiters shall have the
original and exclusive jurisdiction to hear and decide within thirty (30) working days after submission
of the case by the parties for decision, the following cases involving all workers, whether agricultural
or non-agricultural:
1. Unfair labor practice cases;
2. Those that ( involve) WORKERS MAY FILE INVOLVING wages, hours of work and other terms and
conditions of employment;
3. All money claims of workers, including those based on non-payment or underpayment of wages,
overtime compensation, separation pay and other benefits provided by law or appropriate
agreement, except claims for employees compensation, social security, and maternity benefits;
JAGUAR v. SALES
Facts:
Petitioner Jaguar Security and Investigation Agency ("Jaguar") is a private corporation engaged in the business of
providing security services to its clients, one of whom is Delta Milling Industries, Inc. ("Delta").
Private respondents Rodolfo Sales, Melvin Tamayo, Dionisio Caranyagan, Jesus Silva, Jr., Jaime Moron and
Daneth Fetalvero were hired as security guards by Jaguar. They were assigned at the premises of Delta in Libis,
Quezon City. Caranyagan and Tamayo were terminated by Jaguar on May 26, 1998 and August 21, 1998,
respectively. Allegedly their dismissals were arbitrary and illegal. Sales, Moron, Fetalvero and Silva remained
with Jaguar. All the guard-employees, claim for monetary benefits such as underpayment, overtime pay, rest day
and holiday premium pay, underpaid 13th month pay, night shift differential, five days service and incentive
leave pay. In addition to these money claims, Caranyagan and Tamayo argue that they were entitled to separation
pay and back wages, for the time they were illegally dismissed until finality of the decision. Furthermore, all
respondents claim for moral and exemplary damages.
On September 18, 1998, respondent security guards instituted the instant labor case before the labor arbiter.
On May 25, 1999, the labor arbiter rendered a decision in favor of private respondents Sales, et al., the dispositive
portion of which provides:
"WHEREFORE, judgment is hereby rendered dismissing the charges of illegal dismissal on the part of the
complainants MELVIN R. TAMAYO and DIONISIO C. CARANYAGAN for lack of merit but ordering
respondents JAGUAR SECURITY AND INVESTIGATION AGENCY and DELTA MILLING INDUSTRIES, INC.,
to jointly and severally pay all the six complainants, namely: RODOLFO A. SALES, MELVIN R. TAMAYO,
JAIME MORON and DANETH FETALVERO the following money claims for their services rendered from April
24, 1995 to April 24, 1998:
a) wage differentials
b) overtime pay differentials (4 hours a day)
c) rest day pay
d) holiday pay
e) holiday premium pay
f) 13th month pay differentials
g) five days service incentive leave pay per year subject to the exception earlier cited.
The Research and Information Unit of this Commission is hereby directed to compute and quantify the above
awards and submit a report thereon within 15 days from receipt of this decision.
For purposes of any appeal, the appeal bond is tentatively set at P100,000.00.
All other claims are DISMISSED for lack of merit.
SO ORDERED."
On July 1, 1999, petitioner Jaguar filed a partial appeal questioning the failure of public respondent NLRC to
resolve its cross-claim against Delta as the party ultimately liable for payment of the monetary award to the
security guards.
In its Resolution dated September 19, 2000, the NLRC dismissed the appeal, holding that it was not the proper
forum to raise the issue. It went on to say that Jaguar, being the direct employer of the security guards, is the one
principally liable to the employees. Thus, it directed petitioner to file a separate civil action for recovery of the
amount before the regular court having jurisdiction over the subject matter, for the purpose of proving the
liability of Delta.
Jaguar sought reconsideration of the dismissal, but the Commission denied the same in its Resolution dated
November 9, 2001.
Petitioner filed a petition for certiorari with the CA, which, in the herein assailed Decision dated October 21, 2002
and Resolution dated February 13, 2004, dismissed the petition for lack of merit.
Issue: Whether or not petitioner may claim reimbursement from Delta Milling through a cross-claim filed with
the labor court?
Held: The Court ruled in the negative.
The jurisdiction of labor courts extends only to cases where an employer-employee relationship exists.
In the present case, there exists no employer-employee relationship between petitioner and Delta Milling. In its
cross-claim, petitioner is not seeking any relief under the Labor Code but merely reimbursement of the monetary
benefits claims awarded and to be paid to the guard employees. There is no labor dispute involved in the cross-
claim against Delta Milling. Rather, the cross-claim involves a civil dispute between petitioner and Delta Milling.
Petitioner's cross-claim is within the realm of civil law, and jurisdiction over it belongs to the regular courts.
Moreover, the liability of Delta Milling to reimburse petitioner will only arise if and when petitioner actually pays
its employees the adjudged liabilities. Payment, which means not only the delivery of money but also the
performance, in any other manner, of the obligation, is the operative fact which will entitle either of the solidary
debtors to seek reimbursement for the share which corresponds to each of the debtors. In this case, it appears that
petitioner has yet to pay the guard employees.
The petition is DENIED.
____
ESPINO v. NLRC Corporation Law; Securities and Exchange Commission; P.D. 902-A; Jurisdiction; Labor Law; NLRC;
It is the Securities and Exchange Commission (SEC) and not the NLRC which has original and
FACTS: exclusive jurisdiction over cases involving the removal from employment of corporate officers
under P.D. 902-A.—The Court, citing Presidential Decree No. 902-A, laid down the rule in the case
of Philippine School of Business Administration v. Leano, and consequently reiterated in three (3)
➔
other cases that it is the Securities and Exchange Commission (SEC) and not the NLRC which has
Airlines (PAL) when his service was terminated in 1990 as a result of the findings of the panels
original and exclusive jurisdiction over cases involving the removal from employment of corporate
created by then President Corazon C. Aquino to investigate the administrative charges filed
officers.
against him. It appears that petitioner and other several senior officers of PAL were charged
for their involvement in 4 cases, labeled as “Goldair,” “Robelle,” “Kabash/Primavera,” and Same; Same; Same; Same; Section 5(c), P.D. 902-A specifically provides SEC original and
“Middle East.” exclusive jurisdiction over matters concerning the election or appointment of officers of a
➔ corporation.—In intracorporate matters concerning the election or appointment of officers of a
from the service effective immediately for loss of confidence corporation, Section 5, PD 902-A specifically provides; “SEC. 5. In addition to the regulatory and
➔ adjudicative functions of the Securities and Exchange Commission over corporations, partnerships
➔ and other forms of associations registered with it as expressly granted under existing laws and
petitioner Espino should have been addressed by way of appeal, to the OP. decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: x x x x
➔ x x x x x (c) Controversies in the election or appointments of directors, trustees, officers or
➔ managers of such corporations, partnerships or associations”
subject matter as it is the SEC, and not the NLRC which has jurisdiction over involving
dismissal or removal of corporate officers. Same; Same; Same; Same; Generally speaking, the relationship of a person to a corporation,
➔ whether as officer or as agent or employee, is not determined by the nature of the services
jurisdiction performed, but by the incidents of the relationship as they actually exist.—The matter of
➔ petitioner’s not being elected to the office of Executive Vice PresidentChief Operating Officer thus
the termination of a regular employee and involves claim for backwages and other benefits and falls squarely within the purview of Section 5, par. (c) of P.D. 902-A. In the case of PSBA v. Leano,
damages supra, which involved an Executive Vice-President who was not re-elected to the said position
during the election of officers on September 5, 1981 by the PSBA’s newly elected Board of
Issue: Whether the NLRC has jurisdiction over the complaint filed by the petitioner for illegal Directors, the Court emphatically stated: ‘This is not a case of dismissal. The situation is that of a
dismissal corporate office having been declared vacant, and that of TAN’s not having been elected thereafter.
The matter of whom to elect is a prerogative that belongs to the Board, and involves the exercise
HELD: NO of deliberate choice and the faculty of discriminative selection. Generally speaking, the relationship
Under P.D. No. 902-A, it is the Securities and Exchange Commission and not the NLRC that has of a person to a corporation, whether as officer or as agent or employee, is not determined by the
original and exclusive jurisdiction over cases involving the removal from employment of corporate nature of the services performed, but by the incidents of the relationship as they actually exist.”
officers. Under the said decree, the SEC has the exclusive and original jurisdiction to hear and Same; Same; Same; Same; A corporate officer’s dismissal is always a corporate act.—A corporate
decide cases involving “Controversies in the election or appointments of directors, trustees, officers officer’s dismissal is always a corporate act and/or an intra-corporate controversy and that nature
or managers of such corporations, partnerships or associations.” is not altered by the reason or wisdom which the Board of Directors may have in taking such
action. Furthermore, it must be noted that the reason behind the non-election of petitioner to the
It has been ruled that a corporate officer’s dismissal is always a corporate act and/or an intra- position of Executive Vice President-Chief Operating Officer arose from, or is closely connected
corporate controversy and that nature is not altered by the reason or wisdom which the Board of with, his involvement in the alleged irregularities in the aforementioned cases which, upon
Directors may have in taking such action. Evidently, this intra-corporate controversy must be place investigation and recommendation, were resolved by the PAL Board of Directors against him and
under the specialized competence and expertise of the SEC. other senior officers. Evidently, this intra-corporate ruling places the instant case under the
specialized competence and expertise of the SEC.
The fact that petitioner sought payment of his backwages, other benefits, as well as damages and
attorney's fees in his complaint for illegal dismissal will not operate to prevent the SEC from Same; Same; Same; Same; The principal function of the SEC is the supervision and control over
exercising its jurisdiction under PD 902-A. As to the contention of Espino that PAL is estopped from corporations, partnerships and associations with the end in view that investment in these entities
questioning the jurisdiction of the NLRC, it is well-settled that jurisdiction over the subject matter is may be encouraged and protected, and their activities pursued for the promotion of economic
conferred by law and the question of lack of jurisdiction may be raised anytime even on appeal. development.—The jurisdiction of the SEC has likewise been clarified by this Court in the case of
Union Glass and Container Corporation, et al. v. SEC, et al., thus: ‘This grant of jurisdiction must
WHERFORE, PETITION IS DENIED. be viewed in the light of the nature and function of the SEC under the law. Section 3 of PD No.
_______________________________________________________________________ 902-A confers upon the latter ‘absolute jurisdiction, supervision, and control over all corporations,
partnerships or associations, who are grantees of primary franchise and/or license or permit issued
by the government to operate in the Philippines x x x.’ The principal function of the SEC is the
supervision and control over corporations, partnerships and associations with the end in view that
investment in these entities may be encouraged and protected, and their activities pursued for the
promotion of economic development.
Same; Same; Same; Same; Requisites in order that SEC can take cognizance of a case. —It is in
aid of this office that the adjudicative power of the SEC must be exercised. Thus the law explicitly
specified and delimited its jurisdiction to matters intrinsically connected with the regulation of
corporations, partnerships and associations and those dealing with the internal affairs of such
corporations, partnerships or associations. Otherwise stated, in order that the SEC can take
cognizance of a case, the controversy must pertain to any of the following relationships: (a)
between the corporation, partnership or association and the public; (b)) between the corporation,
partnership or association and its stockholders, partners, members, or officers; (c) between the
corporation, partnership or association and the state in so far as its franchise, permit or license to
operate is concerned, and (d) among the stockholders, partners or associates themselves.
Same; Same; Same; Same; The affirmative reliefs and monetary claims sought by petitioner in his
complaint reveal that they are actually part of the perquisites of his elective position; hence,
intimately linked with his relations with the corporation.—The fact that petitioner sought payment
of his backwages, other benefits, as well as moral and exemplary damages and attorney ’s fees in
his complaint for illegal dismissal will not operate to prevent the SEC from exercising its jurisdiction
under PD 902-A. While the affirmative reliefs and monetary claims sought by petitioner in his
complaint may, at first glance, mislead one into placing the case under the jurisdiction of the Labor
Arbiter, a closer examination reveals that they are actually part of the perquisites of his elective
position; hence, intimately linked with his relations with the corporation. In Dy v. NLRC, et al., the
Court, confronted with the same issue ruled, thus: “The question of remuneration, involving as it
does, a person who is not a mere employee but a stockholder and officer, an integral part, it might
be said, of the corporation, is not a simple labor problem but a matter that comes within the area
of corporate affairs and management, and is in fact a corporate controversy in contemplation of the
Corporation Code.”
Same; Same; Same; Same; It is still within the competence of and expertise of the SEC to resolve
all matters arising from or closely related with all intra-corporate disputes.—The Court has likewise
ruled in the case of Andaya v. Abadia that in intra-corporate matters, such as those affecting the
corporation, its directors, trustees, officers and shareholders, the issue of consequential damages
may just as well be resolved and adjudicated by the SEC. Undoubtedly, it is still within the
competence and expertise of the SEC to resolve all matters arising from or closely connected with
all intra-corporate disputes.
Same; Same; Same; Same; The issue of jurisdiction is unavailing because estoppel does not apply
to confer jurisdiction upon a tribunal that has none over the cause of action.—It is well-settled that
jurisdiction over the subject matter is conferred by law and the question of lack of jurisdiction may
be raised at anytime even on appeal. The principle of estoppel cannot be invoked to prevent this
Court from taking up the question of jurisdiction, which has been apparent on the face of the
pleadings since the start of the litigation before the Labor Arbiter. In the case of Dy v. NLRC, supra,
the Court, citing the case of Calimlim v. Ramirez reiterated that the decision of a tribunal not
vested with appropriate jurisdiction is null and void. Again, the Court in Southeast Asian Fisheries
Development Center-Aquaculture Department v. NLRC restated the rule that the invocation of
estoppel with respect to the issue of jurisdiction is unavailing because estoppel does not apply to
confer jurisdiction upon a tribunal that has none over the cause of action. The instant case does not
provide an exception to the said rule.
MANEJA v. NLRC
Facts: Maneja (employee) worked for Manila Midtown Hotel(MMH) (employer) as a telephone operator. Maneja was
dismissed by MMH due to violation of their company policy on culpable negligence – negligence or failure to follow specific
instruction(s) or established procedure(s). Maneja filed a complaint for illegal dismissal against MMH. Labor Arbiter Oswald
Lorenzo ruled in favor of Maneja. Lorenzo noted that on the face of the complaint, the issue revolves around the
implementation and interpretation of existing company policies, and as such it is within the jurisdiction of the grievance
procedure under the CBA between MMH and NUWRAIN (the Union in which Maneja is a member), but he still assumed
jurisdiction over the case since termination cases is within his jurisdiction.
Issue: Does the Labor Arbiter have jurisdiction over the case?
Ruling: Yes. Since there has been an actual termination, the matter falls within the jurisdiction of the Labor Arbiter. The
dismissal of Maneja does not call for the interpretation or enforcement of company personnel policies but is a termination
dispute which comes under the jurisdiction of the Labor Arbiter.
It should be explained that “company personnel policies” are guiding principles stated in broad, long-range terms express
the philosophy or beliefs of an organization’s top authority regarding personnel matters. They deal with matters affecting
efficiency and well-being of employees and include, among others, the procedure in the administration of wages, benefits,
promotions, transfer and other personnel movements which are usually not spelled out in the collective agreement. The
usual source of grievances, however, are the rules and regulations governing disciplinary actions.
________________________________________________________________________
Labor Law; Jurisdiction; Labor Arbiters; Voluntary Arbitration; Grievance Procedure; Collective
Bargaining Agreements; Dismissal of Employees; Termination cases fall under the original and
exclusive jurisdiction of the Labor Arbiters, not voluntary arbitrators.—As can be seen from the
aforequoted Article, termination cases fall under the original and exclusive jurisdiction of the Labor
Arbiter. It should be noted, however, that in the opening paragraph there appears the phrase:
“Except as otherwise provided under this Code x x x.” It is paragraph (c) of the same Article which
respondent Commission has erroneously interpreted as giving the voluntary arbitrator jurisdiction
over the illegal dismissal case. However, Article 217(c) should be read in conjunction with Article
261 of the Labor Code which grants to voluntary arbitrators original and exclusive jurisdiction to
hear and decide all unresolved grievances arising from the interpretation or implementation of the
collective bargaining agreement and those arising from the interpretation or enforcement of
company personnel policies. Note the phrase “unresolved grievances.” In the case at bar, the
termination of petitioner is not an unresolved grievance.
Same; Same; Same; Same; Same; Same; Same; Where the dispute is just in the interpretation,
implementation or enforcement stage, it may be referred to the grievance machinery set up in the
Collective Bargaining Agreement or by voluntary arbitration, but where there is already actual
termination, i.e., violation of rights, it is already cognizable by the Labor Arbiter.—The stance of the
Solicitor General in the Sanyo case is totally the reverse of its posture in the case at bar. In Sanyo,
the Solicitor General was of the view that a distinction should be made between a case involving
“interpretation or implementation of Collective Bargaining Agreement” or interpretation or
“enforcement” of company personnel policies, on the one hand and a case involving termination, on
the other hand, It argued that the dismissal of the private respondents does not involve an
“interpretation or implementation” of a Collective Bargaining Agreement or “interpretation or
enforcement” of company personnel policies but involves “termination.” The Solicitor General
further said that where the dispute is just in the interpretation, implementation or enforcement
stage, it may be referred to the grievance machinery set up in the Collective Bargaining Agreement
or by voluntary arbitration. Where there was already actual termination, i.e., violation of rights, it is
already cognizable by the Labor Arbiter. We fully agree with the theory of the Solicitor General in
the Sanyo case, which is radically opposite to its position in this case.
Same; Same; Same; Same; Same; Same; Same; Only disputes involving the union and the
company shall be referred to the grievance machinery or voluntary arbitrators.—Moreover, the
dismissal of petitioner does not fall within the phrase “grievances arising from the interpretation or
implementation of collective bargaining agreement and those arising from the interpretation or
enforcement of company personnel policies,” the jurisdiction of which pertains to the grievance
machinery or thereafter, to a voluntary arbitrator or panel of voluntary arbitrators. It is to be
stressed that under Article 260 of the Labor Code, which explains the function of the grievance
machinery and voluntary arbitrator, “(T)he parties to a Collective Bargaining Agreement shall
include therein provisions that will ensure the mutual observance of its terms and conditions. They
shall establish a machinery for the adjustment and resolution of grievances arising from the
interpretation or implementation of their Collective Bargaining Agreement and those arising from
the interpretation or enforcement of company personnel policies.” Article 260 further provides that
that parties to a CBA shall name or designate their respective representative to the grievance
machinery and if the grievance is unsettled in that level, it shall automatically be referred to the
voluntary arbitrators designated in advance by the parties to a CBA of the union and the company.
It can thus be deduced that only disputes involving the union and the company shall be referred to
the grievance machinery or voluntary arbitrators.
Same; Same; Same; Same; Same; Same; Words and Phrases; “Company Personnel Policies,”
Explained.—It should be explained that “company personnel policies” are guiding principles stated
in broad, long-range terms that express the philosophy or beliefs of an organization’s top authority
regarding personnel matters. They deal with matters affecting efficiency and well-being of
employees and include, among others, the procedure in the administration of wages, benefits,
promotions, transfer and other personnel movements which are usually not spelled out in the
collective agreement. The usual source of grievances, however, are the rules and regulations
governing disciplinary actions.
Same; Same; Pleadings and Practice; Estoppel; The issue of jurisdiction is mooted by a party’s
active participation in the proceedings.—Clearly, estoppel lies. The issue of jurisdiction was mooted
by herein private respondent’s active participation in the proceedings below. In Marquez vs.
Secretary of Labor, the Court said: “x x x. The active participation of the party against whom the
action was brought, coupled with his failure to object to the jurisdiction of the court or quasi-
judicial body where the action is pending, is tantamount to an invocation of that jurisdiction and a
willingness to abide by the resolution of the case and will bar said party from later on impugning
the court or body’s jurisdiction.”
Same; Dismissals; Requisites for Valid Dismissal.—The requisites of a valid dismissal are (1) the
dismissal must be for any of the causes expressed in Article 282 of the Labor Code, and (2) the
employee must be given an opportunity to be heard and to defend himself. The substantive and
procedural laws must be strictly complied with before a worker can be dismissed from his
employment because what is at stake is not only the employee’s position but his livelihood.
Same; Same; Social Justice; Presumption of Good Faith; Our norms of social justice demand that
we credit employees with the presumption of good faith in the performance of their duties.—Given
the factual circumstances of the case, we cannot deduce dishonesty from the act and omission of
petitioner. Our norms of social justice demand that we credit employees with the presumption of
good faith in the performance of their duties, especially petitioner who has served private
respondent since 1985 up to 1990 without any tinge of dishonesty and was even named “Model
Employee” for the month of April, 1989.
Same; Same; Dismissal must be based on a clear and not on an ambiguous or ambivalent ground on the part of the company is sanctioned by Article 2219, No. 10 of the Civil Code, which allows
—any ambiguity or ambivalence on the ground relied upon by an employer in terminating the recovery of such damages in actions referred to in Article 21.
services of an employee denies the latter his full right to contest its legality.—Petitioner has been
charged with a very serious offense—dishonesty. This can irreparably wreck her life as an employee
for no employer will take to its bosom a dishonest employee. Dismissal is the supreme penalty that
can be meted to an employee and its imposition cannot be justified where the evidence is
ambivalent. It must, therefore, be based on a clear and not on an ambiguous or ambivalent
ground. Any ambiguity or ambivalence on the ground relied upon by an employer in terminating
the services of an employee denies the latter his full right to contest its legality. Fairness cannot
countenance such ambiguity or ambivalence.
Same; Same; Due Process; Well-settled is the dictum that the twin requirements of notice and
hearing constitute the essential elements of due process in the dismissal of employees.— Well-
settled is the dictum that the twin requirements of notice and hearing constitute the essential
elements of due process in the dismissal of employees. It is a cardinal rule in our jurisdiction that
the employer must furnish the employee with two written notices before the termination of
employment can be effected: (a) the first apprises the employee of the particular acts or omissions
for which his dismissal is sought; and, (b) the second informs the employee of the employer’s
decision to dismiss him. The requirement of a hearing, on the other hand, is complied with as long
as there was an opportunity to be heard, and not necessarily that an actual hearing was conducted.
Same; Same; Same; Consultations or conferences may not be a substitute for the actual holding of
a hearing.—An examination of the record reveals that no hearing was ever conducted by private
respondent before petitioner was dismissed. While it may be true that petitioner submitted a
written explanation, no hearing was actually conducted before her employment was terminated.
She was not accorded the opportunity to fully defend herself. Consultations or conferences may not
be a substitute for the actual holding of a hearing. Every opportunity and assistance must be
accorded to the employee by the management to enable him to prepare adequately for his defense,
including legal representation. Considering that petitioner denied having allegedly taken the second
P500.00 deposit of the Japanese guest which was eventually found; and, having made the
alteration of the date on the second RLDC merely to reflect the true date of the transaction, these
circumstances should have at least warranted a separate hearing to enable petitioner to fully
ventilate her side. Absent such hearing, petitioner’s right to due process was clearly violated.
Same; Same; Same; A worker’s employment is property in the constitutional sense.—It bears
stressing that a worker’s employment is property in the constitutional sense. He cannot be deprived
of his work without due process of law. Substantive due process mandates that an employee can
only be dismissed based on just or authorized causes. Procedural due process requires further that
he can only be dismissed after he has been given an opportunity to be heard. The import of due
process necessitates the compliance of these two aspects.
Same; Same; Damages; Where the termination of the services of an employee is attended by
fraud or bad faith on the part of the employer, as when the latter knowingly made false allegations
of a supposed valid cause when none existed, moral and exemplary damages may be awarded in
favor of the former.—The award of moral and exemplary damages to petitioner is also warranted
where there is lack of due process in effecting the dismissal. Where the termination of the services
of an employee is attended by fraud or bad faith on the part of the employer, as when the latter
knowingly made false allegations of a supposed valid cause when none existed, moral and
exemplary damages may be awarded in favor of the former. The anti-social and oppressive abuse
of its right to investigate and dismiss its employees constitute a violation of Article 1701 of the New
Civil Code which prohibits acts of oppression by either capital or labor against the other, and Article
21 on human relations. The grant of moral damages to the employees by reason of such conduct
SANYO v. CANIZARES enforcement should not be characterized by arbitrariness (Manila Mandarin Employee Union v.
NLRC, G.R. No. 76989, 29 Sept. 1987, 154 SCRA 368) and always with due process.
Facts:
Same; Same; Same; The law grants to voluntary arbitrators original and exclusive jurisdiction to
·
hear and decide all unresolved grievances arising from the interpretation or implementation of the
·
Collective Bargaining Agreement and those arising from the interpretation or enforcement of
employment)
company personnel policies.—The reference to a Grievance Machinery and Voluntary Arbitrators for
·
the adjustment or resolution of grievances arising from the interpretation or implementation of
economic sabotage, threats, coercion and intimidation, disloyalty and for joining another union called KAMAO.
their CBA and those arising from the interpretation or enforcement of company personnel policies is
·
mandatory. The law grants to voluntary arbitrators original and exclusive jurisdiction to hear and
· decide all unresolved grievances arising from the interpretation or implementation of the Collective
Sanyo. Bargaining Agreement and those arising from the interpretation or enforcement of company
· personnel policies.
relying on Article 217(c) of the Labor Code which provides that cases arising from the interpretation or
implementation of the CBA shall be disposed of by the labor arbiter by referring the same to the grievance Same; Same; Same; Procedure of referring certain grievances originally and exclusively to the
machinery and voluntary arbitration. grievance machinery and to a panel of voluntary arbitrators include not only grievances arising
· from the interpretation or implementation of the CBA but applies as well to those arising from the
implementation of company personnel policies.—The procedure introduced in RA 6715 of referring
ISSUE: certain grievances originally and exclusively to the grievance machinery and when not settled at
Whether or not the Labor Arbiter has jurisdiction over the case. this level, to a panel of voluntary arbitrators outlined in CBA’s does not only include grievances
arising from the interpretation or imple-mentation of the CBA but applies as well to those arising
HELD: from the implementation of company personnel policies. No other body shall take cognizance of
· We hold that the Labor Arbiter and not the Grievance Machinery provided for in the CBA has the jurisdiction to these cases.
hear and decide the case.
· While it appears that the dismissal of the private respondents was made upon the recommendation of PSSLU
pursuant to the union security clause provided in the CBA, We are of the opinion that these facts do not come
within the phrase "grievances arising from the interpretation or implementation of (their) Collective Bargaining
Agreement
· THE RULE IS: only disputes involving the union and the company shall be referred to the grievance machinery or
voluntary arbitrators.
o In the instant case, both the union and the company are united or have come to an agreement
regarding the dismissal of private respondents. 
o No grievance between them exists which could be brought to a grievance machinery.
o The problem or dispute in the present case is between the union and the company on the one hand
and some union and non-union members who were dismissed, on the other hand.
o The dispute has to be settled before an impartial body. The grievance machinery with members
designated by the union and the company cannot be expected to be impartial against the dismissed
employees.
· Since there has already been an actual termination, the matter falls within the jurisdiction of the Labor Arbiter.
_______________________________________________________________________________

Labor Law; Collective Bargaining Agreement; Dismissal; Enforcement of the union security clause
in the CBA is authorized by law provided that enforcement should not be characterized by
arbitrariness and always with due process.—It was provided in the CBA executed between PSSLU
and Sanyo that a member’s voluntary resignation from membership, willful refusal to pay union
dues and his/her forming, organizing, joining, supporting, affiliating or aiding directly or indirectly
another labor union shall be a cause for it to demand his/her dismissal from the company. The
demand for the dismissal and the actual dismissal by the company on any of these grounds is an
enforcement of the union security clause in the CBA. This act is authorized by law provided that
PANTRANCO v NLRC
Facts:
Private respondent was hired by petitioner in 1964 as a bus conductor. He eventually joined the
Pantranco Employees Association, PTGWO. He continued in petitioner’s employ until August 12,
1989, when he was retired at the age of 52 after having rendered twenty five year’s service. The
basis of his retirement was the compulsory retirement provision of the collective bargaining
agreement between the petitioner and the aforenamed union. Private respondent received P49,
300.00 as retirement pay.
Private respondent filed a complaint for illegal dismissal against petitioner with the Sub-Regional
Arbitration Branch of the respondent Commission in Dagupan City. The complaint was consolidated
with two other cases of illegal dismissal having similar facts and issues, filed by other employees,
non union members.
Issue:
Is a Collective Bargaining Agreement provision allowing compulsory retirement before age 60 but
after twenty five years of service legal and enforceable?
Who has jurisdiction over a case involving such a question -- the labor arbiter or
arbitrators authorized by such CBA?
Ruling:
On the first issue:
The bone of contention in this case is the provision on compulsory retirement after 25 years of
service. Article XI, Section 1 (e) (5) of the May 2, 1989 Collective Bargaining Agreement between
petitioner company and the union states:
"Section 1. The COMPANY shall formulate a retirement plan with the following main features:
xxx xxx xxx
(e) The COMPANY agrees to grant the retirement benefits herein provided to regular
employees who may be separated from the COMPANY for any of the following reasons:
xxx xxx xxx
Upon reaching the age of sixty (60) years or upon completing twenty-five (25) years of service to
the COMPANY, whichever comes first, and the employee shall be compulsory retired and paid the
retirement benefits herein provided."
Art. 287 of the Labor Code as worded permits employers and employees to fix the applicable
retirement age at below 60 years. Moreover, providing for early retirement does not constitute
diminution of benefits. In almost all countries today, early retirement, i.e., before age 60, is
considered a reward for services rendered since it enables an employee to reap the fruits of his
labor — particularly retirement benefits, whether lump-sum or otherwise — at an earlier age, when
said employee, in presumably better physical and mental condition, can enjoy them better and
longer. As a matter of fact, one of the advantages of early retirement is that the corresponding
retirement benefits, usually consisting of a substantial cash windfall, can early on be put to
productive and profitable uses by way of income-generating investments, thereby affording a more
significant measure of financial security and independence for the retiree who, up till then, had to
contend with life's vicissitudes within the parameters of his fortnightly or weekly wages. Thus we
are now seeing many CBAs with such early retirement provisions. And the same cannot be
considered a diminution of employment benefits.
It is also further argued that, being a union member, private respondent is bound by the CBA
because its terms and conditions constitute the law between the parties. The parties are bound not
only to the fulfillment of what has been expressly stipulated but also to all the consequences which
according to their nature, may be in keeping with good faith, usage and law. It binds not only the
union but also its members. Thus, the Solicitor General said:
"Private respondent cannot therefore claim illegal dismissal when he was compulsory retired after
rendering twenty-five (25) years of service since his retirement is in accordance with the CBA."
A CBA incorporates the agreement reached after negotiations between employer and bargaining
agent with respect to terms and conditions of employment. A CBA is not an ordinary contract.
"(A)s a labor contract within the contemplation of Article 1700 of the Civil Code of the Philippines
which governs the relations between labor and capital, (it) is not merely contractual in nature but
impressed with public interest, thus it must yield to the common good. As such, it must be
construed liberally rather than narrowly and technically, and the courts must place a practical and
realistic construction upon it, giving due consideration to the context in which it is negotiated and
purpose which it is intended to serve."
Being a product of negotiation, the CBA between the petitioner and the union intended the
provision on compulsory retirement to be beneficial to the employees-union members, including
herein private respondent. When private respondent ratified the CBA with the union, he not only
agreed to the CBA but also agreed to conform to and abide by its provisions. Thus, it cannot be
said that he was illegally dismissed when the CBA provision on compulsory retirement was applied
to his case.
On the second issue:
In Sanyo Philippines Workers Union — PSSLU vs. Cañizares, a case cited by the petitioner,
this Court ruled:
“x x x Hence, only disputes involving the union and the company shall be referred to the grievance
machinery or voluntary arbitrators.
In the instant case, both the union and the company are united or have come to an agreement
regarding the dismissal of private respondents. No grievance between them exists which could be
brought to a grievance machinery. The problem or dispute in the present case is between the
union and the company on the one hand and some union and non-union members who were
dismissed, on the other hand. The dispute has to be settled before an impartial body. The
grievance machinery with members designated by the union and the company cannot be expected
to be impartial against the dismissed employees. Due process demands that the dismissed
workers’ grievances be ventilated before an impartial body. Since there has already been an actual
termination, the matter falls within the jurisdiction of the Labor Arbiter.”
Applying the same rationale to the case at bar, it cannot be said that the "dispute" is between the Same; Same; RA 7641 known as “The Retirement Pay Law” which went into effect on January 7,
union and petitioner company because both have previously agreed upon the provision on 1993 amended Art. 287 of the Labor Code.—Incidentally, we call attention to Republic Act No.
"compulsory retirement" as embodied in the CBA. Also, it was only private respondent on his own 7641, known as “The Retirement Pay Law,” which went into effect on January 7, 1993. Although
passed many years after the compulsory retirement of herein private respondent, nevertheless, the
who questioned the compulsory retirement. Thus, the case is properly denominated as a
said statute sheds light on the present discussion when it amended Art. 287 of the Labor Code, to
"termination dispute" which comes under the jurisdiction of labor arbiters. make it read as follows: “ART. 287. Retirement.—Any employee may be retired upon reaching the
_______________________________________________________________________________ retirement age established in the collective bargaining agreement or other applicable employment
contract. x x x x x x x x x In the absence of a retirement plan or agreement providing for
Labor Law; Termination; A termination dispute comes under the jurisdiction of Labor Arbiters .— retirement benefits of employees in the establishment, an employee upon reaching the age of sixty
Applying the same rationale to the case at bar, it cannot be said that the “dispute” is between the (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory
union and petitioner company because both have previously agreed upon the provision on retirement age, who has served at least five (5) years in the said establishment may retire x x x.”
“compulsory retirement” as embodied in the CBA. Also, it was only private respondent on his own
Same; Same; CBA; Contracts; The intention and spirit of the law is to give employers and
who questioned the compulsory retirement. Thus, the case is properly denominated as a
“termination dispute” which comes under the jurisdiction of labor arbiters. Therefore, public employees a free hand to determine and agree upon the terms and conditions of retirement.—The
aforequoted provision makes clear the intention and spirit of the law to give employers and
respondent did not commit a grave abuse of discretion in upholding the jurisdiction of the labor
arbiter over this case. employees a free hand to determine and agree upon the terms and conditions of retirement.
Providing in a CBA for compulsory retirement of employees after twenty-five (25) years of service
Same; Retirement; Article 287 of the Labor Code as worded permits employers and employees to is legal and enforceable so long as the parties agree to be governed by such CBA. The law
fix the applicable retirement age at below 60 years.—We agree with petitioner and the Solicitor presumes that employees know what they want and what is good for them absent any showing
General. Art. 287 of the Labor Code as worded permits employers and employees to fix the that fraud or intimidation was employed to secure their consent thereto.
applicable retirement age at below 60 years. Moreover, providing for early retirement does not
constitute diminution of benefits. In almost all countries today, early retirement, i.e., before age
60, is considered a reward for services rendered since it enables an employee to reap the fruits of
his labor—particularly retirement benefits, whether lump-sum or otherwise—at an earlier age, when
said employee, in presumably better physical and mental condition, can enjoy them better and
longer. As a matter of fact, one of the advantages of early retirement is that the corresponding
retirement benefits, usually consisting of a substantial cash windfall, can early on be put to
productive and profitable uses by way of in-come-generating investments, thereby affording a
more significant measure of financial security and independence for the retiree who, up till then,
had to contend with life’s vicissitudes within the parameters of his fortnightly or weekly wages.
Thus we are now seeing many CBAs with such early retirement provisions. And the same cannot be
considered a diminution of employment benefits.
Same; Same; Collective Bargaining Agreement; Contract; A CBA incorporates the agreement
reached after negotiations between employer and bargaining agent with respect to terms and
conditions of employment.—A CBA incorporates the agreement reached after negotiations between
employer and bargaining agent with respect to terms and conditions of employment. A CBA is not
an ordinary contract. “(A)s a labor contract within the contemplation of Article 1700 of the Civil
Code of the Philippines which governs the relations between labor and capital, (it) is not merely
contractual in nature but impressed with public interest, thus it must yield to the common good. As
such, it must be construed liberally rather than narrowly and technically, and the courts must place
a practical and realistic construction upon it, giving due consideration to the context in which it is
negotiated and purpose which it is intended to serve.”
Same; Same; Same; Same; It cannot be said that private respondent was illegally dismissed when
the CBA provision on compulsory retirement was applied to his case.—Being a product of
negotiation, the CBA between the petitioner and the union intended the provision on compulsory
retirement to be beneficial to the employees-union members, including herein private respondent.
When private respondent ratified the CBA with the union, he not only agreed to the CBA but also
agreed to conform to and abide by its provisions. Thus, it cannot be said that he was illegally
dismissed when the CBA provision on compulsory retirement was applied to his case.
SANTOS v. SERVIER
Facts: Petitioner Ma. Isabel T. Santos, as the Human Resource Manager of Servier Philippines,
attended a meeting of all human resource managers of respondent, held in Paris, France together
with her family. During her stay in Paris, she was hospitalized due to "alimentary allergy," as she
had recently ingested a meal of mussels which resulted in a concomitant uticarial eruption. All
hospitalization expenses were paid by respondent. When she came back in the Philippines and
underwent medical evaluation, the physician concluded that she had not fully recovered mentally
and physically. This prompted respondent to terminate petitioner‘s services. As a consequence
thereof, respondent offered a retirement package. Of the promised retirement benefits amounting
to P1,063,841.76, only P701,454.89 was released to petitioner‘s husband, the balance thereof was
withheld for taxation purposes. Petitioner then filed a case for unpaid balance of the retirement
package. The LA dismissed the complaint. However, it refused to rule on the legality of the
deductions made by respondent from petitioner‘s total retirement benefits for taxation purposes, as
the issue was beyond the jurisdiction of the NLRC. On appeal, NLRC set aside the ruling of LA. They
emphasized that petitioner was not retired from the service; rather, she was dismissed from
employment due to a disease/disability under Article 2842 of the Labor Code. In view of her non-
entitlement to retirement benefits, the amounts received by petitioner should then be treated as
her separation pay. CA affirmed the same.
Issue: Whether determination of legality of taxable benefits was beyond the labor tribunal ‘s
jurisdiction.
Ruling: No. Contrary to the Labor Arbiter and NLRC‘s conclusions, petitioner‘s claim for illegal
deduction falls within the tribunal‘s jurisdiction. It is noteworthy that petitioner demanded the
completion of her retirement benefits, including the amount withheld by respondent for taxation
purposes. The issue of deduction for tax purposes is intertwined with the main issue of whether or
not petitioner‘s benefits have been fully given her. It is, therefore, a money claim arising from the
employer-employee relationship, which clearly falls within the jurisdiction of the Labor Arbiter and
the NLRC.
Section 32 (B) (6) (a) of the New National Internal Revenue Code (NIRC) provides for the exclusion
of retirement benefits from gross income, thus for the retirement benefits to be exempt from the
withholding tax, the taxpayer is burdened to prove the concurrence of the following elements: (1) a
reasonable private benefit plan is maintained by the employer; (2) the retiring official or employee
has been in the service of the same employer for at least ten (10) years; (3) the retiring official or
employee is not less than fifty (50) years of age at the time of his retirement; and (4) the benefit
had been availed of only once.
the retirement plan and/or in the Collective Bargaining Agreement.—We have declared in Aquino v.
National Labor Relations Commission, 206 SCRA 118 (1992), that the receipt of retirement benefits
does not bar the retiree from receiving separation pay. Separation pay is a statutory right designed
to provide the employee with the wherewithal during the period that he/she is looking for another
employment. On the other hand, retirement benefits are intended to help the employee enjoy the
remaining years of his life, lessening the burden of worrying about his financial support, and are a
form of reward for his loyalty and service to the employer. Hence, they are not mutually exclusive.
However, this is only true if there is no specific prohibition against the payment of both benefits in
the retirement plan and/or in the Collective Bargaining Agreement (CBA).
Same; Same; Same; There being a provision in the Retirement Plan, petitioner is entitled
only to either the separation pay under the law or retirement benefits under the Plan, and not both.
—In the instant case, the Retirement Plan bars the petitioner from claiming additional benefits on
top of that provided for in the Plan. x x x There being such a provision, as held in Cruz v. Philippine
Global Communications, Inc., 430 SCRA 184 (2004), petitioner is entitled only to either the
separation pay under the law or retirement benefits under the Plan, and not both.
Same; Jurisdiction; Labor Arbiters; National Labor Relations Commission; Illegal Deduction;
The issue of deduction for tax purposes is a money claim arising from the employer-employee
relationship, which clearly falls within the jurisdiction of the Labor Arbiter and the National Labor
Relations Commission (NLRC).—Contrary to the Labor Arbiter and NLRC’s conclusions, petitioner’s
claim for illegal deduction falls within the tribunal’s jurisdiction. It is noteworthy that petitioner
demanded the completion of her retirement benefits, including the amount withheld by respondent
for taxation purposes. The issue of deduction for tax purposes is intertwined with the main issue of
whether or not petitioner’s benefits have been fully given her. It is, therefore, a money claim
arising from the employer-employee relationship, which clearly falls within the jurisdiction of the
Labor Arbiter and the NLRC.
Same; Retirement Benefits; Exemption from Withholding Tax; Requisites for the Retirement
Benefits to be Bxempt from the Withholding Tax.—For the retirement benefits to be exempt from
the withholding tax, the taxpayer is burdened to prove the concurrence of the following elements:
(1) a reasonable private benefit plan is maintained by the employer; (2) the retiring official or
employee has been in the service of the same employer for at least ten (10) years; (3) the retiring
official or employee is not less than fifty (50) years of age at the time of his retirement; and (4)
the benefit had been availed of only once.

Petitioner was qualified for disability retirement. At the time of such retirement, petitioner was only
41 years of age; and had been in the service for more or less eight (8) years. As such, the above
provision is not applicable for failure to comply with the age and length of service requirements.
Therefore, respondent cannot be faulted for deducting from petitioner‘s total retirement benefits
the amount of P362,386.87, for taxation purposes.

_______________________________________________________________________________

Labor Law; Retirement Benefits; Separation Pay; The receipt of retirement benefits does not
bar the retiree from receiving separation pay; Retirement benefits and separation pay are not
mutually exclusive unless there is no specific prohibition against the payment of both benefits in
SENTINEL v. BAUTISTA
Facts:
• Porfirio M. Bautista was hired as Legal Officer by Sentinel
• In the course of his employment, Bautista handled a number of cases for which he was paid
fifteen (15%) per cent on amounts recovered except for the four cases in question which,
according to Bautista, he deferred the billing and collection of his percentage on said cases...
because of his awareness of the tight financial condition of the company
• On March 29, 1979, petitioner applied for clearance to... terminate employment with the Ministry
of Labor and Employment but which was opposed by Bautista on May 31, 1979.
• Bautista questioned the legality of his dismissal and at the same time asserted his claim for
unpaid legal fee
• Dissatisfied with the portion awarding the money claim, petitioner appealed to the National Labor
Relations Commission and argued that the Labor Arbiter erred in assuming that Bautista was
entitled to... the legal fees irrespective of the means by which he effected recoveries for the
company.
Issues:
the money claim is civil in character cognizable only by regular courts and therefore beyond the
jurisdiction and competence of the Labor Arbiter
Ruling:
• The Calderon case, however, is no longer controlling because the law upon which said decision
was based, Article 217 of the Labor Code as amended by PD No. 1367, has been superceded by
PD No. 1691 which took effect May 1, 1980 and which restored to the Labor Arbiters original...
and exclusive jurisdiction over claims, monetary or otherwise, provided by law or by appropriate
agreement, arising from employer-employee relations, except those expressly excluded there...
therefrom.[5]
• Although the cause of action arose when PD No. 1367 was then the prevailing law and upon which
the Calderon case was premised, said Decree was no longer applicable when the case was
resolved by the National Labor Relaions Commission on August 29, 1980. The law then in force...
was PD No. 1691.
• Article 217 as amended by PD No. 1367 and PD No. 1691 was again amended by Batas Pambansa
Bilang 130 which took effect August 21, 1981. On June 1, 1982, said Article 217 was amended
anew by Batas Pambansa Bilang 227 vesting on Labor Arbiters jurisdiction over cases that...
workers may file involving wages, hours of work and other terms and conditions of employment
and all money claims of workers, except claims for employees' compensation, social security,
medicare and maternity benefits.
• the claim of 15% legal fees arose out of employer-employee relationship and clearly falls within
the coverage of Article 217 as amended by PD No. 1691 and Batas Pambansa Bilang 227
_______________________________________________________________________________
Labor Law; NLRC; Employer-employee relationship, no cessation of, by his timely opposition to
application for authority to terminate his employment.—It is alleged that at the time Bautista
instituted his money claim by way of opposition, the employer-employee relationship has ceased.
The allegation is without basis. Bautista filed a timely opposition to the application for authority to
terminate his employment. The employer-employee tie certainly existed at that point of time.
Although Bautista did not seek reinstatement, he demanded compliance with one of the express
terms of his employment, thus the dispute is one arising from employer-employee relationship.
Same; Same; Money Claims; Jurisdiction; Calderon vs. Court of Appeals case, no longer
controlling, as PD 1367 superseded by PD 1691 which restored to Labor Arbiters original and
exclusive jurisdiction over monetary and other claims.—The Calderon case, however, is no longer
controlling because the law upon which said decision was based, Article 217 of the Labor Code as
amended by PD No. 1367, has been superseded by PD No. 1691 which took effect May 1, 1980 and
which restored to the Labor Arbiters original and exclusive jurisdiction over claims, monetary or
otherwise, provided by law or by appropriate agreement, arising from employer-employee
relations, except those expressly excluded therefrom.
Same; Same; Same; Same; PD 1691; Cause of action which arose when PD 1367 was the
prevailing law and upon which the Calderon case was premised, cannot prevail over the law in
force when the case was resolved by the NLRC which was PD 1691. —Although the cause of action
arose when PD No. 1367 was then the prevailing law and upon which the Calderon case was
premised, said Decree was no longer applicable when the case was resolved by the National Labor
Relations Commission on August 29, 1980. The law then in force was PD No. 1691.
Same; Same; Same; Same; Same; BP 227 amending PD 1367, and PD 1691 as amended by BP
130, vests on Labor Arbiters jurisdiction over money claims involving employer-employee
relationship.—Article 217 as amended by PD No. 1367 and PD No. 1691 was again amended by
Batas Pambansa Bilang 130 which took effect August 21, 1981. On June 1, 1982, said Article 217
was amended anew by Batas Pambansa Bilang 227 vesting on Labor Arbiters jurisdiction over cases
that workers may file involving wages, hours of work and other terms and conditions of
employment and all money claims of workers, except claims for employees’ compensation, social
security, medicare and maternity benefits.
Same; Same; Same; Same; Same; Same; Legal fees of attorney-employee which arose out of
employer-employee relationship clearly falls under Art. 217 of the Labor Code, as amended by PD
1691 and BP 227.—Undoubtedly, the claim of 15% legal fees arose out of employer-employee
relationship and clearly falls within the coverage of Article 217 as amended by PD No. 1691 and
Batas Pambansa Bilang. 227.
Same; Same; Same; Same; Same; Same; PD 1691 and BP 227, considered curative statutes and
are given retroactive effect; Reason.—In Garcia vs. Martinez, promulgated May 28, 1979, PD No.
1367 was held to be an amendatory decree in the nature of a curative statute with retrospective
application to a pending proceeding which cured the lack of jurisdiction of the Court of First
Instance of Davao City over a complaint for damages allegedly arising from the dismissal of a radio
station manager which was filed on August 2, 1976. PD No. 1691 and BP No. 227 are likewise
curative statutes which cured the lack of jurisdiction of the Labor Arbiter at the start of the
proceeding and should be given retrospective application to this pending proceedings, as the
precise purpose of the amendments was to settle once and for all the conflict of jurisdiction
between regular courts and labor agencies.
Same; Same; Same; Estoppel; Employer estopped from questioning jurisdiction of Labor Arbiter to
award money claim for its failure to object to the employee’s money claim.—Moreover, petitioner is
estopped from questioning the jurisdiction of the Labor Arbiter to award the money claim
considering that in the position paper it submitted to the Labor Arbiter, it never objected but in fact
remained silent as to the claim which was asserted not only in the opposition for termination of
employment but also raised as an issue at the conciliation hearing.
Same; Same; Same; Same; Categorizing a money claim for legal fees as involving both a labor
controversy and a civil dispute would result in split jurisdiction; Intent of law making authority not
to deprive Labor Arbiters and the NLRC of jurisdiction to award damages in labor cases; Reason. —
Furthermore, to state that this case involves both a labor controversy and a civil dispute would be
to sanction split jurisdiction which is obnoxious to the orderly administration of justice. In a number
of cases this Court expounded on this holding that evidently, the lawmaking authority had second
thoughts about depriving Labor Arbiters and the National Labor Relations Commission of the
jurisdiction to award damages in labor cases because that setup means duplicity of suits, splitting
the cause of action and possible conflicting findings and conclusions by two tribunals of one and the
same claim.
PAL v. NLRC (1996)
Labor Law; Employer-Employee Relationship; Elements.—We have pronounced in numerous
cases that in determining the existence of an employer-employee relationship, the following
elements are generally considered: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power to dismiss; and (4) the power to control the employee’s conduct.
Same; Same; Security Guards; Jurisdiction; The Labor Arbiter has no jurisdiction over a
claim filed where no employer-employee relationship existed between a company and the security
guards assigned to it by a security service contractor.—Even if we disregard the explicit covenant in
said agreement that “there exists no employer-employee relationship between CONTRACTOR
and/or his guards on the one hand, and PAL on the other” all other considerations confirm the fact
that PAL was not the security guards’ employer. Analogous to the instant case is Canlubang
Security Agency Corp. vs. NLRC. Considering then that no employer-employee relationship existed
between PAL and the security guards, the Labor Arbiter had no jurisdiction over the claim in NLRC-
NCR Case No. 00-11-06008-90.
Same; Same; Same; Indirect Employers; Read together, Articles 106 and 109 of the Labor
Code simply mean that the party with whom an independent contractor deals is solidarily liable
with the latter for unpaid wages, and only to that extent and for that purpose that the latter is
considered a direct employer.—The Labor Arbiter cannot avoid the jurisdictional issue or justify his
assumption of jurisdiction on the pretext that PAL was the indirect employer of the security guards
under Article 107 in relation to Articles 106 and 109 of the Labor Code and, therefore, it is solidarily
liable with USSI. We agree with the Solicitor General that these Articles are inapplicable to PAL
under the facts of this case. While USSI is an independent contractor under the security service
agreement and PAL may be considered an indirect employer, that status did not make PAL the
employer of the security guards in every respect. As correctly posited by the Office of the Solicitor
General, PAL may be considered an indirect employer only for purposes of unpaid wages since
Article 106, which is applicable to the situation contemplated in Section 107, speaks of wages. The
concept of indirect employer only relates or refers to the liability for unpaid wages. Read together,
Articles 106 and 109 simply mean that that party with whom an independent contractor deals is
solidarily liable with the latter for unpaid wages, and only to that extent and for that purpose that
the latter is considered a direct employer.
Same; Same; Same; Same; Words and Phrases; “Wage,” Defined.—The term “wage” is
defined in Article 97(f) of the Labor Code as “the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece,
or commission basis, or other method of calculating the unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee.”
Same; Same; Same; Same; A breach of a security service agreement could only give rise to
damages under the Civil Code, which is cognizable by the appropriate regular court of justice. —No
valid claim for wages or separation pay can arise from the security service agreement in question
by reason of its termination at the instance of PAL. The agreement contains no provision for
separation pay. A breach thereof could only give rise to damages under the Civil Code, which is
cognizable by the appropriate regular court of justice.
Same; Same; Same; Same; The Labor Arbiter commits grave abuse of discretion if he
disregards the rule he is bound to observe, such as when he fails to resolve forthwith a motion to
dismiss grounded on lack of jurisdiction, improper venue, res judicata or prescription.—The Labor
Arbiter’s lack of jurisdiction was too obvious from the allegations in the complaint and its annex
(the security service agreement) in NLRC-NCR Case No. 00-11-06008-90. The Labor Arbiter then
should have forthwith resolved the motion to dismiss and the supplemental motion to dismiss. As
correctly pointed out by PAL, under Section 15 of Rule V of the New Rules of Procedure of the
NLRC, any motion to dismiss on the ground of lack of jurisdiction, improper venue, res judicata, or
prescription shall be immediately resolved by the Labor Arbiter by a written order. Yet, the Labor
Arbiter did not, and it was only in his decision that he mentioned that the resolution of the motion
to dismiss “was deferred until this case is decided on the merits” because the ground therefor was
not “indubitable.” On this score the Labor Arbiter acted with grave abuse of discretion for
disregarding the rules he was bound to observe.
Same; Appeals; Pleadings and Practice; Negligence; Belief in good faith by an employer as
to the exact date of its receipt of a decision renders excusable any negligence it might have
committed; The higher interest of justice favors a relaxation of the rule on perfection of appeals in
labor cases where there is a delay of only one day in the filing of the appeal, considered along with
the fact that the Labor Arbiter had no jurisdiction over the subject matter of the claim and that the
security guards are not in fact entitled to separation pay under the security service agreement.—
We shall now turn to the issue of tardiness of the appeal. The record does indeed show that on the
original copy of the Notice of Judgment/Final Order, there is stamped by the PAL Legal Department
the date of its receipt of the decision, viz., “AUG. 23 1991.” It is not also denied by respondents
that on the right upper hand corner of PAL’s copy of the Notice of Judgment/Final Orders, there is
stamped the date of receipt thereof by PAL Legal Department, viz., “AUG. 26 1991.” PAL explained
how this discrepancy occurred and how its counsel was misled into believing that PAL received a
copy of the decision only on 26 August 1991. This belief in good faith rendered excusable any
negligence it might have committed. Besides, the delay in the perfection of the appeal was only
one day. Considering that the Labor Arbiter had no jurisdiction over the subject matter of NLRC-
NCR Case No. 00-11-06008-90 and that the 16 security guards are not in fact entitled to
separation pay under the security service agreement, the higher interest of justice favors a
relaxation of the rule on perfection of appeals in labor cases.
Same; Same; Same; While it is an established rule that the perfection of an appeal in the
manner and within the period prescribed by law is not only mandatory but jurisdictional, and failure
to perfect an appeal has the effect of rendering the judgment final and executory, it is equally
settled that the NLRC may disregard the procedural lapse where there is an acceptable reason to
excuse tardiness in the taking of the appeal.—While it is an established rule that the perfection of
an appeal in the manner and within the period prescribed by law is not only mandatory but
jurisdictional, and failure to perfect an appeal has the effect of rendering the judgment final and
executory, it is equally settled that the NLRC may disregard   the procedural lapse where there is
an acceptable reason to excuse tardiness in the taking of the appeal. Among the acceptable
reasons recognized by this Court are (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. A one-day delay in the
perfection of the appeal was excused in Pacific Asia Overseas Shipping Corp. vs. NLRC, Insular Life
Assurance Co. vs. NLRC, and City Fair Corp. vs. NLRC.
Same; Same; Same; The Labor Arbiter’s lack of jurisdiction — so palpably clear on the face
of the complaint — and the perpetuation of unjust enrichment if the appeal is disallowed are
enough combination of reasons that warrant a relaxation of the rules on perfection of appeals in
labor cases.—In the instant case, the Labor Arbiter’s lack of jurisdiction — so palpably clear on the
face of the complaint — and the perpetuation of unjust enrichment if the appeal is disallowed are
enough combination of reasons that warrant a relaxation of the rules on perfection of appeals in
labor cases.