LABOR RELATIONS – 3RD EXAM
was primarily held by the NLRC.  The law did not say that the
Xandredg Sumpt L. Latog
I disputed, the DOLE would refer the matter to the NLRC.  The
REMEDIES AND JURISDICTION
A. PRELIMINARY CONSIDERATIONS ON
JURISDICTION AND REMEDIES
1. Existence of Employer-Employee Relationship
The existence of employer-employee relationship
between the parties-litigants, or a reasonable causal connection to
such relationship is a jurisdictional pre-requisite for the exercise of
jurisdiction over a labor dispute by the Labor Arbiters [Uy v.
Bueno] or any other labor tribunals.
Even if there is employer-employee relationship, if the
cause of action did not arise out of or was not incurred in the
connection with the employer-employee relationship, Labor
Arbiters have no jurisdiction thereover [Pondoc v. NLRC]. This is
so because not every dispute between an employer and employee
involves matters that only labor tribunals like the Labor Arbiters
and the NLRC can resolve in the exercise of their adjudicatory or
quasi-judicial power. Actions between employers and employees
where the employer-employee relationship is merely incidental are
within the exclusive original jurisdiction of the regular courts
[Villamaria, Jr. v. Court of Appeals].
Exception of OFW Cases
In cases filed by OFWs, the Labor Arbiters may exercise
jurisdiction even absent the employment relationship. In Santiago
v. CF Sharp Crew Management, Inc., it was held that a seafarer
who has already signed a POEA-approved employment contract
but was not deployed overseas and, therefore, there is no employer-
employee relationship, may file his monetary claims case with the
Labor Arbiter. This is because the jurisdiction of the Labor
Arbiters is not limited to claims arising from employer-employee
relationships. Under Section 10 of RA 8042, the Labor Arbiter may
exercise jurisdiction over the claims of OFWs 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 damage.
2. Reasonable Causal Connection Rule
The Reasonable Causal Connection Rule is a rule to
determine jurisdiction between labor courts or regular courts.
Under this rule, if there is a reasonable causal connection between
the claim asserted and the employer-employee relations, then the
case is within the jurisdiction of the labor courts [Dai-ichi
Electronics v. Villarama, Jr]. In the absence of such nexus, it is the
regular courts that have jurisdiction [San Miguel Corporation v.
Etcuban].
3. Power to Determine Employment Relationship
Under labor laws, it is not only the Labor Arbiters and
the NLRC that are vested with the power to determine the
existence of employer-employee relationship.
a. DOLE Secretary and the DOLE Regional
Directors
In People’s Broadcasting Service v. Secretary, it was
held:
No limitation in the law was placed upon the power
of the DOLE to determine the existence of an employer-
employee relationship.  No procedure was laid down where the
Page 1 of 49
DOLE would only make a preliminary finding, that the power
DOLE would first seek the NLRC’s determination of the
existence of an employer-employee relationship, or that should
the existence of the employer-employee relationship be
DOLE must have the power to determine whether or not an
employer-employee relationship exists, and from there to decide
whether or not to issue compliance orders in accordance with
Art. 128(b) of the Labor Code, as amended by RA 7730.
The DOLE, in determining the existence of an
employer-employee relationship, has a ready set of guidelines to
follow, the same guide the courts themselves use.  The elements
to determine the existence of an employment relationship are:
(1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; (4) the
employer’s power to control the employee’s conduct. The use of
this test is not solely limited to the NLRC. The DOLE Secretary,
or his or her representatives, can utilize the same test, even in
the course of inspection, making use of the same evidence that
would have been presented before the NLRC.
The determination of the existence of an employer-
employee relationship by the DOLE must be respected.  The
expanded visitorial and enforcement power of the DOLE
granted by RA 7730 would be rendered nugatory if the alleged
employer could, by the simple expedient of disputing the
employer-employee relationship, force the referral of the matter
to the NLRC.  The Court issued the declaration that at least a
prima facie showing of the absence of an employer-employee
relationship be made to oust the DOLE of jurisdiction.  But it is
precisely the DOLE that will be faced with that evidence, and it
is the DOLE that will weigh it, to see if the same does
successfully refute the existence of an employer-employee
relationship.
If the DOLE makes a finding that there is an existing
employer-employee relationship, it takes cognizance of the
matter, to the exclusion of the NLRC.  The DOLE would have
no jurisdiction only if the employer-employee relationship has
already been terminated, or it appears, upon review, that no
employer-employee relationship existed in the first place.
The Court, in limiting the power of the DOLE, gave
the rationale that such limitation would eliminate the prospect of
competing conclusions between the DOLE and the NLRC.  The
prospect of competing conclusions could just as well have been
eliminated by according respect to the DOLE findings, to the
exclusion of the NLRC, and this We believe is the more prudent
course of action to take.
This is not to say that the determination by the
DOLE is beyond question or review.  Suffice it to say, there are
judicial remedies such as a petition for certiorari under Rule 65
that may be availed of, should a party wish to dispute the
findings of the DOLE.
It must also be remembered that the power of the
DOLE to determine the existence of an employer-employee
relationship need not necessarily result in an affirmative
finding.  The DOLE may well make the determination that no
employer-employee relationship exists, thus divesting itself of
jurisdiction over the case.  It must not be precluded from being
able to reach its own conclusions, not by the parties, and
certainly not by this Court.
Under Art. 128(b) of the Labor Code, as amended by
RA 7730, the DOLE is fully empowered to make a
determination as to the existence of an employer-employee
relationship in the exercise of its visitorial and enforcement
power, subject to judicial review, not review by the NLRC.
There is a view that despite Art. 128(b) of the Labor
Code, as amended by RA 7730, there is still a threshold amount
set by Arts. 129 and 217 of the Labor Code when money claims
are involved, i.e., that if it is for PhP 5,000 and below, the
jurisdiction is with the regional director of the DOLE, under Art.
129, and if the amount involved exceeds PhP 5,000, the
jurisdiction is with the labor arbiter, under Art. 217.  The view
states that despite the wording of Art. 128(b), this would only
apply in the course of regular inspections undertaken by the
DOLE, as differentiated from cases under Arts. 129 and 217,
 which originate from complaints.  There are several cases,
however, where the Court has ruled that Art. 128(b) has been
amended to expand the powers of the DOLE Secretary and his
duly authorized representatives by RA 7730.   In these cases, the
Court resolved that the DOLE had the jurisdiction, despite the
amount of the money claims involved.  Furthermore, in these
cases, the inspection held by the DOLE regional director was
prompted specifically by a complaint.  Therefore, the initiation
of a case through a complaint does not divest the DOLE
Secretary or his duly authorized representative of jurisdiction
under Art. 128(b).
To recapitulate, if a complaint is brought before the
DOLE to give effect to the labor standards provisions of the
Labor Code or other labor legislation, and there is a finding by
the DOLE that there is an existing employer-employee
relationship, the DOLE exercises jurisdiction to the exclusion of
the NLRC.  If the DOLE finds that there is no employer-
employee relationship, the jurisdiction is properly with the
NLRC.  If a complaint is filed with the DOLE, and it is
accompanied by a claim for reinstatement, the jurisdiction is
properly with the Labor Arbiter, under Art. 217(3) of the Labor
Code, which provides that the Labor Arbiter has original and
exclusive jurisdiction over those cases involving wages, rates of
pay, hours of work, and other terms and conditions of
employment, if accompanied by a claim for reinstatement.  If a
complaint is filed with the NLRC, and there is still an existing
employer-employee relationship, the jurisdiction is properly
with the DOLE.  The findings of the DOLE, however, may still
be questioned through a petition for certiorari under Rule 65 of
the Rules of Court.
In the present case, the finding of the DOLE
Regional Director that there was an employer-employee
relationship has been subjected to review by this Court, with the
finding being that there was no employer-employee relationship
between petitioner and private respondent, based on the
evidence presented.  Private respondent presented self-serving
allegations as well as self-defeating evidence. The findings of
the Regional Director were not based on substantial evidence,
and private respondent failed to prove the existence of an
employer-employee relationship.  The DOLE had no jurisdiction
over the case, as there was no employer-employee relationship
present.  Thus, the dismissal of the complaint against petitioner
is proper.
b. Med-Arbiters
As the authority to determine the employer-employee
relationship is necessary and indispensable in the exercise of
jurisdiction by the med-arbiter, his finding thereon may only be
reviewed and reversed by the Secretary of Labor who exercises
appellate jurisdiction. It is absurd to suggest that the med-arbiter
and Secretary of Labor cannot make their own independent finding
as to the existence of such relationship and must have to rely and
wait for such a determination by the labor arbiter or NLRC in a
separate proceeding.  For then, given a situation where there is no
separate complaint filed with the labor arbiter, the med-arbiter
and/or the Secretary of Labor can never decide a certification
election case or any labor-management dispute properly brought
before them as they have no authority to determine the existence of
an employer-employee relationship.  Such a proposition is, to say
the least, anomalous [M.Y. San Biscuits v. Laguesma].
c. Social Security Commission (SSC)
The SSC is also vested with this power. In Republic v.
Asiapro Cooperative, involving the issue of coverage of owner-
members of respondent cooperative under the Social Security
System (SSS), it was held that it is not only the Labor Arbiter or
the NLRC that has the exclusive jurisdiction to determine the
existence of the employer-employee relationship. The SSC also has
that power.
B. LABOR ARBITER
Page 2 of 49
The Labor Arbiter is an official in the Regional
Arbitration Branch of the NLRC who hears and decides cases
falling under his original and exclusive jurisdiction as provided by
law.
Besides their adjudicatory power to hear and decide cases
over which they have jurisdiction, the Labor Arbiters have (1)
contempt power; and (2) power to conduct ocular inspection.
However, the Labor Arbiter has no more injunctive power. Only
the NLRC has that power.
The jurisdiction conferred upon the Labor Arbiters is
both original and exclusive. This means that as a general rule, no
other officers or tribunals can take cognizance of, or hear and
decide, any of the cases therein enumerated.
However, the following are the exceptions to the exercise
of original and exclusive jurisdiction of Labor Arbiters:
a. When the DOLE Secretary or the President
exercises his power under Article 278(g) of the
Labor Code to assume jurisdiction over national
interest cases and decide them himself.
b. When the NLRC exercises its power of compulsory
arbitration over similar national interest cases that
are certified to it by the DOLE Secretary pursuant to
the exercise by the latter of his certification power
under the same Article.
c. When cases arise from the interpretation or
implementation of collective bargaining agreements
and from the interpretation of enforcement of
company personnel policies which shall be disposed
of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration, as
may be provided in said agreements.
d. When the parties agree to submit the case to
voluntary arbitration before a Voluntary Arbitrator
or panel of Voluntary Arbitrators who, under
Articles 274 and 275, are also possessed of original
and exclusive jurisdiction to hear and decide cases
mutually submitted to them by the parties for
arbitration and adjudication.
1. Jurisdiction of the Labor Arbiters
Article 224. [217] Jurisdiction of the Labor Arbiters and the
Commission. (a) Except as otherwise provided under this Code, the
Labor Arbiters shall have original and exclusive jurisdiction to hear
and decide, within thirty (30) calendar days after the submission of the
case by the parties for decision without extension, even in the absence
of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
(1) Unfair labor practice cases;
(2) Termination disputes;
(3) If accompanied with a claim for reinstatement, those
cases that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
(4) Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
(5) Cases arising from any violation of Article 264 of this
Code, including questions involving the legality of strikes and lockouts;
and
(6) Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims arising
from employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding five
thousand pesos (P5,000.00) regardless of whether accompanied with a
claim for reinstatement.
xxx
(c) Cases arising from the interpretation or implementation
of collective bargaining agreements and those arising from the
interpretation or enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided in
said agreements.
a. Jurisdiction over ULP Cases
The Labor Arbiters have jurisdiction only on the civil
aspect of ULP which may include claims for actual, moral,
exemplary and other forms of damages, attorney’s fees and other
affirmative reliefs. It must be noted that recovery of civil liability
in the administrative proceeding before the LA bars recovery under
the Civil Code.
b. Jurisdiction over Termination Disputes
The validity of the exercise of jurisdiction by Labor
Arbiters over illegal dismissal cases is not dependent on the kind or
nature of the ground cited in support of the dismissal; hence,
whether the dismissal is for just cause or authorized cause, it is of
no consequence [C. Alcantara & Sons v. Court of Appeals].
In case of conflict of jurisdiction between Labor Arbiter
and the Voluntary Arbitrator over termination cases, the former’s
jurisdiction shall prevail for the following reasons:
(i) Termination of employment is not a grievable
issue that must be submitted to the grievance
machinery or voluntary arbitration for
adjudication [Navarro III v. Damasco]. The
jurisdiction thereover remains within the
original and exclusive ambit of the Labor
Arbiter and not of the Voluntary Arbitrator
[Maneja v. NLRC].
(ii) Even if the CBA provides that termination
disputes are grievable, the same is merely
discretionary on the part of the parties thereto
[San Miguel Corporation v. NLRC].
(iii) Once there is actual termination, jurisdiction is
conferred upon Labor Arbiters by operation of
law [Atlas Farms v. NLRC].
(iv) Interpretation of CBA and enforcement of
company personnel policies are merely
corollary to an illegal dismissal case [Maneja
v. NLRC].
(v) Article 224 is deemed written into the CBA
being an intrinsic part thereof [Landtex
Industries v. Court of Appeals].
In other words, a Voluntary Arbitrator will only have
jurisdiction over illegal dismissal cases when there is express
agreement of the parties in the CBA, i.e., the employer and the
bargaining agent, to submit the termination case to voluntary
arbitration. Absent the express mutual agreement of the parties, the
Voluntary Arbitrator cannot acquire jurisdiction over termination
cases [Maneja v. NLRC].
The express agreement must be stated in the CBA or, in
its absence, there must be enough evidence on record unmistakably
showing that the parties have agreed to resort to voluntary
arbitration [University of the Immaculate Conception v. NLRC].
Atlas Farms v. NLRC
Held: Records show, however, that private respondents sought
without success to avail of the grievance procedure in their CBA. On this
point, petitioner maintains that by so doing, private respondents recognized
that their cases still fell under the grievance machinery. According to
petitioner, without having exhausted said machinery, the private
respondents filed their action before the NLRC, in a clear act of forum-
shopping. However, it is worth pointing out that private respondents went
to the NLRC only after the labor arbiter dismissed their original complaint
for illegal dismissal. Under these circumstances private respondents had to
Page 3 of 49
find another avenue for redress. We agree with the NLRC that it was
petitioner who failed to show proof that it took steps to convene the
grievance machinery after the labor arbiter first dismissed the complaints
for illegal dismissal and directed the parties to avail of the grievance
procedure under Article VII of the existing CBA. They could not now be
faulted for attempting to find an impartial forum, after petitioner failed to
listen to them and after the intercession of the labor arbiter proved futile.
The NLRC had aptly concluded in part that private respondents had already
exhausted the remedies under the grievance procedure. It erred only in
finding that their cause of action was ripe for arbitration.
In the case of Maneja vs. NLRC, we held that the dismissal case
does not fall within the phrase “grievances arising from the interpretation or
implementation of the collective bargaining agreement and those
arising from the interpretation or enforcement of company personnel
policies.” In Maneja, the hotel employee was dismissed without hearing.
We ruled that her dismissal was unjustified, and her right to due process
was violated, absent the twin requirements of notice and hearing. We also
held that the labor arbiter had original and exclusive jurisdiction over the
termination case, and that it was error to give the voluntary arbitrator
jurisdiction over the illegal dismissal case.
In Vivero vs. CA,  private respondents attempted to justify the
jurisdiction of the voluntary arbitrator over a termination dispute alleging
that the issue involved the interpretation and implementation of the
grievance procedure in the CBA. There, we held that since what was
challenged was the legality of the employee’s dismissal for lack of cause
and lack of due process, the case was primarily a termination dispute. The
issue of whether there was proper interpretation and implementation of the
CBA provisions came into play only because the grievance procedure in the
CBA was not observed, after he sought his union’s assistance. Since the
real issue then was whether there was a valid termination, there was no
reason to invoke the need to interpret nor question an implementation of
any CBA provision.
One significant fact in the present petition also needs stressing.
Pursuant to Article 260 of the Labor Code, the parties to a CBA shall name
or designate their respective representatives 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.
Consequently only disputes involving the union and the company shall be
referred to the grievance machinery or voluntary arbitrators. In these
termination cases of private respondents, the union had no participation, it
having failed to object to the dismissal of the employees concerned by the
petitioner. It is obvious that arbitration without the union’s active
participation on behalf of the dismissed employees would be pointless, or
even prejudicial to their cause.
Coming to the merits of the petition, the NLRC found that
petitioner did not comply with the requirements of a valid dismissal. For a
dismissal to be valid, the employer must show that: (1) the employee was
accorded due process, and (2) the dismissal must be for any of the valid
causes provided for by law. No evidence was shown that private
respondents refused, as alleged, to receive the notices requiring them to
show cause why no disciplinary action should be taken against them.
Without proof of notice, private respondents who were subsequently
dismissed without hearing were also deprived of a chance to air their side at
the level of the grievance machinery. Given the fact of dismissal, it can be
said that the cases were effectively removed from the jurisdiction of the
voluntary arbitrator, thus placing them within the jurisdiction of the labor
arbiter. Where the dispute is just in the interpretation, implementation or
enforcement stage, it may be referred to the grievance machinery set up in
the CBA, or brought to voluntary arbitration. But, where there was already
actual termination, with alleged violation of the employee’s rights, it is
already cognizable by the labor arbiter.
In sum, we conclude that the labor arbiter and then the NLRC
had jurisdiction over the cases involving private respondents’ dismissal,
and no error was committed by the appellate court in upholding their
assumption of jurisdiction.
c. Jurisdiction over Money Claims Cases
Money claims falling within the original and exclusive
jurisdiction of the Labor Arbiters may be classified as follows:
(i) Any money claim, regardless of amount,
accompanied with a claim for reinstatement; or
 (ii) Any money claim, regardless of whether
accompanied with a claim for reinstatement,
exceeding the amount of P5,000.00.
Money claims must arise out of employer-employee
relationship [San Miguel Corporation v. NLRC]. If not, jurisdiction
is with the regular courts [Lapanday Agricultural v. Court of
Appeals].
The money claim in Item (i) above presupposes that it
proceeds from a termination case, it being accompanied with a
claim for reinstatement. Hence, it falls within the jurisdiction of the
Labor Arbiter since it is principally a termination dispute.
The money claim in item (ii) above does not necessarily
arise from or involve a termination case btu because the amount
exceeds P5,000.00, it falls within the jurisdiction of the Labor
Arbiter. If the amount does not exceed P5,000.00, it is the Regional
Director of the DOLE or his duly authorized hearing officers who
have jurisdiction to take cognizance thereof [Article 129].
The award of statutory benefits even if not prayed for is
valid [Oasis Academy v. DOLE].
San Miguel Corporation v. NLRC
Held: While paragraph 3 above refers to "all money claims of
workers," it is not necessary to suppose that the entire universe of money
claims that might be asserted by workers against their employers has been
absorbed into the original and exclusive jurisdiction of Labor Arbiters. In
the first place, paragraph 3 should be read not in isolation from but rather
within the context formed by paragraph 1 related to unfair labor practices),
paragraph 2 (relating to claims concerning terms and conditions of
employment), paragraph 4 (claims relating to household services, a
particular species of employer-employee relations), and paragraph 5
(relating to certain activities prohibited to employees or to
employers).<äre||anº•1àw>  It is evident that there is a unifying element
which runs through paragraphs 1 to 5 and that is, that they all refer to cases
or disputes arising out of or in connection with an employer-employee
relationship. This is, in other words, a situation where the rule of noscitur a
sociis may be usefully invoked in clarifying the scope of paragraph 3, and
any other paragraph of Article 217 of the Labor Code, as amended. We
reach the above conclusion from an examination of the terms themselves of
Article 217, as last amended by B.P. Blg. 227, and even though earlier
versions of Article 217 of the Labor Code expressly brought within the
jurisdiction of the Labor Arbiters and the NLRC "cases arising from
employer employee relations," 6 which clause was not expressly carried
over, in printer's ink, in Article 217 as it exists today. For it cannot be
presumed that money claims of workers which do not arise out of or in
connection with their employer-employee relationship, and which would
therefore fall within the general jurisdiction of the regular courts of justice,
were intended by the legislative authority to be taken away from the
jurisdiction of the courts and lodged with Labor Arbiters on an exclusive
basis. The Court, therefore, believes and so holds that the money claims of
workers" referred to in paragraph 3 of Article 217 embraces money claims
which arise out of or in connection with the employer-employee
relationship, or some aspect or incident of such relationship. Put a little
differently, that money claims of workers which now fall within the
original and exclusive jurisdiction of Labor Arbiters are those money
claims which have some reasonable causal connection with the employer-
employee relationship.
Applying the foregoing reading to the present case, we note that
petitioner's Innovation Program is an employee incentive scheme offered
and open only to employees of petitioner Corporation, more specifically to
employees below the rank of manager. Without the existing employer-
employee relationship between the parties here, there would have been no
occasion to consider the petitioner's Innovation Program or the submission
by Mr. Vega of his proposal concerning beer grande; without that
relationship, private respondent Vega's suit against petitioner Corporation
would never have arisen. The money claim of private respondent Vega in
this case, therefore, arose out of or in connection with his employment
relationship with petitioner.
Labor Arbiter vs. Voluntary Arbitrator
Page 4 of 49
The original and exclusive jurisdiction of the Labor
Arbiters under Article 224(c), over cases for money claims is
limited only to those arising from statutes or contracts other than a
CBA. The voluntary Arbitrators, under Article 274, have original
and exclusive jurisdiction over money claims “arising from the
interpretation or implementation of the CBA and, those arising
from the interpretation or enforcement of company personnel
policies.”
San Jose v. NLRC ruled that it was correct for the NLRC
to hold that the Labor Arbiter has no jurisdiction to hear and decide
the employee’s money claims (underpayment of retirement
benefits), as the controversy between the parties involved an issue
“arising from the interpretation or implementation” of a provision
of the CBA. The Voluntary Arbitrator has original and exclusive
jurisdiction over this controversy under Article 274.
Jurisdiction over Contested Cases under the Exception
Clause in Article 128(b)
Article 128(b) provides:
Article 128. Visitorial and Enforcement Power. xxx
xxx
(b) Notwithstanding the provisions of Articles 129
and 21789 of this Code to the contrary, and in cases where the
relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives
shall have the power to issue compliance orders to give effect to
the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and
enforcement officers or industrial safety engineers made in the
course of inspection. The Secretary or his duly authorized
representatives shall issue writs of execution to the appropriate
authority for the enforcement of their orders, except in cases
where the employer contests the findings of the labor
employment and enforcement officer and raises issues
supported by documentary proofs which were not
considered in the course of inspection.
xxx
The above highlighted portion of Article 128(b)
providing for the exception grants jurisdiction to Labor Arbiters
over contested cases falling thereunder.
In interpreting the afore-quoted provision of the
exception clause, three elements must concur to divest the Regional
Directors or their representatives of jurisdiction thereunder, to wit:
(i) That the employer contests the findings of the
labor inspector and raises issues thereon;
(ii) That in order to resolve such issues, there is a
need to examine evidentiary matters; and
(iii) That such matters are not verifiable in the
normal course of inspection [Ex-Bataan
Veterans v. Laguesma].
Reluctantly, if the said elements are present and therefore
the labor standards case is covered by said exception clause, then
the Regional Director will have to endorse the case to the Labor
Arbiters of the NLRC [Ex-Bataan Veterans v. Laguesma].
d. Jurisdiction over Claims for Damages
It is now well settled that claims for damages as well as
attorney’s fees in labor cases are cognizable by the Labor Arbiters,
to the exclusion of all other courts. Rulings to the contrary are
deemed abandoned or modified accordingly [Primero v. IAC]. No
matter how designated, for as long as the action primarily involves
an employer-employee relationship, the labor court has jurisdiction
over any damage claims [Rodriguez, Jr. v. Aguilar, Sr.].
 e. Jurisdiction over Legality of Strikes and
Lockouts
In general, the Labor Arbiter has the power to determine
questions involving the legality or illegality of a strike or lockout
upon the filing of a proper complaint and after due proceedings.
The employer, in case of a strike, or the union, in case of
a lockout, may file the proper petition with the Labor Arbiter to
seek a declaration of the illegality thereof. It shall be the duty of the
Labor Arbiter concerned to act on the case immediately and
dispose of the same, subject only to the requirements of due
process.
2. Jurisdiction Over Cases Involving Legislated
Wage Increases and Wage Distortions
In establishments where there are no CBAs or certified
SEBAs, the Labor Arbiters have jurisdiction to hear and decide
wage distortion cases after the parties and the NCMB failed to
correct the distortion [Article 124].
In establishments where there are existing CBAs or
SEBAs, RA 6727 vests upon the VA the jurisdiction to hear and
decide wage distortion cases, after the grievance procedure in the
CBA failed to settle the same [Ibid].
3. Jurisdiction Over Enforcement or Annulment of
Compromise Agreements
Article 233. [227] Compromise Agreements. Any 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.
It is clear from the foregoing provision that although the
compromise agreement may have been entered into by the parties
before the BLR or the DOLE Regional office, it is the Labor
Arbiter who has jurisdiction to take cognizance of the following
issues related thereto, to the exclusion of the BLR and the DOLE
Regional Directors:
a. To enforce the compromise agreement in case of
non-compliance therewith by any of the parties
thereto; or
b. To nullify it if there is prima facie evidence that the
settlement was obtained through fraud,
misrepresentation, or coercion.
4. Jurisdiction Over Execution and Enforcement of
Decisions of Voluntary Arbitrators
Article 276 prescribes the procedures that Voluntary
Arbitrators should follow in adjudicating cases filed before them.
Once a decision has been rendered in a case and subsequently
becomes final and executory, it may be enforced through the writ
of execution issued by the same Voluntary Arbitrator who rendered
it, addressed to and requiring certain public officers to execute the
final decision, order or award.
In situations, however, where the VA who rendered the
decision is absent or incapacitated for any reason, Article 276
grants jurisdiction to any Labor Arbiter in the region where the
winning party resides, to take cognizance of a motion for the
issuance of the writ of execution filed by such party and
accordingly issue such writ addressed to and requiring the public
officers to execute the final decision, order or award of the VA.
Page 5 of 49
5. Jurisdiction Over Cases of Overseas Filipino
Workers
RA 8042 confers original and exclusive jurisdiction upon
Labor Arbiters, to hear and decide all claims arising from
employment relationship or by virtue of any law or contract
involving OFWs, including claims for actual, moral, exemplary
and other forms of damages.
If there is a CBA between the foreign employer and the
bargaining union of the OFWs, the jurisdiction over monetary
claims of OFWs is vested in the Voluntary Arbitrator and not in the
Labor Arbiter [Ace Navigation v. Fernandez].
PNB v. Cabansag
Held: More specifically, Section 10 of RA 8042 reads in part:
“SECTION 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.
x x x                          x x x                   x x x”
Based on the foregoing provisions, labor arbiters clearly
have original and exclusive jurisdiction over claims arising from employer-
employee relations, including termination disputes involving all workers,
among whom are overseas Filipino workers (OFW).[15]
We are not unmindful of the fact that respondent was directly
hired, while on a tourist status in Singapore, by the PNB branch in that city
state. Prior to employing respondent, petitioner had to obtain an
employment pass for her from the Singapore Ministry of Manpower.
Securing the pass was a regulatory requirement pursuant to the immigration
regulations of that country.
Similarly, the Philippine government requires non-Filipinos
working in the country to first obtain a local work permit in order to be
legally employed here. That permit, however, does not automatically mean
that the non-citizen is thereby bound by local laws only, as averred by
petitioner. It does not at all imply a waiver of one’s national laws on labor.
Absent any clear and convincing evidence to the contrary, such permit
simply means that its holder has a legal status as a worker in the issuing
country.
Noteworthy is the fact that respondent likewise applied for and
secured an Overseas Employment Certificate from the POEA through the
Philippine Embassy in Singapore. The Certificate, issued on March 8, 1999,
declared her a bona fide contract worker for Singapore. Under Philippine
law, this document authorized her working status in a foreign country and
entitled her to all benefits and processes under our statutes. Thus, even
assuming arguendo that she was considered at the start of her employment
as a “direct hire” governed by and subject to the laws, common practices
and customs prevailing in Singapore[17] she subsequently became a contract
worker or an OFW who was covered by Philippine labor laws and policies
upon certification by the POEA. At the time her employment was illegally
terminated, she already possessed the POEA employment Certificate.
Moreover, petitioner admits that it is a Philippine corporation
doing business through a branch office in Singapore. Significantly,
respondent’s employment by the Singapore branch office had to be
approved by Benjamin P. Palma Gil, the president of the bank whose
principal offices were in Manila. This circumstance militates against
petitioner’s contention that respondent was “locally hired”; and totally
“governed by and subject to the laws, common practices and customs” of
Singapore, not of the Philippines. Instead, with more reason does this fact
reinforce the presumption that respondent falls under the legal definition
of migrant worker, in this case one deployed in Singapore. Hence,
petitioner cannot escape the application of Philippine laws or the
jurisdiction of the NLRC and the labor arbiter.
In any event, we recall the following policy pronouncement of
the Court in Royal Crown Internationale v. NLRC:
“x x x. Whether employed locally or overseas, all Filipino
workers enjoy the protective mantle of Philippine labor and social
legislation, contract stipulations to the contrary notwithstanding. This
pronouncement is in keeping with the basic public policy of the State to
afford protection to labor, promote full employment, ensure equal work
opportunities regardless of sex, race or creed, and regulate the relations
between workers and employers. For the State assures the basic rights of all
workers to self-organization, collective bargaining, security of tenure, and
just and humane conditions of work [Article 3 of the Labor Code of the
Philippines; See also Section 18, Article II and Section 3, Article XIII, 1987
Constitution]. This ruling is likewise rendered imperative by Article 17 of
the Civil Code which states that laws ‘which have for their object public
order, public policy and good customs shall not be rendered ineffective by
laws or judgments promulgated, or by determination or conventions agreed
upon in a foreign country.’”
6. Jurisdiction Over Other Cases
In accordance with well-entrenched jurisprudence, the
issues, claims or cases of the following fall under the jurisdiction of
the Labor Arbiters:
a. Employees in government-owned and/or
controlled corporations without Original
Charters;
The hiring and firing of employees of GOCCs without
original charters are covered by the Labor Code, and therefore, the
Labor Arbiters have jurisdiction over illegal dismissal and other
cases that may be filed under this law; while those with original
charters are basically governed by the Civil Service Law, rules and
regulations, and therefore, jurisdiction on any of the cases that may
be initiated under this law is vested in the Civil Service
Commission (CSC) [Zamboanga City Water District v. Buat].
b. Alien parties;
A basic policy of contract is to protect the expectations of
the parties. Such party expectations are protected by giving effect
to the parties’ own choice of the applicable law. The choice of law
must, however, bear some relationship to the parties or their
transaction [Asia International v. Mondejar]. A manning agency,
for instance, cannot be faulted for complying with the applicable
foreign law. By so complying, it has discharged its monetary
obligation to the employee [Omanfil International v. NLRC].
c. Priests and ministers;
The fact that a case involves as parties thereto the church
and its religious minister does not ipso facto give the case a
religious significance. If what is involved is a labor case, the
relationship of the church, as employer, and the priest or minister,
as employee is a purely secular matter not related to the practice of
faith, worship, or doctrines of the church. Hence, Labor Arbiters
may validly exercise jurisdiction over the labor case.
The religious minister in Austria v. NLRC was not
excommunicated or expelled from the membership of the church
but was terminated from employment based on the just causes
provided in Article 297. Indeed, the matter of terminating an
employee which is purely secular in nature is different from the
ecclesiastical act of expelling a member from the religious
congregation. As such, the State, through the Labor Arbiter and the
NLRC, has the right to take cognizance of the case to determine
whether the church, as employer, rightfully exercised its
management prerogative to dismiss the religious minister as its
employee.
d. Employees of cooperatives;
The Labor Arbiter has jurisdiction only over monetary
claims and illegal dismissal cases involving employees of
cooperatives btu not the claims or termination of membership of
members thereof. Cooperatives organized under RA 6938 (The
Cooperative Code of the Philippines) are composed of members;
hence, issues on the termination of their membership with the
cooperative do not fall within the jurisdiction of the Labor Arbiter
but with the Cooperative Development Authority (CDA).
Page 6 of 49
e. Counter-claims of employers against
employees.
In Banez v. Valdevilla, it was held that the jurisdiction of
the Labor Arbiters and the NLRC is comprehensive enough to
include claims for all forms of damages “arising from the
employer-employee relations.” By this clause, Article 224 should
apply with equal force to the claim of an employer for actual
damages against its dismissed employee, where the basis for the
claim arises from or is necessarily connected with the fact of
termination, and should be entered as a counter-claim in the illegal
dismissal case. This is in accord with paragraph 6 of Article 224(a),
which covers “all other claims, arising from employer-employee
relations.”
7. Cases Over Which Labor Arbiters Have NO
Jurisdiction
The following issues or cases do not fall under the
jurisdiction of Labor Arbiters:
a. Claims for Damages Arising from Breach of
Non-Compete Clause and Other Post-
Employment Prohibitions
In case of violation of the non-compete clause and
similar post-employment bans or prohibitions, the employer can
assert his claim for damages against the erring employee with the
regular courts and not with the labor courts, such breach being civil
in nature [Dai-Chi Electronics v. Villarama].
b. Employer’s Claims for Cash Advances, Car,
Appliance and Other Personal loans of
Employees
With respect to resolving issues involving loans availed
of by employees from their employers, it has been the consistent
ruling of the Supreme Court that the Labor Arbiters have no
jurisdiction thereover but the regular courts.
c.Dismissal of Directors and Corporate
Officers
The dismissal of a director or corporate officer is not a
labor case but an intra-corporate dispute cognizable by the
Regional Trial Court and not by the Labor Arbiter.
Matling Industrial v. Coros
Held: Coros was a regular employee of Matling. And his
complaint for illegal dismissal is within the jurisdiction of the LA.
The illegal dismissal of an officer or other employee of a private
employer is properly cognizable by the LA. This is pursuant to Article 217
(a) 2 of the Labor Code, as amended. Where the complaint for illegal
dismissal concerns a corporate officer, however, the controversy falls
under the jurisdiction of the Securities and Exchange Commission (SEC)
now with RTC effective August 8, 2000 pursuant to RA8799 or SRC. 
On Coros’ being a VP for Finance and Admin Section 25 of
the Corporation Code provides:
Section 25. Corporate officers, quorum.--Immediately after their
election, the directors of a corporation must formally organize by the
election of a president, who shall be a director, a treasurer who may or
may not be a director, a secretary who shall be a resident and citizen of the
Philippines, and such other officers as may be provided for in the by-
laws. Any two (2) or more positions may be held concurrently by the same
person, except that no one shall act as president and secretary or as
president and treasurer at the same time.
Conformably with Section 25 RCCP, a position must be
expressly mentioned in the By-Laws in order to be considered as a
corporate office. Thus, the creation of an office pursuant to or under a
By-Law enabling provision is not enough to make a position a
corporate office.
Thus, it was held in Easycall Communications Phils., Inc. v.
King: An "office" is created by the charter of the corporation and the officer
is elected by the directors or stockholders. On the other hand, an employee
occupies no office and generally is employed not by the action of the
directors or stockholders but by the managing officer of the corporation
who also determines the compensation to be paid to such employee.
In this case, respondent was appointed vice president for
nationwide expansion by Malonzo, petitioner’s general manager, not
by the board of directors of petitioner.
SEC OPINION on the interpretation of Sec 25 dated
November 25, 1993
Corporate officers are those enumerated in the by-laws. They are
the exclusive Officers of the corporation and the Board has no power to
create other Offices without amending first the corporate By-
laws. However, the Board may create appointive positions other than
the positions of corporate Officers, but the persons occupying such
positions are not considered as corporate officers within the meaning of
Section 25 of the Corporation Code
The Board of Directors of Matling could not validly delegate the
power to create a corporate office to the President, in light of Section 25 of
the Corporation Code requiring the Board of Directors itself to elect the
corporate officers.
Did Coros status as a director/stockholder of the
Corporation convert his dismissal into an intracorporate dispute to fall
under the jurisdiction of the SEC (now RTC)? NO
In an intra-corporate controversy, the Court considers two
elements, namely: (a) the status or relationship of the parties; and (b)
the nature of the question that is the subject of their controversy
Not every conflict between a corporation and its
stockholders involves corporate matters that only the SEC can resolve
in the exercise of its adjudicatory or quasi-judicial powers. If, for
example, a person leases an apartment owned by a corporation of which he
is a stockholder, there should be no question that a complaint for his
ejectment for non-payment of rentals would still come under the
jurisdiction of the regular courts
The fact that the parties involved in the controversy are all
stockholders or that the parties involved are the stockholders and the
corporation does not necessarily place the dispute within the ambit of the
jurisdiction of SEC.
Obviously enough, the respondent was not appointed as Vice
President for Finance and Administration because of his being a
stockholder or Director of Matling. He had started working for Matling on
September 8, 1966, and had been employed continuously for 33 years until
his termination on April 17, 2000, first as a bookkeeper, and his climb in
1987 to his last position as Vice President for Finance and Administration
had been gradual but steady
Coros promotion to the position of Vice President for
Finance and Administration in 1987 was by virtue of the length of
quality service he had rendered as an employee of Matling. His
subsequent acquisition of the status of Director/stockholder had no
relation to his promotion. Besides, his status of Director/stockholder was
unaffected by his dismissal from employment as Vice President for Finance
and Administration.
Nacpil v. Intercontinental Broadcasting
Held: The Court has consistently held that there are two
elements to be considered in determining whether the SEC has jurisdiction
over the controversy, to wit: (1) the status or relationship of the parties; and
(2) the nature of the question that is the subject of their controversy.
Even assuming that Nacpil was in fact appointed by the General
Manager, such appointment was subsequently approved by the Board of
Directors of the IBC. That the position of comptroller is not expressly
mentioned among the officers of the IBC in the By-Laws is of no moment,
because the IBC’s Board of Directors is empowered under Section 25 of the
Corporation Code and under the corporation’s By-Laws to appoint such
other officers as it may deem necessary. The By-Laws of the IBC
categorically provides:
XII. OFFICERS
The officers of the corporation shall consist of a President, a
Vice-President, a Secretary-Treasurer, a General Manager, and
such other officers as the Board of Directors may from time to time does
fit to provide for. Said officers shall be elected by a majority vote of the
Board of Directors and shall have such powers and duties as shall
hereinafter provide.
The Court has held that in most cases, the “by-laws may and
usually do provide for such other officers,” and that where a corporate
office is not specifically indicated in the roster of corporate offices in the
Page 7 of 49
by-laws of a corporation, the Board of directors may also be empowered
under the by-laws to create additional officers as may be necessary.
In the present case, since Nacpil’s appointment was approved
unanimously by the corporation’s Board of Directors, he is therefore
considered a corporate officer. His claim of illegal dismissal is a
controversy that falls under the jurisdiction of the SEC as
contemplated by Section 5 of P.D. 902-A. The rule is that dismissal or
nonappointment of a corporate officer is clearly an intra-corporate
matter, and jurisdiction over the case properly belongs to the SEC, not
to the NLRC.
As to Nacpil’s argument that the nature of his functions is
recommendatory, thereby making him a mere managerial officer, the Court
has previously held that the relationship of a person to a corporation,
whether as officer or agent or employee, is not determined by the nature of
the services performed, but instead by the incidents of the relationship as
they exist.
It is likewise of no consequence that petitioner’s complaint for
illegal dismissal includes money claims, for such claims are part of the
perquisites of his position in, and therefore linked with his relations with,
the corporation. The inclusion of such money claims does not convert the
issue into a simple labor problem. Clearly, the issues raised by Nacpil
against the IBC are matters that come within the area of corporate affairs
and management and constitute a corporate controversy in contemplation of
the Corporation Code.
d. Labor Cases Involving Entities Immune from
Suit
In this jurisdiction, we recognize and adopt the generally
accepted principles of international law as part of the law of the
land. Immunity of State from suit is one of these universally
recognized principles. In international law,
“immunity” is commonly understood as the exemption of the state
and its organs from the judicial jurisdiction of another state. [ This is
anchored on the principle of the sovereign equality of states under
which one state cannot assert jurisdiction over another in violation
of the maxim par in parem non habet imperium (an equal has no
power over an equal) [JUSMAG v. NLRC].
In USA v. Guinto, the Supreme Court ruled:
The traditional rule of immunity exempts a State
from being sued in the courts of another State without its
consent or waiver. This rule is a necessary consequence of the
principles of independence and equality of States. However, the
rules of International Law are not petrified; they are constantly
developing and evolving. And because the activities of states
have multiplied, it has been necessary to distinguish them —
between sovereign and governmental acts (jure imperii) and
private, commercial and proprietary acts (jure gestionis). The
result is that State immunity now extends only to acts jure
imperii.
The restrictive application of State immunity is
proper only when the proceedings arise out of commercial
transactions of the foreign sovereign, its commercial activities or
economic affairs. Stated differently, a State may be said to have
descended to the level of an individual and can thus be deemed
to have tacitly given its consent to be sued only when it enters
into business contracts. It does not apply where the contract
relates to the exercise of its sovereign functions.
. From these circumstances, the Court can assume
that the restaurant services offered at the John Hay Air Station
partake of the nature of a business enterprise undertaken by the
United States government in its proprietary capacity. Such
services are not extended to the American servicemen for free as
a perquisite of membership in the Armed Forces of the United
States. Neither does it appear that they are exclusively offered to
these servicemen; on the contrary, it is well known that they are
available to the general public as well, including the tourists in
Baguio City, many of whom make it a point to visit John Hay
for this reason. All persons availing themselves of this facility
pay for the privilege like all other customers as in ordinary
restaurants. Although the prices are concededly reasonable and
 relatively low, such services are undoubtedly operated for profit,
as a commercial and not a governmental activity.
The consequence of this finding is that the petitioners
cannot invoke the doctrine of state immunity to justify the
dismissal of the damage suit against them by Genove. Such
defense will not prosper even if it be established that they were
acting as agents of the United States when they investigated and
later dismissed Genove. For that matter, not even the United
States government itself can claim such immunity. The reason is
that by entering into the employment contract with Genove in
the discharge of its proprietary functions, it impliedly divested
itself of its sovereign immunity from suit.
But these considerations notwithstanding, we hold
that the complaint against the petitioners in the court below must
still be dismissed. While suable, the petitioners are nevertheless
not liable. It is obvious that the claim for damages cannot be
allowed on the strength of the evidence before us, which we
have carefully examined.
The dismissal of the private respondent was decided
upon only after a thorough investigation where it was
established beyond doubt that he had polluted the soup stock
with urine.
Conversely, if the contract was entered into in the
discharge of its governmental functions, the sovereign state cannot
be deemed to have waived its immunity from suit. Such is the case
of JUSMAG v. NLRC, holding thus:
Prescinding from this premise, we need not
determine whether JUSMAG controls the employment
conditions of the private respondent.
We also hold that there appears to be no basis for
public respondent to rule that JUSMAG is estoppel from
denying the existence of employer-employee relationship with
private respondent. On the contrary, in its Opposition before the
public respondent, JUSMAG consistently contended that the
(74) SASP, including private respondent, working in JUSMAG,
are employees of the Armed Forces of the Philippines. This can
be gleaned from: (1) the Military Assistance Agreement, supra,
(2) the exchange of notes between our Government, thru
Department of Foreign Affairs, and the Unites States, thru the
US Embassy to the Philippines, and (3) the Agreement on May
21, 1991, supra, between the Armed Forces of the Philippines
and JUSMAG.
e. Doctrine of Forum Non Conveniens
This doctrine is an international law principle which has
been applied to labor cases. The following are the requisites for its
applicability:
(i) That the Philippine court is one to which the
parties may conveniently resort;
(ii) That the Philippine court is in a position to
make an intelligent decision as to the law and
the facts; and
(iii) That the Philippine court has or is likely to
have power to enforce its decision [Bank of
America v. Court of Appeals].
Manila Hotel v. NLRC
Held: Under the rule, a Philippine court or agency may assume
jurisdiction over the case if it chooses to do so provided: 
1. that the Philippine court is one to which the parties may conveniently
resort to; 
2. that the Philippine court is in a position to make an intelligent
decision as to the law and the facts; and 
3. that the Philippine court has or is likely to have power to enforce its
decision
LA is not a forum to which the parties may conveniently resort
to
Page 8 of 49
The Palace Hotel and Manila Hotel are not nationals of the
Philippines. Neither are they "doing business in the Philippines." Likewise,
the main witnesses, are non-residents of the Philippines. The only factor
tying this case to the Philippines is that Santos was a Filipino Citizen
LA is not in a position to make an intelligent decision as to the
law.
Pursuant to lex loci contractus, an intelligent decision cannot be
made as to the law governing the employment contract as such was
perfected in foreign soil. 
LA is not in a position to make an intelligent decision as to the
facts. 
All acts complained of took place in Beijing, People's Republic
of China. The NLRC was not in a position to determine whether the
Tiannamen Square incident truly adversely affected operations of the
Palace Hotel as to justify Santos' retrenchment.
f. Quasi-Delict or Tort Cases
Damages arising from quasi-delict or tort are often
confused with damages that may be claimed under labor laws and
labor agreements. Consequently, quasi-delict or tort damages are
asserted, though erroneously, in labor cases filed with the Labor
Arbiters. As earlier emphasized, however, Labor Arbiters and the
NLRC have no power or authority to grant reliefs in claims that do
not arise from employer-employee relationship such as those
emanating from quasi-delict or tort cases per Article 2176 of the
Civil Code that have no reasonable causal connection to any of the
claims provided in the Labor Code, other labor statutes, or
collective bargaining agreements.
Tolosa v. NLRC
Held: We affirm the CA’s ruling that the NLRC and the labor
arbiter had no jurisdiction over petitioner’s claim for damages, because that
ruling was based on a quasi delict or tort per Article 2176 of the Civil Code.
Time and time again, we have held that the allegations in the
complaint determine the nature of the action and, consequently, the
jurisdiction of the courts. After carefully examining the complaint/position
paper of petitioner, we are convinced that the allegations therein are in the
nature of an action based on a quasi delict or tort. It is evident that she sued
Pedro Garate and Mario Asis for gross negligence.
Petitioner’s complaint/position paper refers to and extensively
discusses the negligent acts of shipmates Garate and Asis, who had no
employer-employee relation with Captain Tolosa. Specifically, the paper
alleges the following tortious acts:
“x x x [R]espondent Asis was the medical officer of the Vessel,
who failed to regularly monitor Capt. Tolosa’s condition, and who needed
the USCG to prod him to take the latter’s vital signs. In fact, he failed to
keep a medical record, like a patient’s card or folder, of Capt. Tolosa’s
illness.”
“Respondents, however, failed Capt. Tolosa because Garate
never initiated actions to save him. x x x In fact, Garate rarely checked
personally on Capt. Tolosa’s condition, to wit:”[13]
“x x x Noticeably, the History (Annex “D”) fails to mention any
instance when Garate consulted the other officers, much less Capt. Tolosa,
regarding the possibility of deviation. To save Capt. Tolosa’s life was
surely a just cause for the change in course, which the other officers would
have concurred in had they been consulted by respondent Garate – which
he grossly neglected to do.
“Garate’s poor judgement, since he was the officer effectively in
command of the vessel, prevented him from undertaking these emergency
measures, the neglect of which resulted in Capt. Tolosa’s untimely
demise.”
The labor arbiter himself classified petitioner’s case as “a
complaint for damages, blacklisting and watchlisting (pending inquiry) for
gross negligence resulting in the death of complainant’s husband, Capt.
Virgilio Tolosa.”[
We stress that the case does not involve the adjudication of a
labor dispute, but the recovery of damages based on a quasi delict. The
jurisdiction of labor tribunals is limited to disputes arising from employer-
employee relations.
Not every dispute between an employer and employee involves
matters that only labor arbiters and the NLRC can resolve in the exercise of
their adjudicatory or quasi-judicial powers. The jurisdiction of labor
arbiters and the NLRC under Article 217 of the Labor Code is limited to
disputes arising from an employer-employee relationship which can only be
resolved by reference to the Labor Code, other labor statutes, or their
collective bargaining agreement.
The pivotal question is whether the Labor Code has any
relevance to the relief sought by petitioner. From her paper, it is evident
that the primary reliefs she seeks are as follows: (a) loss of earning capacity
denominated therein as “actual damages” or “lost income” and (b)
blacklisting. The loss she claims does not refer to the actual earnings of the
deceased, but to his earning capacity based on a life expectancy of 65 years.
This amount is recoverable if the action is based on a quasi delict as
provided for in Article 2206 of the Civil Code, but not in the Labor Code.
While it is true that labor arbiters and the NLRC have
jurisdiction to award not only reliefs provided by labor laws, but also
damages governed by the Civil Code, these reliefs must still be based on an
action that has a reasonable causal connection with the Labor Code, other
labor statutes, or collective bargaining agreements.
It must be noted that a worker’s loss of earning capacity and
blacklisting are not to be equated with wages, overtime compensation or
separation pay, and other labor benefits that are generally cognized in labor
disputes. The loss of earning capacity is a relief or claim resulting from a
quasi delict or a similar cause within the realm of civil law.
“Claims for damages under paragraph 4 of Article 217 must
have a reasonable causal connection with any of the claims provided for in
the article in order to be cognizable by the labor arbiter. Only if there is
such a connection with the other claims can the claim for damages be
considered as arising from employer-employee relations.” In the present
case, petitioner’s claim for damages is not related to any other claim under
Article 217, other labor statutes, or collective bargaining agreements.
Petitioner cannot anchor her claim for damages to Article 161 of
the Labor Code, which does not grant or specify a claim or relief. This
provision is only a safety and health standard under Book IV of the same
Code. The enforcement of this labor standard rests with the labor
secretary. Thus, claims for an employer’s violation thereof are beyond the
jurisdiction of the labor arbiter. In other words, petitioner cannot enforce
the labor standard provided for in Article 161 by suing for damages before
the labor arbiter.
It is not the NLRC but the regular courts that have jurisdiction
over actions for damages, in which the employer-employee relation is
merely incidental, and in which the cause of action proceeds from a
different source of obligation such as a tort. [25] Since petitioner’s claim for
damages is predicated on a quasi delict or tort that has no reasonable causal
connection with any of the claims provided for in Article 217, other labor
statutes, or collective bargaining agreements, jurisdiction over the action
lies with the regular courts[26] -- not with the NLRC or the labor arbiters.
g. Criminal and Civil Actions Arising from
Violations of the Penal Provisions of the
Labor Code
The Labor Code has expressly conferred jurisdiction over
criminal and civil cases arising from violations of the Labor Code
with the regular courts.
h. Constitutionality of CBA Provisions
In Halaguena v. Philippine Airlines, it was pronounced
that it is not the Labor Arbiter but the regular court which has
jurisdiction to rule on the constitutionality of labor contracts such
as a CBA.
i. Replevin Intertwined with a Labor Dispute
Replevin is a possessory action, the gist of which is the
right of possession in the plaintiff. The primary relief sought
therein is the return of the property in specie wrongfully detained
by another person. It is an ordinary statutory proceeding to
adjudicate rights to the title or possession of personal property. The
question of whether or not a party has the right of possession over
the property involved and if so, whether or not the adverse party
has wrongfully taken and detained said property as to require its
return to plaintiff, is outside the pale of competence of a labor
tribunal; it is beyond the field of specialization of Labor Arbiters
[Basaya, Jr. v. Militante].
Page 9 of 49
j. Cases Arriving from Violation of Training
Agreement
The primary relief sought is for liquidated damages for
breach of a contractual obligation. The other items demanded are
not labor benefits demanded by workers generally taken
cognizance of in labor disputes, such as payment of wages,
overtime compensation or separation pay. The items claimed are
the natural consequences flowing from breach of an obligation,
intrinsically a civil dispute [Singapore Airlines v. Pano].
C. NATIONAL LABOR RELATIONS COMMISSION
The NLRC exercises two (2) kinds of jurisdiction:
(1) Exclusive original jurisdiction; and
(2) Exclusive appellate jurisdiction.
1. Exclusive Original Jurisdiction
The NLRC exercises exclusive and original jurisdiction
over the following cases:
a. Petition for injunction in ordinary labor
disputes to enjoin or restrain any actual or
threatened commission of any or all prohibited
or unlawful acts or to require the performance
of a particular act in any labor dispute which,
if not restrained or performed forthwith, may
cause grave irreparable damage to any party
[Article 218(e)].
b. Petition for injunction in strikes or lockouts
under Article 279 of the Labor Code.
c. Certified cases which refer to labor disputes
causing or likely to cause a strike or lockout in
an industry indispensable to the national
interest, certified to it by the Secretary of
Labor and Employment for compulsory
arbitration by virtue of Article 278(g) of the
Labor Code [Article 278(g)].
d. Petition for extraordinary remedies from
orders or resolutions of Labor Arbiters
(including those issued during execution
proceedings).
2. Exclusive Appellate Jurisdiction
Article 229. [223] Appeal. Decisions, awards, or orders of the
Labor Arbiter are final and executory unless appealed to the
Commission by any or both parties within ten (10) calendar days from
receipt of such decisions, awards, or orders. Such appeal may be
entertained only on any of the following grounds:
(a) If there is prima facie evidence of abuse of discretion on
the part of the Labor Arbiter;
(b) If the decision, order or award was secured through
fraud or coercion, including graft and corruption;
(c) If made purely on questions of law; and
(d) If serious errors in the findings of facts are raised which
would cause grave or irreparable damage or injury to the appellant.
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.
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. 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 of the employer, merely reinstated in the payroll. The posting of
a bond by the employer shall not stay the execution for reinstatement The date of mailing by registered mail of the appeal
provided herein. memorandum is the date of its filing [Associated Anglo-American
To discourage frivolous or dilatory appeals, the Commission Tobacco Corporation v. NLRC].
or the Labor Arbiter shall impose reasonable penalty, including fines The requisites for perfection of appeal to the NLRC are
or censures, upon the erring parties.
as follows:
In all cases, the appellant shall furnish a copy of the
memorandum of appeal to the other party who shall file an answer not
later than ten (10) calendar days from receipt thereof. (i) Observance of the reglementary period;
The Commission shall decide all cases within twenty (20) (ii) Payment of appeal and legal research fee;
calendar days from receipt of the answer of the appellee. (iii) Filing of a memorandum of appeal;
The decision of the Commission shall be final and executory (iv) Proof of service to the other party; and
after ten (10) calendar days from receipt thereof by the parties. (v) Posting of cash, property or surety bond, in
Any law enforcement agency may be deputized by the case of monetary awards.
Secretary of Labor and Employment or the Commission in the
enforcement of decisions, awards or orders.
xxx
Reglementary Period
The reglementary period is mandatory and not a mere
technicality [Calipay v. NLRC].
The NLRC has exclusive appellate jurisdiction over the
The reglementary period depends on where the appeal to
following:
the NLRC emanates, viz:
a. All cases decided by the Labor Arbiters
(i) Ten (10) calendar days in case of appeals from
[Article 224(b)].
decisions of the Labor Arbiters under Article
b. Cases by decided by the DOLE Regional
229;
Directors or hearing officers involving small
(ii) Five (5) calendar days in case of appeals in
money claims under Article 129 of the Labor
contempt cases decided by Labor Arbiters; and
Code.
(iii) Five (5) calendar days in case of appeals from
c. Contempt cases decided by the Labor Arbiters.
decisions of the DOLE Regional Director
under Article 129 (small money claims of
The perfection of an appeal shall stay the execution of
P5000.00 or less).
the decision of the Labor Arbiter except execution for
reinstatement pending appeal [NLRC Rules of Procedure].
The periods provided are all calendar days and not
working days [RJL Martinez Fishing v. NLRC]. Consequently,
a. Grounds for Appeal
Saturdays, Sundays and legal holidays are included in reckoning
The appeal to the NLRC may be entertained only on any
and computing of the reglementary period [Judy Philippines v.
of the following grounds:
NLRC].
However, certain procedural lapses may be disregarded
(i) If there is prima facie evidence of abuse of
where there is an acceptable reason to excuse tardiness in the
discretion on the part of the labor arbiter;
taking of the appeal [Philippine Airlines v. NLRC]. It is always
(ii) If the decision, order or award was secured
within the power of the court to suspend its own rules or to except
through fraud or coercion, including graft and
a particular case from its operation, whenever the purposes of
corruption;
justice require it [Chronicle Securities v. NLRC]. Thus, procedural
(iii) If made purely on questions of law; and/or
rules may be waived, dispensed with, or relaxed in the interest of
(iv) If serious errors in the findings of fact are
substantial justice. The Court may deign to veer away from the
raised which, if not corrected, would cause
general rule if, on its face, the appeal appears to be absolutely
grave or irreparable damage or injury to the
meritorious [Tiger Construction v. Abay].
appellant.
The following are the specific instances where the rules
on the reckoning of the reglementary period have not been strictly
The NLRC has certiorari power. The first ground above
observed:
regarding prima facie evidence of abuse of discretion on the part of
the Labor Arbiter is actually an exercise of certiorari power by the
(i) 10th day (or 5th day) falling on a Saturday [Judy
NLRC. The case of Triad Security v. Ortega expressly recognized
Philippines v. NLRC], Sunday or Holiday
this certiorari power. Clearly, according to Auza, Jr. v. MOL
[Philippine Geothermal v. NLRC], in which
Philippines, the NLRC is possessed of the power to rectify any
case, the appeal may be filed the next working
abuse of discretion committed by the Labor Arbiter.
day.
(ii) Reliance on erroneous notice of decision
b. Requirements to Perfect an Appeal before
[Firestone Tire and Rubber v. Lariosa] as
the NLRC
when the notice expressly states “working
The perfection of appeal within the period and in the
days” and not “calendar days.”
manner prescribed by law is jurisdictional and non-compliance
(iii) Filing of petition or extraordinary remedies
with the legal requirements is fatal and has the effect of rendering
from orders or resolutions of Labor Arbiters or
the judgment final and executory, hence, unappealable [Opinaldo
on third party claims – ten (10) calendar days.
v. Ravina]. The date of receipt of decisions, resolutions, or orders
(iv) When technical rules are disregarded under
by the parties is of no moment. For purposes of appeal, the
Article 227 [City Fair Corporation v. NLRC].
reglementary period shall be counted from receipt of such
(v) When there are some compelling reasons that
decisions, resolutions, or orders by the counsel or representative of
justify the allowance of the appeal despite its
record [NLRC Rules of Procedure].
late filing such as when it is granted in the

Page 10 of 49
 interest of substantial justice [Surima v.
NLRC].
Posting of Bond
Only in case the decision of the Labor Arbiter or the
DOLE Regional Director involves a monetary award, that an
appeal by the employer may be perfected upon the posting of a
bond. When the judgment of the Labor Arbiter does not involve
any monetary award, no appeal bond is necessary [Aba v. NLRC].
The Labor Arbiter’s decision or order should state the amount
awarded. If the amount of the monetary award is not contained or
fixed in the judgment, the appeal bond is not required to be posted
[Orozco v. Court of Appeals]. In case of conflict between the body
and the fallo of the decision, the latter should prevail [Mendoza, Jr.
v. San Miguel Foods, Inc.].
The surety bond must be issued by a reputable bonding
company duly accredited by the NLRC or the Supreme Court
[UERM-Memorial medical Center v. NLRC].
The amount of such bound should be equivalent to the
monetary award, exclusive of damages and attorney’s fees [NLRC
Rules of Procedure]. In other words, only monetary awards (such
as unpaid wages, backwages, separation pay, 13 th month pay, etc.)
are required to be covered by the bond. Moral and exemplary
damages and attorney’s fees are excluded.
The cash or surety bond required for the perfection
appeal should be posted within the reglementary period [Gaudia v.
NLRC]. If a party failed to perfect his appeal by the non-payment
of the appeal bond within the 10-calendar day period provided by
law, the decision of the Labor Arbiter becomes final and executory
upon the expiration the said period [Santos v. Velarde].
In case the employer failed to post a bond to perfect its
appeal, the remedy of the employee is to file a motion to dismiss
the appeal and not a petition for mandamus for the issuance of writ
of execution [Diaz v. Nora].
Motion to Reduce Appeal Bond
No motion to reduce bond shall be entertained except on
meritorious grounds, and only upon the posting of a bond in a
reasonable amount in relation to the monetary award. The mere
filing of a motion to reduce bond without complying with the
requisites in the preceding paragraphs shall not stop the running of
the period to perfect an appeal [NLRC Rules of Procedure].
The general rule is that the appeal bond that should be
posted should be equivalent to the monetary award of the Labor
Arbiter [Ramirez v. Court of Appeals]. In practice the NLRC has
allowed the reduction of the bond upon showing of meritorious
grounds and filed within the reglementary period for appeal.
The following are principles on reduction of bond:
 Bond may be reduced when the decision failed
to specify the exact amount of monetary award.
 Monetary award running into millions is not
justification to reduce bond.
 Financial difficulties or financial incapacity is
not sufficient grounds to reduce bond.
 Full amount of bond must be posted within the
reglementary period while motion to reduce
bond is pending. Alternatively, a reasonable
partial appeal bond may be paid within the
reglementary period.
c. Prohibited Motions
Rule V, Section 5 of the NLRC Rules of Procedure
provides:
Page 11 of 49
SECTION 5. PROHIBITED PLEADINGS AND
MOTIONS. – The following pleadings and motions shall not be
allowed and acted upon nor elevated to the Commission:
(a) Motion to dismiss the complaint except on the
ground of lack of jurisdiction over the subject matter, improper
venue, res judicata, prescription and forum shopping;
(b) Motion for a bill of particulars;
(c) Motion for new trial;
(d) Petition for relief from judgment;
(e) Motion to declare respondent in default;
(f) Motion for reconsideration of any decision or any
order of the Labor Arbiter;
(g) Motion to Quash and/or Motion to Lift
Garnishment if a Petition had been filed under Rule XII;
(h) Appeal from any interlocutory order of the Labor
Arbiter, such as but not limited to, an order: (1) denying a
motion to dismiss; (2) denying a motion to inhibit; (3) denying a
motion for issuance of writ of execution; or (4) denying a
motion to quash writ of execution;
(i) Appeal from the issuance of a certificate of
finality of decision by the Labor Arbiter;
(j) Appeal from orders issued by the Labor Arbiter in
the course of execution proceedings; and
(k) Such other pleadings, motions and petitions of
similar nature intended to circumvent above provisions. (5a,
RIII) (As amended by En Banc Resolution No. 02-15, Series of
2015)
d. Reinstatement Pending Appeal
Reinstatement pending appeal applies to all kinds of
illegal dismissal cases, regardless of the grounds therefor [C.
Alcantara & Sons v. Court of Appeals].
An order of reinstatement issued by the Labor Arbiter
under Article 229 is self-executory even pending appeal by the
employer. This means that while perfection of an appeal shall stay
the execution of the decision of the Labor Arbiter the exception is
in respect to the execution of the reinstatement order which should
proceed even pending appeal by the employer. An order or award
for reinstatement does not require a writ of execution. The
employer has no way of staying execution of immediate
reinstatement. He cannot post bond to prevent its execution
[Pioneer Texturizing Corporation v. NLRC].
When the former position is already filled up, the
employee ordered reinstated pending appeal should be reinstated to
a substantially equivalent position [Medina v. Consolidated
Broadcasting System]. Reinstatement to a position lower in rank is
not proper [Panuncillo v. CAP Philippines].
Reinstatement pending appeal is not affected by the
reinstated employee’s employment elsewhere [Triad Security v.
Ortega]. Such employment elsewhere also does not affect the
obligation of the employer to pay reinstatement backwages.
The failure of the employee ordered reinstated pending
appeal to report back to work as directed by the employer does not
give the employer the right to remove him, especially when there is
a reasonable explanation for his failure [Buenviaje v. Court of
Appeals].
By way of distinction, the rule on reinstatement pending
appeal applies only to the order of reinstatement issued by the
Labor Arbiter and to no other. This means that if the reinstatement
order is issued by the NLRC on appeal, or by the Court of Appeals
or by the Supreme Court, there is a need to secure a writ of
execution from the Labor Arbiter of origin to enforce the
reinstatement of the employee whose dismissal is declared illegal
[Mt. Carmel College v. Resuena].
Moreover, reinstatement pending appeal does not apply
when the dismissal is legal but reinstatement is ordered for some
reasons like equity and compassionate justice [Lansangan v.
Amkor Technology].
 In case of two successive dismissals, the order of
reinstatement pending appeal under Article 229 issued in the first
case shall apply only to the first case and should not affect the
second dismissal [Sevilla v. NLRC].
Options of the Employer
To implement the reinstatement aspect of a Labor
Arbiter’s decision, there are only two (2) options available to the
employer, to wit:
(i) Actual reinstatement. – The employee should
be reinstated to his position which he occupies
prior to his illegal dismissal under the same
terms and conditions prevailing prior to his
dismissal or separation or, if no longer
available, to a substantially-equivalent
position; or
(ii) Payroll reinstatement. – The employee should
be reinstated in the payroll of the company
without requiring him to report back to his
work.
It is required that in case the decision of the Labor
Arbiter includes an order of reinstatement, it should contain:
(i) A statement that the reinstatement aspect is
immediately executory; and
(ii) A directive for the employer to submit a report
of compliance within 10 calendar days from
receipt of the said decision [NLRC Rules of
Procedure].
From the moment an employee is ordered reinstated by
the Labor Arbiter on the basis of the finding that his dismissal is
illegal, up to the time that an appellate tribunal like the NLRC, CA
or the Supreme Court, as the case may be, reverses the said finding,
the reinstated employee is generally entitled to his so-called
“reinstatement salaries/wages” and regular allowances, benefits,
incentives, and bonuses [Bago v. NLRC].
In cases where the employer totally fails or refuses to
reinstate the employee but nonetheless appeals from the Labor
Arbiter’s adverse decision, there arises the issue of whether the
employee would still be entitled to his accrued salaries/wages,
allowances and other benefits in the event that the employer is
subsequently successful in having the reinstatement order reversed
in its appeal.
Section 12, Rule XI of the NLRC Rules of Procedure
provides:
SECTION 12. EXECUTION
REINSTATEMENT PENDING APPEAL. – In case the
decision includes an order of reinstatement, and the employer
disobeys the directive under the second paragraph of Section 19
of Rule V or refuses to reinstate the dismissed employee, the
Labor Arbiter shall immediately issue writ of execution, even
pending appeal, directing the employer to immediately reinstate
the dismissed employee either physically or in the payroll, and
to pay the accrued salaries as a consequence of such non-
reinstatement in the amount specified in the decision.
The Labor Arbiter shall motu proprio issue a
corresponding writ to satisfy the reinstatement wages as they
accrue until actual reinstatement or reversal of the order of
reinstatement. (En Banc Resolution No. 11-12, Series of 2012)
The Sheriff shall serve the writ of execution upon the
employer or any other person required by law to obey the same.
If he/she disobeys the writ, such employer or person may be
cited for contempt in accordance with Rule IX. (6a)
As a consequence of such disobedience, the employer
has the following liabilities [NLRC Rules of Procedure]:
(i) He shall be liable to pay the accrued salaries of
the reinstated employee as a consequence of
such non-reinstatement in the amount specified
in the decision; and
(ii) He may be cited for contempt, in accordance
with the NLRC Rules of Procedure, for his
refusal to comply with the writ of execution
ordering the reinstatement. This remedy,
however, is available only after the sheriff shall
have served the writ of execution upon the
employer or any other person required by law
to obey the same.
Roquero Doctrine
Roquero v. Philippine Airlines declared the rule that in
cases where an employee is ordered reinstated by the Labor Arbiter
and the employer fails or refuses to obey the reinstatement order
but initiates an appeal, the employer’s success in having the
decision of the Labor Arbiter’s decision reversed on appeal will not
exculpate him from the liability to pay the reinstatement wages and
benefits of the employee, reckoned and computed from the time the
employee was ordered reinstated by the Labor Arbiter until the date
of reversal on appeal.
No Obligation to Reimburse
In the Roquero case, both the CA and the SC reversed the
order of reinstatement as they upheld the employee's dismissal.
Must the employee pay back the salary he received during the
reinstatement? The Court said no.
"We reiterate the rule that technicalities have no
room in labor cases where the Rules of Court are applied only in
a suppletory manner and only to effectuate the objectives of the
Labor Code and not to defeat them. Hence, even if the order of
reinstatement of the Labor Arbiter is reversed on appeal, it is
obligatory on the part of the employer to reinstate and pay the
wages of the dismissed employee during the period of appeal
until reversal by the higher court. On the other hand, if the
employee has been reinstated during the appeal period and such
reinstatement order is reversed with finality, the employee is not
required to reimburse whatever salary he received for he is
entitled to such, more so if he actually rendered services during
the period."
But a deviation occurred in Genuino v. NLRC, also
known as the Genuino Doctrine. The Court in Genuino said:
xxx
OF
If the decision of the labor arbiter is later reversed on
appeal upon the finding that the ground for dismissal is valid,
then the employer has the right to require the dismissed
employee on payroll reinstatement to refund the salaries s/he
received while the case was pending appeal, or it can be
deducted from the accrued benefits that the dismissed employee
was entitled to receive from his/her employer under existing
laws, collective bargaining agreement provisions, and company
practices. However, if the employee was reinstated to work
during the pendency of the appeal, then the employee is entitled
to the compensation received for actual services rendered
without need of refund.
xxx
The case of Garcia v. Philippine Airlines, also known as
the Garcia Doctrine, downplays the "stray posture" of Genuino
and reaffirms the no-reimbursement doctrine in Roquero and
conforming rulings. The court explains in Garcia that pursuant to
Page 12 of 49
the police power, the state may authorize an immediate
implementation, pending appeal, of a decision reinstating a
dismissed or separated employee. The immediate reinstatement is
"a saving act" designed to stop a continuing threat or danger to the
survival or even the life of the employee and his family. Moreover,
the social justice principles of labor law outweigh or render
inapplicable the civil law doctrine of unjust enrichment.
However, Garcia modified the doctrine enunciated in
Roquero, to wit:
xxx
After the labor arbiter's decision is reversed by a
higher tribunal, the employee may be barred from collecting
the accrued wages, if it is shown that the delay in enforcing
the reinstatement pending appeal was without fault on the
part of the employer.
The test is two-fold: (1) there must be actual delay or
the fact that the order of reinstatement pending appeal was not
executed prior to its reversal; and (2) the delay must not be due
to the employer's unjustified act or omission. If the delay is due
to the employer's unjustified refusal, the employer may still be
required to pay the salaries notwithstanding the reversal of the
Labor Arbiter's decision.
In Genuino, there was no showing that the employer
refused to reinstate the employee, who was the Treasury Sales
Division Head, during the short span of four months or from the
promulgation on May 2, 1994 of the Labor Arbiter's Decision up
to the promulgation on September 3, 1994 of the NLRC
Decision. Notably, the former NLRC Rules of Procedure did not
lay down a mechanism to promptly effectuate the self-executory
order of reinstatement, making it difficult to establish that the
employer actually refused to comply.
In a situation like that in International Container
Terminal Services, Inc. v. NLRC where it was alleged that the
employer was willing to comply with the order and that the
employee opted not to pursue the execution of the order, the
Court upheld the self-executory nature of the reinstatement
order and ruled that the salary automatically accrued from notice
of the Labor Arbiter's order of reinstatement until its ultimate
reversal by the NLRC. It was later discovered that the employee
indeed moved for the issuance of a writ but was not acted upon
by the Labor Arbiter. In that scenario where the delay was
caused by the Labor Arbiter, it was ruled that the inaction of the
Labor Arbiter who failed to act upon the employee's motion for
the issuance of a writ of execution may no longer adversely
affect the cause of the dismissed employee in view of the self-
executory nature of the order of reinstatement.
The new NLRC Rules of Procedure, which took
effect on January 7, 2006, now require the employer to submit a
report of compliance within 10 calendar days from receipt of the
Labor Arbiter's decision, disobedience to which clearly denotes
a refusal to reinstate. The employee need not file a motion for
the issuance of the writ of execution since the Labor
Arbiter shall thereafter motu proprio issue the writ. With the
new rules in place, there is hardly any difficulty in
determining the employer's intransigence in immediately
complying with the order.
In the case at bar, petitioners exerted efforts to
execute the Labor Arbiter's order of reinstatement until they
were able to secure a writ of execution, albeit issued on October
5, 2000 after the reversal by the NLRC of the Labor Arbiter's
decision. Technically, there was still actual delay which brings
to the question of whether the delay was due to respondent's
unjustified act or omission.
It is apparent that there was inaction on the part of
respondent to reinstate them, but whether such omission was
justified depends on the onset of the exigency of corporate
rehabilitation.
It is settled that upon appointment by the SEC of a
rehabilitation receiver, all actions for claims before any court,
tribunal or board against the corporation shall ipso jure be
suspended. As stated early on, during the pendency of
petitioners' complaint before the Labor Arbiter, the SEC placed
Page 13 of 49
respondent under an Interim Rehabilitation Receiver. After the
Labor Arbiter rendered his decision, the SEC replaced the
Interim Rehabilitation Receiver with a Permanent Rehabilitation
Receiver.
Case law recognizes that unless there is a restraining
order, the implementation of the order of reinstatement is
ministerial and mandatory. This injunction or suspension of
claims by legislative fiat partakes of the nature of a restraining
order that constitutes a legal justification for respondent's non-
compliance with the reinstatement order. Respondent's failure to
exercise the alternative options of actual reinstatement and
payroll reinstatement was thus justified. Such being the case,
respondent's obligation to pay the salaries pending appeal, as the
normal effect of the non-exercise of the options, did not attach.
While reinstatement pending appeal aims to avert the
continuing threat or danger to the survival or even the life of the
dismissed employee and his family, it does not contemplate the
period when the employer-corporation itself is similarly in
a judicially monitored state of being resuscitated in order to
survive.
The parallelism between a judicial order of
corporation rehabilitation as a justification for the non-exercise
of its options, on the one hand, and a claim of actual and
imminent substantial losses as ground for retrenchment, on the
other hand, stops at the red line on the financial statements.
Beyond the analogous condition of financial gloom, as discussed
by Justice Leonardo Quisumbing in his Separate Opinion, are
more salient distinctions. Unlike the ground of substantial losses
contemplated in a retrenchment case, the state of corporate
rehabilitation was judicially pre-determined by a competent
court and not formulated for the first time in this case by
respondent.
More importantly, there are legal effects arising from
a judicial order placing a corporation under rehabilitation.
Respondent was, during the period material to the case,
effectively deprived of the alternative choices under Article 223
of the Labor Code, not only by virtue of the statutory injunction
but also in view of the interim relinquishment of management
control to give way to the full exercise of the powers of the
rehabilitation receiver. Had there been no need to rehabilitate,
respondent may have opted for actual physical reinstatement
pending appeal to optimize the utilization of resources. Then
again, though the management may think this wise, the
rehabilitation receiver may decide otherwise, not to mention the
subsistence of the injunction on claims.
In sum, the obligation to pay the employee's salaries
upon the employer's failure to exercise the alternative options
under Article 223 of the Labor Code is not a hard and fast rule,
considering the inherent constraints of corporate rehabilitation.
xxx
D. NATIONAL CONCILIATION AND MEDIATION
BOARD
The NCMB is an agency attached to the DOLE
principally in-charge of the settlement of labor disputes through
conciliation, mediation and voluntary arbitration. It is charged with
the promotion of voluntary approaches to labor dispute prevention
and settlement. It also administers the voluntary arbitration
program; maintains/updates a list of voluntary arbitrators; compiles
arbitration awards and decisions; and provides counselling and
preventive mediation assistance particularly in the administration
of collective agreements. It is with the NCMB that Notices of
Strike or Lockout are filed.
The NCMB is not a quasi-judicial agency. Its decisions,
not having been rendered in the exercise of its quasi-judicial
functions, cannot be elevated to the Court of Appeals under Rule
43 of the Rules of Court [Tabigue v. International Copra Export
Corporation].
1. Conciliation and Mediation
Both terms refer to a process whereby a neutral third
person usually called Conciliator (in case of conciliation) or
Mediator (in case of mediation), intervenes in a dispute involving
two or more conflicting parties for the purpose of reconciling their
differences or persuading them into adjusting or settling their
dispute. The Conciliator or Mediator normally does not make or
render any decision, his role being confined to the functions afore-
described.
Conciliator-Mediator
A Conciliator-Mediator refers to an officer of the NCMB
whose principal function is to assist in the settlement and
disposition of labor-management disputes through conciliation and
preventive mediation, including the promotion and encouragement
of voluntary approaches to labor disputes prevention and settlement
[D.O. No. 40-03].
2. Preventive Mediation
Preventive mediation, as a remedy, is not found in the
Labor Code. But under the law which created the NCMB, it is
expressly stated that one of its functions is to provide preventive
mediation to disputing parties [E.O. No. 126]. It covers potential
labor disputes that are the subject of a formal or informal request
for conciliation and mediation assistance sought by either or both
parties or upon the initiative of the NCMB to avoid the occurrence
of actual labor disputes and in order to remedy, contain or prevent
its degeneration into a full-blown dispute through amicable
settlement [NCMB Manual of Procedures].
Preventive mediation proceeding may be intiated in two
(2) ways:
a. By filing a notice or request of preventive
mediation, as distinguished from a notice of
strike/lockout; or
b. By conversion of the notice of strike/lockout into a
preventive mediation case.
Procedurally, the filing of the notice of preventive
suspension is the first step to submit a case for mediation. It is only
after this step that a submission agreement may be entered into by
the parties concerned [Insular Hotel Employees Union v.
Waterfront Insular Hotel Davao]. Moreover, just like in notices of
strike or lockout, only certified SEBAs may file a notice or request
for preventive mediation in cases of bargaining deadlocks and
unfair labor practices, the only two (2) grounds that may be
invoked in support of a strike or lockout [Ibid].
As distinguished from a notice of strike/lockout, “notice
of preventive mediation” refers to the notification filed by either an
employer or a duly registered labor union with the NCMB-DOLE
informing the latter of its desire to submit the issues between them
for preventive mediation and conciliation. The issues that may be
submitted for preventive mediation may either be strikeable or non-
strikeable.
In case of strikeable issues, the parties may mutually
agree that the same be treated or converted into a preventive
mediation case, in which event, no strike or lockout may be legally
and validly mounted based on the same issues since their
conversion into a preventive mediation case has the effect of
dismissing the notice of strike/lockout and removing it from the
docket of notices of strike/lockout.
In case of non-strikeable issues raised in a notice of strike
or notice of lockout, the NCMB may, motu proprio, convert the
same into a preventive mediation case or, alternatively, refer said
issues to voluntary arbitration, if they are in the nature of
unresolved grievances or to the Med-Arbiter, if they involve
representation or inter-union disputes.
Page 14 of 49
3. Authority to Convert a Notice of Strike/Lockout
Into a Preventive Mediation Case
The NCMB has the authority to convert a notice of
strike/lockout filed by the union/employer into a preventive
mediation case under any of the following circumstances:
a. When the issues raised in the notice of
strike/lockout are not strikeable in character.
b. When the party which filed the notice of
strike/lockout voluntarily asks for the conversion.
c. When both parties to a labor dispute mutually agree
to have it subjected to preventive mediation
proceeding.
Such authority is in pursuance of the NCMB’s duty to
exert all efforts at mediation and conciliation to enable the parties
to settle their dispute amicably and in line with the State policy of
favoring voluntary modes of settling labor disputes [NCMB
Primer].
E. DOLE REGIONAL DIRECTORS
The DOLE Regional Directors are the duly authorized
representatives of the DOLE Secretary referred to in Article 128 of
the Labor Code which grants to them both visitorial and
enforcement powers. They are in charge of the administration and
enforcement of labor standards within their respective territorial
jurisdiction [Atilano v. De la Cruz].
The DOLE Regional Directors have original and
exclusive jurisdiction over the following cases:
a. Visitorial (inspection) cases under Article 37 of the
Labor Code referring to the inspection of the
premises, books of accounts and records of any
person or entity covered by the Title I, Book I,
Labor Code.
b. Visitorial (inspection) and enforcement cases under
Article 128, (either routine or initiated through a
complaint).
c. Visitorial cases under Article 289, involving
examination of books of accounts of independent
unions, local chapters/chartered locals and workers’
associations.
d. Occupational safety and health violations.
e. Small money claims cases arising from labor
standards violations in an amount not exceeding
P5000.00 and not accompanied with a claim for
reinstatement under Article 129.
f. Cases related to private recruitment and placement
agencies for local employment.
g. Cases submitted for voluntary arbitration in their
capacity as Ex-Officio Voluntary Arbitrators under
D.O. No. 83-07
h. Request for SEBA certification when made in an
unorganized establishment with only one (1)
legitimate union.
1. Small Money Claims Cases
The DOLE Regional Director has original jurisdiction
over small money claims cases arising from labor standards
violations in the amount not exceeding P5000.00 and not
accompanied with a claim for reinstatement under Article 129 of
the Labor Code.
Article 129 contemplates the recovery of wages and other
monetary claims and benefits, including legal interest, owing to an
employee arising from employer-employee relationship provided
the claim does not exceed P5000.00
 The following requisites for the valid exercise of employer’s compliance with labor standards prescribed under labor
jurisdiction over small money claims must all concur, to wit: laws and social legislations, the purposes of the other articles are
different, thus:
a. The claim is presented by an employee or domestic
worker or kasambahay; a. Article 37 treats of the visitorial power of the DOLE
b. The claimant, no longer being employed, does not Secretary and the DOLE Regional Directors in
seek reinstatement; and relation to recruitment and placement of workers for
c. The aggregate money claim of the employee does both local and overseas employment.
not exceed P5000.00. b. Article 289 treats of the visitorial power of the
DOLE Secretary and the DOLE Regional Directors
In the absence of any of the aforesaid three (3) requisites, to inquire into the financial activities of legitimate
the Labor Arbiters have original and exclusive jurisdiction over all labor organizations.
claims arising from employer-employee relations, other than claims
for employees’ compensation, social security, PhilHealth and Article 129 vs. Article 128
maternity benefits.
Article 129 Article 128
2. Visitorial and Enforcement Powers Adjudication powers Visitorial and enforcement powers
Article 128 basically enunciates the three kinds of power Power to hear and decide any Inspection of establishments and
claim for recovery of wages, the issuance of orders to comply
which the DOLE Secretary and/or the Regional Directors, his duly
simple (small) money claims, and with labor standards, wage orders,
authorized representatives, may exercise in connection with the other benefits of employees, and other labor laws and
administration and enforcement of the labor standards provisions of domestic worker, or kasambahay, regulations
the Labor Code and of any labor law, wage order or rules and arising from a severed employer-
regulations issued pursuant thereto. employee relationship
No employer-employee Employment relationship is
What is being inspected in the exercise of the visitorial
relationship required
and enforcement powers granted to the DOLE Secretary or the Appealable to the NLRC Appealable to the DOLE
DOLE Regional Directors under Article 128 is the employer- Secretary
establishment and not the employees thereof. Consequently, in case
of a finding of violation of the labor standards, the awards granted 3. Appeals from Decisions of DOLE Regional
in the inspection case are not confined to employees who signed Directors
the complaint inspection but are equally applicable to all those who Decisions in the following cases relevant and related to
were employed by the establishment concerned at the time the labor relations are appealable to the BLR Director:
complaint was filed, even if they were not signatories [Maternity
Children’s Hospital v. Secretary of Labor]. a. Visitorial cases under Article 289, involving
examination of books of accounts of independent
Grant of Another Visitorial Power Under Articles 37 unions, local chapters/chartered locals and workers’
and 289 associations;
Besides the visitorial power granted under Article 128, b. Union registration-related cases such as:
another visitorial power is granted to the DOLE Secretary and the
DOLE Regional Directors under Article 37 and 289 of the Labor (i) Denial of applications for union registration
Code, to wit: of independent unions, local chapters and
workers’ associations;
Article 37. Visitorial Power. The Secretary of Labor (ii) Revocation or cancellation of registration
or his duly authorized representatives may, at any time, inspect of said unions
the premises, books of accounts and records of any person or
entity covered by this Title, require it to submit reports regularly
on prescribed forms, and act on violation of any provisions of
c. Notice of merger, consolidation, affiliation and
this Title. change of name of said unions and or petition for
denial thereof;
Article 289. [274] Visitorial Power. The Secretary of d. CBA-related cases, such as:
Labor and Employment or his duly authorized representative is
hereby empowered to inquire into financial activities of (i) Applications for registration of single-
legitimate labor organizations upon the filing of a complaint enterprise CBAs or petition for
under oath and duly supported by the written consent of at least
deregistration thereof;
twenty percent (20%) of the total membership of the labor
organization concerned and to examine their books of accounts
(ii) Petition for denial of registration of
and other records to determine compliance or non-compliance single-enterprise CBAs or denial of
with the law and to prosecute any violations of the law and the petition thereof.
union constitution and by-laws: Provided, That such inquiry or
examination shall not be conducted during the sixty (60) days Decisions of the DOLE Regional Directors in the
freedom period nor within the thirty (30) days immediately following cases which are not related to labor relations are
preceding the date of election of union officials. appealable to the DOLE Secretary and not to the BLR Director:

Article 128 should not be confused with Articles 37 and a.
289 because the purpose and object of the DOLE Secretary’s b.
exercise of his visitorial power provided thereunder are completely
distinct from each other.
While Article 128 dwells on the visitorial and c.
enforcement powers of the DOLE Secretary to inquire into the
Visitorial (inspection) cases under Article 37;
Visitorial (inspection) and enforcement cases under
Article 128, (either routine or initiated through a
complaint);
Occupational safety and health violations;

Page 15 of 49
 d. Cases related to private recruitment and placement When two or more petitions involving the same
agencies (PRPAs) for local employment, such as: parties and the same causes of action are filed, the same shall be
automatically consolidated.
(i) Application for license or denial thereof;
(ii) Complaints for suspension or As to appeals, Sections 15 and 16 provide:
cancellation of license by reason of
Section 15. Appeal. – The decision of the Mediator-
administrative offenses;
Arbiter and Regional Director may be appealed to the Bureau by
(iii) Complaints for illegal recruitment; and any of the parties within ten (10) days from receipt thereof, copy
(iv) Petition for closure of agency. furnished the opposing party. The decision of the Bureau
Director in the exercise of his/her original jurisdiction may be
Additionally, their decisions on small money claims appealed to the Office of the Secretary by any party within the
cases arising from labor standards violations in an amount not same period, copy furnished the opposing party.
exceeding P5000.00 and not accompanied with a claim for The appeal shall be verified under oath and shall
reinstatement under Article 129 are appealable to the NLRC. consist of a memorandum of appeal specifically stating the
grounds relied upon by the appellant, with supporting arguments
and evidence.
F. REGIONAL OFFICE
The Regional Office has to exercise administrative Section 16. Where to file appeal. – The
functions over the following: memorandum of appeal shall be filed in the Regional Office or
Bureau where the complaint or petition originated. Within
a. Union registration-related cases. twenty-four (24) hours from receipt of the memorandum of
b. Notice of merger, consolidation, affiliation and appeal, the Bureau or Regional Director shall cause the
change of name of said unions and or petition for transmittal thereof together with the entire records of the case to
the Office of the Secretary or the Bureau, as the case may be.
denial thereof.
c. Notice for change of name of a registered labor
b. Registration of Labor Organizations
organization.
Section 1, Rule III and Section 6, Rule IV of the IRR
d. Report of affiliation of an independently registered
provide:
labor union with a federation or national union.
e. Notice of merger or consolidation of independent
Section 1. Where to file. – Applications for
labor union, chartered local and workers’ registration of independent labor unions, chartered locals,
association. workers’ associations shall be filed with the Regional Office
f. Request for SEBA certification. where the applicant principally operates. It shall be processed by
g. Petition for certification election. the Labor Relations Division at the Regional Office in
h. Petition for the conduct of election of officers of accordance with Sections 2-A, 2-C, and 2-E of this Rule.
independent labor unions, chartered locals, workers’ Applications for registration of federations, national
associations. unions or workers’ associations operating in more than one
region shall be filed with the Bureau or the Regional Offices,
i. Request for examination of books of accounts of
but shall be processed by the Bureau in accordance with
independent labor unions, chartered locals and Sections 2-B and 2-D of this Rule.
workers’ association.
j. Petition for cancellation or application for voluntary Section 6. Form of Denial of Application/Return of
dissolution. Notice; Appeal. – The notice of the Regional Office or the
k. Registration of single-enterprise collective Bureau denying the application for registration/returning the
bargaining agreements. notice of change of name, affiliation, merger or consolidation
shall be in writing stating in clear terms the reasons for the
denial or return. The denial may be appealed to the Bureau if
a. Inter/Intra-Union Disputes and Other
denial is made by the Regional Office or to the Secretary if
Related Labor Relations Disputes denial is made by the Bureau, within ten (10) days from receipt
Section 4, Rule XI of the IRR provides: of such notice, on the ground of grave abuse of discretion or
violation of these Rules.
Section 4. Where to file. – Complaints or petitions
involving labor unions with independent registrations, chartered c. Certification Election
locals, workers’ associations, its officers or members shall be
Sections 2 and 19, Rule VIII of the IRR provide:
filed with the Regional Office that issued its certificate of
registration or certificate of creation of chartered local.
Section 2. Where to file. – A petition for certification
Complaints involving federations, national unions, industry
election shall be filed with the Regional Office which issued the
unions, its officers or member organizations shall be filed with
petitioning union’s certificate of registration or certificate of
the Bureau.
creation of chartered local.
Petitions for cancellation of registration of labor
At the option of the petitioner, a petition for
unions with independent registration, chartered locals and
certification election and its supporting documents may also be
workers association and petitions for deregistration of collective
filed online. (as amended by D.O. 40-I-15)
bargaining agreements shall be resolved by the Regional
The petition shall be heard and resolved by the
Director. He/She may appoint a Hearing Officer from the Labor
Mediator-Arbiter.
Relations Division.
Where two (2) or more petitions involving the same
Other inter/intra-union disputes and related labor
bargaining unit are filed in one (1) Regional Office, the same
relations disputes shall be heard and resolved by the Mediator-
shall be automatically consolidated with the Mediator-Arbiter
Arbiter in the Regional Office.
who first acquired jurisdiction. Where the petitions are filed in
Complaints or petitions involving federations,
different Regional Offices, the Regional Office in which the
national or industry unions, trade union centers and their
petition was first filed shall exclude all others; in which case, the
chartered locals, affiliates or member organizations shall be filed
latter shall indorse the petition to the former for consolidation.
either with the Regional Office or the Bureau. The complaint or
petition shall be heard and resolved by the Bureau.
Page 16 of 49
 Section 19. Appeal. – The Order granting the
conduct of a certification election in an unorganized
establishment shall not be subject to appeal. Any issue arising
therefrom may be raised by means of protest on the conduct and
results of the certification election.
The order granting the conduct of a certification
election in an organized establishment and the decision
dismissing or denying the petition, whether in an organized or
unorganized establishment, may be appealed to the Office of the
Secretary within ten (10) days from receipt thereof.
The appeal shall be verified under oath and shall
consist of a memorandum of appeal, specifically stating the
grounds relied upon by the appellant with the supporting
arguments and evidence.
d. Registration of Collective Bargaining
Agreements
Sections 1 and 5, Rule XVII of the IRR provide:
Section 1. Where to file. – Within thirty (30) days
from execution of a collective bargaining agreement, the parties
thereto shall submit two (2) duly signed copies of the agreement
to the Regional Office which issued the certificate of
registration/certificate of creation of chartered local of the labor
union-party to the agreement. Where the certificate of creation
of the concerned chartered local was issued by the Bureau, the
agreement shall be filed with the Regional Office which has
jurisdiction over the place where it principally operates.
Multi-employer collective bargaining agreements
shall be filed with the Bureau.
Section 5. Denial of registration; grounds for appeal.
– The denial of registration shall be in writing, stating in clear
terms the reasons therefor and served upon the applicant union
and employer within twenty-four (24) hours from issuance. The
denial by the Regional Office of the registration of single
enterprise collective bargaining agreements may be appealed to
the Bureau within ten (10) days from receipt of the notice of
denial. The denial by the Bureau of the registration of multi-
employer collective bargaining agreements may be appealed to
the Office of the Secretary within the same period.
The memorandum of appeal shall be filed with the
Regional Office or the Bureau, as the case may be. The same
shall be transmitted, together with the entire records of the
application, to the Bureau or the Office of the Secretary, as the
case may be, within twenty-four (24) hours from receipt of the
memorandum of appeal.
G. BUREAU OF LABOR RELATIONS
1. Administrative Functions
The BLR has to exercise its administrative functions over
the following:
a. Applications for registration of federations, national
unions or workers’ associations operating in more
than one region.
b. Notice for change of name of a registered labor
organization.
c. Notice of merger or consolidation of federations or
national unions
d. Keeping of registry of legitimate labor organizations
e. Petition for the conduct of election of officers of
federations, national, or industry unions and trade
union centers.
f. Request for examination of books of accounts of
federations or national unions and trade union
centers (Article 289)
g. Petition for cancellation or application for voluntary
dissolution of federations, national or industry
unions and trade union centers.
Page 17 of 49
h. Registration of multi-employer collective bargaining
agreements.
NOTE: All issues pertaining to the (1) validity of the
petitioning union’s certificate of registration or its legal personality
as a labor organization, (2) validity of registration and execution of
CBA shall be heard and resolved by the Regional Director in an
independent petition or cancellation of its registration and not by
the Mediator-Arbiter in the petition or certification election, unless
the petitioning union is not listed in the Department’s roster of
legitimate labor organizations, or an existing collective bargaining
agreement is not registered with the Department.
2. Exclusive Original Jurisdiction
Article 232. [226] Bureau of Labor Relations. The Bureau of
Labor Relations and the Labor Relations Divisions in the regional
offices of the Department of Labor shall have original and exclusive
authority to act, at their own initiative or upon request of either or
both parties, on all inter-union and intra-union conflicts, and all
disputes, grievances or problems arising from or affecting labor-
management relations in all workplaces, whether agricultural or non-
agricultural, except those arising from the implementation or
interpretation of collective bargaining agreements which shall be the
subject of grievance procedure and/or voluntary arbitration.
The Bureau shall have fifteen (15) working days to act on
labor cases before it, subject to extension by agreement of the parties.
The BLR has exclusive original jurisdiction over:
a. Intra/inter-union disputes of federations, national or
industry unions, trade union centers, its officers or
member organizations.
b. Petitions for cancellation of registration of
federations, national or industry unions, trade union
centers.
Labor Relations Division (LRD) refers to the following
units in the DOLE Regional Office: (1) Labor Organization and
CBA Registration Unit; and (2) Med-Arbitration Unit.
The BLR and the LRDs in the Regional Offices have
concurrent jurisdiction over the cases described in Article 232. This
concurrent character is stressed not only in the provision of this
article but in Article 219 of the Labor Code which defines the term
“Bureau” as referring to both the BLR and/or the LRD in the
regional offices.
For purposes of clarifying the issue of jurisdiction over
cases mentioned in Article 232, there is a need to cite first the
following labor officials who exercise such jurisdiction, to wit:
a. Mediator-Arbiters (Med-Arbiters);
b. DOLE Regional Directors; and
c. BLR Director
3. Mediator-Arbiter
The Mediator-Arbiter refers to an officer in the Regional
Office or in the BLR authorized to hear and decide representation
cases, inter-union or intraunion disputes and other related labor
relations disputes, except cancellation of union registration cases.
Thus, the cases falling under the original and exclusive
jurisdiction of the Mediator-Arbiter are as follows:
a. Inter-union disputes (representation or certification
election conflicts), such as
(i) Request for SEBA certification when made
in an unorganized establishment with only
 one or more than one (1) legitimate union
or in an organized establishment, or
(ii) Petition for certification election, consent
election, run-off election or re-run election;
b. Intra-union disputes;
c. Other related labor relations disputes;
d. Contempt cases.
Other related labor relations dispute refers to any conflict
between a labor union and the employer or any individual, entity or
group that is not a labor union or workers’ association. More
specifically, it may refer to any of the following:
a. Any conflict between:
(i) A labor union and an employer, or
(ii) A labor union and a group that is not a
labor organization; or
(iii) A labor union and an individual who is
not a member of such union.
b. Cancellation of registration of unions and workers’
associations filed by individuals other than their
members, or by a group that is not a labor
organization; and
c. A petition for interpleader involving labor relations.
The Mediator-Arbiter has the following administrative
functions:
a. Grant or deny a Petition for Certification Election
b. Conduct preliminary conference and hearing to
determine: (i) the bargaining unit to be represented;
(ii) contending labor unions; (iii) possibility of a
consent election; (iv) existence of any of the bars to
certification election under Section 3 of this Rule;
and (v) such other matters as may be relevant for the
final disposition of the case.
NOTE: The Med-Arbiter can rule on all issues pertaining
to the existence of employer-employee relationship raised before
the Med-Arbiter during the hearing and in the pleadings
4. Appeals from Decisions of Med-Arbiters
Decisions in cases falling under the original and
exclusive jurisdiction of the Med-Arbiters are appealable as
follows:
a. Inter-union disputes (representation or certification
election conflicts) – DOLE Secretary
(i) Request for SEBA Certification when
made in an unorganized establishment
with only one or more than 1 legitimate
union or in an organized establishment –
DOLE Secretary
(ii) Petition for certification election, consent
election, run-off election or re-run
election – DOLE Secretary
b. Intra-union disputes – BLR Director
c. Other related labor relations disputes – BLR
Director
d. Injunction cases – BLR Director
Page 18 of 49
e. Contempt Cases – BLR Director
5. BLR Director
The following cases fall under the original jurisdiction of
the BLR Director:
a. Complaints and petitions involving the application
for registration, revocation or cancellation of
registration of federations, national unions, industry
unions, trade union centers and their local
chapters/chartered locals, affiliates and member
organizations;
b. Request for examination of books of accounts of
said labor organizations under Article 289;
c. Intra-union disputes involving said labor
organizations;
d. Notice of merger, consolidation, affiliation and
change of name of said unions and or petition for
denial thereof;
e. Registration of multi-employer CBAs or petitions
for deregistration thereof;
f. Contempt cases.
6. Appeals from Decisions of BLR Director
Decisions in the cases falling under the original and
exclusive jurisdiction of the BLR Director are all appealable to the
DOLE Secretary, to wit:
a. Complaints and petitions involving the application
for registration, revocation, or cancellation of
registration of federations, national unions, industry
unions, trade union centers and their local
chapters/chartered locals, affiliates and member
organizations;
b. Request for examination of books of accounts of
said labor organizations under Article 289 of the
Labor Code;
c. Intra-union disputes involving said labor
organizations;
d. Notice of merger, consolidation, affiliation and
change of name of said unions and or petition for
denial thereof;
e. Registration of multi-employer CBAs or petitions
for deregistration thereof; and
f. Contempt cases.
H. PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION
The POEA has no more jurisdiction over monetary
claims of OFWs, the same having been transferred to the Labor
Arbiters by virtue of RA 8042.
The POEA’s jurisdiction is now confined to recruitment
or pre-employment cases which are administrative in nature,
involving or arising out of recruitment laws, rules, and regulations,
including money claims arising therefrom or violation of the
conditions for issuance of license to recruit workers.
It has original exclusive jurisdiction over the following
cases:
a. Recruitment violations and other related cases – all
cases administrative in character, involving or
arising out of violation of rules and regulations
relating to licensing and registration of recruitment
and employment agencies or entities, including
refund of fees collected from workers and violation
 of the conditions for the issuance of license to
recruit workers.
b. Disciplinary action cases and other special cases –
which are administrative in character, involving
employers, principals, contracting partners and
Filipino migrant workers.
I. DOLE SECRETARY
1. Visitorial and Enforcement Powers
Article 128. Visitorial and Enforcement Power. (a) The
Secretary of Labor and Employment or his duly authorized
representatives, including labor regulation officers, shall have access to
or night whenever work is being undertaken therein, and the right to
copy therefrom, to question any employee and investigate any fact,
condition or matter which may be necessary to determine violations or
which may aid in the enforcement of this Code and of any labor law,
wage order or rules and regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 21789
of this Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and
Employment or his duly authorized representatives shall have the
power to issue compliance orders to give effect to the labor standards
provisions of this Code and other labor legislation based on the
findings of labor employment and enforcement officers or industrial
safety engineers made in the course of inspection. The Secretary or his
duly authorized representatives shall issue writs of execution to the
appropriate authority for the enforcement of their orders, except in
cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by
documentary proofs which were not considered in the course of
inspection.
An order issued by the duly authorized representative of the
Secretary of Labor and Employment under this Article may be
appealed to the latter. In case said order involves 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 Secretary of Labor and Employment in the amount
equivalent to the monetary award in the order appealed from.
(c) The Secretary of Labor and Employment may likewise
order stoppage of work or suspension of operations of any unit or
department of an establishment when non-compliance with the law or
implementing rules and regulations poses grave and imminent danger
to the health and safety of workers in the workplace. Within twenty-
four hours, a hearing shall be conducted to determine whether an
order for the stoppage of work or suspension of operations shall be
lifted or not. In case the violation is attributable to the fault of the
employer, he shall pay the employees concerned their salaries or wages
during the period of such stoppage of work or suspension of operation.
(d) It shall be unlawful for any person or entity to obstruct,
impede, delay or otherwise render ineffective the orders of the
Secretary of Labor and Employment or his duly authorized
representatives issued pursuant to the authority granted under this
Article, and no inferior court or entity shall issue temporary or
permanent injunction or restraining order or otherwise assume
jurisdiction over any case involving the enforcement orders issued in
accordance with this Article.
(e) Any government employee found guilty of violation of, or
abuse of authority, under this Article shall, after appropriate
administrative investigation, be subject to summary dismissal from the
service.
(f) The Secretary of Labor and Employment may, by
appropriate regulations, require employers to keep and maintain such
employment records as may be necessary in aid of his visitorial and
enforcement powers under this Code.
Article 37. Visitorial Power. The Secretary of Labor or his
duly authorized representatives may, at any time, inspect the premises,
books of accounts and records of any person or entity covered by this
Title, require it to submit reports regularly on prescribed forms, and
act on violation of any provisions of this Title.
Page 19 of 49
Article 289. [274] Visitorial Power. The Secretary of Labor
and Employment or his duly authorized representative is hereby
empowered to inquire into financial activities of legitimate labor
organizations upon the filing of a complaint under oath and duly
supported by the written consent of at least twenty percent (20%) of
the total membership of the labor organization concerned and to
examine their books of accounts and other records to determine
compliance or non-compliance with the law and to prosecute any
violations of the law and the union constitution and by-laws: Provided,
That such inquiry or examination shall not be conducted during the
sixty (60) days freedom period nor within the thirty (30) days
immediately preceding the date of election of union officials.
As a summary, the DOLE Secretary has the following
enforcement powers:
a. To issue compliance orders to give effect to the
labor standards provisions of the Labor Code and
other labor legislation [Article 128(b)];
b. To issue writs of execution to the appropriate
authority for the enforcement of their orders, except
in cases where the employer contests the findings of
the labor and employment officers and raises issues
supported by documentary proofs which were not
considered in the course of inspection [Ibid].
c. To order stoppage of work or suspension of
operations of any unit or department of an
establishment when non-compliance with the law or
implementing rules and regulations poses grave and
imminent danger to the health and safety of workers
in the workplace [Article 128(c)];
d. To require employers to keep and maintain
employment records as may be necessary in aid of
his visitorial and enforcement powers under the
Labor Code [Article 128(f)].
2. Power to Suspend Effects of Termination
The DOLE Secretary may suspend the effects of
termination pending resolution of the dispute in the event of a
prima facie finding by the appropriate official of the DOLE before
whom the dispute is pending that:
a. The termination may cause a serious labor dispute;
and/or
b. The termination is in implementation of a mass lay-
off [Article 292(b)].
The Labor Arbiters and the Voluntary Arbitrators or
panel of Voluntary Arbitrators, as the case may be, are the
“appropriate officials” referred to in Article 292(b) who may make
the preliminary determination of the existence of prima facie
evidence that the termination will cause a serious labor dispute or
is being made in implementation of a mass lay-off. Such prima
facie finding will then become the basis for the issuance by the
DOLE Secretary of his order suspending the effects of termination
which, as earlier emphasized, would mean the immediate
reinstatement of the terminated employees pending the final
resolution of their termination case.
Suspension of Termination vs. Assumption or
Certification
Suspension of Termination Assumption or Certification
Involves only the issue of Applicable to all labor disputes,
termination of employment which irrespective of the grounds,
may cause serious labor dispute or provided it will cause strikes or
mass lay-off lockouts in industries
 indispensable to national interest
Requires preliminary Does not require preliminary 4. Contempt Powers
determination of the existence of prima facie determination. In fact,
prima facie evidence prior notice and hearing is not
required Article 231. [225] Contempt Powers of the Secretary. In the
Serious labor dispute may or may Labor dispute will cause or likely exercise of his powers under this Code, the Secretary of Labor may
not involve a strike lockout to cause a strike or lockout hold any person in direct or indirect contempt and impose the
Irrespective of the nature of the Only in industries indispensable appropriate penalties therefor.
business of the employer to national interest
Remedy is immediate Remedy is automatic return to 5. Petition for Certiorari under Rule 65
reinstatement pending resolution work of the strikers or locked-out
of the termination case employees or enjoining the strike
It has long been settled that the remedy of an aggrieved
or lockout. party in a decision or resolution of the Secretary of Labor is to
timely file a motion for reconsideration as a precondition for any
The case of University of Sto. Tomas v. NLRC and UST further or subsequent remedy, and then seasonably file a special
Faculty Union illustrates the situation where the DOLE Secretary civil action for certiorari under Rule 65 of the 1997 Rules on Civil
ordered both the suspension of the effects of termination and the Procedure; it is a condition sine qua non to afford an opportunity
return to work of employees pursuant to a certification order. In for the correction of the error or mistake complained of [Philtranco
this case, all the sixteen (16) officers and directors of the faculty Service v. Philtranco Workers Union].
union were terminated on the grounds of grave misconduct, serious Accordingly, the Secretary of Labor’s Decision is a
disrespect to a superior and conduct unbecoming a faculty member. proper subject of certiorari. In fact the Court said that there is no
As a result of said dismissal, some faculty members staged mass distinction: when the Secretary of Labor assumes jurisdiction over
leaves of absence for several days, disrupting classes in all levels at a labor case in an industry indispensable to national interest "he
the university., the faculty union filed a complaint for illegal exercises great breadth of discretion" in finding a solution to the
dismissal and unfair labor practice with the Labor Arbiter who, on parties’ dispute. "[T]he authority of the Secretary of Labor to
a prima facie showing that the termination was causing a serious assume jurisdiction over a labor dispute causing or likely to cause a
labor dispute, certified the matter to the DOLE Secretary for a strike or lockout in an industry indispensable to national interest
possible suspension of the effects of termination. On this basis, includes and extends to all questions and controversies arising
Secretary Franklin Drilon issued an order suspending the effects of therefrom. This power may not be the subject of appeal [Ibid].
the termination of the union officers and directors and directing the
university to accept them back to work under the same terms and J. VOLUNTARY ARBITRATOR
conditions prevailing prior to their dismissal. Later, on the asis of a Resort to voluntary arbitration from grievance machinery
petition for assumption or certification filed by the university, is in the nature of appeal. The proceedings before a Voluntary
Drilon modified said order by certifying the labor dispute to the Arbitrator are non-litigious in nature. They are not governed by
NLRC for compulsory arbitration pursuant to Article 278(g). He technical rules available to court or judicial proceedings but they
accordingly ordered the university to readmit all its faculty must, at all times, comply with the requirements of due process.
members, including the 16 union officers and directors, under the The Voluntary Arbitrator or panel of Voluntary
same terms and conditions prevailing prior to the dispute. Arbitrators shall have exclusive and original jurisdiction over the
Based on the foregoing, it may be said that suspension of following cases:
the effects of termination has the same effect as assumption or
certification as far as the reinstatement of the affected employees is a. Unresolved grievances arising from the
concerned. interpretation or implementation of the collective
bargaining (CBA);
3. Exclusive Appellate Jurisdiction b. Unresolved grievances arising from the
The DOLE Secretary has appellate jurisdiction over the interpretation or enforcement of company personnel
following cases: policies;
c. Violations of the CBA which are not gross in
a. Orders issued by the Regional Director under: character;
d. Other labor disputes, including unfair labor
(i) Article 128 practices and bargaining deadlocks, upon agreement
(ii) Occupational safety and health violations; of the parties;
(iii) Complaints against private recruitment and e. National interest cases;
placement agencies (PRPAs) for local f. Wage distortion issues arising from the application
employment. of any wage orders in organized establishments;
g. Unresolved grievances arising from the
b. Order of the Med Arbiter granting the petition for interpretation and implementation of the
Certification Election (in an organized Productivity Incentive Programs under RA 6971.
establishment) and denying the petition for
certification election (either in organized or Cases cognizable by Voluntary Arbitrators in their
unorganized establishment); original jurisdiction but filed with Labor Arbiters, DOLE Regional
c. All cases decided by the BLR in its original and Officers, or NCMB, should be disposed of by referring them to the
exclusive jurisdiction including denial of application Voluntary Arbitrators mutually chosen by the parties.
for union registration or cancellation of union Cases cognizable by VAs but filed with regular courts
registration of federations, national unions or should be dismissed [Union of Nestle Workers v. Nestle].
workers’ associations operating in more than one Only grievances that are “unresolved” by the grievance
region; machinery fall under the original and exclusive jurisdiction of the
d. All cases decided by the POEA in its original and VA. If a grievance therefore has not been submitted at the first
exclusive jurisdiction. instance to a grievance machinery, the VA does not have

Page 20 of 49
jurisdiction to hear and decide it. “Unresolved” grievance does not
require that a decision or resolution be made or rendered or an
action be taken on the grievance before it may be considered as
unresolved. The grievance that would necessitate its elevation to a
VA for adjudication and resolution may be treated as unresolved in
either of two (2) senses, namely:
a. A decision or resolution was rendered thereon
through the various steps of the grievance
machinery and either or both parties is/are not
satisfied therewith; or
b. No action at all was taken thereon within the period
of seven (7) days from its submission or resolution
to the last step of the grievance machinery.
Within 7 days, the law requires that the grievance be
automatically referred to voluntary arbitration. It is this clear that
the said period should be reckoned not from the date of the
issuance of any decision or resolution on the grievance, or more
accurately, from the receipt of a copy of the decision or resolution
by the parties to the grievance but from the date the grievance is
submitted for resolution to the last step of the grievance machinery.
No other conclusion can be drawn from the clear provision of
Article 273 except that whether or not a decision or resolution is
issued therein, the said period starts to run from the date of
submission for resolution of the grievance to the last step of the
grievance machinery prescribed in the CBA and not from the date a
decision or resolution is rendered by and through the grievance
machinery.
NOTE: When a case does not involve the parties to a
CBA – the employer and the SEBA – it is not subject to voluntary
arbitration. Only disputes involving the union and the company
shall be referred to the grievance machinery or voluntary
arbitrators [Tabigue v. International Copra Export].
Finality of Awards or Decisions
Section 7, Rule XIX of the IRR provides:
Section 7. Finality of Award/Decision. –
The decision, order, resolution or award of the
voluntary arbitrator or panel of voluntary arbitrators
shall be final and executory after ten (10) calendar
days from receipt of the copy of the award or
decision by the parties and it shall not be subject of a
motion for reconsideration.
The 10-day period stated in Article 276 should be
understood as the period within which the party adversely affected
by the ruling of the Voluntary Arbitrators or Panel of Arbitrators
may file a motion for reconsideration. Only after the resolution of
the motion for reconsideration may the aggrieved party appeal to
the CA by filing the petition for review under Rule 43 of the Rules
of Court within 15 days from notice pursuant to Section 4 of Rule
43 [Guagua National Colleges v. Court of Appeals].
Chin v. Maersk-Filipinas Crewing Inc.
Held: In the 2018 case of Guagua National Colleges vs.
CA (Guagua), the Court acknowledged the variance in its rulings and
categorically declared that the correct period to appeal the decision or
award of the Voluntary Arbitrator or Panel of Arbitrators to the CA via a
petition for review under Rule 43 of the Rules of Court is the fifteen (15)-
day period set forth in Section 4 thereof reckoned from notice or receipt of
the VA's resolution on the motion for reconsideration, and that the ten (10)-
day period provided in Article 276 of the Labor Code refers to the period
within which an aggrieved party may file said motion for reconsideration,
to wit:
Page 21 of 49
Given the variable rulings of the Court, what should now be the
period to be followed in appealing the decisions or awards of the Voluntary
Arbitrators or Panel of Arbitrators?
In the 2010 ruling in Teng v. Pagahac, the Court clarified that
the 10-day period set in Article 276 of the Labor Code gave the aggrieved
parties the opportunity to file their motion for reconsideration, which was
more in keeping with the principle of exhaustion of administrative
remedies, holding thusly:
In the exercise of its power to promulgate implementing rules
and regulations, an implementing agency, such as the Department of Labor,
is restricted from going beyond the terms of the law it seeks to implement;
it should neither modify nor improve the law. The agency formulating the
rules and guidelines cannot exceed the statutory authority granted to it by
the legislature.
By allowing a 10-day period, the obvious intent of Congress
in amending Article 263 to Article 262-A is to provide an opportunity
for the party adversely affected by the VA's decision to seek recourse
via a motion for reconsideration or a petition for review under Rule 43
of the Rules of Court filed with the CA. Indeed, a motion for
reconsideration is the more appropriate remedy in line with the
doctrine of exhaustion of administrative remedies. For this reason, an
appeal from administrative agencies to the CA via Rule 43 of the Rules
of Court requires exhaustion of available remedies as a condition
precedent to a petition under that Rule.
The requirement that administrative remedies be exhausted is
based on the doctrine that in providing for a remedy before an
administrative agency, every opportunity must be given to the agency to
resolve the matter and to exhaust all opportunities for a resolution under the
given remedy before bringing an action in, or resorting to, the courts of
justice. Where Congress has not clearly required exhaustion, sound judicial
discretion governs, guided by congressional intent.
By disallowing reconsideration of the VA's decision, Section
7, Rule XIX of DO 40-03 and Section 7 of the 2005 Procedural
Guidelines went directly against the legislative intent behind Article
262-A of the Labor Code. These rules deny the VA the chance to
correct himself and compel the courts of justice to prematurely
intervene with the action of an administrative agency entrusted with
the adjudication of controversies coming under its special knowledge,
training and specific field of expertise. In this era of clogged court
dockets, the need for specialized administrative agencies with the special
knowledge, experience and capability to hear and determine promptly
disputes on technical matters or intricate questions of facts, subject to
judicial review, is indispensable. In Industrial Enterprises, Inc. v. Court of
Appeals, we ruled that relief must first be obtained in an administrative
proceeding before a remedy will be supplied by the courts even though the
matter is within the proper jurisdiction of a court. (Emphasis supplied)
Hence, the 10-day period stated in Article 276 should be
understood as the period within which the party adversely affected by the
ruling of the Voluntary Arbitrators or Panel of Arbitrators may file a
motion for reconsideration. Only after the resolution of the motion for
reconsideration may the aggrieved party appeal to the CA by filing the
petition for review under Rule 43 of the Rules of Court within 15 days
from notice pursuant to Section 4 of Rule 43. (Citations omitted;
emphasis and underscoring supplied)
The Court further noted in Guagua that despite the clarification
made in Teng v. Pagahac in 2010, the Department of Labor and
Employment (DOLE) and NCMB have yet to revise or amend Section
7, Rule VII of the Revised Procedural Guidelines in the Conduct of
Voluntary Arbitration Proceedings and that such inaction has caused
confusion, particularly with respect to the filing of the motion for
reconsideration as a condition precedent to the filing of the petition for
review in the CA. Thus, the Court expressly directed the DOLE and the
NCMB to cause the revision or amendment of the aforesaid section in order
to allow the filing of motions for reconsideration in line with Article 276 of
the Labor Code. Unfortunately, no revision has yet been made in this
regard. Consequently, the DOLE and the NCMB are again reminded to
cause the revision or amendment of Section 7, Rule VII of the Revised
Procedural Guidelines in the Conduct of Voluntary Arbitration Proceedings
insofar as it prohibits the filing of a motion for reconsideration, if they have
not done so.
In view of the foregoing, petitioner in this case had fifteen (15)
days from receipt of the Resolution denying his motion for reconsideration
to file his petition for review with the CA. Having received a copy of the
VA's October 29, 2018 Resolution on November 22, 2018, petitioner
therefore had until December 7, 2018 to file his petition. As the records Petitioners herein are part of the rank-and-file workforce; they
show that the petition was filed on December 4, 2018, albeit through a are cooks, miners, helpers and mechanics of the respondent.
private courier, it was therefore timely filed and the CA erred in dismissing As held also in the Mercury Drug case:
it outright. To rule otherwise would be clearly antithetical to the tenets of To protect labor’s security of tenure, we emphasize that the
fair play, not to mention the undue prejudice to petitioner's rights. [30] Thus, doctrine of strained relations should be strictly applied so as not to
in light of the fact that the CA dismissed the petition for review outright deprive an illegally dismissed employee of his right to reinstatement.
based solely on procedural grounds, a remand of the case for a resolution Every labor dispute almost always results in strained relations and the
on the merits is warranted. phrase cannot be given an overarching interpretation, otherwise an
unjustly dismissed employee can never be reinstated.
Considering the circumstances in the present case, we find
Unicrafts Industries v. Court of Appeals
that the only issue to be resolved is whether the supervening events are
Held: While under the law decisions of voluntary arbitrators are
grave enough to warrant a modification in the execution of the
accorded finality, the same may still be subject to review, such as here
judgment. 
where there was a violation of to due process such as in this case. 
Both the voluntary arbitrator and the Court of Appeals found
The proceedings before the Voluntary Arbitrator are non-
that reinstatement is no longer possible due to the fact that respondent has
litigious in nature, and they are nit governed by technical rules applicable to
been continuously suffering business losses and reducing the number of its
court or judicial proceedings but they must, at all times, comply with the
employees pending litigation, and so the positions held by petitioners were
requirement of due process making reference to Rule VI, Section 6 of the
abolished as a cost-cutting measure. 
Procedural Guidelines in the Conduct of Voluntary Arbitration Proceeding
Despite our sympathy for the workers’ plight, however, we find
which provides:
no legal support for their opposition to the conclusion and findings of the
SECTION 6. Arbitration Hearing. — In the conduct of hearing,
voluntary arbitrator and the Court of Appeals.
the arbitrator shall provide the parties adequate opportunities to be heard.
On record, there is no showing that the abolition of the
He shall control the proceedings and see to it that proper decorum is
petitioners positions was capricious or whimsical. The appellate court, as
observed. He must render a ruling of the issue/s raised in the course of the
well as the voluntary arbitrator, based their decisions on applicable law and
proceedings. He must treat all significant aspects of the proceedings as
the evidence. As confirmed by the appellate court, the voluntary arbitrator
confidential in nature unless confidentiality is waived by the parties. 
also found that petitioners reinstatement had become not only inappropriate
Further, While the intendment of our laws is to favor the
but also impossible.
employee, it in no way implies that the employer is not entitled to due
Regrettably, petitioners now raise questions the determination of
process, hence, the finding of the Voluntary Arbitrator, however, was
which would require the Court to look into the evidence adduced by the
premature and null and void, and there is a need to remand the case to the
parties. This cannot be done in a petition for review on certiorari. It is
Voluntary Arbitrator to allow Unicraft to present evidence. As such, the
outside its purview under Rule 45 of the 1997 Rules of Court. Factual
Court of Appeals committed grave abuse of discretion amounting to lack of
findings of labor officials who are deemed to have acquired expertise in
jurisdiction when it ordered the immediate execution of the Voluntary
matters within their respective jurisdiction are generally accorded not only
Arbitrator's decision. 
respect but even finality, and bind us when supported by substantial
evidence.
Abalos v. Philex Mining
Held: A basic tenet in our rules of procedure is that an award
II
that is final and executory cannot be amended or modified anymore.
PRESCRIPTION OF ACTIONS
Nothing is more settled in law than that once a judgment attains finality it
thereby becomes immutable and unalterable. It may no longer be
modified in any respect, even if the modification is meant to correct what is Filing a case with the grievance machinery tolls the
perceived to be an erroneous conclusion of fact or law, and regardless of running of the prescriptive period.
whether the modification is attempted to be made by the court rendering it
or by the highest court of the land. A. MONEY CLAIMS
However, this rule is subject to exceptions as stated in the case
The prescriptive period of money claims (like separation
of David vs. CA, 316 SCRA 710 (1999), cited by respondent:
pay) and benefits arising from employer-employee relationship is
One exception is that where facts and/or events transpire after a three (3) years under Article 306 of the Labor Code, reckoned from
decision has become executory, which facts and/or events present a the time the cause of action accrued; otherwise, they shall be
supervening cause or reason which renders the final and executory forever barred [IRR].
decision no longer enforceable.  Money claims under Article 306 include those arising
Under the law, the court may modify or alter a judgment from:
even after the same has become executory whenever circumstances
transpire rendering its execution unjust and inequitable, as where
a. Law
certain facts and circumstances justifying or requiring such
modification or alteration transpired after the judgment has become
b. CBA
final and executory. c. Incremental proceeds from tuition increases
The fact that the decision has become final does not preclude a d. Overseas employment of OFWs.
modification or an alteration thereof because even with the finality of
judgment, when its execution becomes impossible or unjust, it may be A cause of action for money claims accrues upon the
modified or altered to harmonize the same with justice and the facts. categorical denial of a claim. The three-year prescriptive period is
In Deltaventures Resources Inc. vs. Cabato, 327 SCRA 521 not applicable to execution of final judgment which should be done
(2000), we held that “jurisdiction once acquired is not lost upon the
within 5 years.
instance of the parties but continues until the case is terminated.” The
power of a voluntary arbitrator to issue a writ of execution carries with
it the power to inquire into the correctness of its execution and to B. ILLEGAL DISMISSAL
consider whatever supervening events transpire during execution. The 3-year prescriptive period in Article 291 solely
Therefore, we are in agreement with the appellate court that a voluntary applies to money claims but not to illegal dismissal cases which are
arbitrator has jurisdiction to amend the mode of executing an award if not in the nature of money claims. The prescriptive period of illegal
and when the case merits such amendment. dismissal cases is 4 years under Article 1146 of the Civil Code.
However, we find respondent’s reliance on the doctrine of
“strained relations” misplaced. In Mercury Drug Corporation vs.
C. UNFAIR LABOR PRACTICE (ULP)
Quijano, we stated that said doctrine is inapplicable to a situation where
the employee has no say in the operation of the employer’s business. 

Page 22 of 49
 The prescriptive period for criminal complaints involving
ULPs is one (1) year from the time the acts complained of were
committed; otherwise, they shall be forever barred [Article 305].
However, before a criminal case for ULP can be filed, it
is a pre-requisite that a labor case for ULP involving the same set
of facts should first be initiated with the competent labor court. It is
only upon a finding of guilt in the labor case and after the decision
herein has become final and executory that the one-year
prescriptive period to prosecute the criminal aspect of ULP starts to
run.
D. OFFENSES UNDER THE LABOR CODE
The prescriptive period of all criminal offenses penalized
under the Labor Code and its IRR is three (3) years from the time
of commission thereof [Article 305].
E. ILLEGAL RECRUTIMENT CASES
The prescriptive period of simple illegal recruitment
cases is five (5) years [RA 8042].
The prescriptive period of illegal recruitment cases
involving economic sabotage is twenty (20) years [Ibid].
F. ACTIONS INVOLVING UNION FUNDS
Actions involving union funds must be brought within 3
years from the date of submission of audited financial statements or
from the date they should have been submitted as required by law,
whichever comes first.
G. CLAIMS FOR SSS BENEFITS
1. Against the Employer
Claims for SSS benefits against the employer must be
brought within 20 years from the time delinquency is known,
assessment is made by the SSS, or benefit accrues, as the case may
be.
2. Action for Disability Claim
Claims for benefits for disability claim must be brought
within 10 years from the date of disability.
H. CLAIMS FOR GSIS BENEFITS
Claims for GSIS benefits must be brought within 4 years
from the date of contingency (except claims for life and
retirement).
III
EMPLOYER-EMPLOYEE RELATIONSHIP
The existence of the employer-employee relationship is
essential in that it comprises as the jurisdictional basis for recovery
under the law. Only cases arising from said relationship are
cognizable by the labor courts [Madrigal Shipping v. Melad].
A. BASIC PRINCIPLES ON EMPLOYER-EMPLOYEE
RELATIONSHIP
 The relationship of ER-EE is contractual in nature,
either written or oral.
 Terminologies used in a contract is not controlling.
 Mode of paying salary or compensation of a worker is
not the basis of existence of ER-EE relationship.
 Retainer fee arrangement does not give rise to
employment relationship.
B. FOUR-FOLD TEST
Page 23 of 49
In determining the existence of employer-employee
relationship, the following elements are generally considered,
namely: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to
control the employees' conduct – although the latter is the most
important element [Viana v. Al-Lagadan]
The difference in the manner of "selection and
engagement" does not prove, however, the alleged absence of
employer-employee relationship. Most business enterprises have
employees of different classes, necessarily requiring different
methods of selection and contracts of services of various types,
without detracting from the existence of said relationship [Ysmael
v. Court of Industrial Relations].
C. CONTROL TEST
It is well settled that "an employer-employee relationship
exists where the person for whom the services are performed
reserves a right to control not only the end to be achieved but also
the means to be used in reaching such end. The decisive nature of
said control over the "means to be used", is illustrated in the case of
Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No. 210,
pp. 1197, 1199-1201), in which, by reason of said control, the
employer-employee relationship was held to exist between the
management and the workers, notwithstanding the intervention of
an alleged independent contractor, who had, and exercised, the
power to hire and fire said workers [LVN v. Philippine Musicians
Guild].
The test of the existence of employee and employer
relationship is whether there is an understanding between the
parties that one is to render personal services to or for the benefit of
the other, and recognition by them of the right of one to order and
control the other in the performance of the work and to direct the
manner and method of its performance [Dy Keh Beng v.
International Labor].
LVN v. Philippine Musicians Guild
Held: The right of control of the film company over the
musicians is shown (1) by calling the musicians through 'call slips' in the
name of the company; (2) by arranging schedules in its studio for recording
sessions; (3) by furnishing transportation and meals to musicians; and (4)
by supervising and directing in detail, through the motion picture director,
the performance of the musicians before the camera, in order to suit the
music they are playing to the picture which is being flashed on the screen.
Does the mere fact that the employee is not under
supervision while performing his duties render him a contractor?
No. The Supreme Court held in Sterling Products v. Sol:
We cannot accept this argument. Respondent Sol was
directed to listen to certain broadcasts, directing her, in the
instructions given her, when to listen and what to listen, petitioners
herein naming the stations to be listened to, the hours of
broadcasts, and the days when listening was to be done.
Respondent Sol had to follow these directions. The mere fact that
while performing the duties assigned to her she was not under the
supervision of the petitioners does not render her a contractor,
because what she has to do, the hours that she has to work and the
report that she has to submit—all these are according to
instructions given by the employer. It is not correct to say,
therefore, that she was an independent contractor, for an
independent contractor is one who does not receive instructions as
to what to do, how to do, without specific instructions.
Finally, the very act of respondent Sol in demanding
vacation leave, Christmas bonus and additional wages shows that
she considered herself an employee. A contractor is not entitled to
a vacation leave or to a bonus nor to a minimum wage. This act of
hers in demanding these privileges are inconsistent with the claim
that she was an independent contractor.
Actual exercise of control, not necessary
It should be borne in mind that the control test calls
merely for the existence of the right to control the manner of doing
the work, not the actual exercise of the right [Dy Keh Beng v.
International Labor].
Dy Keh Beng v. International Labor
Petitioner contends that the private respondents "did not meet
the control test in the light of the ... definition of the terms employer and
employee, because there was no evidence to show that petitioner had the
right to direct the manner and method of respondent's work."[ Moreover, it
is argued that petitioner's evidence showed that "Solano worked on
a pakiaw basis" and that he stayed in the establishment only when there was
work.
Held: While this Court upholds the control test under which an
employer-employee relationship exists "where the person for whom the
services are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end," it finds no
merit with petitioner's arguments as stated above.  It should be borne in
mind that the control test calls merely for the existence of the right to
control the manner of doing the work, not the actual exercise of the
right. Considering the finding by the Hearing Examiner that the
establishment of Dy Keh Beng is "engaged in the manufacture of baskets
known as kaing,"[ it is natural to expect that those working under Dy would
have to observe, among others, Dy's requirements of size and quality of
the kaing.  Some control would necessarily be exercised by Dy as the
making of the kaing would be subject
to Dy's specifications.  Parenthetically, since the work on the baskets is
done at Dy's establishments, it can be inferred that the proprietor Dy could
easily exercise control on the men he employed.
As to the contention that Solano was not an employee because
he worked on piece basis, this Court agrees with the Hearing Examiner that
"circumstances must be construed to determine indeed if
payment by the piece is just a method of compensation and does not define
the essence of the relation.  Units of time ... and units of work are in
establishments like respondent (sic) just yardsticks whereby to determine
rate of compensation, to be applied whenever agreed upon.  We cannot
construe payment by the piece where work is done in such an establishment
so as to put the worker completely at liberty to turn him out and take in
another at pleasure."
At this juncture, it is worthy to note that Justice Perfecto,
concurring with Chief Justice Ricardo Paras who penned the decision in
"Sunripe Coconut Products Co. v. Court of Industrial Relations" (83 Phil.
518, 523), opined that
"judicial notice of the fact that the so-called 'pakyaw' system
mentioned in this case as generally practiced in our country, is, in fact, a
labor contract between employers and employees, between capitalists and
laborers."
Continuity of Control, not necessary
In the case of Industrial-Commercial-Agricultural
Workers Organization vs. CIR, the Supreme Court held 'that during
the temporary layoff the laborers are considered free to seek other
employment is natural, since the laborers are not being paid, yet
must find means of support' and such temporary cessation of
operations 'should not mean starvation for employees and their
families'."
Thus, in RJL Martinez Fishing v. NLRC, the Supreme
Court held:
We further find that the employer-employee
relationship between the parties herein is not co-terminous with
each loading and unloading job. As earlier shown, respondents
are engaged in the business of fishing. For this purpose, they
have a fleet of fishing vessels. Under this situation, respondents'
activity of catching fish is a continuous process and could hardly
be considered as seasonal in nature. So that the activities
performed by herein complainants, i.e. unloading the catch of
Page 24 of 49
tuna fish from respondents' vessels and then loading the same to
refrigerated vans, are necessary or desirable in the business of
respondents. This circumstance makes the employment of
complainants a regular one, in the sense that it does not depend
on any specific project or seasonal activity.
xxx
"The Court holds, therefore, that the employer-
employee relationship existed between the parties
notwithstanding evidence to the fact that petitioners Visayas and
Bergado, even during the time that they worked with respondent
company alternated their employment on different vessels when
they were not assigned on the company's vessels. For, as was
stressed in the above-quoted case of Industrial-Commercial-
Agricultural Workers Organization vs. CIR, (16 SCRA 562
(1966), 'that during the temporary layoff the laborers are
considered free to seek other employment is natural, since the
laborers are not being paid, yet must find means of support' and
such temporary cessation of operations 'should not mean
starvation for employees and their families'."
Indeed, considering the length of time that private
respondents have worked for petitioner - since 1978 - there is
justification to conclude that they were engaged to perform
activities usually necessary or desirable in the usual business or
trade of petitioners and are, therefore, regular employees.As
such, they are entitled to the benefits awarded them by
respondent NLRC.
Sterling products vs. Sol says that there is no need for the
employer and the employee to be in the same place for control to
take place. Control that satisfies employer-employee relationship
can be met even if the employee is not juxtaposed with the
employer in the same physical location.
And then in Dy keh beng vs International labor, the
Supreme Court has said that piece-rate system, a payment on a
piece-rate basis, neither affirms nor negates the existence of
employer-employee relationship. It is neutral. It does not prove or
disprove. It merely proves payment.
Now, the Supreme Court further said that in order to
arrive at a conclusion that there exists an employee-employer
relationship by virtue of the satisfaction of the control test that it is
not necessary to proffer evidence of actual exercise of control. All
you need is evidence that there is RESERVATION OF THE
POWER TO CONTROL. Namely that the employer COULD
HAVE exercised the control because he deserves that right to
control. The issue in the specks of the baskets that Dy Keh Beng
paid for those two so called “Employees” of his whom he claimed
he was just buying Kaings from them. Kaings, big baskets,
according to Dy Keh Beng’s specification.
In RJL Martinez fishing, the test of power of control can
be met even if the exercise is not continuous. It need not be
uninterrupted.
D. JOB CONTRACTING
“Contracting” or “subcontracting” refers to an
arrangement whereby a principal agrees to farm out to a contractor
the performance or completion of a specific job or work within a
definite or predetermined period, regardless of whether such job or
work is to be performed or completed within or outside the
premises of the principal.
NOTE: Employment contracts – is governed by the LC
(for Employees); while “Service Agreements” or “Contractors
Agreements” are governed by the Civil Code (for independent
contractors)
1. Legitimate Job Contracting
Under Department Order No. 174 Series of 2017, the
concurrence of the following is essential for a contractor to be
considered as a legitimate job contractor:

a) The contractor must be duly registered with the
DOLE;
b) The contractor is engaged in a distinct and
independent business and undertakes to perform
the job or work on its own responsibility,
according to its own manner and method, and
free from control and direction of the principal
in all matters connected with the performance of
the work except as to the results thereof;
c) The contractor has substantial capital to carry out
the job farmed out by the principal on his account,
manner and method, investment in the form of
tools, equipment, machinery and supervision;
d) The Service Agreement ensures compliance with
all the rights and benefits for all the employees
of the contractor or subcontractor under the labor
laws.
Absence of any of the foregoing requisites makes the
arrangement a labor-only arrangement [Philippine School of
Business Administration v. NLRC].
In Consolidated Building Maintenance Inc. vs Asprec
Jr., “job contracting is deemed legitimate and permissible when the
contractor has substantial capital or investment and runs a business
that is independent and free from the control of the principal.” This
“substantial capital” requirement refers to paid-up capital
stock/shares of at least P5 million in the case of corporations and
partnerships, and a net worth of at least P5 million for single
proprietorships.
2. Labor-Only Contracting
Labor-only contracting has the following elements:
a. (i) The contractor or subcontractor does not have
substantial capital; or (ii) the contractor or
subcontractor does not have investments in the form
of tools, equipment, machineries, supervision and
work premises, among others; and
b. The contractor’s or subcontractor’s employees
recruited and placed are performing activities which
are directly related to the main business operation of
the principal; or
c. The contractor or subcontractor does not exercise
the right to control the performance of the work of
the employees.
Where labor-only contracting exists in a given case, the
law itself implies or establishes an employer-employee relationship
between the employer and the employees of the labor-only
contractor to prevent any violation or circumvention of provisions
of the Labor Code [Vallum Security v. NLRC].
Article 106 of the Labor Code defines "labor-only"
contracting thus -
Art. 106. Contractor or subcontractor. - x x x x There
is "labor-only" contracting where the person supplying workers
to an employer does not have substantial capital or investment in
the form of tools, equipment, machineries, work premises,
among others, and the workers recruited by such persons are
performing activities which are directly related to the principal
business of such employer.
The law does not require both substantial capital and
investment in the form of tools, equipment, machineries, etc. This
is clear from the use of the conjunction "or". If the intention was to
require the contractor to prove that he has both capital and the
Page 25 of 49
requisite investment, then the conjunction "and" should have been
used [Neri v. NLRC].
IV
CLASSIFICATIONS OF EMPLOYEES
There are five (5) classifications of employees and
Article 295 provides for four (4) of them.
Article 295. Regular and Casual Employment. The provisions
of written agreement to the contrary notwithstanding and regardless of
the oral agreement of the parties, an employment shall be deemed to be
regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of which
has been determined at the time of the engagement of the employee or
where the work or service to be performed is seasonal in nature and
the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That any employee
who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment
shall continue while such activity exists.
A. REGULAR EMPLOYEES
Regular employees are those who have been engaged to
perform activities which are usually necessary or desirable in the
usual business or trade of the employer.
There are two kinds of regular employees, to wit:
a. Those engaged to perform activities which are
usually necessary or desirable in the usual business
or trade of the employer; and
b. Those who have rendered at least one (1) year of
service, whether such service is continuous or
broken, with respect to the activity which they are
employed.
The law presumes regularity of employment. No
declaration or appointment paper is necessary to make one a
regular employee [Philips Semiconductors v. Fadriquela].
Written or oral agreement is immaterial to determine
regularity of employment [Association of Trade Unions v. Abella].
However, there is a need to execute a written employment contract
if the intention is to stipulate on such other kinds of employment
such as probationary, project, seasonal, casual, or fixed-term
because in the absence thereof, it will be presumed regular.
The Doctrine of Adhesion applies to employment
contracts. However, it does not apply if the contract is clear and
unambiguous because a contract of adhesion is not prohibited per
se [RCBC v. Court of Appeals].
Settled Principles
• The act of hiring and rehiring employees over a period of
time without considering them as regular evidences bad
faith on the part of the employer [Bustamante v. NLRC].
• Manner and method of payment of wage or salary is
immaterial to the issue of whether the employee is
regular or not [Columbus Philippines v. NLRC].
B. PROJECT EMPLOYEES
Project employees are those whose employment has been
fixed for a specific project or undertaking, the completion or
termination of which has been determined at the time of the
engagement of the employee. Employment automatically
terminates upon completion of the project.
If the project or the phase of the project the project
employee is working on has not yet been completed and his
services are terminated without just or authorized cause and there is
no showing that his services are unsatisfactory, the project
employee is entitled to reinstatement with backwages to his former
position or substantially equivalent position. If the reinstatement is
no longer possible, the employee is entitled to his salaries for the
unexpired portion of the agreement [FilSystems, Inc. v. Puente].
Fegurin v. NLRC
Held: We find merit in petitioners' stand that they are regular
and permanent employees. Under Article 281 of the Labor Code, any
employee who has rendered at least one year of service, or who performs
activities usually necessary or desirable in the usual business of the
employer, is considered a regular employee, the provision of written
agreement to the contrary notwithstanding.
In this case, four of the petitioners had been working with the
Company for nine years, one 4 for 8 years, another for 6 years, the shortest
term being 3 years.  The Company has not rebutted petitioners' averments
that they had been employed for several years before their services were
terminated. The Notices of Employment, therefore, do not reflect accurately
petitioners' respective lengths of service as they give the starting point of
petitioners' employment as between 1975 and 1977, or just a few months
before their dismissal. Moreover, they performed activities usually
necessary or desirable in the usual business of the Company, their
employer, hence, their employment is deemed regular.
Policy Instructions No. 20 of the Minister of Labor, intended to
stabilize employer-employee relations in the construction industry, also lays
down the distinction between project employees and non-project
employees, thus:
Generally, there are two types of employees in the construction
industry, namely: 1) Project employees, and 2) Non-Project employees.
Project employees are those employed in connection with a
particular construction project. Non-project employees are those employed
by a construction company without reference to any particular project.
xxx xxx xxx
Members of a work pool from which a construction company
draws its project employees, if considered employees of the construction
company while in the work pool, are non-project employees or employees
for an indefinite period. If they are employed in a particular project, the
completion of the project or of any phase thereof will not mean severance
of employer-employee relationship.
Considering the nature of the work of petitioners, that of
carpenter, laborer or mason, their respective jobs would actually be
continuous and on-going. When a project to which they are individually
assigned is completed, they would be assigned to the next project or a phase
thereof. In other words, they belonged to a "work pool" from which the
Company would draw workers for assignment to other projects at its
discretion. They are, therefore, actually "non-project employees".
Moreover, as brought out by the Solicitor General, in the
Collective Bargaining Agreement between petitioners' Union and the
Company, the latter had categorically recognized petitioners as regular and
permanent employees effective May 1, 1976 "for the purpose of forming a
core group of permanent and regular construction workers" for the
Company. Thus, Section 1, Article I of the CBA provides:
Section 1. The Company recognizes the Union as the only and
properly designated and authorized representative for the permanent and
regular employees of the company, except the following:
a. Supervisory personnel;
b. Workers hired on casual basis;
c. Workers hired on contract basis for the construction of
company's projects;
d. Company watchmen and security guards.
For the purpose of forming a core group of permanent and
regular construction workers, the Company hereby extends permanent and
regular employment effective May 1, 1976 to the individuals named in
Annex 'A' (Annex 'B-l' of this Petition) hereof; and effective November 1,
1974 to the individuals named in Annex 'B' (Annex 'B-2' of this Petition)
hereof. Vacancies in the said core group occassioned by retirement,
dismissal, death or permanent disability may be filled by the Company at its
Page 26 of 49
option, upon consultation with the Union, whose opinion shall be regarded
as advisory.
The names of petitioners appear in Annex "A" of the
CBA except in respect of petitioner Pedro B. Barber who obtained
employment with the Company in August, 1968. Having been in the
Company's employ for several years, even the Notices of Employment
(supra) would show a clear violation of the CBA, which recognizes
petitioners as "regular and permanent" employees of the Company. The
terms and conditions of the CBA must be complied with as they constitute
the law between the parties. 
The fact that petitioners did not present the CBA as evidence
before the agencies below will not alter the conclusion arrived at because
the Supreme Court has the authority to review matters even if they are not
assigned as errors in the appeal, if it is found that their consideration is
necessary in arriving at a just decision of the case. 
PNCC v. NLRC
Held: After a careful consideration of the petition and the
comment filed by the Solicitor General for the respondents, We hold that
the NLRC did not abuse its discretion in affirming the Labor Arbiter's
conclusion that the private respondent was a member of the work pool and
that he was illegally dismissed from his job.
Members of a work pool from which a construction company
draws its project employees, if considered employee of the construction
company while in the work pool, are non-project employees or employees
for an indefinite period. If they are employed in a particular project, the
completion of the project or any phase thereof will not mean severance of
employer-employee relationship.
.... Any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity which he is employed and his
employment shall continue while such actually exists. (Art. 280, Labor
Code.)
A project employee is one whose "employment has been fixed
for a specific project or undertaking the completion or termination of which
has been determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season." (Sec. 280, Labor Code;
Sandoval Shipping Inc. vs. NLRC, 136 SCRA 674.)
In finding that Porciuncula was a regular employee, the Labor
Arbiter noted that it was the petitioner's practice to rehire him after the
completion of every project and this re-hiring continued throughout
Porciuncula's 13 years of employment in the company.
The Labor Arbiter also observed that the petitioner never
reported the completion of its projects and the termination of the employees
(like Porciuncula) in its finished projects, to the nearest Public Employment
Office as required by Policy Instruction No. 20 of the Secretary of Labor. In
the case of Ochoco vs. NLRC, 120 SCRA 774, the failure of the employer
to report to the nearest employment office the termination of the workers
everytime it completed a project was considered by this Court as proof that
they were not project employees.
Settled Principles
• Project employees enjoy security of tenure only during
the term of their project employment
• If they are terminate without just or authorized cause
before the completion of the project, they are entitled to
reinstatement or salaries for the unexpired portion of the
agreement.
• Project employees are not entitled to separation pay at
the completion of the project.
• Project employees are presumed to be regular if they are
allowed to work beyond the completion of the project.
Having become regular employees, they can no longer be
terminated on the basis of completion of the project.
• Advanced notice of termination of project employment is
not required.
• Report to DOLE on termination of project employees is
required. Report should be made after every completion
of project or phase thereof.
 • Payment of completion bonus is an indicator of project
employment.
• Burden of proof in termination of project employment
rests on the employer.
C. SEASONAL EMPLOYEES
Seasonal employees are those who work or perform
services which are seasonal in nature, and the employment is for
the duration of the season.
In Manila Hotel v. CIR, it was held that where it appears
that the questioned employees were never separated from the
service but their status is that of regular seasonal employees who
are called to work from time to time, mostly during summer
season, and the nature of their relationship with the hotel is such
that during off season they are temporarily laid off but during
summer season they are re-employed, or when their services are
needed, and they are not strictly speaking separated from the
service but are merely considered as on leave of absence without
pay until they are re-employed, it is held that their employment
relationship is never severed but only suspended, and as such, they
can be considered as in the regular employment of the hotel.
Regular seasonal workers, if not rehired for the next
season, are deemed illegally dismissed
Regular seasonal workers are called to work from time to
time, mostly during certain seasons. The nature of their relationship
with the employer is such that during off-season, they are
temporarily laid off but they are re-employed during the season or
when their services may be needed. They are not, strictly speaking,
separated from the service but are merely considered as on leave of
absence without pay until they are re-employed. Their employment
relationship is never severed but only suspended. As such, they can
be considered as being in the regular employment of the employer
[Abasolo v. NLRC].
D. CASUAL EMPLOYEES
Casual employees are those who are not regular, project,
or seasonal employees. Employment automatically terminates upon
the lapse of the agreed period.
There is casual employment where an employee is
engaged to perform a job, work or service which is merely
incidental to the principal business of the employer, and such job,
work, or service is for a definite period made known to the
employee at the time of engagement [Conti v. NLRC].
There is such a thing as qualified security of tenure of
casual employees. Any employee who has rendered at least one
year of service, whether such service is continuous or broken, shall
be considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while
such activity exists. No regular appointment papers are necessary
for a casual employee to become regular [Kimberly v. Drilon].
Repeated rehiring of a casual employee makes him a
regular employee [Tan v. Lagarma].
Settled Principles
• Causal employee becomes regular after one year of
service by operation of law. One year period reckoned
from the hiring date.
• No regular appointment papers necessary for casual
employees to become regular.
• Repeated rehiring of a casual employee makes him a
regular employee.
• The wages and benefits of a casual employee whose
status is converted into regular should not be diminished.
Page 27 of 49
E. PROBATIONARY EMPLOYEE
Article 296. Probationary Employment. Probationary
employment shall not exceed six (6) months from the date the employee
started working, unless it is covered by an apprenticeship agreement
stipulating a longer period. The services of an employee who has been
engaged on a probationary basis may be terminated for a just cause or
when he fails to qualify as a regular employee in accordance with
reasonable standards made known by the employer to the employee at
the time of his engagement. An employee who is allowed to work after
a probationary period shall be considered a regular employee.
Regardless of the kind of employment arrangement
between the parties, an employer has the right to put a newly-hired
employee under a probationary period or it may choose not to do
so, as part and parcel of its power to hire. If the employer puts the
employee under probationary employment, the employee would
then be given a certain period of time within which to prove that he
deserves to be regularized. Throughout such probationary period,
he will be under constant observation, evaluation and trial by the
employer during which the employer shall determine whether or
not he is qualified for permanent employment. During the
probationary period, the employer is given the opportunity to
observe the skill, competence, attitude and fitness of the
probationary employee while the latter seeks to prove to the
employer that he has the qualifications to meet the reasonable
standards for permanent employment [Dela Cruz v. NLRC].
The probationary period may be extended but only upon
the mutual agreement by the employer and the probationary
employee. Absent such agreement would make the extension
invalid, hence, the employee would be considered as having
become a regular employee after the lapse of the original
probationary period [Dusit Hotel Nikko v. Gatbonton].
1. Probationary period, how reckoned and
computed
In Cebu Royal Plant v. Deputy Minister of Labor, it was
held that if the period is six (6) months, it shall be reckoned “from
the date of appointment up to the same calendar date of the 6 th
month following.” This means that if a probationary employee is
hired on January 1, his probationary period expires on July 1 which
is the same calendar date of the 6th month following the date of
appointment.
Philips Semiconductors v. Fadriquela
Held:  The agreement embodied in the "Minutes of Meeting"
between the representative union and private respondent, providing that
contractual employees shall become regular employees only after seventeen
months of employment, cannot bind petitioner. Such a provision runs
contrary to law not only because contractual employees do not form part of
the collective bargaining unit which entered into the CBA with private
respondent but also because of the Labor Code provision on regularization.
The law explicitly states that an employee who had rendered at least one
year of service, whether such service is continuous or broken, shall be
considered a regular employee. The period set by law is one year. The
seventeen months provided by the "Minutes of Meeting" is obviously much
longer.
2. Exceptions to the 6-Month Probationary Period
The following are the exceptions to the 6-month
probationary period:
a. When the probationary employment is covered by
an apprenticeship agreement stipulating a longer
period.
b. When the employer and employee agree on a shorter
or longer period, such as when the same is
 established by company policy or when the same is
required by the nature of work to be performed by
the employee. [Buiser vs. Leogardo].
In the latter case, there is recognition of the exercise of
managerial prerogatives especially where the employee must learn
a particular kind of work or when the job requires certain
qualifications, skills, experience or training (131 SCRA 151). In
the Buiser case, for example, the Supreme Court justified the 18-
month probationary period by the fact that the company can only
evaluate the efficiency, conduct, and selling ability of its sales
representatives upon publication of the solicited ads which will
occur only a year after the sale has been made, and that such period
is provided in the collective bargaining agreement of the company
and the employee’s union.
3. Security of Tenure of Probationary Employees
Within the limited 6-month probationary period,
probationary employees are entitled to security of tenure
notwithstanding their limited tenure and non-permanent status
[Philippine Daily Inquirer v. Magtibay, Jr.]. Hence, during their
probationary employment, they cannot be dismissed except under
any of the following three (3) grounds:
a. For just cause; or
b. For authorized cause; or
c. When the probationary employee fails to qualify as
a regular employee in accordance with reasonable
standards made known by the employer to the
employee at the start of the employment.
Due process for a probationary employee consists in
having informed him of the standards against which his
performance will be continuously assessed during the probationary
period. These work standards should be understood at the time of
his engagement and then, if he fails to meet these standards, a
written notice is served to the him by the employer within a
reasonable time from the effective date of termination. In all cases
of probationary employment, the employer shall make known to
the employee the standards under which he will qualify as a regular
employee at the time of his engagement. Where no standards are
made known to the employee at that time, he shall be deemed a
regular employee [Philippine Daily Inquirer v. Magtibay, Jr].
Valid severance of the probationary employer-employee
relationship outside of the just and authorized causes presupposes
that the employer had accomplished the following things:
a. The employer must communicate to the employee
that he is being hired on a probationary basis;
b. The employer must convey to the probationary
employee the reasonable standards to qualify for
regularization;
c. The probationary status of the newly-hired
employee must be communicated to him prior to the
commencement of his employment;
d. The employer must convey these reasonable
standards at the start of the probationary employee’s
engagement and not in the course thereof or towards
its end; otherwise, he becomes a regular employee
from day one of his employment.
e. The employer must evaluate the performance of the
probationary employee in relation to the duly
communicated reasonable standards; and
Page 28 of 49
f. The employee fails to comply with these reasonable
standards before the completion of the probationary
period [Tamson’s Enterprises v. Court of Appeals].
Abbott Laboratories v. Alcaraz
Held: A probationary employee, like a regular employee, enjoys
security of tenure. However, in cases of probationary employment, aside
from just or authorized causes of termination, an additional ground is
provided under Article 295 of the Labor Code, i.e., the probationary
employee may also be terminated for failure to qualify as a regular
employee in accordance with the reasonable standards made known by the
employer to the employee at the time of the engagement. Thus, the services
of an employee who has been engaged on probationary basis may be
terminated for any of the following: (a) a just or (b) an authorized cause;
and (c) when he fails to qualify as a regular employee in accordance with
reasonable standards prescribed by the employer.
Corollary thereto, Section 6(d), Rule I, Book VI of the
Implementing Rules of the Labor Code provides that if the employer fails
to inform the probationary employee of the reasonable standards upon
which the regularization would be based on at the time of the engagement,
then the said employee shall be deemed a regular employee, viz.:
(d) In all cases of probationary employment, the employer shall
make known to the employee the standards under which he will qualify as a
regular employee at the time of his engagement. Where no standards are
made known to the employee at that time, he shall be deemed a regular
employee.
In other words, the employer is made to comply with two (2)
requirements when dealing with a probationary employee: first, the
employer must communicate the regularization standards to the
probationary employee; and second, the employer must make such
communication at the time of the probationary employee’s engagement. If
the employer fails to comply with either, the employee is deemed as a
regular and not a probationary employee.
Keeping with these rules, an employer is deemed to have made
known the standards that would qualify a probationary employee to be a
regular employee when it has exerted reasonable efforts to apprise the
employee of what he is expected to do or accomplish during the trial period
of probation. This goes without saying that the employee is sufficiently
made aware of his probationary status as well as the length of time of the
probation.
The exception to the foregoing is when the job is self-
descriptive in nature, for instance, in the case of maids, cooks, drivers, or
messengers.[61] Also, in Aberdeen Court, Inc. v. Agustin, it has been held
that the rule on notifying a probationary employee of the standards of
regularization should not be used to exculpate an employee who acts in a
manner contrary to basic knowledge and common sense in regard to which
there is no need to spell out a policy or standard to be met. In the same
light, an employee’s failure to perform the duties and responsibilities which
have been clearly made known to him constitutes a justifiable basis for a
probationary employee’s non-regularization.
In this case, petitioners contend that Alcaraz was terminated
because she failed to qualify as a regular employee according to Abbott’s
standards which were made known to her at the time of her engagement.
Contrarily, Alcaraz claims that Abbott never apprised her of these standards
and thus, maintains that she is a regular and not a mere probationary
employee.
The Court finds petitioners’ assertions to be well-taken.
A punctilious examination of the records reveals that Abbott had
indeed complied with the above-stated requirements. This conclusion is
largely impelled by the fact that Abbott clearly conveyed to Alcaraz her
duties and responsibilities as Regulatory Affairs Manager prior to, during
the time of her engagement, and the incipient stages of her employment. On
this score, the Court finds it apt to detail not only the incidents which point
out to the efforts made by Abbott but also those circumstances which would
show that Alcaraz was well-apprised of her employer’s expectations that
would, in turn, determine her regularization.
Verily, basic knowledge and common sense dictate that the
adequate performance of one’s duties is, by and of itself, an inherent and
implied standard for a probationary employee to be regularized; such is a
regularization standard which need not be literally spelled out or mapped
into technical indicators in every case. In this regard, it must be observed
that the assessment of adequate duty performance is in the nature of a
management prerogative which when reasonably exercised – as Abbott did
in this case – should be respected. This is especially true of a managerial
employee like Alcaraz who was tasked with the vital responsibility of
handling the personnel and important matters of her department.
In fine, the Court rules that Alcaraz’s status as a probationary
employee and her consequent dismissal must stand. Consequently, in
holding that Alcaraz was illegally dismissed due to her status as a regular
and not a probationary employee, the Court finds that the NLRC committed
a grave abuse of discretion.
To elucidate, records show that the NLRC based its decision on
the premise that Alcaraz’s receipt of her job description and Abbott’s Code
of Conduct and Performance Modules was not equivalent to being actually
informed of the performance standards upon which she should have been
evaluated on.[64] It, however, overlooked the legal implication of the other
attendant circumstances as detailed herein which should have warranted a
contrary finding that Alcaraz was indeed a probationary and not a regular
employee – more particularly the fact that she was well-aware of her duties
and responsibilities and that her failure to adequately perform the same
would lead to her non-regularization and eventually, her termination.
Accordingly, by affirming the NLRC’s pronouncement which is
tainted with grave abuse of discretion, the CA committed a reversible error
which, perforce, necessitates the reversal of its decision.
C.  Probationary employment; termination procedure.
A different procedure is applied when terminating a
probationary employee; the usual two-notice rule does not govern. Section
2, Rule I, Book VI of the Implementing Rules of the Labor Code states that
“[i]f the termination is brought about by the x x x failure of an employee to
meet the standards of the employer in case of probationary employment, it
shall be sufficient that a written notice is served the employee, within a
reasonable time from the effective date of termination.”
As the records show, Alcaraz's dismissal was effected through a
letter dated May 19, 2005 which she received on May 23, 2005 and again
on May 27, 2005. Stated therein were the reasons for her termination, i.e.,
that after proper evaluation, Abbott determined that she failed to meet the
reasonable standards for her regularization considering her lack of time and
people management and decision-making skills, which are necessary in the
performance of her functions as Regulatory Affairs Manager.
[66]
 Undeniably, this written notice sufficiently meets the criteria set forth
above, thereby legitimizing the cause and manner of Alcaraz’s dismissal as
a probationary employee under the parameters set by the Labor Code.[67]
4. Settled Jurisprudential Principles
• Purpose and not length of the probationary period is
material.
• Employee is deemed regular absent any written contract
to prove probationary employment [San Miguel
Corporation v. Del Rosario].
• Repetitive rehiring of a probationary employee means he
has become a regular employee [Octaviano v. NLRC].
• Regular workers of previous owner of business may be
hired as probationary employees of a new owner [Espina
v. Court of Appeals].
• Probationary employment cannot be ad infinitum
[Cathay Pacific v. Marin].
F. FIXED-TERM EMPLOYEES
This is the exception to the rule that an employee
becomes regular by reason of nature of work or period of
employment [Brent School, Inc. v. Zamora] because in a fixed
period employment, these factors are not decisive indicators of
regularity of employment. The decisive determinant is the day
certain agreed upon by the parties for the commencement and
termination of their employment relationship, a day certain being
understood to be “that which must necessarily come, although it
may not be known when” [Pantranco North Expres, Inc.].
Employment automatically terminates upon he expiration of the
fixed period.
This, however, is not provided in the Labor Code but
recognized only in jurisprudence [Innodata Knowledge Services v.
Inting]. Fixed Term employment must comply with at least two
criteria: (1) The fixed period employment was knowingly and
Page 29 of 49
freely agreed upon by the parties; no circumstance such as force,
duress or improper pressure vitiates the employee’s consent; and
(2) employer and the employee dealt with each other on more or
less equal terms with no moral dominance exercised by the former
over the latter [Romares v. NLRC].
Settled Principles
• Fixed-term employment is valid even if duties are usually
necessary or desirable in the employer’s usual business
or trade.
• Notice of termination not necessary in fixed-term
employment.
• Employee is deemed regular if contract failed to state the
specific fixed period of employment, if they are allowed
to work beyond the fixed term, if they render work for
more than 1 year, and if they are successively renewed
for work.
• Termination prior to the lapse of the fixed term should be
for just or authorized cause.
Probationary v. Fixed-Term Employment
The distinction between probationary employment and
fixed-term employment lies in the intention of the employer and
employee. Both employments involve fixed period in terms of
duration of employment. However, in probationary employment,
the parties mutually intend to make their relationship regular after
the lapse of the period; while in fixed-term employment, no such
intention exists and the relationship automatically terminates at the
expiration of the period.
V
TERMINATION BY EMPLOYER
A. SECURITY OF TENURE
Article 294. Security of Tenure. In cases of regular
employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and
to his full backwages, inclusive of allowances, and to his other benefits
or their monetary equivalent computed from the time his compensation
was withheld from him up to the time of his actual reinstatement.
Termination Law is the implementation of security
tenure which is a policy translated by the 1987 Constitution in
Article 13 in Section 3 which states:
The State shall afford full protection to labor, local
and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-
organization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.
B. JUST CAUSES
Article 297.Termination by Employer. An employer may
terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or representative in
connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
 (c) Fraud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee
against the person of his employer or any immediate member of his
family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing.
Dismissal is cessation of an employment due to a just
cause, attributable to the employee. Termination is cessation of an
employment due to an authorized cause, which is not the fault of
the employee. Dismissal does not merit separation pay;
termination carries with it separation pay.
Tenure is presumed. The burden of proving that the
termination was for a valid or authorized cause shall rest on the
employer.
The just causes in the Labor Code are found in the
following provisions thereof:
(1) Article 297 [282] - (Termination by the Employer)
which provides for the following grounds:
(a)Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or
representative in connection with his work;
(b)Gross and habitual neglect by the employee of his
duties;
(c)Fraud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized
representative;
(d)Commission of a crime or offense by the employee
against the person of his employer or any immediate
member of his family or his duly authorized
representatives; and
(e)Other causes analogous to the foregoing.
(2) Article 279(a) [264(a)] - (Prohibited Activities) which
provides for the termination of the following:
(a)Union officers who knowingly participate in an illegal
strike and therefore deemed to have lost their
employment status.
(b)Any employee, union officer or ordinary member who
knowingly participates in the commission of illegal acts
during a strike (irrespective of whether the strike is legal
or illegal), is also deemed to have lost his employment
status.
(3) Article 278(g) [263(g)] - (National Interest Cases) where
strikers who violate orders, prohibitions and/or injunctions as
are issued by the DOLE Secretary or the NLRC, may be
imposed immediate disciplinary action, including dismissal or
loss of employment status.
(4) Article 259(e) [248(e)] - (Union Security Clause) where
violation of the union security agreement in the CBA may
result in termination of employment. Under this clause, the
bargaining union can demand from the employer the dismissal
of an employee who commits a breach of union security
arrangement, such as failure to join the union or to maintain
his membership in good standing therein. The same union can
also demand the dismissal of a member who commits an act of
disloyalty against it, such as when the member organizes a
rival union.
The Secretary of Labor has extraordinary, express
power to intervene in a labor dispute to enjoin a potential
termination
Page 30 of 49
Article 292 [b] of the Labor Code provides:
Subject to the constitutional right of workers to
security of tenure and their right to be protected against
dismissal except for a just and authorized cause and without
prejudice to the requirement of notice under Article 283 of this
Code, employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a statement
of the causes for termination and shall afford the latter ample
opportunity to be heard and to defend himself with the
assistance of his representative if he so desires in accordance
with company rules and regulations promulgated pursuant to
guidelines set by the Department of Labor and Employment.
Any decision taken by the employer shall be without prejudice
to the right of the worker to contest the validity or legality of his
dismissal by filing a complaint with the regional branch of the
National Labor Relations Commission. The burden of proving
that the termination was for a valid or authorized cause shall rest
on the employer. The Secretary of the Department of Labor and
Employment may suspend the effects of the termination pending
resolution of the dispute in the event of a prima facie finding by
the appropriate official of the Department of Labor and
Employment before whom such dispute is pending that the
termination may cause a serious labor dispute or is in
implementation of a mass lay-off.
1. Serious Misconduct
For serious misconduct or improper behavior to be a just
cause for dismissal, the following requisites must concur:
(a) It must be serious;
(b) It must relate to the performance of the employee’s
duties;
(c) It must show that he has become unfit to continue
working for the employer; and
(d) It must have been performed with wrongful intent.
The 2014 case of Imasen v. Alcon added the 4th requisite
above which, it said, is “equally important and required.” All the
above requisites must concur [Coca-Cola Bottlers v. KMMC-
FFW].
Colegio de San Juan de Letran v. Meris
Held: The fact that eight students were made beneficiaries of
such increase does not justify the irregular alteration since the rule is, the
rating of the pupil should be based on his scholastic record, even if the
same is non-tested or qualitative in nature, as in the case at bar.
Respondent’s prerogative to give her students the grade that they deserve is
not incoherent with having a fair and reasonable basis therefor.
To our mind, the acts of the respondent in altering the grades in
the Clean Records even after the same were already reviewed and approved
by the subject coordinators; of effecting the alterations and erasures without
placing her initials thereon; of not informing the subject coordinators of
such alterations and erasures; of allowing the discrepancies to last without
any effort to reconcile the same to avoid any doubts on the grading system
of petitioner; of refusing to accept the memo informing her of the aforesaid
tampering and snubbing any explanation relevant thereto, are all acts of
transgression of school rules, regulations and policies. Truly, then,
respondent had committed a misconduct, serious enough to warrant her
dismissal from employment under paragraph (a) of Article 282 of the Labor
Code, as well as Section 94(b), Article XVII of the Manual of Regulations
for Private Schools, which provides that the employment of a teacher may
be terminated for negligence in keeping school or student records, or
tampering with or falsification of the same.
Settled Principles
 Serious misconduct implies that it must be of such grave
and aggravated character and not merely trivial or
unimportant.
 Simple or minor misconduct would not justify the
termination of the services of an employee.
  Possession or use of shabu or other drugs is a valid ground
to terminate employment.
 Immorality, as a general rule, is not a just ground to
terminate employment. The exception is when such
immoral conduct is prejudicial or detrimental to the
interest of the employer
 Immoral act committed beyond office hours is a valid
ground to terminate employment.
 Sexual intercourse inside company premises constitutes
serious misconduct.
 The act of a 30-year old lady teacher in falling in love
with a 16-year old student is not immoral.
 Fighting is a ground for termination but only the
instigator or aggressor and not the victim who was
constrained to defend himself should be dismissed.
 Challenging superiors to a fight is a just cause for
termination.
 Assaulting another employee is a just cause for
termination.
 Utterance of obscene, insulting or offensive words
constitutes serious misconduct.
 Gambling within company premises is a serious
misconduct.
 Rendering service to business rival is a just cause to
terminate employment.
 Selling products of a competitor is a just cause for
termination.
 Organizing a credit union by employees in a bank is a
serious misconduct.
 Deceiving a customer for personal gain is a just cause for
termination.
 Contracting work in competition with employer
constitutes serious misconduct.
 Intoxication which interferes with the employee’s work
constitutes serious misconduct.
 The act of a teacher in pressuring a colleague to change
the failing grade of a student is serious misconduct.
 Sexual harassment is a just ground to dismiss.
 Sleeping while on duty is a ground for termination.
 Dismissal is too harsh a penalty for eating while at work.
 Pilferage or theft of company-owned property is a just
cause to terminate.
 Theft of funds or property not owned by employer is not a
ground to terminate.
 Act of falsification is a valid ground to terminate
employment.
 Punching-in of time cards of other employees is a just
cause for termination.
2. Insubordination or Willful Disobedience of
Lawful Orders
One of the fundamental duties of an employer is to obey
all reasonable rules, orders and instructions of the employer. In
order to validly invoke this ground, the following requisites must
be complied with, to wit:
(a) The employee’s assailed conduct must have been
willful or intentional, the willfulness being
characterized by a wrongful and perverse attitude;
and
(b) The order violated must be based on a reasonable
and lawful company rule, regulation or policy and
made known to the employee and must pertain to
the duties for which he has been engaged to
discharge.
Page 31 of 49
Requisites for validity of company rules and
regulations
As far as the second requisite for insubordination or
willful disobedience is concerned, it is required that there should
exist a rule, regulation or policy upon which the order is based
which must be:
(a) Lawful and reasonable;
(b) Sufficiently known to the employee; and
(c) In connection with the duties for which the
employee has been engaged to discharge.
An order which is not based on a rule, regulation or
policy which does not satisfy the foregoing three (3) requisites is
not lawful and thus may not be invoked as basis for terminating an
employee on the ground of insubordination. Needlessly, absent any
of the foregoing elements would make the refusal of the employee
to comply with the rule, regulation, or policy justified and not
constitutive of “willful disobedience” as would warrant the
imposition of the penalty of dismissal for such refusal.
Settled Principles
 Making false allegations in complaint does not constitute
insubordination.
 Failure to answer memo to explain constitutes willful
disobedience.
 Another notice is required in case of termination on the ground
of failure to answer memo to explain.
 Refusal to undergo random drug testing constitutes both
serious misconduct and insubordination.
 Refusal to render overtime to meet production deadline
constitutes insubordination.
 Refusal to comply with a lawful transfer constitutes
insubordination.
3. Gross and Habitual Neglect of Duties
The following are the requisites:
(a) There must be negligence which is gross and/or
habitual in character; and
(b) It must be work-related as would make him unfit to
work for his employer.
Settled Principles
 Simple negligence is not sufficient to terminate employment.
 The negligence must be gross in character which means absence
of that diligence that an ordinarily prudent man would use in his
own affairs.
 As a general rule, negligence must be both gross and habitual
to be a valid ground to dismiss.
 Habituality may be disregarded if negligence is gross or the
damage or loss is substantial. “Habitual negligence” implies
repeated failure to perform one’s duties for a period of time,
depending upon the circumstances.
 Actual damage, loss or injury is not an essential requisite.
 Gross negligence may result to loss of trust and confidence.
 Absences, if authorized, cannot be cited as a ground to terminate
employment.
 Tardiness or absenteeism, if not habitual, cannot be cited as a
ground to terminate employment.
 Tardiness or absenteeism, if habitual, may be cited as a ground to
terminate employment.
 Tardiness or absenteeism, if habitual, may be tantamount to
serious misconduct.
 Absences or tardiness due to emergency, ailment or fortuitous
event are justified and may not be cited as just cause to terminate
employment.
 Unsatisfactory or poor performance, inefficiency and
incompetence are considered just causes for dismissal only if
they amount to gross and habitual neglect of duties.
4. Abandonment of Work
Abandonment is a form of neglect of duty, hence, a just
cause for termination of employment under Article 297 of the
Labor Code. To constitute abandonment, two (2) elements must
concur, namely:
(a) The employee must have failed to report for work or
must have been absent without valid or justifiable
reason; and
(b) There must have been a clear intention on the part of
the employee to sever the employer-employee
relationship manifested by some overt act.
No hearing is required to validly dismiss an employee for
abandonment [Intertranz Container v. Bautista].
a. Due Process
Due process in abandonment cases consists only of the
service of two (2) notices to the employee, viz:
i. First notice directing the employee to explain why
he should not be declared as having abandoned his
job; and
ii. Second notice to inform him of the employer’s
decision to dismiss him on the ground of
abandonment.
Batangas Laguna Tayabas Bus Company v. NLRC
Held: The contention of the petitioner that the private
respondents abandoned their position is also not acceptable. An employee
who forthwith takes steps to protest his lay-off cannot by any logic be said
to have abandoned his work.
For abandonment to constitute a valid cause for termination of
employment, there must be a deliberate, unjustified refusal of the employee
to resume his employment.[4] This refusal must be clearly established. As
we stressed in a recent case, [5] mere absence is not sufficient; it must be
accompanied by overt acts unerringly pointing to the fact that the employee
simply does not want to work anymore. In the case at bar, the affidavit of
Eduardo Azucena, BLTBCo operations manager,[6] besides being hearsay,
lacks credibility in light of the subsequent acts of the private respondents in
complaining about their separation.
A worker who joins a strike does so precisely to assert or
improve the terms and conditions of his employment. If his purpose is to
abandon his work, he would not go to the trouble of joining a strike.
b. Settled Principles
 Mere absence is not enough to constitute abandonment.
 Clear intention to sever employment relationship is necessary.
 Due process in abandonment cases consists only of the service
of 2 notices to the employee, viz.:
i. First notice directing the employee to explain why he
should not be declared as having abandoned his job; and
ii.Second notice to inform him of the employer’s decision
to dismiss him on the ground of abandonment.
 No hearing is required to validly dismiss an employee for
abandonment.
Page 32 of 49
 Notices in abandonment cases must be sent to employee’s last
known address per record of the company. The employer need
not look for the employee’s current whereabouts.
 Immediate filing of a complaint for illegal dismissal praying for
reinstatement negates abandonment.
 Lapse of time between dismissal and filing of a case is not a
material indication of abandonment. Hence, lapse of 2 years and
5 months or 20 months or 9 months or 8 months before filing the
complaint for illegal dismissal is not an indication of
abandonment. Under the law, the employee has a 4-year
prescriptive period within which to institute his action for illegal
dismissal.
 Filing of a case to pre-empt investigation of the administrative
case is tantamount to abandonment.
 When what is prayed for in the complaint is separation pay
and not reinstatement, the filing of complaint does not negate
abandonment.
 It is abandonment when what is prayed for in the complaint is
separation pay and it was only in the position paper that
reinstatement was prayed for.
 Employment in another firm coinciding with the filing of
complaint does not indicate abandonment.
 Offer of reinstatement by employer during proceedings before
Labor Arbiter and refusal by employee does not indicate
abandonment but more of a symptom of strained relations
between the parties.
 An employee may be absolved from the charge of abandonment
of work but adjudged guilty of AWOL. These two grounds are
separate and distinct from each other.
 An employee who failed to report for work after the expiration of
the duly approved leave of absence is considered to have
abandoned his job.
 An employee who failed to comply with the order for his
reinstatement is deemed to have abandoned his work.
 An employee who, after being transferred to a new assignment,
did not report for work anymore is deemed to have abandoned
his job.
 An employee who deliberately absented from work without leave
or permission from his employer for the purpose of looking for a
job elsewhere is deemed to have abandoned his work.
 Imprisonment or detention by military does not constitute
abandonment.
 Absence to evade arrest is not a valid justification. To do so
would be to place an imprimatur on the employee’s attempt to
derail the normal course of the administration of justice.
5. Fraud
Fraud is separate and distinct from the other ground
provided in the same paragraph, that is, loss of trust and confidence
[Sanden Aircon v. Rosales].
The following are the requisites of this ground:
(a) The employee has committed fraud, an intentional
deception and used dishonest methods for personal
gain or to damage he employer; and
(b) The fraud is work-related and rendered him unfit for
work for his employer.
Falsification constitutes not only serious misconduct but
fraud under the Labor Code [San Miguel Corp v. NLRC].
Settled Principles
 Failure to deposit collection constitutes fraud.
 Lack of damage or losses is not necessary in fraud cases. The fact
that the employer did not suffer losses from the dishonesty of the
dismissed employee because of its timely discovery does not
excuse the latter from any culpability.
 Lack of misappropriation or shortage is immaterial in case of
unauthorized encashment of personal checks by teller and
cashier.
 Restitution does not have absolutory effect.
6. Willful Breach of Trust and Confidence
For the doctrine of loss of trust and confidence to apply,
the following requisites must concur:
(a) The employee holds a position of trust and
confidence;
(b) There exists an act justifying the loss of trust and
confidence, which means that the act that betrays
the employer’s trust must be real, i.e., founded on
clearly established facts;
(c) The employee’s breach of the trust must be willful,
i.e., it was done intentionally, knowingly and
purposely, without justifiable excuse; and
(d) The act must be in relation to his work which would
render him unfit to perform it.
a. Guidelines
As a safeguard against employers who indiscriminately
use “loss of trust and confidence” to justify arbitrary dismissal of
employees, the Court, in addition to the above elements, imposes
the following guidelines for the doctrine to apply:
(a) The loss of confidence must not be simulated;
(b) It should not be used as a subterfuge for causes
which are illegal, improper or unjustified;
(c) It may not be arbitrarily asserted in the face of
overwhelming evidence to the contrary; and
(d) It must be genuine, not a mere afterthought, to
justify earlier action taken in bad faith.
b. Settled Principles
 Employee’s position must be reposed with trust and
confidence.
 “Position of trust and confidence” is one where a person is
entrusted with confidence on delicate matters, or with the
custody, handling, or care and protection of the employer’s
property.
 Two (2) classes of positions of trust. The first class consists of
managerial employees or those who, by the nature of their
position, are entrusted with confidential and delicate matters
and from whom greater fidelity to duty is correspondingly
expected. They refer to those vested with the powers or
prerogatives to lay down and execute management policies
and/or to hire, transfer suspend, lay-off, recall, discharge,
assign or discipline employees or to effectively recommend
such managerial actions. Their primary duty consists of the
management of the establishment in which they are employed
or of a department or a subdivision thereof.
 The second class consists of fiduciary rank-and-file
employees who, though rank-and-file, are routinely charged
with the custody, handling or care and protection of the
employer's money or property, or entrusted with confidence
on delicate matters, and are thus classified as occupying
positions of trust and confidence. Included under this class are
“cashiers, auditors, property custodians, or those who, in the
normal and routine exercise of their functions, regularly
Page 33 of 49
handle significant amounts of [the employer’s] money or
property.”
 Rules on termination of managerial and supervisory
employees different from those applicable to rank- and-file
employees. Thus, with respect to rank-and-file personnel, loss
of trust and confidence as a ground for valid dismissal
requires proof of involvement in the alleged events in question
and that mere uncorroborated assertions and accusations by
the employer will not be sufficient. But as regards a
managerial employee, the mere existence of a basis for
believing that he has breached the trust of his employer would
suffice for his dismissal.
 There must be “some basis” for the loss of trust and
confidence which means that there is reasonable ground to
believe, if not to entertain the moral conviction, that the
concerned employee is responsible for the misconduct and
that the nature of his participation therein rendered him
absolutely unworthy of trust and confidence demanded by his
position.
 Dismissal due to feng shui mismatch is not a valid ground to
lose trust and confidence.
 Command responsibility of managerial employees is a ground
to dismiss.
 Confidential employee may be dismissed for loss of trust and
confidence.
 Grant of promotions and bonuses negates loss of trust and
confidence.
 Long years of service, absence of derogatory record and small
amount involved are deemed inconsequential insofar as loss of
trust and confidence is concerned.
 Dropping of criminal charges or acquittal in a criminal case
arising from the same act does not affect the validity of
dismissal based on loss of trust and confidence.
7. Commission of Crime or Offense
The following are the requisites for the valid invocation
of this ground:
(a) A crime or offense was committed by the employee;
(b) It was committed against any of the following
persons:
(i) His employer;
(ii) Any immediate member of his employer’s
family; or
(iii) His employer’s duly authorized
representative.
Because of its gravity, work-relation is not necessary.
Neither is it necessary to show that the commission of the criminal
act would render the employee unfit to perform his work for the
employer.
8. Other Causes
a. Union Officers who knowingly participate in
an Illegal Strike
Article 279(a) provides:
No labor organization or employer shall declare a
strike or lockout without first having bargained collectively in
accordance with Title VII of this Book or without first having
filed the notice required in the preceding Article or without the
necessary strike or lockout vote first having been obtained and
reported to the Ministry.
No strike or lockout shall be declared after
assumption of jurisdiction by the President or the Minister or
after certification or submission of the dispute to compulsory or
 voluntary arbitration or during the pendency of cases involving
the same grounds for the strike or lockout.
Any worker whose employment has been terminated
as a consequence of any unlawful lockout shall be entitled to
reinstatement with full backwages. Any union officer who
knowingly participates in an illegal strike and any worker or
union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his
employment status: Provided, That mere participation of a
worker in a lawful strike shall not constitute sufficient ground
for termination of his employment, even if a replacement had
been hired by the employer during such lawful strike.
Jackbilt Industries v. Jackbilt Employees Workers Union
Held: The principle of conclusiveness of judgment, embodied in
Section 47(c), Rule 39 of the Rules of Court,[24]  holds that the parties to a
case are bound by the findings in a previous judgment with respect to
matters actually raised and adjudged therein.[25]
Article 264(e) of the Labor Code prohibits any person engaged
in picketing from obstructing the free ingress to and egress from the
employer's premises. Since respondent was found in the July 17, 1998
decision of the NLRC to have prevented the free entry into and exit of
vehicles from petitioner's compound, respondent's officers and employees
clearly committed illegal acts in the course of the March 9, 1998 strike
The use of unlawful means in the course of a strike renders such
strike illegal.[26] Therefore, pursuant to the principle of conclusiveness of
judgment, the March 9, 1998 strike was ipso facto illegal. The filing of a
petition to declare the strike illegal was thus unnecessary.
Consequently, we uphold the legality of the dismissal of
respondent's officers and employees. Article 264 of the Labor
Code[27] further provides that an employer may terminate employees found
to have committed illegal acts in the course of a strike. [28] Petitioner clearly
had the legal right to terminate respondent's officers and employees
b.
Employees who knowingly violate the union
security clause stipulated in the CBA
Another cause for termination is dismissal from
employment due to the enforcement of the union security clause in
the CBA [Alabang Country Club v. NLRC].
General Milling Corp. v. Casio
Held: Union security clauses are recognized and explicitly
allowed under Article 248(e) of the Labor Code, which provides that:
Art. 248. Unfair Labor Practices of Employers. x x x
(e) To discriminate in regard to wages, hours of work, and other
terms and conditions of employment in order to encourage or discourage
membership in any labor organization. Nothing in this Code or in any
other law shall stop the parties from requiring membership in a
recognized collective bargaining agent as a condition for employment,
except those employees who are already members of another union at
the time of the signing of the collective bargaining
agreement.  (Emphasis supplied.)
It is State policy to promote unionism to enable workers to
negotiate with management on an even playing field and with more
persuasiveness than if they were to individually and separately bargain with
the employer. For this reason, the law has allowed stipulations for "union
shop" and "closed shop" as means of encouraging workers to join and
support the union of their choice in the protection of their rights and
interest vis-à-vis the employer.[24]
Moreover, a stipulation in the CBA authorizing the dismissal of
employees are of equal import as the statutory provisions on dismissal
under the Labor Code, since "a CBA is the law between the company and
the union and compliance therewith is mandated by the express policy to
give protection to labor."[25]
In terminating the employment of an employee by enforcing the
union security clause, the employer needs only to determine and prove that:
(1) the union security clause is applicable; (2) the union is requesting for
the enforcement of the union security provision in the CBA; and (3) there is
sufficient evidence to support the decision of the union to expel the
employee from the union. These requisites constitute just cause for
terminating an employee based on the union security provision of the CBA.
[26]
Page 34 of 49
There is no question that in the present case, the CBA between
GMC and IBM-Local 31 included a maintenance of membership and closed
shop clause as can be gleaned from Sections 3 and 6 of Article II. IBM-
Local 31, by written request, can ask GMC to terminate the employment of
the employee/worker who failed to maintain its good standing as a union
member.
It is similarly undisputed that IBM-Local 31, through Gabiana,
the IBM Regional Director for Visayas and Mindanao, twice requested
GMC, in the letters dated March 10 and 19, 1992, to terminate the
employment of Casio, et al. as a necessary consequence of their expulsion
from the union.
It is the third requisite - that there is sufficient evidence to
support the decision of IBM-Local 31 to expel Casio, et al. - which appears
to be lacking in this case.
The provisions of the CBA are clear enough. The termination
of employment on the basis of the closed shop provision of the CBA is well
recognized in law and in jurisprudence.
There is no valid ground to refuse to terminate. On the other
hand as pointed out in the union's strongly demanding letter dated March
19, 1992, the company could be sued for unfair labor practice. While
we would have wanted not to accommodate the union's request, we are
left with no other option. The terms of the CBA should be respected. To
refuse to enforce the CBA would result in the breakdown of industrial
peace and the end of harmonious relations between the union and
management. The company would face the collective anger and enmity of
its employees who are union members.
In the light of the union's very insistent demand, verbal and in
writing and to avoid the union accusation of "coddling" you, and
considering the explicitly mandatory language of the closed shop provision
of the CBA, the company is constrained to terminate your employment, to
give you ample time to look and find another employment, and/or exert
efforts to become again a member of good standing of your union, effective
April 24, 1992.
In the meantime, to prevent serious danger to the life and
property of the company and of its employees, we are placing you under
preventive suspension beginning today.
It is apparent from the aforequoted letter that GMC terminated
the employment of Casio, et al. relying upon the Resolution dated February
29, 1992 of Pino, et al. expelling Casio, et al. from IBM-Local 31;
Gabiana's Letters dated March 10 and 19, 1992 demanding that GMC
terminate the employment of Casio, et al. on the basis of the closed shop
clause in the CBA; and the threat of being sued by IBM-Local 31 for unfair
labor practice. The letter made no mention at all of the evidence supporting
the decision of IBM-Local 31 to expel Casio, et al. from the union. GMC
never alleged nor attempted to prove that the company actually looked into
the evidence of IBM-Local 31 for expelling Casio, et al. and made a
determination on the sufficiency thereof. Without such a determination,
GMC cannot claim that it had terminated the employment of Casio, et al.
for just cause.
The failure of GMC to make a determination of the sufficiency
of evidence supporting the decision of IBM-Local 31 to expel Casio, et al.
is a direct consequence of the non-observance by GMC of procedural due
process in the dismissal of employees.
As a defense, GMC contends that is an employer, its only duty
was to ascertain that IBM-Local 31 accorded Casio, et al. due process; and,
it is the finding of the company that IBM-Local 31 did give Casio, et al. the
opportunity to answer the charges against them, but they refused to avail
themselves of such opportunity.
This argument is without basis.
The Court has stressed time and again that allegations must be
proven by sufficient evidence because mere allegation is definitely not
evidence.[28] Once more, in Great Southern Maritime Services Corporation.
v. Acuña,[29] the Court declared:
Time and again we have ruled that in illegal dismissal cases like
the present one, the onus of proving that the employee was not dismissed or
if dismissed, that the dismissal was not illegal, rests on the employer and
failure to discharge the same would mean that the dismissal is not justified
and therefore illegal. Thus, petitioners must not only rely on the
weakness of respondents' evidence but must stand on the merits of
their own defense. A party alleging a critical fact must support his
allegation with substantial evidence for any decision based on
unsubstantiated allegation cannot stand as it will offend due process.
PICOP Resources v. Taneca
 Held: However, in terminating the employment of an employee
by enforcing the union security clause, the employer needs to determine
and prove that: (1) the union security clause is applicable; (2) the union is
requesting for the enforcement of the union security provision in the CBA;
and (3) there is sufficient evidence to support the decision of the union to
expel the employee from the union. These requisites constitute just cause
for terminating an employee based on the union security provision of the
CBA.[
As to the first requisite, there is no question that the CBA
between PRI and respondents included a union security clause, specifically,
a maintenance of membership as stipulated in Sections 6 of Article II,
Union Security and Check-Off.  Following the same provision, PRI, upon
written request from the Union, can indeed terminate the employment of
the employee who failed to maintain its good standing as a union member.
Secondly, it is likewise undisputed that NAMAPRI-SPFL, in
two (2) occasions demanded from PRI, in their letters dated May 16 and 23,
2000, to terminate the employment of respondents due to their acts of
disloyalty to the Union.
However, as to the third requisite, we find that there is no
sufficient evidence to support the decision of PRI to terminate the
employment of the respondents.
PRI alleged that respondents were terminated from employment
based on the alleged acts of disloyalty they committed when they signed an
authorization for the Federation of Free Workers (FFW) to file a Petition
for Certification Election among all rank-and-file employees of PRI.  It
contends that the acts of respondents are a violation of the Union Security
Clause, as provided in their Collective Bargaining Agreement.
We are unconvinced.
We are in consonance with the Court of Appeals when it held
that the mere signing of the authorization in support of the Petition for
Certification Election of FFW on March 19, 20 and 21, or before the
"freedom period," is not sufficient ground to terminate the employment of
respondents inasmuch as the petition itself was actually filed during the
freedom period.  Nothing in the records would show that respondents failed
to maintain their membership in good standing in the Union. Respondents
did not resign or withdraw their membership from the Union to which they
belong. Respondents continued to pay their union dues and never joined the
FFW.
Significantly, petitioner's act of dismissing respondents stemmed
from the latter's act of signing an authorization letter to file a petition for
certification election as they signed it outside the freedom period. However,
we are constrained to believe that an "authorization letter to file a petition
for certification election" is different from an actual "Petition for
Certification Election."  Likewise, as per records, it was clear that the actual
Petition for Certification Election of FFW was filed only on May 18, 2000.
[17]
 Thus, it was within the ambit of the freedom period which commenced
from March 21, 2000 until May 21, 2000. Strictly speaking, what is
prohibited is the filing of a petition for certification election outside the 60-
day freedom period.[18] This is not the situation in this case. If at all, the
signing of the authorization to file a certification election was merely
preparatory to the filing of the petition for certification election, or an
exercise of respondents' right to self-organization.
Moreover, PRI anchored their decision to terminate respondents'
employment on Article 253 of the Labor Code which states that "it shall be
the duty of both parties to keep the status quo and to continue in full
force and effect the terms and conditions of the existing agreement
during the 60-day period and/or until a new agreement is reached by the
parties."  It claimed that they are still bound by the Union Security Clause
of the CBA even after the expiration of the CBA; hence, the need to
terminate the employment of respondents.
Petitioner's reliance on Article 253 is misplaced.
The provision of Article 256 of the Labor Code is particularly
enlightening.  It reads:
Article 256. Representation issue in organized establishments. -
In organized establishments, when a verified petition questioning the
majority status of the incumbent bargaining agent is filed before the
Department of Labor and Employment within the sixty-day period before
the expiration of a collective bargaining agreement, the Med-Arbiter shall
automatically order an election by secret ballot when the verified petition is
supported by the written consent of at least twenty-five percent (25%) of all
the employees in the bargaining unit to ascertain the will of the employees
in the appropriate bargaining unit. To have a valid election, at least a
majority of all eligible voters in the unit must have cast their votes. The
labor union receiving the majority of the valid votes cast shall be certified
Page 35 of 49
as the exclusive bargaining agent of all the workers in the unit. When an
election which provides for three or more choices results in no choice
receiving a majority of the valid votes cast, a run-off election shall be
conducted between the labor unions receiving the two highest number of
votes: Provided, That the total number of votes for all contending unions is
at least fifty per cent (50%) of the number of votes cast.
At the expiration of the freedom period, the employer shall
continue to recognize the majority status of the incumbent bargaining
agent where no petition for certification election is filed.[19]
Applying the same provision, it can be said that while it is
incumbent for the employer to continue to recognize the majority status of
the incumbent bargaining agent even after the expiration of the freedom
period, they could only do so when no petition for certification election was
filed. The reason is, with a pending petition for certification, any such
agreement entered into by management with a labor organization is fraught
with the risk that such a labor union may not be chosen thereafter as the
collective bargaining representative.[20] The provision for status quo  is
conditioned on the fact that no certification election was filed during the
freedom period.  Any other view would render nugatory the clear statutory
policy to favor certification election as the means of ascertaining the true
expression of the will of the workers as to which labor organization would
represent them.[21]
In the instant case, four (4) petitions were filed as early as May
12, 2000. In fact, a petition for certification election was already ordered by
the Med-Arbiter of DOLE Caraga Region on August 23, 2000. [22] 
Therefore, following Article 256, at the expiration of the freedom period,
PRI's obligation to recognize NAMAPRI-SPFL as the incumbent
bargaining agent does not hold true when petitions for certification election
were filed, as in this case.
Moreover, the last sentence of Article 253 which provides for
automatic renewal pertains only to the economic provisions of the CBA,
and does not include representational aspect of the CBA. An existing CBA
cannot constitute a bar to a filing of a petition for certification election.
When there is a representational issue, the status quo provision in so far as
the need to await the creation of a new agreement will not apply.
Otherwise, it will create an absurd situation where the union members will
be forced to maintain membership by virtue of the union security clause
existing under the CBA and, thereafter, support another union when filing a
petition for certification election. If we apply it, there will always be an
issue of disloyalty whenever the employees exercise their right to self-
organization. The holding of a certification election is a statutory policy
that should not be circumvented,[23] or compromised.
Time and again, we have ruled that we adhere to the policy of
enhancing the welfare of the workers. Their freedom to choose who should
be their bargaining representative is of paramount importance. The fact that
there already exists a bargaining representative in the unit concerned is of
no moment as long as the petition for certification election was filed within
the freedom period. What is imperative is that by such a petition for
certification election the employees are given the opportunity to make
known of who shall have the right to represent them thereafter. Not only
some, but all of them should have the right to do so. What is equally
important is that everyone be given a democratic space in the bargaining
unit concerned.[24]
We will emphasize anew that the power to dismiss is a normal
prerogative of the employer. This, however, is not without limitations. The
employer is bound to exercise caution in terminating the services of his
employees especially so when it is made upon the request of a labor union
pursuant to the Collective Bargaining Agreement. Dismissals must not be
arbitrary and capricious. Due process must be observed in dismissing an
employee, because it affects not only his position but also his means of
livelihood. Employers should, therefore, respect and protect the rights of
their employees, which include the right to labor.
An employee who is illegally dismissed is entitled to the twin
reliefs of full backwages and reinstatement. If reinstatement is not viable,
separation pay is awarded to the employee. In awarding separation pay to
an illegally dismissed employee, in lieu of reinstatement, the amount to be
awarded shall be equivalent to one month salary for every year of service.
Under Republic Act No. 6715, employees who are illegally dismissed are
entitled to full backwages, inclusive of allowances and other benefits, or
their monetary equivalent, computed from the time their actual
compensation was withheld from them up to the time of their actual
reinstatement.  But if reinstatement is no longer possible, the backwages
shall be computed from the time of their illegal termination up to the
finality of the decision.  Moreover, respondents, having been compelled to
litigate in order to seek redress for their illegal dismissal, are entitled to the
award of attorney's fees equivalent to 10% of the total monetary award.
c. National Interest Cases
Where strikers who violate orders, prohibitions and/or
injunctions as are issued by the DOLE Secretary or the NLRC,
dismissal or loss of employment status may be imposed.
d. Failure to comply with drug test
Plantation Bay v. Dubrico
Held: As reflected in the above matrix, the confirmatory test
results were released earlier than those of the drug test, thereby casting
doubts on the veracity of the confirmatory results.
Indeed, how can the presence of shabu be confirmed when the
results of the initial screening were not yet out? Plantation Bay's arguments
that it should not be made liable thereof and that the doubt arising from the
time of the conduct of the drug and confirmatory tests was the result of the
big volume of printouts being handled by Martell do not thus lie. It was
Plantation Bay's responsibility to ensure that the tests would be properly
administered, the results thereof being the bases in terminating the
employees' services.
Time and again, we have ruled that where there is no showing
of a clear, valid and legal cause for termination of employment, the law
considers the case a matter of illegal dismissal. The burden is on the
employer to prove that the termination of employment was for a valid
and legal cause. For an employee's dismissal to be valid, (a) the dismissal
must be for a valid cause and (b) the employee must be afforded due
process.
In fine, as petitioners failed to indubitably prove that
respondents were guilty of drug use in contravention of its drug-free
workplace policy amounting to serious misconduct, respondents are
deemed to have been illegally dismissed.
e.Other Just Causes under Prevailing
Jurisprudence
In addition to the just causes mentioned in the Labor
Code, the following are also found to be just causes:
a. Violation of Company Rules and Regulations or
Code of Conduct or Code of Discipline
[Sampaguita Auto Transport v. NLRC].
b. Theft of property owned by a co-employee [John
Hancock Life Insurance v. Davis], as distinguished
from company-owned property, which is considered
serious misconduct.
c. Incompetence, inefficiency or ineptitude [Reyes-
Rayel v. Philippine Luen Thai Holdings].
d. Failure to Attain Work Quota [Aliling v. Feliciano].
e. Failure to comply with weight standards of
employer [Yrasuegui v. Philippine Airlines].
f. Attitude Problem [Reyes-Rayel v Philippine Luen
Thai Holdings].
C. JUST CAUSE TERMINATION DUE PROCESS
The Supreme Court has standardized procedural due
process in just cause termination in the 2007 case of King of Kings
Transport v. Mamac. It proclaimed the following steps should be
complied with:
1. Service of First Written Notice (show-cause
notice).
The first written notice to be served on the employee
should:
(a) Contain the specific causes or grounds for
termination against him;
Page 36 of 49
(b) Contain a directive that the employee is given the
opportunity to submit his written explanation with in
the reasonable period of five (5) calendar days from
receipt of the notice;
(i) To enable him to prepare adequately for his
defense;
(ii) To study the accusation against him;
(iii) To consult a union official or lawyer;
(iv) To gather data and evidence; and
(v) To decide on the defenses he will raise
against the complainant.
(c) Contain a detailed narration of the facts and
circumstances that will serve as a basis for the
charge against the employee. This is required in
order to enable him to intelligently prepare his
explanation and defenses. A general description of
the charge will not suffice.
(d) Specifically mention which company rules, if any,
are violated and/or which among the grounds under
Article 297 is being charged against the employee.
Remedy if employee refuses to receive notice: service by
registered mail to last known address
In Nueva Ecija Electric Coop v. NLRC, it was held:
That private respondent refused to receive the
memorandum is to us, too self-serving a claim on the part of
petitioner in the absence of any showing of the signature or
initial of the proper serving office. Moreover, petitioner could
have easily remedied the situation by the expediency of sending
the memorandum to private respondent by registered mail at his
last known address as usually contained in the Personal Data
Sheet or any personal file containing his last known address.
Employee is given a reasonable period to answer
charges
In R.B. Michael Press v. Galit, the Supreme Court
reiterated the rule enunciated in King of Kings Transport v.
Mamac, that the reasonable period within which an employee being
cited administratively should submit his written explanation is five
(5) calendar days from receipt of the first notice to give him an
opportunity to study the accusation against him, consult a union
official or lawyer, or gather data and evidence, and decide on the
defenses he will raise against the complaint.
CBA Grievance proceedings, held after employee had
been dismissed, do not take the place of the required procedure
demanded by the Labor Code before effecting dismissal
In Standard Electric Manufacturing v. Standard Electric
Employees Union, the Court held:
Further, we cannot subscribe to the petitioner's
contention that the due process requirement relative to the
dismissal of respondent Javier was duly complied with when he
was allowed to explain his side during the grievance machinery
conferences. Indeed, in the case at bar, the petitioner did not
conduct any investigation whatsoever prior to his termination,
despite being informed of respondent Javier's predicament by
the latter's siblings, his Union and his counsel. The meetings
held pursuant to the grievance machinery provisions of the
collective bargaining agreement were only done after his
dismissal had already taken effect on February 5, 1996. Clearly,
well-meaning these conferences might be, they cannot cure an
otherwise unlawful termination.
2. Conduct of hearing.
 After serving the first notice above, the employer should
schedule and conduct a hearing or conference wherein the
employee will be given the opportunity to:
(a) Explain and clarify his defenses to the charge/s against
him;
(b) Present evidence in support of his defenses; and
(c) Rebut the evidence presented against him by the
management.
During the hearing or conference, the employee should
be given the chance to defend himself personally, with the
assistance of a representative or counsel of his choice. Moreover,
this conference or hearing could be used by the parties as an
opportunity to come to an amicable settlement.
Perez Doctrine: New Guiding Principle on the Hearing
Requirement
The above 2007 King of Kings concept of hearing as part
of due process has been significantly changed in 2009 in the en
banc case of Perez v. Philippine Telegraph and Telephone
Company. It enunciates the new guiding principles on the hearing
aspect of procedural thus, a formal hearing or conference is no
longer mandatory. It becomes mandatory only under any of the
following circumstances:
a. When requested by the employee in writing; or
b. When substantial evidentiary disputes exist; or
c. When a company rule or practice requires it; or
d. When similar circumstances justify it.
Thus, the Supreme Court held:
We note a marked difference in the standards of due
process to be followed as prescribed in the Labor Code and its
implementing rules. The Labor Code, on one hand, provides that
an employer must provide the employee ample opportunity to
be heard and to defend himself  with the assistance of his
representative if he so desires. x x x
The omnibus rules implementing the Labor Code, on
the other hand, require a hearing and conference during which
the employee concerned is given the opportunity to respond to
the charge, present his evidence or rebut the evidence presented
against him.
Therefore, while the phrase "ample opportunity to be
heard" may in fact include an actual hearing, it is not limited to a
formal hearing only. In other words, the existence of an actual,
formal "trial-type" hearing, although preferred, is not absolutely
necessary to satisfy the employee's right to be heard.
In sum, the following are the guiding principles in
connection with the hearing requirement in dismissal cases:
(a) "ample opportunity to be heard" means any
meaningful opportunity (verbal or written) given to
the employee to answer the charges against him and
submit evidence in support of his defense, whether in
a hearing, conference or some other fair, just and
reasonable way.
(b) a formal hearing or conference becomes mandatory
only when requested by the employee in writing or
substantial evidentiary disputes exist or a company
rule or practice requires it, or when similar
circumstances justify it.
(c) the "ample opportunity to be heard" standard in the
Labor Code prevails over the "hearing or conference"
requirement in the implementing rules and
regulations:
Page 37 of 49
(i) under Article 292(b) of the Labor Code, the
employer is required to afford the employee
“ample opportunity to be heard and to defend
himself with the assistance of his
representative if he so desires”; while –
(ii) Under Section 2(d), Rule I, Book VI of the
IRR, the employee is required to afford the
employee a “hearing or conference during
which the employee concerned, with the
assistance of counsel, if he so desires, is
given opportunity to respond to the charge,
present his evidence or rebut the evidence
presented against him.”
If the employee admits his responsibility for the act he
was accused of, a formal hearing is no longer necessary, as held in
Bernardo v. NLRC.
The unilateral confession made by an alleged co-
conspirator cannot be the basis for terminating an employee. Such
confession must be corroborated by other competent and
convincing evidence. Absent any such corroborative evidence, the
confession must be received with considerable caution [Century
Textile Mills, Inc. v. NLRC]. Likewise, it was held that the act of
the employer in making “prior consultation” with the union of
which the dismissed employee is a member, is not sufficient
compliance with due process.
It is important to stress that the rights of an employee
whose services are sought to be terminated to be informed
beforehand of his proposed dismissal (or suspension) as well as
of the reasons therefor, and to be afforded an adequate
opportunity to defend himself from the charges levelled against
him, are rights personal to the employee. Those rights were not
satisfied by petitioner Corporation's obtaining the consent of or
consulting with the labor union; such consultation or consent
was not a substitute for actual observance of those rights of
private respondent Calangi. The employee can waive those
rights, if he so chooses, but the union cannot waive them for
him. That the private respondent simply 'kept silent" all the
while, is not adequate to show an effective waiver of his rights.
Notice and opportunity to be heard must be accorded by an
employer even though the employee does not affirmatively
demand them.
NOTA BENE: It is surprising that the SC does not quote
from a long line of decisions starting from Rabago v. NLRC
(1991); Rase v. NLRC (1994); Libres v. NLRC (1999). Those cases,
and many more thereafter, held that personal confrontation and
cross examination cannot be invoked as a matter of right in
procedural due process of employee dismissal cases. The right to
cross-examine belongs to the accused only in criminal prosecutions
by the “people of the state. In Manggagawa ng Komunikasyon v.
NLRC (1992), the Court however conceded that “actual adversarial
proceedings may be necessary for clarification purposes or when
there is need to propound searching questions to unclear
witnesses.” That has to do with the duty of the trier of facts, usually
the labor arbiter, to ascertain whether or not there is “substantial
evidence” supporting a claim.
Technol Eight Philippines v. NLRC
Held: The labor arbiter ruled that Technol failed to afford
Amular procedural due process, since he was not able to present his side
regarding the incident; at the time he was called to a hearing, he had already
filed the illegal dismissal complaint. The NLRC, on the other hand, held
that the memorandum terminating Amular's employment was a mere
formality, an afterthought designed to evade company liability since
Amular had already filed an illegal dismissal case against Technol.
We disagree with these conclusions. The notice of preventive
suspension/notice of discharge served on Amular and Ducay required them
to explain within forty-eight (48) hours why no disciplinary action should
be taken against them for their involvement in the mauling incident.
Amular submitted two written statements: the first received by the company
on May 19, 2002 and the other received on May 20, 2002. On June 8, 2002,
Technol management sent Amular a memorandum informing him of an
administrative hearing on June 14, 2002 at 10:00 a.m., regarding the
charges against him. At the bottom left hand corner of the memorandum,
the following notation appears: "accept the copy of notice but refused to
receive, he will study first." A day before the administrative hearing or on
June 13, 2002, Amular filed the complaint for illegal
suspension/dismissal and did not appear at the administrative hearing. On
July 4, 2002, the company sent Amular a notice of dismissal.
What we see in the records belie Amular's claim of denial of
procedural due process. He chose not to present his side at the
administrative hearing. In fact, he avoided the investigation into the charges
against him by filing his illegal dismissal complaint ahead of the scheduled
investigation. Under these facts, he was given the opportunity to be heard
and he cannot now come to us protesting that he was denied this
opportunity. To belabor a point the Court has repeatedly made in employee
dismissal cases, the essence of due process is simply an opportunity to be
heard; it is the denial of this opportunity that constitutes violation of due
process of law.
When hearing is not required
a. Termination of project, seasonal, causal or fixed-term
employment.
b. Termination of probationary employment on the ground
of failure of the probationary employee to qualify as a
regular employee in accordance with reasonable
standards made known to him at the start of the
employment.
c. Termination due to abandonment of work.
d. Termination due to authorized causes under Article 298.
In such cases, there are no allegations which the
employees should refute and defend themselves from by
way of a hearing.
e. Termination due to disease under Article 299.
f. Termination by the employee (resignation) under Article
300.
g. Termination after 6 months of bona-fide suspension of
operation under Article 301. For purposes of satisfying
due process, what is required is simply hat notices
provided under Article 298 be served to both the
affected employees and the DOLE at lease one (1)
month before the termination becomes effective.
h. Termination due to retirement under Article 302.
i. Termination due to expiration of tenure made
coterminous with lease.
j. Termination due to closure or stoppage of work by
government authorities when non-compliance with the
law or implementing rules and regulations poses grave
and imminent danger to the health and safety of workers
in the workplace.
k. Termination of employee who has admitted his guilt for
the offense charged.
Confrontation of witnesses, not a matter of right in
company investigations
Confrontation of witnesses is required only in adversarial
criminal prosecutions, and not in company investigations for the
administrative liability of the employee. Additionally, actual
adversarial proceedings become necessary only for clarification, or
when there is a need to propound searching questions to witnesses
who give vague testimonies. This is not an inherent right, and in
company investigations, summary proceedings may be conducted
[Tuazon v. Wenphil].
Page 38 of 49
If employee refuses to answer/participate, investigation
should still proceed
In Hagonoy Rural Bank v. NLRC, the Court held that
petitioners simply kept silent from the time they were suspended
until they were formally dismissed is not adequate to constitute a
waiver of their rights. Notice and hearing must be accorded by an
employer, even though the employee does not affirmatively
demand it.
3. Service of Second Written Notice (Notice of
Termination)
After determining that termination of employment is
justified, the employer shall serve the employees a written notice of
termination indicating that:
(a) All circumstances involving the charge/s
against the employee have been considered;
and
(b) Grounds have been established to justify the
severance of his employment.
D. AUTHORIZED CAUSES
The authorized causes provided in the Labor Code may
generally be classified into two (2), namely:
(1) Business-related causes. – Referring to the grounds
specifically mentioned in Article 298, to wit:
(a) Installation of labor-saving device;
(b) Redundancy
(c) Retrenchment;
(d) Closure or cessation of business operations
NOT due to serious business losses or financial
reverses; and
(e) Closure or cessation of business operations.
(2) Health-related causes. – Referring to disease under
Article 299.
There are certain requisites that are common to the five
(5) grounds in Article 298. To simplify the discussion, the
following five (5) common requisites are applicable to the said
grounds:
1. There is good faith in effecting the termination;
2. The termination is a matter of last resort, there being
no other option available to the employer after
resorting to cost-cutting measures;
3. Two (2) separate written notices are served on both
the affected employee and the DOLE at least one (1)
month prior to the intended date of termination;
4. Separation pay is paid to the affected employee, to
wit:
(a) If based on (1) installation of labor-saving
device, or (2) redundancy. – One (1) month pay
or at least one (1) month pay for every year of
service, whichever is higher, a fraction of at
least six (6) months shall be considered as one
(1) year.
(b) If based on (1) retrenchment, or (2) closure NOT
due serious business losses or financial reverses.
– One (1) month pay or at lease one-half (1/2)
month pay for every year of service, whichever
is higher, a fraction of at least six (6) months
shall be considered as one (1) whole year.
 (c) If closure is due to serious business losses or
financial reverses, NO separation pay is required
to be paid.
(d) In case the CBA or company policy provides for
a higher separation pay, the same must be
followed instead of he one provided in Article
298.
5. Fair and reasonable criteria in ascertaining what
positions are to be affected by the termination, such
as, but not limited to: nature of work; status of
employment (whether casual, temporary, or regular);
experience; efficiency; seniority; dependability;
adaptability; flexibility; trainability; job performance;
discipline; and attitude towards work. Failure to
follow fair and reasonable criteria in selecting who to
terminate would render the termination invalid.
Each of the five grounds has its own unique requisite/s
that distinguishes it from the others. For instance, the requisite for
extreme business losses or financial reverses is distinctively
applicable to retrenchment in order for termination based on this
ground to be valid and legal. Termination due to redundancy does
not require existence of losses or financial reverses to validate it.
While losses or reverses may be considered as a major factor in
cases of closure or cessation of business operations, but their
relevance is only in relation to the determination of whether the
employer is liable for separation pay or not. Consequently, if the
closure or cessation of business operations is due to serious
business losses or financial reverses, the employer is not liable to
pay any separation pay [North Davao Mining v. NLRC].
1. Installation of Labor-Saving Device
Article 298. Closure of Establishment and Reduction of
Personnel. The employer may also terminate the employment of any
employee due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation
of the establishment or undertaking unless the closing is for the
purpose of circumventing the provisions of this Title, by serving a
written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. In
case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to at least
one (1) month pay for every year of service, whichever is higher. In
case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.
In addition to the five (5) common requisites above, the
unique requisite for this ground is that the purpose for such
installation of labor-saving device/s must be valid, such as to save
on cost, enhance efficiency and other justifiable economic reasons.
The installation of these devices is a management
prerogative and the courts will not interfere with its exercise in the
absence of abuse of discretion, arbitrariness, or malice on the part
of management [Magnolia Dairy Products v. NLRC].
Redundancy results from installation of labor-saving
device. The installation of labor-saving device will result in making
the positions being held by employees who will be adversely
affected thereby redundant and unnecessary [Soriano v. NLRC].
2. Redundancy
Page 39 of 49
In addition to the five (5) common requisites earlier
mentioned, any of the following factors must be present in order
for redundancy to be a valid ground to terminate employment:
a. Where the services of employees are in excess of
what is reasonably demanded by the actual
requirements of the enterprise [Nippon Housing v.
Leynes].
b. Where the position is superfluous because of a
number of factors, such as over-hiring of workers,
decreased volume of business, dropping of a
particular product line or service activity previously
manufactured or undertaken by the enterprise or
phasing out of service activity priorly undertaken by
the business.
c. Where there is duplication of work. Indeed, in any
well-organized business enterprise, it would be
surprising to find duplication of work and two (2) or
more people doing the work of one person [Caltex
v. NLRC].
d. Where it is validly resorted to as a cost-cutting
measure and to streamline operations so as to make
them more viable [Maya Farms Employees
Organization v. NLRC].
Time and again, it has been ruled that employer has no
legal obligation to keep more employees than are necessary for the
operation of its business [Morales v. Metrobank]. Thus, the
employer has the prerogative to implement reorganization and
redundancy and to adopt such measures as will promote greater
efficiency, reduce overhead costs and enhance prospects of
economic gains, albeit always within the framework of existing
laws [Smart Comms v. Astorga]. However, if there is no proof that
the essential requisites for a valid redundancy program as a ground
for the termination of the employee are present, the termination
should be declared illegal [Lamber Pawnbrokers v. Binamira].
3. Retrenchment
Retrenchment has been defined as the termination of
employment initiated by the employer through no fault of the
employees and without prejudice to the latter, resorted by
management during periods of business recession, industrial
depression, or seasonal fluctuations; or during lulls occasioned by
lack of work or orders, shortage of materials or considerable
reduction in the volume of the employer’s business, conversion of
the plant for a new production program or the introduction of new
methods or more efficient machinery, or of automation [Anabe v.
Asian Construction].
In addition to the five (5) common requisites mentioned
earlier, the unique requisite for this ground is that there should be
proof of actual losses or possible imminent losses that would
justify termination of employment. This is the most singular
distinctive requisite of retrenchment. This, in fact, is the only
statutory ground in Article 298 which requires this kind of proof.
As stressed earlier, the grounds of installation of labor-saving
device and redundancy do not impose this requirement. The other
ground of closure or cessation of business operations may be
resorted to with or without losses [Precision Electronics v. NLRC].
Standards to determine validity of losses
The general standards in terms of which the act of an
employer in retrenching or reducing the number of its employees
must be appraised are as follows:
 a. The losses expected should be substantial and not
merely de minimis or insubstantial and
inconsequential in extent.
b. The substantial loss apprehended must be
reasonably imminent, as such imminence can be
perceived objectively and in good faith by the
employer.
c. Retrenchment must be reasonably necessary and
likely to effectively prevent the expected losses. The
employer should have taken other measures prior or
parallel to retrenchment to forestall losses, i.e., cut
other costs other than labor costs.
d. The alleged losses, if already realized, and the
expected imminent losses sought to be forestalled,
must be proved by sufficient and convincing
evidence through presentation of externally audited
financial statements.
If the above standards are present, the wisdom to retrench
cannot be questioned [NDC v. NLRC].
Retrenchment to prevent losses, meaning
In its ordinary connotation, this phrase means that
retrenchment must be undertaken by the employer before the losses
anticipated are actually sustained or realized. The Supreme Court,
in a plethora of cases, has thus interpreted it to mean that the
employer need not keep all his employees until after its losses shall
have materialized [TPI Philippines v. Cajucom]. This is never the
intention of the lawmaker. If such an intent were expressly written
into the law, that law may well be vulnerable to constitutional
attack as unduly taking property from one man to be given to
another [Asian Alcohol v. NLRC].
Redundancy v. Retrenchment
Retrenchment and redundancy are two different
concepts; they are not synonymous; thus, they should not be used
interchangeably [Arabit v. Jardine Pacific].
Redundancy exists when the services of an employee are
in excess of what is required by an enterprise. Retrenchment, on
the other hand, is resorted to primarily to avoid or minimize
business losses. Thus, a “Redundancy Program,” while
denominated as such, is more precisely termed “retrenchment” if it
was primarily intended to prevent serious business losses [Atlantic
Gulf v. NLRC].
Redundancy does not need to be always triggered by a
decline in the business. Primarily, employers resort to redundancy
when the functions of an employee have already become
superfluous, duplicitous or in excess of what the business requires.
Thus, even if a business is doing well, an employer can still validly
dismiss an employee from service due to redundancy if that
employee’s position has already become in excess of what the
employer’s enterprise requires [Andrada v. NLRC].
In terms of monetary consequence, the employer stands
to pay more separation pay if it denominates the personnel
reduction program it is implementing as redundancy and not
retrenchment. Under Article 298, redundancy would require the
employer to pay its employees a separation pay equivalent to at
least their one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher; while retrenchment
would only entail half of this amount.
4. Closure or Cessation of Business Operations
Closure or cessation of business is the complete or partial
cessation of the operations and/or shutdown of the establishment of
the employer. It is carried out to either stave off the financial ruin
Page 40 of 49
or promote business interest of the employer [Eastridge Gold Club
v. Eastridge Labor Union]. Closure involves two (2) situations:
(a) When NOT due to serious business losses or
financial reverses; or
(b) When not due to serious business losses or financial
reverses.
It is only in the first that payment of separation pay is
required. No such requirement is imposed in the second [North
Davao Mining v. NLRC].
Employer may close its business whether its suffering
from business losses or not; court cannot order employer to
continue its business [Penafrancia Tours v. Sarmienta].
Retrenchment v. Closure of business
In a number of cases. Retrenchment has been confused
with closure of the entire business establishment or department,
division or outlet thereof. While the two are often used
interchangeably and are interrelated, they are actually two separate
and independent authorized causes for termination of employment.
Termination of an employment may be predicated on one without
need of resorting to the other.
Closure of business, on one hand, is the reversal of
fortune of the employer whereby there is a complete cessation of
business operations and/or an actual locking-up of the doors of the
establishment, usually due to financial losses. Closure of business
as an authorized cause for termination of employment aims to
prevent further financial drain upon an employer who cannot pay
anymore his employees since business has already stopped. On the
other hand, retrenchment is a reduction of personnel usually due to
poor financial returns so as to cut down on costs of operations in
terms of salaries and wages to prevent bankruptcy of the company.
It is sometimes also referred to as down-sizing. It is an authorizes
cause for termination of employment which the law accords an
employer who is not making good in its operations in order to cut
back on expenses for salaries and wages by laying off some
employees. The purpose of retrenchment is to save a financially
ailing business establishment from eventually collapsing [Sanoh
Fulon Phils v. Bernardo].
Unlike retrenchment, closure or cessation of business, as
an authorized cause of termination of employment, need not
depend for its validity on evidence of actual or imminent reversal
of the employer’s fortune. Article 298 authorizes termination of
employment due to business closure regardless of the underlying
reasons and motivations therefor, be it financial losses or not
[Eastridge Golf Club v. Eastridge Labor Union].
MPCEU v. Manila Polo Club summarized:
a. Closure or cessation of operations of establishment or
undertaking may either be partial or total.
b. Closure or cessation of operations of establishment or
undertaking may or may not be due to serious
business losses or financial reverses. However, in both
instances, proof must be shown that: (1) it was done in
good faith to advance the employer's interest and not
for the purpose of defeating or circumventing the
rights of employees under the law or a valid
agreement; and (2) a written notice on the affected
employees and the DOLE is served at least one month
before the intended date of termination of
employment.
c. The employer can lawfully close shop even if not due
to serious business losses or financial reverses but
separation pay, which is equivalent to at least one
month pay as provided for by Article 283 of the Labor
 Code, as amended, must be given to all the affected
employees.
d. If the closure or cessation of operations of
establishment or undertaking is due to serious
business losses or financial reverses, the employer
must prove such allegation in order to avoid the
payment of separation pay.  Otherwise, the affected
employees are entitled to separation pay.
e. The burden of proving compliance with all the above-
stated falls upon the employer.
5. Disease
Article 299. Disease as Ground for Termination. An employer
may terminate the services of an employee who has been found to be
suffering from any disease and whose continued employment is
prohibited by law or is prejudicial to his health as well as to the health
of his co-employees: Provided, That he is paid separation pay
equivalent to at least one (1) month salary or to one-half (1/2) month
salary for every year of service, whichever is greater, a fraction of at
least six (6) months being considered as one (1) whole year.
In the case of Deoferio v. Intel Technology Philippines,
Inc., the requisites that must be complied with before termination
of employment due to disease may be justified were specifically
divided into two, namely:
a. Substantive requisites; and
b. Procedural requisites.
a. Substantive Requisites
Based on the Labor Code and its Implementing Rules,
the following three (3) substantive elements, according to Deoferio
v. Intel Technology may be drawn therefrom, to wit:
(i) An employee has been found to be suffering from
any disease;
(ii) His continued employment is:
 Prohibited by law; or
 Prejudicial o his health as well as to the health
of his co-employees; and
(iii) A competent public health authority issues a
medical certificate that the disease of such nature or
at such a stage that it cannot be cured within a
period of six (6) months even with proper medical
treatment.
1st Substantive Element
The fact alone that an employee is suffering from a
disease is not generally a sufficient ground to terminate his
employment. That a person has a disease does not per se entitle the
employer to terminate his or her services. Termination is the last
resort. Even if the disease is a contagious one, like pulmonary
tuberculosis, mere sufferance thereof by an employee does not ipso
facto make him a sure candidate for dismissal [Tan v. NLRC].
2nd Substantive Element
Contagious or communicable diseases or infecions, like
sexually transmitted diseases or infections, tuberculosis, hepatitis
A, malaria, and among others, are bext examples of diseases which
would render an employee’s “continued employment prejudicial to
his health as well as to the health of his co-employees.” This
ground may not, however, be solely confined to these kinds of
diseases. Deoferio enunciates that the phrase “prejudicial to his
health as well as to the health of his co-employees” should be
Page 41 of 49
liberally construed to mean “prejudicial to his health or to the
health of his co-employees.” It is clear, therefore, that the intent of
the law is to allow the termination of an employee if he suffers a
disease and his continued employment will either be prejudicial:
(i) To his own health; or
(ii) To the health of his co-employees.
Consistent with this construction, this provision has been
applied in resolving illegal dismissal cases due to non-contagious
diseases such as stroke, heart attack, osteoarthritis, and eye
cataract, among others.
3rd Substantive Element
The third element on presentation of a medical certificate
issued by a competent public health authority substantiates the
contention that the employee has indeed been suffering from a
disease that:
(i) Is prejudicial to his health as well as to the health of
his co-employees; and
(ii) Cannot be cured within a period of six months even
with proper medical treatment.
Without the medical certificate, there can be no
authorized cause for the employee’s dismissal. The absence of this
element thus renders he dismissal void and illegal. Deoforio
instructs that this 3rd element is not merely a procedural
requirement but a substantive one. That certification from a
competent public health authority is precisely the substantial
evidence required by law to prove the existence of the disease
itself, its non-curability within a period of 6 months even with
proper medical treatment, and the prejudice it would cause to the
health of the sick employee and to those of his co-employees.
The company’s own physician engaged by the employer
as its employee or hired on a retainer fee basis to whom sick
workers are referred for consultation or treatment, is not the
“competent public health authority: referred to in the law. Hence, a
medical certificate issued by the company’s own physician is not
an acceptable certificate for purposes of terminating an
employment based on Article 299 [Cebu Royal Plant v. Deputy
Minister].
As to who should procure the medical certificate, the
Court ruled in Tan v. NLRC, that it devolves upon the employer the
obligation to obtain a medical certificate from a competent public
health authority that the employee’s disease is at such stage or of
such nature that it cannot be cured within 6 months even with
proper medical treatment. It is the employer and not the employee,
who has the burden of proof to justify that the termination was
supported by said certificate. Clearly, it is only where there is such
prior certification that the employee could be validly terminated
from his job. The burden of proving the existence of the medical
certificate required under the law is upon the employer, not the
employee [ATCI Overseas Corporation v. Court of Appeals].
b. Procedural Requisites
Deoferio pronounced the rule that due process in
termination due to disease is similar to due process for just cause
termination. Thus, the employer must furnish the employee two (2)
written notices, namely:
(i) The notice to apprise the employee of the ground for
which his dismissal is sought; and
(ii) The notice informing the employee of his dismissal,
to be issued after the employee has been given
 reasonable opportunity to answer and be heard on
his defense.
Under this present rule, the employee should be given
reasonable opportunity to answer and to be heard on his defense.
Although sufferance of disease is not to be equated with
commission of a wrongful act which is the principal requisite of
just cause termination, the ailing employee needs to be given
“reasonable opportunity to answer and to be heard on his defense”
before he could validly be dismissed on the ground of disease.
Consequently, once the substantive requisites for termination due
to disease are complied with, the employer should comply the other
equally important procedural requisite as prescribed in Deoferio.
Per Deoferio, the 2nd required notice informing the
employee of his dismissal should be issued “after the employee has
been given reasonable opportunity to answer and to be heard on his
defense.” This requirement, in effect, dictates that before an
employee may be terminated due to disease, he must first be given
a show-cause notice that would afford him “a reasonable
opportunity to answer” the charge of his being terminable by
reason of his suffering a disease, and secondly, for him to be
afforded a hearing on his defense.
Employee has the right to present countervailing
medical certificates
The employee has the right to present countervailing
evidence in the form of medical certificates to prove that his
dismissal due to disease is not proper and therefore illegal [Fuji
Television Network v. Espiritu].
E. AUTHORIZED CAUSE TERMINATION DUE
PROCESS
Due process in authorized cause termination is classified
into two (2), as follows:
1. Termination due to Business-Related Causes, such
as: installation of labor-saving device, redundancy,
retrenchment and closure of business or
establishment.
2. Termination due to Health-Related Causes
(Disease).
1. Due Process in Termination Due to Business-
Related Authorized Causes
Procedural due process in termination due to any of the
authorized causes of installation of labor-saving device,
redundancy, retrenchment and closure of business or establishment
is deemed complied with upon the separate and simultaneous
service of a written notice of the intended termination to both:
a. The employee to be terminated; and
b. The appropriate DOLE Regional Office
At least one (1) month before the intended date of the
termination specifying the ground/s therefor and the undertaking to
pay the separation pay required under Article 298 of the Labor
Code or the employment contract or the CBA, whichever is higher.
To iterate, hearing is required.
One-month period is mandatory
The observance of the period of 1 month mentioned in
Article 298 is mandatory. There is deprivation of right to statutory
due process if notice requirement is not complied with at least a
month prior to the effectivity of the termination. Hence, the
dismissal, if properly and validly effected for authorized cause,
would still be declared legal but the employer shall be held liable to
Page 42 of 49
pay for indemnity in the form of nominal damages in the stiffer
amount of P50,000, per Jaka Food Processing v. Pacot.
F. EFFECT OF LEGAL DISMISSAL WITHOUT DUE
PROCESS
The substantive (just or authorized cause) and procedural
due process requirements in termination of employment can only
be better understood and appreciated by looking at them through
the prism of the four (4) standard situations provided in the Labor
Code and enunciated in pertinent jurisprudence. Thus, the dismissal
is:
(1) LEGAL if it was done with both substantive and
procedural due process.
(2) ILLEGAL if it was done without substantive due
process although procedural process was observed.
(3) ILLEGAL if it was done without both substantive
and procedural due process.
(4) LEGAL if it was done with substantive due process
but without procedural due process.
1. Belated Due Process Rule
Prior to 1989, the rule was that a dismissal or termination
is illegal if the employee was not given procedural due process. In
the 1989 case of Wenphil Corp v. NLRC (Feb, 8, 1989), the Court
reversed this long-standing rule and held that the dismissed
employee, although not given any notice and hearing, was not
entitled to reinstatement and backwages because the dismissal was
for a just cause, i.e., grave miscoundct and insubordination, a just
ground for termination under Article 297. The employee here had a
violent temper and caused trouble during office hours and defying
superiors who tried to pacify him. The Court concluded that
reinstating the employee and awarding backwages may encourage
him to do even worse and will render a mockery of the rules of
discipline that employees are required to observe.
However, the employer committed an infraction of the
second requirement; thus, it must be imposed a sanction for its
failure to give a formal notice and conduct an investigation as
required by law before dismissing the employee from employment.
Considering the circumstances of this case, the employer must
indemnify the employee. The measure of this award depends of the
facts of each case and the graviy of the omission committed by the
employer.
The rule thus evolved: where the employer had a valid
reason to dismiss an employee but did not follow the due process
requirement, the dismissal may be upheld but the employer will be
penalized to pay an indemnity to the employee.
2. Ineffectual Dismissal Rule
In 2000, the rule on the extent of the sanction was
changed in the en banc decision in Serrano v. NLRC. The Court
held that the vilation by the employer of the notice requirement in
termination for just or authorized causes was not a denial of due
process that will nullify the termination. However, the dismissal is
declared ineffectual and the employer must pay the full backwages
from the time of termination until it is judicially declared that the
dismissal was for a just cause or authorized cause. The Court, in
effect, re-examined the Wenphil doctrine. Hence, instead of
penalty, Serrano now required payment of full backwages from the
time of dismissal until the time the Court finds the dismissal was
for a just or authorized cause. Serrano thus confronted the practice
of employers to dismiss now and pay later by imposing full
backwages as penalty.
3. Statutory Due Process Rule
 About 4 years after Serrano, the Supreme Court, in the his dismissal from service. Logically, if there is no dismissal, then
2004 en banc decision in Agabon v. NLRC, abandoned Serrano and there can be no question as to the legality or illegality thereof
reverted to the Wehnphil doctrine. It thus ruled that where the [Ledesma, Jr. v. NLRC].
dismissal is for a just cause, as in the instant case, the lack of
statutory due process should not nullify the dismissal, or render it 2. Quitclaims
illegal, or ineffectual. However, the employer should indemnify the Quitclaims are valid provided that these are voluntarily
employee for the violation of his right to statutory due process. signed by the employee involved, the consideration is reasonable,
Such indemnity or sanction, however, must be stiffer than that and it is not against the law or public policy [More Maritime
imposed in Wenphil. Consequently, the sanction imposed upon the Agencies v. NLRC].
employer in this case was in the form of nominal damages in the However, quitclaims entered into by union officers and
higher amount of P30,000. The imposition of this form of damages some members do not bind those who did not sign it [Liana’s
would serve to deter employers from future violations of the Supermarket v. NLRC].
statutory due processs rights of employees. At the very least., it
provides a vindication or recognition of his fundamental right 3. Reliefs for Illegal Dismissal
granted to the latter under the Labor Code and its Implementing
Rules. Article 294. [279] Security of Tenure. In cases of regular
employment, the employer shall not terminate the services of an
4. Contractual Due Process Rule employee except for a just cause or when authorized by this Title. An
A new doctrine of contractual due process was employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and
pronounced in the 2013 en banc decision in Abbott Laboratories v.
to his full backwages, inclusive of allowances, and to his other benefits
Alcaraz. It was held here that in a situation where there is an or their monetary equivalent computed from the time his compensation
existing company policy enunciating the procedural due process was withheld from him up to the time of his actual reinstatement
that must be observed in termination of employment, compliance
alone with the statutory due process, would not suffice. Under Article 294, an illegally dismissed employee is
Additionally, there must be compliance too with the company- entitled to the following reliefs:
prescribed due process procedure or the so-called contractual due
process. Otherwise, the same consequence as in Agabon case will a. Reinstatement without loss of seniority rights and
ensue, that is, the termination shall be considered legal and valid other privileges;
but for lack of contractual due process, the employer will be b. Full backwages, inclusive of allowances; and
penalized with the payment of indemnity in the form of nominal c. Other benefits or their monetary equivalent.
damages in the same amount of P30,000 as awarded in Agabon.
The following reliefs that are awarded in illegal dismissal
5. Indemnity in the Form of Nominal Damages cases are missing in Article 279:
Termination for a just cause or authorized cause but
without affording the employee procedural due process should no a. Award of separation pay in lieu of reinstatement.
longer be considered illegal or ineffectual [Per Serrano v. NLRC] b. Award of penalty in the form of nominal damages in
but legal. Consequently, the employee will not be ordered case of termination due to just or authorized cause
reinstated but will be awarded an indemnity in the form of nominal but without observance of procedural due process.
damages, the amount of which will depend on whether the c. Reliefs to illegally dismissed employee whose
termination is grounded on just cause or authorized cause, thus: employment is for a fixed period. The proper relief
is only the payment of the employee’s salaries
a. If based on just cause – P30,000.00 per Agabon corresponding to the unexpired portion of the
Doctrine employment contract.
b. If based on authorized cause – P50,000.00 per Jaka d. Award of damages and attorney’s fees.
Doctrine. e. Award of financial assistance in cases where the
employee’s dismissal is declared legal but because
The measure of penalty or indemnity is no longer full of long years of service, and other considerations,
backwages but nominal damages. financial assistance is awarded.
f. Imposition of legal interest on separation pay,
G. ILLEGAL DISMISSAL backwages and other monetary awards.
Under the Labor Code, the ordinary and proper recourse
of an illegally dismissed employee is to file a complaint for illegal a. Reinstatement
dismissal with the labor arbiter [Philippine Airlines v. NLRC]. Reinstatement, in its generally accepted sense, refers to a
restoration to a state from which one has been removed or
1. Burden and Degree of Proof separated, it is the return to the position from which he was
It is a basic rule in evidence, however, that the burden of removed [San Miguel Brewery v. Santos].
proof is on the part of the party who makes the allegations – ei
incumbit probatio, qui dicit, non qui negat. If he claims a right Reinstatement in Article 229 vs. 294
granted by law, he must prove his claim by competent evidence,
relying on the strength of his own evidence and not upon the
Article 229 Article 294
weakness of that of his opponent. While this Court is not Finality No finality yet. Already final and
unmindful of the rule that in cases of illegal dismissal, the Subject of an appeal executory
employer bears the burden of proof to prove that the termination Employer’s option Employer has the No option but to
was for a valid or authorized cause. However, before the employer to reinstate option to actual actually reinstate to
must bear the burden of proving that the dismissal was legal, the reinstatement or former position or to
payroll reinstatement. a substantially
employee must first establish by substantial evidence the fact of equivalent position

Page 43 of 49
 Duty of Labor Ministerial for the Not ministerial.
Arbiter to LA to implement his Requires motion for
implement order reinstatement order. the issuance of writ
Reinstatement is self- of execution before
executory LA can implement
the reinstatement
order
Necessity of Not necessary Indispensable to
issuance of Writ of effect reinstatement
Execution
b. Separation Pay in Lieu of Reinstatement
This remedy is not found in the Labor Code but is
granted in case reinstatement is no longer possible or feasible, such
as when any of the following circumstances exists:
(i) Where the continued relationship between the
employer and the employee is no longer viable
due to the strained relations and antagonism
between them (Doctrine of Strained Relations).
(ii) When reinstatement proves impossible,
impracticable, not feasible or unwarranted for
varied reasons and thus hardly in the best
interest of the parties such as:
 Where the employee has already been
replaced permanently as when his position has
already been taken over by a regular employee
and there is no substantially equivalent
position to which he may be reinstated.
 Where the dismissed employee’s position is
no longer available at the time of
reinstatement for reasons not attributable to
the fault of the employer.
 When there has been long lapse or passage of
time that the employee was out of employer’s
employ from the date of the dismissal to the
final resolution of the case or because of the
realities of the situation.
 By reason of the injury suffered by the
employee.
 The employee has already reached retirement
age under a Retirement Plan.
 When the illegally dismissed employees are
over-age or beyond the compulsory retirement
age and their reinstatement would unjustly
prejudice their employer.
(iii) Where the employee decides not to be
reinstated as when he does not pray for
reinstatement in his complaint or position paper
but asked for separation pay instead.
(iv) When reinstatement is rendered moot and
academic due to supervening events, such as:
 Death of the illegally dismissed employee.
 Declaration of insolvency of the employer by
the court.
 Fire which gutted the employer’s establishment
and resulted in its total destruction.
 In case the establishment where the employee
is to be reinstated has closed or ceased
operation.
 To prevent further delay in the execution of the
decision to the prejudice of private respondent.
 Other circumstances such as (a) when
reinstatement is inimical to the employer’s
Page 44 of 49
interest; (b) reinstatement does not serve the
best interests of the parties involved; (c) the
employer is prejudiced by the workers’
continued employment; or (d) that it will not
serve any prudent purpose as when
supervening facts transpired which made
execution unjust or inequitable.
Computation
Per prevailing jurisprudence, the following are the
components of separation pay in lieu of reinstatement:
(i) The amount equivalent to at least one (1)
month salary or to one (1) month salary for
every year of service, whichever is higher, a
fraction of at least six (6) months being
considered as one (1) whole year.
(ii) Allowances that the employee has been
receiving on a regular basis
The salary rate prevailing at the end of the period of
putative service should be the basis for computation which refers to
the period of imputed service for which the employee is entitled to
backwages.
Period Covered
The period for computation shall be from start of
employment up to the date of finality of decision except:
(i) When the employer has ceased its operation
earlier, in which case, the same should be
computed up to the date of closure.
(ii) When the employee is a fixed term employee,
in which case, it shall only be up to the
unexpired portion of the fixed-term contract.
(iii) When the employee reached retirement or
retirement, in which case, it shall only be up to
retirement age or date of retrenchment
(iv) When the employee dies during the pendency
of the case, in which case, it shall only be up to
the time of the death of such employee.
Principles
 Award of separation pay and backwages are not inconsistent
with each other. Hence, both may be awarded to an illegally
dismissed employee. The payment of separation pay is in
addition to payment of backwages.
 Reinstatement cannot be granted when what is prayed for by
employee is separation pay in lieu thereof.
 Award of separation pay in lieu of reinstatement is not proper
if there is no finding of illegal dismissal.
 Separation pay, as a substitute remedy, is only proper for
reinstatement but not for backwages.
 Employer has no option to choose between reinstatement and
separation pay in lieu thereof. Reinstatement is still the
preference.
 Grant of separation pay in lieu of reinstatement converts the
award of reinstatement into a monetary award; hence, legal
interest may be imposed thereon.
 An employee is not entitled to separation pay when he or she
resigns voluntarily, unless it is a company practice or provided
in the CBA [Hanford Philippines v. Joseph].
c. Backwages
 Backwages is a relief that restores the income that was
lost by reason of the illegal dismissal. It refers to the compensation
which an employee would have earned had he not been unjustly
dismissed. On the other hand, “unpaid wages” refer to
compensation for services already rendered but withheld by the
employer.
In 1996, the Supreme Court changed the rule on the
reckoning of backwages. It announced a new doctrine in the case of
Bustamante v. NLRC, which is now known as the Bustamante
doctrine. Under this rule, the term “full backwages” should mean
exactly that, i.e., without deducting from backwages the earnings
derived elsewhere by the concerned employee during the period of
his illegal dismissal.
The components of backwages are as follows:
(i) Salaries or wages computed on the basis of the
wage rate level at the time of the illegal
dismissal and not in accordance with the latest,
current wage level of the employee’s position.
(ii) Allowances and other benefits regularly
granted to and received by the employee
should be made part of backwages.
This is computed from the time compensation was
withheld up to the time of the employee’s reinstatement (actual or
payroll) except:
(i) If reinstatement is not possible (e.g. if what is
awarded is separation pay in lieu of
reinstatement) – only up to the date of finality
of decision.
(ii) If employer ceased operations – only up to the
date of closure.
(iii) If fixed-term/probationary employee – only up
to the unexpired portion of the fixed-term
contract or probationary employment contract.
(iv) If employee was confined in prison – only up
to the date of confinement in prison.
(v) If employee reached retirement or
retrenchment – only up to retirement age or
date of retrenchment.
(vi) If employee becomes physically or mentally
incapacitated – only up to the date of
incapacity.
(vii) If employee dies during the pendency of the
case – only up to the time of death.
Settled Principles
 Any amount received during payroll reinstatement is
deductible from backwages.
 Salary increases during period of unemployment are not
included as component in the computation of backwages.
 Dismissed employee’s ability to earn is irrelevant in the award
of backwages.
 Employee is entitled to backwages even if it is not included in
his prayer or even if the LA or NLRC failed to award
backwages.
 Backwages excludes period of valid suspension but includes
period of preventive suspension.
 Employers offer to reinstate does not forestall payment of full
backwages.
Limited Backwages
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There are also instances where backwages were not
awarded in full but merely limited for the reason of good faith on
the part of the employer.
No Backwages
Under the following situations, reinstatement of an
illegally dismissed employee is granted without the accompanying
backwages:
(i) When the dismissal is deemed too harsh a
penalty;
(ii) When the employer acted in good faith; or
(iii) Where there is no evidence that the employer
dismissed the employee.
Thus, the backwages will not be granted in full but
limited to 1 year, 2 years or 5 years.
As to the first situation, one illustrative case is ALU-
TUCP v. NLRC, where reinstatement with no backwages was
ordered because the penalty imposed on the employee for
committing theft of company property was reduced to suspension
due to mitigating circumstances. The justification was that the
entire period when the employee was out of job because of his
dismissal should already be considered as the period of his
suspension; hence, he should no longer be entitled to backwages
for the same period.
Another case is Yupangco v. NLRC, where, after finding
that the employee was illegally dismissed but at the same time
guilty of misconduct, it was ruled that there was no grave abuse of
discretion in the resolution of the NLRC which meted only the
penalty of suspension without backwages.
In Pepsi-Cola v. NLRC, where the employee filed a leave
of absence for one day after he suffered stomach ache and upon the
advice of his doctor, he took a rest for 25 days without prior leave.
When he reported back for work, he was told he had been
dismissed for being absent without leave. It was held that while he
was at fault, he could not be dismissed. He was thus ordered
reinstated but he was denied backwages.
H. PREVENTIVE SUSPENSION
Preventive suspension may be legally imposed against an
errant employee only while he is undergoing an investigation for
certain serious offenses. Consequently, its purpose is to prevent
him from causing harm or injury to the company as well as to his
fellow employees, hence, his actual presence in the workplace
would not be desirable for the meaningful conduct of the
investigation of his case. Its imposition is thus justified only in
cases where the employee’s continued presence in the company
premises during the investigation poses a serious and imminent
threat to the life or property of the employer or of the
employee’s co-workers. Without this threat, preventive
suspension is not proper.
Settled Principles
 Preventive suspension, by itself, does not signify that the
company has already adjudged the employee guilty of the
charges for which she was asked to answer and explain.
 Preventive suspension is not a penalty. This is different from
PUNITIVE SUSPENSION which is imposed as a penalty less
harsh than dismissal.
 Preventive suspension is neither equivalent nor tantamount to
dismissal.
 If the basis of the preventive suspension is the employee’s
absences and tardiness, the imposition of preventive suspension
 on him is not justified as his presence in the company premises
does not pose any such serious or imminent threat to the life or
property of the employer or of the employee’s co-workers
simply “by incurring repeated absences and tardiness.”
 Preventive suspension does not mean that due process may be
disregarded.
 Preventive suspension should only be for a maximum period of
thirty (30) days. After the lapse of the 30-day period, the
employer is required to reinstate the worker to his former
position or to a substantially equivalent position. For the
construction industry, preventive suspension should only be for
a maximum of 15 days.
 During the 30-day preventive suspension, the worker is not
entitled to his wages and other benefits. However, if the
employer decides, for a justifiable reason, to extend the period
of preventive suspension beyond said 30- day period, he is
obligated to pay the wages and other benefits due the worker
during said period of extension. In such a case, the worker is not
bound to reimburse the amount paid to him during the extension
if the employer decides to dismiss him after the completion of
the investigation.
 Extension of period must be justified. During the 30-day period
of preventive suspension, the employer is expected to conduct
and finish the investigation of the employee’s administrative
case. The period of thirty (30) days may only be extended if the
employer failed to complete the hearing or investigation within
said period due to justifiable grounds. No extension thereof can
be made based on whimsical, capricious or unreasonable
grounds.
 Preventive suspension lasting longer than 30 days, without the
benefit of valid extension, amounts to constructive dismissal.
 Indefinite preventive suspension amounts to constructive
dismissal.
VI
TERMINATION BY EMPLOYEE
Article 300. [285] Termination by Employee. (a) An employee
may terminate without just cause the employee-employer relationship
by serving a written notice on the employer at least one (1) month in
advance. The employer upon whom no such notice was served may
hold the employee liable for damages.
(b) An employee may put an end to the relationship without
serving any notice on the employer for any of the following just causes:
1. Serious insult by the employer or his representative on the
honor and person of the employee;
2. Inhuman and unbearable treatment accorded the
employee by the employer or his representative;
3. Commission of a crime or offense by the employer or his
representative against the person of the employee or any of the
immediate members of his family; and
4. Other causes analogous to any of the foregoing.
A. VOLUNTARY RESIGNATION
Resignation is the voluntary act of an employee who
finds herself in a situation where she believes that personal reasons
cannot be sacrificed in favor of the exigency of the service and that
she has no other choice but to disassociate herself from
employment. Employees resign for various reasons. A big salary is
certainly no hindrance to a voluntary cessation of employment.
Human resource studies reveal that various factors (in and out of
the workplace) affect an employee’s employment decision [Globe
Telecom v. Crisologo].
1. Requisites
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In case of voluntary resignation without just cause, the
following requisites must concur:
(a) The resigning employee should tender a written (not
verbal) notice of the termination (commonly known
as “resignation letter”);
(b)Service of such notice to the employer at least one
(1) month in advance; and
(c) Written acceptance by the employer of the
resignation.
Written acceptance of resignation is necessary to make it
binding and effective. A duly accepted resignation effectively
terminates the employer-employee relationship [BMG Records v.
Aparecio].
2. Liability for Damages
The failure by the resigning employee to comply with the
legal requirement of service of a written notice (resignation letter)
at least 30 days from its effectivity does not result in making his
resignation void but only in making him liable for damages
[Serrano v. NLRC].
3. Withdrawal of Resignation
Resignations, once accepted, may not be withdrawn
without the consent of the employer. If the employer accepts the
withdrawal, the employee retains his job. If the employer does not,
the employee cannot claim illegal dismissal. To say that an
employee who has resigned is illegally dismissed, is to encroach
upon the right of employers to hire persons who will be of service
to them. Obviously, this is a recognition of the contractual nature
of employment which requires mutuality of consent between the
parties. An employment contract is consensual and voluntary.
Hence, if the employee "finds-himself in a situation where he
believes that personal reasons cannot be sacrificed in favor of the
exigency of the service, then he has no other choice but to
disassociate himself from his employment". If accepted by the
employer, the consequent effect of resignation is severance of the
contract of employment [Philippines Today v. NLRC].
A resigned employee who desires to take his job back has
to re-apply therefor and he shall have the status of a stranger who
cannot unilaterally demand an appointment. He cannot arrogate
unto himself the same position which he earlier decided to leave.
To allow him to do so would be to deprive the employer of his
basic right to choose whom to employ. Such is tantamount to
undue oppression of the employer. It has been held that an
employer is free to regulate, according to his own discretion and
judgment, all aspects of employment including hiring. The law, in
protecting the rights of the laborer, impels neither the oppression
nor self-destruction of the employer [Ibid].
B. INVOLUNTARY RESIGNATION
The following are the just causes that may justify the
termination by the employee of the employment relationship
without need to comply with the 30-day prior written notice
requirement:
(a) Serious insult by the employer or his representative
on the honor and person of the employee;
(b) Inhuman and unbearable treatment accorded the
employee by the employer or his representative;
(c) Commission of a crime or offense by the employer
or his representative against the person of the
employee or any of the immediate members of his
family; and
(d) Other causes analogous to any of the foregoing.

C. CONSTRUCTIVE DISMISSAL
Constructive dismissal contemplates any of the following
situations:
a. An involuntary resignation resorted to when
continued employment is rendered impossible,
unreasonable or unlikely;
b. A demotion in rank and/or a diminution in pay; or
c. A clear discrimination, insensibility or disdain by
an employer which becomes unbearable to the
employee that it could foreclose any choice by him
except to forego his continued employment.
The employer has to prove that such managerial actions
do not constitute constructive dismissal [Blue Dairy Corp. v.
NLRC].
The test of constructive dismissal is whether a reasonable
person in the employee’s position would have felt compelled to
give up his position under the circumstances. It is an act amounting
to dismissal but made to appear as if it were not. In fact, the
employee who is constructively dismissed may be allowed to keep
on coming to work. Constructive dismissal is, therefore, a
DISMISSAL IN DISGUISE. The law recognizes and resolves this
situation in favor of the employees in order to protect their rights
and interests from the coercive acts of the employer [Ang v. San
Joaquin].
Singa Ship Management v. NLRC
Held: Corollarily, the contention of petitioners that respondent
Sangil voluntarily quit and was not illegally dismissed is without merit. We
defer to the findings of the NLRC -
Since complainant is not the aggressor, and since he figured a
head injury, he is then afraid to go back to the ship and to mix with his
aggressor. This apprehension or fear is normal to an ordinary prudent
individual and is tantamount to self-preservation. Therefore, his decision to
leave the ship "Crown Odyssey" is not voluntary. He did not leave the ship
out of his own free will but his departure was precipitated by fear. Without
that incident on 20 July 1990 he would have no reason not to go back to the
ship but with that incident, he fears for his life and limb.
In People's Security, Inc. v. NLRC we said that "constructive
dismissal exists when there is a quitting because continued employment is
rendered impossible, unreasonable or unlikely x x x x" Then in Philippine
Advertising Counselors, Inc. v. NLRC we held that "[c]onstructive
dismissal, however, does not always involve such kinds of diminution; an
act of clear discrimination, insensibility, or disdain by an employer may
become so unbearable on the part of the employee that it could foreclose
any choice by him except to forego his continued employment."
In the instant case, respondent Sangil quit because he feared for
his life and his fear was well founded. He already figured in an incident
with the much taller, bigger and heavier Zakkas who had been intimidating
him. He already suffered a cut in his head. Earlier, Zakkas threatened to
pour hot coffee on his head. Indeed, the intense undercurrent between the
Filipinos and the Greeks that could erupt into violence at the slightest
provocation was apparent as manifested by the writings in blood on the
wall of the word "magkaisa," as witnessed by another Greek steward on the
day of the incident. And, Sangil could not get any protection from the
Greek ship captain, not even the slightest assurance of safety from him. In
fine, the decision of respondent Sangil to leave the ship was not voluntary
at all but was impelled by a legitimate desire for self-preservation. He did
not leave the ship out of his own free will, whim or caprice but was moved
by fear for his life. Without that incident on 20 July 1990 where he was
pushed by the Greek Zakkas, respondent Sangil would not have had any
reason not to return to his ship. After all, he must have worked so hard to
get on board "Crown Odyssey."
Mandapat v. Add Force Personnel Services
Held: Petitioner reiterates that she was constructively dismissed.
She harps on the alleged pattern of harassment committed by respondent as
tantamount to constructive dismissal, such as, illegally placing her under
Page 47 of 49
preventive suspension, the disconnection of her internet account, and the
pressure exerted by respondent to force her to resign.
Petitioner claims that the preventive suspension meted upon her
is illegal for being indefinite, as the duration of her suspension was not
stated in the company’s memorandum.
On the other hand, respondent employer argues that petitioner’s
preventive suspension for one day can hardly be considered indefinite,
given the fact that petitioner immediately resigned one day after the
suspension.
We find that there was no act of discrimination committed
against petitioner that would render her employment unbearable.
Preventive suspension may be legally imposed against an
employee whose alleged violation is the subject of an investigation. The
purpose of his suspension is to prevent him from causing harm or injury to
the company as well as to his fellow employees.
The pertinent rules dealing with preventive suspension are found
in Section 8 and Section 9 of Rule XXIII, Book V of the Omnibus Rules
Implementing the Labor Code, as amended by Department Order No. 9,
Series of 1997, which read as follows:
Section 8. Preventive suspension. The employer may place the
worker concerned under preventive suspension only if his continued
employment poses a serious and imminent threat to the life or property of
the employer or of his co-workers.
Section 9. Period of suspension. No preventive suspension shall
last longer than thirty (30) days. The employer shall thereafter reinstate the
worker in his former or in a substantially equivalent position or the
employer may extend the period of suspension provided that during the
period of extension, he pays the wages and other benefits due to the worker.
In such case, the worker shall not be bound to reimburse the amount paid to
him during the extension if the employer decides, after completion of the
hearing, to dismiss the worker.
When preventive suspension exceeds the maximum period
allowed without reinstating the employee either by actual or payroll
reinstatement or when preventive suspension is for indefinite period, only
then will constructive dismissal set in.
While no period was mentioned in the show-cause
memorandum, it was wrong for petitioner to infer that her suspension was
for an indefinite period. It must be pointed out that the inclusion of the
phrase "during the course of investigation" would lead to a reasonable and
logical presumption that said suspension in fact has a duration which could
very well be not more than 30 days as mandated by law. And, as the Court
of Appeals correctly observed, the suspension has been rendered moot by
petitioner’s resignation tendered a day after the suspension was made
effective.
Petitioner contests the grounds for her suspension as she denies
posing a danger on the lives of the officers or employees of respondent or
of their properties. Petitioner adds that she was not in a position to bind
respondent to any contract, therefore, she could not and would not be able
to sabotage the operations of respondent. Upon the other hand, respondent
asserts that preventive suspension was necessary in order to protect the
assets and operations of the company pending investigation of the alleged
infractions committed by the employee concerned.
Respondent is correct. Indeed, as sales manager, petitioner had
the power and authority to enter into contracts that would bind respondent,
regardless of whether these contracts would prove to be beneficial or
prejudicial to the interest of respondent. Respondent has every right to
protect its assets and operations pending investigation of petitioner.
Neither could we consider the acts of disconnection of computer
and internet access privileges as harassment. Respondent clearly explained
that the cessation of her internet and network privileges were but a
consequence of the investigation against her and not for the purpose of
harassment. The Court of Appeals gave merit to respondent’s explanation
and held, thus:
x x x while her suspension, cessation of internet privileges, and
exclusion from local network access were but a consequence of the
investigation against her, and were intended to prevent her from having
further access to the company’s network-based documents and forms.
The acts respondent complains about are just measures enforced
by respondent to protect itself while the investigation was ongoing.
Petitioner claims that Longstaff forced her to resign by baiting
her with the promise of separation pay; but respondent maintains that there
was nothing illegal in giving petitioner the option to either resign or be
separated for a just cause.
 We agree with the Court of Appeals that there was no coercion
employed on petitioner. The appellate court made the following
observation:
Unfortunately, however, before the investigation could proceed
to the second step of the termination process into a hearing or conference,
Mandapat chose to resign from her job. Mandapat’s bare allegation that she
was coerced into resigning can hardly be given credence in the absence of
clear evidence proving the same. No doubt, Mandapat read the writing on
the wall, knew that she would be fired for her transgressions, and beat the
company to it by resigning. Indeed, by the disrespectful tenor of her
memorandum, Mandapat practically indicated that she was no longer
interested in continuing cordial relations, much less gainful employment
with Add Force.
Mere allegations of threat or force do not constitute evidence to
support a finding of forced resignation. In order for intimidation to vitiate
consent, the following requisites must concur: (1) that the intimidation
caused the consent to be given; (2) that the threatened act be unjust or
unlawful; (3) that the threat be real or serious, there being evident
disproportion between the evil and the resistance which all men can offer,
leading to the choice of doing the act which is forced on the person to do as
the lesser evil; and (4) that it produces a well-grounded fear from the fact
that the person from whom it comes has the necessary means or ability to
inflict the threatened injury to his person or property.
None of these requisites was proven by petitioner. No demand
was made on petitioner to resign. At most, she was merely given the option
to either resign or face disciplinary investigation, which respondent had
every right to conduct in light of the numerous infractions committed by
petitioner. There is nothing irregular in providing an option to petitioner.
Ultimately, the final decision on whether to resign or face disciplinary
action rests on petitioner alone.
All told, the instances of harassment alleged by petitioner appear
to be more apparent than real. We find no reason to disturb the conclusion
of the Court of Appeals that petitioner resigned and was not constructively
dismissed.
Consolidated Foods v. NLRC
Held: We find that petitioners acts of conducting audits and
investigation on the alleged irregularities committed by private respondent
and in reassigning him to another place of work pending the results of the
investigation were based on valid and legitimate grounds. As such, these
acts of management cannot amount to constructive dismissal. It is worthy to
note that petitioners gave Baron every opportunity to raise his defense and
fully explain the discrepancies in the funds in his possession. In fact private
respondent informed petitioners that he would be returning for work on 5
March 1991 after his sick leave. But instead of doing so, he filed a
complaint for constructive dismissal before the Labor Arbiter.
By leaving his job without submitting the required final
explanation on the alleged irregularities, private respondent deprived
himself of the opportunity to face his accusers and prove his innocence of
the charges hurled against him.
Dangan v. NLRC
Held: Instead of terminating the petitioner’s employment, the
private respondent merely reassigned her to other temporary positions
before giving her a permanent job as secretary in the Technical Training
Department located at Bicutan, Taguig, Metro Manila. The acts of the
company negate the petitioner’s claim of discrimination and illegal
constructive dismissal. It tried its best to continue using her services.
Needless to say, no reinstatement can be effected because the petitioner has
not been dismissed. Neither may she be reinstated to her former position
which no longer exists. Ad imposible nemo tenetur. Insofar as this aspect of
the petition is concerned, the respondent NLRC committed no abuse of
discretion in dismissing the petitioner’s appeal.
Cases where there was constructive dismissal
 Denying to the workers entry to their work area and placing
them on shifts “not by weeks but almost by month” by reducing
their workweek to three days.
 Reducing employee’s functions
 Blackmailing an employee to resign
Page 48 of 49
 Delaying when the employee can start working or asking the
employee to wait for a long period of time before rehiring
 Barring the employees from entering the premises whenever
they would report for work in the morning without any
justifiable reason, and they were made to wait for a certain
employee who would arrive in the office at around noon, after
they had waited for a long time and had left.
 Sending to an employee a notice of indefinite suspension which
is tantamount to dismissal.
 Imposing indefinite preventive suspension without actually
conducting any investigation.
 Changing the employee’s status from regular to casual
constitutes constructive dismissal.
 Preventing the employee from reporting for work by ordering
the guards not to let her in. This is clear notice of dismissal.
Illegal Dismissal vs. Constructive Dismissal
In illegal dismissal, the employer openly shows his
intention to dismiss the employee. In fact, the employer, in
compliance with due process, asks the employee to explain why he
should not be dismissed for committing a wrongful act and he is
given due process prior to terminating him.
In contrast, in constructive dismissal, the employer will
never indicate that he is terminating the employee. He will even
allow the employee to report to his work every day. But he will do
any of the three (3) acts mentioned above that indicates his
intention to get rid of the services of the employee. This is the
reason why it is called “dismissal in disguise.”
D. WHEN EMPLOYMENT NOT DEEMED TERMINATED
Article 301. [286] When Employment not Deemed
Terminated. The bona fide suspension of the operation of a business or
undertaking for a period not exceeding six (6) months, or the
fulfillment by the employee of a military or civic duty shall not
terminate employment. In all such cases, the employer shall reinstate
the employee to his former position without loss of seniority rights if he
indicates his desire to resume his work not later than one (1) month
from the resumption of operations of his employer or from his relief
from the military or civic duty.
At the outset, it bears reiterating that although placing an
employee like a security guard on “floating” status (or sometimes
called temporary “off-detail” status) is considered a temporary
retrenchment measure, the Supreme Court, in Exocet v. Serrano,
recognized the fact that there is similarly no provision in the Labor
Code which treats of a temporary retrenchment or lay-off. Neither
is there any provision which provides for its requisites or its
duration.
VII
RETIREMENT
Article 302. [287] Retirement. Any employee may be retired
upon reaching the retirement age established in the collective
bargaining agreement or other applicable employment contract.
In case of retirement, the employee shall be entitled to
receive such retirement benefits as he may have earned under existing
laws and any collective bargaining agreement and other agreements:
Provided, however, retirement benefits under any collective bargaining
and other agreements shall not be less than those provided therein.
In the absence of a retirement plan or agreement providing
for retirement benefits of employees in the establishment, an employee
upon reaching the age of sixty (60) years or more, but not beyond sixty-
five (65) years which is hereby declared the compulsory retirement age,
who has served at least five (5) years in the said establishment, may
retire and shall be entitled to retirement pay equivalent to at least one-
half (1/2) month salary for every year of service, a fraction of at least
six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term
one-half (1/2) month salary shall mean fifteen (15) days plus one-
twelfth (1/12) of the 13th month pay and the cash equivalent of not
more than five (5) days of service incentive leaves.
An underground mining employee upon reaching the age of
fifty (50) years or more, but not beyond sixty (60) years which is hereby
declared the compulsory retirement age for underground mine
workers, who has served at least five (5) years as underground mine
worker, may retire and shall be entitled to all the retirement benefits
provided for in this Article.
Retail, service and agricultural establishments or operations
employing not more than ten (10) employees or workers are exempted
from the coverage of this provision.
Violation of this provision is hereby declared unlawful and
subject to the penal provisions under Article 288 of this Code.
Nothing in this Article shall deprive any employee of benefits
to which he may be entitled under existing laws or company policies or
practices.
A. COVERAGE
The following employees are eligible to avail of
retirement benefits under Article 302 [287] of the Labor Code:
(2) Compulsory retirement upon reaching the age
of sixty-five (65) years (60 if
underground/surface mine employees).
It is the employee who exercises the option under No. 1
above. At age 65, there is no more option of the employee to speak
of. He has to retire as this age is considered compulsory retirement
age.
C. AMOUNT OF RETIREMENT PAY
1. One-half (½) month salary.
In the absence of a retirement plan or agreement
providing for retirement benefits of employees in the
establishment, an employee, upon reaching the optional or
compulsory retirement age specified in Article 287, shall be
entitled to retirement pay equivalent to at least one-half (½) month
salary for every year of service, a fraction of at least six (6) months
being considered as one (1) whole year.
For purposes of determining the minimum retirement pay
due an employee under Article 287, the term “one- half month
salary” shall include all of the following:

1) All employees in the private sector, regardless of their
position, designation or status and irrespective of the
method by which their wages are paid;
2) Part-time employees;
3) Employees of service and other job contractors;
4) Domestic workers/kasambahays or persons in the
personal service of another;
5) Underground mine workers;
6) Employees of government-owned and/or controlled
corporations organized under the Corporation Code
(without original charters).
Article 302 [287], as amended, does not apply to the
following employees:
1. Employees of the national government and its political
subdivisions, including government-owned and/or
controlled corporations, if they are covered by the
Civil Service Law and its regulations.
2. Employees of retail, service and agricultural
establishments or operations regularly employing not
more than ten (10) employees. These terms are
defined as follows:
a. Fifteen (15) days salary of the employee based on
his latest salary rate.
b. The cash equivalent of five (5) days of service
incentive leave;
c. One-twelfth (1/12) of the 13th month pay due the
employee; and
d. All other benefits that the employer and employee
may agree upon that should be included in the
computation of the employee’s retirement pay.
“One-half (½) month salary” means 22.5 days.
“One-half [½] month salary” is equivalent to “22.5
days” arrived at after adding 15 days plus 2.5 days representing
one-twelfth [1/12] of the 13th month pay plus 5 days of service
incentive leave.

a) “Retail establishment” is one principally

engaged in the sale of goods to end-users for
personal or household use. It shall lose its retail
character qualified for exemption if it is engaged
in both retail and wholesale of goods.
b) “Service establishment” is one principally
engaged in the sale of service to individuals for
their own or household use and is generally
recognized as such.

B. OPTIONS
The two (2) types of retirement under the law (Article
302 [287] of the Labor Code) are:

(1) Optional retirement upon reaching the age of

sixty (60) years (50 if underground/surface
mine employees).

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