G.R. No.

143855 September 21, 2010

REPRESENTATIVES GERARDO S. ESPINA, ORLANDO FUA, JR., PROSPERO AMATONG, ROBERT

ACE S. BARBERS, RAUL M. GONZALES, PROSPERO PICHAY, JUAN MIGUEL ZUBIRI and FRANKLIN
BAUTISTA, Petitioners,
vs.
HON. RONALDO ZAMORA, JR. (Executive Secretary), HON. MAR ROXAS (Secretary of Trade and
Industry), HON. FELIPE MEDALLA (Secretary of National Economic and Development Authority),
GOV. RAFAEL BUENAVENTURA (Bangko Sentral ng Pilipinas) and HON. LILIA BAUTISTA
(Chairman, Securities and Exchange Commission), Respondents.

DECISION

ABAD, J.:

This case calls upon the Court to exercise its power of judicial review and determine the
constitutionality of the Retail Trade Liberalization Act of 2000, which has been assailed as in breach
of the constitutional mandate for the development of a self-reliant and independent national
economy effectively controlled by Filipinos.

The Facts and the Case

On March 7, 2000 President Joseph E. Estrada signed into law Republic Act (R.A.) 8762, also known
as the Retail Trade Liberalization Act of 2000. It expressly repealed R.A. 1180, which absolutely
prohibited foreign nationals from engaging in the retail trade business. R.A. 8762 now allows them
to do so under four categories:

Category A Less than Exclusively for Filipino citizens and

US$2,500,000.00 corporations wholly owned by Filipino
citizens.
Category B US$2,500,000.00 up but less For the first two years of R.A. 8762’s
than US$7,500,000.00 effectivity, foreign ownership is allowed up to
60%. After the two-year period, 100% foreign
equity shall be allowed.
Category C US$7,500,000.00 or more May be wholly owned by foreigners. Foreign
investments for establishing a store in
Categories B and C shall not be less than the
equivalent in Philippine Pesos of
US$830,000.00.
Category D US$250,000.00 per store of May be wholly owned by foreigners.
foreign enterprises
specializing in high-end or
luxury products

R.A. 8762 also allows natural-born Filipino citizens, who had lost their citizenship and now reside in
the Philippines, to engage in the retail trade business with the same rights as Filipino citizens.

On October 11, 2000 petitioners ***Magtanggol T. Gunigundo I, Michael T. Defensor, Gerardo S.

Espina, Benjamin S. Lim, Orlando Fua, Jr., Prospero Amatong, Sergio Apostol, Robert Ace S. Barbers,
Enrique Garcia, Jr., Raul M. Gonzales, Jaime Jacob, Apolinario Lozada, Jr., Leonardo Montemayor,
Ma. Elena Palma-Gil, Prospero Pichay, Juan Miguel Zubiri and Franklin Bautista, all members of the
House of Representatives, filed the present petition, assailing the constitutionality of R.A. 8762 on
the following grounds:

First, the law runs afoul of Sections 9, 19, and 20 of Article II of the Constitution which enjoins
the State to place the national economy under the control of Filipinos to achieve equal
distribution of opportunities, promote industrialization and full employment, and protect
Filipino enterprise against unfair competition and trade policies.

Second, the implementation of R.A. 8762 would lead to alien control of the retail trade, which
taken together with alien dominance of other areas of business, would result in the loss of
effective Filipino control of the economy.

Third, foreign retailers like Walmart and K-Mart would crush Filipino retailers and sari-sari
store vendors, destroy self-employment, and bring about more unemployment.

Fourth, the World Bank-International Monetary Fund had improperly imposed the passage
of R.A. 8762 on the government as a condition for the release of certain loans.

Fifth, there is a clear and present danger that the law would promote monopolies or
combinations in restraint of trade.

Respondents Executive Secretary Ronaldo Zamora, Jr., Trade and Industry Secretary Mar Roxas,
National Economic and Development Authority (NEDA) Secretary Felipe Medalla, Bangko Sentral ng
Pilipinas Gov. Rafael Buenaventura, and Securities and Exchange Commission Chairman Lilia
Bautista countered that:

First, petitioners have no legal standing to file the petition. They cannot invoke the fact that
they are taxpayers since R.A. 8762 does not involve the disbursement of public funds. Nor
can they invoke the fact that they are members of Congress since they made no claim that
the law infringes on their right as legislators.

Second, the petition does not involve any justiciable controversy. Petitioners of course claim
that, as members of Congress, they represent the small retail vendors in their respective
districts but the petition does not allege that the subject law violates the rights of those
vendors.

Third, petitioners have failed to overcome the presumption of constitutionality of R.A. 8762.
Indeed, they could not specify how the new law violates the constitutional provisions they
cite. Sections 9, 19, and 20 of Article II of the Constitution are not self-executing provisions
that are judicially demandable.

Fourth, the Constitution mandates the regulation but not the prohibition of foreign
investments. It directs Congress to reserve to Filipino citizens certain areas of investments
upon the recommendation of the NEDA and when the national interest so dictates. But the
Constitution leaves to the discretion of the Congress whether or not to make such
reservation. It does not prohibit Congress from enacting laws allowing the entry of foreigners
into certain industries not reserved by the Constitution to Filipino citizens.

The Issues Presented

Simplified, the case presents two issues:

1. Whether or not petitioner lawmakers have the legal standing to challenge the
constitutionality of R.A. 8762; and

2. Whether or not R.A. 8762 is unconstitutional.

The Court’s Ruling

One. The long settled rule is that he who challenges the validity of a law must have a standing to do
so.1 Legal standing or locus standi refers to the right of a party to come to a court of justice and
make such a challenge. More particularly, standing refers to his personal and substantial interest in
that he has suffered or will suffer direct injury as a result of the passage of that law.2 To put it another
way, he must show that he has been or is about to be denied some right or privilege to which he is
lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the
law he complains of.3

Here, there is no clear showing that the implementation of the Retail Trade Liberalization Act
prejudices petitioners or inflicts damages on them, either as taxpayers 4 or as legislators.5 Still the
Court will resolve the question they raise since the rule on standing can be relaxed for nontraditional
plaintiffs like ordinary citizens, taxpayers, and legislators when as in this case the public interest so
requires or the matter is of transcendental importance, of overarching significance to society, or of
paramount public interest.6

Two. Petitioners mainly argue that R.A. 8762 violates the mandate of the 1987 Constitution for the
State to develop a self-reliant and independent national economy effectively controlled by Filipinos.
They invoke the provisions of the Declaration of Principles and State Policies under Article II of the
1987 Constitution, which read as follows:

Section 9. The State shall promote a just and dynamic social order that will ensure the prosperity
and independence of the nation and free the people from poverty through policies that provide
adequate social services, promote full employment, a rising standard of living, and an improved
quality of life for all.

xxxx

Section 19. The State shall develop a self-reliant and independent national economy effectively
controlled by Filipinos.

Section 20. The State recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investments.

Petitioners also invoke the provisions of the National Economy and Patrimony under Article XII of the
1987 Constitution, which reads:

Section 10. The Congress shall, upon recommendation of the economic and planning agency, when
the national interest dictates, reserve to citizens of the Philippines or to corporations or associations
at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as
Congress may prescribe, certain areas of investments. The Congress shall enact measures that will
encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy and patrimony, the
State shall give preference to qualified Filipinos.

The State shall regulate and exercise authority over foreign investments within its national
jurisdiction and in accordance with its national goals and priorities.

xxxx

Section 12. The State shall promote the preferential use of Filipino labor, domestic materials and
locally produced goods, and adopt measures that help make them competitive.

Section 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms
and arrangements of exchange on the basis of equality and reciprocity.

But, as the Court explained in Tañada v. Angara,7 the provisions of Article II of the 1987 Constitution,
the declarations of principles and state policies, are not self-executing. Legislative failure to pursue
such policies cannot give rise to a cause of action in the courts.

The Court further explained in Tañada that Article XII of the 1987 Constitution lays down the ideals
of economic nationalism: (1) by expressing preference in favor of qualified Filipinos in the grant of
rights, privileges and concessions covering the national economy and patrimony and in the use of
Filipino labor, domestic materials and locally-produced goods; (2) by mandating the State to adopt
measures that help make them competitive; and (3) by requiring the State to develop a self-reliant
and independent national economy effectively controlled by Filipinos. 8ten.lihpwal

In other words, while Section 19, Article II of the 1987 Constitution requires the development of a
self-reliant and independent national economy effectively controlled by Filipino entrepreneurs, it
does not impose a policy of Filipino monopoly of the economic environment. The objective is simply
to prohibit foreign powers or interests from maneuvering our economic policies and ensure that
Filipinos are given preference in all areas of development.

Indeed, the 1987 Constitution takes into account the realities of the outside world as it requires the
pursuit of a trade policy that serves the general welfare and utilizes all forms and arrangements of
exchange on the basis of equality and reciprocity; and speaks of industries which are competitive in
both domestic and foreign markets as well as of the protection of Filipino enterprises against unfair
foreign competition and trade practices. Thus, while the Constitution mandates a bias in favor of
Filipino goods, services, labor and enterprises, it also recognizes the need for business exchange
with the rest of the world on the bases of equality and reciprocity and limits protection of Filipino
enterprises only against foreign competition and trade practices that are unfair. 9

In other words, the 1987 Constitution does not rule out the entry of foreign investments, goods, and
services. While it does not encourage their unlimited entry into the country, it does not prohibit them
either. In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on foreign
competition that is unfair.10 The key, as in all economies in the world, is to strike a balance between
protecting local businesses and allowing the entry of foreign investments and services. 1avvphi1

More importantly, Section 10, Article XII of the 1987 Constitution gives Congress the discretion to
reserve to Filipinos certain areas of investments upon the recommendation of the NEDA and when
the national interest requires. Thus, Congress can determine what policy to pass and when to pass
it depending on the economic exigencies. It can enact laws allowing the entry of foreigners into
certain industries not reserved by the Constitution to Filipino citizens. In this case, Congress has
decided to open certain areas of the retail trade business to foreign investments instead of reserving
them exclusively to Filipino citizens. The NEDA has not opposed such policy.

The control and regulation of trade in the interest of the public welfare is of course an exercise of
the police power of the State. A person’s right to property, whether he is a Filipino citizen or foreign
national, cannot be taken from him without due process of law. In 1954, Congress enacted the Retail
Trade Nationalization Act or R.A. 1180 that restricts the retail business to Filipino citizens. In denying
the petition assailing the validity of such Act for violation of the foreigner’s right to substantive due
process of law, the Supreme Court held that the law constituted a valid exercise of police
power.11 The State had an interest in preventing alien control of the retail trade and R.A. 1180 was
reasonably related to that purpose. That law is not arbitrary.

Here, to the extent that R.A. 8762, the Retail Trade Liberalization Act, lessens the restraint on the
foreigners’ right to property or to engage in an ordinarily lawful business, it cannot be said that the
law amounts to a denial of the Filipinos’ right to property and to due process of law. Filipinos continue
to have the right to engage in the kinds of retail business to which the law in question has permitted
the entry of foreign investors.

Certainly, it is not within the province of the Court to inquire into the wisdom of R.A. 8762 save when
it blatantly violates the Constitution. But as the Court has said, there is no showing that the law has
contravened any constitutional mandate. The Court is not convinced that the implementation of R.A.
8762 would eventually lead to alien control of the retail trade business. Petitioners have not
mustered any concrete and strong argument to support its thesis. The law itself has provided strict
safeguards on foreign participation in that business. Thus –

First, aliens can only engage in retail trade business subject to the categories above-
enumerated; Second, only nationals from, or juridical entities formed or incorporated in countries
which allow the entry of Filipino retailers shall be allowed to engage in retail trade business;
and Third, qualified foreign retailers shall not be allowed to engage in certain retailing activities
outside their accredited stores through the use of mobile or rolling stores or carts, the use of sales
representatives, door-to-door selling, restaurants and sari-sari stores and such other similar
retailing activities.

In sum, petitioners have not shown how the retail trade liberalization has prejudiced and can
prejudice the local small and medium enterprises since its implementation about a decade ago.

WHEREFORE, the Court DISMISSES the petition for lack of merit. No costs.

SO ORDERED.

G.R. No. 188747 January 29, 2014

MANILA WATER COMPANY, Petitioner,

vs.
CARLITO DEL ROSARIO, Respondent.

DECISION

PEREZ, J.:
This is a Petition for Review on Certiorari 1 filed pursuant to Rule 45 of the Revised Rules of Court,
assailing the 31 March 2009 Decision2 rendered by the Fifth Division of the Court of Appeals in CA-
G.R. SP No. 925 83. In its assailed decision, the appellate court: ( 1) reversed as grave abuse of
discretion the Resolution of the National Labor Relations Commission (NLRC) which dismissed the
petition of Manila Water Company (Manila Water) on technical grounds; and (2) proceeded to affirm
with modification the ruling of the Labor Arbiter. Manila Water was ordered to pay respondent Carlito
Del Rosario (Del Rosario) separation pay to be computed from 1 August 1997 up to June 2000.

In a Resolution3 dated 7 July 2009, the appellate court refused to reconsider its earlier decision.

The Facts

On 22 October 1979, Del Rosario was employed as Instrument Technician by Metropolitan

Waterworks and Sewerage System (MWSS). Sometime in 1996, MWSS was reorganized pursuant to
Republic Act No. 8041 or the National Water Crisis Act of 1995, and its implementing guidelines −
Executive Order No. 286. Because of the reorganization, Manila Water absorbed some employees
of MWSS including Del Rosario. On 1 August 1997, Del Rosario officially became an employee of
Manila Water.

Sometime in May 2000, Manila Water discovered that 24 water meters were missing in its
stockroom. Upon initial investigation, it appeared that Del Rosario and his co-employee, a certain
Danilo Manguera, were involved in the pilferage and the sale of water meters to the company’s
contractor. Consequently, Manila Water issued a Memorandum dated 23 June 2000, directing Del
Rosario to explain in writing within 72 hours why he should not be dealt with administratively for the
loss of the said water meters.4 In his letter-explanation,5 Del Rosario confessed his involvement in
the act charged and pleaded for forgiveness, promising not to commit similar acts in the future.

On 29 June 2000, Manila Water conducted a hearing to afford Del Rosario the opportunity to
personally defend himself and to explain and clarify his defenses to the charge against him. During
the formal investigation Del Rosario was found responsible for the loss of the water meters and
therefore liable for violating Section 11.1 of the Company’s Code of Conduct. 6 Manila Water
proceeded to dismiss Del Rosario from employment on 3 July 2000. 7

This prompted Del Rosario to file an action for illegal dismissal claiming that his severance from
employment is without just cause. In his Position Paper submitted before the labor officer, Del
Rosario averred that his admission to the misconduct charged was not voluntary but was coerced
by the company. Such admission therefore, made without the assistance of a counsel, could not be
made basis in terminating his employment.

Refuting the allegations of Del Rosario, Manila Water pointed out that he was indeed involved in the
taking of the water meters from the company’s stock room and of selling these to a private
contractor for personal gain. Invoking Section 11.1 of the Company’s Code of Conduct, Manila Water
averred that such act of stealing the company’s property is punishable by dismissal. The company
invited the attention of this Court to the fact that Del Rosario himself confessed his involvement to
the loss of the water meters not only in his letter-explanation, but also during the formal
investigation, and in both instances, pleaded for his employer’s forgiveness.8

After weighing the positions taken by the opposing parties, including the evidence adduced in
support of their respective cases, the Labor Arbiter issued a Decision9 dated 30 May 2002
dismissing for lack of merit the complaint filed by Del Rosario who was, however, awarded
separation pay. According to the Labor Arbiter, Del Rosario’s length of service for 21 years, without
previous derogatory record, warrants the award of separation pay. The decretal portion of the
decision reads:

WHEREFORE, viewed from the foregoing, judgment is hereby rendered DISMISSING the complaint
for illegal dismissal for lack of merit.

[Manila Water] is hereby ordered to pay complainant separation pay equivalent to one-half (1/2)
month’s salary for every year of service based on his basic salary (Php 11,244.00) at the time of his
dismissal. This shall be computed from [1 August 1997] up to June 2000, the total amount of which
is ONE HUNDRED EIGHTEEN THOUSAND SIXTY-TWO (Php 118,062.00) PESOS.10

In a Resolution11 dated 30 September 2003, the NLRC dismissed the appeal interposed by Manila
Water for its failure to append a certification against forum shopping in its Memorandum of Appeal.

Similarly ill-fated was Manila Water’s Motion for Reconsideration which was denied by the NLRC in
a Resolution12 dated 28 April 2005.

On Certiorari, the Court of Appeals in its Decision dated 31 March 2009, reversed the NLRC
Resolution and held that it committed a grave abuse of discretion when it dismissed Manila Water’s
appeal on mere technicality. The appellate court, however, proceeded to affirm the decision of the
Labor Arbiter awarding separation pay to Del Rosario. Considering that Del Rosario rendered 21
years of service to the company without previous derogatory record, the appellate court considered
the granting of separation pay by the labor officer justified. The fallo of the assailed Court of Appeals
Decision reads:

WHEREFORE, the petition is partly granted. The assailed Resolutions dated September 30, 2003 and
[April 28, 2005] of public respondent NLRC are set aside. The Decision dated May 30, 2002 of the
[L]abor [A]rbiter is reinstated, subject to the modification that the computation of the award of
separation pay [to] private respondent shall be counted from August 1, 1997 x x x up to June 2000. 13

In a Resolution14 dated 7 July 2009, the Court of Appeals refused to reconsider its earlier decision.

Unrelenting, Manila Water filed the instant Petition for Review on Certiorari assailing the foregoing
Court of Appeals Decision and Resolution on the sole ground that:

THE [COURT OF APPEALS] SERIOUSLY ERRED IN ISSUING THE QUESTIONED DECISION AND
RESOLUTION WHICH DIRECTLY CONTRAVENE BOOK VI, RULE 1, AND SECTION 7 OF THE OMNIBUS
RULES IMPLEMENTING THE LABOR CODE AND PREVAILING JURISPRUDENCE WHICH
CATEGORICALLY PROVIDE THAT AN EMPLOYEE SEPARATED FROM SERIOUS MISCONDUCT IS
NOT ENTITLED TO TERMINATION (SEPARATION) PAY.15

The Court’s Ruling

In the instant petition, Manila Water essentially questions the award of separation pay to respondent
who was dismissed for stealing the company’s property which amounted to gross misconduct. It
argues that separation pay or financial assistance is not awarded to employees guilty of gross
misconduct or for cause reflecting on his moral character. 16

Del Rosario for his part maintains that there is no legal ground to justify his termination from
employment. He insists that his admission pertaining to his involvement in the loss of the water
meters was merely coerced by the company. Since his dismissal was without valid or just cause, Del
Rosario avers that Manila Water is guilty of illegal dismissal rendering it liable for the payment of
backwages and separation pay.17

It must be stressed at the outset that the correctness of the Labor Arbiter’s pronouncement on the
legality of Del Rosario’s dismissal is no longer an issue and is beyond modification. While Manila
Water timely appealed the ruling of the Labor Arbiter awarding separation pay to Del Rosario, the
latter did not question the dismissal of his illegal termination case. 18 It is settled in our jurisprudence
that a party who has not appealed cannot obtain from the appellate court any affirmative relief other
than the ones granted in the appealed decision. 19 Due process prevents the grant of additional
awards to parties who did not appeal.20 Having said that, this Court will no longer dwell on the issue
of whether or not Del Rosario was illegally dismissed from employment. Included in the closed aspect
of the case is respondent’s argument that the absence of his counsel when he admitted the charge
against him diminished the evidentiary value of such admission. Nonetheless, it may be mentioned
that the constitutional right to counsel is available only during custodial investigation. If the
investigation is merely administrative conducted by the employer and not a criminal investigation,
the admission made during such investigation may be used as evidence to justify dismissal. 21

Our focus will be on the propriety of the award for separation pay.

As a general rule, an employee who has been dismissed for any of the just causes enumerated under
Article 28222 of the Labor Code is not entitled to a separation pay.23 Section 7, Rule I, Book VI of the
Omnibus Rules implementing the Labor Code provides:

Sec. 7. Termination of employment by employer. — The just causes for terminating the services of
an employee shall be those provided in Article 282 of the Code. The separation from work of an
employee for a just cause does not entitle him to the termination pay provided in the Code, without
prejudice, however, to whatever rights, benefits and privileges he may have under the applicable
individual or collective agreement with the employer or voluntary employer policy or practice.

In exceptional cases, however, the Court has granted separation pay to a legally dismissed
employee as an act of "social justice" or on "equitable grounds." 24 In both instances, it is required
that the dismissal (1) was not for serious misconduct; and (2) did not reflect on the moral character
of the employee.25

In the leading case of Philippine Long Distance Telephone Company v. NLRC, 26 we laid down the
rule that separation pay shall be allowed as a measure of social justice only in the instances where
the employee is validly dismissed for causes other than serious misconduct reflecting his moral
character. We clarified that:

We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or
those reflecting on his moral character. Where the reason for the valid dismissal is, for example,
habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with
a fellow worker, the employer may not be required to give the dismissed employee separation pay,
or financial assistance, or whatever other name it is called, on the ground of social justice.

A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than
punishing the erring employee for his offense. And we do not agree that the punishment is his
dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of
course it has. Indeed, if the employee who steals from the company is granted separation pay even
as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next
employment because he thinks he can expect a like leniency if he is again found out. This kind of
misplaced compassion is not going to do labor in general any good as it will encourage the infiltration
of its ranks by those who do not deserve the protection and concern of the Constitution.

The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best[,] it may mitigate the penalty but it certainly will not
condone the offense. Compassion for the poor is an imperative of every humane society but only
when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be
permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment
of the guilty. Those who invoke social justice may do so only if their hands are clean and their
motives blameless and not simply because they happen to be poor. This great policy of our
Constitution is not meant for the protection of those who have proved they are not worthy of it, like
the workers who have tainted the cause of labor with the blemishes of their own character. 27

In the subsequent case of Toyota Motor Phils. Corp. Workers Association (TMPCWA) v. National
Labor Relations Commission,28 we expanded the exclusions and elucidated that separation pay shall
be allowed as a measure of social justice only in instances where the employee is validly dismissed
for causes other than serious misconduct, willful disobedience, gross and habitual neglect of duty,
fraud or willful breach of trust, commission of a crime against the employer or his family, or those
reflecting on his moral character. In the same case, we instructed the labor officials that they must
be most judicious and circumspect in awarding separation pay or financial assistance as the
constitutional policy to provide full protection to labor is not meant to be an instrument to oppress
the employers.29 The commitment of the court to the cause of the labor should not embarrass us
from sustaining the employers when they are right, as here. In fine, we should be more cautious in
awarding financial assistance to the undeserving and those who are unworthy of liberality of the
law.30

Guided by the foregoing rules, we have carefully treaded the path of compassionate justice in the
subsequent cases so as not to slip and favor labor at the expense of management.

In Tirazona v. Phillippine EDS Techno-Service, Inc. (PET, Inc.),31 we denied the award of separation
pay to an employee who was dismissed from employment due to loss of trust and confidence.

While [this] Court commiserates with the plight of Tirazona, who has recently manifested that she
has since been suffering from her poor health condition, the Court cannot grant her plea for the
award of financial benefits based solely on this unfortunate circumstance. For all its conceded merit,
equity is available only in the absence of law and not as its replacement. Equity as an exceptional
extenuating circumstance does not favor, nor may it be used to reward, the indolent or the
wrongdoer for that matter. This Court will not allow a party, in guise of equity, to benefit from its
own fault.32 (Emphasis supplied).

The attendant circumstances in the present case considered, we are constrained to deny Del
Rosario separation pay since the admitted cause of his dismissal amounts to serious misconduct.
He is not only responsible for the loss of the water meters in flagrant violation of the company’s
policy but his act is in utter disregard of his partnership with his employer in the pursuit of mutual
benefits.

In the recent case of Daabay v. Coca-Cola Bottlers,33 this Court reiterated our ruling in Toyota and
disallowed the payment of separation pay to an employee who was found guilty of stealing the
company’s property. We repeated that an award of separation pay in such an instance is misplaced
compassion for the undeserving who may find their way back and weaken the fiber of labor.
That Del Rosario rendered 21 years of service to the company will not save the day for
him.1âwphi1 To this case, Central Pangasinan Electric Cooperative, Inc. v. National Labor Relations
Commission is on all fours, thus:

Although long years of service might generally be considered for the award of separation benefits
or some form of financial assistance to mitigate the effects of termination, this case is not the
appropriate instance for generosity under the Labor Code nor under our prior decisions. The fact
that private respondent served petitioner for more than twenty years with no negative record prior
to his dismissal, in our view of this case, does not call for such award of benefits, since his violation
reflects a regrettable lack of loyalty and worse, betrayal of the company. If an employee's length of
service is to be regarded as a justification for moderating the penalty of dismissal, such gesture will
actually become a prize for disloyalty, distorting the meaning of social justice and undermining the
efforts of labor to cleanse its ranks of undesirables. 34
(Emphasis supplied).

Indubitably, the appellate court erred in awarding separation pay to Del Rosario without taking into
consideration that the transgression he committed constitutes a serious offense. The grant of
separation pay to a dismissed employee is determined by the cause of the dismissal. The years of
service may determine how much separation pay may be awarded. It is, however, not the reason
why such pay should be granted at all.

In sum, we hold that the award of separation pay or any other kind of financial assistance to Del
Rosario, under the nomenclature of compassionate justice, is not warranted in the instant case. A
contrary rule would have the effect of rewarding rather than punishing an erring employee,
disturbing the noble concept of social justice.

WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision and Resolution
of the Court of Appeals are hereby REVERSED and SET ASIDE.

SO ORDERED.

G.R. No. 118978 May 23, 1997

PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, * petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and GRACE DE GUZMAN, respondents.

REGALADO, J.:

Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph and
Telephone Company (hereafter, PT & T) invokes the alleged concealment of civil status and
defalcation of company funds as grounds to terminate the services of an employee. That employee,
herein private respondent Grace de Guzman, contrarily argues that what really motivated PT & T to
terminate her services was her having contracted marriage during her employment, which is
prohibited by petitioner in its company policies. She thus claims that she was discriminated against
in gross violation of law, such a proscription by an employer being outlawed by Article 136 of the
Labor Code.
Grace de Guzman was initially hired by petitioner as a reliever, specifically as a "Supernumerary
Project Worker," for a fixed period from November 21, 1990 until April 20, 1991 vice one C.F. Tenorio
who went on maternity leave. 1 Under the Reliever Agreement which she signed with petitioner
company, her employment was to be immediately terminated upon expiration of the agreed period.
Thereafter, from June 10, 1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991, private
respondent's services as reliever were again engaged by petitioner, this time in replacement of one
Erlinda F. Dizon who went on leave during both periods.2 After August 8, 1991, and pursuant to their
Reliever Agreement, her services were terminated.

On September 2, 1991, private respondent was once more asked to join petitioner company as a
probationary employee, the probationary period to cover 150 days. In the job application form that
was furnished her to be filled up for the purpose, she indicated in the portion for civil status therein
that she was single although she had contracted marriage a few months earlier, that is, on May 26,
1991.3

It now appears that private respondent had made the same representation in the two successive
reliever agreements which she signed on June 10, 1991 and July 8, 1991. When petitioner supposedly
learned about the same later, its branch supervisor in Baguio City, Delia M. Oficial, sent to private
respondent a memorandum dated January 15, 1992 requiring her to explain the discrepancy. In that
memorandum, she was reminded about the company's policy of not accepting married women for
employment.4

In her reply letter dated January 17, 1992, private respondent stated that she was not aware of
PT&T's policy regarding married women at the time, and that all along she had not deliberately
hidden her true civil status.5 Petitioner nonetheless remained unconvinced by her explanations.
Private respondent was dismissed from the company effective January 29, 1992, 6 which she readily
contested by initiating a complaint for illegal dismissal, coupled with a claim for non-payment of cost
of living allowances (COLA), before the Regional Arbitration Branch of the National Labor Relations
Commission in Baguio City.

At the preliminary conference conducted in connection therewith, private respondent volunteered

the information, and this was incorporated in the stipulation of facts between the parties, that she
had failed to remit the amount of P2,380.75 of her collections. She then executed a promissory note
for that amount in favor of petitioner7. All of these took place in a formal proceeding and with the
agreement of the parties and/or their counsel.

On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision declaring that
private respondent, who had already gained the status of a regular employee, was illegally dismissed
by petitioner. Her reinstatement, plus payment of the corresponding back wages and COLA, was
correspondingly ordered, the labor arbiter being of the firmly expressed view that the ground relied
upon by petitioner in dismissing private respondent was clearly insufficient, and that it was apparent
that she had been discriminated against on account of her having contracted marriage in violation
of company rules.

On appeal to the National Labor Relations Commission (NLRC), said public respondent upheld the
labor arbiter and, in its decision dated April 29, 1994, it ruled that private respondent had indeed
been the subject of an unjust and unlawful discrimination by her employer, PT & T. However, the
decision of the labor arbiter was modified with the qualification that Grace de Guzman deserved to
be suspended for three months in view of the dishonest nature of her acts which should not be
condoned. In all other respects, the NLRC affirmed the decision of the labor arbiter, including the
order for the reinstatement of private respondent in her employment with PT & T.
The subsequent motion for reconsideration filed by petitioner was rebuffed by respondent NLRC in
its resolution of November 9, 1994, hence this special civil action assailing the aforestated decisions
of the labor arbiter and respondent NLRC, as well as the denial resolution of the latter.

1. Decreed in the Bible itself is the universal norm that women should be regarded with love and
respect but, through the ages, men have responded to that injunction with indifference, on the
hubristic conceit that women constitute the inferior sex. Nowhere has that prejudice against
womankind been so pervasive as in the field of labor, especially on the matter of equal employment
opportunities and standards. In the Philippine setting, women have traditionally been considered as
falling within the vulnerable groups or types of workers who must be safeguarded with preventive
and remedial social legislation against discriminatory and exploitative practices in hiring, training,
benefits, promotion and retention.

The Constitution, cognizant of the disparity in rights between men and women in almost all phases
of social and political life, provides a gamut of protective provisions. To cite a few of the primordial
ones, Section 14, Article II8 on the Declaration of Principles and State Policies, expressly recognizes
the role of women in nation-building and commands the State to ensure, at all times, the fundamental
equality before the law of women and men. Corollary thereto, Section 3 of Article XIII9 (the progenitor
whereof dates back to both the 1935 and 1973 Constitution) pointedly requires the State to afford
full protection to labor and to promote full employment and equality of employment opportunities
for all, including an assurance of entitlement to tenurial security of all workers. Similarly, Section 14
of Article XIII 10 mandates that the State shall protect working women through provisions for
opportunities that would enable them to reach their full potential.

2. Corrective labor and social laws on gender inequality have emerged with more frequency in the
years since the Labor Code was enacted on May 1, 1974 as Presidential Decree No. 442, largely due
to our country's commitment as a signatory to the United Nations Convention on the Elimination of
All Forms of Discrimination Against Women (CEDAW). 11

Principal among these laws are Republic Act No. 6727 12 which explicitly prohibits discrimination
against women with respect to terms and conditions of employment, promotion, and training
opportunities; Republic Act No. 6955 13 which bans the "mail-order-bride" practice for a fee and the
export of female labor to countries that cannot guarantee protection to the rights of women workers;
Republic Act No. 7192 14 also known as the "Women in Development and Nation Building Act," which
affords women equal opportunities with men to act and to enter into contracts, and for appointment,
admission, training, graduation, and commissioning in all military or similar schools of the Armed
Forces of the Philippines and the Philippine National Police; Republic Act No. 7322 15 increasing the
maternity benefits granted to women in the private sector; Republic Act No. 7877 16 which outlaws
and punishes sexual harassment in the workplace and in the education and training environment;
and Republic Act No. 8042, 17 or the "Migrant Workers and Overseas Filipinos Act of 1995," which
prescribes as a matter of policy, inter alia, the deployment of migrant workers, with emphasis on
women, only in countries where their rights are secure. Likewise, it would not be amiss to point out
that in the Family Code, 18 women's rights in the field of civil law have been greatly enhanced and
expanded.

In the Labor Code, provisions governing the rights of women workers are found in Articles 130 to
138 thereof. Article 130 involves the right against particular kinds of night work while Article 132
ensures the right of women to be provided with facilities and standards which the Secretary of Labor
may establish to ensure their health and safety. For purposes of labor and social legislation, a woman
working in a nightclub, cocktail lounge, massage clinic, bar or other similar establishments shall be
considered as an employee under Article 138. Article 135, on the other hand, recognizes a woman's
right against discrimination with respect to terms and conditions of employment on account simply
of sex. Finally, and this brings us to the issue at hand, Article 136 explicitly prohibits discrimination
merely by reason of the marriage of a female employee.

3. Acknowledged as paramount in the due process scheme is the constitutional guarantee of

protection to labor and security of tenure. Thus, an employer is required, as a condition sine qua
non prior to severance of the employment ties of an individual under his employ, to convincingly
establish, through substantial evidence, the existence of a valid and just cause in dispensing with
the services of such employee, one's labor being regarded as constitutionally protected property.

On the other hand, it is recognized that regulation of manpower by the company falls within the so-
called management prerogatives, which prescriptions encompass the matter of hiring, supervision
of workers, work assignments, working methods and assignments, as well as regulations on the
transfer of employees, lay-off of workers, and the discipline, dismissal, and recall of employees. 19 As
put in a case, an employer is free to regulate, according to his discretion and best business
judgment, all aspects of employment, "from hiring to firing," except in cases of unlawful
discrimination or those which may be provided by law. 20

In the case at bar, petitioner's policy of not accepting or considering as disqualified from work any
woman worker who contracts marriage runs afoul of the test of, and the right against, discrimination,
afforded all women workers by our labor laws and by no less than the Constitution. Contrary to
petitioner's assertion that it dismissed private respondent from employment on account of her
dishonesty, the record discloses clearly that her ties with the company were dissolved principally
because of the company's policy that married women are not qualified for employment in PT & T,
and not merely because of her supposed acts of dishonesty.

That it was so can easily be seen from the memorandum sent to private respondent by Delia M.
Oficial, the branch supervisor of the company, with the reminder, in the words of the latter, that
"you're fully aware that the company is not accepting married women employee ( sic), as it was
verbally instructed to you." 21 Again, in the termination notice sent to her by the same branch
supervisor, private respondent was made to understand that her severance from the service was
not only by reason of her concealment of her married status but, over and on top of that, was her
violation of the company's policy against marriage ("and even told you that married women
employees are not applicable [sic] or accepted in our company.") 22 Parenthetically, this seems to
be the curious reason why it was made to appear in the initiatory pleadings that petitioner was
represented in this case only by its said supervisor and not by its highest ranking officers who would
otherwise be solidarily liable with the corporation. 23

Verily, private respondent's act of concealing the true nature of her status from PT & T could not be
properly characterized as willful or in bad faith as she was moved to act the way she did mainly
because she wanted to retain a permanent job in a stable company. In other words, she was
practically forced by that very same illegal company policy into misrepresenting her civil status for
fear of being disqualified from work. While loss of confidence is a just cause for termination of
employment, it should not be simulated. 24 It must rest on an actual breach of duty committed by
the employee and not on the employer's caprices. 25 Furthermore, it should never be used as a
subterfuge for causes which are improper, illegal, or unjustified. 26

In the present controversy, petitioner's expostulations that it dismissed private respondent, not
because the latter got married but because she concealed that fact, does have a hollow ring. Her
concealment, so it is claimed, bespeaks dishonesty hence the consequent loss of confidence in her
which justified her dismissal.
Petitioner would asseverate, therefore, that while it has nothing against marriage, it nonetheless
takes umbrage over the concealment of that fact. This improbable reasoning, with interstitial
distinctions, perturbs the Court since private respondent may well be minded to claim that the
imputation of dishonesty should be the other way around.

Petitioner would have the Court believe that although private respondent defied its policy against
its female employees contracting marriage, what could be an act of insubordination was
inconsequential. What it submits as unforgivable is her concealment of that marriage yet, at the
same time, declaring that marriage as a trivial matter to which it supposedly has no objection. In
other words, PT & T says it gives its blessings to its female employees contracting marriage, despite
the maternity leaves and other benefits it would consequently respond for and which obviously it
would have wanted to avoid. If that employee confesses such fact of marriage, there will be no
sanction; but if such employee conceals the same instead of proceeding to the confessional, she
will be dismissed. This line of reasoning does not impress us as reflecting its true management policy
or that we are being regaled with responsible advocacy.

This Court should be spared the ennui of strained reasoning and the tedium of propositions which
confuse through less than candid arguments. Indeed, petitioner glosses over the fact that it was its
unlawful policy against married women, both on the aspects of qualification and retention, which
compelled private respondent to conceal her supervenient marriage. It was, however, that very
policy alone which was the cause of private respondent's secretive conduct now complained of. It
is then apropos to recall the familiar saying that he who is the cause of the cause is the cause of the
evil caused.

Finally, petitioner's collateral insistence on the admission of private respondent that she supposedly
misappropriated company funds, as an additional ground to dismiss her from employment, is
somewhat insincere and self-serving. Concededly, private respondent admitted in the course of the
proceedings that she failed to remit some of her collections, but that is an altogether different story.
The fact is that she was dismissed solely because of her concealment of her marital status, and not
on the basis of that supposed defalcation of company funds. That the labor arbiter would thus
consider petitioner's submissions on this supposed dishonesty as a mere afterthought, just to
bolster its case for dismissal, is a perceptive conclusion born of experience in labor cases. For, there
was no showing that private respondent deliberately misappropriated the amount or whether her
failure to remit the same was through negligence and, if so, whether the negligence was in nature
simple or grave. In fact, it was merely agreed that private respondent execute a promissory note to
refund the same, which she did, and the matter was deemed settled as a peripheral issue in the
labor case.

Private respondent, it must be observed, had gained regular status at the time of her dismissal.
When she was served her walking papers on January 29, 1992, she was about to complete the
probationary period of 150 days as she was contracted as a probationary employee on September
2, 1991. That her dismissal would be effected just when her probationary period was winding down
clearly raises the plausible conclusion that it was done in order to prevent her from earning security
of tenure. 27 On the other hand, her earlier stints with the company as reliever were undoubtedly
those of a regular employee, even if the same were for fixed periods, as she performed activities
which were essential or necessary in the usual trade and business of PT & T. 28 The primary standard
of determining regular employment is the reasonable connection between the activity performed by
the employee in relation to the business or trade of the employer. 29

As an employee who had therefore gained regular status, and as she had been dismissed without
just cause, she is entitled to reinstatement without loss of seniority rights and other privileges and
to full back wages, inclusive of allowances and other benefits or their monetary
equivalent. 30 However, as she had undeniably committed an act of dishonesty in concealing her
status, albeit under the compulsion of an unlawful imposition of petitioner, the three-month
suspension imposed by respondent NLRC must be upheld to obviate the impression or inference
that such act should be condoned. It would be unfair to the employer if she were to return to its fold
without any sanction whatsoever for her act which was not totally justified. Thus, her entitlement to
back wages, which shall be computed from the time her compensation was withheld up to the time
of her actual reinstatement, shall be reduced by deducting therefrom the amount corresponding to
her three months suspension.

4. The government, to repeat, abhors any stipulation or policy in the nature of that adopted by
petitioner PT & T. The Labor Code state, in no uncertain terms, as follows:

Art. 136. Stipulation against marriage. — It shall be unlawful for an employer to

require as a condition of employment or continuation of employment that a woman
shall not get married, or to stipulate expressly or tacitly that upon getting married, a
woman employee shall be deemed resigned or separated, or to actually dismiss,
discharge, discriminate or otherwise prejudice a woman employee merely by reason
of marriage.

This provision had a studied history for its origin can be traced to Section 8 of Presidential Decree
No. 148, 31 better known as the "Women and
Child Labor Law," which amended paragraph (c), Section 12 of Republic Act No. 679, 32 entitled "An
Act to Regulate the Employment of Women and Children, to Provide Penalties for Violations Thereof,
and for Other Purposes." The forerunner to Republic Act No. 679, on the other hand, was Act No.
3071 which became law on March 16, 1923 and which regulated the employment of women and
children in shops, factories, industrial, agricultural, and mercantile establishments and other places
of labor in the then Philippine Islands.

It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et
al. vs. Philippine Air Lines, 33 a decision that emanated from the Office of the President. There, a
policy of Philippine Air Lines requiring that prospective flight attendants must be single and that they
will be automatically separated from the service once they marry was declared void, it being violative
of the clear mandate in Article 136 of the Labor Code with regard to discrimination against married
women. Thus:

Of first impression is the incompatibility of the respondent's policy or regulation with

the codal provision of law. Respondent is resolute in its contention that Article 136
of the Labor Code applies only to women employed in ordinary occupations and that
the prohibition against marriage of women engaged in extraordinary occupations,
like flight attendants, is fair and reasonable, considering the pecularities of their
chosen profession.

We cannot subscribe to the line of reasoning pursued by respondent. All along, it

knew that the controverted policy has already met its doom as early as March 13,
1973 when Presidential Decree No. 148, otherwise known as the Women and Child
Labor Law, was promulgated. But for the timidity of those affected or their labor
unions in challenging the validity of the policy, the same was able to obtain a
momentary reprieve. A close look at Section 8 of said decree, which amended
paragraph (c) of Section 12 of Republic Act No. 679, reveals that it is exactly the
same provision reproduced verbatim in Article 136 of the Labor Code, which was
promulgated on May 1, 1974 to take effect six (6) months later, or on November 1,
1974.
 It cannot be gainsaid that, with the reiteration of the same provision in the new Labor
Code, all policies and acts against it are deemed illegal and therefore abrogated.
True, Article 132 enjoins the Secretary of Labor to establish standards that will
ensure the safety and health of women employees and in appropriate cases shall by
regulation require employers to determine appropriate minimum standards for
termination in special occupations, such as those of flight attendants, but that is
precisely the factor that militates against the policy of respondent. The standards
have not yet been established as set forth in the first paragraph, nor has the
Secretary of Labor issued any regulation affecting flight attendants.

It is logical to presume that, in the absence of said standards or regulations which

are as yet to be established, the policy of respondent against marriage is patently
illegal. This finds support in Section 9 of the New Constitution, which provides:

Sec. 9. The State shall afford protection to labor, promote full employment and
equality in employment, ensure equal work opportunities regardless of sex, race, or
creed, and regulate the relations between workers and employees. The State shall
assure the rights of workers to self-organization, collective bargaining, security of
tenure, and just and humane conditions of work . . . .

Moreover, we cannot agree to the respondent's proposition that termination from

employment of flight attendants on account of marriage is a fair and reasonable
standard designed for their own health, safety, protection and welfare, as no basis
has been laid therefor. Actually, respondent claims that its concern is not so much
against the continued employment of the flight attendant merely by reason of
marriage as observed by the Secretary of Labor, but rather on the consequence of
marriage-pregnancy. Respondent discussed at length in the instant appeal the
supposed ill effects of pregnancy on flight attendants in the course of their
employment. We feel that this needs no further discussion as it had been adequately
explained by the Secretary of Labor in his decision of May 2, 1976.

In a vain attempt to give meaning to its position, respondent went as far as invoking
the provisions of Articles 52 and 216 of the New Civil Code on the preservation of
marriage as an inviolable social institution and the family as a basic social institution,
respectively, as bases for its policy of non-marriage. In both instances, respondent
predicates absence of a flight attendant from her home for long periods of time as
contributory to an unhappy married life. This is pure conjecture not based on actual
conditions, considering that, in this modern world, sophisticated technology has
narrowed the distance from one place to another. Moreover, respondent overlooked
the fact that married flight attendants can program their lives to adapt to prevailing
circumstances and events.

Article 136 is not intended to apply only to women employed in ordinary occupations,
or it should have categorically expressed so. The sweeping intendment of the law,
be it on special or ordinary occupations, is reflected in the whole text and supported
by Article 135 that speaks of non-discrimination on the employment of women.

The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial
Corporation 34 considered as void a policy of the same nature. In said case, respondent, in dismissing
from the service the complainant, invoked a policy of the firm to consider female employees in the
project it was undertaking as separated the moment they get married due to lack of facilities for
married women. Respondent further claimed that complainant was employed in the project with an
oral understanding that her services would be terminated when she gets married. Branding the
policy of the employer as an example of "discriminatory chauvinism" tantamount to denying equal
employment opportunities to women simply on account of their sex, the appellate court struck down
said employer policy as unlawful in view of its repugnance to the Civil Code, Presidential Decree No.
148 and the Constitution.

Under American jurisprudence, job requirements which establish employer preference or conditions
relating to the marital status of an employee are categorized as a "sex-plus" discrimination where it
is imposed on one sex and not on the other. Further, the same should be evenly applied and must
not inflict adverse effects on a racial or sexual group which is protected by federal job discrimination
laws. Employment rules that forbid or restrict the employment of married women, but do not apply
to married men, have been held to violate Title VII of the United States Civil Rights Act of 1964, the
main federal statute prohibiting job discrimination against employees and applicants on the basis of,
among other things, sex. 35

Further, it is not relevant that the rule is not directed against all women but just against married
women. And, where the employer discriminates against married women, but not against married
men, the variable is sex and the discrimination is unlawful. 36 Upon the other hand, a requirement
that a woman employee must remain unmarried could be justified as a "bona fide occupational
qualification," or BFOQ, where the particular requirements of the job would justify the same, but not
on the ground of a general principle, such as the desirability of spreading work in the workplace. A
requirement of that nature would be valid provided it reflects an inherent quality reasonably
necessary for satisfactory job performance. Thus, in one case, a no-marriage rule applicable to both
male and female flight attendants, was regarded as unlawful since the restriction was not related to
the job performance of the flight attendants. 37

5. Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor Code on
the right of a woman to be free from any kind of stipulation against marriage in connection with her
employment, but it likewise assaults good morals and public policy, tending as it does to deprive a
woman of the freedom to choose her status, a privilege that by all accounts inheres in the individual
as an intangible and inalienable right. 38 Hence, while it is true that the parties to a contract may
establish any agreements, terms, and conditions that they may deem convenient, the same should
not be contrary to law, morals, good customs, public order, or public policy. 39 Carried to its logical
consequences, it may even be said that petitioner's policy against legitimate marital bonds would
encourage illicit or common-law relations and subvert the sacrament of marriage.

Parenthetically, the Civil Code provisions on the contract of labor state that the relations between
the parties, that is, of capital and labor, are not merely contractual, impressed as they are with so
much public interest that the same should yield to the common good. 40 It goes on to intone that
neither capital nor labor should visit acts of oppression against the other, nor impair the interest or
convenience of the public. 41 In the final reckoning, the danger of just such a policy against marriage
followed by petitioner PT & T is that it strikes at the very essence, ideals and purpose of marriage
as an inviolable social institution and, ultimately, of the family as the foundation of the nation. 42 That
it must be effectively interdicted here in all its indirect, disguised or dissembled forms as
discriminatory conduct derogatory of the laws of the land is not only in order but imperatively
required.

ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone Company is
hereby DISMISSED for lack of merit, with double costs against petitioner.

SO ORDERED.
G.R. No. 181806 March 12, 2014

WESLEYAN UNIVERSITY-PHILIPPINES, Petitioner,

vs.
WESLEYAN UNIVERSITY-PHILIPPINES FACULTY and STAFF ASSOCIATION, Respondent.

DECISION

DEL CASTILLO, J.:

A Collective Bargaining Agreement (CBA) is a contract entered into by an employer and a legitimate
labor organization concerning the terms and conditions of employment. 1 Like any other contract, it
has the force of law between the parties and, thus, should be complied with in good faith. 2 Unilateral
changes or suspensions in the implementation of the provisions of the CBA, therefore, cannot be
allowed without the consent of both parties.

This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the September 25,
2007 Decision4 and the February 5, 2008 Resolution5 of the Court of Appeals (CA) in CA-G.R. SP No.
97053.

Factual Antecedents

Petitioner Wesleyan University-Philippines is a non-stock, non-profit educational institution duly

organized and existing under the laws of the Philippines. 6 Respondent Wesleyan University-
Philippines Faculty and Staff Association, on the other hand, is a duly registered labor
organization7 acting as the sole and exclusive bargaining agent of all rank-and-file faculty and staff
employees of petitioner.8

In December 2003, the parties signed a 5-year CBA9 effective June 1, 2003 until May 31, 2008.10

On August 16, 2005, petitioner, through its President, Atty. Guillermo T. Maglaya (Atty. Maglaya),
issued a Memorandum11 providing guidelines on the implementation of vacation and sick leave
credits as well as vacation leave commutation. The pertinent portions of the Memorandum read:

1. VACATION AND SICK LEAVE CREDITS

Vacation and sick leave credits are not automatic. They have to be earned. Monthly, a
qualified employee earns an equivalent of 1.25 days credit each for VL and SL. Vacation
Leave and Sick Leave credits of 15 days become complete at the cut off date of May 31 of
each year. (Example, only a total of 5 days credit will be given to an employee for each of
sick leave [or] vacation leave, as of month end September, that is, 4 months from June to
September multiplied by 1.25 days). An employee, therefore, who takes VL or SL beyond his
leave credits as of date will have to file leave without pay for leaves beyond his credit.

2. VACATION LEAVE COMMUTATION

Only vacation leave is commuted or monetized to cash. Vacation leave commutation is

effected after the second year of continuous service of an employee. Hence, an employee
who started working June 1, 2005 will get his commutation on May 31, 2007 or thereabout. 12
On August 25, 2005, respondent’s President, Cynthia L. De Lara (De Lara) wrote a letter 13 to Atty.
Maglaya informing him that respondent is not amenable to the unilateral changes made by
petitioner.14 De Lara questioned the guidelines for being violative of existing practices and the
CBA,15 specifically Sections 1 and 2, Article XII of the CBA, to wit:

ARTICLE XII
VACATION LEAVE AND SICK LEAVE

SECTION 1. VACATION LEAVE - All regular and non-tenured rank-and-file faculty and staff who are
entitled to receive shall enjoy fifteen (15) days vacation leave with pay annually.

1.1 All unused vacation leave after the second year of service shall be converted into cash and be
paid to the entitled employee at the end of each school year to be given not later than August 30 of
each year.

SECTION 2. SICK LEAVE - All regular and non-tenured rank-and-file faculty and staff shall enjoy
fifteen (15) days sick leave with pay annually.16

On February 8, 2006, a Labor Management Committee (LMC) Meeting was held during which
petitioner advised respondent to file a grievance complaint on the implementation of the vacation
and sick leave policy.17 In the same meeting, petitioner announced its plan of implementing a one-
retirement policy,18 which was unacceptable to respondent.

Ruling of the Voluntary Arbitrator

Unable to settle their differences at the grievance level, the parties referred the matter to a Voluntary
Arbitrator. During the hearing, respondent submitted affidavits to prove that there is an established
practice of giving two retirement benefits, one from the Private Education Retirement Annuity
Association (PERAA) Plan and another from the CBA Retirement Plan. Sections 1, 2, 3 and 4 of Article
XVI of the CBA provide:

ARTICLE XVI
SEPARATION, DISABILITY AND RETIREMENT PAY

SECTION 1. ELIGIBILITY FOR MEMBERSHIP - Membership in the Plan shall be automatic for all full-
time, regular staff and tenured faculty of the University, except the University President.
Membership in the Plan shall commence on the first day of the month coincident with or next
following his statement of Regular/Tenured Employment Status.

SECTION 2. COMPULSORY RETIREMENT DATE - The compulsory retirement date of each Member
shall be as follows:

a. Faculty – The last day of the School Year, coincident with his attainment of age sixty (60)
with at least five (years) of unbroken, credited service.

b. Staff – Upon reaching the age of sixty (60) with at least five (5) years of unbroken, credited
service.

SECTION 3. OPTIONAL RETIREMENT DATE - A Member may opt for an optional retirement prior to
his compulsory retirement. His number of years of service in the University shall be the basis of
computing x x x his retirement benefits regardless of his chronological age.
SECTION 4. RETIREMENT BENEFIT - The retirement benefit shall be a sum equivalent to 100% of
the member’s final monthly salary for compulsory retirement.

For optional retirement, the vesting schedule shall be:

x x x x19

On November 2, 2006, the Voluntary Arbitrator rendered a Decision 20 declaring the one-retirement
policy and the Memorandum dated August 16, 2005 contrary to law. The dispositive portion of the
Decision reads:

WHEREFORE, the following award is hereby made:

1. The assailed University guidelines on the availment of vacation and sick leave credits and
vacation leave commutation are contrary to law. The University is consequently ordered to
reinstate the earlier scheme, practice or policy in effect before the issuance of the said
guidelines on August 16, 2005;

2. The "one retirement" policy is contrary to law and is hereby revoked and rescinded. The
University is ordered x x x to resume and proceed with the established practice of extending
to qualified employees retirement benefits under both the CBA and the PERAA Plan.

3. The other money claims are denied.21

Ruling of the Court of Appeals

Aggrieved, petitioner appealed the case to the CA via a Petition for Review under Rule 43 of the
Rules of Court.

On September 25, 2007, the CA rendered a Decision 22 finding the rulings of the Voluntary Arbitrator
supported by substantial evidence. It also affirmed the nullification of the one-retirement policy and
the Memorandum dated August 16, 2005 on the ground that these unilaterally amended the CBA
without the consent of respondent.23 Thus:

WHEREFORE, the instant appeal is DISMISSED for lack of merit.

SO ORDERED.24

Petitioner moved for reconsideration but the same was denied by the CA in its February 5, 2008
Resolution.25

Issues

Hence, this recourse by petitioner raising the following issues:

a.

Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s
ruling that the Affidavits submitted by Respondent WU-PFSA are substantial evidence as defined
by the rules and jurisprudence that would substantiate that Petitioner WU-P has long been in the
practice of granting its employees two (2) sets of Retirement Benefits.

b.

Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s
ruling that a university practice of granting its employees two (2) sets of Retirement Benefits had
already been established as defined by the law and jurisprudence especially in light of the illegality
and lack of authority of such alleged grant.

c.

Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s
ruling that it is incumbent upon Petitioner WU-P to show proof that no Board Resolution was issued
granting two (2) sets of Retirement Benefits.

d.

Whether x x x the [CA] committed grave and palpable error in revoking the 16 August 2005
Memorandum of Petitioner WU-P for being contrary to extant policy.26

Petitioner’s Arguments

Petitioner argues that there is only one retirement plan as the CBA Retirement Plan and the PERAA
Plan are one and the same.27 It maintains that there is no established company practice or policy of
giving two retirement benefits to its employees. 28 Assuming, without admitting, that two retirement
benefits were released,29 petitioner insists that these were done by mere oversight or mistake as
there is no Board Resolution authorizing their release.30 And since these benefits are unauthorized
and irregular, these cannot ripen into a company practice or policy. 31 As to the affidavits submitted
by respondent, petitioner claims that these are self-serving declarations,32 and thus, should not be
given weight and credence.33

In addition, petitioner claims that the Memorandum dated August 16, 2005, which provides for the
guidelines on the implementation of vacation and sick leave credits as well as vacation leave
commutation, is valid because it is in full accord with existing policy. 34

Respondent’s Arguments

Respondent belies the claims of petitioner and asserts that there are two retirement plans as the
PERAA Retirement Plan, which has been implemented for more than 30 years, is different from the
CBA Retirement Plan.35 Respondent further avers that it has always been a practice of petitioner to
give two retirement benefits36 and that this practice was established by substantial evidence as
found by both the Voluntary Arbitrator and the CA. 37

As to the Memorandum dated August 16, 2005, respondent asserts that it is arbitrary and contrary
to the CBA and existing practices as it added qualifications or limitations which were not agreed
upon by the parties.38

Our Ruling

The Petition is bereft of merit.

The Non-Diminution Rule found in Article 10039 of the Labor Code explicitly prohibits employers from
eliminating or reducing the benefits received by their employees. This rule, however, applies only if
the benefit is based on an express policy, a written contract, or has ripened into a practice. 40 To be
considered a practice, it must be consistently and deliberately made by the employer over a long
period of time.41

An exception to the rule is when "the practice is due to error in the construction or application of a
doubtful or difficult question of law."42 The error, however, must be corrected immediately after its
discovery;43 otherwise, the rule on Non-Diminution of Benefits would still apply.

The practice of giving two retirement

benefits to petitioner’s employees is
supported by substantial evidence.

In this case, respondent was able to present substantial evidence in the form of affidavits to support
its claim that there are two retirement plans. Based on the affidavits, petitioner has been giving two
retirement benefits as early as 1997.44 Petitioner, on the other hand, failed to present any evidence
to refute the veracity of these affidavits. Petitioner’s contention that these affidavits are self-serving
holds no water. The retired employees of petitioner have nothing to lose or gain in this case as they
have already received their retirement benefits. Thus, they have no reason to perjure themselves.
Obviously, the only reason they executed those affidavits is to bring out the truth. As we see it then,
their affidavits, corroborated by the affidavits of incumbent employees, are more than sufficient to
show that the granting of two retirement benefits to retiring employees had already ripened into a
consistent and deliberate practice.

Moreover, petitioner’s assertion that there is only one retirement plan as the CBA Retirement Plan
and the PERAA Plan are one and the same is not supported by any evidence. There is nothing in
Article XVI of the CBA to indicate or even suggest that the "Plan" referred to in the CBA is the PERAA
Plan. Besides, any doubt in the interpretation of the provisions of the CBA should be resolved in
favor of respondent. In fact, petitioner’s assertion is negated by the announcement it made during
the LMC Meeting on February 8, 2006 regarding its plan of implementing a "one-retirement plan."
For if it were true that petitioner was already implementing a one-retirement policy, there would
have been no need for such announcement. Equally damaging is the letter-memorandum45 dated
May 11, 2006, entitled "Suggestions on the defenses we can introduce to justify the abolition of
double retirement policy," prepared by the petitioner’s legal counsel.

These circumstances, taken together, bolster the finding that the two-retirement policy is a
practice.1âwphi1 Thus, petitioner cannot, without the consent of respondent, eliminate the two-
retirement policy and implement a one-retirement policy as this would violate the rule on non-
diminution of benefits.

As a last ditch effort to abolish the two-retirement policy, petitioner contends that such practice is
illegal or unauthorized and that the benefits were erroneously given by the previous administration.
No evidence, however, was presented by petitioner to substantiate its allegations.

Considering the foregoing disquisition, we agree with the findings of the Voluntary Arbitrator, as
affirmed by the CA, that there is substantial evidence to prove that there is an existing practice of
giving two retirement benefits, one under the PERAA Plan and another under the CBA Retirement
Plan.

The Memorandum dated August 16,

2005 is contrary to the existing CBA.
Neither do we find any reason to disturb the findings of the CA that the Memorandum dated August
16, 2005 is contrary to the existing CBA.

Sections 1 and 2 of Article XII of the CBA provide that all covered employees are entitled to 15 days
sick leave and 15 days vacation leave with pay every year and that after the second year of service,
all unused vacation leave shall be converted to cash and paid to the employee at the end of each
school year, not later than August 30 of each year.

The Memorandum dated August 16, 2005, however, states that vacation and sick leave credits are
not automatic as leave credits would be earned on a month-to-month basis. This, in effect, limits
the available leave credits of an employee at the start of the school year. For example, for the first
four months of the school year or from June to September, an employee is only entitled to five days
vacation leave and five days sick leave.46 Considering that the Memorandum dated August 16, 2005
imposes a limitation not agreed upon by the parties nor stated in the CBA, we agree with the CA
that it must be struck down.

In closing, it may not be amiss to mention that when the provision of the CBA is clear, leaving no
doubt on the intention of the parties, the literal meaning of the stipulation shall govem. 47

However, if there is doubt in its interpretation, it should be resolved in favor of labor, 48 as this is
mandated by no less than the Constitution.49

WHEREFORE, the Petition is hereby DENIED. The assailed September 25, 2007 Decision and the
February 5, 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 97053 are hereby AFFIRMED.

SO ORDERED.

G.R. No. 167614 March 24, 2009

ANTONIO M. SERRANO, Petitioner,

vs.
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

For decades, the toil of solitary migrants has helped lift entire families and communities out of
poverty. Their earnings have built houses, provided health care, equipped schools and planted the
seeds of businesses. They have woven together the world by transmitting ideas and knowledge
from country to country. They have provided the dynamic human link between cultures, societies
and economies. Yet, only recently have we begun to understand not only how much international
migration impacts development, but how smart public policies can magnify this effect.

United Nations Secretary-General Ban Ki-Moon

Global Forum on Migration and Development
Brussels, July 10, 20071

For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of Section
10, Republic Act (R.A.) No. 8042,2 to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just, valid or
authorized cause as defined by law or contract, the workers shall be entitled to the full
reimbursement of his placement fee with interest of twelve percent (12%) per annum, plus his
salaries for the unexpired portion of his employment contract or for three (3) months for every year
of the unexpired term, whichever is less.

x x x x (Emphasis and underscoring supplied)

does not magnify the contributions of overseas Filipino workers (OFWs) to national development,
but exacerbates the hardships borne by them by unduly limiting their entitlement in case of illegal
dismissal to their lump-sum salary either for the unexpired portion of their employment contract "or
for three months for every year of the unexpired term, whichever is less" (subject clause). Petitioner
claims that the last clause violates the OFWs' constitutional rights in that it impairs the terms of their
contract, deprives them of equal protection and denies them due process.

By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the December
8, 2004 Decision3 and April 1, 2005 Resolution4 of the Court of Appeals (CA), which applied the
subject clause, entreating this Court to declare the subject clause unconstitutional.

Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd.
(respondents) under a Philippine Overseas Employment Administration (POEA)-approved Contract
of Employment with the following terms and conditions:

Duration of contract 12 months

Position Chief Officer

Basic monthly salary US$1,400.00

Hours of work 48.0 hours per week

Overtime US$700.00 per month

Vacation leave with pay 7.00 days per month5

On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded
employment contract for the position of Second Officer with a monthly salary of US$1,000.00, upon
the assurance and representation of respondents that he would be made Chief Officer by the end
of April 1998.6

Respondents did not deliver on their promise to make petitioner Chief Officer. 7 Hence, petitioner
refused to stay on as Second Officer and was repatriated to the Philippines on May 26, 1998. 8

Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to March
19, 1999, but at the time of his repatriation on May 26, 1998, he had served only two (2) months and
seven (7) days of his contract, leaving an unexpired portion of nine (9) months and twenty-three
(23) days.

Petitioner filed with the Labor Arbiter (LA) a Complaint 9 against respondents for constructive
dismissal and for payment of his money claims in the total amount of US$26,442.73, broken down
as follows:
May 27/31, 1998 (5 days) incl. Leave pay US$ 413.90
June 01/30, 1998 2,590.00
July 01/31, 1998 2,590.00
August 01/31, 1998 2,590.00
Sept. 01/30, 1998 2,590.00
Oct. 01/31, 1998 2,590.00
Nov. 01/30, 1998 2,590.00
Dec. 01/31, 1998 2,590.00
Jan. 01/31, 1999 2,590.00
Feb. 01/28, 1999 2,590.00
Mar. 1/19, 1999 (19 days) incl. leave pay 1,640.00
--------------------
--------------------
--------------------
--------------------
25,382.23
Amount adjusted to chief mate's salary
(March 19/31, 1998 to April 1/30, 1998) + 1,060.5010
--------------------
--------------------
--------------------
--------------------
--------------
TOTAL CLAIM US$ 26,442.7311

as well as moral and exemplary damages and attorney's fees.

The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal
and awarding him monetary benefits, to wit:

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

dismissal of the complainant (petitioner) by the respondents in the above-entitled case was
illegal and the respondents are hereby ordered to pay the complainant [petitioner], jointly
and severally, in Philippine Currency, based on the rate of exchange prevailing at the time of
payment, the amount of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US
$8,770.00), representing the complainant’s salary for three (3) months of the unexpired
portion of the aforesaid contract of employment.1avvphi1

The respondents are likewise ordered to pay the complainant [petitioner], jointly and
severally, in Philippine Currency, based on the rate of exchange prevailing at the time of
payment, the amount of FORTY FIVE U.S. DOLLARS (US$ 45.00), 12 representing the
complainant’s claim for a salary differential. In addition, the respondents are hereby ordered
 to pay the complainant, jointly and severally, in Philippine Currency, at the exchange rate
prevailing at the time of payment, the complainant’s (petitioner's) claim for attorney’s fees
equivalent to ten percent (10%) of the total amount awarded to the aforesaid employee
under this Decision.

The claims of the complainant for moral and exemplary damages are hereby DISMISSED for
lack of merit.

All other claims are hereby DISMISSED.

SO ORDERED.13 (Emphasis supplied)

In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on

the salary period of three months only -- rather than the entire unexpired portion of nine
months and 23 days of petitioner's employment contract - applying the subject clause.
However, the LA applied the salary rate of US$2,590.00, consisting of petitioner's "[b]asic
salary, US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month,
vacation leave pay = US$2,590.00/compensation per month."14

Respondents appealed15 to the National Labor Relations Commission (NLRC) to question the
finding of the LA that petitioner was illegally dismissed.

Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not applying the
ruling of the Court in Triple Integrated Services, Inc. v. National Labor Relations
Commission17 that in case of illegal dismissal, OFWs are entitled to their salaries for the
unexpired portion of their contracts.18

In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:

WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby ordered
to pay complainant, jointly and severally, in Philippine currency, at the prevailing rate of
exchange at the time of payment the following:

1. Three (3) months salary

$1,400 x 3 US$4,200.00

2. Salary differential 45.00

US$4,245.00

3. 10% Attorney’s fees 424.50

TOTAL US$4,669.50

The other findings are affirmed.

SO ORDERED.19

The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by reducing
the applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042 "does not
provide for the award of overtime pay, which should be proven to have been actually performed,
and for vacation leave pay."20

Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality
of the subject clause.21 The NLRC denied the motion.22

Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional challenge against
the subject clause.24 After initially dismissing the petition on a technicality, the CA eventually gave
due course to it, as directed by this Court in its Resolution dated August 7, 2003 which granted the
petition for certiorari, docketed as G.R. No. 151833, filed by petitioner.

In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the
applicable salary rate; however, the CA skirted the constitutional issue raised by petitioner. 25

His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this
Court on the following grounds:

The Court of Appeals and the labor tribunals have decided the case in a way not in accord with
applicable decision of the Supreme Court involving similar issue of granting unto the migrant worker
back wages equal to the unexpired portion of his contract of employment instead of limiting it to
three (3) months

II

In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their
interpretation of Section 10 of Republic Act No. 8042, it is submitted that the Court of Appeals
gravely erred in law when it failed to discharge its judicial duty to decide questions of substance not
theretofore determined by the Honorable Supreme Court, particularly, the constitutional issues
raised by the petitioner on the constitutionality of said law, which unreasonably, unfairly and
arbitrarily limits payment of the award for back wages of overseas workers to three (3) months.

III

Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042, the
Court of Appeals gravely erred in law in excluding from petitioner’s award the overtime pay and
vacation pay provided in his contract since under the contract they form part of his salary.28

On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old and
sickly, and he intends to make use of the monetary award for his medical treatment and
medication.29 Required to comment, counsel for petitioner filed a motion, urging the court to allow
partial execution of the undisputed monetary award and, at the same time, praying that the
constitutional question be resolved.30

Considering that the parties have filed their respective memoranda, the Court now takes up the full
merit of the petition mindful of the extreme importance of the constitutional question raised therein.

On the first and second issues

The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not
disputed. Likewise not disputed is the salary differential of US$45.00 awarded to petitioner in all
three fora. What remains disputed is only the computation of the lump-sum salary to be awarded to
petitioner by reason of his illegal dismissal.

Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at
the monthly rate of US$1,400.00 covering the period of three months out of the unexpired portion
of nine months and 23 days of his employment contract or a total of US$4,200.00.

Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the
US$4,200.00 awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a total of
US$25,382.23, equivalent to his salaries for the entire nine months and 23 days left of his
employment contract, computed at the monthly rate of US$2,590.00. 31

The Arguments of Petitioner

Petitioner contends that the subject clause is unconstitutional because it unduly impairs the freedom
of OFWs to negotiate for and stipulate in their overseas employment contracts a determinate
employment period and a fixed salary package.32 It also impinges on the equal protection clause, for
it treats OFWs differently from local Filipino workers (local workers) by putting a cap on the amount
of lump-sum salary to which OFWs are entitled in case of illegal dismissal, while setting no limit to
the same monetary award for local workers when their dismissal is declared illegal; that the disparate
treatment is not reasonable as there is no substantial distinction between the two groups;33 and that
it defeats Section 18,34 Article II of the Constitution which guarantees the protection of the rights
and welfare of all Filipino workers, whether deployed locally or overseas. 35

Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line with
existing jurisprudence on the issue of money claims of illegally dismissed OFWs. Though there are
conflicting rulings on this, petitioner urges the Court to sort them out for the guidance of affected
OFWs.36

Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves no
other purpose but to benefit local placement agencies. He marks the statement made by the Solicitor
General in his Memorandum, viz.:

Often, placement agencies, their liability being solidary, shoulder the payment of money claims in
the event that jurisdiction over the foreign employer is not acquired by the court or if the foreign
employer reneges on its obligation. Hence, placement agencies that are in good faith and which
fulfill their obligations are unnecessarily penalized for the acts of the foreign employer. To protect
them and to promote their continued helpful contribution in deploying Filipino migrant workers,
liability for money claims was reduced under Section 10 of R.A. No. 8042. 37 (Emphasis supplied)

Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause
sacrifices the well-being of OFWs. Not only that, the provision makes foreign employers better off
than local employers because in cases involving the illegal dismissal of employees, foreign
employers are liable for salaries covering a maximum of only three months of the unexpired
employment contract while local employers are liable for the full lump-sum salaries of their
employees. As petitioner puts it:

In terms of practical application, the local employers are not limited to the amount of backwages
they have to give their employees they have illegally dismissed, following well-entrenched and
unequivocal jurisprudence on the matter. On the other hand, foreign employers will only be limited
to giving the illegally dismissed migrant workers the maximum of three (3) months unpaid salaries
notwithstanding the unexpired term of the contract that can be more than three (3) months. 38

Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives him
of the salaries and other emoluments he is entitled to under his fixed-period employment contract.39

The Arguments of Respondents

In their Comment and Memorandum, respondents contend that the constitutional issue should not
be entertained, for this was belatedly interposed by petitioner in his appeal before the CA, and not
at the earliest opportunity, which was when he filed an appeal before the NLRC. 40

The Arguments of the Solicitor General

The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995, its
provisions could not have impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042
having preceded petitioner's contract, the provisions thereof are deemed part of the minimum terms
of petitioner's employment, especially on the matter of money claims, as this was not stipulated
upon by the parties.42

Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their
employment, such that their rights to monetary benefits must necessarily be treated differently. The
OSG enumerates the essential elements that distinguish OFWs from local workers: first, while local
workers perform their jobs within Philippine territory, OFWs perform their jobs for foreign employers,
over whom it is difficult for our courts to acquire jurisdiction, or against whom it is almost impossible
to enforce judgment; and second, as held in Coyoca v. National Labor Relations Commission 43 and
Millares v. National Labor Relations Commission,44 OFWs are contractual employees who can never
acquire regular employment status, unlike local workers who are or can become regular employees.
Hence, the OSG posits that there are rights and privileges exclusive to local workers, but not
available to OFWs; that these peculiarities make for a reasonable and valid basis for the
differentiated treatment under the subject clause of the money claims of OFWs who are illegally
dismissed. Thus, the provision does not violate the equal protection clause nor Section 18, Article II
of the Constitution.45

Lastly, the OSG defends the rationale behind the subject clause as a police power measure adopted
to mitigate the solidary liability of placement agencies for this "redounds to the benefit of the migrant
workers whose welfare the government seeks to promote. The survival of legitimate placement
agencies helps [assure] the government that migrant workers are properly deployed and are
employed under decent and humane conditions."46

The Court's Ruling

The Court sustains petitioner on the first and second issues.

When the Court is called upon to exercise its power of judicial review of the acts of its co-equals,
such as the Congress, it does so only when these conditions obtain: (1) that there is an actual case
or controversy involving a conflict of rights susceptible of judicial determination; 47 (2) that the
constitutional question is raised by a proper party 48 and at the earliest opportunity;49 and (3) that
the constitutional question is the very lis mota of the case, 50 otherwise the Court will dismiss the
case or decide the same on some other ground.51
Without a doubt, there exists in this case an actual controversy directly involving petitioner who is
personally aggrieved that the labor tribunals and the CA computed his monetary award based on
the salary period of three months only as provided under the subject clause.

The constitutional challenge is also timely. It should be borne in mind that the requirement that a
constitutional issue be raised at the earliest opportunity entails the interposition of the issue in the
pleadings before a competent court, such that, if the issue is not raised in the pleadings before that
competent court, it cannot be considered at the trial and, if not considered in the trial, it cannot be
considered on appeal.52 Records disclose that the issue on the constitutionality of the subject clause
was first raised, not in petitioner's appeal with the NLRC, but in his Motion for Partial Reconsideration
with said labor tribunal,53 and reiterated in his Petition for Certiorari before the CA.54 Nonetheless,
the issue is deemed seasonably raised because it is not the NLRC but the CA which has the
competence to resolve the constitutional issue. The NLRC is a labor tribunal that merely performs a
quasi-judicial function – its function in the present case is limited to determining questions of fact to
which the legislative policy of R.A. No. 8042 is to be applied and to resolving such questions in
accordance with the standards laid down by the law itself; 55 thus, its foremost function is to
administer and enforce R.A. No. 8042, and not to inquire into the validity of its provisions. The CA,
on the other hand, is vested with the power of judicial review or the power to declare
unconstitutional a law or a provision thereof, such as the subject clause. 56 Petitioner's interposition
of the constitutional issue before the CA was undoubtedly seasonable. The CA was therefore remiss
in failing to take up the issue in its decision.

The third condition that the constitutional issue be critical to the resolution of the case likewise
obtains because the monetary claim of petitioner to his lump-sum salary for the entire unexpired
portion of his 12-month employment contract, and not just for a period of three months, strikes at
the very core of the subject clause.

Thus, the stage is all set for the determination of the constitutionality of the subject clause.

Does the subject clause violate Section 10,

Article III of the Constitution on non-impairment
of contracts?

The answer is in the negative.

Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on
the term of his employment and the fixed salary package he will receive 57 is not tenable.

Section 10, Article III of the Constitution provides:

No law impairing the obligation of contracts shall be passed.

The prohibition is aligned with the general principle that laws newly enacted have only a prospective
operation,58 and cannot affect acts or contracts already perfected; 59 however, as to laws already in
existence, their provisions are read into contracts and deemed a part thereof. 60 Thus, the non-
impairment clause under Section 10, Article II is limited in application to laws about to be enacted
that would in any way derogate from existing acts or contracts by enlarging, abridging or in any
manner changing the intention of the parties thereto.

As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution of
the employment contract between petitioner and respondents in 1998. Hence, it cannot be argued
that R.A. No. 8042, particularly the subject clause, impaired the employment contract of the parties.
Rather, when the parties executed their 1998 employment contract, they were deemed to have
incorporated into it all the provisions of R.A. No. 8042.

But even if the Court were to disregard the timeline, the subject clause may not be declared
unconstitutional on the ground that it impinges on the impairment clause, for the law was enacted
in the exercise of the police power of the State to regulate a business, profession or calling,
particularly the recruitment and deployment of OFWs, with the noble end in view of ensuring respect
for the dignity and well-being of OFWs wherever they may be employed.61 Police power legislations
adopted by the State to promote the health, morals, peace, education, good order, safety, and
general welfare of the people are generally applicable not only to future contracts but even to those
already in existence, for all private contracts must yield to the superior and legitimate measures
taken by the State to promote public welfare.62

Does the subject clause violate Section 1,

Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?

The answer is in the affirmative.

Section 1, Article III of the Constitution guarantees:

No person shall be deprived of life, liberty, or property without due process of law nor shall any
person be denied the equal protection of the law.

Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector, without
distinction as to place of deployment, full protection of their rights and welfare.

To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to
economic security and parity: all monetary benefits should be equally enjoyed by workers of similar
category, while all monetary obligations should be borne by them in equal degree; none should be
denied the protection of the laws which is enjoyed by, or spared the burden imposed on, others in
like circumstances.65

Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it
sees fit, a system of classification into its legislation; however, to be valid, the classification must
comply with these requirements: 1) it is based on substantial distinctions; 2) it is germane to the
purposes of the law; 3) it is not limited to existing conditions only; and 4) it applies equally to all
members of the class.66

There are three levels of scrutiny at which the Court reviews the constitutionality of a classification
embodied in a law: a) the deferential or rational basis scrutiny in which the challenged classification
needs only be shown to be rationally related to serving a legitimate state interest; 67 b) the middle-
tier or intermediate scrutiny in which the government must show that the challenged classification
serves an important state interest and that the classification is at least substantially related to
serving that interest;68 and c) strict judicial scrutiny69 in which a legislative classification which
impermissibly interferes with the exercise of a fundamental right 70 or operates to the peculiar
disadvantage of a suspect class71 is presumed unconstitutional, and the burden is upon the
government to prove that the classification is necessary to achieve a compelling state interest and
that it is the least restrictive means to protect such interest.72
Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications73 based
on race74 or gender75 but not when the classification is drawn along income categories. 76

It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas) Employee
Association, Inc. v. Bangko Sentral ng Pilipinas,77 the constitutionality of a provision in the charter of
the Bangko Sentral ng Pilipinas (BSP), a government financial institution (GFI), was challenged for
maintaining its rank-and-file employees under the Salary Standardization Law (SSL), even when the
rank-and-file employees of other GFIs had been exempted from the SSL by their respective
charters. Finding that the disputed provision contained a suspect classification based on salary
grade, the Court deliberately employed the standard of strict judicial scrutiny in its review of the
constitutionality of said provision. More significantly, it was in this case that the Court revealed the
broad outlines of its judicial philosophy, to wit:

Congress retains its wide discretion in providing for a valid classification, and its policies should be
accorded recognition and respect by the courts of justice except when they run afoul of the
Constitution. The deference stops where the classification violates a fundamental right,
or prejudices persons accorded special protection by the Constitution. When these violations
arise, this Court must discharge its primary role as the vanguard of constitutional guaranties, and
require a stricter and more exacting adherence to constitutional limitations. Rational basis should
not suffice.

Admittedly, the view that prejudice to persons accorded special protection by the Constitution
requires a stricter judicial scrutiny finds no support in American or English jurisprudence.
Nevertheless, these foreign decisions and authorities are not per se controlling in this jurisdiction.
At best, they are persuasive and have been used to support many of our decisions. We should not
place undue and fawning reliance upon them and regard them as indispensable mental crutches
without which we cannot come to our own decisions through the employment of our own
endowments. We live in a different ambience and must decide our own problems in the light of our
own interests and needs, and of our qualities and even idiosyncrasies as a people, and always with
our own concept of law and justice. Our laws must be construed in accordance with the intention of
our own lawmakers and such intent may be deduced from the language of each law and the context
of other local legislation related thereto. More importantly, they must be construed to serve our own
public interest which is the be-all and the end-all of all our laws. And it need not be stressed that
our public interest is distinct and different from others.

xxxx

Further, the quest for a better and more "equal" world calls for the use of equal protection as a tool
of effective judicial intervention.

Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble
proclaims "equality" as an ideal precisely in protest against crushing inequities in Philippine society.
The command to promote social justice in Article II, Section 10, in "all phases of national
development," further explicitated in Article XIII, are clear commands to the State to take affirmative
action in the direction of greater equality. x x x [T]here is thus in the Philippine Constitution no lack
of doctrinal support for a more vigorous state effort towards achieving a reasonable measure of
equality.

Our present Constitution has gone further in guaranteeing vital social and economic rights to
marginalized groups of society, including labor. Under the policy of social justice, the law bends over
backward to accommodate the interests of the working class on the humane justification that those
with less privilege in life should have more in law. And the obligation to afford protection to labor is
incumbent not only on the legislative and executive branches but also on the judiciary to translate
this pledge into a living reality. Social justice calls for the humanization of laws and the equalization
of social and economic forces by the State so that justice in its rational and objectively secular
conception may at least be approximated.

xxxx

Under most circumstances, the Court will exercise judicial restraint in deciding questions of
constitutionality, recognizing the broad discretion given to Congress in exercising its legislative
power. Judicial scrutiny would be based on the "rational basis" test, and the legislative discretion
would be given deferential treatment.

But if the challenge to the statute is premised on the denial of a fundamental right, or the
perpetuation of prejudice against persons favored by the Constitution with special protection,
judicial scrutiny ought to be more strict. A weak and watered down view would call for the
abdication of this Court’s solemn duty to strike down any law repugnant to the Constitution and the
rights it enshrines. This is true whether the actor committing the unconstitutional act is a private
person or the government itself or one of its instrumentalities. Oppressive acts will be struck down
regardless of the character or nature of the actor.

xxxx

In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-
employee status. It is akin to a distinction based on economic class and status, with the higher
grades as recipients of a benefit specifically withheld from the lower grades. Officers of the BSP
now receive higher compensation packages that are competitive with the industry, while the poorer,
low-salaried employees are limited to the rates prescribed by the SSL. The implications are quite
disturbing: BSP rank-and-file employees are paid the strictly regimented rates of the SSL while
employees higher in rank - possessing higher and better education and opportunities for career
advancement - are given higher compensation packages to entice them to stay. Considering that
majority, if not all, the rank-and-file employees consist of people whose status and rank in life are
less and limited, especially in terms of job marketability, it is they - and not the officers - who have
the real economic and financial need for the adjustment . This is in accord with the policy of the
Constitution "to free the people from poverty, provide adequate social services, extend to them a
decent standard of living, and improve the quality of life for all." Any act of Congress that runs
counter to this constitutional desideratum deserves strict scrutiny by this Court before it can pass
muster. (Emphasis supplied)

Imbued with the same sense of "obligation to afford protection to labor," the Court in the present
case also employs the standard of strict judicial scrutiny, for it perceives in the subject clause a
suspect classification prejudicial to OFWs.

Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs. However,
a closer examination reveals that the subject clause has a discriminatory intent against, and an
invidious impact on, OFWs at two levels:

First, OFWs with employment contracts of less than one year vis-à-vis OFWs with
employment contracts of one year or more;

Second, among OFWs with employment contracts of more than one year; and
 Third, OFWs vis-à-vis local workers with fixed-period employment;

OFWs with employment contracts of less than one year vis-à-vis OFWs with employment
contracts of one year or more

As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor Relations
Commission79 (Second Division, 1999) that the Court laid down the following rules on the application
of the periods prescribed under Section 10(5) of R.A. No. 804, to wit:

A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally
dismissed overseas contract worker, i.e., whether his salaries for the unexpired portion of his
employment contract or three (3) months’ salary for every year of the unexpired term, whichever
is less, comes into play only when the employment contract concerned has a term of at least one
(1) year or more. This is evident from the words "for every year of the unexpired term" which
follows the words "salaries x x x for three months." To follow petitioners’ thinking that private
respondent is entitled to three (3) months salary only simply because it is the lesser amount is to
completely disregard and overlook some words used in the statute while giving effect to some. This
is contrary to the well-established rule in legal hermeneutics that in interpreting a statute, care
should be taken that every part or word thereof be given effect since the law-making body is
presumed to know the meaning of the words employed in the statue and to have used them
advisedly. Ut res magis valeat quam pereat.80 (Emphasis supplied)

In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but
was awarded his salaries for the remaining 8 months and 6 days of his contract.

Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings on
Section 10(5). One was Asian Center for Career and Employment System and Services v. National
Labor Relations Commission (Second Division, October 1998),81 which involved an OFW who was
awarded a two-year employment contract, but was dismissed after working for one year and two
months. The LA declared his dismissal illegal and awarded him SR13,600.00 as lump-sum salary
covering eight months, the unexpired portion of his contract. On appeal, the Court reduced the
award to SR3,600.00 equivalent to his three months’ salary, this being the lesser value, to wit:

Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just, valid
or authorized cause is entitled to his salary for the unexpired portion of his employment contract or
for three (3) months for every year of the unexpired term, whichever is less.

In the case at bar, the unexpired portion of private respondent’s employment contract is eight (8)
months. Private respondent should therefore be paid his basic salary corresponding to three (3)
months or a total of SR3,600.82

Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third
Division, December 1998),83 which involved an OFW (therein respondent Erlinda Osdana) who was
originally granted a 12-month contract, which was deemed renewed for another 12 months. After
serving for one year and seven-and-a-half months, respondent Osdana was illegally dismissed, and
the Court awarded her salaries for the entire unexpired portion of four and one-half months of her
contract.

The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:
 Case Title Contract Period of Unexpired Period Applied in
Period Service Period the Computation
of the Monetary
Award

Skippers v. 6 months 2 months 4 months 4 months

Maguad84

Bahia Shipping 9 months 8 months 4 months 4 months

v. Reynaldo
Chua 85

Centennial 9 months 4 months 5 months 5 months

Transmarine v.
dela Cruz l86

Talidano v. 12 months 3 months 9 months 3 months

Falcon87

Univan v. CA 88 12 months 3 months 9 months 3 months

Oriental v. 12 months more than 2 10 months 3 months

CA 89 months

PCL v. NLRC90 12 months more than 2 more or less 9 3 months

months months

Olarte v. 12 months 21 days 11 months and 9 3 months

Nayona91 days

JSS v.Ferrer92 12 months 16 days 11 months and 24 3 months

days

Pentagon v. 12 months 9 months and 2 months and 23 2 months and 23

Adelantar93 7 days days days

Phil. Employ v. 12 months 10 months 2 months Unexpired portion

Paramio, et al.94

Flourish 2 years 26 days 23 months and 4 6 months or 3

Maritime v. days months for each
Almanzor 95 year of contract

Athenna 1 year, 10 1 month 1 year, 9 months 6 months or 3

Manpower v. months and and 28 days months for each
Villanos 96 28 days year of contract

As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories. The
first category includes OFWs with fixed-period employment contracts of less than one year; in case
of illegal dismissal, they are entitled to their salaries for the entire unexpired portion of their contract.
The second category consists of OFWs with fixed-period employment contracts of one year or more;
in case of illegal dismissal, they are entitled to monetary award equivalent to only 3 months of the
unexpired portion of their contracts.
The disparity in the treatment of these two groups cannot be discounted. In Skippers, the
respondent OFW worked for only 2 months out of his 6-month contract, but was awarded his salaries
for the remaining 4 months. In contrast, the respondent OFWs in Oriental and PCL who had also
worked for about 2 months out of their 12-month contracts were awarded their salaries for only 3
months of the unexpired portion of their contracts. Even the OFWs involved
in Talidano and Univan who had worked for a longer period of 3 months out of their 12-month
contracts before being illegally dismissed were awarded their salaries for only 3 months.

To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an
employment contract of 10 months at a monthly salary rate of US$1,000.00 and a hypothetical OFW-
B with an employment contract of 15 months with the same monthly salary rate of US$1,000.00.
Both commenced work on the same day and under the same employer, and were illegally dismissed
after one month of work. Under the subject clause, OFW-A will be entitled to US$9,000.00,
equivalent to his salaries for the remaining 9 months of his contract, whereas OFW-B will be entitled
to only US$3,000.00, equivalent to his salaries for 3 months of the unexpired portion of his contract,
instead of US$14,000.00 for the unexpired portion of 14 months of his contract, as the US$3,000.00
is the lesser amount.

The disparity becomes more aggravating when the Court takes into account jurisprudence
that, prior to the effectivity of R.A. No. 8042 on July 14, 1995,97 illegally dismissed OFWs, no matter
how long the period of their employment contracts, were entitled to their salaries for the entire
unexpired portions of their contracts. The matrix below speaks for itself:

Case Title Contract Period of Unexpired Period Applied in the

Period Service Period Computation of the
Monetary Award

ATCI v. CA, et 2 years 2 months 22 months 22 months

al.98

Phil. Integrated 2 years 7 days 23 months 23 months and 23

v. NLRC99 and 23 days days

JGB v. NLC100 2 years 9 months 15 months 15 months

Agoy v. NLRC101 2 years 2 months 22 months 22 months

EDI v. NLRC, et 2 years 5 months 19 months 19 months

al.102

Barros v. NLRC, 12 months 4 months 8 months 8 months

et al.103

Philippine 12 months 6 months 5 months and 5 months and 18 days

Transmarine v. and 22 days 18 days
Carilla104

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired
portions thereof, were treated alike in terms of the computation of their monetary benefits in case
of illegal dismissal. Their claims were subjected to a uniform rule of computation: their basic salaries
multiplied by the entire unexpired portion of their employment contracts.
The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of computation
of the money claims of illegally dismissed OFWs based on their employment periods, in the
process singling out one category whose contracts have an unexpired portion of one year or more
and subjecting them to the peculiar disadvantage of having their monetary awards limited to their
salaries for 3 months or for the unexpired portion thereof, whichever is less, but all the while sparing
the other category from such prejudice, simply because the latter's unexpired contracts fall short of
one year.

Among OFWs With Employment Contracts of More Than One Year

Upon closer examination of the terminology employed in the subject clause, the Court now has
misgivings on the accuracy of the Marsaman interpretation.

The Court notes that the subject clause "or for three (3) months for every year of the unexpired
term, whichever is less" contains the qualifying phrases "every year" and "unexpired term." By its
ordinary meaning, the word "term" means a limited or definite extent of time. 105 Corollarily, that
"every year" is but part of an "unexpired term" is significant in many ways: first, the unexpired term
must be at least one year, for if it were any shorter, there would be no occasion for such unexpired
term to be measured by every year; and second, the original term must be more than one year, for
otherwise, whatever would be the unexpired term thereof will not reach even a year. Consequently,
the more decisive factor in the determination of when the subject clause "for three (3) months
for every year of the unexpired term, whichever is less" shall apply is not the length of the original
contract period as held in Marsaman,106 but the length of the unexpired portion of the contract period
-- the subject clause applies in cases when the unexpired portion of the contract period is at least
one year, which arithmetically requires that the original contract period be more than one year.

Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose
contract periods are for more than one year: those who are illegally dismissed with less than one
year left in their contracts shall be entitled to their salaries for the entire unexpired portion thereof,
while those who are illegally dismissed with one year or more remaining in their contracts shall be
covered by the subject clause, and their monetary benefits limited to their salaries for three months
only.

To concretely illustrate the application of the foregoing interpretation of the subject clause, the
Court assumes hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary
rate of US$1,000.00 per month. OFW-C is illegally dismissed on the 12th month, and OFW-D, on the
13th month. Considering that there is at least 12 months remaining in the contract period of OFW-
C, the subject clause applies to the computation of the latter's monetary benefits. Thus, OFW-C will
be entitled, not to US$12,000,00 or the latter's total salaries for the 12 months unexpired portion of
the contract, but to the lesser amount of US$3,000.00 or the latter's salaries for 3 months out of
the 12-month unexpired term of the contract. On the other hand, OFW-D is spared from the effects
of the subject clause, for there are only 11 months left in the latter's contract period. Thus, OFW-D
will be entitled to US$11,000.00, which is equivalent to his/her total salaries for the entire 11-month
unexpired portion.

OFWs vis-à-vis Local Workers

With Fixed-Period Employment

As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary
awards of illegally dismissed OFWs was in place. This uniform system was applicable even to local
workers with fixed-term employment.107
The earliest rule prescribing a uniform system of computation was actually Article 299 of the Code
of Commerce (1888),108 to wit:

Article 299. If the contracts between the merchants and their shop clerks and employees should
have been made of a fixed period, none of the contracting parties, without the consent of the other,
may withdraw from the fulfillment of said contract until the termination of the period agreed upon.

Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the
exception of the provisions contained in the following articles.

In Reyes v. The Compañia Maritima,109 the Court applied the foregoing provision to determine the
liability of a shipping company for the illegal discharge of its managers prior to the expiration of their
fixed-term employment. The Court therein held the shipping company liable for the salaries of its
managers for the remainder of their fixed-term employment.

There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of Commerce
which provides:

Article 605. If the contracts of the captain and members of the crew with the agent should be for a
definite period or voyage, they cannot be discharged until the fulfillment of their contracts, except
for reasons of insubordination in serious matters, robbery, theft, habitual drunkenness, and damage
caused to the vessel or to its cargo by malice or manifest or proven negligence.

Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie, 110 in

which the Court held the shipping company liable for the salaries and subsistence allowance of its
illegally dismissed employees for the entire unexpired portion of their employment contracts.

While Article 605 has remained good law up to the present,111 Article 299 of the Code of Commerce
was replaced by Art. 1586 of the Civil Code of 1889, to wit:

Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for a
certain work cannot leave or be dismissed without sufficient cause, before the fulfillment of the
contract. (Emphasis supplied.)

Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as a
conjunctive "and" so as to apply the provision to local workers who are employed for a time certain
although for no particular skill. This interpretation of Article 1586 was reiterated in Garcia Palomar v.
Hotel de France Company.113 And in both Lemoine and Palomar, the Court adopted the general
principle that in actions for wrongful discharge founded on Article 1586, local workers are entitled
to recover damages to the extent of the amount stipulated to be paid to them by the terms of their
contract. On the computation of the amount of such damages, the Court in Aldaz v. Gay 114 held:

The doctrine is well-established in American jurisprudence, and nothing has been brought to our
attention to the contrary under Spanish jurisprudence, that when an employee is wrongfully
discharged it is his duty to seek other employment of the same kind in the same community, for the
purpose of reducing the damages resulting from such wrongful discharge. However, while this is the
general rule, the burden of showing that he failed to make an effort to secure other employment of
a like nature, and that other employment of a like nature was obtainable, is upon the
defendant. When an employee is wrongfully discharged under a contract of employment his prima
facie damage is the amount which he would be entitled to had he continued in such employment
until the termination of the period. (Howard vs. Daly, 61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492;
Farrell vs. School District No. 2, 98 Mich., 43.)115 (Emphasis supplied)

On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term employment:
Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor) and 3
(Contract for a Piece of Work), Chapter 3, Title VIII, Book IV. 116 Much like Article 1586 of the Civil
Code of 1889, the new provisions of the Civil Code do not expressly provide for the remedies
available to a fixed-term worker who is illegally discharged. However, it is noted that in Mackay
Radio & Telegraph Co., Inc. v. Rich,117 the Court carried over the principles on the payment of
damages underlying Article 1586 of the Civil Code of 1889 and applied the same to a case involving
the illegal discharge of a local worker whose fixed-period employment contract was entered into in
1952, when the new Civil Code was already in effect.118

More significantly, the same principles were applied to cases involving overseas Filipino workers
whose fixed-term employment contracts were illegally terminated, such as in First Asian Trans &
Shipping Agency, Inc. v. Ople,119 involving seafarers who were illegally discharged. In Teknika Skills
and Trade Services, Inc. v. National Labor Relations Commission, 120 an OFW who was illegally
dismissed prior to the expiration of her fixed-period employment contract as a baby sitter, was
awarded salaries corresponding to the unexpired portion of her contract. The Court arrived at the
same ruling in Anderson v. National Labor Relations Commission, 121 which involved a foreman hired
in 1988 in Saudi Arabia for a fixed term of two years, but who was illegally dismissed after only nine
months on the job -- the Court awarded him salaries corresponding to 15 months, the unexpired
portion of his contract. In Asia World Recruitment, Inc. v. National Labor Relations Commission, 122 a
Filipino working as a security officer in 1989 in Angola was awarded his salaries for the remaining
period of his 12-month contract after he was wrongfully discharged. Finally, in Vinta Maritime Co.,
Inc. v. National Labor Relations Commission,123 an OFW whose 12-month contract was illegally cut
short in the second month was declared entitled to his salaries for the remaining 10 months of his
contract.

In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were
illegally discharged were treated alike in terms of the computation of their money claims: they were
uniformly entitled to their salaries for the entire unexpired portions of their contracts. But with the
enactment of R.A. No. 8042, specifically the adoption of the subject clause, illegally dismissed OFWs
with an unexpired portion of one year or more in their employment contract have since been
differently treated in that their money claims are subject to a 3-month cap, whereas no such
limitation is imposed on local workers with fixed-term employment.

The Court concludes that the subject clause contains a suspect classification in that, in the
computation of the monetary benefits of fixed-term employees who are illegally discharged, it
imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in
their contracts, but none on the claims of other OFWs or local workers with fixed-term
employment. The subject clause singles out one classification of OFWs and burdens it with a
peculiar disadvantage.

There being a suspect classification involving a vulnerable sector protected by the Constitution, the
Court now subjects the classification to a strict judicial scrutiny, and determines whether it serves a
compelling state interest through the least restrictive means.

What constitutes compelling state interest is measured by the scale of rights and powers arrayed in
the Constitution and calibrated by history.124 It is akin to the paramount interest of the state 125 for
which some individual liberties must give way, such as the public interest in safeguarding health or
maintaining medical standards,126 or in maintaining access to information on matters of public
concern.127

In the present case, the Court dug deep into the records but found no compelling state interest that
the subject clause may possibly serve.

The OSG defends the subject clause as a police power measure "designed to protect the
employment of Filipino seafarers overseas x x x. By limiting the liability to three months [sic], Filipino
seafarers have better chance of getting hired by foreign employers." The limitation also protects the
interest of local placement agencies, which otherwise may be made to shoulder millions of pesos in
"termination pay."128

The OSG explained further:

Often, placement agencies, their liability being solidary, shoulder the payment of money claims in
the event that jurisdiction over the foreign employer is not acquired by the court or if the foreign
employer reneges on its obligation. Hence, placement agencies that are in good faith and which
fulfill their obligations are unnecessarily penalized for the acts of the foreign employer. To protect
them and to promote their continued helpful contribution in deploying Filipino migrant workers,
liability for money are reduced under Section 10 of RA 8042.

This measure redounds to the benefit of the migrant workers whose welfare the government seeks
to promote. The survival of legitimate placement agencies helps [assure] the government that
migrant workers are properly deployed and are employed under decent and humane
conditions.129 (Emphasis supplied)

However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception
of the state interest sought to be served by the subject clause.

The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in sponsorship
of House Bill No. 14314 (HB 14314), from which the law originated; 130 but the speech makes no
reference to the underlying reason for the adoption of the subject clause. That is only natural for
none of the 29 provisions in HB 14314 resembles the subject clause.

On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit:

Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of
the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to
hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising
out of an employer-employee relationship or by virtue of the complaint, the claim arising out of an
employer-employee relationship or by virtue of any law or contract involving Filipino workers for
overseas employment including claims for actual, moral, exemplary and other forms of damages.

The liability of the principal and the recruitment/placement agency or any and all claims under this
Section shall be joint and several.

Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of

damages under this Section shall not be less than fifty percent (50%) of such money
claims: Provided, That any installment payments, if applicable, to satisfy any such compromise or
voluntary settlement shall not be more than two (2) months. Any compromise/voluntary agreement
in violation of this paragraph shall be null and void.
Non-compliance with the mandatory period for resolutions of cases provided under this Section
shall subject the responsible officials to any or all of the following penalties:

(1) The salary of any such official who fails to render his decision or resolution within the
prescribed period shall be, or caused to be, withheld until the said official complies therewith;

(2) Suspension for not more than ninety (90) days; or

(3) Dismissal from the service with disqualification to hold any appointive public office for
five (5) years.

Provided, however, That the penalties herein provided shall be without prejudice to any liability
which any such official may have incurred under other existing laws or rules and regulations as a
consequence of violating the provisions of this paragraph.

But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of money
claims.

A rule on the computation of money claims containing the subject clause was inserted and eventually
adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined the rationale of
the subject clause in the transcripts of the "Bicameral Conference Committee (Conference
Committee) Meetings on the Magna Carta on OCWs (Disagreeing Provisions of Senate Bill No. 2077
and House Bill No. 14314)." However, the Court finds no discernible state interest, let alone a
compelling one, that is sought to be protected or advanced by the adoption of the subject clause.

In fine, the Government has failed to discharge its burden of proving the existence of a compelling
state interest that would justify the perpetuation of the discrimination against OFWs under the
subject clause.

Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the
employment of OFWs by mitigating the solidary liability of placement agencies, such callous and
cavalier rationale will have to be rejected. There can never be a justification for any form of
government action that alleviates the burden of one sector, but imposes the same burden on another
sector, especially when the favored sector is composed of private businesses such as placement
agencies, while the disadvantaged sector is composed of OFWs whose protection no less than the
Constitution commands. The idea that private business interest can be elevated to the level of a
compelling state interest is odious.

Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement
agencies vis-a-vis their foreign principals, there are mechanisms already in place that can be
employed to achieve that purpose without infringing on the constitutional rights of OFWs.

The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based
Overseas Workers, dated February 4, 2002, imposes administrative disciplinary measures on erring
foreign employers who default on their contractual obligations to migrant workers and/or their
Philippine agents. These disciplinary measures range from temporary disqualification to preventive
suspension. The POEA Rules and Regulations Governing the Recruitment and Employment of
Seafarers, dated May 23, 2003, contains similar administrative disciplinary measures against erring
foreign employers.
Resort to these administrative measures is undoubtedly the less restrictive means of aiding local
placement agencies in enforcing the solidary liability of their foreign principals.

Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right
of petitioner and other OFWs to equal protection.1avvphi1

Further, there would be certain misgivings if one is to approach the declaration of the
unconstitutionality of the subject clause from the lone perspective that the clause directly violates
state policy on labor under Section 3,131 Article XIII of the Constitution.

While all the provisions of the 1987 Constitution are presumed self-executing,132 there are some
which this Court has declared not judicially enforceable, Article XIII being one,133 particularly
Section 3 thereof, the nature of which, this Court, in Agabon v. National Labor Relations
Commission,134 has described to be not self-actuating:

Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as
self-executing in the sense that these are automatically acknowledged and observed without need
for any enabling legislation. However, to declare that the constitutional provisions are enough to
guarantee the full exercise of the rights embodied therein, and the realization of ideals therein
expressed, would be impractical, if not unrealistic. The espousal of such view presents the
dangerous tendency of being overbroad and exaggerated. The guarantees of "full protection to
labor" and "security of tenure", when examined in isolation, are facially unqualified, and the broadest
interpretation possible suggests a blanket shield in favor of labor against any form of removal
regardless of circumstance. This interpretation implies an unimpeachable right to continued
employment-a utopian notion, doubtless-but still hardly within the contemplation of the framers.
Subsequent legislation is still needed to define the parameters of these guaranteed rights to ensure
the protection and promotion, not only the rights of the labor sector, but of the employers' as well.
Without specific and pertinent legislation, judicial bodies will be at a loss, formulating their own
conclusion to approximate at least the aims of the Constitution.

Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive
enforceable right to stave off the dismissal of an employee for just cause owing to the failure to
serve proper notice or hearing. As manifested by several framers of the 1987 Constitution, the
provisions on social justice require legislative enactments for their enforceability.135 (Emphasis
added)

Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable rights, for
the violation of which the questioned clause may be declared unconstitutional. It may unwittingly
risk opening the floodgates of litigation to every worker or union over every conceivable violation of
so broad a concept as social justice for labor.

It must be stressed that Section 3, Article XIII does not directly bestow on the working class any
actual enforceable right, but merely clothes it with the status of a sector for whom the Constitution
urges protection through executive or legislative action and judicial recognition. Its utility is best
limited to being an impetus not just for the executive and legislative departments, but for the
judiciary as well, to protect the welfare of the working class . And it was in fact consistent with that
constitutional agenda that the Court in Central Bank (now Bangko Sentral ng Pilipinas) Employee
Association, Inc. v. Bangko Sentral ng Pilipinas, penned by then Associate Justice now Chief Justice
Reynato S. Puno, formulated the judicial precept that when the challenge to a statute is premised
on the perpetuation of prejudice against persons favored by the Constitution with special protection
-- such as the working class or a section thereof -- the Court may recognize the existence of a
suspect classification and subject the same to strict judicial scrutiny.
The view that the concepts of suspect classification and strict judicial scrutiny formulated in Central
Bank Employee Association exaggerate the significance of Section 3, Article XIII is a groundless
apprehension. Central Bank applied Article XIII in conjunction with the equal protection clause.
Article XIII, by itself, without the application of the equal protection clause, has no life or force of its
own as elucidated in Agabon.

Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's
right to substantive due process, for it deprives him of property, consisting of monetary benefits,
without any existing valid governmental purpose. 136

The argument of the Solicitor General, that the actual purpose of the subject clause of limiting the
entitlement of OFWs to their three-month salary in case of illegal dismissal, is to give them a better
chance of getting hired by foreign employers. This is plain speculation. As earlier discussed, there
is nothing in the text of the law or the records of the deliberations leading to its enactment or the
pleadings of respondent that would indicate that there is an existing governmental purpose for the
subject clause, or even just a pretext of one.

The subject clause does not state or imply any definitive governmental purpose; and it is for that
precise reason that the clause violates not just petitioner's right to equal protection, but also her
right to substantive due process under Section 1,137 Article III of the Constitution.

The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire
unexpired period of nine months and 23 days of his employment contract, pursuant to law and
jurisprudence prior to the enactment of R.A. No. 8042.

On the Third Issue

Petitioner contends that his overtime and leave pay should form part of the salary basis in the
computation of his monetary award, because these are fixed benefits that have been stipulated into
his contract.

Petitioner is mistaken.

The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like
petitioner, DOLE Department Order No. 33, series 1996, provides a Standard Employment Contract
of Seafarers, in which salary is understood as the basic wage, exclusive of overtime, leave pay and
other bonuses; whereas overtime pay is compensation for all work "performed" in excess of the
regular eight hours, and holiday pay is compensation for any work "performed" on designated rest
days and holidays.

By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and
holiday pay in the computation of petitioner's monetary award, unless there is evidence that he
performed work during those periods. As the Court held in Centennial Transmarine, Inc. v. Dela
Cruz,138

However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in
Cagampan v. National Labor Relations Commission, to wit:

The rendition of overtime work and the submission of sufficient proof that said was actually
performed are conditions to be satisfied before a seaman could be entitled to overtime pay which
should be computed on the basis of 30% of the basic monthly salary. In short, the contract provision
guarantees the right to overtime pay but the entitlement to such benefit must first be established.

In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is
unwarranted since the same is given during the actual service of the seamen.

WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for every
year of the unexpired term, whichever is less" in the 5th paragraph of Section 10 of Republic Act No.
8042 is DECLARED UNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005
Resolution of the Court of Appeals are MODIFIED to the effect that petitioner is AWARDED his
salaries for the entire unexpired portion of his employment contract consisting of nine months and
23 days computed at the rate of US$1,400.00 per month.

No costs.

SO ORDERED.

G.R. No. 147572 February 19, 2003

TEODORICO ROSARIO, petitioner,

vs.
VICTORY RICEMILL, respondent.

DECISION

CALLEJO, J.:

Petitioner Teodorico Rosario filed the instant petition for review on certiorari seeking to reverse and
set aside the Decision1 dated September 22, 2000 and Resolution2 dated March 16, 2001 of the Court
of Appeals in CA-G.R. SP No. 52487. In the assailed decision, the appellate court affirmed the
decision of the National Labor Relations Commission (NLRC) declaring petitioner’s dismissal from
employment valid. The assailed resolution denied petitioner’s motion for reconsideration.

The case stemmed from a complaint for illegal dismissal with money claims (separation pay,
overtime pay, 13th month pay and incentive pay) filed by petitioner against respondent Victory
Ricemill, a single proprietorship owned by Emilio Uy. The antecedent facts, as culled from the
records of the case are, as follows:

Emilio Uy was engaged in the business of milling palay under the business name Victory Ricemill. He
employed petitioner as truck driver from January 11, 1982 up to his dismissal on June 22, 1993.
Petitioner was paid the wage rate of ₱110.00 per day. As truck driver, petitioner was tasked to,
among others, haul palay from various points in Isabela and Cagayan and bring them to respondent’s
ricemill in Cabatuan, Isabela. In addition, petitioner acted as personal driver to the family of Mr. Uy
during their trips to Manila.

On June 22, 1993, respondent terminated petitioner’s employment for his notorious acts of
insubordination and that he attempted to kill a fellow employee. According to respondent, petitioner
was guilty of insubordination when he refused to serve as driver of Mr. Uy’s son when the latter
needed a driver. Further, on one occasion, petitioner was instructed to deliver 600 bags of cement
to the Felix Hardware in Tuguegarao. Instead of bringing the merchandise to the said store,
petitioner delivered the same to one Eduardo Interior, who had not since then paid for it to the
damage of respondent in the total sum of ₱60,000.00. Because of petitioner’s tendency to disobey
the orders to him, respondent was constrained to engage the services of another driver in the person
of Michael Ng. Petitioner resented the new driver and became uncooperative, disrespectful and
quarrelsome. On June 21, 1993, petitioner, armed with a dagger, fought with Michael Ng and inflicted
an injury on the latter. Petitioner likewise inflicted injuries on the head of Rody Senias, a co-
employee, when he intervened in the fight and tried to pacify petitioner.

After the proceedings, the regional labor arbiter rendered his decision 3 dismissing for lack of merit
the complaint for illegal dismissal. The regional labor arbiter found that there were valid causes, i.e.,
willful disobedience to the lawful orders of the employer and commission of a crime or offense
against the employer’s duly authorized representative, for the termination of petitioner’s
employment.

On appeal, the NLRC ordered the remand of the case to the regional labor arbiter for further
proceedings.4 The NLRC found that petitioner was denied due process during the proceedings with
the regional labor arbiter as he (petitioner) was not given the opportunity to present his additional
rebuttal evidence. On the other hand, respondent was allowed to submit in evidence various exhibits
to discredit the rebuttal testimony of petitioner.

During the subsequent proceedings before the regional labor arbiter, petitioner submitted the
affidavit of Mario Roque. Roque averred that contrary to respondent’s claim, the 600 bags of cement
delivered to Eduardo Interior had been paid as evidenced by DBP Check No. B-065462, dated May
22, 1993, in the sum of ₱58,950.00 payable to respondent.

Thereafter, the regional labor arbiter promulgated his decision 5 stating that he found no reason to
deviate from his previous decision. Roque’s testimony was not given any probative value as the
same was found to be hearsay. The regional labor arbiter concluded that respondent was justified
in terminating the employment of petitioner on ground of loss of confidence. Accordingly, the
regional labor arbiter again dismissed, for lack of merit, petitioner’s complaint for illegal dismissal.

On appeal, the NLRC affirmed the ruling of the regional labor arbiter and declared that petitioner’s
dismissal was valid.

Petitioner then elevated the case to the CA which rendered the assailed decision. 6 The appellate
court accorded respect to the findings of the NLRC. It declared that petitioner’s act of delivering the
merchandise to Edgardo Interior, instead of Felix Hardware, without being authorized to do so by
respondent was not only inimical to the latter’s business interests, but constitutive of insubordination
or willful disobedience as well. The CA likewise held that petitioner’s act of fomenting a fight with a
co-worker constituted serious misconduct. It further noted that petitioner’s contumacious refusal to
obey the reasonable orders of respondent was not sufficiently explained. The CA thus found that
respondent had justifiable cause to dismiss petitioner.

Anent the procedural aspect, the CA observed that although there was no strict compliance with
the two-notice rule, it could be gleaned from the records that petitioner was given ample opportunity
to explain his side. Moreover, even granting that respondent fell short of the two-notice requirement,
such irregularity, according to the CA, does not militate against the legality of the dismissal. 7

The dispositive portion of the assailed CA decision reads:

WHEREFORE, premises considered, the decision, dated August 24, 1998, of the National Labor
Relations Commission in NLRC NCR CA 0008213-95 (NLRC RAB-II-CN-07-00262-93) is hereby
AFFIRMED. Costs against the petitioner.8
Petitioner filed a motion for reconsideration of the aforesaid decision but the CA denied the same in
the assailed resolution. Aggrieved, petitioner filed with this Court the instant petition on the ground
that:

THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, COMMITTED A REVERSIBLE
ERROR WHEN IT AFFIRMED THE QUESTIONED DECISION OF THE PUBLIC RESPONDENT NATIONAL
LABOR RELATIONS COMMISSION NOTWITHSTANDING THE FACT THAT PETITIONER WAS
ILLEGALLY DISMISSED. THE HONORABLE COURT OF APPEALS LIKEWISE ERRED IN NOT
SUSTAINING PETITIONER’S STANCE THAT HIS DISMISSAL FROM HIS EMPLOYMENT WAS NOT IN
ACCORDANCE WITH THE DUE PROCESS REQUIREMENT OF THE LAW. AND AS A CONSEQUENCE
OF PETITIONER’S ILLEGAL DISMISSAL, HE IS ENTITLED TO SEPARATION PAY, OVERTIME PAY,
INCENTIVE LEAVE PAY, HOLIDAY PAY AND OTHER BENEFITS GRANTED BY LAW. IN SO DOING,
THE HONORABLE COURT OF APPEALS RENDERED A DECISION WHICH IS CONTRARY TO THE
FACTS OF THE CASE, THE EVIDENCE, LAW AND ESTABLISHED JURISPRUDENCE. THESE
MANIFEST AND GLARING ERRORS, IF NOT CORRECTED, WOULD INEVITABLY WORK INJUSTICE TO
HEREIN PETITIONER AND MAKE HIM SUFFER IRREPARABLE DAMAGE.9

Petitioner presented the following issues for the Court’s resolution:

WHETHER OR NOT PETITIONER’S TERMINATION WAS FOR A JUST AND LAWFUL CAUSE.

II

WHETHER OR NOT PETITIONER’S DISMISSAL FROM HIS EMPLOYMENT WAS IN ACCORDANCE

WITH THE DUE PROCESS REQUIREMENT OF THE LAW.

III

WHETHER OR NOT PETITIONER IS ENTITLED TO SEPARATION PAY, OVERTIME PAY, INCENTIVE

LEAVE PAY, HOLIDAY PAY AND OTHER BENEFITS GRANTED BY LAW. 10

It is the contention of petitioner that his act of delivering the 600 bags of cement to Edgardo Interior,
instead of the Felix Hardware to which they were intended, does not constitute willful disobedience
nor serious misconduct so as to justify his dismissal. He was allegedly constrained to look for another
buyer for the merchandise because the proprietor of Felix Hardware rejected the aforesaid
materials. It has been allegedly company practice for respondent to allow the delivery of materials
to other business establishments when these are rejected by the intended customers. Contrary to
respondent’s claim, Mr. Interior allegedly paid for the bags of cement as testified to by Roque.

Petitioner maintains that his refusal to serve as driver to Mr. Uy’s son does not constitute willful
disobedience to the employer’s lawful order because it was not work-related. Further, he could not
allegedly be dismissed for committing an offense against his co-worker, Michael Ng, because he
was neither the employer, nor a member of his family nor his duly authorized representative.

Petitioner likewise claims that he was not afforded due process of law because prior to the
termination letter, he was not furnished a written notice detailing the particular acts and/or omissions
which he allegedly committed to warrant his dismissal. Petitioner thus prays that respondent be
directed to reinstate him and pay his money claims.
The regional labor arbiter, the NLRC and the CA are unanimous in finding that there was justifiable
cause for the dismissal of petitioner. They are one in holding that petitioner committed willful
disobedience when he delivered the 600 bags of cement to Mr. Interior, instead of the Felix
Hardware, without respondent’s knowledge nor permission.

The validity of petitioner’s dismissal is a factual question. It is not for the reviewing court to weigh
the conflicting evidence, determine the credibility of witnesses, or otherwise substitute its own
judgment for that of the administrative agency. Well-settled is the rule that findings of fact of quasi-
judicial agencies, like the NLRC, are accorded not only respect but at times even finality if such
findings are supported by substantial evidence.11 This is especially so in this case, in which the
findings of the NLRC were affirmed by the Court of Appeals. The findings of facts made therein can
only be set aside upon showing of grave abuse of discretion, fraud or error of law. 12 None has been
shown in this case.

The unanimous finding of the regional labor arbiter, the NLRC and the CA that petitioner is guilty of
willful disobedience is based on substantial evidence on record. Petitioner’s cause is not helped by
the fact that he committed a crime against his co-worker. His actuations clearly constituted willful
disobedience and serious misconduct justifying his dismissal under Article 282(a) of the Labor Code
which provides:

Art. 282. Termination by employer. – An employer may terminate an employment for any of the
following causes:

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

xxx

Willful disobedience of the employer’s lawful orders, as a just cause for the dismissal of an employee,
envisages the concurrence of at least two requisites: (1) the employee’s assailed conduct must have
been willful or intentional, the willfulness being characterized by a "wrongful and perverse attitude;"
and (2) the order violated must have been reasonable, lawful, made known to the employee and
must pertain to the duties which he had been engaged to discharge. 13

In this case, the order to petitioner was simple, i.e., to deliver the merchandise to the Felix Hardware.
It was clearly reasonable, lawful, made known to petitioner and pertained to his duty as driver of
respondent. Petitioner did not even proffer a justifiable explanation for his disobedience thereto.
Every employee is charged with the implicit duty of caring for the employer’s property. 14 Petitioner’s
conduct showed that he could not even be trusted with this task. Further, his hostile attitude
towards his co-workers which eventually led him to inflict physical injuries on one of them cannot
be countenanced. As correctly put by the NLRC, petitioner’s "continuance in the service of
respondent company is partly inimical not only to its interests but also to the interest of its other
employees."15

To effect the dismissal of an employee, however, the law requires not only that there be just and
valid cause as provided under Article 282 of the Labor Code. It likewise enjoins the employer to
afford the employee the opportunity to be heard and to defend himself. On the latter aspect, the
employer is mandated to furnish the employee with two (2) written notices: (a) a written notice
containing a statement of the cause for the termination to afford the employee ample opportunity
to be heard and defend himself with the assistance of his representative, if he so desires; (b) if the
employer decides to terminate the services of the employee, the employer must notify him in writing
of the decision to dismiss him, stating clearly the reason therefor.16
While there was unanimity among the regional labor arbiter, the NLRC and the CA on the existence
of a valid and lawful cause for petitioner’s dismissal, the same could not be said on their respective
findings on whether or not respondent complied with the procedural requirements in effecting
petitioner’s dismissal, i.e., affording him the opportunity to be heard. The regional labor arbiter and
the NLRC did not make any finding on whether respondent afforded petitioner the opportunity to be
heard and to defend himself. On the other hand, as mentioned earlier, the CA found that petitioner
was given ample opportunity to explain his side. Even granting that there was no strict compliance
with the two-notice requirement, such irregularity, according to the CA, does not militate against
the legality of the dismissal citing Serrano vs. NLRC.17

A careful review of the records revealed that, indeed, respondent’s manner of dismissing petitioner
fell short of the two-notice requirement. While it furnished petitioner the written notice informing
him of his dismissal,18 respondent failed to furnish petitioner the written notice apprising him of the
charge or charges against him. Consequently, petitioner was deprived of the opportunity to respond
thereto.

However, as correctly opined by the CA, respondent’s omission does not render petitioner’s
dismissal invalid but merely ineffectual. The prevailing rule is that when the dismissal is effected for
a just and valid cause, as in this case, the failure to observe procedural requirements does not
invalidate nor nullify the dismissal of an employee. The Court had the occasion to expound this rule
in the case of Serrano19 in this wise:

Not all notice requirements are requirements of due process. Some are simply part of a procedure
to be followed before a right granted to a party can be exercised. Others are simply an application
of the Justinian precept, embodied in the Civil Code, to act with justice, give everyone his due, and
observe honesty and good faith toward one’s fellowmen. Such is the notice requirement in Arts.
282-283. The consequence of the failure either of the employer or the employee to live up to this
precept is to make him liable in damages, not to render his act (dismissal or resignation, as the case
may be) void. The measure of damages is the amount of wages the employee should have received
were it not for the termination of his employment without prior notice. If warranted, nominal and
moral damages may also be awarded.

We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employer’s failure to comply
with the notice requirement does not constitute a denial of due process but a mere failure to observe
a procedure for the termination of employment which makes the termination of employment merely
ineffectual. It is similar to the failure to observe the provisions of Art. 1592, in relation to Art. 1191, of
the Civil Code in rescinding a contract for the sale of immovable property. Under these provisions,
while the power of a party to rescind a contract is implied in reciprocal obligations, nonetheless, in
cases involving the sale of immovable property, the vendor cannot exercise this power even though
the vendee defaults in the payment of the price, except by bringing an action in court or giving notice
of rescission by means of a notarial demand. Consequently, a notice of rescission given in the letter
of an attorney has no legal effect, and the vendee can make payment even after the due date since
no valid notice of rescission has been given.

Indeed, under the Labor Code, only the absence of a just cause for the termination of employment
can make the dismissal of an employee illegal. This is clear from Art. 279 which provides:

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.

Thus, only if the termination of employment is not for any of the causes provided by law is it illegal
and, therefore, the employee should be reinstated and paid backwages. x x x. 20 (Citations omitted)

In so ruling, the Court recognized that "the law, in protecting the rights of labor, authorized neither
the oppression nor self-destruction of the employer," thus:

The refusal to look beyond the validity of the initial action taken by the employer to terminate
employment either for an authorized or just cause can result in an injustice to the employer. For not
giving notice and hearing before dismissing an employee, who is otherwise guilty of, say, theft, or
even of an attempt against the life of the employer, an employer will be forced to keep in his employ
such guilty employee. This is unjust.

It is true the Constitution regards labor as "a primary social economic force." But so does it declare
that it "recognizes the indispensable role of the private sector, encourages private enterprise, and
provides incentives to needed investment. The Constitution bids the State to "afford full protection
to labor." But it is equally true that "the law, in protecting the rights of the laborer, authorizes neither
oppression nor self-destruction of the employer. And it is oppression to compel the employer to
continue in employment one who is guilty or to force the employer to remain in operation when it is
not economically in his interest to do so.

xxx

On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the
employee was dismissed for any of the just causes mentioned in said Art. 282, then, in accordance
with that article, he should not be reinstated. However, he must be paid backwages from the time
his employment was terminated until it is determined that the termination of employment is for a just
cause because the failure to hear him before he is dismissed renders the termination of his
employment without legal effect.21 (Citations omitted)

In fine, the lack of notice and hearing is considered as being a mere failure to observe a procedure
for the termination of employment which makes the dismissal ineffectual but not necessarily illegal.
The procedural infirmity is then remedied by ordering the payment to the employee his full
backwages from the time of his dismissal until the court finally rules that the dismissal has been for
a valid cause.22

Having established that respondent had just and valid cause to terminate petitioner’s employment
but failed to hear him prior to his dismissal, respondent is obliged to pay petitioner his backwages
computed from the time of his dismissal up to the time the decision in this case becomes final.

WHEREFORE, the Decision dated September 22, 2000 and Resolution dated March 16, 2001 of the
Court of Appeals in CA-G.R. SP No. 52487, are hereby AFFIRMED with MODIFICATION. Emilio Uy,
doing business under the business name Victory Ricemill, is ordered to pay petitioner full backwages
from the time his employment was terminated on June 22, 1993 up to the time the herein decision
becomes final. For this purpose, this case is REMANDED to the regional labor arbiter for the
computation of the backwages due petitioner.

SO ORDERED.