EN BANC

G.R. No. 158693             November 17, 2004

JENNY M. AGABON and VIRGILIO C. AGABON, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC.
and VICENTE ANGELES, respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review seeks to reverse the decision of the Court of Appeals dated January 23,
1 

2003, in CA-G.R. SP No. 63017, modifying the decision of National Labor Relations Commission
(NLRC) in NLRC-NCR Case No. 023442-00.

Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and
installing ornamental and construction materials. It employed petitioners Virgilio Agabon and Jenny
Agabon as gypsum board and cornice installers on January 2, 1992 until February 23, 1999 when
2 

they were dismissed for abandonment of work.

Petitioners then filed a complaint for illegal dismissal and payment of money claims and on
3 

December 28, 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and
ordered private respondent to pay the monetary claims. The dispositive portion of the decision
states:

WHEREFORE, premises considered, We find the termination of the complainants illegal.

Accordingly, respondent is hereby ordered to pay them their backwages up to November 29, 1999 in
the sum of:

1. Jenny M. Agabon - P56, 231.93

2. Virgilio C. Agabon - 56, 231.93

and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of
service from date of hiring up to November 29, 1999.
Respondent is further ordered to pay the complainants their holiday pay and service incentive leave
pay for the years 1996, 1997 and 1998 as well as their premium pay for holidays and rest days and
Virgilio Agabon's 13th month pay differential amounting to TWO THOUSAND ONE HUNDRED
FIFTY (P2,150.00) Pesos, or the aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND
SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for Jenny Agabon, and ONE
HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED TWENTY EIGHT & 93/100
(P123,828.93) Pesos for Virgilio Agabon, as per attached computation of Julieta C. Nicolas, OIC,
Research and Computation Unit, NCR.

SO ORDERED. 4

On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had
abandoned their work, and were not entitled to backwages and separation pay. The other money
claims awarded by the Labor Arbiter were also denied for lack of evidence. 5

Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court
of Appeals.

The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they
had abandoned their employment but ordered the payment of money claims. The dispositive portion
of the decision reads:

WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only insofar
as it dismissed petitioner's money claims. Private respondents are ordered to pay petitioners holiday
pay for four (4) regular holidays in 1996, 1997, and 1998, as well as their service incentive leave pay
for said years, and to pay the balance of petitioner Virgilio Agabon's 13th month pay for 1998 in the
amount of P2,150.00.

SO ORDERED. 6

Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed. 7

Petitioners assert that they were dismissed because the private respondent refused to give them
assignments unless they agreed to work on a "pakyaw" basis when they reported for duty on
February 23, 1999. They did not agree on this arrangement because it would mean losing benefits
as Social Security System (SSS) members. Petitioners also claim that private respondent did not
comply with the twin requirements of notice and hearing. 8

Private respondent, on the other hand, maintained that petitioners were not dismissed but had
abandoned their work. In fact, private respondent sent two letters to the last known addresses of the
9 

petitioners advising them to report for work. Private respondent's manager even talked to petitioner
Virgilio Agabon by telephone sometime in June 1999 to tell him about the new assignment at Pacific
Plaza Towers involving 40,000 square meters of cornice installation work. However, petitioners did
not report for work because they had subcontracted to perform installation work for another
company. Petitioners also demanded for an increase in their wage to P280.00 per day. When this
was not granted, petitioners stopped reporting for work and filed the illegal dismissal case. 10

It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only
respect but even finality if the findings are supported by substantial evidence. This is especially so
when such findings were affirmed by the Court of Appeals. However, if the factual findings of the
11 
NLRC and the Labor Arbiter are conflicting, as in this case, the reviewing court may delve into the
records and examine for itself the questioned findings. 12

Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners' dismissal
was for a just cause. They had abandoned their employment and were already working for another
employer.

To dismiss an employee, the law requires not only the existence of a just and valid cause but also
enjoins the employer to give the employee the opportunity to be heard and to defend himself. Article
13 

282 of the Labor Code enumerates the just causes for termination by the employer: (a) serious
misconduct or willful disobedience by the employee of the lawful orders of his employer or the latter's
representative in connection with the employee's work; (b) gross and habitual neglect by the
employee of his duties; (c) fraud or willful breach by the employee of the trust reposed in him by his
employer or his duly authorized representative; (d) commission of a crime or offense by the
employee against the person of his employer or any immediate member of his family or his duly
authorized representative; and (e) other causes analogous to the foregoing.

Abandonment is the deliberate and unjustified refusal of an employee to resume his employment. It 14 

is a form of neglect of duty, hence, a just cause for termination of employment by the employer. For 15 

a valid finding of abandonment, these two factors should be present: (1) the failure to report for work
or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee
relationship, with the second as the more determinative factor which is manifested by overt acts from
which it may be deduced that the employees has no more intention to work. The intent to
discontinue the employment must be shown by clear proof that it was deliberate and unjustified. 16

In February 1999, petitioners were frequently absent having subcontracted for an installation work
for another company. Subcontracting for another company clearly showed the intention to sever the
employer-employee relationship with private respondent. This was not the first time they did this. In
January 1996, they did not report for work because they were working for another company. Private
respondent at that time warned petitioners that they would be dismissed if this happened again.
Petitioners disregarded the warning and exhibited a clear intention to sever their employer-employee
relationship. The record of an employee is a relevant consideration in determining the penalty that
should be meted out to him. 17

In Sandoval Shipyard v. Clave, we held that an employee who deliberately absented from work
18 

without leave or permission from his employer, for the purpose of looking for a job elsewhere, is
considered to have abandoned his job. We should apply that rule with more reason here where
petitioners were absent because they were already working in another company.

The law imposes many obligations on the employer such as providing just compensation to workers,
observance of the procedural requirements of notice and hearing in the termination of employment.
On the other hand, the law also recognizes the right of the employer to expect from its workers not
only good performance, adequate work and diligence, but also good conduct and loyalty. The
19 

employer may not be compelled to continue to employ such persons whose continuance in the
service will patently be inimical to his interests.
20

After establishing that the terminations were for a just and valid cause, we now determine if the
procedures for dismissal were observed.

The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the  Omnibus
Rules Implementing the Labor Code:
Standards of due process: requirements of notice. – In all cases of termination of employment, the
following standards of due process shall be substantially observed:

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

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

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

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

In case of termination, the foregoing notices shall be served on the employee's last known address.

Dismissals based on just causes contemplate acts or omissions attributable to the employee while
dismissals based on authorized causes involve grounds under the Labor Code which allow the
employer to terminate employees. A termination for an authorized cause requires payment of
separation pay. When the termination of employment is declared illegal, reinstatement and full
backwages are mandated under Article 279. If reinstatement is no longer possible where the
dismissal was unjust, separation pay may be granted.

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give
the employee two written notices and a hearing or opportunity to be heard if requested by the
employee before terminating the employment: a notice specifying the grounds for which dismissal is
sought a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice
of the decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283
and 284, the employer must give the employee and the Department of Labor and Employment
written notices 30 days prior to the effectivity of his separation.

From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause
under Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons
under Article 284, and due process was observed; (2) the dismissal is without just or authorized
cause but due process was observed; (3) the dismissal is without just or authorized cause and there
was no due process; and (4) the dismissal is for just or authorized cause but due process was not
observed.

In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability.

In the second and third situations where the dismissals are illegal, Article 279 mandates that the
employee is entitled to reinstatement without loss of seniority rights and other privileges and full
backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from
the time the compensation was not paid up to the time of actual reinstatement.

In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be
cured, it should not invalidate the dismissal. However, the employer should be held liable for non-
compliance with the procedural requirements of due process.
The present case squarely falls under the fourth situation. The dismissal should be upheld because
it was established that the petitioners abandoned their jobs to work for another company. Private
respondent, however, did not follow the notice requirements and instead argued that sending notices
to the last known addresses would have been useless because they did not reside there anymore.
Unfortunately for the private respondent, this is not a valid excuse because the law mandates the
twin notice requirements to the employee's last known address. Thus, it should be held liable for
21 

non-compliance with the procedural requirements of due process.

A review and re-examination of the relevant legal principles is appropriate and timely to clarify the
various rulings on employment termination in the light of Serrano v. National Labor Relations
Commission. 22

Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any
notice. In the 1989 case of Wenphil Corp. v. National Labor Relations Commission, we reversed this
23 

long-standing rule and held that the dismissed employee, although not given any notice and hearing,
was not entitled to reinstatement and backwages because the dismissal was for grave misconduct
and insubordination, a just ground for termination under Article 282. The employee had a violent
temper and caused trouble during office hours, defying superiors who tried to pacify him. We
concluded that reinstating the employee and awarding backwages "may encourage him to do even
worse and will render a mockery of the rules of discipline that employees are required to observe." 24 

We further held that:

Under the circumstances, the dismissal of the private respondent for just cause should be
maintained. He has no right to return to his former employment.

However, the petitioner must nevertheless be held to account for failure to extend to private
respondent his right to an investigation before causing his dismissal. The rule is explicit as above
discussed. The dismissal of an employee must be for just or authorized cause and after due
process. Petitioner committed an infraction of the second requirement. Thus, it must be imposed a
sanction for its failure to give a formal notice and conduct an investigation as required by law before
dismissing petitioner from employment. Considering the circumstances of this case petitioner must
indemnify the private respondent the amount of P1,000.00. The measure of this award depends on
the facts of each case and the gravity of the omission committed by the employer. 25

The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not
follow the due process requirement, the dismissal may be upheld but the employer will be penalized
to pay an indemnity to the employee. This became known as the Wenphil or Belated Due Process
Rule.

On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that
the violation by the employer of the notice requirement in termination for just or authorized causes
was not a denial of due process that will nullify the termination. However, the dismissal is ineffectual
and the employer must pay full backwages from the time of termination until it is judicially declared
that the dismissal was for a just or authorized cause.

The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of
cases involving dismissals without requisite notices. We concluded that the imposition of penalty by
way of damages for violation of the notice requirement was not serving as a deterrent. Hence, we
now required payment of full backwages from the time of dismissal until the time the Court finds the
dismissal was for a just or authorized cause.
Serrano was confronting the practice of employers to "dismiss now and pay later" by imposing full
backwages.

We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the
Labor Code which states:

ART. 279. 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.

This means that the termination is illegal only if it is not for any of the justified or authorized causes
provided by law. Payment of backwages and other benefits, including reinstatement, is justified only
if the employee was unjustly dismissed.

The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has
prompted us to revisit the doctrine.

To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of
rights based on moral principles so deeply imbedded in the traditions and feelings of our people as
to be deemed fundamental to a civilized society as conceived by our entire history. Due process is
that which comports with the deepest notions of what is fair and right and just. It is a constitutional
26 

restraint on the legislative as well as on the executive and judicial powers of the government
provided by the Bill of Rights.

Due process under the Labor Code, like Constitutional due process, has two aspects:
substantive, i.e., the valid and authorized causes of employment termination under the Labor Code;
and procedural, i.e., the manner of dismissal. Procedural due process requirements for dismissal are
found in the Implementing Rules of P.D. 442, as amended, otherwise known as the Labor Code of
the Philippines in Book VI, Rule I, Sec. 2, as amended by Department Order Nos. 9 and 10. 27 

Breaches of these due process requirements violate the Labor Code. Therefore statutory due

process should be differentiated from failure to comply with constitutional due process.

Constitutional due process protects the individual from the government and assures him of his rights
in criminal, civil or administrative proceedings; while statutory due process found in the Labor Code
and Implementing Rules protects employees from being unjustly terminated without just cause after
notice and hearing.

In Sebuguero v. National Labor Relations Commission, the dismissal was for a just and valid cause
28 

but the employee was not accorded due process. The dismissal was upheld by the Court but the
employer was sanctioned. The sanction should be in the nature of indemnification or penalty, and
depends on the facts of each case and the gravity of the omission committed by the employer.

In Nath v. National Labor Relations Commission, it was ruled that even if the employee was not
29 

given due process, the failure did not operate to eradicate the just causes for dismissal. The
dismissal being for just cause, albeit without due process, did not entitle the employee to
reinstatement, backwages, damages and attorney's fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor
Relations Commission, which opinion he reiterated in Serrano, stated:
30 

C. Where there is just cause for dismissal but due process has not been properly observed by an
employer, it would not be right to order either the reinstatement of the dismissed employee or the
payment of backwages to him. In failing, however, to comply with the procedure prescribed by law in
terminating the services of the employee, the employer must be deemed to have opted or, in any
case, should be made liable, for the payment of separation pay. It might be pointed out that the
notice to be given and the hearing to be conducted generally constitute the two-part due process
requirement of law to be accorded to the employee by the employer. Nevertheless, peculiar
circumstances might obtain in certain situations where to undertake the above steps would be no
more than a useless formality and where, accordingly, it would not be imprudent to apply the res
ipsa loquitur rule and award, in lieu of separation pay, nominal damages to the employee. x x x.31

After carefully analyzing the consequences of the divergent doctrines in the law on employment
termination, we believe that in cases involving dismissals for cause but without observance of the
twin requirements of notice and hearing, the better rule is to abandon the Serrano doctrine and to
follow Wenphil by holding that the dismissal was for just cause but imposing sanctions on the
employer. Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing so, this
Court would be able to achieve a fair result by dispensing justice not just to employees, but to
employers as well.

The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not
complying with statutory due process may have far-reaching consequences.

This would encourage frivolous suits, where even the most notorious violators of company policy are
rewarded by invoking due process. This also creates absurd situations where there is a just or
authorized cause for dismissal but a procedural infirmity invalidates the termination. Let us take for
example a case where the employee is caught stealing or threatens the lives of his co-employees or
has become a criminal, who has fled and cannot be found, or where serious business losses
demand that operations be ceased in less than a month. Invalidating the dismissal would not serve
public interest. It could also discourage investments that can generate employment in the local
economy.

The constitutional policy to provide full protection to labor is not meant to be a sword to oppress
employers. The commitment of this Court to the cause of labor does not prevent us from sustaining
the employer when it is in the right, as in this case. Certainly, an employer should not be compelled
32 

to pay employees for work not actually performed and in fact abandoned.

The employer should not be compelled to continue employing a person who is admittedly guilty of
misfeasance or malfeasance and whose continued employment is patently inimical to the employer.
The law protecting the rights of the laborer authorizes neither oppression nor self-destruction of the
employer. 33

It must be stressed that in the present case, the petitioners committed a grave offense, i.e.,
abandonment, which, if the requirements of due process were complied with, would undoubtedly
result in a valid dismissal.

An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the
Social Justice Clause of the Constitution. Social justice, as the term suggests, should be used only
to correct an injustice. As the eminent Justice Jose P. Laurel observed, social justice must be
founded on the recognition of the necessity of interdependence among diverse units of a society and
of the protection that should be equally and evenly extended to all groups as a combined force in our
social and economic life, consistent with the fundamental and paramount objective of the state of
promoting the health, comfort, and quiet of all persons, and of bringing about "the greatest good to
the greatest number." 34

This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and
related cases. Social justice is not based on rigid formulas set in stone. It has to allow for changing
times and circumstances.

Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-management
relations and dispense justice with an even hand in every case:

We have repeatedly stressed that social justice – or any justice for that matter – is for the deserving,
whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of
reasonable doubt, we are to tilt the balance in favor of the poor to whom the Constitution fittingly
extends its sympathy and compassion. But never is it justified to give preference to the poor simply
because they are poor, or reject the rich simply because they are rich, for justice must always be
served for the poor and the rich alike, according to the mandate of the law.35

Justice in every case should only be for the deserving party. It should not be presumed that every
case of illegal dismissal would automatically be decided in favor of labor, as management has rights
that should be fully respected and enforced by this Court. As interdependent and indispensable
partners in nation-building, labor and management need each other to foster productivity and
economic growth; hence, the need to weigh and balance the rights and welfare of both the employee
and employer.

Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process
should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should
indemnify the employee for the violation of his statutory rights, as ruled in Reta v. National Labor
Relations Commission. The indemnity to be imposed should be stiffer to discourage the abhorrent
36 

practice of "dismiss now, pay later," which we sought to deter in the Serrano ruling. The sanction
should be in the nature of indemnification or penalty and should depend on the facts of each case,
taking into special consideration the gravity of the due process violation of the employer.

Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose
of indemnifying the plaintiff for any loss suffered by him.
37

As enunciated by this Court in Viernes v. National Labor Relations Commissions, an employer is

38 

liable to pay indemnity in the form of nominal damages to an employee who has been dismissed if,
in effecting such dismissal, the employer fails to comply with the requirements of due process. The
Court, after considering the circumstances therein, fixed the indemnity at P2,590.50, which was
equivalent to the employee's one month salary. This indemnity is intended not to penalize the
employer but to vindicate or recognize the employee's right to statutory due process which was
violated by the employer. 39

The violation of the petitioners' right to statutory due process by the private respondent warrants the
payment of indemnity in the form of nominal damages. The amount of such damages is addressed
to the sound discretion of the court, taking into account the relevant circumstances. Considering the
40 

prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this
form of damages would serve to deter employers from future violations of the statutory due process
rights of employees. At the very least, it provides a vindication or recognition of this fundamental
right granted to the latter under the Labor Code and its Implementing Rules.

Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners'
holiday pay, service incentive leave pay and 13th month pay.

We are not persuaded.

We affirm the ruling of the appellate court on petitioners' money claims. Private respondent is liable
for petitioners' holiday pay, service incentive leave pay and 13th month pay without deductions.

As a general rule, one who pleads payment has the burden of proving it. Even where the employee
must allege non-payment, the general rule is that the burden rests on the employer to prove
payment, rather than on the employee to prove non-payment. The reason for the rule is that the
pertinent personnel files, payrolls, records, remittances and other similar documents – which will
show that overtime, differentials, service incentive leave and other claims of workers have been paid
– are not in the possession of the worker but in the custody and absolute control of the employer. 41

In the case at bar, if private respondent indeed paid petitioners' holiday pay and service incentive
leave pay, it could have easily presented documentary proofs of such monetary benefits to disprove
the claims of the petitioners. But it did not, except with respect to the 13th month pay wherein it
presented cash vouchers showing payments of the benefit in the years disputed. Allegations by
42 

private respondent that it does not operate during holidays and that it allows its employees 10 days
leave with pay, other than being self-serving, do not constitute proof of payment. Consequently, it
failed to discharge the onus probandi thereby making it liable for such claims to the petitioners.

Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th
month pay, we find the same to be unauthorized. The evident intention of Presidential Decree No.
851 is to grant an additional income in the form of the 13th month pay to employees not already
receiving the same so as "to further protect the level of real wages from the ravages of world-wide
43 

inflation." Clearly, as additional income, the 13th month pay is included in the definition of wage
44 

under Article 97(f) of the Labor Code, to wit:

(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece ,
or commission basis, or other method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and reasonable value, as determined by
the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to
the employee…"

from which an employer is prohibited under Article 113 of the same Code from making any
45 

deductions without the employee's knowledge and consent. In the instant case, private respondent
failed to show that the deduction of the SSS loan and the value of the shoes from petitioner Virgilio
Agabon's 13th month pay was authorized by the latter. The lack of authority to deduct is further
bolstered by the fact that petitioner Virgilio Agabon included the same as one of his money claims
against private respondent.

The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter ordering
the private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996
to 1998, in the amount of P6,520.00, service incentive leave pay for the same period in the amount
of P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of
P2,150.00.

WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of
Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners' Jenny and
Virgilio Agabon abandoned their work, and ordering private respondent to pay each of the petitioners
holiday pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00, service
incentive leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio
Agabon's thirteenth month pay for 1998 in the amount of P2,150.00 is AFFIRMED with
the MODIFICATION that private respondent Riviera Home Improvements, Inc. is
further ORDERED to pay each of the petitioners the amount of P30,000.00 as nominal damages for
non-compliance with statutory due process.

No costs.

SO ORDERED.

Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio, Austria-Martinez,

Corona, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, and Garcia, JJ., concur.

SEPARATE OPINION

TINGA, J:

I concur in the result, the final disposition of the petition being correct. There is no denying the
importance of the Court's ruling today, which should be considered as definitive as to the effect of
the failure to render the notice and hearing required under the Labor Code when an employee is
being dismissed for just causes, as defined under the same law. The Court emphatically reaffirms
the rule that dismissals for just cause are not invalidated due to the failure of the employer to
observe the proper notice and hearing requirements under the Labor Code. At the same time,
The Decision likewise establishes that the Civil Code provisions on damages serve as the proper
framework for the appropriate relief to the employee dismissed for just cause if the notice-hearing
requirement is not met. Serrano v. NLRC,1 insofar as it is controlling in dismissals for unauthorized
causes, is no longer the controlling precedent. Any and all previous rulings and statements of the
Court inconsistent with these determinations are now deemed inoperative.

My views on the questions raised in this petition are comprehensive, if I may so in all modesty. I offer
this opinion to discuss the reasoning behind my conclusions, pertaining as they do to questions of
fundamental importance.

Prologue

The factual backdrop of the present Petition for Review is not novel. Petitioners claim that they were
illegally dismissed by the respondents, who allege in turn that petitioners had actually abandoned
their employment. There is little difficulty in upholding the findings of the NRLC and the Court of
Appeals that petitioners are guilty of abandonment, one of the just causes for termination under the
Labor Code. Yet, the records also show that the employer was remiss in not giving the notice
required by the Labor Code; hence, the resultant controversy as to the legal effect of such
failure vis-à-vis the warranted dismissal.
Ostensibly, the matter has been settled by our decision in Serrano2, wherein the Court ruled that the
failure to properly observe the notice requirement did not render the dismissal, whether for just or
authorized causes, null and void, for such violation was not a denial of the constitutional right to due
process, and that the measure of appropriate damages in such cases ought to be the amount of
wages the employee should have received were it not for the termination of his employment without
prior notice.3 Still, the Court has, for good reason, opted to reexamine the so-called Serrano doctrine
through the present petition

Antecedent Facts

Respondent Riviera Home Improvements, Inc (Riviera Home) is engaged in the manufacture and
installation of gypsum board and cornice. In January of 1992, the Agabons were hired in January of
1992 as cornice installers by Riviera Home. According to their personnel file with Riviera Home, the
Agabon given address was 3RDS Tailoring, E. Rodriguez Ave., Moonwalk Subdivision, P-II
Parañaque City, Metro Manila.4

It is not disputed that sometime around February 1999, the Agabons stopped rendering services for
Riviera Home. The Agabons allege that beginning on 23 February 1999, they stopped receiving
assignments from Riviera Home.5 When they demanded an explanation, the manager of Riviera
Homes, Marivic Ventura, informed them that they would be hired again, but on a "pakyaw" (piece-
work) basis. When the Agabons spurned this proposal, Riviera Homes refused to continue their
employment under the original terms and agreement. 6 Taking affront, the Agabons filed a complaint
for illegal dismissal with the National Labor Relations Commission ("NLRC").

Riviera Homes adverts to a different version of events leading to the filing of the complaint for illegal
dismissal. It alleged that in the early quarter of 1999, the Agabons stopped reporting for work with
Riviera. Two separate letters dated 10 March 1999, were sent to the Agabons at the address
indicated in their personnel file. In these notices, the Agabons were directed to report for work
immediately.7 However, these notices were returned unserved with the notation "RTS Moved." Then,
in June of 1999, Virgilio Agabon informed Riviera Homes by telephone that he and Jenny Agabon
were ready to return to work for Riviera Homes, on the condition that their wages be first adjusted.
On 18 June 1999, the Agabons went to Riviera Homes, and in a meeting with management,
requested a wage increase of up to Two Hundred Eighty Pesos (P280.00) a day. When no
affirmative response was offered by Riviera Homes, the Agabons initiated the complaint before the
NLRC.8

In their Position Paper, the Agabons likewise alleged that they were required to work even on
holidays and rest days, but were never paid the legal holiday pay or the premium pay for holiday or
rest day. They also asserted that they were denied Service Incentive Leave pay, and that Virgilio
Agabon was not given his thirteenth (13th) month pay for the year 1998. 9

After due deliberation, Labor Arbiter Daisy G. Cauton-Barcelona rendered a Decision dated 28

December 1999, finding the termination of the Agabons illegal, and ordering Riviera Homes to pay
backwages in the sum of Fifty Six Thousand Two Hundred Thirty One Pesos and Ninety Three
Centavos (P56,231.93) each. The Labor Arbiter likewise ordered, in lieu of reinstatement, the
payment of separation pay of one (1) month pay for every year of service from date of hiring up to 29
November 1999, as well as the payment of holiday pay, service incentive leave pay, and premium
pay for holiday and restday, plus thirteenth (13th) month differential to Virgilio Agabon.10

In so ruling, the Labor Arbiter declared that Riviera Homes was unable to satisfactorily refute the
Agabons' claim that they were no longer given work to do after 23 February 1999 and that their
rehiring was only on "pakyaw" basis. The Labor Arbiter also held that Riviera Homes failed to comply
with the notice requirement, noting that Riviera Homes well knew of the change of address of the
Agabons, considering that the identification cards it issued stated a different address from that on
the personnel file.11 The Labor Arbiter asserted the principle that in all termination cases, strict
compliance by the employer with the demands of procedural and substantive due process is a
condition sine qua non for the same to be declared valid.12

On appeal, the NLRC Second Division set aside the Labor Arbiter's Decision and ordered the
dismissal of the complaint for lack of merit. 13 The NLRC held that the Agabons were not able to
refute the assertion that for the payroll period ending on 15 February 1999, Virgilio and Jenny
Agabon worked for only two and one-half (2½) and three (3) days, respectively. It disputed the
earlier finding that Riviera Homes had known of the change in address, noting that the address
indicated in the

identification cards was not the Agabons, but that of the persons who should be notified in case of
emergency concerning the employee. 14 Thus, proper service of the notice was deemed to have been
accomplished. Further, the notices evinced good reason to believe that the Agabons had not been
dismissed, but had instead abandoned their jobs by refusing to report for work.

In support of its conclusion that the Agabons had abandoned their work, the NLRC also observed
that the Agabons did not seek reinstatement, but only separation pay. While the choice of relief was
premised by the Agabons on their purported strained relations with Riviera Homes, the NLRC
pointed out that such claim was amply belied by the fact that the Agabons had actually sought a
conference with Riviera Homes in June of 1999. The NLRC likewise found that the failure of the
Labor Arbiter to justify the award of extraneous money claims, such as holiday and service incentive
leave pay, confirmed that there was no proof to justify such claims.

A Petition for Certiorari was promptly filed with the Court of Appeals by the Agabons, imputing grave
abuse of discretion on the part of the NLRC in dismissing their complaint for illegal dismissal. In
a Decision15 dated 23 January 2003, the Court of Appeals affirmed the finding that the Agabons had
abandoned their employment. It noted that the two elements constituting abandonment had been
established, to wit: the failure to report for work or absence without valid justifiable reason, and; a
clear intention to sever the employer-employee relationship. The intent to sever the employer-
employee relationship was buttressed by the Agabon's choice to seek not reinstatement, but
separation pay. The Court of Appeals likewise found that the service of the notices were valid, as the
Agabons did not notify Riviera Homes of their change of address, and thus the failure to return to
work despite notice amounted to abandonment of work.

However, the Court of Appeals reversed the NLRC as regards the denial of the claims for holiday
pay, service incentive leave pay, and the balance of Virgilio Agabon's thirteenth (13th) month pay. It
ruled that the failure to adduce proof in support thereof was not fatal and that the burden of proving
that such benefits had already been paid rested on Riviera Homes. 16 Given that Riviera Homes failed
to present proof of payment to the Agabons of their holiday pay and service incentive leave pay for
the years 1996, 1997 and 1998, the Court of Appeals chose to believe that such benefits had not
actually been received by the employees. It also ruled that the apparent deductions made by Riviera
Homes on the thirteenth (13th) month pay of Virgilio Agabon violated Section 10 of the Rules and
Regulations Implementing Presidential Decree No. 851. 17 Accordingly, Riviera Homes was ordered
to pay the Agabons holiday for four (4) regular holidays in 1996, 1997 and 1998, as well as their
service incentive leave pay for said years, and the balance of Virgilio Agabon's thirteenth (13th)
month pay for 1998 in the amount of Two Thousand One Hundred Fifty Pesos (P2,150.00).18

In their Petition for Review, the Agabons claim that they had been illegally dismissed, reasserting
their version of events, thus: (1) that they had not been given new assignments since 23 February
1999; (2) that they were told that they would only be re-hired on a "pakyaw" basis, and; (3) that
Riviera Homes had knowingly sent the notices to their old address despite its knowledge of their
change of address as indicated in the identification cards. 19 Further, the Agabons note that only one
notice was sent to each of them, in violation of the rule that the employer must furnish two written
notices before termination — the first to apprise the employee of the cause for which dismissal is
sought, and the second to notify the employee of the decision of dismissal. 20 The Agabons likewise
maintain that they did not seek reinstatement owing to the strained relations between them and
Riviera Homes.

The Agabons present to this Court only one issue, i.e.: whether or not they were illegally dismissed
from their employment.21 There are several dimensions though to this issue which warrant full
consideration.

The Abandonment Dimension

Review of Factual Finding of Abandonment

As the Decision points out, abandonment is characterized by the failure to report for work or

absence without valid or justifiable reason, and a clear intention to sever the employer-employee
relationship. The question of whether or not an employee has abandoned employment is essentially
a factual issue.22 The NLRC and the Court of Appeals, both appropriate triers of fact, concluded that
the Agabons had actually abandoned their employment, thus there is little need for deep inquiry into
the correctness of this factual finding. There is no doubt that the Agabons stopped reporting for work
sometime in February of 1999. And there is no evidence to support their assertion that such absence
was due to the deliberate failure of Riviera Homes to give them work. There is also the fact, as noted
by the NLRC and the Court of Appeals, that the Agabons did not pray for reinstatement, but only for
separation

pay and money claims.23 This failure indicates their disinterest in maintaining the employer-employee
relationship and their unabated avowed intent to sever it. Their excuse that strained relations
between them and Riviera Homes rendered reinstatement no longer feasible was hardly given
credence by the NLRC and the Court of Appeals. 24

The contrary conclusion arrived at by the Labor Arbiter as regards abandonment is of little bearing to
the case. All that the Labor Arbiter said on that point was that Riviera Homes was not able to refute
the Agabons' claim that they were terminated on 23 February 1999. 25 The Labor Arbiter did not
explain why or how such finding was reachhy or how such finding was reachhe Agabons was more
credible than that of Riviera Homes'. Being bereft of reasoning, the conclusion deserves scant
consideration.

Compliance with Notice Requirement

At the same time, both the NLRC and the Court of Appeals failed to consider the apparent fact that
the rules governing notice of termination were not complied with by Riviera Homes. Section 2, Book
V, Rule XXIII of the Omnibus Rules Implementing the Labor Code (Implementing Rules) specifically
provides that for termination of employment based on just causes as defined in Article 282, there
must be: (1) written notice served on the employee specifying the grounds for termination and giving
employee reasonable opportunity to explain his/her side; (2) a hearing or conference wherein the
employee, with the assistance of counsel if so desired, is given opportunity to respond to the charge,
present his evidence or rebut evidence presented against him/her; and (3) written notice of
termination served on the employee indicating that upon due consideration of all the circumstances,
grounds have been established to justify termination.
At the same time, Section 2, Book V, Rule XXIII of the Implementing Rules does not require strict
compliance with the above procedure, but only that the same be "substantially observed."

Riviera Homes maintains that the letters it sent on 10 March 1999 to the Agabons sufficiently
complied with the notice rule. These identically worded letters noted that the Agabons had stopped
working without permission that they failed to return for work despite having been repeatedly told to
report to the office and resume their employment. 26 The letters ended with an invitation to the
Agabons to report back to the office and return to work.27

The apparent purpose of these letters was to advise the Agabons that they were welcome to return
back to work, and not to notify them of the grounds of termination. Still, considering that only
substantial compliance with the notice requirement is required, I am prepared to say that the letters
sufficiently conform to the first notice required under the Implementing Rules. The purpose of the
first notice is to duly inform the employee that a particular transgression is being considered against
him or her, and that an opportunity is being offered for him or her to respond to the charges. The
letters served the purpose of informing the Agabons of the pending matters beclouding their
employment, and extending them the opportunity to clear the air.

Contrary to the Agabons' claim, the letter-notice was correctly sent to the employee's last known
address, in compliance with the Implementing Rules. There is no dispute that these letters were not
actually received by the Agabons, as they had apparently moved out of the address indicated
therein. Still, the letters were sent to what Riviera Homes knew to be the Agabons' last known
address, as indicated in their personnel file. The Agabons insist that Riviera Homes had known of
the change of address, offering as proof their company IDs which purportedly print out their correct
new address. Yet, as pointed out by the NLRC and the Court of Appeals, the addresses indicated in
the IDs are not the Agabons, but that of the person who is to be notified in case on emergency
involve either or both of the Agabons.

The actual violation of the notice requirement by Riviera Homes lies in its failure to serve on the
Agabons the second notice which should inform them of termination. As the Decision notes, Riviera
Homes' argument that sending the second notice was useless due to the change of address is
inutile, since the Implementing Rules plainly require that the notice of termination should be served
at the employee's last known address.

The importance of sending the notice of termination should not be trivialized. The termination letter
serves as indubitable proof of loss of employment, and its receipt compels the employee to evaluate
his or her next options. Without such notice, the employee may be left uncertain of his fate; thus, its
service is mandated by the Implementing Rules. Non-compliance with the notice rule, as evident in
this case, contravenes the Implementing Rules. But does the violation serve to invalidate the
Agabons' dismissal for just cause?

The So-Called Constitutional Law Dimension

Justices Puno and Panganiban opine that the Agabons should be reinstated as a consequence of
the violation of the notice requirement. I respectfully disagree, for the reasons expounded below.

Constitutional Considerations
Of Due Process and the Notice-Hearing
Requirement in Labor Termination Cases

Justice Puno proposes that the failure to render due notice and hearing prior to dismissal for just
cause constitutes a violation of the constitutional right to due process. This view, as acknowledged
by Justice Puno himself, runs contrary to the Court's pronouncement in Serrano v. NLRC28 that the
absence of due notice and hearing prior to dismissal, if for just cause, violates statutory due process.

The ponencia of Justice Vicente V. Mendoza in Serrano provides this cogent overview of the history
of the doctrine:

Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to
overlook the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of Commerce of 1882
which gave either party to the employer-employee relationship the right to terminate their
relationship by giving notice to the other one month in advance. In lieu of notice, an employee could
be laid off by paying him a mesada equivalent to his salary for one month. This provision was
repealed by Art. 2270 of the Civil Code, which took effect on August 30, 1950. But on June 12, 1954,
R.A. No. 1052, otherwise known as the Termination Pay Law, was enacted reviving the mesada. On
June 21, 1957, the law was amended by R.A. No. 1787 providing for the giving of advance notice for
every year of service.29

Under Section 1 of the Termination Pay Law, an employer could dismiss an employee without just
cause by serving written notice on the employee at least one month in advance or one-half month for
every year of service of the employee, whichever was longer. 30 Failure to serve such written notice
entitled the employee to compensation equivalent to his salaries or wages corresponding to the
required period of notice from the date of termination of his employment.

However, there was no similar written notice requirement under the Termination Pay Law if the
dismissal of the employee was for just cause. The Court, speaking through Justice JBL Reyes, ruled
in Phil. Refining Co. v. Garcia:31

[Republic] Act 1052, as amended by Republic Act 1787, impliedly recognizes the right of the
employer to dismiss his employees (hired without definite period) whether for just case, as therein
defined or enumerated, or without it. If there be just cause, the employer is not required to serve
any notice of discharge nor to disburse termination pay to the employee. xxx32

Clearly, the Court, prior to the enactment of the Labor Code, was ill-receptive to the notion that
termination for just cause without notice or hearing violated the constitutional right to due process.
Nonetheless, the Court recognized an award of damages as the appropriate remedy. In Galsim v.
PNB,33 the Court held:

Of course, the employer's prerogative to dismiss employees hired without a definite period may be
with or without cause. But if the manner in which such right is exercised is abusive, the employer
stands to answer to the dismissed employee for damages. 34

The Termination Pay Law was among the repealed laws with the enactment of the Labor Code in
1974. Significantly, the Labor Code, in its inception, did not require notice or hearing before an
employer could terminate an employee for just cause. As Justice Mendoza explained:

Where the termination of employment was for a just cause, no notice was required to be given to the
employee. It was only on September 4, 1981 that notice was required to be given even where the
dismissal or termination of an employee was for cause. This was made in the rules issued by the
then Minister of Labor and Employment to implement B.P. Blg. 130 which amended the Labor Code.
And it was still much later when the notice requirement was embodied in the law with the
amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989. 35
It cannot be denied though that the thinking that absence of notice or hearing prior to termination
constituted a constitutional violation has gained a jurisprudential foothold with the Court. Justice
Puno, in his Dissenting Opinion, cites several cases in support of this theory, beginning
with Batangas Laguna Tayabas Bus Co. v. Court of Appeals 36 wherein we held that "the failure of
petitioner to give the private respondent the benefit of a hearing before he was dismissed constitutes
an infringement on his constitutional right to due process of law. 37

Still, this theory has been refuted, pellucidly and effectively to my mind, by Justice Mendoza's
disquisition in Serrano, thus:

xxx There are three reasons why, on the other hand, violation by the employer of the notice
requirement cannot be considered a denial of due process resulting in the nullity of the employee's
dismissal or layoff.

The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It
does not apply to the exercise of private power, such as the termination of employment under the
Labor Code. This is plain from the text of Art. III, §1 of the Constitution, viz.: "No person shall be
deprived of life, liberty, or property without due process of law. . . ." The reason is simple: Only the
State has authority to take the life, liberty, or property of the individual. The purpose of the Due
Process Clause is to ensure that the exercise of this power is consistent with what are considered
civilized methods.

The second reason is that notice and hearing are required under the Due Process Clause before the
power of organized society are brought to bear upon the individual. This is obviously not the case of
termination of employment under Art. 283. Here the employee is not faced with an aspect of the
adversary system. The purpose for requiring a 30-day written notice before an employee is laid off is
not to afford him an opportunity to be heard on any charge against him, for there is none. The
purpose rather is to give him time to prepare for the eventual loss of his job and the DOLE an
opportunity to determine whether economic causes do exist justifying the termination of his
employment.

xxx

The third reason why the notice requirement under Art. 283 can not be considered a requirement of
the Due Process Clause is that the employer cannot really be expected to be entirely an impartial
judge of his own cause. This is also the case in termination of employment for a just cause under
Art. 282 (i.e., serious misconduct or willful disobedience by the employee of the lawful orders of the
employer, gross and habitual neglect of duties, fraud or willful breach of trust of the employer,
commission of crime against the employer or the latter's immediate family or duly authorized
representatives, or other analogous cases).38

The Court in the landmark case of People v. Marti39 clarified the proper dimensions of the Bill of
Rights.

That the Bill of Rights embodied in the Constitution is not meant to be invoked against acts of private
individuals finds support in the deliberations of the Constitutional Commission. True, the liberties
guaranteed by the fundamental law of the land must always be subject to protection. But protection
against whom? Commissioner Bernas in his sponsorship speech in the Bill of Rights answers the
query which he himself posed, as follows:

"First, the general reflections. The protection of fundamental liberties in the essence of constitutional
democracy. Protection against whom? Protection against the state. The Bill of Rights governs the
relationship between the individual and the state. Its concern is not the relation between individuals,
between a private individual and other individuals. What the Bill of Rights does is to declare some
forbidden zones in the private sphere inaccessible to any power holder." (Sponsorship Speech of
Commissioner Bernas; Record of the Constitutional Commission, Vol. 1, p. 674; July 17,1986; Italics
supplied)40

I do not doubt that requiring notice and hearing prior to termination for just cause is an admirable
sentiment borne out of basic equity and fairness. Still, it is not a constitutional requirement that can
impose itself on the relations of private persons and entities. Simply put, the Bill of Rights affords
protection against possible State oppression against its citizens, but not against an unjust or
repressive conduct by a private party towards another.

Justice Puno characterizes the notion that constitutional due process limits government action alone
as "passé," and adverts to nouvelle vague theories which assert that private conduct may be
restrained by constitutional due process. His dissent alludes to the American experience making
references to the post-Civil War/pre-World War II era when the US Supreme Court seemed overly
solicitous to the rights of big business over those of the workers.

Theories, no matter how entrancing, remain theoretical unless adopted by legislation, or more
controversially, by judicial opinion. There were a few decisions of the US Supreme Court that,
ostensibly, imposed on private persons the values of the constitutional guarantees. However, in
deciding the cases, the American High Court found it necessary to link the actors to adequate
elements of the "State" since the Fourteenth Amendment plainly begins with the words "No State
shall…"41

More crucially to the American experience, it had become necessary to pass legislation in order to
compel private persons to observe constitutional values. While the equal protection clause was
deemed sufficient by the Warren Court to bar racial segregation in public facilities, it necessitated
enactment of the Civil Rights Acts of 1964 to prohibit segregation as enforced by private persons
within their property. In this jurisdiction, I have trust in the statutory regime that governs the
correction of private wrongs. There are thousands of statutes, some penal or regulatory in nature,
that are the source of actionable claims against private persons. There is even no stopping the
State, through the legislative cauldron, from compelling private individuals, under pain of legal
sanction, into observing the norms ordained in the Bill of Rights.

Justice Panganiban's Separate Opinion asserts that corporate behemoths and even individuals may
now be sources of abuses and threats to human rights and liberties. 42 The concern is not unfounded,
but appropriate remedies exist within our statutes, and so resort to the constitutional trump card is
not necessary. Even if we were to engage the premise, the proper juristic exercise should be to
examine whether an employer has taken the attributes of the State so that it could be compelled by
the Constitution to observe the proscriptions of the Bill of Rights. But the strained analogy simply
does not square since the attributes of an employer are starkly incongruous with those of the State.
Employers plainly do not possess the awesome powers and the tremendous resources which the
State has at its command.

The differences between the State and employers are not merely literal, but extend to their very
essences. Unlike the State, the raison d'etre of employers in business is to accumulate profits.
Perhaps the State and the employer are similarly capacitated to inflict injury or discomfort on
persons under their control, but the same power is also possessed by a school principal, hospital
administrator, or a religious leader, among many others. Indeed, the scope and reach of authority of
an employer pales in comparison with that of the State. There is no basis to conclude that an
employer, or even the employer class, may be deemed a de facto state and on that premise,
compelled to observe the Bill of Rights. There is simply no nexus in their functions, distaff as they
are, that renders it necessary to accord the same jurisprudential treatment.

It may be so, as alluded in the dissent of Justice Puno, that a conservative court system overly
solicitous to the concerns of business may consciously gut away at rights or privileges owing to the
labor sector. This certainly happened before in the United States in the early part of the twentieth
century, when the progressive labor legislation such as that enacted during President Roosevelt's
New Deal regime — most of them addressing problems of labor — were struck down by an arch-
conservative Court.43 The preferred rationale then was to enshrine within the constitutional order
business prerogatives, rendering them superior to the express legislative intent. Curiously, following
its judicial philosophy at the time the U. S. Supreme Court made due process guarantee towards
employers prevail over the police power to defeat the cause of labor. 44

Of course, this Court should not be insensate to the means and methods by which the entrenched
powerful class may maneuver the socio-political system to ensure self-preservation. However, the
remedy to rightward judicial bias is not leftward judicial bias. The more proper judicial attitude is to
give due respect to legislative prerogatives, regardless of the ideological sauce they are dipped in.

While the Bill of Rights maintains a position of primacy in the constitutional hierarchy, 45 it has scope
and limitations that must be respected and asserted by the Court, even though they may at times
serve somewhat bitter ends. The dissenting opinions are palpably distressed at the effect of
the Decision, which will undoubtedly provoke those reflexively sympathetic to the labor class. But
haphazard legal theory cannot be used to justify the obverse result. The adoption of the dissenting
views would give rise to all sorts of absurd constitutional claims. An excommunicated Catholic might
demand his/her reinstatement into the good graces of the Church and into communion on the
ground that excommunication was violative of the constitutional right to due process. A celebrity
contracted to endorse Pepsi Cola might sue in court to void a stipulation that prevents him/her from
singing the praises of Coca Cola once in a while, on the ground that such stipulation violates the
constitutional right to free speech. An employee might sue to prevent the employer from reading
outgoing e-mail sent through the company server using the company e-mail address, on the ground
that the constitutional right to privacy of communication would be breached.

The above concerns do not in anyway serve to trivialize the interests of labor. But we must avoid
overarching declarations in order to justify an end result beneficial to labor. I dread the doctrinal
acceptance of the notion that the Bill of Rights, on its own, affords protection and sanctuary not just
from the acts of State but also from the conduct of private persons. Natural and juridical persons
would hesitate to interact for fear that a misstep could lead to their being charged in court as a
constitutional violator. Private institutions that thrive on their exclusivity, such as churches or cliquish
groups, could be forced to renege on their traditional tenets, including vows of secrecy and the like, if
deemed by the Court as inconsistent with the Bill of Rights. Indeed, that fundamental right of all
private persons to be let alone would be forever diminished because of a questionable notion that
contravenes with centuries of political thought.

It is not difficult to be enraptured by novel legal ideas. Their characterization is susceptible to the
same marketing traps that hook consumers to new products. With the help of unique wrapping, a
catchy label, and testimonials from professed experts from exotic lands, a malodorous idea may gain
wide acceptance, even among those self-possessed with their own heightened senses of
perception. Yet before we join the mad rush in order to proclaim a theory as "brilliant," a rigorous test
must first be employed to determine whether it complements or contradicts our own system of laws
and juristic thought. Without such analysis, we run the risk of abnegating the doctrines we have
fostered for decades and the protections they may have implanted into our way of life.
Should the Court adopt the view that the Bill of Rights may be invoked to invalidate actions by
private entities against private individuals, the Court would open the floodgates to, and the docket
would be swamped with, litigations of the scurrilous sort. Just as patriotism is the last refuge of
scoundrels, the broad constitutional claim is the final resort of the desperate litigant.

Constitutional Protection of Labor

The provisions of the 1987 Constitution affirm the primacy of labor and advocate a multi-faceted
state policy that affords, among others, full protection to labor. Section 18, Article II thereof provides:

The State affirms labor as a primary social economic force. It shall protect the rights of workers and
promote their welfare.

Further, Section 3, Article XIII states:

The State shall afford full protection to labor, local and overseas, organized and unorganized, and
promote full employment and equal employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security to tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law.

The State shall promote the principle of shared responsibility between workers and employers and
the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce
their mutual compliance therewith to foster industrial peace.

The State shall regulate the relations between workers and employers, recognizing the right of labor
to its just share in the fruits of production and the right of enterprises to reasonable returns on
investments, and to expansion and growth.

The constitutional enshrinement of the guarantee of full protection of labor is not novel to the 1987
Constitution. Section 6, Article XIV of the 1935 Constitution reads:

The State shall afford protection to labor, especially to working women, and minors, and shall
regulate the relations between the landowner and tenant, and between labor and capital in industry
and in agriculture. The State may provide for compulsory arbitration.

Similarly, among the principles and state policies declared in the 1973 Constitution, is that provided
in Section 9, Article II thereof:

The State shall afford full 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 employers. The State shall assure the rights of workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions of work. The State may provide for
compulsory arbitration.

On the other hand, prior to the 1973 Constitution, the right to security of tenure could only be found
in legislative enactments and their respective implementing rules and regulations. It was only in the
1973 Constitution that security of tenure was elevated as a constitutional right. The development of
the concept of security of tenure as a constitutionally recognized right was discussed by this Court
in BPI Credit Corporation v. NLRC,46 to wit:

The enthronement of the worker's right to security or tenure in our fundamental law was not
achieved overnight. For all its liberality towards labor, our 1935 Constitution did not elevate the right
as a constitutional right. For a long time, the worker's security of tenure had only the protective
mantle of statutes and their interpretative rules and regulations. It was as uncertain protection that
sometimes yielded to the political permutations of the times. It took labor nearly four decades of
sweat and tears to persuade our people thru their leaders, to exalt the worker's right to security of
tenure as a sacrosanct constitutional right. It was Article II, section 2 [9] of our 1973 Constitution that
declared as a policy that the State shall assure the right of worker's to security tenure. The 1987
Constitution is even more solicitous of the welfare of labor. Section 3 of its Article XIII mandates that
the State shall afford full protection to labor and declares that all workers shall be entitled to security
of tenure. Among the enunciated State policies are the

promotion of social justice and a just and dynamic social order. In contrast, the prerogative of
management to dismiss a worker, as an aspect of property right, has never been endowed with a
constitutional status.

The unequivocal constitutional declaration that all workers shall be entitled to security of tenure
spurred our lawmakers to strengthen the protective walls around this hard earned right. The right
was protected from undue infringement both by our substantive and procedural laws. Thus, the
causes for dismissing employees were more defined and restricted; on the other hand, the
procedure of termination was also more clearly delineated. These substantive and procedural laws
must be strictly complied with before a worker can be dismissed from his employment. 47

It is quite apparent that the constitutional protection of labor was entrenched more than eight
decades ago, yet such did not prevent this Court in the past from affirming dismissals for just cause
without valid notice. Nor was there any pretense made that this constitutional maxim afforded a
laborer a positive right against dismissal for just cause on the ground of lack of valid prior notice. As
demonstrated earlier, it was only after the enactment of the Labor Code that the doctrine relied upon
by the dissenting opinions became en vogue. This point highlights my position that the violation of
the notice requirement has statutory moorings, not constitutional.

It should be also noted that the 1987 Constitution also recognizes the principle of shared
responsibility between workers and employers, and the right of enterprise to reasonable returns,
expansion, and growth. Whatever perceived imbalance there might have been under previous
incarnations of the provision have been obviated by Section 3, Article XIII.

In the case of Manila Prince Hotel v. GSIS,48 we affirmed the presumption that all constitutional
provisions are self-executing. We reasoned that to declare otherwise would result in the pernicious
situation wherein by mere inaction and disregard by the legislature, constitutional mandates would
be rendered ineffectual. Thus, we held:

As against constitutions of the past, modern constitutions have been generally ed upon a different
principle and have often become in effect extensive codes of laws intended to operate directly upon
the people in a manner similar to that of statutory enactments, and the function of constitutional
conventions has evolved into one more like that of a legislative body. Hence, unless it is expressly
provided that a legislative act is necessary to enforce a constitutional mandate, the presumption now
is that all provisions of the constitution are self-executing. If the constitutional provisions are treated
as requiring legislation instead of self-executing, the legislature would have the power to ignore and
practically nullify the mandate of the fundamental law. This can be cataclysmic. That is why the
prevailing view is, as it has always been, that —

. . . in case of doubt, the Constitution should be considered self-executing rather than non-self-
executing. . . . Unless the contrary is clearly intended, the provisions of the Constitution should be
considered self-executing, as a contrary rule would give the legislature discretion to determine when,
or whether, they shall be effective. These provisions would be subordinated to the will of the
lawmaking body, which could make them entirely meaningless by simply refusing to pass the
needed implementing statute.49

In further discussing self-executing provisions, this Court stated that:

In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the
exercise of powers directly granted by the constitution, further the operation of such a provision,
prescribe a practice to be used for its enforcement, provide a convenient remedy for the protection of
the rights secured or the determination thereof, or place reasonable safeguards around the exercise
of the right. The mere fact that legislation may supplement and add to or prescribe a penalty for the
violation of a self-executing constitutional provision does not render such a provision ineffective in
the absence of such legislation. The omission from a constitution of any express provision for a
remedy for enforcing a right or liability is not necessarily an indication that it was not intended to be
self-executing. The rule is that a self-executing provision of the constitution does not necessarily
exhaust legislative power on the subject, but any legislation must be in harmony with the
constitution, further the exercise of constitutional right and make it more available. Subsequent
legislation however does not necessarily mean that the subject constitutional provision is not, by
itself, fully enforceable.50

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. This is reflected in the record
of debates on the social justice provisions of the Constitution:

MS. [FELICITAS S.] AQUINO: We appreciate the concern of the Commissioner. But this Committee
[on Social Justice] has actually become the forum already of a lot of specific grievances and
specific demands, such that understandably, we may have been, at one time or another,
dangerously treading into the functions of legislation. Our only plea to the Commission is to
focus our perspective on the matter of social justice and its rightful place in the Constitution. What
we envision here is a mandate specific enough that would give impetus for statutory
implementation. We would caution ourselves in terms of the judicious exercise of self-
censorship against treading into the functions of legislation. (emphasis supplied)51

xxx

[FLORENZ D.] REGALADO: I notice that the 1935 Constitution had only one section on social
justice; the same is true with the 1973 Constitution. But they seem to have stood us in good stead;
and I am a little surprised why, despite that attempt at self-censorship, there are certain
provisions here which are properly for legislation.52

xxx

BISHOP [TEODORO S.] BACANI: [I] think the distinction that was given during the presentation of
the provisions on the Bill of Rights by Commissioner Bernas is very apropos here. He spoke of self-
executing rights which belong properly to the Bill of Rights, and then he spoke of a new body
of rights which are more of claims and that these have come about largely through the works
of social philosophers and then the teaching of the Popes. They focus on the common good
and hence, it is not as easy to pinpoint precisely these rights nor the situs of the rights. And
yet, they exist in relation to the common good. 53

xxx

MS. [MINDA LUZ M.] QUESADA: I think the nitty-gritty of this kind of collaboration will be left
to legislation but the important thing now is the conservation, utilization or maximization of the very
limited resources. xxx

[RICARDO J.] ROMULO: The other problem is that, by and large, government services are
inefficient. So, this is a problem all by itself. On Section 19, where the report says that people's
organizations as a principal means of empowering the people to pursue and protect through
peaceful means…, I do not suppose that the Committee would like to either preempt or
exclude the legislature, because the concept of a representative and democratic system
really is that the legislature is normally the principal means.

[EDMUNDO G.] GARCIA: That is correct. In fact, people cannot even dream of influencing the
composition or the membership of the legislature, if they do not get organized. It is, in fact, a
recognition of the principle that unless a citizenry is organized and mobilized to pursue its ends
peacefully, then it cannot really participate effectively. 54

There is no pretense on the part of the framers that the provisions on Social Justice, particularly
Section 3 of Article XIII, are self-executory. Still, considering the rule that provisions should be
deemed self-executing if enforceable without further legislative action, an examination of Section 3
of Article XIII is warranted to determine whether it is complete in itself as a definitive law, or if it
needs future legislation for completion and enforcement. 55 Particularly, we should inquire whether or
not the provision voids the dismissal of a laborer for just cause if no valid notice or hearing is
attendant.

Constitutional Commissioner Fr. Joaquin G. Bernas makes a significant comment on Section 3,

Article XIII of the 1987 Constitution:
The [cluster] of rights guaranteed in the second paragraph are the right "to security of tenure,
humane conditions of work, and a living wage." Again, although these have been set apart by a
period (.) from the next sentence and are therefore not modified by the final phrase "as may be
provided by law," it is not the intention to place these beyond the reach of valid laws. xxx
(emphasis supplied)56

At present, the Labor Code is the primary mechanism to carry out the Constitution's directives. This
is clear from Article 357 under Chapter 1 thereof which essentially restates the policy on the
protection of labor as worded in the 1973 Constitution, which was in force at the time of enactment of
the Labor Code. It crystallizes the fundamental law's policies on labor, defines the parameters of the
rights granted to labor such as the right to security of tenure, and prescribes the standards for the
enforcement of such rights in concrete terms. While not infallible, the measures provided therein
tend to ensure the achievement of the constitutional aims.

The necessity for laws concretizing the constitutional principles on the protection of labor is evident
in the reliance placed upon such laws by the Court in resolving the issue of the validity of a worker's
dismissal. In cases where that was the issue confronting the Court, it consistently recognized the
constitutional right to security of tenure and employed the standards laid down by prevailing laws in
determining whether such right was violated. 58 The Court's reference to laws other than the
Constitution in resolving the issue of dismissal is an implicit acknowledgment that the right to
security of tenure, while recognized in the Constitution, cannot be implemented uniformly absent a
law prescribing concrete standards for its enforcement.

As discussed earlier, the validity of an employee's dismissal in previous cases was examined by the
Court in accordance with the standards laid down by Congress in the Termination Pay Law, and
subsequently, the Labor Code and the amendments thereto. At present, the validity of an
employee's dismissal is weighed against the standards laid down in Article 279, as well as Article
282 in relation to Article 277(b) of the Labor Code, for a dismissal for just cause, and Article 283 for
a dismissal for an authorized cause.

The Effect of Statutory Violation

Of Notice and Hearing

There is no doubt that the dismissal of an employee even for just cause, without prior notice or
hearing, violates the Labor Code. However, does such violation necessarily void the dismissal?

Before I proceed with my discussion on dismissals for just causes, a brief comment regarding
dismissals for authorized cause under Article 283 of the Labor Code. While the justiciable question
in Serrano pertained to a dismissal for unauthorized cause, the ruling therein was crafted as
definitive to dismissals for just cause. Happily, the Decision today does not adopt the same unwise
tack. It should be recognized that dismissals for just cause and dismissals for authorized cause are
governed by different provisions, entail divergent requisites, and animated by distinct rationales. The
language of Article 283 expressly effects the termination for authorized cause to the service of
written notice on the workers and the Ministry of Labor at least one (1) month before the intended
date of termination. This constitutes an eminent difference than dismissals for just cause, wherein
the causal relation between the notice and the dismissal is not expressly stipulated. The
circumstances distinguishing just and authorized causes are too markedly different to be subjected
to the same rules and reasoning in interpretation.

Since the present petition is limited to a question arising from a dismissal for just cause, there is no
reason for making any pronouncement regarding authorized causes. Such declaration would be
merely obiter, since they are neither the law of the case nor dispositive of the present petition. When
the question becomes justiciable before this Court, we will be confronted with an appropriate factual
milieu on which we can render a more judicious disposition of this admittedly important question.

B. Dismissal for Just Cause

There is no express provision in the Labor Code that voids a dismissal for just cause on the ground
that there was no notice or hearing. Under Section 279, the employer is precluded from dismissing
an employee except for a just cause as provided in Section 282, or an authorized cause under
Sections 283 and 284. Based on reading Section 279 alone, the existence of just cause by itself is
sufficient to validate the termination.

Just cause is defined by Article 282, which unlike Article 283, does not condition the termination on
the service of written notices. Still, the dissenting opinions propound that even if there is just cause,
a termination may be invalidated due to the absence of notice or hearing. This view is anchored
mainly on constitutional moorings, the basis of which I had argued against earlier. For determination
now is whether there is statutory basis under the Labor Code to void a dismissal for just cause due
to the absence of notice or hearing.

As pointed out by Justice Mendoza in Serrano, it was only in 1989 that the Labor Code was
amended to enshrine into statute the twin requirements of notice and hearing. 59 Such requirements
are found in Article 277 of the Labor Code, under the heading "Miscellaneous Provisions." Prior to
the amendment, the notice-hearing requirement was found under the implementing rules issued by
the then Minister of Labor in 1981. The present-day implementing rules likewise mandate that the
standards of due process, including the requirement of written notice and hearing, "be substantially
observed."60

Indubitably, the failure to substantially comply with the standards of due process, including the notice
and hearing requirement, may give rise to an actionable claim against the employer. Under Article
288, penalties may arise from violations of any provision of the Labor Code. The Secretary of Labor
likewise enjoys broad powers to inquire into existing relations between employers and employees.
Systematic violations by management of the statutory right to due process would fall under the broad
grant of power to the Secretary of Labor to investigate under Article 273.

However, the remedy of reinstatement despite termination for just cause is simply not authorized by
the Labor Code. Neither the Labor Code nor its implementing rules states that a termination for just
cause is voided because the requirement of notice and hearing was not observed. This is not simply
an inadvertent semantic failure, but a conscious effort to protect the prerogatives of the employer to
dismiss an employee for just cause. Notably, despite the several pronouncements by this Court in
the past equating the notice-hearing requirement in labor cases to a constitutional maxim, neither
the legislature nor the executive has adopted the same tack, even gutting the protection to provide
that substantial compliance with due process suffices.

The Labor Code significantly eroded management prerogatives in the hiring and firing of employees.
Whereas employees could be dismissed even without just cause under the Termination Pay Law 61,
the Labor Code affords workers broad security of tenure. Still, the law recognizes the right of the
employer to terminate for just cause. The just causes enumerated under the Labor Code ¾ serious
misconduct or willful disobedience, gross and habitual neglect, fraud or willful breach of trust,
commission of a crime by the employee against the employer, and other analogous causes ¾ are
characterized by the harmful behavior of an employee against the business or the person of the
employer.
These just causes for termination are not negated by the absence of notice or hearing. An employee
who tries to kill the employer cannot be magically absolved of trespasses just because the employer
forgot to serve due notice. Or a less extreme example, the gross and habitual neglect of an
employee will not be improved upon just because the employer failed to conduct a hearing prior to
termination.

In fact, the practical purpose of requiring notice and hearing is to afford the employee the opportunity
to dispute the contention that there was just cause in the dismissal. Yet it must be understood – if a
dismissed employee is deprived of the right to notice and hearing, and thus denied the
opportunity to present countervailing evidence that disputes the finding of just cause,
reinstatement will be valid not because the notice and hearing requirement was not
observed, but because there was no just cause in the dismissal. The opportunity to dispute the
finding of the just cause is readily available before the Labor Arbiter, and the subsequent levels of
appellate review. Again, as held in Serrano:

Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is
not to comply with the Due Process Clause of the Constitution. The time for notice and hearing is at
the trial stage. Then that is the time we speak of notice and hearing as the essence of procedural
due process. Thus, compliance by the employer with the notice requirement before he dismisses an
employee does not foreclose the right of the latter to question the legality of his dismissal. As Art.
277(b) provides, "Any decision taken by the employer shall be without prejudice to the right of the
worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch
of the National Labor Relations Commission.62

The Labor Code presents no textually demonstrable commitment to invalidate a dismissal for just
cause due to the absence of notice or hearing. This is not surprising, as such remedy will not restore
the employer or employee into equity. Absent a showing of integral causation, the mutual infliction of
wrongs does not negate either injury, but instead enforces two independent rights of relief.

The Damages' Dimensions

Award for Damages Must Have Statutory Basis

The Court has grappled with the problem of what should be the proper remedial relief of an
employee dismissed with just cause, but not afforded either notice or hearing. In a long line of cases,
beginning with Wenphil Corp. v. NLRC63 and up until Serrano in 2000, the Court had deemed an
indemnification award as sufficient to answer for the violation by the employer against the employee.
However, the doctrine was modified in Serrano.

I disagree with Serrano insofar as it held that employees terminated for just cause are to be paid
backwages from the time employment was terminated "until it is determined that the termination is
for just cause because the failure to hear him before he is dismissed renders the termination of his
employment without legal effect."64 Article 279 of the Labor Code clearly authorizes the payment of
backwages only if an employee is unjustly dismissed. A dismissal for just cause is obviously
antithetical to an unjust dismissal. An award for backwages is not clearly warranted by the law.

The Impropriety of Award for Separation Pay

The formula of one month's pay for every year served does have statutory basis. It is found though
in the Labor Code though, not the Civil Code. Even then, such computation is made for separation
pay under the Labor Code. But separation pay is not an appropriate as a remedy in this case, or in
any case wherein an employee is terminated for just cause. As Justice Vitug noted in his separate
opinion in Serrano, an employee whose employment is terminated for a just cause is not entitled to
the payment of separation benefits.65 Separation pay is traditionally a monetary award paid as an
alternative to reinstatement which can no longer be effected in view of the long passage of time or
because of the realities of the situation. 66 However, under Section 7, Rule 1, Book VI of the Omnibus
Rules Implementing the Labor Code, "[t]he separation from work of an employee for a just cause
does not entitle him to the termination pay provided in the Code." 67 Neither does the Labor Code
itself provide instances wherein separation pay is warranted for dismissals with just cause.
Separation pay is warranted only for dismissals for authorized causes, as enumerated in Article 283
and 284 of the Labor Code.

The Impropriety of Equity Awards

Admittedly, the Court has in the past authorized the award of separation pay for duly terminated
employees as a measure of social justice, provided that the employee is not guilty of serious
misconduct reflecting on moral character.68 This doctrine is inapplicable in this case, as the Agabons
are guilty of abandonment, which is the deliberate and unjustified refusal of an employee to resume
his employment. Abandonment is tantamount to serious misconduct, as it constitutes a willful breach
of the employer-employee relationship without cause.

The award of separation pay as a measure of social justice has no statutory basis, but clearly
emanates from the Court's so-called "equity jurisdiction." The Court's equity jurisdiction as a basis for
award, no matter what form it may take, is likewise unwarranted in this case. Easy resort to equity
should be avoided, as it should yield to positive rules which pre-empt and prevail over such
persuasions.69 Abstract as the concept is, it does not admit to definite and objective standards.

I consider the pronouncement regarding the proper monetary awards in such cases as  Wenphil
Corp. v. NLRC,70 Reta,71 and to a degree, even Serrano as premised in part on equity. This decision
is premised in part due to the absence of cited statutory basis for these awards. In these cases, the
Court deemed an indemnity award proper without exactly saying where in statute could such award
be derived at. Perhaps, equity or social justice can be invoked as basis for the award. However, this
sort of arbitrariness, indeterminacy and judicial usurpation of legislative prerogatives is precisely the
source of my discontent. Social justice should be the aspiration of all that we do, yet I think it the
more mature attitude to consider that it ebbs and flows within our statutes, rather than view it as an
independent source of funding.

Article 288 of the Labor Code as a Source of Liability

Another putative source of liability for failure to render the notice requirement is Article 288 of the
Labor Code, which states:

Article 288 states:

Penalties. — Except as otherwise provided in this Code, or unless the acts complained of hinges on
a question of interpretation or implementation of ambiguous provisions of an existing collective
bargaining agreement, any violation of the provisions of this Code declared to be unlawful or penal in
nature shall be punished with a fine of not less than One Thousand Pesos (P1,000.00) nor more
than Ten Thousand Pesos (P10,000.00), or imprisonment of not less than three months nor more
than three years, or both such fine and imprisonment at the discretion of the court.

It is apparent from the provision that the penalty arises due to contraventions of the provisions of the
Labor Code. It is also clear that the provision comes into play regardless of who the violator may be.
Either the employer or the employee may be penalized, or perhaps even officials tasked with
implementing the Labor Code.

However, it is apparent that Article 288 is a penal provision; hence, the prescription for penalties
such as fine and imprisonment. The Article is also explicit that the imposition of fine or imprisonment
is at the "discretion of the court." Thus, the proceedings under the provision is penal in character.
The criminal case has to be instituted before the proper courts, and the Labor Code violation subject
thereof duly proven in an adversarial proceeding. Hence, Article 288 cannot apply in this case and
serve as basis to impose a penalty on Riviera Homes.

I also maintain that under Article 288 the penalty should be paid to the State, and not to the person
or persons who may have suffered injury as a result of the violation. A penalty is a sum of money
which the law requires to be paid by way of punishment for doing some act which is prohibited or for
not doing some act which is required to be done. 72 A penalty should be distinguished from damages
which is the pecuniary compensation or indemnity to a person who has suffered loss, detriment, or
injury, whether to his person, property, or rights, on account of the unlawful act or omission or
negligence of another. Article 288 clearly serves as a punitive fine, rather than a compensatory
measure, since the provision penalizes an act that violates the Labor Code even if such act does not
cause actual injury to any private person.

Independent of the employee's interests protected by the Labor Code is the interest of the State in
seeing to it that its regulatory laws are complied with. Article 288 is intended to satiate the latter
interest. Nothing in the language of Article 288 indicates an intention to compensate or remunerate a
private person for injury he may have sustained.

It should be noted though that in Serrano, the Court observed that since the promulgation of Wenphil
Corp. v. NLRC73 in 1989, "fines imposed for violations of the notice requirement have varied
from P1,000.00 to P2,000.00 to P5,000.00 to P10,000.00."74 Interestingly, this range is the same
range of the penalties imposed by Article 288. These "fines" adverted to in Serrano were paid to the
dismissed employee. The use of the term "fines," as well as the terminology employed a few other
cases,75 may have left an erroneous impression that the award implemented beginning
with Wenphil was based on Article 288 of the Labor Code. Yet, an examination of Wenphil reveals
that what the Court actually awarded to the employee was an "indemnity", dependent on the facts of
each case and the gravity of the omission committed by the employer. There is no mention
in Wenphil of Article 288 of the Labor Code, or indeed, of any statutory basis for the award.

The Proper Basis: Employer's Liability under the Civil Code

As earlier stated, Wenphil allowed the payment of indemnity to the employee dismissed for just
cause is dependent on the facts of each case and the gravity of the omission committed by the
employer. However, I considered Wenphil flawed insofar as it is silent as to the statutory basis for
the indemnity award. This failure, to my mind, renders it unwise for to reinstate the  Wenphil rule, and
foster the impression that it is the judicial business to invent awards for damages without clear
statutory basis.

The proper legal basis for holding the employer liable for monetary damages to the employee
dismissed for just cause is the Civil Code. The award of damages should be measured
against the loss or injury suffered by the employee by reason of the employer's violation or,
in case of nominal damages, the right vindicated by the award. This is the proper paradigm
authorized by our law, and designed to obtain the fairest possible relief.
Under Section 217(4) of the Labor Code, the Labor Arbiter has jurisdiction over claims for actual,
moral, exemplary and other forms of damages arising from the employer-employee relations. It is
thus the duty of Labor Arbiters to adjudicate claims for damages, and they should disabuse
themselves of any inhibitions if it does appear that an award for damages is warranted. As triers of
facts in a specialized field, they should attune themselves to the particular conditions or problems
attendant to employer-employee relationships, and thus be in the best possible position as to the
nature and amount of damages that may be warranted in this case.

The damages referred under Section 217(4) of the Labor Code are those available under the Civil
Code. It is but proper that the Civil Code serve as the basis for the indemnity, it being the law that
regulates the private relations of the members of civil society, determining their respective rights and
obligations with reference to persons, things, and civil acts. 76 No matter how impressed with the
public interest the relationship between a private employer and employee is, it still is ultimately a
relationship between private individuals. Notably, even though the Labor Code could very well have
provided set rules for damages arising from the employer-employee relationship, referral was
instead made to the concept of damages as enumerated and defined under the Civil Code.

Given the long controversy that has dogged this present issue regarding dismissals for just cause, it
is wise to lay down standards that would guide the proper award of damages under the Civil Code in
cases wherein the employer failed to comply with statutory due process in dismissals for just cause.

First. I believe that it can be maintained as a general rule, that failure to comply with the statutory
requirement of notice automatically gives rise to nominal damages, at the very least, even if the
dismissal was sustained for just cause.

Nominal damages are adjudicated in order that a right of a plaintiff which has been violated or
invaded by another may be vindicated or recognized without having to indemnify the plaintiff for any
loss suffered by him. 77 Nominal damages may likewise be awarded in every obligation arising from
law, contracts, quasi-contracts, acts or omissions punished by law, and quasi-delicts, or where any
property right has been invaded.

Clearly, the bare act of failing to observe the notice requirement gives rise to nominal damages
assessable against the employer and due the employee. The Labor Code indubitably entitles the
employee to notice even if dismissal is for just cause, even if there is no apparent intent to void such
dismissals deficiently implemented. It has also been held that one's employment, profession, trade,
or calling is a "property right" and the wrongful interference therewith gives rise to an actionable
wrong.78

In Better Buildings, Inc. v. NLRC,79 the Court ruled that the while the termination therein was for just
and valid cause, the manner of termination was done in complete disregard of the necessary
procedural safeguards.80 The Court found nominal damages as the proper form of award, as it was
purposed to vindicate the right to procedural due process violated by the employer. 81 A similar
holding was maintained in Iran v. NLRC82 and Malaya Shipping v. NLRC.83 The doctrine has express
statutory basis, duly recognizes the existence of the right to notice, and vindicates the violation of
such right. It is sound, logical, and should be adopted as a general rule.

The assessment of nominal damages is left to the discretion of the court, 84 or in labor cases, of the
Labor Arbiter and the successive appellate levels. The authority to nominate standards governing
the award of nominal damages has clearly been delegated to the judicial branch, and it will serve
good purpose for this Court to provide such guidelines. Considering that the affected right is a
property right, there is justification in basing the amount of nominal damages on the particular
characteristics attaching to the claimant's employment. Factors such as length of service, positions
held, and received salary may be considered to obtain the proper measure of nominal damages.
After all, the degree by which a property right should be vindicated is affected by the estimable value
of such right.

At the same time, it should be recognized that nominal damages are not meant to be compensatory,
and should not be computed through a formula based on actual losses. Consequently, nominal
damages usually limited in pecuniary value.85 This fact should be impressed upon the prospective
claimant, especially one who is contemplating seeking actual/compensatory damages.

Second. Actual or compensatory damages are not available as a matter of right to an employee

dismissed for just cause but denied statutory due process. They must be based on clear factual and
legal bases,86 and correspond to such pecuniary loss suffered by the employee as duly
proven.87 Evidently, there is less degree of discretion to award actual or compensatory damages.

I recognize some inherent difficulties in establishing actual damages in cases for terminations
validated for just cause. The dismissed employee retains no right to continued employment from the
moment just cause for termination exists, and such time most likely would have arrived even before
the employer is liable to send the first notice. As a result, an award of backwages disguised as
actual damages would almost never be justified if the employee was dismissed for just cause. The
possible exception would be if it can be proven the ground for just cause came into being only after
the dismissed employee had stopped receiving wages from the employer.

Yet it is not impossible to establish a case for actual damages if dismissal was for just cause.
Particularly actionable, for example, is if the notices are not served on the employee, thus hampering
his/her opportunities to obtain new employment. For as long as it can be demonstrated that the
failure of the employer to observe procedural due process mandated by the Labor Code is the
proximate cause of pecuniary loss or injury to the dismissed employee, then actual or compensatory
damages may be awarded.

Third. If there is a finding of pecuniary loss arising from the employer violation, but the amount
cannot be proved with certainty, then temperate or moderate damages are available under Article
2224 of the Civil Code. Again, sufficient discretion is afforded to the adjudicator as regards the
proper award, and the award must be reasonable under the circumstances. 88 Temperate or nominal
damages may yet prove to be a plausible remedy, especially when common sense dictates that
pecuniary loss was suffered, but incapable of precise definition.

Fourth. Moral and exemplary damages may also be awarded in the appropriate circumstances. As
pointed out by the Decision, moral damages are recoverable where the dismissal of the employee
was attended by bad faith, fraud, or was done in a manner contrary to morals, good customs or
public policy, or the employer committed an act oppressive to labor. 89 Exemplary damages may avail
if the dismissal was effected in a wanton, oppressive or malevolent manner.

Appropriate Award of Damages to the Agabons

The records indicate no proof exists to justify the award of actual or compensatory damages, as it
has not been established that the failure to serve the second notice on the Agabons was the
proximate cause to any loss or injury. In fact, there is not even any showing that such violation
caused any sort of injury or discomfort to the Agabons. Nor do they assert such causal relation.
Thus, the only appropriate award of damages is nominal damages. Considering the circumstances, I
agree that an award of Fifteen Thousand Pesos (P15,000.00) each for the Agabons is sufficient.

All premises considered, I VOTE to:

(1) DENY the PETITION for lack of merit, and AFFIRM the Decision of the Court of Appeals dated
23 January 2003, with the MODIFICATION that in addition, Riviera Homes be

ORDERED to pay the petitioners the sum of Fifteen Thousand Pesos (P15,000.00) each, as nominal
damages.

(2) HOLD that henceforth, dismissals for just cause may not be invalidated due to the failure to
observe the due process requirements under the Labor Code, and that the only indemnity award
available to the employee dismissed for just cause are damages under the Civil Code as duly
proven. Any and all previous rulings and statements of the Court inconsistent with this holding are
now deemed INOPERATIVE.

DANTE O. TINGA
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 81958 June 30, 1988

PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC., petitioner,

vs.
HON. FRANKLIN M. DRILON as Secretary of Labor and Employment, and TOMAS D.
ACHACOSO, as Administrator of the Philippine Overseas Employment
Administration, respondents.

Gutierrez & Alo Law Offices for petitioner.

SARMIENTO, J.:

The petitioner, Philippine Association of Service Exporters, Inc. (PASEI, for short), a firm "engaged principally in the recruitment of Filipino
workers, male and female, for overseas placement," 1 challenges the Constitutional validity of Department Order No. 1, Series of 1988, of the
Department of Labor and Employment, in the character of "GUIDELINES GOVERNING THE TEMPORARY SUSPENSION OF
DEPLOYMENT OF FILIPINO DOMESTIC AND HOUSEHOLD WORKERS," in this petition for certiorari and prohibition. Specifically, the
measure is assailed for "discrimination against males or females;" 2 that it "does not apply to all Filipino workers but only to domestic helpers
and females with similar skills;" 3 and that it is violative of the right to travel. It is held likewise to be an invalid exercise of the lawmaking
power, police power being legislative, and not executive, in character.

In its supplement to the petition, PASEI invokes Section 3, of Article XIII, of the Constitution,
providing for worker participation "in policy and decision-making processes affecting their rights and
benefits as may be provided by law."   Department Order No. 1, it is contended, was passed in the
4

absence of prior consultations. It is claimed, finally, to be in violation of the Charter's non-impairment

clause, in addition to the "great and irreparable injury" that PASEI members face should the Order
be further enforced.

On May 25, 1988, the Solicitor General, on behalf of the respondents Secretary of Labor and
Administrator of the Philippine Overseas Employment Administration, filed a Comment informing the
Court that on March 8, 1988, the respondent Labor Secretary lifted the deployment ban in the states
of Iraq, Jordan, Qatar, Canada, Hongkong, United States, Italy, Norway, Austria, and Switzerland. * In
submitting the validity of the challenged "guidelines," the Solicitor General invokes the police power of the Philippine State.

It is admitted that Department Order No. 1 is in the nature of a police power measure. The only
question is whether or not it is valid under the Constitution.

The concept of police power is well-established in this jurisdiction. It has been defined as the "state
authority to enact legislation that may interfere with personal liberty or property in order to promote
the general welfare."   As defined, it consists of (1) an imposition of restraint upon liberty or property,
5

(2) in order to foster the common good. It is not capable of an exact definition but has been,
purposely, veiled in general terms to underscore its all-comprehensive embrace.

"Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where it
could be done, provides enough room for an efficient and flexible response to conditions and
circumstances thus assuring the greatest benefits."  6

It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the
Charter. Along with the taxing power and eminent domain, it is inborn in the very fact of statehood
and sovereignty. It is a fundamental attribute of government that has enabled it to perform the most
vital functions of governance. Marshall, to whom the expression has been credited,   refers to it 7

succinctly as the plenary power of the State "to govern its citizens."  8

"The police power of the State ... is a power coextensive with self- protection, and it is not inaptly
termed the "law of overwhelming necessity." It may be said to be that inherent and plenary power in
the State which enables it to prohibit all things hurtful to the comfort, safety, and welfare of society."  9

It constitutes an implied limitation on the Bill of Rights. According to Fernando, it is "rooted in the
conception that men in organizing the state and imposing upon its government limitations to
safeguard constitutional rights did not intend thereby to enable an individual citizen or a group of
citizens to obstruct unreasonably the enactment of such salutary measures calculated to ensure
communal peace, safety, good order, and welfare."   Significantly, the Bill of Rights itself does not
10

purport to be an absolute guaranty of individual rights and liberties "Even liberty itself, the greatest of
all rights, is not unrestricted license to act according to one's will."   It is subject to the far more
11

overriding demands and requirements of the greater number.

Notwithstanding its extensive sweep, police power is not without its own limitations. For all its
awesome consequences, it may not be exercised arbitrarily or unreasonably. Otherwise, and in that
event, it defeats the purpose for which it is exercised, that is, to advance the public good. Thus,
when the power is used to further private interests at the expense of the citizenry, there is a clear
misuse of the power.  12

In the light of the foregoing, the petition must be dismissed.

As a general rule, official acts enjoy a presumed vahdity.   In the absence of clear and convincing
13

evidence to the contrary, the presumption logically stands.

The petitioner has shown no satisfactory reason why the contested measure should be nullified.
There is no question that Department Order No. 1 applies only to "female contract workers,"   but it
14

does not thereby make an undue discrimination between the sexes. It is well-settled that "equality
before the law" under the Constitution   does not import a perfect Identity of rights among all men
15

and women. It admits of classifications, provided that (1) such classifications rest on substantial
distinctions; (2) they are germane to the purposes of the law; (3) they are not confined to existing
conditions; and (4) they apply equally to all members of the same class.  16

The Court is satisfied that the classification made-the preference for female workers — rests on
substantial distinctions.

As a matter of judicial notice, the Court is well aware of the unhappy plight that has befallen our
female labor force abroad, especially domestic servants, amid exploitative working conditions
marked by, in not a few cases, physical and personal abuse. The sordid tales of maltreatment
suffered by migrant Filipina workers, even rape and various forms of torture, confirmed by
testimonies of returning workers, are compelling motives for urgent Government action. As precisely
the caretaker of Constitutional rights, the Court is called upon to protect victims of exploitation. In
fulfilling that duty, the Court sustains the Government's efforts.

The same, however, cannot be said of our male workers. In the first place, there is no evidence that,
except perhaps for isolated instances, our men abroad have been afflicted with an Identical
predicament. The petitioner has proffered no argument that the Government should act similarly with
respect to male workers. The Court, of course, is not impressing some male chauvinistic notion that
men are superior to women. What the Court is saying is that it was largely a matter of evidence (that
women domestic workers are being ill-treated abroad in massive instances) and not upon some
fanciful or arbitrary yardstick that the Government acted in this case. It is evidence capable indeed of
unquestionable demonstration and evidence this Court accepts. The Court cannot, however, say the
same thing as far as men are concerned. There is simply no evidence to justify such an inference.
Suffice it to state, then, that insofar as classifications are concerned, this Court is content that
distinctions are borne by the evidence. Discrimination in this case is justified.

As we have furthermore indicated, executive determinations are generally final on the Court. Under
a republican regime, it is the executive branch that enforces policy. For their part, the courts decide,
in the proper cases, whether that policy, or the manner by which it is implemented, agrees with the
Constitution or the laws, but it is not for them to question its wisdom. As a co-equal body, the
judiciary has great respect for determinations of the Chief Executive or his subalterns, especially
when the legislature itself has specifically given them enough room on how the law should be
effectively enforced. In the case at bar, there is no gainsaying the fact, and the Court will deal with
this at greater length shortly, that Department Order No. 1 implements the rule-making powers
granted by the Labor Code. But what should be noted is the fact that in spite of such a fiction of
finality, the Court is on its own persuaded that prevailing conditions indeed call for a deployment
ban.

There is likewise no doubt that such a classification is germane to the purpose behind the measure.
Unquestionably, it is the avowed objective of Department Order No. 1 to "enhance the protection for
Filipino female overseas workers"   this Court has no quarrel that in the midst of the terrible
17

mistreatment Filipina workers have suffered abroad, a ban on deployment will be for their own good
and welfare.

The Order does not narrowly apply to existing conditions. Rather, it is intended to apply indefinitely
so long as those conditions exist. This is clear from the Order itself ("Pending review of the
administrative and legal measures, in the Philippines and in the host countries . . ." ), meaning to say
18
that should the authorities arrive at a means impressed with a greater degree of permanency, the
ban shall be lifted. As a stop-gap measure, it is possessed of a necessary malleability, depending on
the circumstances of each case. Accordingly, it provides:

9. LIFTING OF SUSPENSION. — The Secretary of Labor and Employment (DOLE) may, upon
recommendation of the Philippine Overseas Employment Administration (POEA), lift the suspension
in countries where there are:

1. Bilateral agreements or understanding with the Philippines, and/or,

2. Existing mechanisms providing for sufficient safeguards to ensure the welfare and protection of
Filipino workers. 
19

The Court finds, finally, the impugned guidelines to be applicable to all female domestic overseas
workers. That it does not apply to "all Filipina workers"   is not an argument for unconstitutionality.
20

Had the ban been given universal applicability, then it would have been unreasonable and arbitrary.
For obvious reasons, not all of them are similarly circumstanced. What the Constitution prohibits is
the singling out of a select person or group of persons within an existing class, to the prejudice of
such a person or group or resulting in an unfair advantage to another person or group of persons. To
apply the ban, say exclusively to workers deployed by A, but not to those recruited by B, would
obviously clash with the equal protection clause of the Charter. It would be a classic case of what
Chase refers to as a law that "takes property from A and gives it to B."   It would be an unlawful
21

invasion of property rights and freedom of contract and needless to state, an invalid act.    (Fernando
22

says: "Where the classification is based on such distinctions that make a real difference as infancy,
sex, and stage of civilization of minority groups, the better rule, it would seem, is to recognize its
validity only if the young, the women, and the cultural minorities are singled out for favorable
treatment. There would be an element of unreasonableness if on the contrary their status that calls
for the law ministering to their needs is made the basis of discriminatory legislation against them. If
such be the case, it would be difficult to refute the assertion of denial of equal protection."    In the
23

case at bar, the assailed Order clearly accords protection to certain women workers, and not the
contrary.)

It is incorrect to say that Department Order No. 1 prescribes a total ban on overseas deployment.
From scattered provisions of the Order, it is evident that such a total ban has hot been
contemplated. We quote:

5. AUTHORIZED DEPLOYMENT-The deployment of domestic helpers and workers of similar skills

defined herein to the following [sic] are authorized under these guidelines and are exempted from
the suspension.

5.1 Hirings by immediate members of the family of Heads of State and Government;

5.2 Hirings by Minister, Deputy Minister and the other senior government officials; and

5.3 Hirings by senior officials of the diplomatic corps and duly accredited international organizations.

5.4 Hirings by employers in countries with whom the Philippines have [sic] bilateral labor agreements
or understanding.

xxx xxx xxx

7. VACATIONING DOMESTIC HELPERS AND WORKERS OF SIMILAR SKILLS--Vacationing
domestic helpers and/or workers of similar skills shall be allowed to process with the POEA and
leave for worksite only if they are returning to the same employer to finish an existing or partially
served employment contract. Those workers returning to worksite to serve a new employer shall be
covered by the suspension and the provision of these guidelines.

xxx xxx xxx

9. LIFTING OF SUSPENSION-The Secretary of Labor and Employment (DOLE) may, upon

recommendation of the Philippine Overseas Employment Administration (POEA), lift the suspension
in countries where there are:

1. Bilateral agreements or understanding with the Philippines, and/or,

2. Existing mechanisms providing for sufficient safeguards to ensure the welfare and protection of
Filipino workers. 
24

xxx xxx xxx

The consequence the deployment ban has on the right to travel does not impair the right. The right
to travel is subject, among other things, to the requirements of "public safety," "as may be provided
by law."   Department Order No. 1 is a valid implementation of the Labor Code, in particular, its basic
25

policy to "afford protection to labor,"   pursuant to the respondent Department of Labor's rule-making
26

authority vested in it by the Labor Code.   The petitioner assumes that it is unreasonable simply
27

because of its impact on the right to travel, but as we have stated, the right itself is not absolute. The
disputed Order is a valid qualification thereto.

Neither is there merit in the contention that Department Order No. 1 constitutes an invalid exercise of
legislative power. It is true that police power is the domain of the legislature, but it does not mean
that such an authority may not be lawfully delegated. As we have mentioned, the Labor Code itself
vests the Department of Labor and Employment with rulemaking powers in the enforcement
whereof. 28

The petitioners's reliance on the Constitutional guaranty of worker participation "in policy and
decision-making processes affecting their rights and benefits"   is not well-taken. The right granted
29

by this provision, again, must submit to the demands and necessities of the State's power of
regulation.

The Constitution declares that:

Sec. 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all.  30

"Protection to labor" does not signify the promotion of employment alone. What concerns the
Constitution more paramountly is that such an employment be above all, decent, just, and humane.
It is bad enough that the country has to send its sons and daughters to strange lands because it
cannot satisfy their employment needs at home. Under these circumstances, the Government is
duty-bound to insure that our toiling expatriates have adequate protection, personally and
economically, while away from home. In this case, the Government has evidence, an evidence the
petitioner cannot seriously dispute, of the lack or inadequacy of such protection, and as part of its
duty, it has precisely ordered an indefinite ban on deployment.
The Court finds furthermore that the Government has not indiscriminately made use of its authority.
It is not contested that it has in fact removed the prohibition with respect to certain countries as
manifested by the Solicitor General.

The non-impairment clause of the Constitution, invoked by the petitioner, must yield to the loftier
purposes targetted by the Government.   Freedom of contract and enterprise, like all other
31

freedoms, is not free from restrictions, more so in this jurisdiction, where laissez faire has never
been fully accepted as a controlling economic way of life.

This Court understands the grave implications the questioned Order has on the business of recruitment.
The concern of the Government, however, is not necessarily to maintain profits of business firms. In the
ordinary sequence of events, it is profits that suffer as a result of Government regulation. The interest of
the State is to provide a decent living to its citizens. The Government has convinced the Court in this case
that this is its intent. We do not find the impugned Order to be tainted with a grave abuse of discretion to
warrant the extraordinary relief prayed for.

WHEREFORE, the petition is DISMISSED. No costs.

SO ORDERED.

Yap, C.J., Fernan, Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin,
Cortes and Griño-Aquino, JJ., concur.

Gutierrez, Jr. and Medialdea, JJ., are on leave.

THIRD DIVISION

G.R. No. 157010               June 21, 2005

PHILIPPINE NATIONAL BANK, petitioner,

vs.
FLORENCE O. CABANSAG, respondent.

DECISION

PANGANIBAN, J.:

The Court reiterates the basic policy that all Filipino workers, whether employed locally or overseas,
enjoy the protective mantle of Philippine labor and social legislations. Our labor statutes may not be
rendered ineffective by laws or judgments promulgated, or stipulations agreed upon, in a foreign
country.

The Case
Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, seeking to
reverse and set aside the July 16, 2002 Decision 2 and the January 29, 2003 Resolution 3 of the Court
of Appeals (CA) in CA-GR SP No. 68403. The assailed Decision dismissed the CA Petition (filed by
herein petitioner), which had sought to reverse the National Labor Relations Commission (NLRC)’s
June 29, 2001 Resolution,4 affirming Labor Arbiter Joel S. Lustria’s January 18, 2000 Decision. 5

The assailed CA Resolution denied herein petitioner’s Motion for Reconsideration.

The Facts

The facts are narrated by the Court of Appeals as follows:

"In late 1998, [herein Respondent Florence Cabansag] arrived in Singapore as a tourist. She applied
for employment, with the Singapore Branch of the Philippine National Bank, a private banking
corporation organized and existing under the laws of the Philippines, with principal offices at the
PNB Financial Center, Roxas Boulevard, Manila. At the time, the Singapore PNB Branch was under
the helm of Ruben C. Tobias, a lawyer, as General Manager, with the rank of Vice-President of the
Bank. At the time, too, the Branch Office had two (2) types of employees: (a) expatriates or the
regular employees, hired in Manila and assigned abroad including Singapore, and (b) locally (direct)
hired. She applied for employment as Branch Credit Officer, at a total monthly package of
$SG4,500.00, effective upon assumption of duties after approval. Ruben C. Tobias found her
eminently qualified and wrote on October 26, 1998, a letter to the President of the Bank in Manila,
recommending the appointment of Florence O. Cabansag, for the position.

xxxxxxxxx

"The President of the Bank was impressed with the credentials of Florence O. Cabansag that he
approved the recommendation of Ruben C. Tobias. She then filed an ‘Application,’ with the Ministry
of Manpower of the Government of Singapore, for the issuance of an ‘Employment Pass’ as an
employee of the Singapore PNB Branch. Her application was approved for a period of two (2) years.

"On December 7, 1998, Ruben C. Tobias wrote a letter to Florence O. Cabansag offering her a
temporary appointment, as Credit Officer, at a basic salary of Singapore Dollars 4,500.00, a month
and, upon her successful completion of her probation to be determined solely, by the Bank, she may
be extended at the discretion of the Bank, a permanent appointment and that her temporary
appointment was subject to the following terms and conditions:

‘1. You will be on probation for a period of three (3) consecutive months from the date of your
assumption of duty.

‘2. You will observe the Bank’s rules and regulations and those that may be adopted from time to
time.

‘3. You will keep in strictest confidence all matters related to transactions between the Bank and its
clients.

‘4. You will devote your full time during business hours in promoting the business and interest of the
Bank.

‘5. You will not, without prior written consent of the Bank, be employed in anyway for any purpose
whatsoever outside business hours by any person, firm or company.
‘6. Termination of your employment with the Bank may be made by either party after notice of one
(1) day in writing during probation, one month notice upon confirmation or the equivalent of one (1)
day’s or month’s salary in lieu of notice.’

"Florence O. Cabansag accepted the position and assumed office. In the meantime, the Philippine
Embassy in Singapore processed the employment contract of Florence O. Cabansag and, on March
8, 1999, she was issued by the Philippine Overseas Employment Administration, an ‘Overseas
Employment Certificate,’ certifying that she was a bona fide contract worker for Singapore.

xxxxxxxxx

"Barely three (3) months in office, Florence O. Cabansag submitted to Ruben C. Tobias, on March 9,
1999, her initial ‘Performance Report.’ Ruben C. Tobias was so impressed with the ‘Report’ that he
made a notation and, on said ‘Report’: ‘GOOD WORK.’ However, in the evening of April 14, 1999,
while Florence O. Cabansag was in the flat, which she and Cecilia Aquino, the Assistant Vice-
President and Deputy General Manager of the Branch and Rosanna Sarmiento, the Chief Dealer of
the said Branch, rented, she was told by the two (2) that Ruben C. Tobias has asked them to tell
Florence O. Cabansag to resign from her job. Florence O. Cabansag was perplexed at the sudden
turn of events and the runabout way Ruben C. Tobias procured her resignation from the Bank. The
next day, Florence O. Cabansag talked to Ruben C. Tobias and inquired if what Cecilia Aquino and
Rosanna Sarmiento had told her was true. Ruben C. Tobias confirmed the veracity of the
information, with the explanation that her resignation was imperative as a ‘cost-cutting measure’ of
the Bank. Ruben C. Tobias, likewise, told Florence O. Cabansag that the PNB Singapore Branch will
be sold or transformed into a remittance office and that, in either way, Florence O. Cabansag had to
resign from her employment. The more Florence O. Cabansag was perplexed. She then asked
Ruben C. Tobias that she be furnished with a ‘Formal Advice’ from the PNB Head Office in Manila.
However, Ruben C. Tobias flatly refused. Florence O. Cabansag did not submit any letter of
resignation.

"On April 16, 1999, Ruben C. Tobias again summoned Florence O. Cabansag to his office and
demanded that she submit her letter of resignation, with the pretext that he needed a Chinese-
speaking Credit Officer to penetrate the local market, with the information that a Chinese-speaking
Credit Officer had already been hired and will be reporting for work soon. She was warned that,
unless she submitted her letter of resignation, her employment record will be blemished with the
notation ‘DISMISSED’ spread thereon. Without giving any definitive answer, Florence O. Cabansag
asked Ruben C. Tobias that she be given sufficient time to look for another job. Ruben C. Tobias
told her that she should be ‘out’ of her employment by May 15, 1999.

"However, on April 19, 1999, Ruben C. Tobias again summoned Florence O. Cabansag and
adamantly ordered her to submit her letter of resignation. She refused. On April 20, 1999, she
received a letter from Ruben C. Tobias terminating her employment with the Bank.

xxxxxxxxx

"On January 18, 2000, the Labor Arbiter rendered judgment in favor of the Complainant and against
the Respondents, the decretal portion of which reads as follows:

‘WHEREFORE, considering the foregoing premises, judgment is hereby rendered finding

respondents guilty of Illegal dismissal and devoid of due process, and are hereby ordered:

1. To reinstate complainant to her former or substantially equivalent position without loss of seniority
rights, benefits and privileges;
2. Solidarily liable to pay complainant as follows:

a) To pay complainant her backwages from 16 April 1999 up to her actual reinstatement. Her
backwages as of the date of the promulgation of this decision amounted to SGD 40,500.00 or its
equivalent in Philippine Currency at the time of payment;

b) Mid-year bonus in the amount of SGD 2,250.00 or its equivalent in Philippine Currency at the time
of payment;

c) Allowance for Sunday banking in the amount of SGD 120.00 or its equivalent in Philippine
Currency at the time of payment;

d) Monetary equivalent of leave credits earned on Sunday banking in the amount of SGD 1,557.67
or its equivalent in Philippine Currency at the time of payment;

e) Monetary equivalent of unused sick leave benefits in the amount of SGD 1,150.60 or its
equivalent in Philippine Currency at the time of payment.

f) Monetary equivalent of unused vacation leave benefits in the amount of SGD 319.85 or its
equivalent in Philippine Currency at the time of payment.

g) 13th month pay in the amount of SGD 4,500.00 or its equivalent in Philippine Currency at the time
of payment;

3. Solidarily to pay complainant actual damages in the amount of SGD 1,978.00 or its equivalent in
Philippine Currency at the time of payment, and moral damages in the amount of PhP 200,000.00,
exemplary damages in the amount of PhP 100,000.00;

4. To pay complainant the amount of SGD 5,039.81 or its equivalent in Philippine Currency at the
time of payment, representing attorney’s fees.

SO ORDERED." 6 [Emphasis in the original.]

PNB appealed the labor arbiter’s Decision to the NLRC. In a Resolution dated June 29, 2001, the
Commission affirmed that Decision, but reduced the moral damages to ₱100,000 and the exemplary
damages to ₱50,000. In a subsequent Resolution, the NLRC denied PNB’s Motion for
Reconsideration.

Ruling of the Court of Appeals

In disposing of the Petition for Certiorari, the CA noted that petitioner bank had failed to adduce in
evidence the Singaporean law supposedly governing the latter’s employment Contract with
respondent. The appellate court found that the Contract had actually been processed by the
Philippine Embassy in Singapore and approved by the Philippine Overseas Employment
Administration (POEA), which then used that Contract as a basis for issuing an Overseas
Employment Certificate in favor of respondent.

According to the CA, even though respondent secured an employment pass from the Singapore
Ministry of Employment, she did not thereby waive Philippine labor laws, or the jurisdiction of the
labor arbiter or the NLRC over her Complaint for illegal dismissal. In so doing, neither did she submit
herself solely to the Ministry of Manpower of Singapore’s jurisdiction over disputes arising from her
employment. The appellate court further noted that a cursory reading of the Ministry’s letter will
readily show that no such waiver or submission is stated or implied.

Finally, the CA held that petitioner had failed to establish a just cause for the dismissal of
respondent. The bank had also failed to give her sufficient notice and an opportunity to be heard and
to defend herself. The CA ruled that she was consequently entitled to reinstatement and back
wages, computed from the time of her dismissal up to the time of her reinstatement.

Hence, this Petition.7

Issues

Petitioner submits the following issues for our consideration:

"1. Whether or not the arbitration branch of the NLRC in the National Capital Region has jurisdiction
over the instant controversy;

"2. Whether or not the arbitration of the NLRC in the National Capital Region is the most convenient
venue or forum to hear and decide the instant controversy; and

"3. Whether or not the respondent was illegally dismissed, and therefore, entitled to recover moral
and exemplary damages and attorney’s fees."8

In addition, respondent assails, in her Comment, 9 the propriety of Rule 45 as the procedural mode
for seeking a review of the CA Decision affirming the NLRC Resolution. Such issue deserves scant
consideration. Respondent miscomprehends the Court’s discourse in St. Martin Funeral Home v.
NLRC,10 which has indeed affirmed that the proper mode of review of NLRC decisions, resolutions or
orders is by a special civil action for certiorari under Rule 65 of the Rules of Court. The Supreme
Court and the Court of Appeals have concurrent original jurisdiction over such petitions
for certiorari. Thus, in observance of the doctrine on the hierarchy of courts, these petitions should
be initially filed with the CA.11

Rightly, the bank elevated the NLRC Resolution to the CA by way of a Petition for  Certiorari. In
seeking a review by this Court of the CA Decision -- on questions of jurisdiction, venue and validity
of employment termination -- petitioner is likewise correct in invoking Rule 45. 12

It is true, however, that in a petition for review on certiorari, the scope of the Supreme Court’s judicial
review of decisions of the Court of Appeals is generally confined only to errors of law. It does not
extend to questions of fact. This doctrine applies with greater force in labor cases. Factual questions
are for the labor tribunals to resolve. 13 In the present case, the labor arbiter and the NLRC have
already determined the factual issues. Their findings, which are supported by substantial evidence,
were affirmed by the CA. Thus, they are entitled to great respect and are rendered conclusive upon
this Court, absent a clear showing of palpable error or arbitrary disregard of evidence. 14

The Court’s Ruling

The Petition has no merit.

First Issue:

Jurisdiction
The jurisdiction of labor arbiters and the NLRC is specified in Article 217 of the Labor Code as
follows:

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

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage,
rates of pay, hours of work and other terms and conditions of employment

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-
employee relations;

5. Cases arising from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
other claims, arising from employer-employee relations, including those of persons in domestic or
household service, involving an amount of exceeding five thousand pesos (₱5,000.00) regardless of
whether accompanied with a claim for reinstatement.

(b) The commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters.

x x x x x x x x x."

More specifically, Section 10 of RA 8042 reads in part:

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

x x x x x x x x x"

Based on the foregoing provisions, labor arbiters clearly have original and exclusive jurisdiction over
claims arising from employer-employee relations, including termination
disputes involving all workers, among whom are overseas Filipino workers (OFW). 15

We are not unmindful of the fact that respondent was directly hired, while on a tourist status in
Singapore, by the PNB branch in that city state. Prior to employing respondent, petitioner had to
obtain an employment pass for her from the Singapore Ministry of Manpower. Securing the pass
was a regulatory requirement pursuant to the immigration regulations of that country. 16
Similarly, the Philippine government requires non-Filipinos working in the country to first obtain a
local work permit in order to be legally employed here. That permit, however, does not automatically
mean that the non-citizen is thereby bound by local laws only, as averred by petitioner. It does not at
all imply a waiver of one’s national laws on labor. Absent any clear and convincing evidence to the
contrary, such permit simply means that its holder has a legal status as a worker in the issuing
country.1avvphil.zw+

Noteworthy is the fact that respondent likewise applied for and secured an Overseas Employment
Certificate from the POEA through the Philippine Embassy in Singapore. The Certificate, issued on
March 8, 1999, declared her a bona fide contract worker for Singapore. Under Philippine law, this
document authorized her working status in a foreign country and entitled her to all benefits and
processes under our statutes. Thus, even assuming arguendo that she was considered at the start
of her employment as a "direct hire" governed by and subject to the laws, common practices and
customs prevailing in Singapore 17 she subsequently became a contract worker or an OFW who was
covered by Philippine labor laws and policies upon certification by the POEA. At the time her
employment was illegally terminated, she already possessed the POEA employment Certificate.

Moreover, petitioner admits that it is a Philippine corporation doing business through a branch office
in Singapore.18 Significantly, respondent’s employment by the Singapore branch office had to be
approved by Benjamin P. Palma Gil,19 the president of the bank whose principal offices were in
Manila. This circumstance militates against petitioner’s contention that respondent was "locally
hired"; and totally "governed by and subject to the laws, common practices and customs" of
Singapore, not of the Philippines. Instead, with more reason does this fact reinforce the presumption
that respondent falls under the legal definition of migrant worker, in this case one deployed in
Singapore. Hence, petitioner cannot escape the application of Philippine laws or the jurisdiction of
the NLRC and the labor arbiter.

In any event, we recall the following policy pronouncement of the Court in Royal Crown
Internationale v. NLRC:20

"x x x. Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of
Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. This
pronouncement is in keeping with the basic public policy of the State to afford protection to labor,
promote full employment, ensure equal work opportunities regardless of sex, race or creed, and
regulate the relations between workers and employers.  For the State assures the basic rights of all
1awphi1.net

workers to self-organization, collective bargaining, security of tenure, and just and humane
conditions of work [Article 3 of the Labor Code of the Philippines; See also Section 18, Article II and
Section 3, Article XIII, 1987 Constitution]. This ruling is likewise rendered imperative by Article 17 of
the Civil Code which states that laws ‘which have for their object public order, public policy and good
customs shall not be rendered ineffective by laws or judgments promulgated, or by determination or
conventions agreed upon in a foreign country.’"

Second Issue:

Proper Venue

Section 1(a) of Rule IV of the NLRC Rules of Procedure reads:

"Section 1. Venue – (a) All cases which Labor Arbiters have authority to hear and decide may be
filed in the Regional Arbitration Branch having jurisdiction over the workplace of the
complainant/petitioner; Provided, however that cases of Overseas Filipino Worker (OFW) shall be
filed before the Regional Arbitration Branch where the complainant resides or where the principal
office of the respondent/employer is situated, at the option of the complainant.

"For purposes of venue, workplace shall be understood as the place or locality where the employee
is regularly assigned when the cause of action arose. It shall include the place where the employee
is supposed to report back after a temporary detail, assignment or travel. In the case of field
employees, as well as ambulant or itinerant workers, their workplace is where they are regularly
assigned, or where they are supposed to regularly receive their salaries/wages or work instructions
from, and report the results of their assignment to their employers."

Under the "Migrant Workers and Overseas Filipinos Act of 1995" (RA 8042), a migrant worker "refers
to a person who is to be engaged, is engaged or has been engaged in a remunerated activity in a
state of which he or she is not a legal resident; to be used interchangeably with overseas Filipino
worker."21 Undeniably, respondent was employed by petitioner in its branch office in Singapore.
Admittedly, she is a Filipino and not a legal resident of that state. She thus falls within the category
of "migrant worker" or "overseas Filipino worker."

As such, it is her option to choose the venue of her Complaint against petitioner for illegal dismissal.
The law gives her two choices: (1) at the Regional Arbitration Branch (RAB) where she resides or (2)
at the RAB where the principal office of her employer is situated. Since her dismissal by petitioner,
respondent has returned to the Philippines -- specifically to her residence at Filinvest II, Quezon City.
Thus, in filing her Complaint before the RAB office in Quezon City, she has made a valid choice of
proper venue.

Third Issue:

Illegal Dismissal

The appellate court was correct in holding that respondent was already a regular employee at the
time of her dismissal, because her three-month probationary period of employment had already
ended. This ruling is in accordance with Article 281 of the Labor Code: "An employee who is allowed
to work after a probationary period shall be considered a regular employee." Indeed, petitioner
recognized respondent as such at the time it dismissed her, by giving her one month’s salary in lieu
of a one-month notice, consistent with provision No. 6 of her employment Contract.

Notice and Hearing Not Complied With

As a regular employee, respondent was entitled to all rights, benefits and privileges provided under
our labor laws. One of her fundamental rights is that she may not be dismissed without due process
of law. The twin requirements of notice and hearing constitute the essential elements of procedural
due process, and neither of these elements can be eliminated without running afoul of the
constitutional guarantee.22

In dismissing employees, the employer must furnish them two written notices: 1) one to apprise them
of the particular acts or omissions for which their dismissal is sought; and 2) the other to inform them
of the decision to dismiss them. As to the requirement of a hearing, its essence lies simply in the
opportunity to be heard.23

The evidence in this case is crystal-clear. Respondent was not notified of the specific act or omission
for which her dismissal was being sought. Neither was she given any chance to be heard, as
required by law. At any rate, even if she were given the opportunity to be heard, she could not have
defended herself effectively, for she knew no cause to answer to.

All that petitioner tendered to respondent was a notice of her employment termination effective the
very same day, together with the equivalent of a one-month pay. This Court has already held that
nothing in the law gives an employer the option to substitute the required prior notice and opportunity
to be heard with the mere payment of 30 days’ salary. 24

Well-settled is the rule that the employer shall be sanctioned for noncompliance with the
requirements of, or for failure to observe, due process that must be observed in dismissing an
employee.25

No Valid Cause for Dismissal

Moreover, Articles 282,26 28327 and 28428 of the Labor Code provide the valid grounds or causes for
an employee’s dismissal. The employer has the burden of proving that it was done for any of those
just or authorized causes. The failure to discharge this burden means that the dismissal was not
justified, and that the employee is entitled to reinstatement and back wages. 29

Notably, petitioner has not asserted any of the grounds provided by law as a valid reason for
terminating the employment of respondent. It merely insists that her dismissal was validly effected
pursuant to the provisions of her employment Contract, which she had voluntarily agreed to be
bound to.

Truly, the contracting parties may establish such stipulations, clauses, terms and conditions as they
want, and their agreement would have the force of law between them. However, petitioner overlooks
the qualification that those terms and conditions agreed upon must not be contrary to law, morals,
customs, public policy or public order. 30 As explained earlier, the employment Contract between
petitioner and respondent is governed by Philippine labor laws. Hence, the stipulations, clauses, and
terms and conditions of the Contract must not contravene our labor law provisions.

Moreover, a contract of employment is imbued with public interest. The Court has time and time
again reminded parties that they "are not at liberty to insulate themselves and their relationships
from the impact of labor laws and regulations by simply contracting with each other." 31 Also, while a
contract is the law between the parties, the provisions of positive law that regulate such contracts
are deemed included and shall limit and govern the relations between the parties. 32

Basic in our jurisprudence is the principle that when there is no showing of any clear, valid, and legal
cause for the termination of employment, the law considers the matter a case of illegal dismissal. 33

Awards for Damages Justified

Finally, moral damages are recoverable when the dismissal of an employee is attended by bad faith
or constitutes an act oppressive to labor or is done in a manner contrary to morals, good customs or
public policy.34 Awards for moral and exemplary damages would be proper if the employee was
harassed and arbitrarily dismissed by the employer. 35

In affirming the awards of moral and exemplary damages, we quote with approval the following
ratiocination of the labor arbiter:
"The records also show that [respondent’s] dismissal was effected by [petitioners’] capricious and
high-handed manner, anti-social and oppressive, fraudulent and in bad faith, and contrary to morals,
good customs and public policy. Bad faith and fraud are shown in the acts committed by [petitioners]
before, during and after [respondent’s] dismissal in addition to the manner by which she was
dismissed. First, [respondent] was pressured to resign for two different and contradictory reasons,
namely, cost-cutting and the need for a Chinese[-]speaking credit officer, for which no written advice
was given despite complainant’s request. Such wavering stance or vacillating position indicates bad
faith and a dishonest purpose. Second, she was employed on account of her qualifications,
experience and readiness for the position of credit officer and pressured to resign a month after she
was commended for her good work. Third, the demand for [respondent’s] instant resignation on 19
April 1999 to give way to her replacement who was allegedly reporting soonest, is whimsical,
fraudulent and in bad faith, because on 16 April 1999 she was given a period of [sic] until 15 May
1999 within which to leave. Fourth, the pressures made on her to resign were highly oppressive,
anti-social and caused her absolute torture, as [petitioners] disregarded her situation as an overseas
worker away from home and family, with no prospect for another job. She was not even provided
with a return trip fare. Fifth, the notice of termination is an utter manifestation of bad faith and whim
as it totally disregards [respondent’s] right to security of tenure and due process. Such notice
together with the demands for [respondent’s] resignation contravenes the fundamental guarantee
and public policy of the Philippine government on security of tenure.

"[Respondent] likewise established that as a proximate result of her dismissal and prior demands for
resignation, she suffered and continues to suffer mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock and social humiliation. Her standing in the social and
business community as well as prospects for employment with other entities have been adversely
affected by her dismissal. [Petitioners] are thus liable for moral damages under Article 2217 of the
Civil Code.

xxxxxxxxx

"[Petitioners] likewise acted in a wanton, oppressive or malevolent manner in terminating

[respondent’s] employment and are therefore liable for exemplary damages. This should served [sic]
as protection to other employees of [petitioner] company, and by way of example or correction for
the public good so that persons similarly minded as [petitioners] would be deterred from committing
the same acts."36

The Court also affirms the award of attorney’s fees. It is settled that when an action is instituted for
the recovery of wages, or when employees are forced to litigate and consequently incur expenses to
protect their rights and interests, the grant of attorney’s fees is legally justifiable. 37

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs

against petitioner.

SO ORDERED.

Sandoval-Gutierrez, Corona, Carpio-Morales, and Garcia, JJ., concur.

 FIRST DIVISION

G.R. No. 128845               June 1, 2000

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner,

vs.
HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and
Employment; HON. CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of
Labor and Employment; DR. BRIAN MACCAULEY in his capacity as the Superintendent of
International School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.

KAPUNAN, J.:

Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent
School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their
colleagues in other schools is, of course, beside the point. The point is that employees should be
given equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a
principle that rests on fundamental notions of justice. That is the principle we uphold today.1âwphi1.nêt

Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree
732, is a domestic educational institution established primarily for dependents of foreign diplomatic
personnel and other temporary residents. To enable the School to continue carrying out its
1 

educational program and improve its standard of instruction, Section 2(c) of the same decree
authorizes the School to employ its own teaching and management personnel selected by it either
locally or abroad, from Philippine or other nationalities, such personnel being exempt from otherwise
applicable laws and regulations attending their employment, except laws that have been or will be
enacted for the protection of employees.

Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying
the same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine
whether a faculty member should be classified as a foreign-hire or a local hire:

a. What is one's domicile?

b. Where is one's home economy?

c. To which country does one owe economic allegiance?

d. Was the individual hired abroad specifically to work in the School and was the School responsible
for bringing that individual to the Philippines?
2

Should the answer to any of these queries point to the Philippines, the faculty member is classified
as a local hire; otherwise, he or she is deemed a foreign-hire.

The School grants foreign-hires certain benefits not accorded local-hires.  These include housing,
1avvphi1

transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a
salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on
two "significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation
factor" and (b) limited tenure. The School explains:

A foreign-hire would necessarily have to uproot himself from his home country, leave his family and
friends, and take the risk of deviating from a promising career path — all for the purpose of pursuing
his profession as an educator, but this time in a foreign land. The new foreign hire is faced with
economic realities: decent abode for oneself and/or for one's family, effective means of
transportation, allowance for the education of one's children, adequate insurance against illness and
death, and of course the primary benefit of a basic salary/retirement compensation.

Because of a limited tenure, the foreign hire is confronted again with the same economic reality after
his term: that he will eventually and inevitably return to his home country where he will have to
confront the uncertainty of obtaining suitable employment after along period in a foreign land.

The compensation scheme is simply the School's adaptive measure to remain competitive on an
international level in terms of attracting competent professionals in the field of international
education.3

When negotiations for a new collective bargaining agreement were held on June 1995, petitioner
International School Alliance of Educators, "a legitimate labor union and the collective bargaining
representative of all faculty members" of the School, contested the difference in salary rates
4 

between foreign and local-hires. This issue, as well as the question of whether foreign-hires should
be included in the appropriate bargaining unit, eventually caused a deadlock between the parties.

On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and
Mediation Board to bring the parties to a compromise prompted the Department of Labor and
Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting
Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and representation issues
in favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied
petitioner's motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief
in this Court.

Petitioner claims that the point-of-hire classification employed by the School is discriminatory to
Filipinos and that the grant of higher salaries to foreign-hires constitutes racial discrimination.

The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in
all, with nationalities other than Filipino, who have been hired locally and classified as local hires.
5 

The Acting Secretary of Labor found that these non-Filipino local-hires received the same benefits
as the Filipino local-hires.

The compensation package given to local-hires has been shown to apply to all, regardless of race.
Truth to tell, there are foreigners who have been hired locally and who are paid equally as Filipino
local hires.
6

The Acting secretary upheld the point-of-hire classification for the distinction in salary rates:

The Principle "equal pay for equal work" does not find applications in the present case. The
international character of the School requires the hiring of foreign personnel to deal with different
nationalities and different cultures, among the student population.

We also take cognizance of the existence of a system of salaries and benefits accorded to foreign
hired personnel which system is universally recognized. We agree that certain amenities have to be
provided to these people in order to entice them to render their services in the Philippines and in the
process remain competitive in the international market.

Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike
the local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits
would also require parity in other terms and conditions of employment which include the employment
which include the employment contract.

A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and
professional compensation wherein the parties agree as follows:

All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof
provided that the Superintendent of the School has the discretion to recruit and hire expatriate
teachers from abroad, under terms and conditions that are consistent with accepted international
practice.

Appendix C of said CBA further provides:

The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary
schedule. The 25% differential is reflective of the agreed value of system displacement and
contracted status of the OSRS as differentiated from the tenured status of Locally Recruited Staff
(LRS).

To our mind, these provisions demonstrate the parties' recognition of the difference in the status of
two types of employees, hence, the difference in their salaries.
The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an
established principle of constitutional law that the guarantee of equal protection of the laws is not
violated by legislation or private covenants based on reasonable classification. A classification is
reasonable if it is based on substantial distinctions and apply to all members of the same class.
Verily, there is a substantial distinction between foreign hires and local hires, the former enjoying
only a limited tenure, having no amenities of their own in the Philippines and have to be given a
good compensation package in order to attract them to join the teaching faculty of the School. 7

We cannot agree.

That public policy abhors inequality and discrimination is beyond contention. Our Constitution and
laws reflect the policy against these evils. The Constitution in the Article on Social Justice and
8 

Human Rights exhorts Congress to "give highest priority to the enactment of measures that protect
and enhance the right of all people to human dignity, reduce social, economic, and political
inequalities." The very broad Article 19 of the Civil Code requires every person, "in the exercise of
his rights and in the performance of his duties, [to] act with justice, give everyone his due, and
observe honesty and good faith.

International law, which springs from general principles of law, likewise proscribes discrimination.
9 

General principles of law include principles of equity,  i.e., the general principles of fairness and
10 

justice, based on the test of what is reasonable.  The Universal Declaration of Human Rights,  the
11  12 

International Covenant on Economic, Social, and Cultural Rights,  the International Convention on
13 

the Elimination of All Forms of Racial Discrimination,  the Convention against Discrimination in
14 

Education,  the Convention (No. 111) Concerning Discrimination in Respect of Employment and
15 

Occupation  — all embody the general principle against discrimination, the very antithesis of
16 

fairness and justice. The Philippines, through its Constitution, has incorporated this principle as part
of its national laws.

In the workplace, where the relations between capital and labor are often skewed in favor of capital,
inequality and discrimination by the employer are all the more reprehensible.

The Constitution  specifically provides that labor is entitled to "humane conditions of work." These
17 

conditions are not restricted to the physical workplace — the factory, the office or the field — but
include as well the manner by which employers treat their employees.

The Constitution  also directs the State to promote "equality of employment opportunities for all."
18 

Similarly, the Labor Code  provides that the State shall "ensure equal work opportunities regardless
19 

of sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the
State, in spite of its primordial obligation to promote and ensure equal employment opportunities,
closes its eyes to unequal and discriminatory terms and conditions of employment.  20

Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes  the payment of lesser compensation to a female employee as
21 

against a male employee for work of equal value. Article 248 declares it an unfair labor practice for
an employer to discriminate in regard to wages in order to encourage or discourage membership in
any labor organization.

Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7
thereof, provides:

The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just
and favourable conditions of work, which ensure, in particular:
a. Remuneration which provides all workers, as a minimum, with:

(i) Fair wages and equal remuneration for work of equal value without distinction of any kind, in
particular women being guaranteed conditions of work not inferior to those enjoyed by men, with
equal pay for equal work;

x x x           x x x          x x x

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism
of "equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort
and responsibility, under similar conditions, should be paid similar salaries.  This rule applies to the
22 

School, its "international character" notwithstanding.

The School contends that petitioner has not adduced evidence that local-hires perform work equal to
that of foreign-hires.  The Court finds this argument a little cavalier. If an employer accords
23 

employees the same position and rank, the presumption is that these employees perform equal
work. This presumption is borne by logic and human experience. If the employer pays one employee
less than the rest, it is not for that employee to explain why he receives less or why the others
receive more. That would be adding insult to injury. The employer has discriminated against that
employee; it is for the employer to explain why the employee is treated unfairly.

The employer in this case has failed to discharge this burden. There is no evidence here that
foreign-hires perform 25% more efficiently or effectively than the local-hires. Both groups have
similar functions and responsibilities, which they perform under similar working conditions.

The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the
distinction in salary rates without violating the principle of equal work for equal pay.

"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services
performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration
paid at regular intervals for the rendering of services." In Songco v. National Labor Relations
Commission,  we said that:
24 

"salary" means a recompense or consideration made to a person for his pains or industry in another
man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the
Roman soldier, it carries with it the fundamental idea of compensation for services rendered.
(Emphasis supplied.)

While we recognize the need of the School to attract foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires
and they ought to be paid the same salaries as the latter. For the same reason, the "dislocation
factor" and the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in
salary rates. The dislocation factor and limited tenure affecting foreign-hires are adequately
compensated by certain benefits accorded them which are not enjoyed by local-hires, such as
housing, transportation, shipping costs, taxes and home leave travel allowances.

The Constitution enjoins the State to "protect the rights of workers and promote their welfare,"   "to
25 

afford labor full protection."  The State, therefore, has the right and duty to regulate the relations
26 

between labor and capital.  These relations are not merely contractual but are so impressed with
27 

public interest that labor contracts, collective bargaining agreements included, must yield to the
common good.  Should such contracts contain stipulations that are contrary to public policy, courts
28 

will not hesitate to strike down these stipulations.

In this case, we find the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is
no reasonable distinction between the services rendered by foreign-hires and local-hires. The
practice of the School of according higher salaries to foreign-hires contravenes public policy and,
certainly, does not deserve the sympathy of this Court. 1avvphi1

We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.

A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of
the entire body of employees, consistent with equity to the employer, indicate to be the best suited to
serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the
law."  The factors in determining the appropriate collective bargaining unit are (1) the will of the
29 

employees (Globe Doctrine); (2) affinity and unity of the employees' interest, such as substantial
similarity of work and duties, or similarity of compensation and working conditions (Substantial
Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment
status.  The basic test of an asserted bargaining unit's acceptability is whether or not it is
30 

fundamentally the combination which will best assure to all employees the exercise of their collective
bargaining rights.  31

It does not appear that foreign-hires have indicated their intention to be grouped together with local-
hires for purposes of collective bargaining. The collective bargaining history in the School also
shows that these groups were always treated separately. Foreign-hires have limited tenure; local-
hires enjoy security of tenure. Although foreign-hires perform similar functions under the same
working conditions as the local-hires, foreign-hires are accorded certain benefits not granted to local-
hires. These benefits, such as housing, transportation, shipping costs, taxes, and home leave travel
allowance, are reasonably related to their status as foreign-hires, and justify the exclusion of the
former from the latter. To include foreign-hires in a bargaining unit with local-hires would not assure
either group the exercise of their respective collective bargaining rights.

WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART.
The Orders of the Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997,
are hereby REVERSED and SET ASIDE insofar as they uphold the practice of respondent School of
according foreign-hires higher salaries than local-hires.

SO ORDERED.

Puno and Pardo, JJ., concur.

Davide, Jr., C.J., on official leave.
Ynares-Santiago, J., is on leave.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 101761. March 24, 1993.

NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION and NBSR SUPERVISORY UNION, (PACIWU) TUCP, respondents.

Jose Mario C. Bunag for petitioner.

The Solicitor General and the Chief Legal Officer, NLRC, for public respondent.

Zoilo V. de la Cruz for private respondent.

DECISION

REGALADO, J p:

The main issue presented for resolution in this original petition for certiorari is whether supervisory
employees, as defined in Article 212 (m), Book V of the Labor Code, should be considered as
officers or members of the managerial staff under Article 82, Book III of the same Code, and hence
are not entitled to overtime rest day and holiday pay.
Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which is fully owned
and controlled by the Government, operates three (3) sugar refineries located at Bukidnon, Iloilo and
Batangas. The Batangas refinery was privatized on April 11, 1992 pursuant to Proclamation No. 50.
1 Private respondent union represents the former supervisors of the NASUREFCO Batangas Sugar
Refinery, namely, the Technical Assistant to the Refinery Operations Manager, Shift Sugar
Warehouse Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost Accountant,
Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler Supervisor,, Shift Operations
Chemist, Shift Electrical Supervisor, General Services Supervisor, Instrumentation Supervisor,
Community Development Officer, Employment and Training Supervisor, Assistant Safety and
Security Officer, Head and Personnel Services, Head Nurse, Property Warehouse Supervisor, Head
of Inventory Control Section, Shift Process Supervisor, Day Maintenance Supervisor and Motorpool
Supervisor.

On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all employees,
from rank-and-file to department heads. The JE Program was designed to rationalized the duties
and functions of all positions, reestablish levels of responsibility, and recognize both wage and
operational structures. Jobs were ranked according to effort, responsibility, training and working
conditions and relative worth of the job. As a result, all positions were re-evaluated, and all
employees including the members of respondent union were granted salary adjustments and
increases in benefits commensurate to their actual duties and functions.

We glean from the records that for about ten years prior to the JE Program, the members of
respondent union were treated in the same manner as rank-and file employees. As such, they used
to be paid overtime, rest day and holiday pay pursuant to the provisions of Articles 87, 93 and 94 of
the Labor Code as amended. With the implementation of the JE Program, the following adjustments
were made: (1) the members of respondent union were re-classified under levels S-5 to S-8 which
are considered managerial staff for purposes of compensation and benefits; (2) there was an
increase in basic pay of the average of 50% of their basic pay prior to the JE Program, with the
union members now enjoying a wide gap (P1,269.00 per month) in basic pay compared to the
highest paid rank-and-file employee; (3) longevity pay was increased on top of alignment
adjustments; (4) they were entitled to increased company COLA of P225.00 per month; (5) there
was a grant of P100.00 allowance for rest day/holiday work.

On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which was
organized pursuant to Republic Act NO. 6715 allowing supervisory employees to form their own
unions, as the bargaining representative of all the supervisory employees at the NASUREFCO
Batangas Sugar Refinery.

Two years after the implementation of the JE Program, specifically on June 20, 1990, the members
of herein respondent union filed a complainant with the executive labor arbiter for non-payment of
overtime, rest day and holiday pay allegedly in violation of Article 100 of the Labor Code.

On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2 disposing as
follows:

"WHEREFORE, premises considered, respondent National Sugar refineries Corporation is hereby

directed to —

1. pay the individual members of complainant union the usual overtime pay, rest day pay and holiday
pay enjoyed by them instead of the P100.00 special allowance which was implemented on June 11,
1988; and
2. pay the individual members of complainant union the difference in money value between the
P100.00 special allowance and the overtime pay, rest day pay and holiday pay that they ought to
have received from June 1, 1988.

All other claims are hereby dismissed for lack of merit.

SO ORDERED."

In finding for the members therein respondent union, the labor ruled that the along span of time
during which the benefits were being paid to the supervisors has accused the payment thereof to
ripen into contractual obligation; at the complainants cannot be estopped from questioning the
validity of the new compensation package despite the fact that they have been receiving the benefits
therefrom, considering that respondent union was formed only a year after the implementation of the
Job Evaluation Program, hence there was no way for the individual supervisors to express their
collective response thereto prior to the formation of the union; and the comparative computations
presented by the private respondent union showed that the P100.00 special allowance given
NASUREFCO fell short of what the supervisors ought to receive had the overtime pay rest day pay
and holiday pay not been discontinued, which arrangement, therefore, amounted to a diminution of
benefits.

On appeal, in a decision promulgated on July 19, 1991 by its Third Division, respondent National
Labor Relations Commission (NLRC) affirmed the decision of the labor arbiter on the ground that the
members of respondent union are not managerial employees, as defined under Article 212 (m) of
the Labor Code and, therefore, they are entitled to overtime, rest day and holiday pay. Respondent
NLRC declared that these supervisory employees are merely exercising recommendatory powers
subject to the evaluation, review and final action by their department heads; their responsibilities do
not require the exercise of discretion and independent judgment; they do not participate in the
formulation of management policies nor in the hiring or firing of employees; and their main function is
to carry out the ready policies and plans of the corporation. 3 Reconsideration of said decision was
denied in a resolution of public respondent dated August 30, 1991. 4

Hence this petition for certiorari, with petitioner NASUREFCO asseverating that public respondent
commission committed a grave abuse of discretion in refusing to recognized the fact that the
members of respondent union are members of the managerial staff who are not entitled to overtime,
rest day and holiday pay; and in making petitioner assume the "double burden" of giving the benefits
due to rank-and-file employees together with those due to supervisors under the JE Program.

We find creditable merit in the petition and that the extraordinary writ of certiorari shall accordingly
issue.

The primordial issue to be resolved herein is whether the members of respondent union are entitled
to overtime, rest day and holiday pay. Before this can be resolved, however it must of necessity be
ascertained first whether or not the union members, as supervisory employees, are to be considered
as officers or members of the managerial staff who are exempt from the coverage of Article 82 of the
Labor Code.

It is not disputed that the members of respondent union are supervisory employees, as defined
employees, as defined under Article 212(m), Book V of the Labor Code on Labor Relations, which
reads:

"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharged, assign or
discipline employees. Supervisory employees are those who, in the interest of the employer
effectively recommend such managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent judgment. All employees not falling
within any of those above definitions are considered rank-and-file employees of this Book."

Respondent NLRC, in holding that the union members are entitled to overtime, rest day and holiday
pay, and in ruling that the latter are not managerial employees, adopted the definition stated in the
aforequoted statutory provision.

Petitioner, however, avers that for purposes of determining whether or not the members of
respondent union are entitled to overtime, rest day and holiday pay, said employees should be
considered as "officers or members of the managerial staff" as defined under Article 82, Book III of
the Labor Code on "Working Conditions and Rest Periods" and amplified in Section 2, Rule I, Book
III of the Rules to Implement the Labor Code, to wit:

"Art. 82 Coverage. — The provisions of this title shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees,
field personnel, members of the family of the employer who are dependent on him for support,
domestic helpers, persons in the personal service of another, and workers who are paid by results
as determined by the Secretary of Labor in Appropriate regulations.

"As used herein, 'managerial employees' refer to those whose primary duty consists of the
management of the establishment in which they are employed or of a department or subdivision
thereof, and to other officers or members of the managerial staff." (Emphasis supplied.)

xxx xxx xxx

'Sec. 2. Exemption. — The provisions of this rule shall not apply to the following persons if they
qualify for exemption under the condition set forth herein:

xxx xxx xxx

(b) Managerial employees, if they meet all of the following conditions, namely:

(1) Their primary duty consists of the management of the establishment in which they are employed
or of a department or subdivision thereof:

(2) They customarily and regularly direct the work of two or more employees therein:

(3) They have the authority to hire or fire other employees of lower rank; or their suggestions and
recommendations as to the hiring and firing and as to the promotion or any other change of status of
other employees are given particular weight.

(c) Officers or members of a managerial staff if they perform the following duties and responsibilities:

(1) The primary duty consists of the performance of work directly related to management policies of
their employer;

(2) Customarily and regularly exercise discretion and independent judgment;

(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty
consists of the management of the establishment in which he is employed or subdivision thereof; or
(ii) execute under general supervision work along specialized or technical lines requiring special
training, experience, or knowledge; or (iii) execute under general supervision special assignments
and tasks; and

(4) Who do not devote more 20 percent of their hours worked in a work-week to activities which are
not directly and closely related to the performance of the work described in paragraphs (1), (2), and
above."

It is the submission of petitioner that while the members of respondent union, as supervisors, may
not be occupying managerial positions, they are clearly officers or members of the managerial staff
because they meet all the conditions prescribed by law and, hence, they are not entitled to overtime,
rest day and supervisory employees under Article 212 (m) should be made to apply only to the
provisions on Labor Relations, while the right of said employees to the questioned benefits should
be considered in the light of the meaning of a managerial employee and of the officers or members
of the managerial staff, as contemplated under Article 82 of the Code and Section 2, Rule I Book III
of the implementing rules. In other words, for purposes of forming and joining unions, certification
elections, collective bargaining, and so forth, the union members are supervisory employees. In
terms of working conditions and rest periods and entitlement to the questioned benefits, however,
they are officers or members of the managerial staff, hence they are not entitled thereto.

While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every labor dispute will be automatically decided in favor of
labor. Management also has its own rights which, as such, are entitled to respect and enforcement
in the interest of simple fair play. Out of its concern for those with less privileges in life, this Court
has inclined more often than not toward the worker and upheld his cause in his conflicts with the
employer. Such favoritism, however, has not blinded us to the rule that justice is in every case for
the deserving, to be dispensed in the light of the established facts and the applicable law and
doctrine. 5

This is one such case where we are inclined to tip the scales of justice in favor of the employer.

The question whether a given employee is exempt from the benefits of the law is a factual one
dependent on the circumstances of the particular case, In determining whether an employee is
within the terms of the statutes, the criterion is the character of the work performed, rather than the
title of the employee's position. 6

Consequently, while generally this Court is not supposed to review the factual findings of respondent
commission, substantial justice and the peculiar circumstances obtaining herein mandate a deviation
from the rule.

A cursory perusal of the Job Value Contribution Statements 7 of the union members will readily
show that these supervisory employees are under the direct supervision of their respective
department superintendents and that generally they assist the latter in planning, organizing, staffing,
directing, controlling communicating and in making decisions in attaining the company's set goals
and objectives. These supervisory employees are likewise responsible for the effective and efficient
operation of their respective departments. More specifically, their duties and functions include,
among others, the following operations whereby the employee:

1) assists the department superintendent in the following:

a) planning of systems and procedures relative to department activities;

b) organizing and scheduling of work activities of the department, which includes employee shifting
scheduled and manning complement;

c) decision making by providing relevant information data and other inputs;

d) attaining the company's set goals and objectives by giving his full support;

e) selecting the appropriate man to handle the job in the department; and

f) preparing annual departmental budget;

2) observes, follows and implements company policies at all times and recommends disciplinary
action on erring subordinates;

3) trains and guides subordinates on how to assume responsibilities and become more productive;

4) conducts semi-annual performance evaluation of his subordinates and recommends necessary

action for their development/advancement;

5) represents the superintendent or the department when appointed and authorized by the former;

6) coordinates and communicates with other inter and intra department supervisors when necessary;

7) recommends disciplinary actions/promotions;

8) recommends measures to improve work methods, equipment performance, quality of service and
working conditions;

9) sees to it that safety rules and regulations and procedure and are implemented and followed by all
NASUREFCO employees, recommends revisions or modifications to said rules when deemed
necessary, and initiates and prepares reports for any observed abnormality within the refinery;

10) supervises the activities of all personnel under him and goes to it that instructions to
subordinates are properly implemented; and

11) performs other related tasks as may be assigned by his immediate superior.

From the foregoing, it is apparent that the members of respondent union discharge duties and
responsibilities which ineluctably qualify them as officers or members of the managerial staff, as
defined in Section 2, Rule I Book III of the aforestated Rules to Implement the Labor Code, viz.: (1)
their primary duty consists of the performance of work directly related to management policies of
their employer; (2) they customarily and regularly exercise discretion and independent judgment; (3)
they regularly and directly assist the managerial employee whose primary duty consist of the
management of a department of the establishment in which they are employed (4) they execute,
under general supervision, work along specialized or technical lines requiring special training,
experience, or knowledge; (5) they execute, under general supervision, special assignments and
tasks; and (6) they do not devote more than 20% of their hours worked in a work-week to activities
which are not directly and clearly related to the performance of their work hereinbefore described.
Under the facts obtaining in this case, we are constrained to agree with petitioner that the union
members should be considered as officers and members of the managerial staff and are, therefore,
exempt from the coverage of Article 82. Perforce, they are not entitled to overtime, rest day and
holiday.

The distinction made by respondent NLRC on the basis of whether or not the union members are
managerial employees, to determine the latter's entitlement to the questioned benefits, is misplaced
and inappropriate. It is admitted that these union members are supervisory employees and this is
one instance where the nomenclatures or titles of their jobs conform with the nature of their
functions. Hence, to distinguish them from a managerial employee, as defined either under Articles
82 or 212 (m) of the Labor Code, is puerile and in efficacious. The controversy actually involved here
seeks a determination of whether or not these supervisory employees ought to be considered as
officers or members of the managerial staff. The distinction, therefore, should have been made along
that line and its corresponding conceptual criteria.

II. We likewise no not subscribe to the finding of the labor arbiter that the payment of the questioned
benefits to the union members has ripened into a contractual obligation.

A. Prior to the JE Program, the union members, while being supervisors, received benefits similar to
the rank-and-file employees such as overtime, rest day and holiday pay, simply because they were
treated in the same manner as rank-and-file employees, and their basic pay was nearly on the same
level as those of the latter, aside from the fact that their specific functions and duties then as
supervisors had not been properly defined and delineated from those of the rank-and-file. Such fact
is apparent from the clarification made by petitioner in its motion for reconsideration 8 filed with
respondent commission in NLRC Case No. CA No. I-000058, dated August 16, 1991, wherein, it
lucidly explained:

"But, complainants no longer occupy the same positions they held before the JE Program. Those
positions formerly classified as 'supervisory' and found after the JE Program to be rank-and-file were
classified correctly and continue to receive overtime, holiday and restday pay. As to them, the
practice subsists.

"However, those whose duties confirmed them to be supervisory, were re-evaluated, their duties re-
defined and in most cases their organizational positions re-designated to confirm their superior rank
and duties. Thus, after the JE program, complainants cannot be said to occupy the same positions."
9

It bears mention that this positional submission was never refuted nor controverted by respondent
union in any of its pleadings filed before herein public respondent or with this Court. Hence, it can be
safely concluded therefrom that the members of respondent union were paid the questioned benefits
for the reason that, at that time, they were rightfully entitled thereto. Prior to the JE Program, they
could not be categorically classified as members or officers of the managerial staff considering that
they were then treated merely on the same level as rank-and-file. Consequently, the payment
thereof could not be construed as constitutive of voluntary employer practice, which cannot be now
be unilaterally withdrawn by petitioner. To be considered as such, it should have been practiced over
a long period of time, and must be shown to have been consistent and deliberate. 10

The test or rationale of this rule on long practice requires an indubitable showing that the employer
agreed to continue giving the benefits knowingly fully well that said employees are not covered by
the law requiring payment thereof. 11 In the case at bar, respondent union failed to sufficiently
establish that petitioner has been motivated or is wont to give these benefits out of pure generosity.
B. It remains undisputed that the implementation of the JE Program, the members of private
respondent union were re-classified under levels S-5 S-8 which were considered under the program
as managerial staff purposes of compensation and benefits, that they occupied re-evaluated
positions, and that their basic pay was increased by an average of 50% of their basic salary prior to
the JE Program. In other words, after the JE Program there was an ascent in position, rank and
salary. This in essence is a promotion which is defined as the advancement from one position to
another with an increase in duties and responsibilities as authorized by law, and usually
accompanied by an increase in salary. 12

Quintessentially, with the promotion of the union members, they are no longer entitled to the benefits
which attach and pertain exclusively to their positions. Entitlement to the benefits provided for by law
requires prior compliance with the conditions set forth therein. With the promotion of the members of
respondent union, they occupied positions which no longer met the requirements imposed by law.
Their assumption of these positions removed them from the coverage of the law, ergo, their
exemption therefrom.

As correctly pointed out by petitioner, if the union members really wanted to continue receiving the
benefits which attach to their former positions, there was nothing to prevent them from refusing to
accept their promotions and their corresponding benefits. As the sating goes by, they cannot have
their cake and eat it too or, as petitioner suggests, they could not, as a simple matter of law and
fairness, get the best of both worlds at the expense of NASUREFCO.

Promotion of its employees is one of the jurisprudentially-recognized exclusive prerogatives of

management, provided it is done in good faith. In the case at bar, private respondent union has
miserably failed to convince this Court that the petitioner acted implementing the JE Program. There
is no showing that the JE Program was intended to circumvent the law and deprive the members of
respondent union of the benefits they used to receive.

Not so long ago, on this particular score, we had the occasion to hold that:

". . . it is the prerogative of the management to regulate, according to its discretion and judgment, all
aspects of employment. This flows from the established rule that labor law does not authorize the
substitution of the judgment of the employer in the conduct of its business. Such management
prerogative may be availed of without fear of any liability so long as it is exercised in good faith for
the advancement of the employer's interest and not for the purpose of defeating on circumventing
the rights of employees under special laws or valid agreement and are not exercised in a malicious,
harsh, oppressive, vindictive or wanton manner or out of malice or spite." 13

WHEREFORE, the impugned decision and resolution of respondent National Labor Relations
Commission promulgated on July 19, 1991 and August 30, 1991, respectively, are hereby
ANNULLED and SET ASIDE for having been rendered and adopted with grave abuse of discretion,
and the basic complaint of private respondent union is DISMISSED.

Narvasa, C . J ., Padilla, Nocon and Campos, Jr., JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 191455               March 12, 2014

DREAMLAND HOTEL RESORT and WESTLEY J. PRENTICE, Petitioners,

vs.
STEPHEN B. JOHNSON, Respondent.

DECISION

REYES, J.:

Before the Court is a Petition for Review on Certiorari  assailing the December 14, 2009  and
1 2

February 11, 2010  Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 111693 which
3

dismissed outright the petition for certiorari on technical grounds.

Dreamland Hotel Resort (Dreamland) and its President, Westley J. Prentice (Prentice) (petitioners)
alleged the following facts in the instant petition:

9. Dreamland is a corporation duly registered with the Securities and Exchange

Commission on January 15, 2003 to exist for a period of fifty [50] years with
registration number SEC A 1998-6436. Prentice is its current President and Chief
Executive Officer. It is engaged in the hotel, restaurant and allied businesses.
Dreamland is presently undertaking operations of its business at National Highway,
Sto. Tomas, Matain Subic, Zambales, 2209.
 10. Respondent Stephen B. Johnson is an Australian citizen who came to the
Philippines as a businessman/investor without the authority to be employed as the
employee/officer of any business as he was not able to secure his Alien Employment
Permit ["AEP" for brevity], which fact was duly supported by the Certification dated
March 14, 2008 of the Department of Labor and Employment ["DOLE" for brevity]
Regional Director, Regional Office No. III, San Fernando City, Pampanga,

x x x.

11. As a fellow Australian citizen, Johnson was able to convince Prentice to accept
his offer to invest in Dreamland and at the same time provide his services as
Operations Manager of Dreamland with a promise that he will secure an AEP and
Tax Identification Number ["TIN" for brevity] prior to his assumption of work.

12. Sometime on June 21, 2007, Prentice and Johnson entered into an Employment
Agreement, which stipulates among others, that the [sic] Johnson shall serve as
Operations Manager of Dreamland from August 1, 2007 and shall serve as such for a
period of three (3) years.

13. Before entering into the said agreement[,] Prentice required the submission of the
AEP and TIN from Johnson. Johnson promised that the same shall be supplied
within one (1) month from the signing of the contract because the application for the
TIN and AEP were still under process. Thus[,] it was agreed that the efficacy of the
said agreement shall begin after one (1) month or on August 1, 2007. x x x.

14. On or about October 8, 2007, Prentice asked on several occasions the

production of the AEP and TIN from Johnson. Johnson gave excuses and promised
that he is already in possession of the requirements. Believing the word of Johnson,
Dreamland commenced a dry run of its operations.

15. Johnson worked as a hotel and resort Operations Manager only at that time. He
worked for only about three (3) weeks until he suddenly abandoned his work and
subsequently resigned as Operations Manager starting November 3, 2007. He never
reported back to work despite several attempts of Prentice to clarify his issues. x x x.
4

On the other hand, respondent Stephen B. Johnson (Johnson) averred that:

4. There is also no truth to the allegation that it was [Johnson] who "offered" and
"convinced" petitioner Prentice to "invest" in and provide his services to petitioner
Dreamland Hotel Resort x x x. The truth of the matter is that it was petitioners who
actively advertised for a resort manager for Dreamland Hotel. x x x

5. It was in response to these advertisements that private respondent Johnson

contacted petitioners to inquire on the terms for employment offered. It was Prentice
who offered employment and convinced Johnson to give out a loan, purportedly so
the resort can be completed and operational by August 2007. Believing the
representations of petitioner Prentice, private respondent Johnson accepted the
employment as Resort Manager and loaned money to petitioners [consisting of] his
retirement pay in the amount of One Hundred Thousand US Dollars (USD
100,000.00) to finish construction of the resort. x x x.
 6. From the start of August 2007, as stipulated in the Employment Agreement,
respondent Johnson already reported for work. It was then that he found out to his
dismay that the resort was far from finished. However, he was instructed to supervise
construction and speak with potential guests. He also undertook the overall
preparation of the guestrooms and staff for the opening of the hotel, even performing
menial tasks (i.e. inspected for cracked tiles, ensured proper grout installation, proper
lighting and air-conditioning unit installation, measured windows for curtain width and
showers for shower curtain rods, unloaded and installed mattresses, beddings,
furniture and appliances and even ironed and hung guest room curtains).

xxxx

8. As [Johnson] remained unpaid since August 2007 and he has loaned all his
money to petitioners, he asked for his salary after the resort was opened in October
2007 but the same was not given to him by petitioners. [Johnson] became very
alarmed with the situation as it appears that there was no intention to pay him his
salary, which he now depended on for his living as he has been left penniless. He
was also denied the benefits promised him as part of his compensation such as
service vehicles, meals and insurance.

9. [Johnson] was also not given the authority due to him as resort manager. Prentice
countermanded his orders to the staff at every opportunity. Worse, he would even be
berated and embarrassed in front of the staff. Prentice would go into drunken tiffs,
even with customers and [Johnson] was powerless to prohibit Prentice. It soon
became clear to him that he was only used for the money he loaned and there was
no real intention to have him as resort manager of Dreamland Hotel.

10. Thus, on November 3, 2007, after another embarrassment was handed out by
petitioner Prentice in front of the staff, which highlighted his lack of real authority in
the hotel and the disdain for him by petitioners, respondent Johnson was forced to
submit his resignation, x x x. In deference to the Employment Agreement signed,
[Johnson] stated that he was willing to continue work for the three month period
stipulated therein.

11. However, in an SMS or text message sent by Prentice to [Johnson] on the same
day at around 8:20 pm, he was informed that "… I consider [yo]ur resignation as
immediate". Despite demand, petitioners refused to pay [Johnson] the salaries and
benefits due him. 5

On January 31, 2008, Johnson filed a Complaint for illegal dismissal and non-payment of salaries,
among others, against the petitioners.

On May 23, 2008, the Labor Arbiter (LA) rendered a Decision  dismissing Johnson’s complaint for
6

lack of merit with the finding that he voluntarily resigned from his employment and was not illegally
dismissed. We quote:

There [is] substantial evidence on record that [Johnson] indeed resigned voluntarily from his position
by his mere act of tendering his resignation and immediately abandoned his work as Operations
Manager from the time that he filed said resignation letter on November 3, 2007 and never returned
to his work up to the filing of this case. Evidence on record also show that [Johnson] only served as
Operations Manager for a period of three (3) weeks after which he tendered his voluntary resignation
and left his job. This fact was not denied or questioned by him. His claim that there was breach of
employment contract committed by the respondents and that he was not refunded his alleged
investment with the respondent Dreamland Hotel and Resort were not properly supported with
substantial evidence and besides these issues are not within the ambit of jurisdiction of this
Commission.

There being competent, concrete and substantial evidence to confirm the voluntary resignation of
[Johnson] from his employment, there was no illegal dismissal committed against him and for him to
be entitled to reinstatement to his former position and backwages.

xxxx

WHEREFORE, premises considered, let this case be as it is hereby ordered DISMISSED for lack of
merit.

All the money claims of the complainant are likewise ordered dismissed for lack of legal basis.

SO ORDERED. 7

Dissatisfied, Johnson appealed to the National Labor Relations Commission (NLRC). The NLRC
rendered its Decision  on April 30, 2009, the dispositive portion of which reads:
8

WHEREFORE, the decision appeared from is hereby REVERSED. Respondent Wes[t]ley Prentice
and/or Dreamland Resort & Hotel, Inc[.] are hereby ordered to pay [Johnson] the following:

1. Backwages computed at [P]60,000.00 monthly from November

3, 2007 up to the finality of this decision;

2. Separation pay equivalent to one month’s salary, or [P]60,000.00;

3. Unpaid salaries from August 1, 2007 to November 1, 2007 amounting to a total of [P]172,800.00.

SO ORDERED. 9

The NLRC also noted the following:

Insofar as the charge of abandonment against [Johnson] is concerned, it is significant that the
contention that [Johnson] received a total of [P]172,000.00 from the [petitioners] since July 2007 is
not supported by the evidence x x x submitted by the [petitioners]. Except for a promissory note x x x
for [P]2,200.00, the pieces of evidence in question do not bear [Johnson’s] signature, and do not
therefore constitute proof of actual receipt by him of the amounts stated therein. Thus, based on the
evidence and on the admission by [Johnson] that he received the amount of [P]5,000.00 from the
[petitioners], it appears that [Johnson] received a total of only [P]7,200.00 from the [petitioners].
Since based on the Employment Agreement, his employment commenced on August 1, 2007, it
follows that as of November 3, 2007, when he tendered his resignation, the [petitioners] had failed to
pay him a total of [P]172,800.00 representing his unpaid salaries for three months ([P]60,000.00 x 3
mos. = [P]180,000.00 – [P]7,200 = [P]172,800.00). Even the most reasonable employee would
consider quitting his job after working for three months and receiving only an insignificant fraction of
his salaries. There was, therefore, not an abandonment of employment nor a resignation in the real
sense, but a constructive dismissal, which is defined as an involuntary resignation resorted to when
continued employment is rendered impossible, unreasonable or unlikely x x x. Consequently,
[Johnson] is entitled to reinstatement with full backwages. However, due to the strained relation
between the parties, which renders his reinstatement inadvisable, separation pay may be awarded in
lieu of reinstatement.10

Consequently, the petitioners elevated the NLRC decision to the CA by way of Petition for Certiorari
with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction
under Rule 47.

In the assailed Resolution  dated December 14, 2009, the CA dismissed the petition for lack of proof
11

of authority and affidavit of service of filing as required by Section 13 of the 1997 Rules of
Procedure. The subsequent motion for reconsideration filed by the petitioners was likewise denied
by the CA in a Resolution  dated February 11, 2010.
12

Undaunted, the petitioners filed before this Court the present Petition for Review on Certiorari,
raising the following issues, viz:

A.

THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN PROMULGATING ITS FIRST

RESOLUTION (DECEMBER 14, 2009) WHICH OUTRIGHTLY DISMISSED PETITIONERS’
PETITION FOR CERTIORARI.

B.

THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN PROMULGATING ITS SECOND

RESOLUTION (FEBRUARY 11, 2010) WHICH DENIED FOR LACK OF MERIT PETITIONERS’
MOTION FOR RECONSIDERATION.

C.

THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN NOT GIVING DUE

CONSIDERATION TO THE MERITS OF THE PETITIONERS’ PETITION AND IN NOT GRANTING
THEIR PRAYER FOR TEMPORARY RESTRAINING ORDER[.] 13

The petition is partially granted.

At its inception, the Court takes note of the Resolutions dated December 14, 2009 and February 11,
2010 of the CA dismissing the Petition for Certiorari due to the following infirmities:

1. The affiant has no proof of authority to file the petition in behalf of petitioner Dreamland.

2. The petition has no appended affidavit of service to show proof of service of filing as required by
Sec. 13 of the 1997 Rules of Civil Procedure. 14

To justify their stance that the CA should have considered the merits of the case, instead of
dismissing merely on procedural grounds, the petitioners cited numerous cases wherein the Court
has decided to waive the strict application of the Rules in the interest of substantial justice.  While
15

"[u]tter disregard of [the rules of procedure] cannot justly be rationalized by harking on the policy of
liberal construction,"  the Court recognizes badges of inequity present in the case at bar, which
16

would be seemingly branded with approval should the Court turn a blind eye and dismiss this petition
on procedural grounds alone.
"While it is desirable that the Rules of Court be faithfully observed, courts should not be so strict
about procedural lapses that do not really impair the proper administration of justice. If the rules are
intended to ensure the proper and orderly conduct of litigation, it is because of the higher objective
they seek which are the attainment of justice and the protection of substantive rights of the parties.
Thus, the relaxation of procedural rules, or saving a particular case from the operation of
technicalities when substantial justice requires it, as in the instant case, should no longer be subject
to cavil."
17

Time and again, this Court has emphasized that procedural rules should be treated with utmost
respect and due regard, since they are designed to facilitate the adjudication of cases to remedy the
worsening problem of delay in the resolution of rival claims and in the administration of justice. "From
time to time, however, we have recognized exceptions to the Rules but only for the most compelling
reasons where stubborn obedience to the Rules would defeat rather than serve the ends of
justice."  "It is true that procedural rules may be waived or dispensed with in the interest of
18

substantial justice."
19

Brushing aside technicalities, in the utmost interest of substantial justice and taking into
consideration the varying and conflicting factual deliberations by the LA and the NLRC, the Court
shall now delve into the merits of the case.

The petitioners contend that the employment of Johnson as operations manager commenced only
on October 8, 2007 and not on August 1, 2007. However, the employment contract categorically
stated that the "term of employment shall commence on [August 1, 2007]." Furthermore, the factual
allegations of Johnson that he actually worked from August 1, 2007 were neither sufficiently rebutted
nor denied by the petitioners. As Johnson has specifically set forth in his reply before the LA:

Although the resort did not open until approximately 8th October 2007, [Johnson’s] employment
began, as per Employment Agreement, on 1st August 2007. During the interim period[, Johnson]
was frequently instructed by [Prentice] to supervise the construction staff and speak with potential
future guests who visited the site out of curiosity. Other duties carried out by [Johnson] prior to [the]
opening included the overall preparation of the guest rooms for eventual occupation ensuring
cracked tiles were replaced, ensuring grout was properly installed between tiles, ensuring all lighting
and air conditioning [were] functioning, measuring windows for curtain width, measuring showers for
shower curtain rods and installing shower curtains. Other duties included the unloading, carrying and
installation of mattresses, bedding[s], TV’s, refrigerators and other furnishings and ironing curtains x
x x.
20

Notably, it was only in their Motion for Reconsideration  of the NLRC decision where the petitioners
21

belatedly disagreed that Johnson performed the abovementioned tasks and argued that had
Johnson done the tasks he enumerated, those were tasks foreign and alien to his position as
operations manager and [were done] without their knowledge and consent. 22

Nevertheless, Prentice did not deny that he ordered Johnson to speak with potential guests of the
hotel. In fact, the petitioners admitted and submitted documents  which showed that Johnson has
23

already taken his residence in the hotel as early as July 2007—a part of Johnson’s remuneration as
the hotel operations manager. In presenting such documents, the petitioners would want to impress
upon the Court that their act of accommodating Johnson was merely due to his being a fellow
Australian national.

As it could not be determined with absolute certainty whether or not Johnson rendered the services
he mentioned during the material time, doubt must be construed in his favor for the reason that "the
consistent rule is that if doubt exists between the evidence presented by the employer and that by
the employee, the scales of justice must be tilted in favor of the latter."  What is clear upon the
24

records is that Johnson had already taken his place in the hotel since July 2007.

For the petitioners’ failure to disprove that Johnson started working on August 1, 2007, as stated on
the employment contract, payment of his salaries on said date, even prior to the opening of the hotel
is warranted.

The petitioners also maintain that they have paid the amount of ₱7,200.00 to Johnson for his three
weeks of service from October 8, 2007 until November 3, 2007, the date of Johnson’s
resignation,  which Johnson did not controvert. Even so, the amount the petitioners paid to Johnson
25

as his three-week salary is significantly deficient as Johnson’s monthly salary as stipulated in their
contract is ₱60,000.00 . Thus, the amount which Johnson should have been paid is ₱45,000.00 and
26

not ₱7,200.00. In light of this deficiency, there is more reason to believe that the petitioners withheld
the salary of Johnson without a valid reason. If they indeed believed that Johnson deserves to be
paid only for three-week worth of service as operations manager, then they should still have paid
him the amount due for three weeks of work rendered.

Another argument posited by the petitioners is that the employment contract executed by the parties
is inefficacious because the employment contract is subject to the presentation of Johnson of his
Alien Employment Permit (AEP) and Tax Identification Number (TIN).

Again, this statement is wanting of merit.

Johnson has adduced proof that as a permanent resident, he is exempted from the requirement of
securing an AEP as expressed under Department Order No. 75-06, Series of 2006 of the
Department of Labor and Employment (DOLE), which we quote:

Rule I- Coverage and Exemption

xxxx

2. Exemption. The following categories of foreign nationals are exempt from securing an
employment permit:

xxxx

2.7 Resident foreign nationals

Furthermore, Johnson submitted a Certification  from DOLE Regional Office III, stating that he is
27

exempted from securing an AEP as a holder of Permanent Resident Visa. Consequently, the
condition imposed upon Johnson’s employment, if there is any, is in truth without effect to its validity.

Anent the requirement of securing a TIN to make the contract of employment efficacious, records
show that Johnson secured his TIN only on December 2007  after his resignation as operations
28

manager. Nevertheless, this does not negate the fact that the contract of employment had already
become effective even prior to such date.

In addition to the foregoing, there is no stipulation in the employment contract itself that the same
shall only be effective upon the submission of AEP and TIN. The petitioners did not present any
proof to support this agreement prior to the execution of the employment contract. In the case of
Ortañez v. CA , the Court held:
29
Spoken words could be notoriously unreliable unlike a written contract which speaks of a uniform
language. Thus, under the general rule in Section 9 of Rule 130 of the Rules of Court, when the
terms of an agreement were reduced to writing, as in this case, it is deemed to contain all the terms
agreed upon and no evidence of such terms can be admitted other than the contents thereof. x x
x.  (Citations omitted)
30

As regards the NLRC findings that Johnson was constructively dismissed and did not abandon his
work, the Court is in consonance with this conclusion with the following basis:

Even the most reasonable employee would consider quitting his job after working for three months
and receiving only an insignificant fraction of his salaries. There was, therefore, not an abandonment
of employment nor a resignation in the real sense, but a constructive dismissal, which is defined as
an involuntary resignation resorted to when continued employment is rendered impossible,
unreasonable or unlikely x x x.31

The petitioners aver that considering that Johnson tendered his resignation and abandoned his
work, it is his burden to prove that his resignation was not voluntary on his part.
32

With this, the Court brings to mind its earlier ruling in the case of SHS Perforated Materials, Inc. v.
Diaz  where it held that:
33

"There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an

employer becomes so unbearable on the part of the employee that it would foreclose any choice by
him except to forego his continued employment. It exists where there is cessation of work because
continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a
demotion in rank and a diminution in pay." 34

It is impossible, unreasonable or unlikely that any employee, such as Johnson would continue
working for an employer who does not pay him his salaries. Applying the Court’s pronouncement in
Duldulao v. CA , the Court construes that the act of the petitioners in not paying Johnson his salaries
35

for three months has become unbearable on the latter’s part that he had no choice but to cede his
employment with them. The Court quotes the pertinent sections of Johnson’s resignation letter which
reflects the real reason why he was resigning as operations manager of the hotel:

I hereby tender my resignation to you, Mr[.] Wes Prentice, Dreamland Resort, Subic, Zambales,
Philippines.

Since joining Dreamland Resort & Hotel over three months ago I have put my heart and soul into the
business. I have donated many hours of my personal time. I have frequently worked seven days a
week and twelve to thirteen hours a day. I am now literally penniless, due totally to the fact that I
have lent you and your resort/hotel well over $200,000AU (approx 8million pesos) and your non-
payment of wages to me from 1st August 2007 as per Employment Agreement. x x x.  (Emphasis36

and underscoring ours)

The above preceding statement only goes to show that while it was Johnson who tendered his
resignation, it was due to the petitioners’ acts that he was constrained to resign. The petitioners
cannot expect Johnson to tolerate working for them without any compensation.

Since Johnson was constructively dismissed, he was illegally dismissed. As to the reliefs granted to
an employee who is illegally dismissed, Golden Ace Builders v. Talde  referring to Macasero v.
37

Southern Industrial Gases Philippines  is instructive:

38
Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The
two reliefs provided are separate and distinct. In instances where reinstatement is no longer feasible
because of strained relations between the employee and the employer, separation pay is granted. In
effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay
if reinstatement is no longer viable, and backwages.

The normal consequences of respondents’ illegal dismissal, then, are reinstatement without loss of
seniority rights, and payment of backwages computed from the time compensation was withheld up
to the date of actual reinstatement. Where reinstatement is no longer viable as an option, separation
pay equivalent to one (1) month salary for every year of service should be awarded as an
alternative. The payment of separation pay is in addition to payment of backwages.  (Emphasis and
39

underscoring supplied)

The case of Golden Ace further provides:

"The accepted doctrine is that separation pay may avail in lieu of reinstatement if reinstatement is no
longer practical or in the best interest of the parties. Separation pay in lieu of reinstatement may
likewise be awarded if the employee decides not to be reinstated." x x x

Under the doctrine of strained relations, the payment of separation pay is considered an acceptable
alternative to reinstatement when the latter option is no longer desirable or viable. On one hand,
such payment liberates the employee from what could be a highly oppressive work environment.  On 1âwphi1

the other hand, it releases the employer from the grossly unpalatable obligation of maintaining in its
employ a worker it could no longer trust. 40

In the present case, the NLRC found that due to the strained relations between the parties,
separation pay is to be awarded to Johnson in lieu of his reinstatement.

The NLRC held that Johnson is entitled to backwages from November 3, 2007 up to the finality of
the decision; separation pay equivalent to one month salary; and unpaid salaries from August 1,
2007 to November 1, 2007 amounting to a total of ₱172,800.00. 41

While the Court agrees with the NLRC that the award of separation pay and unpaid salaries is
warranted, the Court does not lose sight of the fact that the employment contract states that
Johnson's employment is for a term of three years.

Accordingly, the award of backwages should be computed from November 3, 2007 to August 1,
2010 - which is three years from August 1, 2007. Furthermore, separation pay is computed from the
commencement of employment up to the time of termination, including the imputed service for which
the employee is entitled to backwages.  As one-month salary is awarded as separation pay for every
42

year of service, including imputed service, Johnson should be paid separation pay equivalent to his
three-month salary for the three-year contract.

WHEREFORE, the Resolutions dated December 14, 2009 and February 11, 2010 of the Court of
Appeals in CA-G.R. SP No. 111693 are hereby SET ASIDE. The Decision of the NLRC dated April
30, 2009 in NLRC LAC No. 07-002711-08 is REINSTATED and AFFIRMED with MODIFICATIONS
in the computation of backwages and separation pay. Dreamland Hotel Resort and Westley Prentice
are ORDERED to PAY Stephen Johnson backwages of ₱60,000.00 per month which should be
computed from November 3, 2007 to August 1, 2010 less the P.7,200.00 already paid to him.
Likewise, separation pay of ₱180.000.00, representing Stephen Johnson's three-year contract
should be awarded.
SO ORDERED.

BIENVENIDO L. REYES
Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 80609 August 23, 1988

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION and MARILYN ABUCAY, respondents.

Nicanor G. Nuevas for petitioner.

CRUZ, J.:

The only issue presented in the case at bar is the legality of the award of financial assistance to an employee who had been dismissed for
cause as found by the public respondent.

Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone Company, was
accused by two complainants of having demanded and received from them the total amount of
P3,800.00 in consideration of her promise to facilitate approval of their applications for telephone
installation.   Investigated and heard, she was found guilty as charged and accordingly separated
1

from the service.  She went to the Ministry of Labor and Employment claiming she had been illegally
2

removed. After consideration of the evidence and arguments of the parties, the company was
sustained and the complaint was dismissed for lack of merit. Nevertheless, the dispositive portion of
labor arbiter's decision declared:
WHEREFORE, the instant complaint is dismissed for lack of merit.

Considering that Dr. Helen Bangayan and Mrs. Consolacion Martinez are not totally blameless in the
light of the fact that the deal happened outhide the premises of respondent company and that their
act of giving P3,800.00 without any receipt is tantamount to corruption of public officers, complainant
must be given one month pay for every year of service as financial assistance.  3

Both the petitioner and the private respondent appealed to the National Labor Relations Board,
which upheld the said decision in toto and dismissed the appeals.   The private respondent took no
4

further action, thereby impliedly accepting the validity of her dismissal. The petitioner, however, is
now before us to question the affirmance of the above- quoted award as having been made with
grave abuse of discretion.

In its challenged resolution of September 22, 1987, the NLRC said:

... Anent the award of separation pay as financial assistance in complainant's favor, We find the
same to be equitable, taking into consideration her long years of service to the company whereby
she had undoubtedly contributed to the success of respondent. While we do not in any way approve
of complainants (private respondent) mal feasance, for which she is to suffer the penalty of
dismissal, it is for reasons of equity and compassion that we resolve to uphold the award of financial
assistance in her favor. 
5

The position of the petitioner is simply stated: It is conceded that an employee illegally dismissed is
entitled to reinstatement and backwages as required by the labor laws. However, an employee
dismissed for cause is entitled to neither reinstatement nor backwages and is not allowed any relief
at all because his dismissal is in accordance with law. In the case of the private respondent, she has
been awarded financial assistance equivalent to ten months pay corresponding to her 10 year
service in the company despite her removal for cause. She is, therefore, in effect rewarded rather
than punished for her dishonesty, and without any legal authorization or justification. The award is
made on the ground of equity and compassion, which cannot be a substitute for law. Moreover, such
award puts a premium on dishonesty and encourages instead of deterring corruption.

For its part, the public respondent claims that the employee is sufficiently punished with her
dismissal. The grant of financial assistance is not intended as a reward for her offense but merely to
help her for the loss of her employment after working faithfully with the company for ten years. In
support of this position, the Solicitor General cites the cases of Firestone Tire and Rubber Company
of the Philippines v. Lariosa   and Soco v. Mercantile Corporation of Davao,   where the employees
6 7

were dismissed for cause but were nevertheless allowed separation pay on grounds of social and
compassionate justice. As the Court put it in the Firestone case:

In view of the foregoing, We rule that Firestone had valid grounds to dispense with the services of
Lariosa and that the NLRC acted with grave abuse of discretion in ordering his reinstatement.
However, considering that Lariosa had worked with the company for eleven years with no known
previous bad record, the ends of social and compassionate justice would be served if he is paid full
separation pay but not reinstatement without backwages by the NLRC.

In the said case, the employee was validly dismissed for theft but the NLRC nevertheless awarded
him full separation pay for his 11 years of service with the company. In Soco, the employee was also
legally separated for unauthorized use of a company vehicle and refusal to attend the grievance
proceedings but he was just the same granted one-half month separation pay for every year of his
18-year service.
Similar action was taken in Filipro, Inc. v. NLRC,   where the employee was validly dismissed for
8

preferring certain dealers in violation of company policy but was allowed separation pay for his 2
years of service. In Metro Drug Corporation v. NLRC,   the employee was validly removed for loss of
9

confidence because of her failure to account for certain funds but she was awarded separation pay
equivalent to one-half month's salary for every year of her service of 15 years. In Engineering
Equipment, Inc. v. NLRC,   the dismissal of the employee was justified because he had instigated
10

labor unrest among the workers and had serious differences with them, among other grounds, but
he was still granted three months separation pay corresponding to his 3-year service. In New
Frontier Mines, Inc. v. NLRC,   the employee's 3- year service was held validly terminated for lack of
11

confidence and abandonment of work but he was nonetheless granted three months separation pay.
And in San Miguel Corporation v. Deputy Minister of Labor and Employment, et al .,    full separation
12

pay for 6, 10, and 16 years service, respectively, was also allowed three employees who had been
dismissed after they were found guilty of misappropriating company funds.

The rule embodied in the Labor Code is that a person dismissed for cause as defined therein is not
entitled to separation pay.   The cases above cited constitute the exception, based upon
13

considerations of equity. Equity has been defined as justice outside law,   being ethical rather than
14

jural and belonging to the sphere of morals than of law.   It is grounded on the precepts of
15

conscience and not on any sanction of positive law.   Hence, it cannot prevail against the expressed
16

provision of the labor laws allowing dismissal of employees for cause and without any provision for
separation pay.

Strictly speaking, however, it is not correct to say that there is no express justification for the grant of
separation pay to lawfully dismissed employees other than the abstract consideration of equity. The
reason is that our Constitution is replete with positive commands for the promotion of social justice,
and particularly the protection of the rights of the workers. The enhancement of their welfare is one
of the primary concerns of the present charter. In fact, instead of confining itself to the general
commitment to the cause of labor in Article II on the Declaration of Principles of State Policies, the
new Constitution contains a separate article devoted to the promotion of social justice and human
rights with a separate sub- topic for labor. Article XIII expressly recognizes the vital role of labor,
hand in hand with management, in the advancement of the national economy and the welfare of the
people in general. The categorical mandates in the Constitution for the improvement of the lot of the
workers are more than sufficient basis to justify the award of separation pay in proper cases even if
the dismissal be for cause.

The Court notes, however, that where the exception has been applied, the decisions have not been
consistent as to the justification for the grant of separation pay and the amount or rate of such
award. Thus, the employees dismissed for theft in the Firestone case and for animosities with fellow
workers in the Engineering Equipment case were both awarded separation pay notnvithstanding that
the first cause was certainly more serious than the second. No less curiously, the employee in the
Soco case was allowed only one-half month pay for every year of his 18 years of service, but in
Filipro the award was two months separation pay for 2 years service. In Firestone, the emplovee
was allowed full separation pay corresponding to his 11 years of service, but in Metro, the employee
was granted only one-half month separation pay for every year of her 15year service. It would seem
then that length of service is not necessarily a criterion for the grant of separation pay and neither
apparently is the reason for the dismissal.

The Court feels that distinctions are in order. We note that heretofore the separation pay, when it
was considered warranted, was required regardless of the nature or degree of the ground proved, be
it mere inefficiency or something graver like immorality or dishonesty. The benediction of
compassion was made to cover a multitude of sins, as it were, and to justify the helping hand to the
validly dismissed employee whatever the reason for his dismissal. This policy should be re-
examined. It is time we rationalized the exception, to make it fair to both labor and management,
especially to labor.

There should be no question that where it comes to such valid but not iniquitous causes as failure to
comply with work standards, the grant of separation pay to the dismissed employee may be both just
and compassionate, particularly if he has worked for some time with the company. For example, a
subordinate who has irreconcilable policy or personal differences with his employer may be validly
dismissed for demonstrated loss of confidence, which is an allowable ground. A working mother who
has to be frequently absent because she has also to take care of her child may also be removed
because of her poor attendance, this being another authorized ground. It is not the employee's fault
if he does not have the necessary aptitude for his work but on the other hand the company cannot
be required to maintain him just the same at the expense of the efficiency of its operations. He too
may be validly replaced. Under these and similar circumstances, however, the award to the
employee of separation pay would be sustainable under the social justice policy even if the
separation is for cause.

But where the cause of the separation is more serious than mere inefficiency, the generosity of the
law must be more discerning. There is no doubt it is compassionate to give separation pay to a
salesman if he is dismissed for his inability to fill his quota but surely he does not deserve such
generosity if his offense is misappropriation of the receipts of his sales. This is no longer mere
incompetence but clear dishonesty. A security guard found sleeping on the job is doubtless subject
to dismissal but may be allowed separation pay since his conduct, while inept, is not depraved. But if
he was in fact not really sleeping but sleeping with a prostitute during his tour of duty and in the
company premises, the situation is changed completely. This is not only inefficiency but immorality
and the grant of separation pay would be entirely unjustified.

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.
Applying the above considerations, we hold that the grant of separation pay in the case at bar is
unjustified. The private respondent has been dismissed for dishonesty, as found by the labor arbiter
and affirmed by the NLRC and as she herself has impliedly admitted. The fact that she has worked
with the PLDT for more than a decade, if it is to be considered at all, should be taken against her as
it reflects a regrettable lack of loyalty that she should have strengthened instead of betraying during
all of her 10 years of service with the company. If regarded as a justification for moderating the
penalty of dismissal, it will actually become a prize for disloyalty, perverting the meaning of social
justice and undermining the efforts of labor to cleanse its ranks of all undesirables.

The Court also rules that the separation pay, if found due under the circumstances of each case,
should be computed at the rate of one month salary for every year of service, assuming the length of
such service is deemed material. This is without prejudice to the application of special agreements
between the employer and the employee stipulating a higher rate of computation and providing for
more benefits to the discharged employee.  17

WHEREFORE, the petition is GRANTED. The challenged resolution of September 22,1987, is

AFFIRMED in toto except for the grant of separation pay in the form of financial assistance, which is
hereby DISALLOWED. The temporary restraining order dated March 23, 1988, is LIFTED. It is so
ordered.

Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes and
Medialdea, JJ., concur.

Separate Opinions

 
FERNAN, C.J., dissenting:

The majority opinion itself declares that the reason for granting separation pay to lawfully dismissed
employees is that "our Constitution is replete with positive commands for the promotion of social
justice, and particularly the protection of the rights of the workers." 
1

It is my firm belief that providing a rigid mathematical formula for determining the amounts of such
separation pay will not be in keeping with these constitutional directives. By computing the allowable
financial assistance on the formula suggested, we shall be closing our eyes to the spirit underlying
these constitutional mandates that "those who have less in life should have more in law." It cannot
be denied that a low salaried employee who is separated from work would suffer more hardship than
a well-compensated one. Yet, if we follow the formula suggested, we would in effect be favoring the
latter instead of the former, as it would be the low- salaried employee who would encounter difficulty
finding another job.

I am in accord with the opinion of Justice Sarmiento that we should not rationalize compassion and
that of Justice Padilla that the awards of financial assistance should be left to the discretion of the
National Labor Relations Commission as may be warranted by the "environmental facts" of the case.
PADILIA, J., separate opinion

I concur in the decision penned by Mr. Justice Cruz when it disallows separation pay, as financial
assistance, to the private respondent, since the ground for termination of employment is dishonesty
in the performance of her duties.

I do not, however, subscribe to the view that "the separation pay, if found due under the
circumstances of each case, should be computed at the rate of one month salary for every year of
service, assuming the length of such service is deemed material." (p.11, Decision). It is my
considered view that, except for terminations based on dishonesty and serious misconduct involving
moral turpitude-where no separation pay should be allowed--in other cases, the grant of separation
pay, i.e. the amount thereof, as financial assistance to the terminated employee, should be left to the
judgment of the administrative agency concemed which is the NLRC. It is in such cases- where the
termination of employment is for a valid cause without, however, involving dishonesty or serious
misconduct involving moral turpitude-that the Constitutional policy of affording protection to labor
should be allowed full play; and this is achieved by leaving to the NLRC the primary jurisdiction and
judgment to determine the amount of separation pay that should be awarded to the terminated
employee in accordance with the "environmental facts" of each case.

It is further my view that the Court should not, as a rule, disturb or alter the amount of separation pay
awarded by the NLRC in such cases of valid termination of employment but with the financial
assistance, in the absence of a demonstrated grave abuse of discretion on the part of the NLRC.

GRIÑO AQUINO, J., dissent:

We should not rationalize compassion. I vote to affirm the grant of financial assistance.

Separate Opinions

FERNAN, C.J., dissenting:

The majority opinion itself declares that the reason for granting separation pay to lawfully dismissed
employees is that "our Constitution is replete with positive commands for the promotion of social
justice, and particularly the protection of the rights of the workers." 
1

It is my firm belief that providing a rigid mathematical formula for determining the amounts of such
separation pay will not be in keeping with these constitutional directives. By computing the allowable
financial assistance on the formula suggested, we shall be closing our eyes to the spirit underlying
these constitutional mandates that "those who have less in life should have more in law." It cannot
be denied that a low salaried employee who is separated from work would suffer more hardship than
a well-compensated one. Yet, if we follow the formula suggested, we would in effect be favoring the
latter instead of the former, as it would be the low- salaried employee who would encounter difficulty
finding another job.

I am in accord with the opinion of Justice Sarmiento that we should not rationalize compassion and
that of Justice Padilla that the awards of financial assistance should be left to the discretion of the
National Labor Relations Commission as may be warranted by the "environmental facts" of the case.
PADILIA, J., separate opinion

I concur in the decision penned by Mr. Justice Cruz when it disallows separation pay, as financial
assistance, to the private respondent, since the ground for termination of employment is dishonesty
in the performance of her duties.

I do not, however, subscribe to the view that "the separation pay, if found due under the circumstances of
each case, should be computed at the rate of one month salary for every year of service, assuming the
length of such service is deemed material." (p.11, Decision). It is my considered view that, except for
terminations based on dishonesty and serious misconduct involving moral turpitude-where no separation
pay should be allowed--in other cases, the grant of separation pay, i.e. the amount thereof, as financial
assistance to the terminated employee, should be left to the judgment of the administrative agency
concemed which is the NLRC. It is in such cases- where the termination of employment is for a valid
cause without, however, involving dishonesty or serious misconduct involving moral turpitude-that the
Constitutional policy of affording protection to labor should be allowed full play; and this is achieved by
leaving to the NLRC the primary jurisdiction and judgment to determine the amount of separation pay that
should be awarded to the terminated employee in accordance with the "environmental facts" of each
case.

It is further my view that the Court should not, as a rule, disturb or alter the amount of separation pay
awarded by the NLRC in such cases of valid termination of employment but with the financial
assistance, in the absence of a demonstrated grave abuse of discretion on the part of the NLRC.

GRIÑO AQUINO, J., dissent:

We should not rationalize compassion. I vote to affirm the grant of financial assistance.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 85279 July 28, 1989

SOCIAL SECURITY SYSTEM EMPLOYEES ASSOCIATION (SSSEA), DIONISION T. BAYLON,

RAMON MODESTO, JUANITO MADURA, REUBEN ZAMORA, VIRGILIO DE ALDAY, SERGIO
ARANETA, PLACIDO AGUSTIN, VIRGILIO MAGPAYO, petitioner,
vs.
THE COURT OF APPEALS, SOCIAL SECURITY SYSTEM (SSS), HON. CEZAR C. PERALEJO,
RTC, BRANCH 98, QUEZON CITY, respondents.

Vicente T. Ocampo & Associates for petitioners.

CORTES, J:

Primarily, the issue raised in this petition is whether or not the Regional Trial Court can enjoin the
Social Security System Employees Association (SSSEA) from striking and order the striking
employees to return to work. Collaterally, it is whether or not employees of the Social Security
System (SSS) have the right to strike.

The antecedents are as follows:

On June 11, 1987, the SSS filed with the Regional Trial Court of Quezon City a complaint for
damages with a prayer for a writ of preliminary injunction against petitioners, alleging that on June 9,
1987, the officers and members of SSSEA staged an illegal strike and baricaded the entrances to
the SSS Building, preventing non-striking employees from reporting for work and SSS members
from transacting business with the SSS; that the strike was reported to the Public Sector Labor -
Management Council, which ordered the strikers to return to work; that the strikers refused to return
to work; and that the SSS suffered damages as a result of the strike. The complaint prayed that a
writ of preliminary injunction be issued to enjoin the strike and that the strikers be ordered to return
to work; that the defendants (petitioners herein) be ordered to pay damages; and that the strike be
declared illegal.

It appears that the SSSEA went on strike after the SSS failed to act on the union's demands, which
included: implementation of the provisions of the old SSS-SSSEA collective bargaining agreement
(CBA) on check-off of union dues; payment of accrued overtime pay, night differential pay and
holiday pay; conversion of temporary or contractual employees with six (6) months or more of
service into regular and permanent employees and their entitlement to the same salaries,
allowances and benefits given to other regular employees of the SSS; and payment of the children's
allowance of P30.00, and after the SSS deducted certain amounts from the salaries of the
employees and allegedly committed acts of discrimination and unfair labor practices [Rollo, pp. 21-
241].

The court a quo, on June 11, 1987, issued a temporary restraining order pending resolution of the
application for a writ of preliminary injunction [Rollo, p. 71.] In the meantime, petitioners filed a
motion to dismiss alleging the trial court's lack of jurisdiction over the subject matter [Rollo, pp. 72-
82.] To this motion, the SSS filed an opposition, reiterating its prayer for the issuance of a writ of
injunction [Rollo, pp. 209-222]. On July 22,1987, in a four-page order, the court a quo denied the
motion to dismiss and converted the restraining order into an injunction upon posting of a bond, after
finding that the strike was illegal [Rollo, pp. 83- 86]. As petitioners' motion for the reconsideration of
the aforesaid order was also denied on August 14, 1988 [Rollo, p. 94], petitioners filed a petition
for certiorari and prohibition with preliminary injunction before this Court. Their petition was docketed
as G.R. No. 79577. In a resolution dated October 21, 1987, the Court, through the Third Division,
resolved to refer the case to the Court of Appeals. Petitioners filed a motion for reconsideration
thereof, but during its pendency the Court of Appeals on March 9,1988 promulgated its decision on
the referred case [Rollo, pp. 130-137]. Petitioners moved to recall the Court of Appeals' decision. In
the meantime, the Court on June 29,1988 denied the motion for reconsideration in G.R. No. 97577
for being moot and academic. Petitioners' motion to recall the decision of the Court of Appeals was
also denied in view of this Court's denial of the motion for reconsideration [Rollo, pp. 141- 143].
Hence, the instant petition to review the decision of the Court of Appeals [Rollo, pp. 12-37].

Upon motion of the SSS on February 6,1989, the Court issued a temporary restraining order
enjoining the petitioners from staging another strike or from pursuing the notice of strike they filed
with the Department of Labor and Employment on January 25, 1989 and to maintain the status
quo [Rollo, pp. 151-152].

The Court, taking the comment as answer, and noting the reply and supplemental reply filed by
petitioners, considered the issues joined and the case submitted for decision.
The position of the petitioners is that the Regional Trial Court had no jurisdiction to hear the case
initiated by the SSS and to issue the restraining order and the writ of preliminary injunction, as
jurisdiction lay with the Department of Labor and Employment or the National Labor Relations
Commission, since the case involves a labor dispute.

On the other hand, the SSS advances the contrary view, on the ground that the employees of the
SSS are covered by civil service laws and rules and regulations, not the Labor Code, therefore they
do not have the right to strike. Since neither the DOLE nor the NLRC has jurisdiction over the
dispute, the Regional Trial Court may enjoin the employees from striking.

In dismissing the petition for certiorari and prohibition with preliminary injunction filed by petitioners,
the Court of Appeals held that since the employees of the SSS, are government employees, they are
not allowed to strike, and may be enjoined by the Regional Trial Court, which had jurisdiction over
the SSS' complaint for damages, from continuing with their strike.

Thus, the sequential questions to be resolved by the Court in deciding whether or not the Court of
Appeals erred in finding that the Regional Trial Court did not act without or in excess of jurisdiction
when it took cognizance of the case and enjoined the strike are as follows:

1. Do the employees of the SSS have the right to strike?

2. Does the Regional Trial Court have jurisdiction to hear the case initiated by the SSS and to enjoin
the strikers from continuing with the strike and to order them to return to work?

These shall be discussed and resolved seriatim

The 1987 Constitution, in the Article on Social Justice and Human Rights, provides that the State
"shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law" [Art. XIII, Sec.
31].

By itself, this provision would seem to recognize the right of all workers and employees, including
those in the public sector, to strike. But the Constitution itself fails to expressly confirm this
impression, for in the Sub-Article on the Civil Service Commission, it provides, after defining the
scope of the civil service as "all branches, subdivisions, instrumentalities, and agencies of the
Government, including government-owned or controlled corporations with original charters," that
"[t]he right to self-organization shall not be denied to government employees" [Art. IX(B), Sec. 2(l)
and (50)]. Parenthetically, the Bill of Rights also provides that "[tlhe right of the people, including
those employed in the public and private sectors, to form unions, associations, or societies for
purposes not contrary to law shall not abridged" [Art. III, Sec. 8]. Thus, while there is no question that
the Constitution recognizes the right of government employees to organize, it is silent as to whether
such recognition also includes the right to strike.

Resort to the intent of the framers of the organic law becomes helpful in understanding the meaning
of these provisions. A reading of the proceedings of the Constitutional Commission that drafted the
1987 Constitution would show that in recognizing the right of government employees to organize, the
commissioners intended to limit the right to the formation of unions or associations only, without
including the right to strike.
Thus, Commissioner Eulogio R. Lerum, one of the sponsors of the provision that "[tlhe right to self-
organization shall not be denied to government employees" [Art. IX(B), Sec. 2(5)], in answer to the
apprehensions expressed by Commissioner Ambrosio B. Padilla, Vice-President of the Commission,
explained:

MR. LERUM. I think what I will try to say will not take that long. When we proposed this amendment
providing for self-organization of government employees, it does not mean that because they have
the right to organize, they also have the right to strike. That is a different matter. We are only talking
about organizing, uniting as a union. With regard to the right to strike, everyone will remember that in
the Bill of Rights, there is a provision that the right to form associations or societies whose purpose
is not contrary to law shall not be abridged. Now then, if the purpose of the state is to prohibit the
strikes coming from employees exercising government functions, that could be done because the
moment that is prohibited, then the union which will go on strike will be an illegal union. And that
provision is carried in Republic Act 875. In Republic Act 875, workers, including those from the
government-owned and controlled, are allowed to organize but they are prohibited from striking. So,
the fear of our honorable Vice- President is unfounded. It does not mean that because we approve
this resolution, it carries with it the right to strike. That is a different matter. As a matter of fact, that
subject is now being discussed in the Committee on Social Justice because we are trying to find a
solution to this problem. We know that this problem exist; that the moment we allow anybody in the
government to strike, then what will happen if the members of the Armed Forces will go on strike?
What will happen to those people trying to protect us? So that is a matter of discussion in the
Committee on Social Justice. But, I repeat, the right to form an organization does not carry with it the
right to strike. [Record of the Constitutional Commission, vol. 1, p. 569].

It will be recalled that the Industrial Peace Act (R.A. No. 875), which was repealed by the Labor
Code (P.D. 442) in 1974, expressly banned strikes by employees in the Government, including
instrumentalities exercising governmental functions, but excluding entities entrusted with proprietary
functions:

.Sec. 11. Prohibition Against Strikes in the Government. — The terms and conditions of employment
in the Government, including any political subdivision or instrumentality thereof, are governed by law
and it is declared to be the policy of this Act that employees therein shall not strike for the purpose of
securing changes or modification in their terms and conditions of employment. Such employees may
belong to any labor organization which does not impose the obligation to strike or to join in
strike: Provided, however, That this section shall apply only to employees employed in governmental
functions and not those employed in proprietary functions of the Government including but not
limited to governmental corporations.

No similar provision is found in the Labor Code, although at one time it recognized the right of
employees of government corporations established under the Corporation Code to organize and
bargain collectively and those in the civil service to "form organizations for purposes not contrary to
law" [Art. 244, before its amendment by B.P. Blg. 70 in 1980], in the same breath it provided that
"[t]he terms and conditions of employment of all government employees, including employees of
government owned and controlled corporations, shall be governed by the Civil Service Law, rules
and regulations" [now Art. 276]. Understandably, the Labor Code is silent as to whether or not
government employees may strike, for such are excluded from its coverage [Ibid]. But then the Civil
Service Decree [P.D. No. 807], is equally silent on the matter.

On June 1, 1987, to implement the constitutional guarantee of the right of government employees to
organize, the President issued E.O. No. 180 which provides guidelines for the exercise of the right to
organize of government employees. In Section 14 thereof, it is provided that "[t]he Civil Service law
and rules governing concerted activities and strikes in the government service shall be observed,
subject to any legislation that may be enacted by Congress." The President was apparently referring
to Memorandum Circular No. 6, s. 1987 of the Civil Service Commission under date April 21, 1987
which, "prior to the enactment by Congress of applicable laws concerning strike by government
employees ... enjoins under pain of administrative sanctions, all government officers and employees
from staging strikes, demonstrations, mass leaves, walk-outs and other forms of mass action which
will result in temporary stoppage or disruption of public service." The air was thus cleared of the
confusion. At present, in the absence of any legislation allowing government employees to strike,
recognizing their right to do so, or regulating the exercise of the right, they are prohibited from
striking, by express provision of Memorandum Circular No. 6 and as implied in E.O. No. 180. [At this
juncture, it must be stated that the validity of Memorandum Circular No. 6 is not at issue].

But are employees of the SSS covered by the prohibition against strikes?

The Court is of the considered view that they are. Considering that under the 1987 Constitution "[t]he
civil service embraces all branches, subdivisions, instrumentalities, and agencies of the
Government, including government-owned or controlled corporations with original charters" [Art.
IX(B), Sec. .2(l) see also Sec. 1 of E.O. No. 180 where the employees in the civil service are
denominated as "government employees"] and that the SSS is one such government-controlled
corporation with an original charter, having been created under R.A. No. 1161, its employees are
part of the civil service [NASECO v. NLRC, G.R. Nos. 69870 & 70295, November 24,1988] and are
covered by the Civil Service Commission's memorandum prohibiting strikes. This being the case, the
strike staged by the employees of the SSS was illegal.

The statement of the Court in Alliance of Government Workers v. Minister of Labor and
Employment [G.R. No. 60403, August 3, 1:983, 124 SCRA 11 is relevant as it furnishes the rationale
for distinguishing between workers in the private sector and government employees with regard to
the right to strike:

The general rule in the past and up to the present is that 'the terms and conditions of employment in
the Government, including any political subdivision or instrumentality thereof are governed by law"
(Section 11, the Industrial Peace Act, R.A. No. 875, as amended and Article 277, the Labor Code,
P.D. No. 442, as amended). Since the terms and conditions of government employment are fixed by
law, government workers cannot use the same weapons employed by workers in the private sector
to secure concessions from their employers. The principle behind labor unionism in private industry
is that industrial peace cannot be secured through compulsion by law. Relations between private
employers and their employees rest on an essentially voluntary basis. Subject to the minimum
requirements of wage laws and other labor and welfare legislation, the terms and conditions of
employment in the unionized private sector are settled through the process of collective bargaining.
In government employment, however, it is the legislature and, where properly given delegated
power, the administrative heads of government which fix the terms and conditions of employment.
And this is effected through statutes or administrative circulars, rules, and regulations, not through
collective bargaining agreements. [At p. 13; Emphasis supplied].

Apropos is the observation of the Acting Commissioner of Civil Service, in his position paper
submitted to the 1971 Constitutional Convention, and quoted with approval by the Court in Alliance,
to wit:

It is the stand, therefore, of this Commission that by reason of the nature of the public employer and
the peculiar character of the public service, it must necessarily regard the right to strike given to
unions in private industry as not applying to public employees and civil service employees. It has
been stated that the Government, in contrast to the private employer, protects the interest of all
people in the public service, and that accordingly, such conflicting interests as are present in private
labor relations could not exist in the relations between government and those whom they employ. [At
pp. 16-17; also quoted in National Housing Corporation v. Juco, G.R. No. 64313, January
17,1985,134 SCRA 172,178-179].

E.O. No. 180, which provides guidelines for the exercise of the right to organize of government
employees, while clinging to the same philosophy, has, however, relaxed the rule to allow
negotiation where the terms and conditions of employment involved are not among those fixed by
law. Thus:

.SECTION 13. Terms and conditions of employment or improvements thereof, except those that are
fixed by law, may be the subject of negotiations between duly recognized employees' organizations
and appropriate government authorities.

The same executive order has also provided for the general mechanism for the settlement of labor
disputes in the public sector to wit:

.SECTION 16. The Civil Service and labor laws and procedures, whenever applicable, shall be
followed in the resolution of complaints, grievances and cases involving government employees. In
case any dispute remains unresolved after exhausting all the available remedies under existing laws
and procedures, the parties may jointly refer the dispute to the [Public Sector Labor- Management]
Council for appropriate action.

Government employees may, therefore, through their unions or associations, either petition the
Congress for the betterment of the terms and conditions of employment which are within the ambit of
legislation or negotiate with the appropriate government agencies for the improvement of those
which are not fixed by law. If there be any unresolved grievances, the dispute may be referred to the
Public Sector Labor - Management Council for appropriate action. But employees in the civil service
may not resort to strikes, walk-outs and other temporary work stoppages, like workers in the private
sector, to pressure the Govemment to accede to their demands. As now provided under Sec. 4, Rule
III of the Rules and Regulations to Govern the Exercise of the Right of Government- Employees to
Self- Organization, which took effect after the instant dispute arose, "[t]he terms and conditions of
employment in the government, including any political subdivision or instrumentality thereof and
government- owned and controlled corporations with original charters are governed by law and
employees therein shall not strike for the purpose of securing changes thereof."

II

The strike staged by the employees of the SSS belonging to petitioner union being prohibited by law,
an injunction may be issued to restrain it.

It is futile for the petitioners to assert that the subject labor dispute falls within the exclusive
jurisdiction of the NLRC and, hence, the Regional Trial Court had no jurisdiction to issue a writ of
injunction enjoining the continuance of the strike. The Labor Code itself provides that terms and
conditions of employment of government employees shall be governed by the Civil Service Law,
rules and regulations [Art. 276]. More importantly, E.O. No. 180 vests the Public Sector Labor -
Management Council with jurisdiction over unresolved labor disputes involving government
employees [Sec. 16]. Clearly, the NLRC has no jurisdiction over the dispute.

This being the case, the Regional Trial Court was not precluded, in the exercise of its general
jurisdiction under B.P. Blg. 129, as amended, from assuming jurisdiction over the SSS's complaint
for damages and issuing the injunctive writ prayed for therein. Unlike the NLRC, the Public Sector
Labor - Management Council has not been granted by law authority to issue writs of injunction in
labor disputes within its jurisdiction. Thus, since it is the Council, and not the NLRC, that has
jurisdiction over the instant labor dispute, resort to the general courts of law for the issuance of a writ
of injunction to enjoin the strike is appropriate.

Neither could the court a quo be accused of imprudence or overzealousness, for in fact it had
proceeded with caution. Thus, after issuing a writ of injunction enjoining the continuance of the strike
to prevent any further disruption of public service, the respondent judge, in the same order,
admonished the parties to refer the unresolved controversies emanating from their employer-
employee relationship to the Public Sector Labor - Management Council for appropriate action
[Rollo, p. 86].

III

In their "Petition/Application for Preliminary and Mandatory Injunction," and reiterated in their reply
and supplemental reply, petitioners allege that the SSS unlawfully withheld bonuses and benefits
due the individual petitioners and they pray that the Court issue a writ of preliminary prohibitive and
mandatory injunction to restrain the SSS and its agents from withholding payment thereof and to
compel the SSS to pay them. In their supplemental reply, petitioners annexed an order of the Civil
Service Commission, dated May 5, 1989, which ruled that the officers of the SSSEA who are not
preventively suspended and who are reporting for work pending the resolution of the administrative
cases against them are entitled to their salaries, year-end bonuses and other fringe benefits and
affirmed the previous order of the Merit Systems Promotion Board.

The matter being extraneous to the issues elevated to this Court, it is Our view that petitioners'
remedy is not to petition this Court to issue an injunction, but to cause the execution of the aforesaid
order, if it has already become final.

WHEREFORE, no reversible error having been committed by the Court of Appeals, the instant
petition for review is hereby DENIED and the decision of the appellate court dated March 9, 1988 in
CA-G.R. SP No. 13192 is AFFIRMED. Petitioners' "Petition/Application for Preliminary and
Mandatory Injunction" dated December 13,1988 is DENIED.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 148415               July 14, 2008

RICARDO G. PALOMA, Petitioner,
vs.
PHILIPPINE AIRLINES, INC. and THE NATIONAL LABOR RELATIONS
COMMISSION, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 156764

PHILIPPINE AIRLINES, INC., Petitioner,

vs.
RICARDO G. PALOMA, Respondent.

DECISION
VELASCO, JR., J.:

The Case

Before us are these two consolidated petitions for review under Rule 45 separately interposed by
Ricardo G. Paloma and Philippine Airlines, Inc. (PAL) to nullify and set aside the Amended
Decision1 dated May 31, 2001 of the Court of Appeals (CA) in CA-G.R. SP No. 56429, as effectively
reiterated in its Resolution2 of January 14, 2003.

The Facts

Paloma worked with PAL from September 1957, rising from the ranks to retire, after 35 years of
continuous service, as senior vice president for finance. In March 1992, or some nine (9) months
before Paloma retired on November 30, 1992, PAL was privatized.

By way of post-employment benefits, PAL paid Paloma the total amount of PhP 5,163,325.64 which
represented his separation/retirement gratuity and accrued vacation leave pay. For the benefits thus
received, Paloma signed a document denominated Release and Quitclaim 3 but inscribed the
following reservation therein: "Without prejudice to my claim for further leave benefits embodied in
my aide memoire transmitted to Mr. Roberto Anonas covered by my 27 Nov. 1992 letter x x x."

The leave benefits Paloma claimed being entitled to refer to his 450-day accrued sick leave credits
which PAL allegedly only paid the equivalent of 18 days. He anchored his entitlement on Executive
Order No. (EO) 10774 dated January 9, 1986, and his having accumulated a certain number of days
of sick leave credits, as acknowledged in a letter of Alvia R. Leaño, then an administrative assistant
in PAL. Leaño’s letter dated November 12, 1992 pertinently reads:

At your request, we are pleased to confirm herewith the balance of your sick leave credits as they
appear in our records: 230 days.

According to our existing policy, an employee is entitled to accumulate sick leave with pay only up to
a maximum of 230 days.

Had there been no ceiling as mandated by Company policy, your sick leave credits would have
totaled 450 days to date.5

Answering Paloma’s written demands for conversion to cash of his accrued sick leave credits, PAL
asserted having paid all of Paloma’s commutable sick leave credits due him pursuant to company
policy made applicable to PAL officers starting 1990.

The company leave policy adverted to grants PAL’s regular ground personnel a graduated sick leave
benefits, those having rendered at least 25 years of service being entitled to 20 days of sick leave for
every year of service. An employee, under the policy, may accumulate sick leaves with pay up to
230 days. Subject to defined qualifications, sick leave credits in excess of 230 days shall be
commutable to cash at the employee’s option and shall be paid in lump sum on or before May 31st
of the following year they were earned. 6 Per PAL’s records, Paloma appears to have, for the period
from 1990 to 1992, commuted 58 days of his sick leave credits, broken down as follows: 20 days
each in 1990 and 1991 and 18 days in 1992.

Subsequently, Paloma filed before the Arbitration Branch of the National Labor Relations
Commission (NLRC) a Complaint 7 for Commutation of Accrued Sick Leaves Totaling 392 days. In
the complaint, docketed as NLRC-NCR-Case No. 00-08-05792-94, Paloma alleged having accrued
sick leave credits of 450 days commutable upon his retirement pursuant to EO 1077 which allows
retiring government employees to commute, without limit, all his accrued vacation and sick leave
credits. And of the 450-day credit, Paloma added, he had commuted only 58 days, leaving him a
balance of 392 days of accrued sick leave credits for commutation.

Ruling of the Labor Arbiter

Issues having been joined with the filing by the parties of their respective position papers, 8 the labor
arbiter rendered on June 30, 1995 a Decision 9 dispositively reading:

WHEREFORE, premises considered, respondent PHILIPPINE AIRLINE[S], INC. is hereby ordered

to pay within ten (10) days from receipt hereof herein complainant Ricardo G. Paloma, the sum of
Six Hundred Seventy Five Thousand Pesos (P675,000.00) representing his one Hundred sixty two
days [162] accumulated sick leave credits, plus ten (10%) percent attorney’s fees of P67,500.00, or
a total sum of P742,500.00.

SO ORDERED.

The labor arbiter held that PAL is not covered by the civil service system and, accordingly, its
employees, like Paloma, cannot avail themselves of the beneficent provision of EO 1077. This
executive issuance, per the labor arbiter’s decision, applies only to government officers and
employees covered by the civil service, exclusive of the members of the judiciary whose leave and
retirement system is covered by a special law.

However, the labor arbiter ruled that Paloma is entitled to a commutation of his alternative claim for
202 accrued sick leave credits less 40 days for 1990 and 1991. Thus, the grant of commutation for
162 accrued leave credits.

Both parties appealed10 the decision of the labor arbiter to the NLRC.

Ruling of the NLRC in NLRC NCR CA No. 009652-95

(NLRC-NCR-Case No. 00-08-05792-94)

On November 26, 1997, the First Division of the NLRC rendered a Decision affirming that of the
labor arbiter, thus:

WHEREFORE, as recommended, both appeals are DISMISSED. The decision of Labor Arbiter
Felipe T. Garduque II dated June 30, 1995 is AFFIRMED.

SO ORDERED.11

Both parties moved for reconsideration. In its Resolution of November 10, 1999, the NLRC, finding
Paloma to have, upon his retirement, commutable accumulated sick leave credits of 230 days,
modified its earlier decision, disposing as follows:

In view of all the foregoing, our decision dated November 26, 1997, be modified by increasing the
sick leave benefits of complainant to be commuted to cash from 162 days to 230 days.

SO ORDERED.12
From the above modificatory resolution of the NLRC, PAL went to the CA on a petition for certiorari
under Rule 65, the recourse docketed as CA-G.R. SP No. 56429.

Ruling of the CA in its April 28, 2000 Decision

By a Decision dated April 28, 2000, the CA found for PAL, thus:

WHEREFORE, the petition is granted. Public respondent’s November 10, 1999 Resolution is set
aside. And the complaint of Ricardo Paloma is hereby DISMISSED. Without costs.

SO ORDERED.13

In time, Paloma sought reconsideration. 14

The May 31, 2001 Amended Decision

On May 31, 2001, the CA issued the assailed Amended Decision reversing its April 28, 2000
Decision. The fallo of the Amended Decision reads:

WHEREFORE, premises considered, our Judgment, dated 28 April 2000 is hereby vacated and, set
aside, and another one entered reinstating the Resolution, dated 10 November 1999, issued by the
public respondent National Labor Relations Commission in NLRC NCR Case No. 00-08-05792-94
[NLRC NCR CA No. 009652-95], entitled Ricardo G. Paloma v. Philippine Airlines, Incorporated, with
the only modification that the total sums granted by Labor Arbiter Felipe T. Garduque II
(P742,500.00, inclusive of the ten percent (10%) attorney’s fees), as affirmed by public respondent
National Labor Relations Commission, First Division, in said NLRC Case No. 00-08-05792-94, shall
earn legal interest from the date of the institution of the complaint until fully paid/discharged. (Art.
2212, New Civil Code).

SO ORDERED.15

Justifying its amendatory action, the CA stated that EO 1077 applies to PAL and necessarily to
Paloma on the following rationale: Section 2(1) of Article IX(B) of the 1987 Constitution applies
prospectively and, thus, the expressed limitation therein on the applicability of the civil service law
only to government-owned and controlled corporations (GOCCs) with original charters does not
preclude the applicability of EO 1077 to PAL and its then employees. This conclusion, the CA added,
becomes all the more pressing considering that PAL, at the time of the issuance of EO 1077, was
still a GOCC and that Paloma had already 29 years of service at that time. The appellate court also
stated that since PAL had then no existing retirement program, the provisions of EO 1077 shall
serve as a retirement program for Paloma who had meanwhile acquired vested rights under the EO
pursuant to Arts. 10016 and 28717 of the Labor Code.

Significantly, despite affirmatively positing the applicability of EO 1077, the Amended Decision still
deferred to PAL’s existing policy on the 230-day limit for accrued sick leave with pay that may be
credited to its employees. Incongruously, while the CA reinstated the November 10, 1999 Resolution
of the NLRC, it decreed the implementation of the labor arbiter’s Decision dated June 30, 1995. As
may be recalled, the NLRC, in its November 10, 1999 Resolution, allowed a 230-day sick leave
commutation, up from the 162 days granted under the June 30, 1995 Decision of the labor arbiter.

Paloma immediately appealed the CA’s Amended Decision via a Petition for Review on Certiorari
under Rule 45, docketed as G.R. No. 148415. On the other hand, PAL first sought reconsideration of
the Amended Decision, coming to us after the CA, per its January 14, 2003 Resolution, denied the
desired reconsideration. In net effect then, PAL’s Petition for Review on Certiorari, docketed as G.R.
No. 156764, assails both the Amended Decision and Resolution of the CA.

The Issues

In G.R. No. 148415, Paloma raises the sole issue of:

WHETHER OR NOT THE [CA], IN HOLDING THAT E.O. NO. 1077 IS APPLICABLE TO
PETITIONER AND YET APPLYING COMPANY POLICY BY AWARDING THE CASH EQUIVALENT
OF ONLY 162 DAYS SICK LEAVE CREDITS INSTEAD OF THE 450 DAYS SICK LEAVE CREDITS
PETITIONER IS ENTITLED TO UNDER E.O. NO. 1077, DECIDED A QUESTION OF SUBSTANCE
IN A MANNER CONTRARY TO LAW AND APPLICABLE JURISPRUDENCE. 18

In G.R. No. 156764, PAL raises the following issues for our consideration:

1. May an employee of a non-government corporation [invoke EO] 1077 which the then President
Ferdinand E. Marcos issued on January 9, 1986, solely for the benefit of government officers and
employees covered by the civil service?

2. Can a judicial body modify or alter a company policy by ordering the commutation of sick leave
credits which, under company policy is non-commutable?19

The issues submitted boil down to the question of whether or not EO 1077, before PAL’s
privatization, applies to its employees, and corollarily, whether or not Paloma is entitled to a
commutation of his accrued sick leave credits. Subsumed to the main issue because EO 1077
applies only to government employees subject to civil service law is the question of whether or not
PAL—which, as early as 1960 until its privatization, had been considered as a government-
controlled corporation—is covered by and subject to the limitations peculiar under the civil service
system.

There can be no quibbling, as a preliminary consideration, about PAL having been incorporated as a
private corporation whose controlling stocks were later acquired by the GSIS, which is wholly owned
by the government. Through the years before GSIS divested itself of its controlling interests over the
airline, PAL was considered a government-controlled corporation, as we said as much in Phil. Air
Lines Employees’ Assn. v. Phil. Air Lines, Inc., 20 a case commenced in August 1958 and finally
resolved by the Court in 1964. The late Blas Ople, former Labor Secretary and a member of the
1986 Constitutional Commission, described PAL and other like entities spun off from the GSIS as
"second generation corporations functioning as private subsidiaries." 21 Before the coming into force
of the 1973 Constitution, a subsidiary of a wholly government-owned corporation or a government
corporation with original charter was covered by the Labor Code. Following the ratification of the
1973 Constitution, these subsidiaries theoretically came within the pale of the civil service on the
strength of this provision: "[T]he civil service embraces every branch, agency, subdivision and
instrumentality of the Government, including every [GOCC] x x x." 22 Then came the 1987
Constitution which contextually delimited the coverage of the civil service only to a GOCC "with
original charter."23

The Court’s Ruling

Considering the applicable law and jurisprudence in the light of the undisputed factual milieu of the
instant case, the setting aside of the assailed amended decision and resolution of the CA is
indicated.

Core Issue: Applicability of EO 1077

Insofar as relevant, EO 1077 dated January 9, 1986, entitled Revising the Computation of Creditable
Vacation and Sick Leaves of Government Officers and Employees, provides:

WHEREAS, under existing law and civil service regulations, the number of days of
vacation and sick leaves creditable to a government officer or employee is limited to
300 days;

WHEREAS, by special law, members of the judiciary are not subject to such
restriction;

WHEREAS, it is the continuing policy of the government to institute to the extent

possible a uniform and equitable system of compensation and benefits and to
enhance the morale and performance in the civil service.

xxxx

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by

virtue of the powers vested in me by the Constitution, do hereby order and direct the
following:

Section 1. Any officer [or] employee of the government who retires or voluntary
resigns or is separated from the service through no fault of his own and whose leave
benefits are not covered by special law, shall be entitled to the commutation of all the
accumulated vacation and/or sick leaves to his credit, exclusive of Saturdays,
Sundays, and holidays, without limitation as to the number of days of vacation and
sick leaves that he may accumulate. (Emphasis supplied.)

Paloma maintains that he comes within the coverage of EO 1077, the same having been issued in
1986, before he severed official relations with PAL, and at a time when the applicable constitutional
provision on the coverage of the civil service made no distinction between GOCCs with original
charters and those without, like PAL which was incorporated under the Corporation Code. Implicit in
Paloma’s contention is the submission that he earned the bulk of his sick leave credits under the
aegis of the 1973 Constitution when PAL, being then a government-controlled corporation, was
under civil service coverage.

The contention is without merit.

PAL never ceased to be operated as a private corporation, and was not subjected to the Civil
Service Law

The Court can allow that PAL, during the period material, was a government-controlled corporation
in the sense that the GSIS owned a controlling interest over its stocks. One stubborn fact, however,
remains: Through the years, PAL functioned as a private corporation and managed as such for
profit. Their personnel were never considered government employees. It may perhaps not be amiss
for the Court to take judicial notice of the fact that the civil service law and rules and regulations have
not actually been made to apply to PAL and its employees. Of governing application to them was the
Labor Code. Consider: (a) Even during the effectivity of the 1973 Constitution but prior to the
promulgation on January 17, 1985 of the decision in No. L-64313 entitled National Housing
Corporation v. Juco,24 the Court no less recognized the applicability of the Labor Code to, and the
authority of the NLRC to exercise jurisdiction over, disputes involving discipline, personnel
movements, and dismissal in GOCCs, among them PAL; 25 (b) Company policy and collective
bargaining agreements (CBAs), instead of the civil service law and rules, govern the terms and
conditions of employment in PAL. In fact, Ople rhetorically asked how PAL can be covered by the
civil service law when, at one time, there were three (3) CBAs in PAL, one for the ground crew, one
for the flight attendants, and one for the pilots; 26 and (c) When public sector unionism was just an
abstract concept, labor unions in PAL with the right to engage in strike and other concerted activities
were already active.27

Not to be overlooked of course is the 1964 case of Phil. Air Lines Employees’ Assn., wherein the
Court stated that "the Civil Service Law has not been actually applied to PAL." 28

Given the foregoing considerations, Paloma cannot plausibly be accorded the benefits of EO 1077
which, to stress, was issued to narrow the gap between the leave privileges between the members
of the judiciary, on one hand, and other government officers and employees in the civil service, on
the other. That PAL and Paloma may have, at a time, come within the embrace of the civil service by
virtue of the 1973 Constitution is of little moment at this juncture. As held in National Service
Corporation v. National Labor Relations Commission (NASECO),29 the issue of whether or not a
given GOCC falls within the ambit of the civil service subject, vis-à-vis disputes respecting terms and
conditions of employment, to the jurisdiction of the Civil Service Commission or the NLRC, as the
case may be, resolves itself into the question of which between the 1973 Constitution, which does
not distinguish between a GOCC with or without an original charter, and the 1987 Constitution,
which does, is in place. To borrow from the 1988 NASECO ruling, it is the 1987 Constitution, which
delimits the coverage of the civil service, that should govern this case because it is the Constitution
in place at the time the case was decided, even if, incidentally, the cause of action accrued during
the effectivity of the 1973 Constitution. This has been the consistent holding of the Court in
subsequent cases involving GOCCs without original charters. 30

It cannot be overemphasized that when Paloma filed his complaint for commutation of sick leave
credits, private interests already controlled, if not owned, PAL. Be this as it may, Paloma, when he
filed said complaint, cannot even assert being covered by the civil service and, hence, entitled to the
benefits attached to civil service employment, such as the right under EO 1077 to accumulate and
commute leave credits without limit. In all, then, Paloma, while with PAL, was never a government
employee covered by the civil service law. As such, he did not acquire any vested rights on the
retirement benefits accorded by EO 1077.

Paloma not entitled to the benefits granted in EO 1077; existing company policy on the matter
applies

What governs Paloma’s entitlement to sick leave benefits and the computation and commutation of
creditable benefits is not EO 1077, as the labor arbiter and originally the NLRC correctly held, but
PAL’s company policy on the matter which, as found below, took effect in 1990. The text of the
policy is reproduced in the CA’s April 28, 2000 Decision and sets out the following pertinent rules:

POLICY
Regular employees shall be entitled to a yearly period of sick leave with pay, the exact number of
days to be determined on the basis of the employee’s category and length of service in the
company.

RULES

A. For ground personnel

2. Sick leave shall be granted only upon certification by a company physician that an
employee is incapable of discharging his duties due to illness or injury x x x.

xxxx

3. Sick leave entitlement accrues from the date of an employee’s regular

employment x x x.

In case of direct conversion from temporary/daily/project/contract to regular status,

regular employment shall be deemed to have begun on the date of the employee’s
conversion as a regular employee.

xxxx

4. An employee may accumulate sick leave with pay up to Two Hundred Thirty
(230) days;

An employee who has accumulated seventy-five (75) days sick leave credit at the end of each year
may, at his option, commute seventy-five percent (75%) of his current sick leave entitlement to cash
and the other twenty-five percent (25%) to be added to his accrued sick leave credits up to two
hundred thirty (230) calendar days.

The seventy-five percent (75%) commutable to cash as above provided, shall be paid up in lump
sum on or before May 31st of the following year.

Sick leave credits in excess of two hundred thirty (230) days shall be commutable to cash at
the employee’s option, and shall be paid in lump sum on or before May 31st of the following
year it was earned.31 (Emphasis ours.)

As may be gathered from the records, accrued sick leave credits in excess of 230 days were not, if
earned before 1990 when the above policy took effect, commutable to cash; they were simply
forfeited. Those earned after 1990, but still subject to the 230-day threshold rule, were commutable
to cash to the extent of 75% of the employee’s current entitlement, and payable on or before May
31st of the following year, necessarily implying that the privilege to commute is time-bound.

It appears that Paloma had, as of 1990, more than 230 days of accrued sick leave credits. Following
company policy, Paloma was deemed to have forfeited the monetary value of his leave credits in
excess of the 230-day ceiling. Now, then, it is undisputed that he earned additional accrued sick
leave credits of 20 days in 1990 and 1991 and 18 days in 1992, which he duly commuted pursuant
to company policy and received with the corresponding cash value. Therefore, PAL is correct in
contending that Paloma had received whatever was due on the commutation of his accrued sick
leave credits in excess of the 230 days limit, specifically the 58 days commutation for 1990, 1991,
and 1992.
No commutation of 230 days accrued sick leave credits

The query that comes next is how the 230 days accrued sick leave credits Paloma undoubtedly had
when he retired are to be treated. Is this otherwise earned credits commutable to cash? These
should be answered in the negative.

The labor arbiter granted 162 days commutation, while the NLRC allowed the commutation of the
maximum 230 days. The CA, while seemingly affirming the NLRC’s grant of 230 days commutation,
actually decreed a 162-day commutation. We cannot sustain any of the dispositions thus reached for
lack of legal basis, for PAL’s company policy upon which either disposition was predicated did not
provide for a commutation of the first 230 days accrued sick leave credits employees may have upon
their retirement. Hence, the NLRC and the CA, by their act of allowing commutation to cash, erred
as they virtually read in the policy something not written or intended therein. Indeed, no law provides
for commutation of unused or accrued sick leave credits in the private sector. Commutation is
allowed by way of voluntary endowment by an employer through a company policy or by a CBA.
None of such medium presently obtains and it would be incongruous if the Court fills up the vacuum.

Confronted with a similar situation as depicted above, the Court, in Baltazar v. San Miguel Brewery,
Inc., declared as follows:

In connection with the question of whether or not appellee is entitled to the cash value of six months
accumulated sick leave, it appears that while under the last paragraph of Article 5 of appellant’s
Rules and Regulations of the Health, Welfare and Retirement Plan (Exhibit 3), unused sick leave
may be accumulated up to a maximum of six months, the same is not commutable or payable in
cash upon the employee’s option.

In our view, the only meaning and import of said rule and regulation is that if an employee does not
choose to enjoy his yearly sick leave of thirty days, he may accumulate such sick leave up to a
maximum of six months and enjoy this six months sick leave at the end of the sixth year but may not
commute it to cash.321avvphi1

In fine, absent any provision in the applicable company policy authorizing the commutation of the
230 days accrued sick leave credits existing upon retirement, Paloma may not, as a matter of
enforceable right, insist on the commutation of his sick leave credits to cash.

As PAL’s senior vice-president for finance upon his retirement, Paloma knew or at least ought to
have known the company policy on accrued sick leave credits and how it was being implemented.
Had he acted on that knowledge in utmost good faith, these proceedings would have not come to
pass.

WHEREFORE, the petition under G.R. No. 148415 is hereby DISMISSED for lack of merit, while the
petition under G.R. No. 156764 is hereby GIVEN DUE COURSE. The Amended Decision dated May
31, 2001 of the CA in CA-G.R. SP No. 56429 and its Resolution of January 14, 2003 are hereby
ANNULLED and SET ASIDE, and the CA Decision dated April 28, 2000 is accordingly
REINSTATED.

Costs against Ricardo G. Paloma.

SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CONCHITA CARPIO MORALES DANTE O. TINGA

Associate Justice Associate Justice

ARTURO D. BRION
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify
that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 86773 February 14, 1992

SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER-AQUACULTURE DEPARTMENT

(SEAFDEC-AQD), DR. FLOR LACANILAO (CHIEF), RUFIL CUEVAS (HEAD, ADMINISTRATIVE
DIV.), BEN DELOS REYES (FINANCE OFFICER), petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JUVENAL LAZAGA, respondents.

Ramon Encarnacion for petitioners.

Caesar T. Corpus for private respondent.

NOCON, J.:

This is a petition for certiorari to annul and set aside the July 26, 1988 decision of the National Labor
Relations Commission sustaining the labor arbiter, in holding herein petitioners Southeast Asian
Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD), Dr. Flor Lacanilao, Rufil
Cuevas and Ben de los Reyes liable to pay private respondent Juvenal Lazaga the amount of
P126,458.89 plus interest thereon computed from May 16, 1986 until full payment thereof is made,
as separation pay and other post-employment benefits, and the resolution denying the petitioners'
motion for reconsideration of said decision dated January 9, 1989.

The antecedent facts of the case are as follows:

SEAFDEC-AQD is a department of an international organization, the Southeast Asian Fisheries

Development Center, organized through an agreement entered into in Bangkok, Thailand on
December 28, 1967 by the governments of Malaysia, Singapore, Thailand, Vietnam, Indonesia and
the Philippines with Japan as the sponsoring country (Article 1, Agreement Establishing the
SEAFDEC).

On April 20, 1975, private respondent Juvenal Lazaga was employed as a Research Associate an a
probationary basis by the SEAFDEC-AQD and was appointed Senior External Affairs Officer on
January 5, 1983 with a monthly basic salary of P8,000.00 and a monthly allowance of P4,000.00.
Thereafter, he was appointed to the position of Professional III and designated as Head of External
Affairs Office with the same pay and benefits.

On May 8, 1986, petitioner Lacanilao in his capacity as Chief of SEAFDEC-AQD sent a notice of
termination to private respondent informing him that due to the financial constraints being
experienced by the department, his services shall be terminated at the close of office hours on May
15, 1986 and that he is entitled to separation benefits equivalent to one (1) month of his basic salary
for every year of service plus other benefits (Rollo, p. 153).

Upon petitioner SEAFDEC-AQD's failure to pay private respondent his separation pay, the latter filed
on March 18, 1987 a complaint against petitioners for non-payment of separation benefits plus moral
damages and attorney's fees with the Arbitration Branch of the NLRC (Annex "C" of Petition
for Certiorari).

Petitioners in their answer with counterclaim alleged that the NLRC has no jurisdiction over the case
inasmuch as the SEAFDEC-AQD is an international organization and that private respondent must
first secure clearances from the proper departments for property or money accountability before any
claim for separation pay will be paid, and which clearances had not yet been obtained by the private
respondent.

A formal hearing was conducted whereby private respondent alleged that the non-issuance of the
clearances by the petitioners was politically motivated and in bad faith. On the other hand,
petitioners alleged that private respondent has property accountability and an outstanding obligation
to SEAFDEC-AQD in the amount of P27,532.11. Furthermore, private respondent is not entitled to
accrued sick leave benefits amounting to P44,000.00 due to his failure to avail of the same during
his employment with the SEAFDEC-AQD (Annex "D", Id.).
On January 12, 1988, the labor arbiter rendered a decision, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering respondents:

1. To pay complainant P126,458.89, plus legal interest thereon computed from May 16, 1986 until
full payment thereof is made, as separation pay and other post-employment benefits;

2. To pay complainant actual damages in the amount of P50,000, plus 10% attorney's fees.

All other claims are hereby dismissed.

SO ORDERED. (Rollo, p. 51, Annex "E")

On July 26, 1988, said decision was affirmed by the Fifth Division of the NLRC except as to the
award of P50,000.00 as actual damages and attorney's fees for being baseless. (Annex "A", p.
28, id.)

On September 3, 1988, petitioners filed a Motion for Reconsideration (Annex "G", id.) which was
denied on January 9, 1989. Thereafter, petitioners instituted this petition for certiorari alleging that
the NLRC has no jurisdiction to hear and decide respondent Lazaga's complaint since SEAFDEC-
AQD is immune from suit owing to its international character and the complaint is in effect a suit
against the State which cannot be maintained without its consent.

The petition is impressed with merit.

Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-

AQD) is an international agency beyond the jurisdiction of public respondent NLRC.

It was established by the Governments of Burma, Kingdom of Cambodia, Republic of Indonesia,

Japan, Kingdom of Laos, Malaysia. Republic of the Philippines, Republic of Singapore, Kingdom of
Thailand and Republic of Vietnam (Annex "H", Petition).

The Republic of the Philippines became a signatory to the Agreement establishing SEAFDEC on
January 16,1968. Its purpose is as follows:

The purpose of the Center is to contribute to the promotion of the fisheries development in
Southeast Asia by mutual co-operation among the member governments of the Center, hereinafter
called the "Members", and through collaboration with international organizations and governments
external to the Center. (Agreement Establishing the SEAFDEC, Art. 1; Annex "H" Petition)
(p.310, Rollo)

SEAFDEC-AQD was organized during the Sixth Council Meeting of SEAFDEC on July 3-7, 1973 in
Kuala Lumpur, Malaysia as one of the principal departments of SEAFDEC (Annex "I", id.) to be
established in Iloilo for the promotion of research in aquaculture. Paragraph 1, Article 6 of the
Agreement establishing SEAFDEC mandates:

1. The Council shall be the supreme organ of the Center and all powers of the Center shall be
vested in the Council.

Being an intergovernmental organization, SEAFDEC including its Departments (AQD), enjoys

functional independence and freedom from control of the state in whose territory its office is located.
As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap stated in their book, Public
International Law (p. 83, 1956 ed.):

Permanent international commissions and administrative bodies have been created by the
agreement of a considerable number of States for a variety of international purposes, economic or
social and mainly non-political. Among the notable instances are the International Labor
Organization, the International Institute of Agriculture, the International Danube Commission. In so
far as they are autonomous and beyond the control of any one State, they have a distinct juridical
personality independent of the municipal law of the State where they are situated. As such,
according to one leading authority "they must be deemed to possess a species of international
personality of their own." (Salonga and Yap, Public International Law, 83 [1956 ed.])

Pursuant to its being a signatory to the Agreement, the Republic of the Philippines agreed to be
represented by one Director in the governing SEAFDEC Council (Agreement Establishing
SEAFDEC, Art. 5, Par. 1, Annex "H", ibid.) and that its national laws and regulations shall apply only
insofar as its contribution to SEAFDEC of "an agreed amount of money, movable and immovable
property and services necessary for the establishment and operation of the Center" are concerned
(Art. 11, ibid.). It expressly waived the application of the Philippine laws on the disbursement of
funds of petitioner SEAFDEC-AQD (Section 2, P.D. No. 292).

The then Minister of Justice likewise opined that Philippine Courts have no jurisdiction over
SEAFDEC-AQD in Opinion No. 139, Series of 1984 —

4. One of the basic immunities of an international organization is immunity from local

jurisdiction, i.e., that it is immune from the legal writs and processes issued by the tribunals of the
country where it is found. (See Jenks, Id., pp. 37-44) The obvious reason for this is that the
subjection of such an organization to the authority of the local courts would afford a convenient
medium thru which the host government may interfere in there operations or even influence or
control its policies and decisions of the organization; besides, such subjection to local jurisdiction
would impair the capacity of such body to discharge its responsibilities impartially on behalf of its
member-states. In the case at bar, for instance, the entertainment by the National Labor Relations
Commission of Mr. Madamba's reinstatement cases would amount to interference by the Philippine
Government in the management decisions of the SEARCA governing board; even worse, it could
compromise the desired impartiality of the organization since it will have to suit its actuations to the
requirements of Philippine law, which may not necessarily coincide with the interests of the other
member-states. It is precisely to forestall these possibilities that in cases where the extent of the
immunity is specified in the enabling instruments of international organizations, jurisdictional
immunity from the host country is invariably among the first accorded. (See Jenks, Id.; See
also Bowett, The Law of International Institutions, pp. 284-1285).

Respondent Lazaga's invocation of estoppel with respect to the issue of jurisdiction is unavailing
because estoppel does not apply to confer jurisdiction to a tribunal that has none over a cause of
action. Jurisdiction is conferred by law. Where there is none, no agreement of the parties can
provide one. Settled is the rule that the decision of a tribunal not vested with appropriate jurisdiction
is null and void. Thus, in Calimlim vs. Ramirez, this Court held:

A rule, that had been settled by unquestioned acceptance and upheld in decisions so numerous to
cite is that the jurisdiction of a court over the subject matter of the action is a matter of law and may
not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court may be
raised at any stage of the proceedings, even on appeal. This doctrine has been qualified by recent
pronouncements which it stemmed principally from the ruling in the cited case of Sibonghanoy. It is
to be regretted, however, that the holding in said case had been applied to situations which were
obviously not contemplated therein. The exceptional circumstances involved in Sibonghanoy which
justified the departure from the accepted concept of non-waivability of objection to jurisdiction has
been ignored and, instead a blanket doctrine had been repeatedly upheld that rendered the
supposed ruling in Sibonghanoy not as the exception, but rather the general rule, virtually
overthrowing altogether the time-honored principle that the issue of jurisdiction is not lost by waiver
or by estoppel. (Calimlim vs. Ramirez, G.R. No. L-34362, 118 SCRA 399; [1982])

Respondent NLRC'S citation of the ruling of this Court in Lacanilao v. De Leon (147 SCRA 286
[1987]) to justify its assumption of jurisdiction over SEAFDEC is misplaced. On the contrary, the
Court in said case explained why it took cognizance of the case. Said the Court:

We would note, finally, that the present petition relates to a controversy between two claimants to
the same position; this is not a controversy between the SEAFDEC on the one hand, and an officer
or employee, or a person claiming to be an officer or employee, of the SEAFDEC, on the other hand.
There is before us no question involving immunity from the jurisdiction of the Court, there being no
plea for such immunity whether by or on behalf of SEAFDEC, or by an official of SEAFDEC with the
consent of SEAFDEC (Id., at 300; emphasis supplied).

WHEREFORE, finding SEAFDEC-AQD to be an international agency beyond the jurisdiction of the

courts or local agency of the Philippine government, the questioned decision and resolution of the
NLRC dated July 26, 1988 and January 9, 1989, respectively, are hereby REVERSED and SET
ASIDE for having been rendered without jurisdiction. No costs.

SO ORDERED.

Melencio-Herrera, Paras, Padilla and Regalado, JJ., concur.