SECOND DIVISION

June 3, 2019

G.R. No. 216635

DR. MARY JEAN P. LORECHE-AMIT, Petitioner

vs.
CAGAYAN DE ORO MEDICAL CENTER, INC. (CDMC), DR. FRANCISCO OH AND
DR. HERNANDO EMANO, Respondents

DECISION

REYES, J. JR., J.:

Before us is a Petition for Review on Certiorari,  which seeks to assail the

1

Decision  dated August 3, 2012 and Resolution  dated April 12, 2013 of the Court of
2 3

Appeals (CA)-Cagayan de Oro City, in CA-G.R. SP No. 03067-MIN which affirmed the
decision of the National Labor Relations Commission (NLRC).

The Relevant Antecedents

Dr. Mary Jean P. Loreche-Amit (petitioner) started working with Cagayan De Oro
Medical Center, Inc. (CDMC), sometime in May 1996, when she was engaged by the
late Dr. Jose N. Gaerlan (Dr. Gaerlan) as Associate Pathologist in the Department of
Laboratories. Upon the demise of Dr. Gaerlan, CDMC's Board of Directors formally
appointed petitioner as Chief Pathologist for five years or until May 15, 2011.4

On June 13, 2007, (CDMC's) Board of Directors passed a resolution, recalling

petitioner's appointment as Chief Pathologist. This prompted petitioner to file a
complaint for illegal dismissal, contending that she was dismissed by CDMC from her
work without just cause and due process. 5

In her complaint, petitioner narrated the circumstances which surrounded the recall
of her appointment.  She averred that Dr. Hernando Emano (Dr. Emano) asked her
1âшphi1

to help his daughter Dr. Helga Emano-Bleza (Dr. Emano-Bleza) to qualify as a

pathologist considering that petitioner is one of the six members of the Board of
Governors accredited by the Professional Regulation Commission. However,
petitioner refused to assist Dr. Emano-Bleza because the latter failed to qualify in the
clinical pathology examination. Such refusal, according to petitioner, started the
subtle attempt of Dr. Emano to oust her from her job. 6

Soon thereafter, Dr. Francisco Oh (Dr. Oh) issued an Inter-Office Memorandum

addressed to all laboratory personnel stating that working in and out of the building
without proper permission is to be treated as absence without official leave and
payment for printing of duplicate copies not endorsed to the hospital is a form of
stealing. As petitioner slammed the Memorandum against the wall and tagged the
name of Dr. Oh as an irrational man, she received an Inter-Office Memorandum from
Dr. Oh for alleged conduct unbecoming/insubordination, and to explain why her
appointment should not be revoked due to such behavior.   Finally, a Memorandum
7

recalling her appointment was issued. 8

For their part, Dr. Emano, Dr. Oh, and CDMC (collectively referred to as
respondents) averred that petitioner was not hired by them as she merely assisted
Dr. Gaerlan in operating the hospital's laboratory. Respondents maintained that
petitioner worked at the same time as pathologist in Capitol College Hospital and J.R.
Borja Memorial Hospital as she was not prohibited to do so. 9

In dismissing the complaint for lack of jurisdiction, the Labor Arbiter rendered a
Decision  dated March 31, 2008. The Labor Arbiter found that petitioner is a
10

corporate officer of the hospital because of her appointment by the Board of

Directors through a resolution; thus, matters relating to the propriety of her
dismissal is under the jurisdiction of the Regional Trial Court (RTC) under Section 5.2
of Republic Act (R.A.) No. 8799 (The Securities Regulation Code of the Philippines).
The dispositive portion of the Decision reads:

WHEREFORE, foregoing premises considered, the above-entitled case is DISMISSED

for lack of jurisdiction.

SO ORDERED. 11

On appeal, the NLRC in a Resolution  dated March 31, 2009, affirmed the ruling of
12

the Labor Arbiter and reiterated that petitioner is a corporate officer and that there
was no employer-employee relationship between CDMC and her. As it is, the issue is
an intra-corporate matter, the jurisdiction of which belongs to the regular
courts, viz.:

WHEREFORE, in view of all the foregoing considerations, the instant appeal is

hereby DISMISSED for lack of merit. The assailed Decision dated March 31, 2008
is AFFIRMED.

SO ORDERED. 13

Petitioner filed a Petition for Certiorari before the CA.

In a Decision  dated August 3, 2012, the CA dismissed the petition and echoed the
14

rulings of the Labor Arbiter and NLRC, thus:

WHEREFORE, the petition is DISMISSED.

SO ORDERED. 15

The motion for reconsideration filed by petitioner was likewise dismissed in a

Resolution  dated April 12, 2013.
16

The Issue

Whether or not the labor tribunals have jurisdiction over the complaint for illegal
dismissal filed by petitioner.

The Court's Ruling

The determination of whether petitioner was indeed an employee of CDMC is

necessary before we proceed to rule on the propriety of her dismissal.
Petitioner argues that she is not a corporate officer because her position as
Pathologist is not among those included in the by-laws of CDMC.

This Court agrees.

To be considered as a corporate officer, the designation must be either

provided by the Corporation Code or the by-laws of the corporation, to wit:

Corporate officers are given such character either by the Corporation Code or by the
corporation's by-laws. Under Section 25 of the Corporation Code, the corporate
officers are the president, secretary, treasurer and such other officers as may be
provided in the by-laws. Other officers are sometimes created by the charter or by-
laws of a corporation, or the board of directors may be empowered under the by-
laws of a corporation to create additional offices as may be necessary.  (Citation
17

omitted)

In this case, nowhere in the records could the by-laws of CDMC be found. An
appointment through the issuance of a resolution by the Board of Directors
does not make the appointee a corporate officer. It is necessary that the
position is provided in the Corporation Code or in the by-laws. In the absence of the
by-laws of CDMC, there is no reason to conclude that petitioner, as Pathologist, is
considered as a corporate officer. In the cases of WPP Marketing Communications,
Inc. v. Galera  and Marc II Marketing, Inc. v. Joson,  this Court declared that
18 19

respondents are not corporate officers because neither the Corporation Code nor the
by-laws of the respective corporations provided so. In the latter case, this Court
treated as employee the respondent whose position was not expressly mentioned in
the Corporation Code or the by-laws.20

Thus, the RTC does not have jurisdiction over the case as there was no intra-
corporate controversy, the latter being operative in vesting jurisdiction upon
Regional Trial Courts over all controversies in the election or appointment of
directors, trustees, officers or managers of corporations, partnerships or
associations.

However, this is not an automatic declaration that petitioner is an employee of

CDMC. The four-fold test, to wit: 1) the selection and engagement of the employees;
2) the payment of wages; 3) the power of dismissal; and 4) the power to control the
employee's conduct, must be applied to determine the existence of an employer-
employee relationship.21

In this case, it is apparent that CDMC, through the Board of Directors, exercised the
power to select and supervise petitioner as the Pathologist. It must be emphasized
that petitioner was appointed as Pathologist with a term of five years from May 2006
to May 2011. She was likewise paid compensation which is at 4% of the gross
receipts of the Clinical Section of the laboratory.

However, based on the records, CDMC does not exercise the power of control over
petitioner.

The power to control the work of the employee is considered the most significant
determinant of the existence of an employer-employee relationship. This test is
premised on whether the person for whom the services are performed reserves the
right to control both the end achieved and the manner and means used to achieve
that end.22

As the Labor Arbiter, NLRC, and the CA aptly observed, petitioner was working for
two other hospitals aside from CDMC, not to mention those other hospitals which she
caters to when her services are needed. Such fact evinces that petitioner controls
her working hours. On this note, relevant is the economic reality test which this
Court has adopted in determining the existence of employer-employee relationship.
Under this test, the economic realities prevailing within the activity or between the
parties are examined, taking into consideration the totality of circumstances
surrounding the true nature of the relationship between the parties, to wit:

x x x. In our jurisdiction, the benchmark of economic reality in analyzing possible

employment relationships for purposes of applying the Labor Code ought to be the
economic dependence of the worker on his employer. 23

Thus, the fact that petitioner continued to work for other hospitals strengthens the
proposition that petitioner was not wholly dependent on CDMC.

Petitioner likewise admitted that she receives in full her 4% share in the Clinical
Section of the hospital regardless of the number of hours she worked therein.
Alternatively put, petitioner manages her method and hours of work.

The rule is that where a person who works for another performs his job more or less
at his own pleasure, in the manner he sees fit, not subject to definite hours or
conditions of work, and is compensated according to the result of his efforts and not
the amount thereof, no employer-employee relationship exists. 24

Moreover, the Memorandum, pertaining to petitioner's behavior, issued by Dr. Oh

does not sufficiently establish the element of control.  The Memorandum merely
1âшphi1

states that intolerable behavior in the hospital cannot be countenanced. It is

administrative in character which does not, in any way, pertains to the manner and
method of petitioner's work.

In sum, this Court finds no reason to overturn the finding of the LA, NLRC, and the
CA that there was no illegal dismissal in this case as it was not sufficiently proven
that petitioner is indeed an employee of CDMC.

WHEREFORE, premises considered, the instant petition is PARTLY GRANTED in

that petitioner is not a corporate officer. The Decision dated August 3, 2012 and the
Resolution dated April 12, 2013 of the Court of Appeals-Cagayan de Oro City in CA-
G.R. SP No. 03067-MIN are AFFIRMED.

SO ORDERED.

Carpio (Chairperson), Perlas-Bernabe, and Lazaro-Javier, JJ., concur.

Caguioa, J., on wellness leave.

THIRD DIVISION
[ G.R. No. 200712, July 04, 2018 ]
MARIO A. ABUDA, RODOLFO DEL REMEDIOS, EDWARDO DEL REMEDIOS,
RODOLFO L. ZAMORA, DIONISIO ADLAWAN, ELPIDIO GARCIA, JR., ROGELIO
ZAMORA, SR., JIMMY TORRES, POLICARPIO OBANEL, JOSE FERNANDO,
JOHNNY BETACHE, JAYSON GARCIA, EDWIN ESPE, NEMENCIO CRUZ, LARRY
ABANES, ROLANDO SALEN, JOSEPH TORRES, FRANCISCO LIM, ARNALDO
GARCIA, WILFREDO BRONOLA, GLENN MORAN, JOSE GONZALES, ROGER
MARTINEZ, JAIME CAPELLAN, RICHARD ORING, JEREMIAS CAPELLAN,
ARNEL CAPELLAN, MELCHOR CAPELLAN, ROLLY PUGOY, JOEY GADONES,
ARIES CATIANG, LEONEL LATUGA, CAPILLAN, PETITIONERS,

V. L. NATIVIDAD POULTRY FARMS, JULIANA NATIVIDAD, AND MERLINDA

NATIVIDAD, RESPONDENTS.

DECISION
LEONEN, J.:
The necessity or desirability of the work performed by an employee can be inferred
from the length of time that an employee has been performing this work. If an
employee has been employed for at least one (1) year, he or she is
considered a regular employee by operation of law.

This resolves the Petition for Review[1] filed by Mario A. Abuda, Rodolfo Del
Remedios, Edwardo Del Remedios, Rodolfo L. Zamora, Dionisio Adlawan, Elpidio
Garcia, Jr., Rogelio Zamora, Sr., Jimmy Torres, Policarpio Obanel, Jose Fernando,
Johnny Betache, Jayson Garcia, Edwin Espe, Nemencio Cruz, Larry Abañes, Rolando
Salen, Joseph Torres, Francisco Lim, Arnaldo Garcia, Wilfredo Broñola, Glenn Moran,
Jose Gonzales, Roger Martinez, Jaime Capellan, Richard Oring, Jeremias Capellan,
Arnel Capellan, Melchor Capellan, Rolly Pugoy, Joey Gadones, Aries Catiang, Leonel
Latuga, Vicente Go, Temmie C. Nawal, and Eduardo A. Capillan (collectively,
workers), assailing the October 11, 2011 Decision[2] and February 8, 2012
Resolution[3] of the Court of Appeals in CA-G.R. SP No. 117681.

The workers of L. Natividad Poultry Farms (L. Natividad) filed complaints for "illegal
dismissal, unfair labor practice, overtime pay, holiday pay, premium pay for holiday
and rest day, service incentive leave pay, thirteenth month pay, and moral and
exemplary damages"[4] against it and its owner, Juliana Natividad (Juliana), and
manager, Merlinda Natividad (Merlinda).[5]

The workers claimed that L. Natividad employed and terminated their employment
after several years of employment. The dates they were hired and terminated are as
follows:

NAME POSITION DATE OFDATE OF

HIRING TERMINATION
Arnaldo Garcia Maintenance Personnel May 1997 June 2005
Dionisio Adlawan Maintenance Personnel January 1991 November 2005
Edwardo DelMaintenance Personnel 1990 April 2005
Remedios Maintenance Personnel January 1997 April 2006
Edwin Espe Maintenance Personnel March 1990 February 2006
Elpidio Garcia, Jr. Maintenance Personnel May 1997 March 2007
Francisco Lim Maintenance Personnel March 1998 June 2005
Jayson Garcia Maintenance Personnel May 1990 November 2006
Jimmy Torres Maintenance Personnel May 1990 March 2005
Johnny Betache Maintenance Personnel February 1999 March 2007
Jose Fernando Maintenance Personnel April 1997 April 2005
Larry Abañe[s] Maintenance Personnel September 2004 January 2007
Mario A. Abuda Maintenance Personnel April 1990 May 2006
Nemencio Cruz Maintenance Personnel January 1991 September 2005
Policarpio Obanel Maintenance Personnel March 1990 March 2007
Rodolfo DelMaintenance Personnel January 1999 March 2005
Remedios Maintenance Personnel March 1995 September 2005
Rodolfo L. Zamora Maintenance Personnel 1997 2005
Rogelio Zamora, Sr. Poultry & Livestock Feed1989 May 2007
Rolando Salen Mixers July 2002 May 2007
Jose Gonzales Poultry & Livestock FeedApril 1995 May 2007
Roger Martinez Mixers December 2004 January 2006
Wilfredo Broñola Poultry & Livestock FeedMarch 1989 November 2006
Arnel Capellan Mixers February 2003 December 2006
Eduardo A.Delivery Helper April 2000 August 2000[6]
Cap[i]llan Checker
Jeremias Capellan Security Guard
Temmie C. Nawal Poultry Helper

On May 13, 2009, Labor Arbiter Robert A. Jerez (Labor Arbiter Jerez) dismissed the complaint due
to lack of employer-employee relationship between the workers and L. Natividad. He ruled that San
Mateo General Services (San Mateo), Wilfredo Broñola (Broñola), and Rodolfo Del Remedios (Del
Remedios) were the real employers as they were the ones who employed the workers, not L.
Natividad.[7]

The workers appealed Labor Arbiter Jerez's Decision, and on August 31, 2010, the National Labor
Relations Commission modified the assailed Decision.[8]

The National Labor Relations Commission found that the workers were hired as maintenance
personnel by San Mateo and Del Remedios on pakyaw basis to perform specific services for L.
Natividad.

Furthermore, it ruled that Jose Gonzales (Gonzales) and Roger Martinez (Martinez) could not be
considered as regular employees because their jobs as poultry livestock mixers were not necessary
in L. Natividad's line of business. However, it found Broñola, Jeremias Capellan (Jeremias), Arnel
Capellan (Arnel), Temmie Nawal (Nawal), and Eduardo Capillan (Eduardo) to be regular employees
and ordered L. Natividad to reinstate them and pay their thirteenth month pay and service
incentive leave pay.[9]

The dispositive portion of the National Labor Relations Commission August 31, 2010 Decision read:

WHEREFORE, the Decision dated May 13, 2009 is hereby MODIFIED. Complainants Wilfreda
Bronola, Jeremias Capellan, Arnel Capellan, Temmie Nawal, and Eduardo Capellan, are hereby
declared regular employees of respondent L. Natividad Poultry Farms. However, considering that
the above-named complainants were not illegally dismissed by the respondents and the former's
intention to be reinstated to work, respondents L. Natividad Poultry Farms through respondents
Juliana Natividad and Merlinda Natividad are hereby directed to reinstate the above-named
complainants to their former position or substantially equivalent position without backwages.
Respondent [L. Natividad] is also directed to pay their respective 13th month pays and service
incentive leave pays as follows:

Name 13th Month Service Incentive LeaveTotal Amount

Pay Pay (SILP)
Wilfredo Bronola P20,690.77 Not Entitled/Supervisor P20,690.77
Jeremias
P14,952.60 P2,875.50 P17,828.10
Capellan
Arnel Capellan P5,687.05 P1,093.66 P6,780.71

Temmie Nawal P9,143.90 P1,758.44 P10,902.34

Eduardo Capellan P15,274.53 P2,937.41 P18,211.94

    TOTAL AWARDS P74,413.86

For failure to comply with the requisites of Article 106 of the Labor Code on
permissible job contracting, third party respondents San Mateo General
Services and Rodolfo Del Remedios are hereby declared to be engaged in
labor-only contracting. No employer-employee relationship existed,
however, between respondent [L. Natividad] and the following
complainants: Rodolfo Del Remedios, Edward Del Remedios, Dionisio Adlawan,
Elpidio Garcia, Jr., Rogelio Zamora, Sr., Jimmy Torres, Policarpio Obanel, Jose
Fernando, Johnny Betache, Jayson Garcia, Edwin Espe, Nemencio Cruz, Larry
Aba[ñ]es, Rolando Salen, Francisco Lim, Arnold Garcia, Mario Abuda, Rodolfo
Zamora, Jose Gonzales and Roger Martinez, as they performed tasks not usually
necessary or desirable in the business of respondent [L. Natividad]. Thus, it is
hereby declared that the above-named complainants were engaged on
pakyaw basis and not regular employees of the latter.

All other claims of the complainants are hereby dismissed for lack of merit.

SO ORDERED.[10]

The workers moved to reconsider the National Labor Relations Commission August
31, 2010 Decision, but this was denied by the National Labor Relations Commission
in its October 26, 2010 Resolution.[11]

The workers filed a Petition for Review on Certiorari[12] before the Court of Appeals.

On October 11, 2011, the Court of Appeals[13] modified the National Labor Relations
Commission's assailed Decision and ruled that San Mateo and Del Remedios were
labor-only contractors, and as such, they must be considered as L. Natividad's
agents.[14]

The Court of Appeals also reversed the National Labor Relations Commission's ruling
on Gonzales' and Martinez's employment status since as poultry and livestock feed
mixers, they performed tasks which were necessary and desirable to L. Natividad's
business and were not mere helpers. It deemed them to be L. Natividad's
regular employees.[15]

However, the Court of Appeals upheld the National Labor Relations

Commission's finding that the maintenance personnel were only hired on
a pakyaw basis to perform necessary repairs or construction within the farm as the
need arose.[16]

As for the issue of illegal dismissal, the Court of Appeals also affirmed the
National Labor Relations Commission's finding that the workers failed to
substantiate their bare allegation that L. Natividad verbally notified them of
their dismissal.[17]

The dispositive portion of the Court of Appeals October 11, 2011 Decision read:

ACCORDINGLY, the petition is PARTLY GRANTED and the Decision dated August

31, 2010, MODIFIED. Petitioners Jose Gonzales and Roger Martinez
are DECLARED regular employees of respondent L. Natividad Poultry Farms; and
the latter, DIRECTED to reinstate Jose Gonzales and Roger Martinez without
backwages and to pay their 13th month and service incentive leave pay.
No costs.

SO ORDERED.[18]
On October 24, 2011, the workers moved for the reconsideration of the Court of
Appeals Decision, but their motion was denied in the Court of Appeals February 8,
2012 Resolution.[19]

On March 27, 2012, the workers filed their Petition for Review on Certiorari before
this Court.[20]

In their Petition, petitioners claim that as maintenance personnel assigned to

respondent L. Natividad's farms and sales outlets, they performed functions
that were necessary and desirable to L. Natividad's usual business. [21] They
assert that they have been continuously employed by L. Natividad for a
period ranging from more than one (1) year to 17 years.[22]

Petitioners also state that as maintenance personnel, they repaired and maintained
L. Natividad's livestock and poultry houses, facilities, and sales outlets.[23] They
worked from Monday to Saturday, from 7:15 a.m. to 5:15 p.m., with their
attendance checked by the guard on duty.[24]
Petitioners stress that L. Natividad provided all the tools, equipment, and materials
they used as maintenance personnel. Respondents Juliana and Merlinda then gave
them specific tasks and supervised their work.[25]

Petitioners argue that even if they were mere project employees as respondents
claim, respondents failed to present any service contract executed between them.[26]

Petitioners point out that respondents used the supposed contracting arrangement
with petitioner Del Remedios to prevent them from becoming L. Natividad's regular
employees. They also highlight that the Court of Appeals ruled that petitioner Del
Remedios was engaged in labor-only contracting. Thus, they declare that this should
have already been equivalent to a finding of an employer-employee relationship
between them and L. Natividad[27] and that they were illegally dismissed.[28]
In their Comment,[29] respondents claim to be engaged in the business of livestock
and poultry production.[30] They also aver to have engaged San Mateo's services to
clean-up the poultry farm, and to repair and maintain their chicken pens.[31]

Respondents likewise state that they engaged petitioner Del Remedios to provide
carpentry services. They assert that petitioners who claim to be maintenance
personnel were actually carpenters or masons deployed by petitioner Del Remedios
for his own account.[32]
Respondents refer to the statements of petitioners Rolando Salen and Larry Abañes
as proof that the maintenance personnel were employees of Del Remedios:

4.1.17. It must be also be (sic) pointed out that two (2) of the named petitioners,
namely: ROLANDO SALEN and LARRY ABA[Ñ]E[S], who were supposed to be among
the "Maintenance Personnel" after re-thinking their stance in the present
controversy, in their own handwriting submitted their statements, narrated and
admitted that they were indeed the former employees of Rodolfo Del Remedios and
from whom they drew their respective salaries. And, that when they signed the
complaint, they were only forced by Rodolfo Del Remedios to do so. These two
supposed petitioners are apologetic to Respondent and that they were withdrawing
their respective complaints as indicated in their written statements. They should
therefore be taken out from the list of the petitioners. The written retraction of
Rolando Salen is reproduced as follows:

"Ako po si Rolando A. Salen, dating tauhan ni Rody Del Remedios kusang loob na
pumunta ditto (sic) sa opisina ng L. Natividad Poultry Farms Corporation upang kami
ay humingi ng tawad sa aming ginawa sa pagsama sa pagrereklamo nila sa
Labor. Ako po ay sumama lamang sa kadahilanang ako ay pinilit lamang na sumama
sa kanila.
Alam ko po naman na si Rody Del Remedios an[g] siyang tumangap at humanap sa
amin upang magtrabaho at siya rin ang nagpapasahod sa amin, hindi ang L.
Natividad Poultry Farms Corporation.

Hindi na po ako sasama sa kanilang paghahabla o pagrereklamo sa Labor. Kusang

loob po akong bumibitiw sa kagustuhan ni Rody Del Remedios na magreklamo laban
sa kanila.
SGD. ROLANDO A. SALEN"

(underscoring supplied)

Larry Aba[ñ]es' written retraction is similar with that of Rolando Salen.[33]

Respondents further assert that carpentry and masonry cannot be considered as
necessary or desirable in their business of livestock and poultry production. They
point out that petitioners, through petitioner Del Remedios, were only occasionally
deployed as needed to repair and maintain their farm and sales outlets as needed.[34]

Respondents then state that they engaged the services of petitioner Broñola to mix
feeds for a specific number of tons or on a pakyaw system. They assert that
petitioners Gonzales and Martinez were Broñola's employees, whom he hired
specifically to help him mix feeds.[35]
Respondents deny that petitioners were illegally dismissed and contend that their
contracts were merely not renewed.[36]

Nonetheless, respondents state that pursuant to the National Labor Relations

Commission August 31, 2010 Decision, they sent return to work notices to
petitioners Jeremias, Arnel, Nawal, Eduardo, and Broñola; however, they failed to
return to work.[37]

In their Reply,[38] petitioners who claim to be maintenance personnel deny lodging

their applications with petitioner Del Remedios, who was then employed as L.
Natividad's supervisor. They point out that petitioner Del Remedios was included in
the employees' payroll, therefore, disputing L. Natividad's assertion that he was
engaged as a contractor.[39]

Petitioners then reiterate that they were illegally dismissed and are entitled to
damages.[40]

The primary issue for the resolution of this Court is whether or not the
maintenance personnel in L. Natividad Poultry Farms can be considered as
its regular employees.

When a decision of the Court of Appeals decided under Rule 65 is brought to this
Court through a petition for review under Rule 45, the general rule is that this Court
may only pass upon questions of law. Meralco Industrial Engineering Services Corp.
v. National Labor Relations Commission[41] emphasized as follows:

This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this
Court in a petition for review on certiorari under Rule 45 of the Revised Rules of
Court is limited to reviewing only errors of law, not of fact, unless the factual findings
complained of are completely devoid of support from the evidence on record, or the
assailed judgment is based on a gross misapprehension of facts. Besides, factual
findings of quasi-judicial agencies like the [National Labor Relations Commission],
when affirmed by the Court of Appeals, are conclusive upon the parties and binding
on this Court.[42]

Furthermore, judicial review under Rule 45 is confined to the question of whether or

not the Court of Appeals correctly "determined the presence or absence of grave
abuse of discretion in the [National Labor Relations Commission] decision before it
and not on the basis of whether the [National Labor Relations Commission] decision
on the merits of the case was correct."[43]
Respondents deny that the petitioners, who claim to be maintenance
personnel are their employees and declare that they were hired by
independent contractors, who exercised control over them and paid their
wages.

Respondents fail to convince.

Permissible contracting or subcontracting, and labor-only contracting is provided for

under Article 106 of the Labor Code:

Article 106. Contractor or subcontractor. — Whenever an employer enters into a

contract with another person for the performance of the former's work, the
employees of the contractor and of the latter's subcontractor, if any, shall be paid in
accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and severally
liable with his contractor or subcontractor to such employees to the extent of the
work performed under the contract, in the same manner and extent that he is liable
to employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or

prohibit the contracting-out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the
parties involved shall be considered the employer for purposes of this Code, to
prevent any violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an

employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to the
principal business of such employer. In such cases, the person or intermediary shall
be considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by
him.

Labor-only contracting is prohibited as it is seen as a circumvention of labor

laws; thus, the labor-only contractor is treated as a mere agent or
intermediary of its principal.[44]
The Court of Appeals found that San Mateo and petitioner Del Remedios
were not independent contractors but labor-only contractors since they did
not have substantial investment in the form of tools, equipment, or work
premises.[45] As labor-only contractors, they were considered to be agents of
respondent L. Natividad:
The fact, however, that neither of the contractors [San Mateo] and Rodolfo Del
Remedios had substantial investment in the form of tools, equipment and even work
premises, nor were the services performed by their workers, i.e. carpentry and
masonry works, directly related to and usually necessary and desirable in [L.
Natividad]'s main business of livestock and poultry production showed that they
were merely engaged in "labor-only" contracting. As "labor-only"
contractors, [San Mateo] and Rodolfo Del Remedios are considered as
agents of the employer, [L. Natividad]. Liability, therefore, if any, must
be shouldered by either one or shared by both. As it was, however,
petitioners failed to prove any unpaid claims against [L. Natividad].[46]
However, the Court of Appeals ruled that even if petitioners were L. Natividad's
employees, they still cannot be considered as regular employees because there was
no reasonable connection between the nature of their carpentry and masonry work
and respondents' usual business in poultry and livestock production, sale, and
distribution. It also found that the maintenance personnel were hired on a piece rate
or pakyaw basis about once or thrice a year, to perform repair or maintenance
works; thus, they could not be considered as regular employees.[47]
The Court of Appeals is mistaken.

A pakyaw or task basis arrangement defines the manner of payment of

wages and not the relationship between the parties. [48] Payment
through pakyaw or task basis is provided for in Articles 97(f) and 101 of the
Labor Code:
Article 97. Definitions. — As used in this Title:

....

(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 and Employment, of board, lodging, or other
facilities customarily furnished by the employer to the employee. "Fair and
reasonable value" shall not include any profit to the employer, or to any person
affiliated with the employer.
....

Article 101. Payment by results. — (a) The Secretary of Labor and Employment shall
regulate the payment of wages by results, including pakyao, piecework, and other
non-time work, in order to ensure the payment of fair and reasonable wage rates,
preferably through time and motion studies or in consultation with representatives of
workers' and employers' organizations.

Both the National Labor Relations Commission and the Court of Appeals
found respondent L. Natividad to be petitioners' real employer, in light of
the labor-only contracting arrangement between respondents, San Mateo,
and petitioner Del Remedios. This Court sees no reason to disturb their findings
since their findings are supported by substantial evidence.

Furthermore, a resort to the four (4)-fold test of "(1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employee's conduct" [49] also
strengthens the finding that respondent L. Natividad is petitioners'
employer.

Respondents hired petitioners directly or through petitioner Del Remedios, a

supervisor at respondents' farm.[50] They likewise paid petitioners' wages, as seen by
the vouchers[51] issued to Del Remedios and San Mateo. They also had the power of
dismissal inherent in their power to select and engage their employees. Most
importantly though, they controlled petitioners and their work output by maintaining
an attendance sheet and by giving them specific tasks and assignments.[52]
With an employer-employee relationship between respondent L. Natividad and
petitioners duly established, the next question for resolution is whether petitioners
can be considered to be regular employees.
A regular employee is an employee who is:

1) engaged to perform tasks usually necessary or desirable in the usual

business or trade of the employer, unless the employment is one for a specific
project or undertaking or where the work is seasonal and for the duration of a
season; or 2) has rendered at least 1 year of service, whether such service is
continuous or broken, with respect to the activity for which he is
employed and his employment continues as long as such activity exists.
[53]
 (Emphasis supplied, citation omitted)
This finds basis in Article 280 of the Labor Code which provides:

Article 295. [280] Regular and casual employment. — The provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreement of
the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer, except where the employment has been
fixed for a specific project or undertaking the completion or termination of which has
been determined at the time of the engagement of the employee or where the work
or service to be performed is seasonal in nature and the employment is for the
duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph: Provided, that any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists.

De Leon v. National Labor Relations Commission [54] instructs that "[t]he primary

standard, therefore, of determining a regular employment is the reasonable
connection between the particular activity performed by the employee in relation to
the usual business or trade of the employer." [55] The connection is determined by
considering the nature of the work performed vis-a-vis the entirety of the business
or trade. Likewise, if an employee has been on the job for at least one (1) year, even
if the performance of the job is intermittent, the repeated and continuous need for
the employee's services is sufficient evidence of the indispensability of his or her
services to the employer's business.[56]
Respondents did not refute petitioners' claims that they continuously worked for
respondents for a period ranging from three (3) years to 17 years.[57] Thus, even if
the Court of Appeals is of the opinion that carpentry and masonry are not necessary
or desirable to the business of livestock and poultry production,[58] the nature of their
employment could have been characterized as being under the second paragraph of
Article 280. Thus, petitioners' service of more than one (1) year to respondents has
made them regular employees for so long as the activities they were required to do
subsist.
Nonetheless, a careful review of petitioners' activity as maintenance
personnel and of the entirety of respondents' business convinces this Court
that they performed activities which were necessary and desirable to
respondents' business of poultry and livestock production.

As maintenance personnel, petitioners performed "repair works and

maintenance services such as fixing livestock and poultry houses and
facilities as well as doing construction activities within the premises of [L.
Natividad's] farms and other sales outlets for an uninterrupted period of
three (3) to seventeen (17) years." [59] Respondents had several farms and
offices in Quezon City and Montalban, including Patiis Farm, where petitioners were
regularly deployed to perform repair and maintenance work.[60]
At first glance it may appear that maintenance personnel are not necessary to a
poultry and livestock business. However, in this case, respondents kept several
farms, offices, and sales outlets, meaning that they had animal houses and other
related structures necessary to their business that needed constant repair and
maintenance. In petitioner Del Remedios' sworn affidavit:

1. RODOLFO DEL REMEDIOS — Noong Marso 1990, ako ay direktang tinanggap at

nagtrabaho sa malawak na farm ng L. Natividad Poultry Farms sa San Mateo Rizal na
pagmamay-ari ni Gng. Juliana Natividad at pinamamahalaan ng kanyang anak nasi
Merlinda Natividad. Ako ang nangangasiwa sa pagkukumpuni sa mga sirang bahay
ng mga manok, baboy atbp., gumawa at tumulong sa construction ng mga ito at
magmentina ng mga pasilidad sa loob ng farm at maging sa mga sales outlets nito
sa iba’t ibang Iugar. Ako ay isa lamang empleyado ng L. Natividad Poultry Farms at
kasamang sumasahod ng iba pang mga trabahador. Ang lahat ng gamit o materyales
sa paggawa at pagkukumpuni ng mga bahay ng mga manok, baboy atbp. ay
nanggagaling sa L. Natividad Poultry Farms.[61] (Emphasis supplied)
Gapayao v. Fulo[62] likewise categorically stated that pakyaw workers may be
considered as regular employees provided that their employers exercised control
over them. Thus, while petitioners may have been paid on pakyaw or task basis,
their mode of compensation did not preclude them from being regular employees.

Being regular employees, petitioners, who were maintenance personnel, enjoyed

security of tenure[63] and the termination of their services without just cause entitles
them to reinstatement and full backwages, inclusive of allowances and other
benefits.
Nonetheless, the prayer for moral and exemplary damages must be denied. The
termination of employment without just cause or due process does not immediately
justify the award of moral and exemplary damages. Philippine School of Business
Administration v. National Labor Relations Commission[64] stated:

This Court however cannot sustain the award of moral and exemplary damages in
favor of private respondents. Such an award cannot be justified solely upon the
premise that the employer fired his employee without just cause or due process.
Additional facts must be pleaded and proved to warrant the grant of moral damages
under the Civil Code. The act of dismissal must be attended with bad faith, or fraud
or was oppressive to labor or done in a manner contrary to morals, good customs or
public policy and, of course, that social humiliation, wounded feelings, or grave
anxiety resulted therefrom. Similarly, exemplary damages are recoverable only when
the dismissal was effected in a wanton, oppressive or malevolent manner.
[65]
 (Citations omitted)

Petitioners maintain that their employments were terminated by respondents in an

"oppressive, malicious and unjustified manner,"[66] yet they failed to explain or
illustrate how their dismissal was oppressive, malicious, or unjustified. It is not
enough that they were dismissed without due process. Additional acts of the
employers must also be pleaded and proved to show that their dismissal was tainted
with bad faith or fraud, was oppressive to labor, or was done in a manner contrary to
morals, good customs, or public policy. Petitioners failed to allege any acts by
respondents which would justify the award of moral or exemplary damages.

As for petitioners Broñola, Gonzales, Martinez, Jeremias, Arnel, Nawal, and Eduardo,
although the Court of Appeals reversed the labor tribunals' decisions and held them
to be regular employees, it nonetheless upheld the findings of both Labor Arbiter
Jerez and the National Labor Relations Commission that they failed to support their
allegation that they were illegally dismissed, thus:

In illegal dismissal cases, it is incumbent upon the employees to first establish the
fact of their dismissal before the burden is shifted to the employer to prove that the
dismissal was legal. Here, [the National Labor Relations Commission] found no
dismissal, much less, an illegal one as petitioners failed to substantiate their bare
allegation that [L. Natividad] verbally notified them of their dismissal. It is settled
that in the absence of proof of dismissal, the remedy is reinstatement without
backwages.[67]

Illegal dismissal is essentially a factual issue, [68] and therefore, not proper in

a Rule 45 petition. This Court does not try facts. [69] Moreover, the labor
tribunals and the Court of Appeals unanimously held that petitioners were
not illegally dismissed. This Court sees no reason to overturn their findings as it is
settled that:

[T]he findings of facts and conclusion of the [National Labor Relations Commission]
are generally accorded not only great weight and respect but even clothed with
finality and deemed binding on this Court as long as they are supported by
substantial evidence. This Court finds no basis for deviating from said doctrine
without any clear showing that the findings of the Labor Arbiter, as affirmed by the
[National Labor Relations Commission], are bereft of substantiation. Particularly
when passed upon and upheld by the Court of Appeals, they are binding and
conclusive upon the Supreme Court and will not normally be disturbed. [70] (Citations
omitted)

WHEREFORE, this Court resolves to PARTIALLY GRANT the petition. The assailed

October 11, 2011 Decision and February 8, 2012 Resolution of the Court of Appeals
in CA-G.R. SP No. 117681 are AFFIRMED with MODIFICATION. The following
petitioners are DECLARED to be regular employees of L. Natividad Poultry Farms
and are ORDERED to be REINSTATED to their former positions and to
be PAID their backwages, allowances, and other benefits from the time of their
illegal dismissal up to the time of their actual reinstatement:

a) Rodolfo Del Remedios

b) Edwardo Del Remedios
c) Dionisio Adlawan
d) Elpidio Garcia, Jr.
e) Rogelio Zamora, Sr.
f) Jimmy Torres
g) Policarpio Obanel
h) Jose Fernando
i) Johnny Betache
j) Jayson Garcia
k) Edwin Espe
l) Nemencio Cruz
m) Larry Abañes
n) Rolando Salen
o) Francisco Lim
p) Arnaldo Garcia
q) Mario Abuda
r) Rodolfo Zamora[71]
The monetary awards shall bear the legal interest rate of six percent (6%) per
annum to be computed from the finality of this Decision until full payment.

The case is REMANDED to the Labor Arbiter for the computation of backwages and
other monetary awards due to petitioners.
SO ORDERED.
Velasco, Jr., (Chairperson), Bersamin, Martires, and Gesmundo, JJ., concur.
SECOND DIVISION

December 6, 2017

G.R. No. 211892

INNODATA KNOWLEDGE SERVICES, INC., Petitioner

vs.
SOCORRO D'MARIE T. INTING, ISMAEL R. GARAYGAY, EDSON S. SOLIS,
MICHAEL A. REBATO, JAMES HORACE BALONDA, STEPHEN C. OLINGAY,
DENNIS C. RIZON, JUNETH A. RENTUMA, HERNAN ED NOEL I. DE LEON, JR.,
JESS VINCENT A. DELA PENA, RONAN V. ALAMILLO, ENNOH CHENTIS R.
FERNANDEZ, FRITZ J. SEMBRINO, DAX MATTHEW M. QUIJANO, RODOLFO M.
VASQUEZ, MA. NAZELLE B. MIRALLES, MICHAEL RAY B. MOLDE, WENDELL B.
QUIBAN, ALDRIN O. TORRENTIRA, and CARL HERMES CARSKIT, Respondents

DECISION

PERALTA, J.:

This is a petition for review seeking the reversal of the Decision  of the Court of
1

Appeals (CA), Cebu, Twentieth (20th) Division, dated August 30, 2013 and its
Resolution  dated March 12, 2014 in CA-G.R. CEB-SP No. 06443 which reversed and
2

set aside Decision  of the National Labor Relations Commission (NLRC) on May 31,
3

2011.

The factual and procedural antecedents, as evidenced by the records of the case, are
the following:

Petitioner Innodata Knowledge Services, Inc. (IKSI) is a company engaged

in data processing, encoding, indexing, abstracting, typesetting, imaging, and
other processes in the capture, conversion, and storage of data and information. At
one time, Applied Computer Technologies (ACT), a company based in the
United States of America, hired IKSI to review various litigation documents.
Due to the nature of the job, ACT required IKSI to hire lawyers, or at least, law
graduates, to review various litigation documents, classify said documents into
the prescribed categories, and ensure that outputs are delivered on time. For this
purpose, IKSI engaged the services of respondents Socorro D’Marie Inting,
Ismael R. Garaygay, Edson S. Solis, Michael A. Rebato, James Horace Balonda,
Stephen C. Olingay, Dennis C. Rizon, Juneth A. Rentuma, Hernan Ed Noel I. de Leon,
Jr., Jess Vincent A. dela Pefia, Ronan V. Alamillo, Ennoh Chentis R. Fernandez,
Wendell B. Quiban, Aldrin 0. Torrentira, Michael Ray B. Molde, Fritz J. Sembrino, Dax
Matthew M. Quijano, Rodolfo M. Vasquez, Ma. Nazelle B. Miralles and Carl Hennes
Carskit as senior and junior reviewers with a contract duration of five (5) years.

On January 7, 2010, however, respondents received a Notice of Forced Leave

from IKSI informing them that they shall be placed on indefinite forced
leave effective that same day due to changes in business conditions, client
requirements, and specifications. Hence, respondents filed a complaint for
illegal dismissal, reinstatement or payment of separation pay, backwages, and
damages against IKSI.

Subsequently, IKSI sent respondents separate notices dated May 27, 2010
informing them that due to the unavailability of new work related to the
product stream and uncertainties pertaining to the arrival of new workloads, their
project employment contracts would have to be terminated.

On November 10, 2010, the Labor Arbiter (LA), in the consolidated cases of NLRC
RAB VII Case No. 01-0159-10, NLRC RAB VII Case No. O 1-0182-10, and NLRC RAB
VII Case No. 02-0301-10, declared that there was no illegal dismissal, thus:

WHEREFORE, in view of the foregoing, a decision is hereby rendered declaring that

complainants were not constructively dismissed but were placed on forced leave as a
cost-saving measure. Consequently, herein respondents are directed to recall
complainants back to work as soon as work becomes available. Complainants are
likewise directed to report back to work within ten (10) days from receipt of the
order of respondents to report back to work, otherwise, their failure to do so would
be construed as an abandonment. In the event that reinstatement is no longer
feasible, in lieu thereof, separation pay is granted equivalent to one (1) month salary
for every year of service, a fraction of six (6) months is considered as one (1) whole
year, sans backwages.

The claim for moral and exemplary damages as well as attorney’s fees are
DISMISSED for lack of merit.

SO ORDERED. 4

WHEREFORE, the Decision of the Labor Arbiter is hereby AFFIRMED WITH

MODIFICATION, in that in lieu of reinstatement, to pay the twelve (12)
complainants-appellants namely: Michael A. Rebato, Hernan Ed Noel L. de Leon, Jr.,
Wendell B. Quiban, Fritz Sembrino, Ismael R. Garaygay III, Edson S. Solis, Stephen
Olingay, Ronan Alamillo, Jess Vincent A. dela Pena, Dax Matthew M. Quijano, Juneth
A. Rentuma and Socorro D'Marie T. Inting, the total amount of Php563,500.00.

SO ORDERED. 5

Undaunted, the employees elevated the matter to the CA Cebu, alleging grave
abuse of discretion on the NLRC’s part. On August 30, 2013, the CA granted their
petition and reversed the assailed NLRC ruling, thus:

WHEREFORE, premises considered, this petition is GRANTED. The

assailed Decision dated May 31, 2011 and Resolution dated August 26, 2011 of
public respondent in NLRC Case No. VAC-01-000042-2011 are REVERSED and SET
ASIDE. Petitioners Socorro D'Marie Inting, Ismael R. Garaygay, Edson S. Solis,
Michael A. Rebato, James Horace Balonda, Stephen C. Olingay, Dennis C. Rizon,
Juneth A. Rentuma, Hernan Ed Noel I. de Leon, Jr., Jess Vincent A. dela Pena, Ronan
V. Alamillo, Ennoh Chentis R. Fernandez, Wendell B. Quiban, Aldrin 0. Torrentira,
Michael Ray B. Molde, Fritz J. Sembrino, Dax Matthew M. Quijano, Rodolfo M.
Vasquez, Ma. Nazelle B. Miralles and Carl Hermes Carskit are declared to have been
illegally dismissed by Innodata and hence, each of them is entitled to the payment of
the following:

(a) Backwages reckoned from the start of their employment up to the

finality of this Decision with interest as six percent (6%) per annum,
and 12% legal interest thereafter until fully paid;

(b) Separation pay equivalent to one (1) month salary for every year of
service, with a fraction of at least six (6) months to be considered as
one (1) whole year, to be computed from the date of their employment
up to the finality of this decision;
 (c) Moral damages of Php50,000 and exemplary damages of
Php25,000; and

(d) Attorney's fees equivalent to 10 percent (10%) of the total award.

The case is hereby ordered REMANDED to the labor arbiter for the computation of
the amounts due each petitioner.

Costs on private respondent Innodata.

SO ORDERED. 6

IKSI then filed a Motion for Reconsideration, but the same was denied in a
Resolution dated March 12, 2014. Hence, the instant petition.

The main issue in this case is whether or not the CA committed an error
when it reversed the NLRC, which declared that respondent employees, as
mere project employees, were validly placed on floating status and, therefore,
were not illegally dismissed.

The Court rules in the negative.

Substantive Issues

Nature of respondents’ employment contracts

It is true that factual findings of administrative or quasi-judicial bodies which are

deemed to have acquired expertise in matters within their respective jurisdictions are
generally accorded, not only respect, but even finality, and bind the Court when
supp011ed by substantial evidence. However, the Court may take cognizance of
factual issues when the findings of fact and conclusions of law of the LA and/or the
NLRC are inconsistent with those of the CA,  as in the case at bar.
7

Here, the NLRC ruled that respondents were project employees. It ratiocinated
that their contracts specifically indicated that they were to hold their positions for the
duration of the project which was expected to be completed after a maximum of five
(5) years, or on or before July 2, 2013.  But the CA found that respondents'
8

employment contracts are fixed-term, which are contrary to the

Constitution and labor laws. It then cited several cases  that supposedly involved
9

IKSI itself and would reveal that its fixed-term employment contracts have been
consistently held as a form of circumvention to prevent employees from acquiring
tenurial rights and benefits.

The employment status of a person is defined and prescribed by law and not
by what the parties say it should be. Equally important to consider is that a
contract of employment is impressed with public interest such that labor
contracts must yield to the common good. Thus, provisions of applicable
statutes are deemed written into the contract, and the parties are never at
liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply entering into contracts with each other. 10

Article 295  of the Labor Code provides the distinction between a regular and a
11

project employment:

Art. 295. Regular and casual employment. - The provisions of written agreement to

the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged
to perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined
at the time of the engagement of the employee or where the work or service to be
performed is seasonal in nature and the employment is for the duration of the
season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph: Provided, That any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists.

The aforecited provision contemplates four (4) kinds of employees:

(1) regular employees or those who have been engaged to perform

activities which are usually necessary or desirable in the usual business or
trade of the employer;

(2) project employees or those whose employment has been fixed for a

specific project or undertaking, the completion or termination of which has
been determined at the time of the engagement of the employee;

(3) seasonal employees or those who work or perform services which are

seasonal in nature, and the employment is for the duration of the season;
and

(4) casual employees or those who are not regular, project, or seasonal

employees. Jurisprudence later added a fifth

(5th) kind, the fixed-term employee. Based on Article 295, the law

determines the nature of the employment, regardless of any agreement
expressing otherwise. The supremacy of the law over the nomenclature of the
contract and its pacts and conditions is to bring life to the policy enshrined in the
Constitution to afford full protection to labor. Thus, labor contracts are placed on a
higher plane than ordinary contracts since these are imbued with public interest and,
therefore, subject to the police power of the State. 12

Project employment contracts, which fix the employment for a specific

project or undertaking, are valid under the law. By entering into such a
contract, an employee is deemed to understand that his employment is coterminous
with the project. He may no longer be employed after the completion of the project
for which he was hired. But project employment contracts are not lopsided
agreements in favor of only one party. The employer's interest is equally important
as that of the employees'. While it may be true that it is the employer who drafts
project employment contracts with its business interest as overriding consideration,
such contracts must not prejudice the employee. 13

As stated in IKSI’s petition itself, the following are the basic provisions of the
employment contracts which respondents signed with the company:

(a) the contracts are entitled "Project-Based Employment Contracts";

(b) the first Whereas clause states "the Company [IKSI] desires the services of a
Project Employee for the Content Supply Chain Project";

(c) Clause 1 on Term of Employment provides:

The Employee shall hold the position of [Junior/Senior] Reviewer and shall
perform the duties and responsibilities of such for the duration of the
Project, which is expected to be completed after a maximum of five (5)
years, or on or before___________, (the "Term").

. . . Further, the Employee is granted one Saturday-off per month on a scheduled

basis for the duration of this PROJECT-BASED EMPLOYMENT CONTRACT ...

(d) The second paragraph of Clause 2 on Work Description provides:

The Employee shall render work in accordance with the schedule and/or program to
which he/she may be assigned or reassigned from time to time, in accordance with
the operational requirements for the completion of the Project. In addition,
the Employee shall perform such other duties, functions, and services
related or incidental to the Project which, for purposes of expediency,
convenience, economy, customer interest, may be assigned by the Company.

(e) Clause 5 on Termination of Employment provides:

At any time during the Term of this Contract, or any extension thereof, the Company
may terminate this Contract, upon thirty (30) days' prior notice to the Employee...in
the following instances:

a. the services contracted for by the Company under the

Project is completed prior to the agreed upon completion date; or

b. the specific phase of the Project requiring the Employee’s

services is sooner completed; or

c. substantial decrease in the volume of work for the Project; or

d. the contract for the Project is cancelled, indefinitely

suspended or terminated;

(e) the first paragraph of Clause 6 on Compensation and

Benefits provides:

The Employee shall receive a gross salary of ... In addition to his/her basic pay,
Management may grant an additional incentive pay should the Employee exceed
the Project quota. 14

IKSI argued that based on the contract, it is undeniable that respondents’

employment was fixed for a specific project or undertaking, with its completion or
termination clearly determined at the time of the employee’s engagement. Indeed,
records would disclose that respondents signed employment contracts
specifically indicating the Content Supply Chain Project,  also known as the
15

ACT Project, as the project for which they were being hired, which was
expected to be completed after a maximum of five (5) years. However,
sometime in November 2008, IKSI required respondents to work on another
project called "Bloomberg," which was not included in the original contracts
that they signed and without entering into a new project employment
contracts. Such fact was never refuted by IKSI. During that time, respondents were
required to read and review decided cases in the United States of America and they
were no longer called Senior or Junior Reviewers, but referred to as Case Classifiers.
Respondents initially opposed working on said project but eventually agreed, in fear
of losing their employment altogether. Months later, they were again required to
work on the ACT Project and reverted to their previous designation as Document
Reviewers.16
In the case of ALU-TUCP v. NLRC,  the Court made a pronouncement on the two (2)
17

categories of project employees. The project for which project employees are
hired would ordinarily have some relationship to the usual business of the employer.
There should be no difficulty in distinguishing the employees for a certain project
from ordinary or regular employees, as long as the duration and scope of the project
were determined or specified at the time of engagement of said project employees. 18

In order to safeguard the rights of workers against the arbitrary use of the word
"project" which prevents them from attaining regular status, employers claiming
that their workers are project employees have the burden of showing that:
(a) the duration and scope of the employment was specified at the time
they were engaged; and (b) there was indeed a project.  Therefore, as evident
19

in Article 295, the litmus test for determining whether particular employees are
properly characterized as project employees, as distinguished from regular
employees, is whether or not the employees were assigned to carry out a specific
project or undertaking, the duration and scope of which were specified at the time
the employees were engaged for that project. 20

Here, while IKSI was able to show the presence of a specific project, the ACT
Project, in the contract and the alleged duration of the same, it failed to prove,
however, that respondents were in reality made to work only for that
specific project indicated in their employment documents and that it
adequately informed them of the duration and scope of said project at the
time their services were engaged. It is well settled that a party alleging a critical
fact must support his allegation with substantial evidence, as allegation is not
evidence. The fact is IKSI actually hired respondents to work, not only on the ACT
Project, but on other similar projects such as the Bloomberg. When respondents
were required to work on the Bloomberg project, without signing a new contract for
that purpose, it was already outside of the scope of the particular undertaking for
which they were hired; it was beyond the scope of their employment contracts. The
fact that the same happened only once is inconsequential. What matters is that IKSI
required respondents to work on a project which was separate and distinct from the
one they had signed up for. This act by IKSI indubitably brought respondents outside
the realm of the project employees category.

IKSI likewise fell short in proving that the duration of the project was
reasonably determinable at the time respondents were hired. As earlier
mentioned, the employment contracts provided for "the duration of the Project,
which is expected to be completed after a maximum of five (5) years, or on or
before______ ."The NLRC upheld the same, finding that the contracts clearly
provided for the duration of the project which was expected to end after a maximum
of five (5) years, or on or before July 2, 2013. It is interesting to note, however, that
the five (5)-year period is not actually the duration of the project but merely that of
the employment contract. Naturally, therefore, not all of respondents' employment
would end on July 2, 2013, as the completion of the five (5)-year period would
depend on when each employee was employed, thus: 21

Hiring Date Completion Date

Carl Hermes R. Carskit Nov. 1, ’07 May 31,’12
Ismael R. Garaygay III Mar. 5, ’08 Mar. 4, ‘13
Socorro D’ Marie T. Inting Apr. 7, ’08 Apr. 6, ‘13
James Horace A. Balonda May 12, ’08 May 11, ‘13
Wendell B. Quiban May 12, ’08 May 11, ‘13
Fritz J. Sembrino May 12, ’08 May 11, ‘13
 Edson S. Solis May 12, ’08 May 11, ‘13
Rodolfo M. Vasquez, Jr. May 12, ’08 May 11, ‘13
Stephen C. Olingay May 16, ’08 May 15, ‘13
Michael A. Rebato May 19, ’08 May 18, ‘13
Ma. Nazelle B. Miralles May 21, ’08 May 20, ‘13
Dennis C. Rizon July 3, ’08 July 2, ‘13
Ronan V. Alamillo July 10, ’08 July 9, ‘13
Juneth A. Rentuma July 17, ’08 July16,’13
Jess Vincent A. Dela Peña Aug. 12, ’08 Aug. 11, ‘13
Dax Matthew M. Quijano Nov. 17, ’08 Nov. 16, ‘13
Michael Ray B. Molde May 18, ’09 May 17, ‘14
Aldrin O. Torrentira May 25, ’09 May24, ‘14
Ennoh Chentis R. Fernandez May 28, ’09 May 27, ‘14
Hernan Ed Noel L. De Leon, Jr. June 3, ’09 June 2, ‘14

This is precisely the reason why IKSI originally left a blank for the
termination date because it varied for each employee. If respondents were
truly project employees, as IKSI claims and as found by the NLRC, then the
termination date would have been uniform for all of them.

Thus, while the CA erred in simply relying on the Court's rulings on previous cases
involving Innodata Phils., Inc. since there is no substantial proof that Innodata Phils.,
Inc. and herein petitioner, IKSI, are one and the same entity, it would appear,
however, that respondents indeed entered into fixed-term employment contracts
with IKSI, contracts with a fixed period of five (5) years. But project employment
and fixed-term employment are not the same. While the former requires a particular
project, the duration of a fixed-term employment agreed upon by the parties may be
any day certain, which is understood to be "that which must necessarily come
although it may not be known when."

The Court has previously recognized the validity of fixed-term employment contracts,
but it has consistently held that this is more of an exception rather than the general
rule. Aware of the possibility of abuse in the utilization of fixed-term
employment contracts, the Court has declared that where from the
circumstances it is apparent that the periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be struck down
as contrary to public policy or morals. 23

It is evident that IKSI’s contracts of employment are suspect for being

highly ambiguous. In effect, it sought to alternatively avail of project employment
and employment for a fixed term so as to preclude the regularization of respondents'
status. The fact that respondents were lawyers or law graduates who freely and with
full knowledge entered into an agreement with the company is inconsequential. The
utter disregard of public policy by the subject contracts negates any argument that
the agreement is the law between the parties  and that the fixed period was
24

knowingly and voluntarily agreed upon by the parties. In the interpretation of

contracts, obscure words and provisions shall not favor the party that caused the
obscurity. Consequently, the terms of the present contract should be construed
strictly against the employer, for being the party who prepared it.  Verily, the private
25
agreement of the parties can never prevail over Article 1700 of the Civil Code, which
states:

Art. 1700. The relation between capital and labor are not merely contractual. They
are so impressed with public interest that labor contracts must yield to the common
good. Therefore, such contracts are subject to special laws on labor unions, collective
bargaining, strikes and lockouts, closed shops, wages, working conditions, hours of
labor and similar subjects.

Thus, there were no valid fixed-term or project contracts and respondents

were IKSI’s regular employees who could not be dismissed except for just
or authorized causes. Any ambiguity in said contracts must be resolved against
the company, especially because under Article 1702 of the Civil Code, in case of
doubt, all labor contracts shall be construed in favor of the worker. The Court cannot
simply allow IKSI to construe otherwise what appears to be clear from the wordings
of the contract itself. The interpretation which IKSI seeks to conjure is wholly
unacceptable, as it would result in the violation of respondents' right to security of
tenure guaranteed in Section 3 of Article XIII of the Constitution and in Article
294  of the Labor Code.
26 27

Presence of Just or Authorized Causes

for Termination of Employment

Here, IKSI placed respondents on forced leave, temporary lay-off, or floating

status in January 2010 for the alleged decline in the volume of work in the product
stream where they were assigned. When respondents filed a complaint for illegal
dismissal, the LA dismissed the same for having been filed prematurely, since placing
employees on forced leave or floating status is a valid exercise of management
prerogative and IKSI never really had an intention to terminate their employment. It
relied on the memoranda  which IKSI issued to respondents, the tenor of which
28

would show the intention to recall the affected employees back to work once the
company's condition improves. The NLRC affirmed the LA’s ruling and declared that
the fact of dismissal, whether legal or illegal, is absent in this case.

Among the authorized causes for termination under Article 298  of the 29

Labor Code is retrenchment, or what is sometimes referred to as a layoff,

thus:

Art. 298. Closure of Establishment and Reduction of Personnel. The employer may
also terminate the employment of any employee due to the installation of labor-
saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice
on the workers and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the installation of
labor-saving devices or redundancy, the worker affected thereby shall be entitled to
a separation pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or at least one-half (112) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year.

Retrenchment is the severance of employment, through no fault of and

without prejudice to the employee, which management resorts to during the
periods of business recession, industrial depression, or seasonal fluctuations, or
during lulls caused by lack of orders, shortage of materials, conversion of the plant
to a new production program or the introduction of new methods or more efficient
machinery, or of automation. In other words, lay-off is an act of the employer of
dismissing employees because of losses in the operation, lack of work, and
considerable reduction on the volume of its business. However, a lay-off would
amount to dismissal only if it is permanent. When it is only temporary, the
employment status of the employee is not deemed terminated, but merely
suspended. 30

Article 298, however, speaks of permanent retrenchment as opposed to temporary

lay-off, as in the present case.  There is no specific provision of law which treats of a
1âwphi1

temporary retrenchment or lay-off and provides for the requisites in effecting it or a

specific period or duration.  Notably, in both permanent and temporary lay-offs, the
31

employer must act in good faith - that is, one which is intended for the advancement
of the employer's interest and not for the purpose of defeating or circumventing the
rights of the employees under the law or under valid agreements. 32

Certainly, the employees cannot forever be temporarily laid-off. Hence, in order to

remedy this situation or fill the hiatus, Article 301  may be applied to set a specific
33

period wherein employees may remain temporarily laid-off or in floating

status.  Article 301 states:
34

Art. 301. When Employment not Deemed Terminated. The bona-fide suspension of

the operation of a business or undertaking for a period not exceeding six (6) months,
or the fulfillment by the employee of a military or civic duty shall not terminate
employment. In all such cases, the employer shall reinstate the employee to his
former position without loss of seniority rights if he indicates his desire to resume his
work not later than one (1) month from the resumption of operations of his employer
or from his relief from the military or civic duty.

The law set six (6) months as the period where the operation of a business
or undertaking may be suspended, thereby also suspending the employment of
the employees concerned. The resulting temporary lay-off, wherein the
employees likewise cease to work, should also not last longer than six (6)
months. After the period of six (6) months, the employees should either then be
recalled to work or permanently retrenched following the requirements of the law.
Failure to comply with this requirement would be tantamount to dismissing the
employees, making the employer responsible for such dismissal.  Elsewise stated, an
35

employer may validly put its employees on forced leave or floating status upon bona
fide suspension of the operation of its business for a period not exceeding six (6)
months. In such a case, there is no termination of the employment of the
employees, but only a temporary displacement. When the suspension of the
business operations, however, exceeds six (6) months, then the
employment of the employees would be deemed terminated,  and the 36

employer would be held liable for the same.

Indeed, closure or suspension of operations for economic reasons is recognized as a

valid exercise of management prerogative. But the burden of proving, with sufficient
and convincing evidence, that said closure or suspension is bona fide falls upon the
employer. In the instant case, IKSI claims that its act of placing respondents on
forced leave after a decrease in work volume, subject to recall upon availability of
work, was a valid exercise of its right to lay-off, as an essential component of its
management prerogatives. The Court agrees with the LA's pronouncement that
requiring employees on forced leave is one of the cost-saving measures adopted by
the management in order to prevent further losses. However, IKSI failed to
discharge the burden of proof vested upon it. Having the right should not be
confused with the manner in which that right is exercised; the employer cannot use
it as a subterfuge to run afoul of the employees' guaranteed right to security of
tenure. The records are bereft of any evidence of actual suspension of IKSI's
business operations or even of the ACT Project alone. In fact, while IKSI cited Article
301 to support the temporary lay-off of its employees, it never alleged that it had
actually suspended the subject undertaking to justify such lay-off. It merely
indicated changes in business conditions and client requirements and specifications
as its basis for the implemented forced leave/lay-off.37

In light of the well-entrenched rule that the burden to prove the validity and legality
of the termination of employment falls on the employer, IKSI should have
established the bona fide suspension of its business operations or
undertaking that could legitimately lead to the temporary layoff of its employees for
a period not exceeding six (6) months, in accordance with Article 301.  The LA38

severely erred when it sustained respondents' temporary retrenchment simply

because the volume of their work would sometimes decline, thus, several employees
at the ACT Project stream experienced unproductive time.  Considering the grave
39

consequences occasioned by retrenchment, whether permanent or temporary, on the

livelihood of the employees to be dismissed, and the avowed policy of the State to
afford full protection to labor and to assure the employee's right to enjoy security of
tenure, the Court stresses that not every loss incurred or expected to be incurred by
a company will justify retrenchment. The losses must be substantial and the
retrenchment must be reasonably necessary to avert such losses. The employer
bears the burden of proving this allegation of the existence or imminence of
substantial losses, which by its nature is an affirmative defense. It is the employer’s
duty to prove with clear and satisfactory evidence that legitimate business reasons
exist in actuality to justify any retrenchment. Failure to do so would inevitably result
in a finding that the dismissal is unjustified. Otherwise, such ground for termination
would be susceptible to abuse by scheming employers who might be merely feigning
business losses or reverses in their business ventures to dispose of their employees. 40

Here, IKSI never offered any evidence

that would indicate the presence of
a bona fide suspension of its business
operations or undertaking. IKSI’s paramount
consideration should be the dire exigency of its business that compelled it to put
some of its employees temporarily out of work. This means that it should be able to
prove that it faced a clear and compelling economic reason which reasonably
constrained it to temporarily shut down its business operations or that of the ACT
Project, incidentally resulting in the temporary lay-off of its employees assigned to
said particular undertaking. Due to the grim economic repercussions to the
employees, IKSI must likewise bear the burden of proving that there were no other
available posts to which the employees temporarily put out of work could be possibly
assigned.  Unfortunately, IKSI was not able to fulfill any of the aforementioned
41

duties. IKSI cannot simply rely solely on the alleged decline in the volume of work
for the ACT Project to support the temporary retrenchment of respondents.
Businesses, by their very nature, exist and thrive depending on the continued
patronage of their clients. Thus, to some degree, they are subject to the whims of
clients who may suddenly decide to discontinue patronizing their services for a
variety of reasons. Being inherent in any enterprise, employers should not be
allowed to take advantage of this entrepreneurial risk and use it in a scheme to
circumvent labor laws. Otherwise, no worker could ever attain regular employment
status.  In fact, IKSI still continued its operations and retained several employees
42

who were also working on the ACT Project even after the implementation of the
January 2010 forced leave. Much worse, it continued to hire new employees, with
the same qualifications as some of respondents, through paid advertisements and
placements in Suns tar Cebu,   a local newspaper, dated February 24, 2010 and
43

March 7, 2010. The placing of an employee on floating status presupposes, among

others, that there is less work than there are employees. But if IKSI continued to
hire new employees then it can reasonably be assumed that there was a surplus of
work available for its existing employees. Hence, placing respondents on floating
status was unnecessary. If any, respondents - with their experience, knowledge, and
familiarity with the workings of the company - should be preferred to be given new
projects and not new hires who have little or no experience working for IKSI.
44

There being no valid suspension of

business operations, IKSI’s act
amounted to constructive dismissal of
respondents since it could not validly put
the latter on forced leave or floating status
pursuant to Article 301. And even assuming, without admitting,
that there was indeed suspension of operations, IKSI did not recall the employees
back to work or place them on valid permanent retrenchment after the period of six
(6) months, as required of them by law. IKSI could not even use the completion of
the duration of the alleged project as an excuse for causing the termination of
respondents’ employment. It must be pointed out that the termination was made in
2010 and the expected completion of the project in respondents' contracts was still
in 2012 to 2014. Also, if the Court would rely on IKSI’s own Notice of Partial Appeal
and Memorandum on Partial Appeal  before the NLRC dated December 10, 2010,
45

respondents might even had been put on floating status for a period exceeding the
required maximum of six (6) months. Evidence reveal that the assailed forced leave
took effect on January 7, 2010 and IKSI eventually sent its termination letters four
(4) months after, or on May 27, 2010, with the effectivity of said termination being
on July 7, 2010. But as of December 10, 2010, IKSI was still insisting that
respondents were never dismissed and were merely placed on forced leave. It was
only in its Comment on Complainants’ Motion for Reconsideration dated August 3,
2011 did IKSI admit the fact of dismissal when it appended its own termination
letters dated May 27, 2010.

But even on May 27, 2010, there was still no basis for IKSI to finally make the
retrenchment permanent. While it acknowledged the fact that respondents
could not be placed on an indefinite floating status, it still failed to present
any proof of a bona fide closing or cessation of operations or undertaking to
warrant the termination of respondents' employment. The termination
letter  reads:
46

As you are probably already been aware by now, our Product Stream ACTDR of
Project CSP, have been experiencing a considerably downward trend in terms of
workload. The Company has undertaken every effort to obtain new commitments
from its clients abroad in order to proceed with the expected volume of work under
the same product stream.

Unfortunately, however, it has become evident that despite said efforts being
exerted by the Company, the prospect of new work related to the product stream
coming in, remains uncertain at this point. Management has already utilized all
available options, which include placing its project employees on forced leave. This,
however, cannot go on indefinitely.

It is therefore, with deep regret, that we inform you that in view of the
unavailability of work of the aforementioned product stream as well as the
uncertainties pertaining to the arrival of new worldoads thereof, we are
constrained to terminate your Project Employment Contract in accordance with
the terms and conditions stated under the Termination of Employment of
your Project Employment Contract, effective 7/7/2010.

xxx

It bears to point out that said termination letter did not even state any of the
following valid grounds under the law as anchor for the dismissal:

Art. 297. Termination by Employer. An employer may terminate an employment for

any of the following causes:

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

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representative; and

(e) Other causes analogous to the foregoing. 47

Art. 298. Closure of Establishment and Reduction of Personnel. The employer may
also terminate the employment of any employee due to the installation of labor-
saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice
on the workers and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the installation of
labor-saving devices or redundancy, the worker affected thereby shall be entitled to
a separation pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year.

The NLRC likewise committed a grave error when it held that there was no basis for
respondents' reliance on the case of Bontia v. NLRc  on the sole ground that, in the
48

present case, the employees were neither actually nor constructively dismissed. The
Court affirms respondents’ contention that when IKSI feigned suspension of
operations and placed respondents on forced leave, the same had already amounted
to constructive dismissal. And when IKSI sent letters informing them that they would
be terminated effective July 7, 2010, respondents then had been actually dismissed.
In Bontia, the manner by which the employer severed its relationship with its
employees was remarkably similar to the one in the case at bar, which was held to
be an underhanded circumvention of the law. Consolidated Plywood Industries
summarily required its employees to sign applications for forced leave deliberately
crafted to be without an expiration date, like in this case. This consequently created
an uncertain situation which necessarily discouraged, if not altogether prevented, the
employees from reporting, or determining when or whether to report for work. The
Court further ruled that even assuming that the company had a valid reason to
suspend operations and had filed the necessary notice with the Department of Labor
and Employment (DOLE), it still would not be a legitimate excuse to cursorily dismiss
employees without properly informing them of their rights and status or paying their
separation pay in case they were eventually laid off. Under the Labor Code,
separation pay is payable to an employee whose services are validly terminated as a
result of retrenchment, suspension, closure of business or disease. Thus, the Court
held that Consolidated Plywood's employees should, at the very least, have been
given separation pay and properly informed of their status so as not to leave them in
a quandary as to how they would properly respond to such a situation.  Similarly,
49

respondents never received any separation pay when they were terminated in July of
2010 since IKSI had been denying the existence of a dismissal, whether actual or
constructive.

Withal, in both permanent and temporary lay-offs, jurisprudence dictates that the
one (1)-month notice rule to both the DOLE and the employee under Article 298 is
mandatory.  Here, both the DOLE and respondents did not receive any prior notice of
50

the temporary lay-off. The DOLE Region VII Office was only informed on January 11,
2010  or four (4) days after the forced leave had already taken effect. On the other
51

hand, respondents received the notice  of forced leave on January 7, 2010, after the
52

business day of which the same forced leave was to take effect. Respondents also
pointed out that when they received said notice, they were told to no longer report
starting the next day, made to completely vacate their workstations and surrender
their company identification cards, and were not even allowed to use their remaining
unused leave credits, which gave them the impression that they would never be
returning to the company ever again.

Since dismissal is the ultimate penalty that can be meted to an employee,

the requisites for a valid dismissal from employment must always be met,
namely: (1) it must be for a just or authorized cause; and (2) the employee
must be afforded due process,  meaning, he is notified of the cause of his
53

dismissal and given an adequate opportunity to be heard and to defend

himself. Our rules require that the employer be able to prove that said requisites for
a valid dismissal have been duly complied with. Indubitably, IKSI’s intent was not
merely to put respondents' employment on hold pending the existence of
the unfavorable business conditions and call them back once the same
improves, but really to sever the employer-employee relationship with
respondents right from the very start. The Court cannot just turn a blind eye to
IKSI’s manifest bad faith in terminating respondents under the guise of placing them
on a simple floating status. It is positively aware of the unpleasant practice of some
employers of violating the employees' right to security of tenure under the pretense
of a seemingly valid employment contract and/or valid termination. We must abate
the culture of employers bestowing security of tenure to employees, not on the basis
of the latter's performance on the job, but on their ability to toe the
line.  Unfortunately for IKSI, they chanced upon respondents who, unlike the
54

ordinary workingman who always plays an easy prey to these perfidious companies,
are fully aware of their rights under the law and simply refuse to ignore and endure
in silence the flagrant irruption of their rights, zealously safeguarded by the
Constitution and our labor laws.

Procedural Issues

Tested against the above-discussed considerations, the Court finds that the CA
correctly granted respondents’ certiorari petition before it, since the NLRC gravely
abused its discretion in ruling that respondents were merely IKSI’s project
employees and that they were validly put on floating status as part of management
prerogative, when they had satisfactorily established by substantial evidence that
they had become regular employees and had been constructively dismissed.  Grave55

abuse of discretion connotes judgment exercised in a capricious and whimsical

manner that is tantamount to lack of jurisdiction.  In labor disputes, grave abuse of
56
discretion may be ascribed to the NLRC when, inter alia, its findings and conclusions,
as in the case at bar, are not supported by substantial evidence, or that amount of
relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion.57

In the NLRC’s Decision, only the following petitioners were included: Michael A.
Rebato, Hernan Ed Noel L. de Leon, Jr., Wendell B. Quiban, Fritz Sembrino, Ismael R.
Garaygay III, Edson S. Solis, Stephen Olingay, Ronan Alamillo, Jess Vincent A. dela
Pefia, Dax Matthew M. Quijano, Juneth A. Rentuma and Socorro D'Marie T. Inting.
On the other hand, James Horace Balonda, Dennis C. Rizon, Ennoh Chentis R.
Fernandez, Aldrin 0. Torrentira, Michael Ray B. Molde, Rodolfo M. Vasquez, Ma.
Nazelle B. Miralles, and Carl Hermes Carskit were excluded. IKSI argued that those
eight (8) who were excluded did not sign the required Verification and Certification of
Non-Forum Shopping of the Appeal Memorandum before the NLRC, and some of
them also failed to execute the Verification in the Petition for Certiorari before the
CA.

The Court has previously set the guidelines pertaining to non-compliance with the
requirements on, or submission of defective, verification and certification against
forum shopping: 58

1) A distinction must be made between non-compliance with the requirement on or

submission of defective verification, and noncompliance with the requirement on or
submission of defective certification against forum shopping;

2) As to verification, non-compliance therewith or a defect therein does not

necessarily render the pleading fatally defective. The court may order its submission
or correction, or act on the pleading if the attending circumstances are such that
strict compliance with the Rule may be dispensed with in order that the ends of
justice may be served;

3) Verification is deemed substantially complied with when one who has ample
knowledge to swear to the truth of the allegations in the complaint or petition signs
the verification, and when matters alleged in the petition have been made in good
faith or are true and correct;

4) As to certification against forum shopping, non-compliance therewith or a defect

therein, unlike in verification, is generally not curable by its subsequent submission
or correction thereof, unless there is a need to relax the Rule on the ground of
substantial compliance or the presence of special circumstances or compelling
reasons;

5) The certification against forum shopping must be signed by all the plaintiffs or
petitioners in a case; otherwise, those who did not sign will be dropped as parties to
the case. Under reasonable or justifiable circumstances, however, as when all the
plaintiffs or petitioners share a common interest and invoke a common cause of
action or defense, the signature of only one of them in the certification against forum
shopping substantially complies with the Rule; and

6) Finally, the certification against forum shopping must be executed by the party-
pleader, not by his counsel.  If, however, for reasonable or justifiable reasons, the
1âwphi1

party-pleader is unable to sign, he must execute a Special Power of Attorney

designating his counsel of record to sign on his behalf.

In the case at hand, only twelve (12) of respondents were able to sign the
Verification and Certification Against Forum Shopping since they were only given ten
(10) days from the receipt of the LA's decision to perfect an appeal. Some of them
were even no longer based in Cebu City. But it does not mean that those who failed
to sign were no longer interested in pursuing their case.

In view of the circumstances of this case and the substantive issues raised by
respondents, the Court finds justification to liberally apply the rules of procedure to
the present case. Rules of procedure should be viewed as mere tools designed to
facilitate the attainment of justice; their strict and rigid application, which would
result in technicalities that tend to frustrate rather than promote substantial justice,
must always be eschewed. 59

In a similar case, the Court found that the signing of the Verification by only 11 out
of the 59 petitioners already sufficiently assured the Court that the allegations in the
pleading were true and correct and not the product of the imagination or a matter of
speculation; that the pleading was filed in good faith; and that the signatories were
unquestionably real parties-in-interest who undoubtedly had sufficient knowledge
and belief to swear to the truth of the allegations in the petition.  In the same vein,
60

the twelve (12) respondents who signed the Verification in the instant case had
adequate knowledge to swear to the truth of the allegations in their pleadings,
attesting that the matters alleged therein have been made in good faith or are true
and correct. With respect to the failure of some of respondents to sign the
Certification Against Forum Shopping, IKSI cited the case of Altres, et al. v.
Empleo  which ruled that the non-signing petitioners were dropped as parties to the
61

case. However, the reason of the Court for removing said petitioners from the case
was not because of the failure to sign per se, but actually because of the fact that
they could no longer be contacted or were indeed no longer interested in pursuing
the case.  Here, as mentioned earlier, those who failed to sign the certification
62

against forum shopping will not be dropped as parties to the case since reasonable or
justifiable circumstances are extant, as all respondents share a common interest and
invoke a common cause of action or defense; the signatures of some or even only
one of them substantially complies with the Rule.

The Court previously held that the signature of only one of the petitioners
substantially complied with the Rules if all the petitioners share a common interest
and invoke a common cause of action or defense. In cases, therefore, where it is
highly impractical to require all the plaintiffs to sign the certificate of non-forum
shopping, it is sufficient, in order not to defeat the ends of justice, for one of the
plaintiffs, acting as representative, to sign the certificate, provided that the plaintiffs
share a common interest in the subject matter of the case or filed the case as a
"collective" raising only one common cause of action or defense.  Thus, when63

respondents appealed their case to the NLRC and the CA, they pursued the same as
a collective body, raising only one argument in support of their rights against the
illegal dismissal allegedly committed by IKSI. There was sufficient basis, therefore,
for the twelve (12) respondents to speak and file the Appeal Memorandum before
the NLRC and the petition in the CA for and in behalf of their co-respondents.

Clearly, verification, like in most cases required by the rules of procedure, is a formal
requirement, not jurisdictional.  Such requirement is simply a condition affecting the
64

form of pleading, the non-compliance of which does not necessarily render the
pleading fatally defective.  It is mainly intended to secure an assurance that matters
65

which are alleged are done in good faith or are true and correct and not of mere
speculation. Thus, when circumstances so warrant, as in this case, the court may
simply order the correction of the unverified pleadings or act on it and waive strict
compliance with the rules in order that the ends of justice may be
served.  Moreover, no less than the Labor Code directs labor officials to use all
66

reasonable means to ascertain the facts speedily and objectively, with little regard to
technicalities or formalities, while Section 10, Rule VII of the New Rules of Procedure
of the NLRC provides that technical rules are not binding. Indeed, the application of
technical rules of procedure may be relaxed in labor cases to serve the demand of
substantial justice. Labor cases must be decided according to justice and equity and
the substantial merits of the controversy. After all, the policy of our judicial system is
to encourage full adjudication of the merits of an appeal. Procedural niceties should
be avoided in labor cases in which the provisions of the Rules of Court are applied
only in suppletory manner. Indeed, rules of procedure may be relaxed to relieve a
part of an injustice not commensurate with the degree of non-compliance with the
process required. For this reason, the Court cannot indulge IKSI in its tendency to
nitpick on trivial technicalities to boost its self-serving arguments.
67

The CA, however, erred when it still considered Atty. Ennoh Chentis Fernandez as
one of the petitioners before it and included him in the dispositive portion of its
decision. It must be noted that Fernandez was one of those who filed the Motion for
Execution of Decision  dated May 28, 2012, which prayed for the issuance of a writ
68

of execution of the LA and NLRC’s rulings. The movants likewise admitted therein
that while some of them elevated the case to the NLRC, they, however, did not.
Corollarily, Fernandez should have been dropped as one of the parties to the case
before the CA since the rulings of the labor tribunals had already attained finality
with respect to him.

Award of Damages

Inasmuch as IKSI failed to adduce clear and convincing evidence to support the
legality of respondents' dismissal, the latter is entitled to reinstatement without loss
of seniority rights and backwages computed from the time compensation was
withheld up to the date of actual reinstatement, as a necessary consequence.
However, reinstatement is no longer feasible in this case because of the palpable
strained relations between the parties and the possibility that the positions
previously held by respondents are already being occupied by new hires. Thus,
separation pay equivalent to one (1) month salary for every year of service should
be awarded in lieu of reinstatement. 69

The Court sustains the CA’s award of moral and exemplary damages. Award of moral
and exemplary damages for an illegally dismissed employee is proper where the
employee had been harassed and arbitrarily terminated by the employer. Moral
damages may be awarded to compensate one for diverse injuries such as mental
anguish, besmirched reputation, wounded feelings, and social humiliation occasioned
by the unreasonable dismissal. The Court has consistently accorded the working
class a right to recover damages for unjust dismissals tainted with bad faith, where
the motive of the employer in dismissing the employee is far from noble. The award
of such damages is based, not on the Labor Code, but on Article 2220 of the Civil
Code. In line with recent jurisprudence, the Court finds the amount of ₱50,000.00 for
each of moral and exemplary damages adequate. 70

The award of attorney's fees is likewise due and appropriate since respondents
incurred legal expenses after they were forced to file an action to protect their
rights.  The rate of interest, however, has been changed to 6% starting July 1, 2013,
71

pursuant to the Bangko Sentral ng Pilipinas Circular No. 799, Series of 2013. 72

WHEREFORE, IN VIEW OF THE FOREGOING, the Court DISMISSES the petition,

and AFFIRMS with MODIFICATIONS the Decision of the Court of Appeals Cebu,
Twentieth (20th) Division, dated August 30, 2013 and Resolution dated March 12,
2014 in CA-G.R. CEB-SP No. 06443. Respondents Socorro D'Marie Inting, Ismael R.
Garaygay, Edson S. Solis, Michael A. Rebato, James Horace Balonda, Stephen C.
Olingay, Dennis C. Rizon, Juneth A. Rentuma, Hernan Ed Noel I. de Leon, Jr., Jess
Vincent A. dela Pefia, Ronan V. Alamillo, Wendell B. Quiban, Aldrin 0. Torrentira,
Michael Ray B. Molde, Fritz J. Sembrino, Dax Matthew M. Quijano, Rodolfo M.
Vasquez, Ma. Nazelle B. Miralles and Carl Hermes Carskit are declared to have been
illegally dismissed by petitioner Innodata Knowledge Services, Inc. and hence, the
latter is hereby ORDERED to PAY each of them the following:

a) Backwages and all other benefits from the time compensation was withheld
on January 8, 2010 until finality of this Decision;

b) Separation pay equivalent to one (1) month salary for every year of
service, with a fraction of at least six (6) months to be considered as one (1)
whole year, to be computed from the date of their employment up to the
finality of this Decision;

c) Moral and exemplary damages, each in the amount of ₱50,000.00;

d) Attorney’s fees equivalent to ten percent (10%) of the total awards; and

e) Legal interest of twelve percent (12%) per annum of the total monetary

awards computed from January 8, 2010 up to June 30, 2013 and six percent
(6%) per annum from July 1, 2013 until their full satisfaction.

The case is hereby ordered REMANDED to the labor arbiter for the computation of
the amounts due each respondent.

Costs on petitioner Innodata Knowledge Services, Inc.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:
=

SECOND DIVISION

G.R. No. 221356, March 14, 2018

MARIA CARMELA P. UMALI, Petitioner, v. HOBBYWING SOLUTIONS,

INC., Respondent.

DECISION

REYES, JR., J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, assailing the Decision1 dated May 29, 2015 and Resolution 2 dated November
4, 2015 of the Court of Appeals (CA) in CA G.R. SP No. 136194.

Antecedent Facts

The instant case stemmed from a complaint for illegal dismissal filed by Maria
Carmela P. Umali (petitioner) against Hobbywing Solutions, Inc.
(respondent) and its general manager, Pate Tan (Tan).

In her position paper, the petitioner alleged that she started working for the
respondent, an online casino gaming establishment, on June 19, 2012, as a
Pitboss Supervisor. Her main duties and responsibilities involve, among others,
supervising online casino dealers as well as the operations of the entire gaming area
or studio of the respondent company. She, however, never signed any
employment contract before the commencement of her service but regularly
received her salary every month.3

Sometime in January 2013, after seven (7) months since she started working
for the respondent, the petitioner was asked to sign two employment
contracts. The first employment contract was for a period of five (5) months,
specifically from June 19,2012 to November 19,2012. On the other hand, the second
contract was for a period of three (3) months, running from November 19, 2012
to February 18, 2013. She signed both contracts as directed.4

On February 18, 2013, however, the petitioner was informed by the respondent
that her employment has already ended and was told to just wait for advice
whether she will be rehired or regularized. She was also required to sign an exit
clearance from the company apparently to clear her from accountabilities. She was
no longer allowed to work thereafter. 5 Thus, the filing of a complaint for
illegal dismissal against the respondent.

For its part, the respondent admitted that it hired the petitioner as Pitboss
Supervisor on probationary basis beginning June 19, 2012 to November 18, 2012.
With the conformity of the petitioner, the probationary period was extended for three
(3) months from November 19, 2012 to February 18, 2013.6 The respondent
claimed that the engagement of the petitioner's service as a probationary
employee and the extension of the period of probation were both covered by
separate employment contracts duly signed by the parties. After receiving a
commendable rating by the end of the extended probationary period, the
petitioner was advised that the company will be retaining her services as
Pitboss Supervisor. Surprisingly, the petitioner declined the offer for the
reason that a fellow employee, her best friend, will not be retained by the
company. Thereafter, on February 18, 2013, she processed her exit clearance to
clear herself of any accountability and for the purpose of processing her remaining
claims from the company. As a sign of good will, the company signed and issued a
Waiver of Non Competition Agreement in her favor and a Certificate of Employment,
indicating that she demonstrated a commendable performance during her stint.
Thus, the respondent was surprised to receive the summons pertaining to the
complaint for illegal dismissal tiled by the petitioner.7

Ruling of the Labor Arbiter (LA)

On October 7, 2013, the LA rendered a Decision,8 dismissing the complaint for

lack of merit, the dispositive portion of which reads as follows:
ACCORDINGLY, the cause of action for illegal dismissal is DENIED for lack of merit.

Respondent Hobbywing Solutions, Inc. is ordered to pay complainant here NIGHT

SHIFT DIFFERENTIALS of [P]21,232.58 subject to 5% withholding tax upon
execution whenever applicable. All other claims are DENIED for lack of merit.

Respondent Pate Tan is EXONERATED from all liabilities.

SO ORDERED.9
The LA ruled that the petitioner failed to substantiate her claim that she was
dismissed from employment. As it is, she opted not to continue with her
work out of her own volition. Further, it noted that the respondent did not commit
any overt act to sever employer-employee relations with the petitioner as, in fact, it
even offered the petitioner a regular employment but she turned it down.10

Unyielding, the petitioner filed an appeal with the National Labor Relations
Commission (NLRC), reiterating her claim of illegal dismissal.

Ruling of the NLRC

On January 15, 2014, the NLRC rendered a Decision,11 holding that the petitioner
was illegally dismissed, disposing thus:
WHEREFORE, premises considered, the appeal of complainant is partly GRANTED.
The assailed Decision of the Labor Arbiter dated October 7, 2013 is
hereby MODIFIED. It is hereby declared that complainant is a regular employee of
respondent Hobbywing Solutions, Inc. We also find complainant to have been
illegally dismissed from employment and respondent Hobbywing Solutions, Inc. is
hereby ordered to:

1. reinstate complainant to her former position without loss of seniority

rights and other privileges;

2. pay complainant her full backwages, inclusive of allowances, and to her

other benefits or their monetary equivalent computed from the date of
dismissal up to her actual reinstatement; and

3. pay complainant an amount equivalent to 10% of the total judgment

award as and for attorney's fees.

All other awards of the Labor Arbiter STAND.

The Computation Division of this Office is hereby directed to make the necessary
computation of the monetary award granted to complainant, which computation shall
form an integral part of this decision.

SO ORDERED.12
The NLRC held that the petitioner attained the status of a regular employee
by operation of law when she was allowed to work beyond the probationary
period of employment. From that point, she enjoys security of tenure and may not
be terminated except on just or authorized causes. The respondent's claim that the
petitioner's probationary period of employment was extended cannot be given
credence since the records are bereft of proof that the latter's performance was ever
evaluated based on reasonable standards during the probationary period and that
there was a need to extend the same.13

The respondent filed a motion for reconsideration but the NLRC denied the same in
its Resolution14 dated April 30, 2014.

Dissatisfied, the respondent filed a petition for certiorari with the CA, imputing grave
abuse of discretion on the part of the NLRC for ruling that there was an illegal
dismissal. It argued that the petitioner did not become a regular employee by
operation of Jaw since the probationary period of her employment was extended by
agreement of the parties so as to give her a chance to improve her performance.
There was also no il1egal dismissal since the petitioner was never terminated since
she was the one who refused to accept the offer of the company to retain her
services. It pointed out that the petitioner even processed her Exit Clearance Form
and requested for a Certificate of Employment and Waiver of the Non-Competition
Agreement.15

Ruling of the CA

On May 29, 2015, the CA rendered a Decision,16 reversing the decision of the

NLRC, the dispositive portion of which reads, as follows:
WHEREFORE, based on the foregoing, the petition is GRANTED. The 15 January
2014 Decision and the 30 April 2014 Resolution of the NLRC in NLRC NCR Case No.
(M) 04-06101-13 [NLRC LAC No. 10-003040-13] are REVERSED and SET ASIDE.
The 07 October 2013 Decision of the Labor Arbiter dismissing the Complaint for lack
of merit is REINSTATED.

SO ORDERED.17
The CA agreed with the LA that the petitioner failed to prove the fact of her
dismissal. It held that aside from bare allegations, no evidence was ever
submitted by the petitioner that she was refused or was not allowed to
work after the period of extension. There was no letter of termination given
to the petitioner but only an exit clearance form which she personally
processed, which therefore proved that the severance of her employment was her
choice.18

The petitioner filed a motion for reconsideration but the CA denied the same in
Resolution19 dated November 4, 2015, the dispositive portion of which reads, thus:
WHEREFORE, based on the foregoing, the Motion for Reconsideration is DENIED.

SO ORDERED.20
The petitioner filed the instant petition for review on certiorari, questioning the
issuances of the CA. She claims that she had already attained the status of
regular employment after she was suffered to work for more than six
months of probationary employment. She also reiterates that she was only
belatedly asked to sign two employment contracts on January 19, 2013 after she had
rendered seven (7) months of service.21 She claims that she was terminated without
cause on February 18, 2013 when she was informed that the period of her
probationary employment had already ended and her services were no longer
needed.

Ruling of the Court

The petition is meritorious.

Time and again, the Court has reiterated that, as a rule, it does not entertain
questions of facts in a petition for review on certiorari. In Pedro Angeles vs. Estelita
B. Pascual,22 the Court emphasized, thus:
Section 1, Rule 45 of the Rules of Court explicitly states that the petition for review
on certiorari shall raise only questions of law, which must be distinctly set forth. In
appeal by certiorari, therefore, only questions of law may be raised, because the
Supreme Court is not a trier of facts and does not normally undertake the re-
examination of the evidence presented by the contending parties during the trial.23
There are, however, recognized exceptions to this rule, to wit:
(1) when the findings are grounded entirely on speculation, surmises or conjectures;
(2) when the inference made is manifestly mistaken, absurd or impossible; (3) when
there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of fads; (5) when the findings of facts are conflicting; (6) When
in making its findings the Court of Appeals went beyond the issues of the case, or its
findings are contrary to the admissions of both the appellant and the appellee; (7)
when the findings are contrary to the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the petitioners main and reply briefs
are not disputed by the respondent; (10) when the findings of fact are premised on
the supposed absence of evidence and contradicted by the evidence on record:
and (11) when the Court of Appeals manifestly overlooked certain relevant
facts not disputed by the parties, which, if properly considered, would
justify a different conclusion.24
In the instant case, the Court finds that the CA misapprehended facts and
overlooked details which are crucial and significant that they can warrant a
change in the outcome of the case.

In finding that there was no illegal dismissal, the CA echoed the ruling of the LA that
the petitioner failed to establish the fact of dismissal. It held that the petitioner failed
to present evidence manifesting the intention of the respondent to sever relations
with her. Absent any overt act on the part of the respondent, it ruled that there can
be no dismissal to speak of. It also found credible the respondent's claim that it was
the petitioner who refused to accept the offer of continued employment with the
company.

The CA missed the point that the respondent employed a scheme in order to
obscure the fact of the petitioner's dismissal. The CA would have recognized
this ploy if it only delved deeper into the records and facts of the case.

It is beyond dispute that the petitioner started working for the respondent on
June 19, 2012 as a probationary employee and that there were two (2)
employment contracts signed by the parties. The parties, however, held
conflicting claims with respect to the time when the contracts were signed. The
petitioner is claiming that there was no contract before the commencement of her
employment and that she was only asked to sign two employment contracts on
January 19, 2013, after having rendered seven months of service. On the other
hand, the respondent maintains that there was a contract of probationary
employment signed at the beginning of the petitioner's service and another one
signed on November 18, 2012, extending the probationary period purportedly to give
the petitioner a chance to improve her performance and qualify for regular
employment. The LA and the CA, however, opted to believe the respondent's claim
that the contract of probationary employment was signed and extended on time.
Having taken this theory, it is easy to dispose the case by concluding that no
dismissal had taken place.

There was, however, a single detail which convinced this Court to take a
second look at the facts of case. Contradicting the respondent's claim, the
petitioner consistently reiterates that she was made to sign two contracts of
probationary employment, one covering the period from June 19, 2012 to November
18, 2012, and the other purportedly extending the probationary employment from
November 19, 2012 to February 18, 2013, only on January 19, 2013. To support
her claim, she alleged that she was able to note the actual date when she
signed the contracts, right beside her signature. And indeed, attached with the
position paper submitted by the respondent itself, copies of the two contracts of
employment signed by the petitioner clearly indicates the date "01.19.13" beside
her signature.25 This substantiates the petitioner's claim that the documents were
signed on the same day, that is, on January 19, 2013. Further, while the first
contract was undated,26 the Probation Extension Letter was dated January
10, 2013,27 which was way beyond the end of the supposed probationary
period of employment on November 18, 2013, therefore validating the
petitioner's claim that she had already worked for more than six months
when she was asked to sign an employment contract and its purported
extension. Surprisingly, the respondent never explained the disparity in the dates
on the actual copies of the contracts which were submitted as annexes and that
alleged in its position paper as the time they were signed by the petitioner.

This brings to the conclusion that the contracts were only made up to create a
semblance of legality in the employment and severance of the petitioner.
Unfortunately for the respondent, the significant details left unexplained only
validated the petitioner's claim that she had served way beyond the
allowable period for probationary employment and therefore has attained
the status of regular employment.

Article 281 of the Labor Code is pertinent. It provides:

ART. 281. Probationary Employment. - Probationary employment shall not exceed
six (6) months from the date the employee started working, unless it is covered by
an apprenticeship agreement stipulating a longer period. The services of an
employee who has been engaged on a probationary basis may be
terminated for a just cause or when he fails to qualify as a regular employee
in accordance with reasonable standards made known by the employer to the
employee at the time of his engagement. An employee who is allowed to work
after a probationary period shall be considered a regular employee.
In this case, the petitioner commenced working fur the respondent on June 19, 2012
until February 18, 2013. By that time, however, she has already become a regular
employee, a status which accorded her protection from arbitrary termination.

In Dusit Hotel vs. Gatbonton,28 the Court reiterated, thus:

It is an elementary rule in the law on labor relations that a probationary
employee engaged to work beyond the probationary period of six months, as
provided under Article 281 of the Labor Code, or for any length of time set forth by
the employer (in this case, three months), shall be considered a regular
employee. This is clear in the last sentence of Article 281. Any circumvention of this
provision would put to naught the State's avowed protection for labor.29
The CA, however, believes that the probationary period of employment was validly
extended citing Mariwasa vs. Leogardo.30 In the said case, the Court upheld as valid
the extension of the probationary period for another three (3) months in order to
give the employee a chance to improve his performance and qualify for regular
employment, upon agreement of the parties. Upon conclusion of the period of
extension, however, the employee still failed to live up to the work standards of the
company and was thereafter terminated.

The mentioned case, however, finds no application in the instant case for two
reasons: (1) there was no evaluation upon the expiration of the period of
probationary employment; (2) the supposed extension of the probationary period
was made after the lapse of the original period agreed by the parties. Based on the
evidence on record, the respondent only evaluated the performance of the petitioner
for the period of June 2012 to November 2013 on February 1, 2013, wherein she
garnered a rating of 88.3%, which translates to a satisfactory performance according
to company standards.31 At the time of the evaluation, the original period of
probationary employment had already lapsed on November 18, 2012 and the
petitioner was allowed to continuously render service without being advised that she
failed to qualify for regular employment. Clearly then, there is no reason to justify
the extension since the petitioner had a commendable rating and, apart from this,
there is no more period to be extended since the probationary period had already
lapsed.

It bears stressing that while in a few instances the Court recognized as valid the
extension of the probationary period, still the general rule remains that an
employee who was suffered to work for more than the legal period of six (6)
months of probationary employment or less shall, by operation of law,
become a regular employee. In Buiser vs. Leogardo,32 the Court stated, thus:
Generally, the probationary period of employment is limited to six (6)
months. The exception to this general rule is when the parties to an
employment contract may agree otherwise, such as when the same is
established by company policy or when the same is required by the nature of work to
be performed by the employee.33
Since extension of the period is the exception, rather than the rule, the employer
has the burden of proof to show that the extension is warranted and not
simply a stratagem to preclude the worker's attainment of regular status.
Without a valid ground, any extension of the probationary period shall be taken
against the employer especially since it thwarts the attainment of a fundamental
right, that is, security of tenure.

In the instant case, there was no valid extension of the probationary period
since the same had lapsed long before the company thought of extending
the same. More significantly, there is no justifiable reason for the extension since,
on the basis of the Performance Evaluation dated February 1, 2013, the petitioner
had a commendable performance all throughout the probationary period.

Having rendered service even after the lapse of the probationary period, the
petitioner had attained regular employment, with all the rights and privileges
pertaining thereto. Clothed with security of tenure, she may not be terminated from
employment without just or authorized cause and without the benefit of procedural
due process. Since the petitioner's case lacks both, she is entitled to reinstatement
with payment of full backwages, as correctly held by the NLRC.

The well-settled rule in this regard was reiterated in Peak Ventures Corporation vs.
Heirs of Villareal,34 to wit:
Under Article 279 of the Labor Code, as amended by Republic Act No. 6715, an
employee who is unjustly dismissed shall be entitled to (1) reinstatement without
loss of seniority rights and other privileges; and, (2) full backwages, inclusive of
allowances, and to other benefits or their monetary equivalent computed from the
time his compensation was withheld up to the time of actual reinstatement. If
reinstatement is no longer viable, separation pay is granted.35
The Court therefore finds it proper to reinstate the decision of the NLRC which ruled
that the petitioner was illegally dismissed and held her entitled to the twin relief of
reinstatement and backwages.

WHEREFORE, the Decision dated May 29, 2015 and Resolution dated November 4,
2015 of the Court of Appeals (CA) in CA-G.R. SP No. 136194 are REVERSED and
SET ASIDE. The Decision dated January 15, 2014 of the National Labor Relations
Commission in NLRC NCR Case No. 04-06101-13 is REINSTATED.

SO ORDERED.

THIRD DIVISION

February 28, 2018

G.R. No. 212003

PHILIPPINE SPAN ASIA CARRIERS CORPORATION (FORMERLY SULPICIO

LINES, INC.), Petitioner
vs.
HEIDI PELAYO, Respondent

DECISION

LEONEN, J.:

"Not every inconvenience, disruption, difficulty, or disadvantage that an

employee must endure sustains a finding of constructive dismissal."  It is an
1

employer's right to investigate acts of wrongdoing by employees. Employees

involved in such investigations cannot ipso facto claim that employers are out to get
them. Their involvement in investigations will naturally entail some inconvenience,
stress, and difficulty. However, even if they might be burdened - and, in some cases,
rather heavily so - it does not necessarily mean that an employer has embarked on
their constructive dismissal.

This resolves a Petition for Review on Certiorari  under Rule 45 of the 1997 Rules of
2

Civil Procedure praying that the assailed Court of Appeals July 4, 2013 Decision  and
3

February 12, 2014 Resolution  in CA-G.R. SP No. 04622 be reversed and set aside.
4

The assailed Court of Appeals July 4, 2013 Decision found grave abuse of discretion
on the part of the National Labor Relations Commission in issuing its May 2 7, 2011
Decision  and August 31, 2011 Decision  holding that respondent Heidi Pelayo
5 6

(Pelayo) was not constructively dismissed. The assailed Court of Appeals February
12, 2014 Resolution denied the Motion for Reconsideration  of petitioner Philippine
7

Span Asia Carriers Corporation, then Sulpicio Lines, Inc. (Sulpicio Lines).

Pelayo was employed by Sulpicio Lines as an accounting clerk at its Davao

City branch office. As accounting clerk, her main duties were "to receive statements
and billings for processing of payments, prepare vouchers and checks for the
approval and signature of the branch manager, and release checks for payment." 8
Sulpicio Lines uncovered several anomalous transactions in its Davao City
branch office. Most notably, a check issued to a certain "J. Josol"  had been altered
9

from its original amount of ₱20,804.58 to ₱820,804.58. The signatories to the check
were branch manager Tirso Tan (Tan) and cashier Fely Sobiaco (Sobiaco). 10

There were also apparent double disbursements. In the first double disbursement,
two (2) checks amounting to ₱5,312.15 each were issued for a single ₱5,312.l5
transaction with Davao United Educational Supplies. This transaction was covered by
official receipt no. 16527, in the amount of ₱5,312.15 and dated January 12, 2008.
The first check, Philippine Trust Company (PhilTrust Bank) check no. 2043921, was
issued on December 15, 2007. This was covered by voucher no. 227275. The second
check, Phil Trust Bank check no. 2044116, was issued on January 19, 2008 and was
covered by voucher no. 22 7909. 11

There was another double disbursement for a single transaction. Two (2) checks for
₱20,804.58 each in favor of Everstrong Enterprises were covered by official receipt
no. 5129, dated January 25, 2008. The first check, PhilTrust Bank check no.
2044156, was dated January 26, 2008 and covered by voucher no. 228034. The
second check, PhilTrust Bank check no. 2044244, was dated February 9, 2008 and
covered by voucher no. 228296. 12

Another apparent anomaly was a discrepancy in the amounts reflected in what

should have been a voucher and a check corresponding to each other and covering
the same transaction with ARR Vulcanizing. Voucher no. 232550 dated October 30,
2008 indicated only ₱l7,052.00, but the amount disbursed through check no.
2051313 amounted to ₱29,306.00. 13

Sulpicio Lines' Cebu-based management team went to Davao to investigate

from March 3 to 5, 2010. Pelayo was interviewed by members of the
management team as "she was the one who personally prepared the cash vouchers
and checks for approval by Tan and Sobiaco." 14

The management team was unable to complete its investigation by March 5,

2010. Thus, a follow-up investigation had to be conducted. On March 8, 2010,
Pelayo was asked to come to Sulpicio Lines' Cebu main office for another
interview.  Sulpicio Lines shouldered all the expenses arising from Pelayo's trip.
15 16

In the midst of a panel interview, Pelayo walked out.  She later claimed that
17

she was being coerced to admit complicity with Tan and Sobiaco.  Pelayo then
18

returned to Davao City,  where she was admitted to a hospital "because of

19

depression and a nervous breakdown."  She eventually filed for leave of absence
20

and ultimately stopped reporting for work. 21

Following an initial phone call asking her to return to Cebu, Sulpicio Lines served
on Pelayo a memorandum dated March 15, 2010,  requiring her to submit a
22

written explanation concerning "double disbursements, payments of ghost

purchases and issuances of checks with amounts bigger than what [were] stated in
the vouchers."  Sulpicio Lines also placed Pelayo on preventive suspension for 30
23

days.  It stated:

24

Among your duties is to receive statements and billings for processing of payments,
prepare vouchers and checks for the signature of the approving authority. In the
preparation of the vouchers and the checks, you also are required to check and to
make sure that the supporting documents are in order. Thus, the double payments
and other payments could not have been perpetra[t]ed without your cooperation
and/or neglect of duty/gross negligence.
You are hereby required to submit within three (3) days from receipt of this letter a
written explanation why no disciplinary action [should] be imposed against you for
dishonesty and/or neglect of duty or gross negligence. 25

Sulpicio Lines also sought the assistance of the National Bureau of

Investigation, which asked Pelayo to appear before it on March 19, 2010. 26

Instead of responding to Sulpicio Lines' memorandum or appearing before the

National Bureau of Investigation, Pelayo filed a Complaint against Sulpicio Lines
charging it with constructive dismissal. 27

Sulpicio Lines denied liability asserting that Pelayo was merely asked to
come to Cebu "to shed light on the discovered anomalies"  and was "only 28

asked to cooperate in prosecuting Tan and Sobiaco."  It also decried Pelayo's
29

seeming attempt at "distanc[ing] herself from the ongoing investigation of financial

anomalies discovered." 30

In her September 17, 2010 Decision,  Labor Arbiter Merceditas C. Larida (Labor
31

Arbiter Larida) held that Sulpicio Lines constructively dismissed Pelayo. She
faulted Sulpicio Lines for harassing Pelayo when her participation in the uncovered
anomalies was "far-fetched."  Labor Arbiter Larida relied mainly on the affidavit of
32

Alex Te (Te),  an employee of Sulpicio Lines assigned at the Accounting Department
33

of its Cebu City main office. Te's affidavit was attached to the Secretary's
Certificate,  attesting to Sulpicio Lines' Board Resolution authorizing Te to act in its
34

behalf in prosecuting Tan and Sobiaco. This affidavit detailed the duties of Tan and
Sobiaco, as branch manager and cashier, respectively, and laid out the bases for
their prosecution.  Labor Arbiter Larida noted that the affidavit's silence on how
35

Pelayo could have been involved demonstrated that it was unjust to suspect her of
wrongdoing. 36

In its May 27, 2011 Decision,  the National Labor Relations Commission
37

reversed Labor Arbiter Larida's Decision. It explained that the matter of

disciplining employees was a management prerogative and that complainant's
involvement in the investigation did not necessarily amount to harassment.  The 38

dispositive portion of this Decision read:

WHEREFORE, foregoing premises considered, the appeal is GRANTED and the

appealed decision is SET ASIDE and VACATED. In lieu thereof, a new judgment is
rendered DISMISSING the above-entitled case for lack of merit.

SO ORDERED. 39

In its assailed July 4, 2013 Decision, the Court of Appeals found grave abuse of
discretion on the part of the National Labor Relations Commission in
reversing Labor Arbiter Larida's Decision. 40

Following the denial of its Motion for Reconsideration,  Sulpicio Lines filed the
41

present Petition.

For resolution is the issue of whether or not the Court of Appeals erred in
finding grave abuse of discretion on the part of the National Labor Relations
Commission in ruling that respondent Heidi Pelayo's involvement in the
investigation conducted by petitioner did not amount to constructive
dismissal.

The Court of Appeals must be reversed.

An employer who conducts investigations following the discovery of misdeeds
by its employees is not being abusive when it seeks information from an employee
involved in the workflow which occasioned the misdeed. Basic diligence impels an
employer to cover all bases and inquire from employees who, by their inclusion in
that workflow, may have parti.00000cipated in the misdeed or may have information
that can lead to the perpetrator's identification and the employer's adoption of
appropriate responsive measures. An employee's involvement in such an
investigation will naturally entail difficulty. This difficulty does not mean that the
employer is creating an inhospitable employment atmosphere so as to ease out the
employee involved in the investigation.

While adopted with a view "to give maximum aid and protection to labor,"  labor 42

laws are not to be applied in a manner that undermines valid exercise of

management prerogative.

Indeed, basic is the recognition that even as our laws on labor and social justice
impel a "preferential view in favor of labor,"

[e]xcept as limited by special laws, an employer is free to regulate, according to his

own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, tools to be used,
processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay-off of workers and the discipline, dismissal and
recall of work.  (Emphasis supplied).
43

The validity of management prerogative in the discipline of employees was sustained

by this Court in Philippine Airlines v. National Labor Relations Commission,  "In 44

general, management has the prerogative to discipline its employees and to impose
appropriate penalties on erring workers pursuant to company rules and
regulations."45

The rationale for this was explained in Rural Bank of Cantilan, Inc. v. Julve: 46

While the law imposes many obligations upon the employer, nonetheless, it also
protects the employer's right to expect from its employees not only good
performance, adequate work, and diligence, but also good conduct and loyalty. In
fact, the Labor Code does not excuse employees from complying with valid company
policies and reasonable regulations for their governance and guidance. 47

Accordingly, in San Miguel Corporation v. National Labor Relations Commission: 48

An employer has the prerogative to prescribe reasonable rules and

regulations necessary for the proper conduct of its business, to provide
certain disciplinary measures in order to implement said rules and to assure
that the same would be complied with. An employer enjoys a wide latitude
of discretion in the promulgation of policies, rules and regulations on work-
related activities of the employees.

It is axiomatic that appropriate disciplinary sanction is within the purview of

management imposition. Thus, in the implementation of its rules and policies, the
employer has the choice to do so strictly or not, since this is inherent in its right to
control and manage its business effectively. 49

II
Disciplining employees does not only entail the demarcation of permissible and
impermissible conduct through company rules and regulations, and the imposition of
appropriate sanctions. It also involves intervening mechanisms "to assure that
[employers' rules] would be complied with."  These mechanisms include the conduct
50

of investigations to address employee wrongdoing.

While due process, both substantive and procedural, is imperative in the discipline of
employees, our laws do not go so far as to mandate the minutiae of how employers
must actually investigate employees' wrongdoings. Employers are free to adopt
different mechanisms such as interviews, written statements, or probes by specially
designated panels of officers.

In the case of termination of employment for offenses and misdeeds by employees,

i.e., for just causes under Article 282 of the Labor Code,  employers are required to
51

adhere to the so-called "two-notice rule."  King of Kings Transport v.

52

Mamac  outlined what "should be considered in terminating the services of

53

employees"  :
54

(1) The first written notice to be served on the employees should contain the specific
causes or grounds for termination against them, and a directive that the employees
are given the opportunity to submit their written explanation within a reasonable
period. "Reasonable opportunity" under the Omnibus Rules means every kind of
assistance that management must accord to the employees to enable them to
prepare adequately for their defense. This should be construed as a period of at least
five (5) calendar days from receipt of the notice to give the employees an
opportunity to study the accusation against them, consult a union official or lawyer,
gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed narration of the facts
and circumstances that will serve as basis for the charge against the employees. A
general description of the charge will not suffice. Lastly, the notice should specifically
mention which company rules, if any, are violated and/or which among the grounds
under Art. 282 is being charged against the employees.

(2) After serving the first notice, the employers should schedule and conduct a
hearing or conference wherein the employees will be given the opportunity to: (1)
explain and clarify their defenses to the charge against them; (2) present evidence
in support of their defenses; and (3) rebut the evidence presented against them by
the management. During the hearing or conference, the employees are given the
chance to defend themselves personally, with the assistance of a representative or
counsel of their choice. Moreover, this conference or hearing could be used by the
parties as an opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers

shall serve the employees a written notice of termination indicating that: (1) all
circumstances involving the charge against the employees have been considered;
and (2) grounds have been established to justify the severance of their
employment.  (Citation omitted)
55

The two-notice rule applies at that stage when an employer has previously
determined that there are probable grounds for dismissing a specific employee. The
first notice implies that the employer already has a cause for termination. The
employee then responds to the cause against him or her. The two-notice rule does
not apply to anterior, preparatory investigations precipitated by the initial discovery
of wrongdoing. At this stage, an employer has yet to identify a specific employee as
a suspect. These preparatory investigations logically lead to disciplinary proceedings
against the specific employee suspected of wrongdoing, but are not yet part of the
actual disciplinary proceedings against that erring employee. While the Labor Code
specifically prescribes the two-notice rule as the manner by which an employer must
proceed against an employee specifically charged with wrongdoing, it leaves to the
employer's discretion the manner by which it shall proceed in initially investigating
offenses that have been uncovered, and whose probable perpetrators have yet to be
pinpointed.

Thus, subject to the limits of ethical and lawful conduct, an employer is free to adopt
any means for conducting these investigations. They can, for example, obtain
information from the entire roster of employees involved in a given workflow. They
can also enlist the aid of public and private investigators and law enforcers,
especially when the uncovered iniquity amounts to a criminal offense just as much as
it violates company policies.

When employee wrongdoing has been uncovered, employers are equally free to
adopt contingency measures; lest they, their clients, and other employees suffer
from exigencies otherwise left unaddressed. These measures may be enforced as
soon as an employee's wrongdoing is uncovered, may extend until such time that
disciplinary proceedings are commenced and terminated, and in certain instances,
even made permanent. Employers can rework processes, reshuffle assignments,
enforce stopgap measures, and put in place safety checks like additional approvals
from superiors. In Mandapat v. Add Force Personnel Services, lnc.,  this Court
56

upheld the temporary withholding of facilities and privileges as an incident to an

ongoing investigation. Thus, this Court found no fault in the disconnection of an
employee's computer and the suspension of her internet access privilege.  Employers
57

can also place employees under preventive suspension, not as a penalty in itself, but
as an intervening means to enable unhampered investigation and to foreclose "a
serious and imminent threat to the life or property of the employer or of the
employee's co-workers."  As Artificio
58
v. National Labor Relations
Commission  illustrated:
59

In this case, Artificio's preventive suspension was justified since he was employed as
a security guard tasked precisely to safeguard respondents' client. His continued
presence in respondents' or its client's premises poses a serious threat to
respondents, its employees and client in light of the serious allegation of conduct
unbecoming a security guard such as abandonment of post during night shift duty,
light threats and irregularities in the observance of proper relieving time.

Besides, as the employer, respondent has the right to regulate, according to its
discretion and best judgment, all aspects of employment, including work assignment,
working methods, processes to be followed, working regulations, transfer of
employees, work supervision, lay-off of workers and the discipline, dismissal and
recall of workers. Management has the prerogative to discipline its employees and to
impose appropriate penalties on erring workers pursuant to company rules and
regulations.

This Court has upheld a company's management prerogatives so long as they are
exercised in good faith for the advancement of the employer's interest and not for
the purpose of defeating or circumventing the rights of the employees under special
laws or under valid agreements. 60

III

The standards for ascertaining constructive dismissal are settled:

There is constructive dismissal when an employer's act of clear

discrimination, insensibility or disdain becomes so unbearable on the part of
the employee so as to foreclose any choice on his part except to resign from
such employment. It exists where there is involuntary resignation because of
the harsh, hostile and unfavorable conditions set by the employer. We have
held that the standard for constructive dismissal is "whether a reasonable person
in the employee's position would have felt compelled to give up his
employment under the circumstances." 61

This Court has, however, been careful to qualify that "[n]ot every inconvenience,
disruption, difficulty, or disadvantage that an employee must endure sustains a
finding of constructive dismissal."  In a case where the employee decried her
62

employers' harsh words as supposedly making for a work environment so

inhospitable that she was compelled to resign, this Court explained:

The unreasonably harsh conditions that compel resignation on the part of an

employee must be way beyond the occasional discomforts brought about by the
misunderstandings between the employer and employee. Strong words may
sometimes be exchanged as the employer describes her expectations or as the
employee narrates the conditions of her work environment and the obstacles she
encounters as she accomplishes her assigned tasks. As in every human relationship,
there are bound to be disagreements.

However, when these strong words from the employer happen without
palpable reason or are expressed only for the purpose of degrading the
dignity of the employee, then a hostile work environment will be created. In
a sense, the doctrine of constructive dismissal has been a consistent vehicle by this
Court to assert the dignity of labor.
63

Resolving allegations of constructive dismissal is not a one-sided affair impelled by

romanticized sentiment for a preconceived underdog. Rather, it is a question of
justice that "hinges on whether, given the circumstances, the employer acted fairly
in exercising a prerogative."  It involves the weighing of evidence and a
64

consideration of the "totality of circumstances."

65

IV

This Court fails to see how the petitioner's investigation amounted to respondent's
constructive dismissal.

The assailed Court of Appeals July 4, 2013 Decision devoted all ofthree (3)
paragraphs  in explaining why respondent was constructively dismissed. It anchored
66

its conclusion on how "petitioner was made to admit the commission of the
crime,"  and on how "[respondent] was compelled to give up her employment due to
67

[petitioner's] unfounded, unreasonable and improper accusations, which made her

employment unbearable." 68

The Court of Appeals was in serious error.

The most basic flaw in the Court of Appeals' reasoning is its naive credulity.
It did not segregate verified facts from impressions and bare allegations. It
was quick to lend credence to respondent's version of events and her bare claim that
she "was made to admit the commission of the crime." 69

As it stands, all that have been ascertained are that: first, petitioner discovered
anomalies in its Davao branch; second, members of its management team went to
Davao to investigate ; third, the investigation involved respondent considering that,
as accounting clerk, her main duties were "to receive statements and billings for
processing of payments, prepare vouchers and checks for the approval and signature
of the Branch Manager, and release the checks for cash payment";  fourth, the
70

investigation in Davao could not be completed for lack of time; fifth, respondent was
made to come to petitioner's Cebu main office - all expense paid - for the
continuation of the investigation; sixth, in Cebu, respondent was again interviewed;
seventh, respondent walked out in the midst of this interview.

There is no objective proof demonstrating how the interview in Cebu actually

proceeded. Other than respondent's bare allegation, there is nothing to support the
claim that her interviewers were hostile, distrusting, and censorious, or that the
interview was a mere pretext to pin her down. Respondent's recollection is riddled
with impressions, unsupported by independently verifiable facts. These impressions
are subjective products of nuanced perception, personal interpretation, and ingrained
belief that cannot be appreciated as evidencing "the truth respecting a matter of
fact."
71

Respondent's subsequent hospitalization does not prove harassment or

coercion to make an admission either. The mere fact of its occurrence is not an
attestation that respondent's interview proceeded in the manner that she claimed it
did. While it proves that she was stressed, it does not prove that she was
stressed specifically because she was cornered into admitting wrongdoing.

Human nature dictates that involvement in investigations for wrongdoing, even if one
is not the identified suspect, will entail discomfort and difficulty. Indeed, stress is
merely the "response to physical or psychological demands on a person."  Even 72

positive stimuli can become stressors.  Stress, challenge, and adversity are the
73

natural state of things when a problematic incident is revealed and begs to be

addressed. They do not mean that an employer is bent on inflicting suffering on an
employee.

Different individuals react to stress differently "and some people react to stress by
getting sick."  Stress is as much a matter of psychological perception as it is of
74

physiological reaction. Respondent's confinement at a hospital proves that, indeed,

she was stressed at such a degree that it manifested physically. It may also be
correlated with the stressors that respondent previously encountered. Among these
stressors was her interview. One can then reasonably say that respondent's
interview may have been difficult for her. However, any analysis of causation and
correlation can only go as far as this. The evidence does not lead to an inescapable
conclusion that respondent's confinement was solely and exclusively because of how
respondent claims her interviewers incriminated her.

The discomfort of having to come to the investigation's venue, the strain of recalling
and testifying on matters that transpired months prior, the frustration that she was
being dragged into the wrongdoing of other employees-if indeed she was completely
innocent-or the trepidation that a reckoning was forthcoming-if indeed she was
guilty-and many other worries doubtlessly weighed on respondent. Yet, these are
normal burdens cast upon her plainly on account of having to cooperate in the
investigation. They themselves do not translate to petitioner's malice. Respondent's
physical response may have been acute, but this, by itself, can only speak of her
temperament and physiology. It would be fallacious to view this physical response as
proof of what her interviewers actually told her or did to her.

Indeed, it was possible that respondent was harassed. But possibility is not
proof. Judicial and quasi-judicial proceedings demand proof. Respondent's
narrative is rich with melodramatic undertones of how she suffered a
nervous breakdown, but is short of prudent, verifiable proof. In the absence
of proof, it would be a miscarriage of justice to sustain a party-litigant's
allegation.

What is certain is that there were several anomalies in petitioner's Davao branch. It
made sense for petitioner to investigate these anomalies. It also made sense for
respondent to be involved in the investigation.
Contrary to Labor Arbiter Larida's conclusion, respondent's connection with the
uncovered anomalies was not "far-fetched."  The anomalies related to discrepancies
75

between vouchers and checks, multiple releases of checks backed by as many

vouchers (even if there had only been one transaction), and a check altered to
indicate a larger amount, thereby enabling a larger disbursement. Certainly, it made
sense to involve in the investigation the accounting clerk whose main duty was to
"prepare vouchers and checks for the approval and signature of the Branch Manager,
and release the checks for cash payment." 76

Labor Arbiter Larida's reliance on Te's affidavit is misplaced. That affidavit was
prepared to facilitate the criminal prosecution of Tan, the branch manager, and
Sobiaco, the cashier.  It naturally emphasized Tan's and Sobiaco's functions, and
77

related these to the uncovered anomalies. It would have been absurd to make
respondent a focal point as she was extraneous to the criminal suit against Tan and
Sobiaco. The affidavit was reticent about respondent because it did not have to
discuss her.

If at all, Te's affidavit even militates against respondent's claim that petitioner was
out to get her. For if petitioner was indeed bent on pinning her down, it was
foolhardy for it to concentrate its attempts at criminal prosecution on Tan and
Sobiaco.

Respondent cannot point to petitioner's referral to the National Bureau of

Investigation as proof of petitioner's malevolence. In the first place, petitioner
was free to refer the commission of crimes to the National Bureau of Investigation.
Republic Act No. 157,  which was in effect until the National Bureau of
78

Investigation's functions were calibrated in 2016 by Republic Act No.

10867,  enabled the National Bureau of Investigation "[t]o render assistance,
79

whenever properly requested in the investigation or detection of crimes and other

offenses."  Moreover, petitioner's efforts show that it opted to avail of
80

legitimate, official channels for conducting investigations. Petitioner's actions

demonstrate that rather than insisting on its own position and proceeding with undue
haste, it was submitting to the wisdom of an independent, official investigator and
was willing to await the outcome of an official process. While this could have also led
to criminal prosecution, it still negates malicious fixation. Indeed, if petitioner's focus
was to subvert respondent, it could have just lumped her with Tan and Sobiaco. This
would hav15e even been to petitioner's advantage as joining all defendants in a
single case would have been more efficient and economical. 1awp++i1

In any case, for the very reason of her main functions as accounting clerk, it made
sense to view respondent with a degree of suspicion. It was only logical for petitioner
to inquire into how multiple vouchers and checks could have passed the scrutiny of
the officer tasked to prepare them. It was not capricious for petitioner to ponder if its
accounting clerk acted negligently or had allowed herself to be used, if not acted with
deliberate intent to defraud.

Even if petitioner were to completely distance itself from judicious misgivings against
respondent, elect to not treat her as a suspect, and restrict itself to Tan's and
Sobiaco's complicity, it was still reasonable for it to involve respondent in its
investigation. Given her direct interactions with Tan and Sobiaco and her role in the
workflow for payments and disbursements, it was wise, if not imperative, to invoke
respondent as a witness.

In prior jurisprudence, this Court has been so frank as to view an employee's

preemption of investigation as a badge of guilt. In Mandapat v. Add Force Personnel
Services, lnc.,  this Court quoted with approval the following findings of the Court of
81

Appeals:
Unfortunately, however, before the investigation could proceed to the second step of
the termination process into a hearing or conference, Mandapat chose to resign from
her job. Mandapat's bare allegation that she was coerced into resigning can hardly
be given credence in the absence of clear evidence proving the same. No doubt,
Mandapat read the writing on the wall, knew that she would be fired for her
transgressions, and beat the company to it by resigning. Indeed, by the disrespectful
tenor of her memorandum, Mandapat practically indicated that she was no longer
interested in continuing cordial relations, much less gainful employment with Add
Force.  (Citation omitted)
82

This Court will not be so intrepid in this case as to surmise that respondent
was truly complicit in the uncovered anomalies and that termination of
employment for just cause was a foregone conclusion which she was merely
trying to evade by ceasing to report to work. Still, fairness dictates that this
Court decline to condone her acts in preempting and refusing to cooperate
in a legitimate investigation, only to cry constructive dismissal. To do so
would be to render inutile legitimate measures to address employee iniquity. It
would be to send a chilling effect against bona fide investigations, for to investigate -
riddled as it is with the strain on employees it naturally entails - would be to court
liability for constructive dismissal. Employees cannot tie employers' hands,
incapacitating them, and preemptively defeating investigations with laments of how
the travails of their involvement in such investigations translates to their employers'
fabrication of an inhospitable employment atmosphere so that an employee is left
with no recourse but to resign.

WHEREFORE, the Petition for Review on Certiorari is GRANTED. The assailed July

4, 2013 Decision and February 12, 2014 Resolution of the Court of Appeals in CA-
G.R. SP No. 04622 are REVERSED and SET ASIDE. The National Labor Relations
Commission May 27, 2011 and August 31, 2011 Decisions in NLRC No. MAC-01-
011835-2011 (RAB-Xl- 03-00352-2010) are REINSTATED.

SO ORDERED.

MARVIC M.V.F. LEONEN

Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

LUCAS P. BERSAMIN SAMUEL R. MARTIRES

Associate Justice Associate Justice

ALEXANDER G. GESMUNDO
Associate Justice

ATTESTATION

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

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division
CERTIFICATION

Pursuant to the 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.

MARIA LOURDES P.A. SERENO

Chief Justice
THIRD DIVISION

G.R. No. 214744, March 14, 2018

LA CONSOLACION COLLEGE OF MANILA, SR. IMELDA A. MORA, OSA, ALBERT

D. MANALILI, AND ALICIA MANABAT, Petitioners, v. VIRGINIA PASCUA,
M.D., Respondent.

DECISION

LEONEN, J.:

When termination of employment is occasioned by retrenchment to prevent

losses, an employer must declare a reasonable cause or criterion for
retrenching an employee. Retrenchment that disregards an employee's record and
length of service is an illegal termination of employment.

This resolves a Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of
Civil Procedure, praying that the assailed June 2, 2014 Decision2 and October 8,
2014 Resolution3 of the Court of Appeals in CA-G.R. SP No. 130793 be reversed and
set aside.

The assailed Court of Appeals June 2, 2014 Decision reversed the ruling of the
National Labor Relations Commission which, in turn, reversed Labor Arbiter Luvina P.
Roque's (Labor Arbiter Roque) January 8, 2013 Decision,4 holding that Virginia
Pascua's (Pascua) employment was illegally terminated. The assailed Court of
Appeals October 8, 2014 Resolution denied the Motion for Reconsideration file by
herein petitioners La Consolacion College of Manila (La Consolacion), Sr. Imelda A.
Mora (Sr. Mora), Albert Manalili (Manalili), and Alicia Manabat (Manabat).

On January 10, 2000, Pascua's services as school physician were engaged by

La Consolacion.5 She started working part-time before serving full-time
from 2008.6

On September 29, 2011, Pascua was handed an Inter-Office Memo from

Manalili, La Consolacion's Human Resources Division Director, inviting her
to a meeting concerning her "working condition."7 The meeting was set the
following day, September 30, 2011, at the office of La Consolacion's President, Sr.
Mora.8

In that meeting, Pascua was handed a termination of employment letter,

explaining the reasons for and the terms of her dismissal, including payment
of separation pay as follows:

Due to the current financial situation of La Consolacion College Manila caused by

the decrease in enrollment in our institution, the Board of Trustees in its last meeting
of September 24, 2011 has advised the [La Consolacion College] to downsize the
health services staff at the end of this 1st Semester of School Year 2011-2012.

Accordingly, we were forced to eliminate your position as school physician who is

rendering thirty-five (35) hours in a week.
It is really with regret that management has to take this decision, as a last resort, to
prevent serious business losses.

Your last day of service with La Consolacion College Manila shall be one month after
your receipt of this letter.

The payments that you shall be receiving are the computation of your one (1) month
pay of the thirty (30) days notice, one-half QA) month of basic salary for every year
of service as a regular employee (as of August 19, 2008), 13 th month pay and tax
refund.9
Not satisfied, Pascua wrote to Sr. Mora, pointing out that the part-time school
physician, Dr. Venus Dimagmaliw (Dr. Dimagmaliw), 10 should have been
considered for dismissal first. She also noted that rather than dismissing her
outright, La Consolacion could have asked her to revert to part-time status instead.
Pascua sought clarification specifically on the following points:
1. What were your criteria for retrenchment selection?

2. Why was I selected to be terminated (with the status of regular, ful[l-]time School
Physician) over my counterpart who is merely a part-time School Physician without
even giving me the option to rever[t] back to my part-time status?

3. How come I was the only one terminated among the health services staff?

4. Were there other cost-cutting measures done by the school to abate its alleged
losses other than implementation of that drastic measure of termination of one (1)
employee as in my case?11
In the meantime, Pascua underwent La Consolacion's clearance procedures
and completed them on November 3, 2011. However, Pascua made a handwritten
note on her Exit Clearance, stating that she was reserving the right "to question the
validity/legality of [her] termination . . . before any agency/court with appropriate
jurisdiction over the case."12 Following this, Pascua proceeded to file a complaint for
illegal dismissal against La Consolacion, Sr. Mora, Manalili, and Manabat.13

On November 28, 2011, Sr. Mora replied to Pascua's letter. She indicated the
futility of her response considering that Pascua had opted to file a complaint
in the interim. She nevertheless answered Pascua's queries "as a matter of
courtesy."14 She explained that Pascua in particular was retrenched because
her position, the highest paid in the health services division, was
dispensable:
One obvious measure to prevent serious business losses was to downsize the health
services division, by eliminating your position as a full-time physician. As you may
know, the monthly payroll of the health services division, which consists of five (5)
personnel, came to P90,462.34 in basic salary and P5,550.00 in rice subsidy and
transportation allowance. Your item in this payroll was P24,687.10 in basic salary
and P850.00 in rice subsidy and transportation allowance, or about 26% of total
payroll.

Since the purpose of the downsizing was to reduce payroll costs, the
employees with the highest rates of pay would be the first to be retrenched,
if their services could be dispensed with. For this reason, you were the employee
terminated. This same objective criteri[on] was used in downsizing the nursing
faculty which resulted in the retrenchment of the six highest paid faculty members
out of a faculty of eleven.15
On January 8, 2013, Labor Arbiter Roque16 rendered a Decision holding that
Pascua's employment was illegally terminated and noting that "[La
Consolacion, Sr. Mora, Manalili, and Manabat] failed to justify the criteria used in
terminating the employment of [Pascua]."17 The dispositive portion of this
Decision read:
WHEREFORE, premise[s] considered, judgment is hereby rendered finding the
dismissal of complainant Virginia R. Pascua as illegal. Respondent La Concolacion
College, through its responsible officers, is directed to immediately reinstate said
complainant to her former position as School Physician within ten (10) days from
receipt of this Decision, and submit compliance top (sic) this Office.

Moreover, respondent college is directed to pay complainant the following sums: (a)
backwages from the time of illegal dismissal until actual reinstatement, which as of
this date is computed at P387,225.56 pesos; (b) proportionate 13th month pay in
the amount of P20,739.25 pesos; and attorney's fees in the amount of P40,796.48.

SO ORDERED.18
On appeal, the National Labor Relations Commission reversed Labor Arbiter
Roque's Decision. It explained the validity of the basis for dismissing Pascua, as
follows:
The primary criterion used in selecting complainant-appellee for termination
was valid considering that they faced a substantial drop in income, and
sought to directly address the problem by reducing the larger of the college
expenses, such as salaries and allowances of its more expensive staff
members including but not limited to complainant-appel[l]ee. 19
In its assailed June 2, 2014 Decision,20 the Court of Appeals reinstated Labor Arbiter
Roque's January 8, 2013 Decision.

Following the denial21 of their Motion for Reconsideration,22 La Consolacion, Sr. Mora,
Manalili, and Manabat filed the present Petition on January 12, 2015.23

For resolution is the sole issue of whether or not respondent Virginia Pascua's
retrenchment was valid. More specifically, this concerns the issue of whether or
not the reason cited for her retrenchment—that she had the highest rate of pay—
justified her dismissal.

The Labor Code recognizes retrenchment as an authorized cause for

terminating employment.24 It is an option validly available to an employer to
address "losses in the operation of the enterprise, lack of work, or considerable
reduction on the volume of business":25
Retrenchment is normally resorted to by management during periods of
business reverses and economic difficulties occasioned by such events as
recession, industrial depression, or seasonal fluctuations. It is an act of the employer
of reducing the work force because of losses in the operation of the enterprise, lack
of work, or considerable reduction on the volume of business. Retrenchment is, in
many ways, a measure of last resort when other less drastic means have been tried
and found to be inadequate.26 (Citations omitted)
While a legitimate business option, retrenchment may only be exercised in
compliance with substantive and procedural requisites.

As to the substantive requisites, an employer must first show "that the

retrenchment is reasonably necessary and likely to prevent business losses
which, if already incurred, are not merely de minimis, but substantial, serious, actual
and real, or if only expected, are reasonably imminent as perceived objectively and
in good faith by the employer."27 Second, an employer must also show "that [it]
exercises its prerogative to retrench employees in good faith for the
advancement of its interest and not to defeat or circumvent the employees' right to
security of tenure."28 Third, an employer must demonstrate "that [it] used fair and
reasonable criteria in ascertaining who would be dismissed and who would be
retained among the employees, such as status (i.e., whether they are temporary,
casual, regular or managerial employees), efficiency, seniority, physical fitness, age,
and financial hardship for certain workers."29

Procedurally, employers must serve a "written notice both to the employees

and to the Department of Labor and Employment at least one month prior to the
intended date of retrenchment."30 Likewise, they must pay "the retrenched
employees separation pay equivalent to one month pay or at least 1/2
month pay for every year of service, whichever is higher." 31

II

Jurisprudence requires that the necessity of retrenchment to stave off genuine and
significant business losses or reverses be demonstrated by an employer's
independently audited financial statements. Documents that have not been the
subject of an independent audit may very well be self-serving. Moreover, it is not
enough that it presents its audited financial statement for the year that
retrenchment was undertaken for even as it may be incurring losses for that year, its
overall financial status may already be improving. Thus, it must "also show that its
losses increased through a period of time and that the condition of the company is
not likely to improve in the near future."32

The records indicate that La Consolacion suffered serious business reverses

or an aberrant drop in its revenue and income, thus, compelling it to
retrench employees. In its Petition, it explained the backdrop of a "sharp spike in
enrollment of students in its College of Nursing"33 in 2008, only for "[t]he nursing
bubble [to] burst."34 It further explained how its comprehensive income nosedived by
96%:
In this case, petitioners acted in response to an actual drop in enrollment as shown
by their documentary attachments. The drop in enrollment and corresponding drop
in income to cover basic operating expenses was not a mere figment of the
imagination of the administration. Attached as Annex "C" of the Appeal at the NLRC
which is Annex "I" of the Petition was a summary of the audited financial statements
from 2006 to 2011 that show very clearly the deterioration of income due to decline
in enrollment in a long period of time. Also attached were copies of the audited
financial statements of the school from 2008-2012 Annexes "D", "E" and "F" . . . The
2010 audited financial report of SGV (2010 vs. 2009) clearly showed the decline in
total tuition fee revenue from Php 210,355,192 million to Php 155,823,959 million or
by a drop of Php 54,531,233 million or twenty-six [percent] (26%). Moreover the
decline in comprehensive income from Php 19,133,158 to [Php] 738,671 or Php
18,394,487 or ninety-six percent (96%) was very alarming indeed.35
As acknowledged by Labor Arbiter Roque,36 this financial backdrop demonstrates the
starkly difficult financial situation besetting La Consolacion. This also shows that
La Consolacion proceeded with a modicum of good faith and not with a
stratagem specifically intended to undermine certain employees' security of
tenure.

III

La Consolacion's failure was non-compliance with the third substantive

requisite of using fair and reasonable criteria that considered the status and
seniority of the retrenched employee.

As early as 1987, this Court in Asia World Publishing House, Inc. v. Ople37 considered
seniority, along with efficiency rating and less-preferred status, as a crucial facet of a
fair and reasonable criterion for effecting retrenchment.38Emcor, Inc. v. Sienes39 was
categorical, a "[r]etrenchment scheme without taking seniority into account
rendered the retrenchment invalid": 40
Records do not show any criterion adopted or used by petitioner in
dismissing respondent. Respondent was terminated without considering her
seniority. Retrenchment scheme without taking seniority into account
rendered the retrenchment invalid. While respondent was the third most senior
employee among the 7 employees in petitioner's personnel department, she was
retrenched while her other co-employees junior than her were either
retained in the Personnel Department or were transferred to other positions in the
company. There was no showing that respondent was offered to be transferred to
other positions.41 (Citations omitted)
In Philippine Tuberculosis Society, Inc. v. National Labor Union,42 this Court quoted
with approval the following discussion by the National Labor Relations Commission:
We noted with concern that the criteria used by the Society failed to consider the
seniority factor in choosing those to be retrenched, a failure which, to our mind,
should invalidate the retrenchment, as the omission immediately makes the selection
process unfair and unreasonable. Things being equal, retaining a newly hired
employee and dismissing one who had occupied the position for years, even if the
scheme should result in savings for the employer, since he would be paying the
newcomer a relatively smaller wage, is simply unconscionable and violative of the
senior employee's tenurial rights. In Villena vs. NLRC, 193 SCRA 686. February 7,
1991, the Supreme Court considered the seniority factor an important ingredient for
the validity of a retrenchment program. According to the Court, the following legal
procedure should be observed for a retrenchment to be valid: (a) one-month prior
notice to the employee as prescribed by Article 282 of the Labor Code; and b) use of
a fair and reasonable criteria in carrying out the retrenchment program, such as 1)
less preferred status (as in the case of temporary employees) 2) efficiency rating, 3)
seniority, and 4) proof of claimed financial losses.43
There is no dispute here about respondent's seniority and preferred status.
Petitioners acknowledge that she had been employed by La Consolacion since
January 2000, initially as a part-time physician then serving full-time beginning
2008. It is also not disputed that while respondent was a full-time physician, La
Consolacion had another physician, Dr. Dimagmaliw, who served part-time.
Precisely, respondent's preeminence is a necessary implication of the very criteria
used by La Consolacion in retrenching her, i.e., that she was the highest paid
employee in health services division.

La Consolacion's disregard of respondent's seniority and preferred status

relative to a part-time employee indicates its resort to an unfair and
unreasonable criterion for retrenchment.

Indeed, it may have made mathematical sense to dismiss the highest paid employee
first. However, appraising the propriety of retrenchment is not merely a matter of
enabling an employer to augment financial prospects. It is as much a matter of
giving employees their just due. Employees who have earned their keep by
demonstrating exemplary performance and securing roles in their respective
organizations cannot be summarily disregarded by nakedly pecuniary considerations.
The Labor Code's permissiveness towards retrenchments aims to strike a balance
between legitimate management prerogatives and the demands of social justice.
Concern for the employer cannot mean a disregard for employees who have shown
not only their capacity, but even loyalty. La Consolacion's pressing financial
condition may invite commiseration, but its flawed standard for
retrenchment constrains this Court to maintain that respondent was
illegally dismissed.

Besides, La Consolacion could have also modified respondent's status from full-time
to part-time. When retrenchment becomes necessary, the employer may, in the
exercise of its business judgment, implement cost-saving measures, but at the same
time, should respect labor rights.
IV

While the impropriety of the termination of respondent's employment is settled, it is

equally manifest that she "was not a victim of arbitrary and high handed
action."44 Her dismissal was a result, not so much of purposeful malevolence, but of
a flawed appreciation of circumstances. La Consolacion was contending with dire
financial straits and wound up resorting to a monetarily logical, though legally faulty,
course of action.

In prior cases, this Court mitigated an employer's liability for backwages "where
good faith is evident."45 In Pepsi-Cola Products Philippines, Inc. v. Molon:46
An illegally dismissed employee is entitled to either reinstatement, if viable, or
separation pay if reinstatement is no longer viable, and backwages. In certain cases,
however, the Court has ordered the reinstatement of the employee without
backwages considering the fact that (1) the dismissal of the employee would be too
harsh a penalty; and (2) the employer was in good faith in terminating the
employee. For instance, in the case of Cruz v. Minister of Labor and Employment[,]
the Court ruled as follows:
The Court is convinced that petitioner's guilt was substantially established.
Nevertheless, we agree with respondent Minister's order of reinstating petitioner
without backwages instead of dismissal which may be too drastic. Denial of
backwages would sufficiently penalize her for her infractions. The bank officials acted
in good faith. They should be exempt from the burden of paying backwages. The
good faith of the employer, when clear under the circumstances, may preclude or
diminish recovery of backwages. Only employees discriminately dismissed are
entitled to backpay ...
Likewise, in the case of Itogon-Suyoc Mines, Inc. v. National Labor Relations
Commission, the Court pronounced that "[t]he ends of social and compassionate
justice would therefore be served if private respondent is reinstated but without
backwages in view of petitioner's good faith."47 (Citations omitted)
La Consolacion's prohibitive financial condition and demonstrated, though
imperfect, attempt at devising a reasonable mechanism for retrenching
employees impel this Court to temper its liability for backwages. Accordingly,
this Court upholds Labor Arbiter Roque's order for respondent to be
reinstated, but modifies the amount of backwages. Respondent is deemed to be
employed on a part-time basis from the effective date of her wrongful
termination and is entitled to backwages corresponding to such status and
period.

WHEREFORE, the Petition for Review on Certiorari is PARTIALLY GRANTED with

respect to the award of backwages and proportionate thirteenth (13th) month pay.
Labor Arbiter Luvina P. Roque's January 8, 2013 Decision is MODIFIED by awarding
to respondent Virginia Pascua backwages corresponding to a part-time physician,
reckoned from October 30, 2011.

SO ORDERED.

Velasco, Jr., (Chairperson), Bersamin, Martires, and Gesmundo, JJ., concur.

FIRST DIVISION

G.R. No. 159350, March 09, 2016

ALUMAMAY O. JAMIAS, JENNIFER C. MATUGUINAS AND JENNIFER F.

CRUZ,*Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION (SECOND
DIVISION), HON. COMMISSIONERS: RAUL T. AQUINO, VICTORIANO R.
CALAYCAY AND ANGELITA A. GACUTAN; HON. LABOR ARBITER VICENTE R.
LAYAWEN; INNODATA PHILIPPINES, INC., INNODATA PROCESSING
CORPORATION, (INNODATA CORPORATION), AND TODD
SOLOMON, Respondents.

DECISION

BERSAMIN, J.:

The petitioners appeal the adverse judgment promulgated on July 31,

2002,1 whereby the Court of Appeals (CA) upheld the ruling of the National Labor
Relations Commission (NLRC) declaring them as project employees hired for a fixed
period.

Antecedents

Respondent Innodata Philippines, Inc. (Innodata), a domestic corporation

engaged in the business of data processing and conversion for foreign
clients,2 hired the following individuals on various dates and under the following
terms, to wit:
chanRoblesvirtualLawlibrary

Name Position Duration of Contract

August 7, 1995 to August 7,
Alumamay Jamias Manual Editor
19963
Marietha V. Delos August 7, 1995 to August 7,
Manual Editor
Santos 19964
August 16, 1995 to August 16,
Lilian R. Guamil Manual Editor
19965
August 7, 1995 to August 7,
Rina C. Duque Manual Editor
19966
August 23, 1995 to August 23,
Marilen Agabayani Manual Editor
19967
Production September 1, 1995 to
Alvin V. Patnon 8
Personnel September 1, 1996
September 18, 1995 to
Analyn I. Beter Type Reader 9
September 18, 1996
Jerry O. Soldevilla Production September 18, 1995 to
 Personnel September 18, 199610
Ma. Concepcion A. Production September 18, 1995 to
11
Dela Cruz Personnel September 18, 1996
November 20, 1995 to
Jennifer Cruz Data Encoder 12
November 20, 1996
November 20, 1995 to
Jennifer Matuguinas Data Encoder 13
November 20, 1996
After their respective contracts expired, the aforenamed individuals filed a
complaint for illegal dismissal claiming that Innodata had made it appear
that they had been hired as project employees in order to prevent them
from becoming regular employees.14

Decision of the Labor Arbiter

On September 8, 1998, Labor Arbiter (LA) Vicente Layawen rendered his decision
dismissing the complaint for lack of merit.15 He found and held that the
petitioners had knowingly signed their respective contracts in which the
durations of their engagements were clearly stated; and that their fixed term
contracts, being exceptions to Article 280 of the Labor Code, precluded their
claiming regularization.

Ruling of the National Labor Relations Commission

On appeal, the NLRC affirmed the decision of LA Layawen,16 opining that Article

280 of the Labor Code did not prohibit employment contracts with fixed
periods provided the contracts had been voluntarily entered into by the
parties, viz.:
chanRoblesvirtualLawlibrary

[I]t is distinctly provided that complainants were hired for a definite period of one
year incidental upon the needs of the respondent by reason of the seasonal increase
in the volume of its business. Consequently, following the rulings in Pantranco North
Express, Inc. vs. NLRC, et al., G.R. No. 106654, December 16, 1994, the decisive
determinant in term of employment should not be the activities that the employee is
called upon to perform, but the day certain agreed upon by the parties for the
commencement and termination of their employment relationship, a day certain
being understood to be "that which must necessarily come, although it may not be
known when." Further, Article 280 of the Labor Code does not prescribe or prohibit
an employment contract with a fixed period provided, the same is entered into by
the parties, without any force, duress or improper pressure being brought to bear
upon the employee and absent any other circumstance vitiating consent. It does not
necessarily follow that where the duties of the employee consist of activities usually
necessary or desirable in the usual business of the employer, the parties are
forbidden from agreeing on a period of time for the performance of such activities.
There is thus nothing essentially contradictory between a definite period of
employment and the nature of the employee's duties. x x x17 ChanRoblesVirtualawlibrary

Judgment of the CA

As earlier mentioned, the CA upheld the NLRC. It observed that the desirability and
necessity of the functions being discharged by the petitioners did not make
them regular employees; that Innodata and the employees could still validly
enter into their contracts of employment for a fixed period provided they
had agreed upon the same at the time of the employees' engagement;18 that
Innodata's operations were contingent on job orders or undertakings for its foreign
clients; and that the availability of contracts from foreign clients, and the duration of
the employments could not be treated as permanent, but coterminous with the
projects.19
The petitioners moved for reconsideration,20 but the CA denied their motion on
August 8, 2003.21

Hence, this appeal by only three of the original complainants, namely petitioners
Alumamay Jamias, Jennifer Matuguinas and Jennifer Cruz.

Issues

The petitioners anchor their appeal on the following:

chanRoblesvirtualLawlibrary

THE HON. COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OF JURISDICTION OR IN EXCESS OF JURISDICTION AS IT
CANNOT REVERSE OR ALTER THE SUPREME COURT DECISION

THE SUPREME COURT HAS RULED THAT THE NATURE OF EMPLOYMENT AT

RESPONDENTS IS REGULAR NOT FIXED OR CONTRACTUAL IN AT LEAST TWO (2)
CASES AGAINST INNODATA PHILS., INC.

II

THE HON. COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW WHEN IT DID
NOT STICK TO PRECENDENT AS IT HAS ALREADY RULED IN AN EARLIER CASE THAT
THE NATURE OF EMPLOYMENT AT INNODATA PHILS., INC. IS REGULAR AND NOT
CONTRACTUAL

III

THE HON. COURT OF APPEALS PATENTLY ERRED IN LAW AND COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN RULING THAT
PETITIONERS' EMPLOYMENT IS FOR A FIXED PERIOD CO-TERMINOUS WITH A
PROJECT WHEN THERE IS NO PROJECT TO SPEAK OF

IV

THE HON. COURT OF APPEALS PALPABLY ERRED IN LAW IN RULING THAT THE
STIPULATION IN CONTRACT IS GOVERNING AND NOT THE NATURE OF EMPLOYMENT
AS DEFINED BY LAW.22 ChanRoblesVirtualawlibrary

The petitioners maintain that the nature of employment in Innodata had been settled
in Villanueva v. National Labor Relations Commission (Second
23 24
Division)  and Servidad v. National Labor Relations Commission,  whereby the
Court accorded regular status to the employees because the work they performed
were necessary and desirable to the business of data encoding, processing and
conversion.25 They insist that the CA consequently committed serious error in not
applying the pronouncement in said rulings, thereby ignoring the principle of stare
decisis in declaring their employment as governed by the contract of employment;
that the CA also erroneously found that the engagement of the petitioners was
coterminous with the project that was nonexistent; that Innodata engaged in
"semantic interplay of words" by introducing the concept of "fixed term employment"
or "project employment" that were not founded in law;26 and that Article 280 of
the Labor Code guarantees the right of workers to security of tenure, which rendered
the contracts between the petitioners and Innodata meaningless.27cralawred

In refutation, Innodata insists that the contracts dealt with

in Villanueva and Servidad were different from those entered into by the petitioners
herein,28 in that the former contained stipulations that violated the provisions of
the Labor Code on probationary employment and security of tenure,29 while the latter
contained terms known and explained to the petitioners who then willingly signed the
same;30 that as a mere service provider, it did not create jobs because its operations
depended on the availability of job orders or undertakings from its client; 31 that
Article 280 of the Labor Code allowed "term employment" as an exception to security
of tenure; and that the decisive determinant was the day certain agreed upon by the
parties, not the activities that the employees were called upon to perform.32

Were the petitioners regular or project employees of Innodata?

Ruling of the Court

We deny the petition for review on certiorari.

Stare decisis does not apply where the facts are essentially different

Contrary to the petitioners' insistence, the doctrine of stare decisis, by which the
pronouncements in Villanueva and Servidad would control the resolution of this case,
had no application herein.

The doctrine of stare decisis enjoins adherence to judicial precedents.33 When a court

has laid down a principle of law as applicable to a certain state of facts, it will adhere
to that principle and apply it to all future cases in which the facts are substantially
the same; but when the facts are essentially different, stare decisis does not apply
because a perfectly sound principle as applied to one set of facts might be entirely
inappropriate when a factual variance is introduced.34

Servidad and Villanueva involved contracts that contained stipulations not found in

the contracts entered by the petitioners. The cogent observations in this regard by
the CA are worth reiterating:
chanRoblesvirtualLawlibrary

A cursory examination of the facts would reveal that while all the cases
abovementioned involved employment contracts with a fixed term, the employment
contract subject of contention in the Servidad and Villanueva cases provided
for double probation, meaning, that the employees concerned, by virtue of a clause
incorporated in their contracts, were made to remain as probationary employees
even if they continue to work beyond the six month probation period set by law.
Indeed, such stipulation militates against Constitutional policy of guaranteeing the
tenurial security of the workingman. To Our mind, the provision alluded to is what
prodded the Supreme Court to disregard and nullify altogether the terms of the
written entente. Nonetheless, it does not appear to be the intendment of the High
Tribunal to sweepingly invalidate or declare as unlawful all employment contracts
with a fixed period. To phrase it differently, the said agreements providing for a one
year term would have been declared valid and, consequently, the separation from
work of the employees concerned would have been sustained had their contracts not
included any unlawful and circumventive condition.

It ought to be underscored that unlike in the Servidad and Villanueva cases, the

written contracts governing the relations of the respondent company and the
petitioners herein do not embody such illicit stipulation.35 ChanRoblesVirtualawlibrary

36
We also disagree with the petitioners' manifestation  that the Court struck down
in Innodata Philippines, Inc. v. Quejada-Lopez37 a contract of employment that was
similarly worded as their contracts with Innodata. What the Court invalidated
in Innodata Philippines, Inc. v. Quejada-Lopez was the purported fixed-term contract
that provided for two periods - a fixed term of one year under paragraph 1 of the
contract, and a three-month period under paragraph 7.4 of the contract - that in
reality placed the employees under probation. In contrast, the petitioners' contracts
did not contain similar stipulations, but stipulations to the effect that their
engagement was for the fixed period of 12 months, to wit:
chanRoblesvirtualLawlibrary
1. The EMPLOYER shall employ the EMPLOYEE and the EMPLOYEE shall serve the
EMPLOYER in the EMPLOYER'S business as a MANUAL EDITOR on a fixed term only
and for a fixed and definite period of twelve months, commencing on August 7, 1995
and terminating on August 7, 1996, x x x.38 ChanRoblesVirtualawlibrary

In other words, the terms of the petitioners' contracts did not subject them to
a probationary period similar to that indicated in the contracts struck down
in Innodata, Villanueva and Servidad.

II

A fixed period in a contract of employment does not by itself signify an

intention to circumvent Article 280 of the Labor Code

The petitioners argue that Innodata circumvented the security of tenure protected
under Article 280 of the Labor Code by providing a fixed term; and that they were
regular employees because the work they performed were necessary and desirable
to the business of Innodata.

The arguments of the petitioners lack merit and substance.

Article 280 of the Labor Code provides:

chanRoblesvirtualLawlibrary

Art. 280. Regular and Casual Employment. - The provisions of written

agreement to the contrary notwithstanding and regardless of the oral agreements of
the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer except
where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the
engagement of the employee or where the work or service to be performed is
seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed casual if it is not covered by the preceding

paragraph: Provided, That, any employee who has rendered at least one year
of service, whether such service is continuous or broken, shall be considered a
regular employee with respect to the activity in which he is employed and his
employment shall continue while such actuallv exists.
The provision contemplates three kinds of employees, namely: (a) regular
employees; (b) project employees; and (c) casuals who are neither regular
nor project employees. The nature of employment of a worker is determined
by the factors provided in Article 280 of the Labor Code, regardless of any
stipulation in the contract to the contrary.39 Thus, in Brent School, Inc. v.
Zamora,40 we explained that the clause referring to written contracts should be
construed to refer to agreements entered into for the purpose of circumventing the
security of tenure. Obviously, Article 280 does not preclude an agreement providing
for a fixed term of employment knowingly and voluntarily executed by the parties.41

A fixed term agreement, to be valid, must strictly conform with the

requirements and conditions provided in Article 280 of the Labor Code. The
test to determine whether a particular employee is engaged as a project or
regular employee is whether or not the employee is assigned to carry out a
specific project or undertaking, the duration or scope of which was specified
at the time of his engagement. 42 There must be a determination of, or a clear
agreement on, the completion or termination of the project at the time the employee
is engaged.43 Otherwise put, the fixed period of employment must be knowingly and
voluntarily agreed upon by the parties, without any force, duress or improper
pressure being brought to bear upon the employee and absent any other
circumstances vitiating his consent, or it must satisfactorily appear that the employer
and employee dealt with each other on more or less equal terms with no moral
dominance whatsoever being exercised by the former on the latter.44

The contracts of the petitioners indicated the one-year duration of their

engagement as well as their respective project assignments (i.e., Jamias
being assigned to the CD-ROM project; Cruz and Matuguinas to the TSET
project).45 There is no indication that the petitioners were made to sign the contracts
against their will. Neither did they refute Innodata's assertion that it did not employ
force, intimidate or fraudulently manipulate the petitioners into signing their
contracts, and that the terms thereof had been explained and made known to
them.46 Hence, the petitioners knowingly agreed to the terms of and voluntarily
signed their respective contracts.

That Innodata drafted the contracts with its business interest as the
overriding consideration did not necessarily warrant the holding that the
contracts were prejudicial against the petitioners.47 The fixing by Innodata of
the period specified in the contracts of employment did not also indicate its ill-motive
to circumvent the petitioners' security of tenure. Indeed, the petitioners could not
presume that the fixing of the one-year term was intended to evade or avoid
the protection to tenure under Article 280 of the Labor Code in the absence
of other evidence establishing such intention. This presumption must ordinarily
be based on some aspect of the agreement other than the mere specification of the
fixed term of the employment agreement, or on evidence aliunde of the intent to
evade.48

Lastly, the petitioners posit that they should be accorded regular status because
their work as editors and proofreaders were usually necessary to Innodata's business
of data processing.

We reject this position. For one, it would be unusual for a company like Innodata to
undertake a project that had no relationship to its usual business.49 Also, the
necessity and desirability of the work performed by the employees are not the
determinants in term employment, but rather the "day certain" voluntarily agreed
upon by the parties.50 As the CA cogently observed in this respect:
chanRoblesvirtualLawlibrary

There is proof to establish that Innodata's operations indeed rests upon job orders or
undertakings coming from its foreign clients. Apparently, its employees are assigned
to projects - one batch may be given a fixed period of one year, others, a slightly
shorter duration, depending on the estimated time of completion of the particular job
or undertaking farmed out by the client to the company.51 ChanRoblesVirtualawlibrary

In fine, the employment of the petitioners who were engaged as project

employees for a fixed term legally ended upon the expiration of their
contract. Their complaint for illegal dismissal was plainly lacking in merit. chanrobleslaw

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision

promulgated on July 31, 2002; and ORDER the petitioners to pay the costs of suit

SO ORDERED.

Sereno, C.J., Leonardo-De Castro, Perlas-Bernabe, and Caguioa, JJ., concur. chanroblesvirtuallawlibrary

SECOND DIVISION

G.R. No. 202015, July 13, 2016

ANTONIO VALEROSO AND ALLAN LEGATONA, Petitioners, v. SKYCABLE

CORPORATION, Respondent.

DECISION

DEL CASTILLO, J.:

By this Petition for Review on Certiorari,1 Antonio Valeroso and Allan Legatona

(petitioners) assail the November 11, 2011 Decision2 and May 18, 2012
Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 116296, which reversed
the May 24, 2010 Decision4 of the National Labor Relations Commission (NLRC) and
consequently dismissed their Complaint for illegal dismissal and money claims
against Skycable Corporation (respondent).

Antecedent Facts

This case arose from a Complaint5 for illegal dismissal, non-payment of 13th month

pay, separation pay and illegal deduction filed by petitioners against respondent on
February 25, 2009 before the Labor Arbiter, docketed as NLRC NCR Case No. 02-
03439-09. The Complaint was subsequently amended to include regularization and
payment of moral and exemplary damages as additional causes of action.6 ChanRoblesVirtualawlibrary

Petitioners Valeroso and Legatona alleged that they started working on

November 1, 1998 and July 13,1998, respectively, as account executives tasked to
solicit cable subscriptions for respondent, as evidenced by
7
Certifications  issued by Michael T. De la Cuesta (De la Cuesta),
respondent's Sales Territory Manager. As shown in their payslips8 for the years
2001 to 2006, they received commissions ranging from P15,000.00 to
530,000.00 each upon reaching a specific quota every month and an allowance of
P6,500.00 to P7,000.00 per month. From being direct hires of respondent, they
were transferred on January 1, 2007 to Skill Plus Manpower Services sans
any agreement for their transfer. In February 2009, they were informed that
their commissions would be reduced due to the introduction of prepaid
cards sold to cable subscribers resulting in lower monthly cable subscriptions.
Dismayed, they notified their manager, Marlon Pasta (Pasta), of their
intention to file a labor case with the NLRC, which they did on February 25,
2009. Pasta then informed them that they will be dropped from the roster of
its account executives, which act, petitioners claimed, constitutes unfair labor
practice.

Further, petitioners claimed that they did not receive 13 th month pay for 2006
and were underpaid of such benefit for the years 2007 and 2008; and that in January
2008, petitioner Legatona signed a Release and Quitclaim9 in consideration of the
amount of P25,000.00 as loyalty bonus from respondent.

Respondent, on the other hand, claimed that it did not terminate the
services of petitioners for there was never an employer-employee
relationship to begin with. It averred that in 1998, respondent (then Central
CATV, Inc.) engaged petitioners as independent contractors under a Sales
Agency Agreement.10 In 2007, respondents decided to streamline its operations and
instead of contracting with numerous independent account executives such as
petitioners, respondent engaged the services of an independent contractor, Armada
Resources & Marketing Solutions, Inc. (Armada, for brevity; formerly Skill Plus
Manpower Services) under a Sales Agency Agreement.11 As a result, petitioners'
contracts were terminated but they, together with other sales account executives,
were referred for transfer to Armada. Petitioners then became employees of Armada.
In 2009, respondent and Armada again entered into a Sales Agency
Agreement,12 wherein petitioners were again tasked to solicit accounts/ generate
sales for respondent.
Respondent insisted that in hiring petitioners and Armada as independent
contractors, it engaged in legitimate job contracting where no employer-
employee relation exists between them. In an affidavit,13 De la Cuesta stated
that the certifications he issued are not employment certifications but are mere
accommodations, requested by petitioners themselves, for their credit card and loan
applications. Moreover, Armada's President, Francisco Navasa (Navasa), in his
affidavit,14 verified that Armada is an independent contractor which selected and
engaged the services of petitioners, paid their compensation, exercised the power to
control their conduct and discipline or dismiss them. Therefore, when petitioners filed
their Complaint in February 2009, they were employees of Armada and as such, had
no cause of action against respondent.

Petitioners, however, assailed the allegation that they were employees of

Armada, claiming that they were directly hired, paid and dismissed by
respondent. They cited the following as indicators that they are under the direct
control and supervision of respondent: 1) respondent's officers supervise their
area of work, monitor them daily, update them of new promos and installations they
need to work on, inform them of meetings and penalize them for non-attendance,
ask them to train new agents/account executives, and inform them of new prices
and expiration dates of product promos; 2) respondent's supervisors delegate to
them authority to investigate, campaign against and legalize unlawful cable
connections; 3) respondent's supervisors monitor their quota production
and impose guaranteed charges as penalty for failing to meet their quota; and
4) respondent consistently gives trophies to award them of their
outstanding performance.

Ruling of the Labor Arbiter

In a Decision15 dated August 26, 2009, the Labor Arbiter dismissed the

Complaint since petitioners failed to establish by substantial evidence that
respondent was their employer. The Labor Arbiter observed that petitioners
failed to identify and specify the person who allegedly hired them, paid their
wages and exercised supervision and control over the manner and means of
performing their work. There was neither any evidence to prove that Pasta, who
allegedly dismissed them, is an officer of respondent with an authority to dismiss
them. The dispositive portion of the Decision reads:

WHEREFORE, premises considered, the complaint filed in the instant case is

dismissed as discussed in the body hereof.

SO ORDERED.16

Ruling of the National Labor Relations Commission

Petitioners filed an appeal with the NLRC attributing reversible error on the Labor
Arbiter in dismissing their Complaint on the ground of no employer-employee
relationship.

In a Decision17 dated May 24, 2010, the NLRC reversed the Labor Arbiter's
ruling. It found that petitioners are regular employees of respondent having
performed their job as account executives for more than one year, even if not
continuous and merely intermittent, and considering the indispensability and
continuing need of petitioners' tasks to the business. The NLRC observed that there
was no evidence that petitioners have substantial capitalization or
investment to consider them as independent contractors. On the other hand,
the certifications and the payslips presented by petitioners constitute
substantial evidence of employer-employee relationship. The NLRC held that
upon termination of the Sales Agency Agreement with Armada in 2009, petitioners
were considered dismissed without just cause and due process. The dispositive
portion of the NLRC Decision reads:

WHEREFORE, premises considered, the instant appeal is GRANTED and the assailed
Decision of Labor Arbiter Gaudencio P. Demaisip, Jr. dated August 26, 2009, is
REVERSED and SET ASIDE, and a new one entered declaring complainants to have
been illegally dismissed. Accordingly, respondent Skycable Corporation/Central CATV
Inc. is hereby directed to immediately reinstate complainants to their former
positionfs] and to pay each of the complainants their full backwages reckoned from
February 25,2009 up to the actual payroll reinstatement, (tentatively computed at
P607,200.00), in addition to the amount of P58,500.00 representing 13 th month pay
differentials and pro-ratal 3th month pay for 2009.

SO ORDERED.18 cralawred

With the NLRC s ruling in favor of petitioners, respondent filed a motion for
reconsideration. This motion was, however, denied by the NLRC in its Resolution 19 of
July 27, 2010.

Riding of the Court of Appeals

Respondent filed a Petition for Certiorari20 with the CA, attributing grave abuse of

discretion on the part of the NLRC in holding it liable for the alleged illegal dismissal
of petitioners.

The CA rendered a Decision21 on November 11, 2011 granting respondent's

Petition for Certiorari and reversing the NLRC Decision. The CA sustained the
Labor Arbiter's finding that there was no evidence to substantiate the bare allegation
of employer-employee relationship between the parties. The dispositive portion of
the CA Decision reads:

WHEREFORE, premises considered, the instant petition is GRANTED and the Decision
dated May 24, 2010 of the National Labor Relations Commission in NLRC NCR Case
No. 02-03439-09 is hereby REVERSED and SET ASIDE.

SO ORDERED.22 cralawred

Petitioners moved for reconsideration which was denied by the CA in its

Resolution23 dated May 18, 2012.

Issues

Hence, this Petition raising the following issues:

I.
WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RENDERING ITS DECISION
DATED NOVEMBER 11, 2011.

II.

WHETHER THE PETITIONERS WERE RESPONDENT'S REGULAR EMPLOYEES, WHOSE

DISMISSAL FROM EMPLOYMENT WAS ILLEGAL.24 cralawred

Petitioners maintain that respondent failed to discharge the burden of

disproving the employer-employee relationship through competent evidence
of independent contractorship. They assert that the nature of their work and
length of service with respondent made them regular employees as defined in Article
28025 of the Labor Code. Consequently, the CA gravely erred in dismissing their
Complaint for illegal dismissal against respondent.

Our Ruling

The Petition has no merit.

The pivotal issue to be resolved in this case is whether petitioners were

employees of respondent.

Well-entrenched is the doctrine that the existence of an employer-employee

relationship is ultimately a question of fact and that the findings thereon by the
Labor Arbiter and NLRC shall be accorded not only respect but even finality when
supported by substantial evidence.26 However, considering the conflicting findings of
fact by the Labor Arbiter, the NLRC and the CA, the Court is impelled to re-examine
the records and resolve this factual issue.

To prove the claim of an employer-employee relationship, the following should be

established by competent evidence: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employer's power to control the employee with respect to the means and methods
by which the work is to be accomplished.27 Among the four, the most determinative
factor in ascertaining the existence of employer-employee relationship is the "right of
control test."28 Under this control test, the person for whom the services are
performed reserves the right to control not only the end to be achieved, but also the
means by which such end is reached.29 ChanRoblesVirtualawlibrary

We rule that an employer-employee relationship is absent in this case. The

evidence presented by petitioners did not prove their claim that they were
employees of respondent. The certifications issued by De la Cuesta are not
competent evidence of employer-employee relation as these merely
certified that respondent had engaged the services of petitioners without
specifying the true nature of such engagement. These documents did not certify that
petitioners were employees but were only issued to accommodate petitioners'
request for loan applications, which fact was not refuted by petitioners. As for the
payslips presented, it appears that only the payslips for the years 2001 to
2006 were submitted. No payslips for the years material to this case (2007
to 2009) were submitted. It is undisputed that petitioners were transferred to
Armada in 2007, thus, we cannot give much credence to the payslips issued before
this period.

We, further, find no merit in petitioners' assertion that respondent's control over
them was demonstrated. "[Guidelines indicative of labor law 'control' do not merely
relate to the mutually desirable result intended by the contractual relationship; they
must have the nature of dictating the means and methods to be  employed in
attaining the result."30 Here, we find that respondent's act of regularly
updating petitioners of new promos, new price listings, meetings and
trainings of new account executives; imposing quotas and penalties; and
giving commendations for meritorious performance do not pertain to the
means and methods of how petitioners were to perform and accomplish their task
of soliciting cable subscriptions. At most, these indicate that respondent
regularly monitors the result of petitioners' work but in no way dictate upon
them the manner in which they should perform their duties. Absent any
intrusion by respondent into the means and manner of conducting petitioners' tasks,
bare assertion that petitioners' work was supervised and monitored does not suffice
to establish employer-employee relationship.

Reliance by petitioners on the case of Francisco v. National Labor Relations

Commission31 is misplaced. In that case, the Court adopted a two-tiered test in order
to determine the true relationship between the employer and employee. This two-
tiered test, which involves: "(1) the putative employer's power to control the
employee with respect to the means and methods by which the work is to be
accomplished; and (2) the underlying economic realities of the activity or
relationship," has been made especially appropriate in cases where there is no
written agreement to base the relationship on and where the various tasks
performed by the worker brings complexity to the relationship with the
employer.32 Thus, in addition to the control test, the totality of the economic
circumstances of the worker is taken into light to determine the existence of
employment relationship.

In the present case, there is a written contract, i.e., the Sales Agency

Agreement, which served as the primary evidence of the nature of the
parties' relationship. In this duly executed and signed agreement, petitioners and
respondent unequivocally agreed that petitioners' services were to be engaged on an
agency basis as sales account executives and that no employer-employee
relationship is created but an independent contractorship. It is therefore clear that
the intention at the time of the signing of the agreement is not to be bound by an
employer-employee relationship. At any rate, even if we are to apply the two-tiered
test pronounced in the Francisco  case, there can still be no employer-employee
relationship since, as discussed, the element of control is already absent.

Indeed, "[t]he presence of [the] power of control is indicative of an employment

relationship while the absence thereof is indicative of independent
contractorship."33 Moreover, evidence on record reveal the existence of independent
contractorship between the parties. As mentioned, the Sales Agency Agreement
provided the primary evidence of such relationship. "While the existence of 
employer-employee relationship is a matter of  law, the characterization made by the
parties in their contract as to the nature of their juridical relationship cannot be
simply ignored, particularly in this case where the parties' written contract
unequivocally states their intention"34 to be strictly bound by independent
contractorship. Petitioner Legatona, in fact, in his Release and Quitclaim,
acknowledged that he was performing sales activities as sales agent/independent
contractor and not an employee of respondent. In the same token, De la Cuesta and
Navasa, made sworn testimonies that petitioners are employees of Armada which is
an independent contractor engaged to provide marketing services for respondent.

Neither can we subscribe to petitioners' contention that they are considered regular
employees of respondent for they perform functions necessary and desirable to the
business operation of respondent in consonance with Article 280 of the Labor Code.
We have held that "Article 280 is not the yardstick for determining the existence of
an employment relationship because it merely distinguishes between two kinds of
employees, i.e., regular employees and casual employees, for purposes of
determining [their rights] to certain benefits, [such as] to join or form a union, or to
security of tenure. Article 280 does not apply where the existence of an employment
relationship is in dispute,"35 as in this case.
Evidently, the legal relation of petitioners as sales account executives to
respondent can be that of an independent contractor. There was no showing
that respondent had control with respect to the details of how petitioners
must conduct their sales activity of soliciting cable subscriptions from the
public. In the case of Abante, Jr. v. Lamadrid Bearing & Parts
Corporation,36 Empermaco Abante, Jr., a commission salesman who pursued his
selling activities without interference or supervision from respondent company and
relied on his own resources to perform his functions, was held to be an independent
contractor. Similarly, in Sandigan Savings & Loan Bank, Inc. v. National Labor
Relations Commission,37 Anita Javier was also held to be an independent contractor
as the Court found that Sandigan Realty Development Corporation had no control
over her conduct as a realty sales agent since its only concern or interest was in the
result of her work and not in how it was achieved.

All told, we sustain the CA's factual findings and conclusion and accordingly,
find no cogent reason to overturn the dismissal of petitioners' Compl.
,aint against respondent.

WHEREFORE, the Petition is DENIED. The November 11, 2011 Decision and May
18, 2012 Resolution of the Court of Appeals in CA-G.R. SP No. 116296
are AFFIRMED.

SO ORDERED. chanroblesvirtuallawlibrary

Carpio, (Chairperson), Brion, and Leonen, JJ., concur.

Mendoza, J., on official leave.
THIRD DIVISION

January 17, 2018

G.R. No. 219435

ALLIED BANKING CORPORATION, now merged with PHILIPPINE NATIONAL

BANK, Petitioner
vs.
REYNOLD CALUMPANG, Respondent

DECISION

VELASCO, J.:

The Case

Before the Court is a Petition for Review on Certiorari filed under Rule 45 of the Rules
of Court for the reversal and setting aside of the Decision  dated September 12, 2014
1

and the Resolution  dated June 9, 2015 of the Court of Appeals (CA) - Cebu City in
2

CA-G.R. CEB SP No. 02906, which affirmed the findings of the National Labor
Relations Commission (NLRC) and of the Labor Arbiter, declaring respondent to have
been illegally dismissed by petitioner.

The Facts

Petitioner Allied Banking Corporation  ("Bank") and Race Cleaners, Inc.

3

("RCI"), a corporation engaged in the business of janitorial and manpower

services, had entered into a Service Agreement whereby the latter provided the
former with messengerial, janitorial, communication, and maintenance services and
the personnel therefor.4

On September 28, 2003, respondent Reynold Calumpang was hired as a

janitor by RCI and was assigned at the Bank's Tanjay City Branch ("the
Branch"). He was tasked to perform janitorial work and messengerial/errand
services. His job required him to be out of the Branch at times to nm errands such
as delivering statements and checks for clearing, mailing letters, among others. 5

Petitioner, however, observed that whenever respondent went out on errands,

it takes a long time for him to return to the Branch. It was eventually
discovered that during these times, respondent was also plying his pedicab and
ferrying passengers. Petitioner also found out through several clients of the
Branch who informed the Bank Manager, Mr. Oscar Infante, that respondent had
been borrowing money from them. Because of these acts, Mr. Infante informed
respondent that his services would no longer be required at the Branch. 6
Disgruntled, respondent thereafter filed a complaint for illegal dismissal and
underpayment of wages against petitioner before the NLRC,  which was docketed as
7

RAB VII-07-0094-2005-D. 8

In his position paper, respondent asserted that the four-fold test of employer-
employee relationship is present between him and the Bank.  First, he averred
9

that he was a regular employee of the Bank assigned as a Janitor of the Branch with
a salary of ₱4,200 payable every 15 days each month, and assigned such other tasks
essential and necessary for the Bank's business. 10

He alleged that petitioner engaged his services and exercised direct control
and supervision over him through the Branch Head, Oscar Infante, not only as
to the results of his work but also as to the means and methods by which the same
was to be accomplished. According to respondent, Infante gives the direct orders on
the work to be done and accomplished during working days, such as "m[o]pping,
cleaning the comfort room of the [B]ank, arrang[ing] furniture and fixture, bank
documents, throw[ing] garbage/waste disposal, cleaning the windows, tables and
teller cage" as well as directing him to "do messengerial/errand services such as
mailing of letters, delivery of bank statements and deliver[ing] checks for clearing." 11

As regards the payment of salary, respondent claimed that it was the Branch
that directly paid his salaries and wages every "quincina."  As for the power
12

of dismissal, respondent further alleged that it was petitioner Bank, through its
Branch Head, who terminated his services. 13

For its part, petitioner alleged that respondent was not its employee, but that of RCI,
with which it had entered into a Service Agreement to provide "messengerial,
janitorial, communications and maintenance services and the personnel therefor."  It14

claimed that while respondent was required to be out of the Branch at times to
accomplish his tasks, it was observed that whenever he went out on these errands,
he would take a long time to return to the Branch. Petitioner eventually discovered
that during these times, respondent was "also plying his pedicab and ferrying
passengers." Aside from this, petitioner averred that several clients of the Branch
informed Infante that respondent had been borrowing money from them "owing to
his familiarity with said clients." Upon discovering these incidents, petitioner "had no
choice but to have complainant relieved and replaced." Accordingly, Infante informed
respondent that his services would no longer be required by the Branch. 15

Petitioner denied the existence of any employer-employee relationship

between itself and respondent. It asserted that respondent was clearly an
employee of RCI by virtue of the Service Agreement which clearly indicated in
Article XI thereof that there would be no employer-employee relationship between
RCI's employees and the Bank.  It further averred that RCI is a qualified job
16

contractor because of its capitalization and the fact that it exercised control and
supervision over its employees deployed at the branches of the petitioner in
accordance with Rule VIII-A, Sec. 4, pars. (d) and (e) of the Omnibus Rules
Implementing the Labor Code. 17

Furthermore, petitioner argued that it was merely exercising its prerogative

under the Service Agreement to seek the replacement or relief of any personnel
assigned by RCI when the Branch Head informed respondent that his services would
no longer be required at the Branch. According to petitioner, this decision to replace
respondent was not equivalent to termination of employment, especially since it was
neither whimsical nor arbitrary.  Thus, petitioner concludes that, in the absence
18

of any employer-employee relationship between the parties, respondent had

no cause of action against petitioner for illegal dismissal, damages and
other claims. 19
Ruling of the Labor Arbiter

In its Decision  dated March 28, 2006, the Labor Arbiter ruled in favor of
20

respondent, the dispositive portion of which reads:

WHEREFORE, foregoing considered, complainant is hereby declared to be an

employee of respondent Allied Banking Corporation. It is declared further that
complainant has been illegally dismissed. Respondent Allied Banking Corporation is
hereby ordered to reinstate complainant to his former position without loss of
seniority rights or privileges, with full backwages from the time his salary was
withheld until his actual reinstatement, which is tentatively computed in the amount
of ₱37,800.00. Should reinstatement be unfeasible for valid reasons, respondent is
ordered to pay the complainant separation pay of one month salary per year of
service, a fraction of six months is considered as one year which is computed in the
amount of ₱46,200.

SO ORDERED. 21

The Labor Arbiter held that there was an employer-employee relationship

between petitioner and respondent, based on the following findings: (a)
Respondent rendered services to petitioner for eleven (11) unbroken years;
(b) There was no evidence of a Service Agreement between petitioner and RCI;
(c) There was no evidence of a request for replacement of respondent made by
petitioner with RCI; (d) Respondent was directly paid by petitioner and not
through RCI; (e) Respondent's work was directly controlled and supervised by
petitioner; (f) It was petitioner who terminated the services of respondent
with no participation of RCI whatsoever; and (g) RCI disowned any
employment relationship with respondent. 22

Considering its finding of the existence of an employer-employee relationship

between petitioner and respondent, the Labor Arbiter further ruled that the reason
and manner by which respondent was terminated fell short of the requirements of
the law since due process was not observed. Accordingly, respondent was declared
to have been illegally dismissed and ordered to be reinstated without loss of seniority
or privileges, with full backwages.
23

Aggrieved, petitioner immediately filed a Notice of Appeal and Memorandum of

Appeal with the NLRC, which was docketed as NLRC Case No. V-000628-2006. 24

Ruling of the National Labor Relations Commission

The NLRC affirmed the decision of the Labor Arbiter in its Decision dated
February 16, 2007, to wit:

WHEREFORE, premises considered, the appeal of respondent Allied Banking

Corporation is hereby DISMISSED for lack of merit and the appealed Decision is
AFFIRMED.

SO ORDERED. 25

Agreeing with the Labor Arbiter's findings, the NLRC ruled that petitioner
exercised all the elements of an employer-employee relationship through
the payment of wages, control and supervision over complainant's work and
the power of dismissal.  The NLRC discredited petitioner's argument that it merely
26

exercised its prerogative to seek for a replacement or relief of any personnel

assigned by RCI absent any evidence that it sought respondent's relief from RCI. 27
Petitioner moved for the reconsideration of the NLRC Decision,  but the same was
28

denied in a Resolution dated May 17, 2007.  Thus, petitioner elevated the matter to
29

the CA in a petition which was docketed as CA-G.R. SP No. 02906. 30

Ruling of the Court of Appeals

In the assailed Decision dated September 12, 2014, the CA denied the petition
and upheld the rulings of the Labor Arbiter and the NLRC. The dispositive
portion of the assailed Decision reads:

WHEREFORE, premises considered, the petition is hereby DENIED. The NLRC

Decision dated 16 February 2007 and the Resolution dated 17 May 2007, in RAB VII
Case No. 07-0094-2005-D, is AFFIRMED.

The Labor Arbiter is hereby ordered to re-compute the award of backwages and
separation pay in accordance with the above disquisitions.

SO ORDERED. 31

The CA ruled that RCI is a labor-only contractor. It applied the test of

independent contractorship that "whether one claiming to be an independent
contractor has contracted to do work according to his own methods and without
being subject to the control of the employer, except only as to the results of the
work" in determining that RCI merely served as an agent of petitioner bank and that
respondent was truly an employee of petitioner. 32

As to the issue of the propriety of respondent's dismissal, the CA affirmed the

findings of the Labor Arbiter and the NLRC that petitioner Bank failed to give
respondent ample opportunity to contest the legality of his dismissal since
no notice of termination was given to him. Consequently, the CA affirmed the award
of reinstatement without loss of seniority rights and other privileges, and his full
backwages inclusive of allowances and other benefits or their monetary equivalent,
computed from the time his compensation was withheld up to the time of his actual
reinstatement.

Nevertheless, finding that there were strained relations between petitioner

bank and respondent, the CA ordered the award of separation pay in lieu of
reinstatement, equivalent to one (1) month salary for every year of service, with a
fraction of a year of at least six (6) months to be considered as one (1) whole year,
to be computed from the date he was hired until the finality of the decision, earning
a legal interest at the rate of six percent (6%) per annum until full satisfaction.

Petitioner filed a Motion for Reconsideration (of the Decision Dated 12 September
2014) with Entry of Appearance and Motion for Substitution of Party dated October
16, 2014,  but it was denied in the assailed Resolution dated June 9, 2015.
33

Hence, this petition.

The Petition

Petitioner asserts that the CA erred in declaring RCI as a labor-only

contractor. It claims that RCI carried an independent business as reflected in the
Service Agreement that petitioner bank entered with RCI. Aside from the substantial
capitalization of RCI, petitioner bank avers that RCI exercises control and supervision
over its personnel deployed at its branches. Petitioner bank further argues that even
assuming that respondent's work is related to its business, such work is not
necessary in the conduct of the bank's principal business. Finally, petitioner contends
that it does not have the power to dismiss respondent and control his work based on
the Service Agreement with RCI.

Nevertheless, petitioner bank defends its right to ask for respondent's replacement
under Article IV of the Service Agreement. Petitioner reiterates that
respondent's acts of borrowing money from the bank's clients and
plying/ferrying passengers for a fee during his hour of duty constitute conduct
which is prejudicial to the interest of petitioner. Thus, in accordance with the
Service Agreement, petitioner bank merely exercised its right to change or have
respondent replaced instead of imposing disciplinary measures on him. According to
petitioner, this act was erroneously construed by the CA as an exercise of the power
of control over or of dismissal of respondent.

In a Resolution  dated September 28, 2015, We required respondent to comment on

34

the petition within ten (10) days from notice. However, respondent has failed to file
any comment thereon to date. Accordingly, respondent is deemed to have waived his
right to comment on the petition and the Court shall now proceed to rule on its
merits.

The Issues

Petitioner raises the following issues:

1. Whether or not the CA erred in declaring that RCI is a laboronly contractor.

2. Whether or not the CA erred in declaring that there exists an employer-

employee relationship between the Bank and respondent.

3. Whether or not the CA erred in (i) declaring that respondent had been
illegally dismissed, and (ii) granting his monetary claims.

Essentially, the principal issue is whether the CA erred in affirming the NLRC
Decision which declared that RCI is a labor-only contractor, and in ordering
the Labor Arbiter to re-compute the award of backwages and separation
pay.

The Court's Ruling

The petition is partly meritorious.

RCI is a labor-only contractor

Article 106 of the Labor Code provides the relations which may arise between an
employer, a contractor, and the contractors' employees, thus:

ART. 106. Contractor or subcontracting. - Whenever an employer enters into a

contract with another person for the performance of the former's work, the
employees of the contractor and of the latter's subcontractor, if any, shall be paid in
accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of
his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees
to the extent of the work performed under the contract, in the same manner and
extent that he is liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or
prohibit the contracting out of labor to protect the rights of workers established
under the Code. In so prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the
parties involved shall be considered the employer for purposes of this Code, to
prevent any violation or circumvention of any provision of this Code.

There is labor-only contracting where the person supplying workers to an

employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to the
principal business of such employer. In such cases, the person or intermediary shall
be considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by
him.

Permissible job contracting or subcontracting has been distinguished from labor-only

contracting such that permissible job contracting or subcontracting refers to an
arrangement whereby a principal agrees to put out or farm out to a contractor or
subcontractor the performance or completion of a specific job, work or service within
a definite or predetermined period, regardless of whether such job, work or service is
to be performed or completed within or outside the premises of the principal, while
labor-only contracting, on the other hand, pertains to an arrangement where the
contractor or subcontractor merely recruits, supplies or places workers to perform a
job, work or service for a principal.
35

These distinctions were laid out in the Omnibus Rules Implementing the Labor Code
thus:

SECTION 8. Job Contracting. - There is job contracting permissible under the

Code if the following conditions are met:

(a) The contractor carries on an independent business and

undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results
thereof; and

(b) The contractor has substantial capital or investment in the form

of tools, equipment, machineries, work premises, and other materials
which are necessary in the conduct of his business.

SECTION 9. Labor-only contracting. - (a) Any person who undertakes to supply

workers to an employer shall be deemed to be engaged in labor-only contracting
where such person:

(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and

(2) The workers recruited and placed by such person are performing
activities which are directly related to the principal business or operations of
the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and

the person acting as contractor shall be considered merely as an agent
or intermediary of the employer who shall be responsible to the
 workers in the same manner and extent as if the latter were directly
employed by him.

(c) For cases not falling under this Rule, the Secretary of Labor and
Employment shall determine through appropriate orders whether or not
the contracting out of labor is permissible in the light of the
circumstances of each case and after considering the operating needs
of the employer and the rights of the workers involved. In such case,
he may prescribe conditions and restrictions to insure the protection
and welfare of the workers.

As a general rule, a contractor is presumed to be a labor-only contractor ,

unless such contractor overcomes the burden of proving that it has the substantial
capital, investment, tools and the like. 36

In the present case, petitioner failed to establish that RCI is a legitimate labor
contractor as contemplated under the Labor Code. Except for the bare
allegation of petitioner that RCI had substantial capitalization, it presented
no supporting evidence to show the same. Petitioner never submitted financial
statements from RCI. Even the Service Agreement allegedly entered into between
petitioner and RCI, upon which petitioner relied to show that RCI was an
independent contractor, had lapsed in August 2005, as admitted by petitioner in its
Position Paper.  Notably, petitioner failed to allege when the Service Agreement was
37

executed, thus, making its claim that respondent was hired by RCI and assigned to
petitioner in 2003 even more ambiguous.

Aside from this, petitioner's claim that RCI exercised control and supervision
over respondent is belied by the fact that petitioner admitted that its own
Branch Manager had informed respondent that his services would no longer
be required at the Branch.  This overt act shows that petitioner had direct
38

control over respondent while he was assigned at the Branch. Moreover, the CA is
correct in finding that respondent's work is related to petitioner's business and is
characterized as part of or in pursuit of its banking operations.

An employer-employee relationship exists between petitioner and

respondent

A finding that a contractor is a labor-only contractor, as opposed to permissible job

contracting, is equivalent to declaring that there is an employer-employee
relationship between the principal and the employees of the supposed
contractor, and the labor-only contractor is considered as a mere agent of
the principal, the real employer. 39

In this case, petitioner bank is the principal employer and RCI is the labor-only
contractor. Accordingly, petitioner and RCI are solidarily liable for the rightful claims
of respondent.

Petitioner had valid grounds to dismiss respondent

It is an established principle that the dismissal of an employee is justified where

there was a just cause and the employee was afforded due process prior to
dismissal.  The burden of proof to establish these twin requirements is on the
40

employer, who must present clear, accurate, consistent, and convincing evidence to
that effect. 41

The Labor Arbiter haphazardly declared that respondent was illegally dismissed when
it ruled that respondent's misconduct was not established since due process was not
observed.  The NLRC also ruled in a similar manner and failed to address the
42
grounds for termination raised by petitioner, specifically respondent's
transgressions.  While the CA addressed the aspect of substantive due process, it
43

simply disregarded the grounds raised by petitioner and concluded that petitioner
failed to discharge the burden of proof that valid or authorized causes under the
Labor Code exist. 44

We, however, find that petitioner's basis for terminating respondent rests on
valid and legal grounds. At the very first instance, petitioner had already stressed
in its position paper that respondent was found committing conduct prejudicial to the
interests of the Branch when it was discovered that 1) respondent was plying his
pedicab and ferrying passengers during his work hours and 2) he had been
borrowing money from several clients of the Branch.

Nowhere in the records was it shown that respondent denied these imputations
against him.  Absent any denial on the part of respondent, the Court is constrained
1âwphi1

to believe that respondent's silence can be construed as an admission of these

accusations against him.

The very nature of the actions imputed against respondent is serious and
detrimental to the Bank's operations and reputation. Thus, petitioner's
decision to relieve respondent from his employment is justified.

Respondent's right to procedural due process was violated

Nevertheless, We agree with the findings of the appellate court that there were
procedural lapses in the dismissal of respondent.

The importance of procedural due process was expounded by this Court in King of
Kings Transport, Inc. v. Mamac, thus:

(1) The first written notice to be served on the employees should contain
the specific causes or grounds for termination against them, and a directive
that the employees are given the opportunity to submit their written explanation
within a reasonable period. Reasonable opportunity under the Omnibus Rules means
every kind of assistance that management must accord to the employees to enable
them to prepare adequately for their defense. This should be construed as a period
of at least five calendar days from receipt of the notice x x x. Moreover, in order to
enable the employees to intelligently prepare their explanation and defenses, the
notice should contain a detailed narration of the facts and circumstances that will
serve as basis for the charge against the employees. A general description of the
charge will not suffice. Lastly, the notice should specifically mention which company
rules, if any, are violated and/or which among the grounds under Art. 288 [of the
Labor Code] is being charged against the employees.

(2) After serving the first notice, the employees should schedule and conduct a
hearing or conference wherein the employees will be given the opportunity to (1)
explain and clarify their defenses to the charge against them; (2) present evidence
in support of their defenses; and (3) rebut the evidence presented against them by
the management. During the hearing or conference, the employees are given the
chance to defend themselves personally, with the assistance of a representative or
counsel of their choice x x x.

(3) After determining that termination is justified, the employer shall serve the
employees a written notice of termination indicating that:

(1) all the circumstances involving the charge against the employees have been
considered; and (2) grounds have been established to justify the severance of
their employment.  (emphasis in the original)
45
In the present case, it is uncontested that petitioner failed to give respondent
ample opportunity to contest the legality of his dismissal since he was
neither given a notice to explain nor a notice of termination. The first and
second notice requirements have not been properly observed; thus,
respondent's dismissal, albeit with valid grounds, is tainted with illegality.

The award of backwages and separation pay is deleted but respondent is

entitled to nominal damages

Considering that there were valid and substantive grounds to terminate respondent's
employment, the award of backwages and separation pay is deleted. However,
petitioner's violation of respondent's right to statutory procedural due process
warrants the payment of indemnity in the form of nominal damages.

of vindicating or recognizing that right, and not for indemnifying the plaintiff for any
loss suffered by him. Its award is thus not for the purpose of indemnification for a
loss but for the recognition and vindication of a right.46

;l,sound discretion, the Court should take into account several factors surrounding
the case, such as: (1) the employer's financial, medical, and/or moral assistance to
the sick employee; (2) the flexibility and leeway that the employer allowed the sick
employee in performing his duties while attending to his medical needs; (3) the
employer's grant of other termination benefits in favor of the employee; and (4)
whether there was a bona fide attempt on the part of the employer to comply with
the twin-notice requirement as opposed to giving no notice at all. 47

Based on the factual considerations of the present case, We deem it appropriate to

award nominal damages in the amount of Thirty Thousand Pesos (₱30,000) in favor
of respondent as a result of petitioner's act of violating his right to procedural due
process.

WHEREFORE, the petition is hereby PARTIALLY GRANTED. The Decision dated

September 12, 2014 and the Resolution dated June 9, 2015 of the Court of Appeals-
Cebu City in CA-G.R. CEB SP No. 02906 are
hereby AFFIRMED with MODIFICATION. Since Race Cleaners Inc. is a labor-only
contractor, petitioner Allied Banking Corporation now merged with Philippine National
Bank is declared to be the employer of respondent Reynold Calumpang, whose
dismissal is declared to be substantively valid for being based on sufficient and valid
grounds. However, he was denied his right to procedural due process for lack of the
required twin notices to explain and of dismissal.

Consequently, petitioner is ordered to pay respondent nominal damages in the

amount of ₱30,000 for its non-compliance with procedural due process.

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice

WE CONCUR:

LUCAS P. BERSAMIN
Associate Justice

MARVIC M.V.F. LEONEN SAMUEL R. MARTIRES

Associate Justice Associate Justice
ALEXANDER G. GESMUNDO
Associate Justice

ATTESTATION

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

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

CERTIFICATION

Pursuant to the 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.

MARIA LOURDES P.A. SERENO

Chief Justice
SECOND DIVISION

June 5, 2017

G.R. No. 215627

LUIS S. DOBLE, JR., Petitioner

vs.
ABB, INC./NITIN DESAI, Respondents

DECISION

PERALTA, J.:

This is a petition for review on certiorari  under Rule 45 of the Rules of Court, seeking
to reverse and set aside the minute Resolution   dated November 29, 2013 and
1

Resolution  dated November 28, 2014 issued by the Court of Appeals, and to
2

reinstate with modification the Decision dated November 29, 2012 of the Labor
Arbiter in NLRC-Case No. NCR-03- 04889-12.

Petitioner Luis S. Doble, Jr., a duly licensed engineer, was hired by

respondent ABB, Inc. as Junior Design Engineer on March 29, 1993. During almost
nineteen (19) years of his employment with the respondent ABB, Inc. prior to his
disputed termination, Doble rose through the ranks and was promoted as
follows:

1. 1994 -Design Engineer

2. 1996 - Sales Engineer of the Network Protection

3. 1999 - Senior Sales Engineer of the Power Technology Utility Automation Business

4. March 2005 - Manager for Sales Sub-Station Automation Business Unit, Power
System Division

5. July 2006 - Officer-In-Charge of the Power Technology Utility Business Unit

6. March 2007 - Senior Manager and Head of the Power Technology Utility
Automation, Power System Division

7. November 2008 - Local Division Manager, Power System Division

8. March 2010 - Vice-President and Local Division Manager of Power System

Division.

As a matter of policy, ABB, Inc. conducts the yearly Performance and

Development Appraisal of all its employees. In all years prior to 2008, Doble
was rated with grades three (3) or four (4), which are equivalent to Strong
Performance or Superior Results. In the years 2008, 2009, and 2010, he received a
performance rating of 4 for superior results.

On March 2, 2012, Doble was called by respondent ABB, Inc. Country

Manager and President Nitin Desai, and was informed that his performance
rating for 2011 is one (1) which is equivalent to unsatisfactory
performance.

On March 13, 2012, at about 10:45 a.m., a company Executive Assistant

informed Doble that he has a meeting with ABB, Inc. President Desai and
Country Human Resource (HR)  Manager Marivic Miranda at 11: 15 a.m. in the Luzon
Conference Room of ABB, Inc.

During the meeting, ABB, Inc. President Desai explained to Doble that the
Global and Regional Management have demanded for a change in leadership
due to the extent of losses and level of discontent among the ranks of the PS
Division. Desai then raised the option for Doble to resign as Local Division Manager
of the PS Division. Thereafter, HR Manager Miranda told Doble that he would be
paid separation pay equivalent to 75% of his monthly salary for every year
of service, provided he would submit a letter of resignation, and gave him
until 12:45 p.m. within which to decide.

Shocked by the abrupt decision of the management, Doble asked why he should
be the one made to resign. Miranda said that it was the decision of the
management, and left him alone in the conference room to decide whether or not to
resign. At this juncture, the parties gave contrasting accounts on the ensuing events
which led to the termination of Doble's employment.

Doble narrated in his Position Paper how he was constructively dismissed

and forced to resign:

21. [HR Manager Miranda] came back at about 12:45 o'clock in the afternoon and
asked the complainant if he was able to decide already. Complainant told Mrs.
Miranda that he could not decide because he was in a quandary why he was [the one
being] made to resign;

22. Then, Mrs. Miranda said that complainant could be given One Month
Separation Pay per year of service instead of 75% of the monthly salary.
Complainant again asked Mrs. Miranda why he was the one being made to resign.
Mrs. Miranda repeated that it was the decision of the management;

23. Complainant told Mrs. Miranda that he was already so hungry, thirsty,
weak and tired because of extreme pressure. So, he asked Mrs. Miranda to
allow him to go back to his office and to buy food in the canteen;

24. Mrs. Miranda said that she would be the one to request somebody to buy
food for him and that he (complainant) should just eat in the conference
room;

25. However, complainant appealed to Mrs. Miranda to allow him to return to

his office where he could eat. She allowed complainant under [the]
condition that he should go back to the conference room at 2:00 o'clock in the
afternoon. Mrs. Miranda instructed complainant not to leave the company premises
to take lunch and informed him that she gave instruction to the security guard of the
gate not to allow him to go outside the company;

26. At 2:00 o'clock in the afternoon, complainant returned to the Luzon

Conference Room. Mrs. Miranda asked complainant [about] the letter of
resignation. Complainant answered that he had not prepared a resignation letter.
Complainant did not prepare the resignation letter because he was aware
that respondents were actually terminating his services illegally and without
due process, that the letter of resignation he was being made to prepare was only a
"palusot" (to borrow the word of Cong. Farinas) of respondent.

27. Mrs. Miranda again told the complainant to prepare the resignation letter as she
said there was a need to complete the process within that day and further told him
that he would not be allowed to leave the company without finishing all the
necessary papers and that he would not be permitted to return to the company
on the following days;

28. Complainant could not do anything. Under the extreme pressure and
threat of Mrs. Miranda, he went to his office and prepared the letter of
resignation;

29. In his office, complainant was surprised when he did not have an access
anymore on the server and could not use his computer. He learned from the IT
personnel that after the office hours on March 12, 2012 his access to the computer
system was already cut upon instruction of the top management. So, he just used
the computer of his staff in the preparation of the letter of resignation;

30. At about 4:30 o'clock in the afternoon, the Country HR Manager Mrs. Miranda
came to the office of the complainant to get the resignation letter. Complainant gave
it to Mrs. Miranda. The letter states that:

March 13, 2012

"To: Mr. Nitin Desai President

Marivic Miranda Country HR

Dear Sir/Madam,

As per your instruction, I am sending you my immediate resignation

effective today, March 13, 2012 as Vice-President of Power Systems
Division.

Very Truly Yours,

SGD. Luis S. Doble, Jr."

xxx

Upon reading it, Mrs. Miranda did not like the contents and told the complainant to
make another letter of resignation and instructed him to put the words, "tendering
my immediate resignation" and to remove the words, "as per your instruction."

31. Complainant told Mrs. Miranda that he could not change the letter because he
made the letter upon her instruction. But, Mrs. Miranda insisted to revise the letter of
resignation and submit it before 7:00 o'clock in the evening. Though against his
conscience, complainant revised the letter of resignation. Complainant was also told
by Mrs. Miranda if he would purchase the company Car Plan of the 2009 Ford Escape
being used by him so that the balance leasing cost could be deducted from his
separation pay. As complainant could do nothing, he just agreed to buy the car. Mrs.
Miranda also informed complainant that she would be the one to prepare the letter of
intent to purchase the car for him to sign. Then, Mrs. Miranda left.
32. About 6:30 o'clock in the evening, complainant submitted the revised letter of
resignation. His revised letter of resignation following the instruction of Mrs. Miranda
states that:

March 13, 2012

"To: Mr. Nitin Desai

President

Marivic Miranda
Country HR

Dear Sir/Madam,

I am tendering my immediate resignation effective today, March 13, 2012

as Vice-President of Power Systems Division.

Very Truly Yours,

SGD. Luis S. Doble, Jr."

xxxx

33. About 8:00 o'clock in the evening, Mrs. Miranda went to the office of the
complainant and let him sign the Letter of Intent to purchase the car and the Letter
of Acceptance dated March 13, 2012. x x x The letter [of acceptance] states that:

March 13, 2012

Luis S. Doble, Jr.

Vice-President
PS Division

Thru: Nitin Desai

Country HR Manager and President

Dear Luis,

Relative to your letter dated March 13, 2012 informing us of your

resignation from ABB effective March 13, 2012 please be informed that the
same is accepted after your completion of the Company's Clearance process.

Thank you for your support to ABB, Inc., and we wish you luck in your
future endeavors.

Truly Yours,

SGD. Marivic Miranda

Country HR Manager

Received by:

SGD. Luis S. Doble, Jr.

Date: 3/13/2012"
Mrs. Miranda also brought with her the Employee Clearance Sheet dated March 13,
2012 of complainant already signed by her with same date March 13, 2012. Then,
she let complainant surrender the company ID, mobile phone, laptop and cabinet
keys. She went to the car of the complainant in the parking area, checked it and got
the Caltex Gasoline Star Card and the Safety Medical Kit;

34. At time, it was already about 8:30 o'clock in the evening. Complainant was tired,
stressed, weak, felt uneasy, mentally and psychologically disturbed and hungry as
his detention had lasted for more than eight (8) hours already from 11: 15 o'clock in
the morning to 8 :40 o'clock in evening;

35. Complainant was only allowed to leave the office at about 8:40 o'clock in the
evening. Mrs. Miranda called and informed the gate guard to already allow the
complainant to leave the company premises; x x x.  3

On the part of ABB, Inc., HR Manager Miranda narrated in her affidavit how
Doble voluntarily resigned:

6. x x x At about 12:45 p.m., I returned to the Luzon Room and he told me that he
has yet to decide. At this time, he requested tha t he would want to go to his room
and eat lunch. I offered that I could request someone to buy for him food instead. He
reiterated his request to go back to his room and eat and I said by all means he can;

7. Thereafter, I told him that we may meet again to discuss his resignation. He
asked what time and I replied that 2:00 p.m. would be ideal. He agreed. At around
2:00 p.m., Mr. Doble did not come back to the Luzon room. At 2:30 p.m., however,
we met again;

8. At this meeting, I asked him whether he has made a decision. He then attempted
to negotiate by proposing to get a resignation benefit equivalent to 1.5 month's pay
and said that if he is given said amount, there will be no issue, no labor case
between him and ABB, Inc. I told him that the request could not be accommodated,
as the policy provides 75% month's pay for every year of service. I then suggested
to him that he could talk to Mr. Desai regarding this request but he declined. At this
point, he requested that the separation benefit be higher, as he anticipates that
there will still be deductions thereon. I left the room to confer with Mr. Desai, and
ABB's Chief Finance Officer, Mr. Robert Ramos. It was agreed that we can extend a
one-month pay per every year of service to Mr. Doble in consideration of his tenure
of service with ABB. Thereafter, I returned to the Luzon Room to inform Mr. Doble
that ABB would be willing to give him a separation benefit equivalent to one-month
pay per every year of service. Unrelenting, he again negotiated the possibility of a
higher amount. I replied that this is ABB's final and last offer. He then said that he
will draft his letter of resignation.

xxxx

10. At around 4:30 p.m., Mr. Doble handed me a resignation letter which read as
follows: "as per your instruction, I am sending you my immediate resignation
effective today, March 13, 2012 as Vice-President of Power Systems Division." I
expressed my strong disagreement with the wordings of the resignation letter and
asked him to remove the phrase "as per your instruction." ABB and I never gave him
any instruction/s to resign. I emphasized to him that it was his decision to resign.
Thus, he agreed to revise the letter. Also, contrary to Mr. Doble' s assertion in his
Position Paper, I never imposed any deadline on the submission of the revised letter.

11. He then brought up the possibility of purchasing the company-issued vehicle. I

responded that it is possible but he has to make a request. I volunteered to draft the
document signifying his intent to purchase the company-issued vehicle.
12. At about 6:00 p.m., Mr. Doble went to my office and gave me the revised
resignation letter. I then told him that I will prepare the acceptance letter, the
clearance form and request to purchase the vehicle. I asked him whether he will
come to my office or shall I go to his office. He responded that I should just go to his
office.

13. Around 7:00 p.m., I gave him a copy of ABB's letter of acceptance of his
resignation and the employee's clearance form. As he has already returned the
company-issued mobile phone and laptop computer to me, I acknowledged the same
and then signed the employee clearance form to reflect the surrender of these items.
I also gave him the draft of the intent to purchase the company-issued vehicle,
which he there and then signed. He left the clearance form to me for routing to the
various heads of office in ABB.

14. It was at this point that he asked me as to when he will receive the resignation
benefit, as some of his payables are coming up in the following days. I told him that
processing usually takes 5-7 work days because a big part of the resignation benefit
will not come directly from ABB but from the retirement plan manager- BPI.
Nevertheless, I told him that I would do my best to have the resignation benefit
released to him, if possible, on 16 March 2012 and told him to give me his personal
mobile number and to make follow-ups via  text message.

15. On 23 March 2012, I met Mr. Doble at McDonald's Alabang Town Center - the
venue that we both agreed to meet because his vehicle could not go farther because
of the vehicle volume reduction scheme and because it was the graduation of his son
later in the afternoon. Thereat, he received the check for his resignation benefit and
signed all the pertinent documents, including a Release and Quitclaim. 4

On March 26, 2012, Doble filed a Complaint  for illegal dismissal with prayer for
5

reinstatement and payment of backwages, other monetary claims and damages.

In a Decision dated November 29, 2012, the Labor Arbiter   held that Doble was
6

illegally dismissed because his resignation was involuntary, and ordered ABB,
Inc. and Desai to pay his backwages and separation pay, since reinstatement is no
longer feasible. The dispositive portion of the Decision reads:

IN VIEW OF THE FOREGOING, respondent[s] is [are] directed to pay the complainant

of his backwages from the time of complainant's dismissal up to the finality of this
Decision and such award is computed at One Million Six Hundred Forty-Eight
Thousand Nine Hundred Seventeen Pesos and 24/100 (₱ 1,648,917 .24) as of this
date, the computation of which is shown below:

Backwages:

3/13112 - 11/29112 = 8.53 Mos.

₱193,308 x 8.53 mos.= .................. ₱ 1,648,917.24

Complainant is deemed paid of his separation pay. The rest of the claims are
dismissed for lack of merit. SO ORDERED. 7

Aggrieved by the Decision of the Labor Arbiter, ABB, Inc. and Desai filed an
appeal, whereas Doble filed a partial appeal from the dismissal of his
monetary claims.

In a Decision dated June 26, 2013, the two (2) Commissioners8 of the NLRC Sixth
Division voted to grant the appeal filed by ABB, Inc. and Desai, and to dismiss
the partial appeal of Doble. They found that the resignation of Doble being
voluntary, there can be no illegal dismissal and no basis for the award of
other monetary claims, damages and attorney's fees. However, one NLRC
Commissioner9 dissented in this wise:

The complainant has no reason to resign, much less to abruptly resign on March 13,
2012. What happened on that day was that complainant was called to a meeting by
the company President who told him that his performance or rating the previous year
was unsatisfactory. In the same meeting the President gave him the option to resign.
x x x In simple terms, the company wants to get rid of him so he can either resign or
be fired. Clearly, his resignation is not voluntary. Besides, why would he file
for illegal dismissal and reinstatement if he voluntarily resigned?  10

Doble filed a motion for reconsideration, but the NLRC denied the motion in a
Resolution dated August 14, 2013 for lack of compelling reason to disturb its findings
and conclusions. Dissatisfied with the NLRC Decision and Resolution, Doble filed a
petition for certiorari before the Court of Appeals (CA).

In a minute Resolution  dated November 29, 2013, the CA dismissed outright the
11

Petition for Certiorari  because (1) "the assailed National Labor Relations

Commission (NLRC) Decision and Resolution attached are mere 'CERTIFIED
PHOTOCOP(IES)' and not duplicate originals or certified true copies;" and (2)
"petitioner's counsel's MCLE Compliance No. III- 0006542' xxx does not
appear to have complied with the Fourth (IV) MCLE compliance period."

In a Resolution dated November 28, 2014, the CA also denied petitioner's motion for
reconsideration because (1) the NLRC Decision and Resolution attached to the
petition were certified "photo" copies, unlike the specific requirement for a certified
"true" copy, or a "clearly legible duplicate original or certified true copy" of the
assailed disposition, and (2) petitioner's counsel conceded his inability to comply with
the MCLE requirement.  12

Disgruntled with the Resolutions of the CA, Doble filed this petition for review
on certiorari,  raising the following arguments:

I. WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS ERRED AND

COMMITTED GRAVE ABUSE OF DISCRETION IN DISMISSING THE PETITION ON
MERE TECHNICALITY DESPITE THAT PETITIONER HAS THE MOST PERSUASIVE
REASON TO RELAX THE APPLICATION OF THE RULES OF PROCEDURES TO AFFORD
HIM THE OPPORTUNITY TO VENTILATE HIS CASE ON THE MERITS.

II. WITH DUE RESPECT, THE QUESTIONED RESOLUTIONS ARE CONTRARY TO THE
LIBERAL APPLICATION OF THE RULES OF PROCEDURE AND TO THE CASE OF
GALANG VS. COURT OF APPEALS, ET AL., G.R. NO. 76221, JULY 29, 1991.

III. WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SHOULD HA VE

DECIDED THE PETITION ON THE MERITS INSTEAD OF DISMISSING THE SAME
PURELY ON TECHNICAL GROUNDS IN THE INTEREST OF JUSTICE AND EQUITY AND
THAT THE ASSAILED RESOLUTIONS ARE CONTRARY TO THE CASE OF YONG CHAN
KIM VS. PEOPLE OF THE PHILIPPINES, HON. EDGAR D. GUSTILO, PRESIDING
JUDGE, RTC, 6TH WDUCIAL REGION, BRANCH 28, ILOILO CITY AND COURT APPEALS
(13 TH DIVISION), SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER
AQUACULTURE DEPARTMENT (SEAFDEC), G.R. NO. 84719, AUGUST 10, 1989.  13

Faulting grave abuse of discretion against the NLRC for dismissing his
complaint for illegal dismissal, Doble prays for the reinstatement of the
Decision of the Labor Arbiter with the following modifications:
1. ordering the respondents, jointly and severally, to reinstate the petitioner with full
backwages without loss of seniority rights and benefits from the time he was
dismissed until his actual reinstatement;

2. ordering the respondents, jointly and severally, to pay petitioner the following
allowance and benefits -

a. Recreational allowance of ₱l80,000.00 per year;

b. Bonus of 3.9 months of his total monthly salary equivalent to an

average of P750,000.00 every year;

c. Rice subsidy monthly converted to cash in the average amount of

₱20,400.00 per year;

d. 15 days sick leave, 15 days vacation leave and 3 days long service
leave per year; and

e. 13th month pay equivalent to one (1) month salary.

3. ordering the respondents, jointly and severally, to pay petitioner ₱l,000,000.00 as

moral damages;

4. condemning the respondents, jointly and severally, to pay petitioner

₱l,000,000.00 as exemplary damages;

5. ordering the respondents, jointly and severally, to pay a fine of ₱l ,000,000.00 for
dismissing the petitioner without due process;

6. ordering the respondents, jointly and severally, to pay petitioner ₱100,000.00 as

actual damages for acceptance fee and ₱5,000.00 per hearing;

7. ordering the respondents, jointly and severally, to pay 10% attorney's fees of the
total monetary award.  14

The petition is partly impressed with merit on procedural grounds, but still devoid of
substantive merit.

On the procedural aspect, the Court rules that the CA gravely erred when it
dismissed outright the Petition for Certiorari and refused to reinstate the same,
despite the fact that the two defects noted in the minute Resolution dated November
29, 2013 have already been substantially rectified.

First, the CA gravely erred in dismissing the petition on the ground that the
assailed NLRC Decision and Resolution attached thereto are mere "certified
photocopies" and not duplicate originals or certified true copies. The CA's inordinate
nitpicking on procedural requirements is contrary to the Court's ruling in Coca-Cola
Bottlers Phils., Inc. v. Cabalo: 
15

The problem presented is not novel. In fact, it is a fairly recurrent one in petitions
for certiorari  of NLRC decisions as it seems to be the practice of the NLRC to issue
certified "xerox copies" only instead of certified "true copies." We have, however, put
an end to this issue in Quintano v. NLRC  when we declared that there is no
substantial distinction between a photocopy or a "Xerox copy" and a "true
copy" for as long as the photocopy is certified by the proper officer of the
court, tribunal, agency or office involved or his duly-authorized
representative and that the same is a faithful reproduction of the
original. We held therein:

The submission of the duplicate original or certified true copy of judgment, order,
resolution or ruling subject of a petition for certiorari is essential to determine
whether the court, body or tribunal, which rendered the same, indeed, committed
grave abuse of discretion. The provision states that either a legible duplicate original
or certified true copy thereof shall be submitted. If what is submitted is a copy, then
it is required that the same is certified by the proper officer of the court, tribunal,
agency or office involved or his duly-authorized representative. The purpose for this
requirement is not difficult to see. It is to assure that such copy is a faithful
reproduction of the judgment, order, resolution or ruling subject of the petition.

x x x           x x x          x x x

Indeed, for all intents and purposes, a certified Xerox copy is no different from a
certified true copy of the original document. The operative word in the term certified
true copy under Section 3, Rule 46 of the Rules of Court is certified. The word means
made certain. It comes from the Latin word certificare  meaning, to make certain.
Thus, as long as the copy of the assailed judgment, order, resolution or ruling
submitted to the court has been certified by the proper officer of the court, tribunal,
agency or office involved or his duly-authorized representative and that the same is
a faithful reproduction thereof, then the requirement of the law has been complied
with. It is presumed that, before making the certification, the authorized
representative had compared the Xerox copy with the original and found the same a
faithful reproduction thereof.  16

In this case, a perusal of the attached NLRC Decision and Resolution shows that they
are indeed certified photocopies of the said decision and resolution.  Each page of
1âwphi1

the NLRC Decision and the Resolution has been certified by the NLRC Sixth Division's
Deputy Clerk of Court, Atty. Cherry P. Sarmiento, who is undisputedly the proper
officer to make such certification.   Moreover, the attached copies of the NLRC
17

Decision and Resolution appear to be faithful reproductions thereof. Thus, there is

substantial compliance with Section 1, Rule 65 of the Rules of Court which provides
that any petition filed under Rule 65 should be accompanied by a certified true copy
of the judgment, order or resolution subject thereof.

Second,  the CA also gravely erred in denying the Motion for Reconsideration of
the Resolution dated November 29, 2013 which dismissed the Petition
for Certiorari on the ground that petitioner's counsel had conceded his
inability to comply with the Mandatory Continuing Legal
Education (MCLE)  requirement.

On point is People v. Arrojado  where it was held that the failure of a lawyer to
18

indicate in his or her pleadings the number and date of issue of his or her MCLE
Certificate of Compliance will no longer result in the dismissal of the case:

In any event, to avoid inordinate delays in the disposition of cases brought about by
a counsel's failure to indicate in his or her pleadings the number and date of issue of
his or her MCLE Certificate of Compliance, this Court issued an En Banc Resolution,
dated January 14, 2014 which amended B.M. No. 1922 by repealing the phrase
"Failure to disclose the required information would cause the dismissal of the case
and the expunction of the pleadings from the records" and replacing it with "Failure
to disclose the required information would subject the counsel to appropriate penalty
and disciplinary action." Thus, under the amendatory Resolution, the failure of a
lawyer to indicate in his or her pleadings the number and date of issue of his or her
MCLE Certificate of Compliance will no longer result in the dismissal of the case and
expunction of the pleadings from the records. Nonetheless, such failure will subject
the lawyer to the prescribed fine and/or disciplinary action. 
19

Granted that the Petition for Certiorari  was filed before the CA on October 29, 2013
even before the effectivity of En Banc  Resolution dated January 14, 2014 which
amended B.M. No. 1922,  it bears to stress that petitioner's counsel later submitted
20

Receipts of Attendance in the MCLE Lecture Series for his MCLE Compliance IV  on 21

March 3, 2014 and the Certificate of Compliance   albeit on January 26, 2015.
22

Hence, the CA erred in issuing the assailed November 28, 2014 Resolution denying
Doble's motion for reconsideration, there being no more reason not to reinstate the
petition for certiorari based on procedural defects which have already been
corrected. Needless to state, liberal construction of procedural rules is the norm to
effect substantial justice, and litigations should, as much as possible, be decided on
the merits and not on technicalities.

While as a general rule, only errors of law are reviewed by the Court in petitions for
review under Rule 45, one of the well-recognized exceptions to this rule is when the
factual findings of the NLRC contradict those of the labor arbiter.   In the interest of
23

substantial justice, judicial economy and efficiency, and given that the records on
hand are sufficient to make a determination of the validity of Doble's dismissal, the
Court may re-evaluate and review the factual findings of the labor tribunals, instead
of remanding the case before the CA for the resolution of the case on the merits.

On the substantive issue of whether Doble was illegally dismissed, the Court
holds that he voluntarily resigned, and was not constructively dismissed.

In illegal dismissal cases, the fundamental rule is that when an employer interposes
the defense of resignation, the burden to prove that the employee indeed
voluntarily resigned necessarily rests upon the employer.  The concepts of
24

constructive dismissal and resignation are discussed in Gan v. Galderma Philippines,

Inc.,   thus:
25

To begin with, constructive dismissal is defined as quitting or cessation of

work because continued employment is rendered impossible, unreasonable or
unlikely; when there is a demotion in rank or a diminution of pay and other
benefits. It exists if an act of clear discrimination, insensibility, or disdain by an
employer becomes so unbearable on the part of the employee that it could foreclose
any choice by him except to forego his continued employment. There is involuntary
resignation due to the harsh, hostile, and unfavorable conditions set by the
employer. The test of constructive dismissal is whether a reasonable person
in the employee's position would have felt compelled to give up his
employment/position under the circumstances.

On the other hand, "[r]esignation is the voluntary act of an employee who is in a

situation where one believes that personal reasons cannot be sacrificed in favor of
the exigency of the service, and one has no other choice but to dissociate oneself
from employment. It is a formal pronouncement or relinquishment of an office, with
the intention of relinquishing the office accompanied by the act of relinquishment. As
the intent to relinquish must concur with the overt act of relinquishment, the acts of
the employee before and after the alleged resignation must be considered in
determining whether he or she, in fact, intended to sever his or her employment." 26

Guided by these principles, the Court agrees with the NLRC that ABB, Inc. and
Desai were able to prove by substantial evidence that Doble voluntarily
resigned, as shown by the following documents (1) the affidavit of ABB, Inc. 's
HR Manager Miranda;  (2) the resignation letter;  the letter of intent to
27 28

purchase service vehicle;  and ABB, Inc. 's acceptance letter,  all dated March 13,
29 30

2012, (3) the Employee Clearance Sheet;  (4) the Certificate of Employment
31
dated March 23, 2012;  (5) photocopy of Bank of the Philippine Islands manager's
32

check  in the amount of ₱2,009,822.72, representing the separation benefit; (6)
33

Employee Final Pay Computation,  showing payment of leave credits, rice

34

subsidy and bonuses, amounting to ₱805,399.35; and (7) the Receipt, Release
and Quitclaim for a consideration of the total sum of ₱2,815,222.07. 35

For his part, Doble insisted that he was constructively dismissed because he
was threatened, detained as if he were a prisoner, unreasonably pressured
and compelled to write a resignation letter for more than eight (8) hours inside the
company office. Because of the incident, which supposedly besmirched his
reputation, he claimed to have suffered embarrassment before his staff and other
personnel, sleepless nights, moral shock and anxiety. He even claimed to have
received calls and text messages from customers, competitors, colleagues and
friends because of what the company did to him. Apart from his bare and self-
serving allegations, however, Doble failed to present substantial
documentary or testimonial evidence to corroborate the same. It is well
settled that bare allegations of constructive dismissal, when uncorroborated by the
evidence on record, cannot be given credence.  Neither can it be held that Doble was
36

constructively dismissed because there is no evidence on record of any act of clear

discrimination, insensibility, or disdain towards him which rendered his continued
employment unbearable or forced him to terminate his employment from ABB, Inc.,
much less a claim of demotion in rank or a diminution of pay and other benefits.

Since Doble claims to have been forced to submit a resignation letter, it is

incumbent upon him to prove with clear and convincing evidence that his
resignation was not voluntary, but was actually a case of constructive
dismissal, i.e., a product of coercion or intimidation.  Coercion exists when there is a
37

reasonable or well-grounded fear of an imminent evil upon a person or his property

or upon the person or property of his spouse, descendants or ascendants.  The 38

requisites for intimidation to vitiate one's consent are stated in St. Michael
Academy v. NLRC,  thus:
39

.... (1) that the intimidation caused the consent to be given; (2) that the
threatened act be unjust or unlawful; (3) that the threat be real or serious,
there being evident disproportion between the evil and the resistance which all men
can offer, leading to the choice of doing the act which is forced on the person to do
as the lesser evil; and (4) that it produces a well-grounded fear from the fact
that the person from whom it comes has the necessary means or ability to inflict the
threatened injury to his person or property x x x.

After a careful review of the records, the Court finds that the above-stated
requisites are absent, and that the NLRC has exhaustively discussed that Doble
was not coerced into submitting a resignation letter, thus:

" [c]omplainant has been employed with Respondent-ABB for nineteen (19) years.
He is holding one of the top positions in the company and answerable only to the
President, herein Respondent-Desai. He is a highly educated man. It is improbable
that a man of his stature may be pressured into doing something that he does not
want to do. Being a man of high educational attainment and qualifications, he is
expected to know the import of everything he executes. His claim that he was forced
to resign by HR Miranda is unbelievable. The Complainant is the Vice President and
Local Division Manager of the Power System Division of the Respondent-ABB, while
HR Miranda is the Country HR Manager. The latter does not outrank the former. It is
likewise unbelievable that the HR Manager would prevent the Complainant from
leaving the premises of the company nor prevent him from taking his lunch wherever
he wants to take it. HR Miranda simply does not have that power and she cannot
possibly do that to a high-ranking officer who has served the company for nineteen
(19) years. The event of 13 March 2012 is undoubtedly stressful to the Complainant
as the top management had already expressed displeasure with his performance. But
such degree of tension is expected in a corporation environment where the
primordial consideration is to earn profit. As stated in the sworn statement of HR
Miranda, the Complainant was given the option to resign by Respondent-Desai. Her
statement that the Complainant negotiated for a higher benefit is more attuned with
what actually transpired on 13 March 2012. The retirement plan for Respondent-ABB
only gives a retiree 75% of his monthly pay for every year of service. The
Complainant was able to get a higher rate equivalent to one (1) month salary for
every year of service.

The Complainant prepared his resignation letter in his own office. His first
letter was not accepted by HR Miranda because it gave the impression that he
was being directed or ordered to resign. HR Miranda made it clear to him that he
is not being ordered to resign as it is his own decision whether to resign or not. The
Complainant submitted another resignation letter which was accepted by
Respondent-ABB through its Country HR Manager. Thereafter, the Complainant no
longer reported for work as his resignation was effective immediately. It was
ten (10) days after he submitted his resignation letter that he again met
with HR Miranda to get his retirement benefits. The meeting took place outside
the company premises. If, indeed, the resignation of the Complainant was
involuntary, he could have easily sought legal counsel or advice right after he left the
company premises on 13 March 2012. Instead, he waited for his clearance to be
processed and his check prepared. He cannot claim that he was still under duress
from March 14 to 22, 2012. The Complainant waited to be given his benefits first,
and three (3) days thereafter filed his complaint before this Office. This is hardly the
mindset of a person who is not in control of his life.
40

On the other hand, the Court disagrees with the findings of the Labor Arbiter
that Doble's resignation was not voluntary based on the following events, to
wit: (1) on March 2, 2012, Doble's Performance and Development Approval rating
in 2011 is unsatisfactory; (2) there are no prior circumstances that may show
his intention to resign; (3) on March 13, 2012, Desai raised the option for him
to resign, after explaining that due to the extent of losses and level of discontent
among the ranks of the PS Division, the Global and Regional management have
demanded for a change in leadership; (4) from the circumstances surrounding his
resignation, the option to resign did not originate from Doble but from Desai,
whose actuations was not a mere suggestion but a directive or order that
was effected on the same day of March 13, 2012; (5) HR Manager Miranda's affidavit
clearly show that Doble underwent pressure to resign because starting 11 :00 a.m.
until 6:00 p.m. of even date, the option to resign was reiterated and repeated until
he handed a revised resignation letter; and (6) Doble was not given the opportunity
or option to stay in the service.

Even if the option to resign originated from the employer, what is important
for resignation to be deemed voluntary is that the employee's intent to
relinquish must concur with the overt act of relinquishment. There can be no
doubt as to the drastic and shocking nature of the abrupt decision of ABB, Inc. to let
Doble resign on March 13, 2012 after almost 19 years of dedicated and satisfactory
service, on account of the extent of losses, the level of discontent among the ranks
of PS Division, and the ABB, Inc. Global and Regional management's demand for a
change in leadership. It bears emphasis, however, that between the start of the
conference at around 11:00 a.m. and about eight (8) hours later in the evening
when he left the company premises, Doble negotiated for a higher separation
pay, i.e.,  from 7 5o/o of the monthly salary for every year of service allowed under
the company retirement plan up to double that amount, or 1.5 month's pay for every
year of service. In fact, Doble tendered a resignation letter only after being offered a
better separation benefit of 1-month pay for every year of service, and even
submitted a separate letter expressing his intent to buy his service vehicle. After
considering the acts of Doble before and after his resignation, the Court is convinced
of Doble's clear intention to sever his employment with ABB, Inc.

Doble claimed that while inside the conference room at about 2:00 p.m. of March 13,
2012, "he was aware that respondents were actually terminating his services illegally
and without due process, that the letter of resignation he was being made to prepare
was only a 'palusot' (to borrow the word of Cong. Farinas) of respondents (ABB, Inc.
and Desai)."  Despite being aware of the illegality of his dismissal, Doble submitted a
41

resignation letter and a letter of intent to purchase his service vehicle, allowed
Miranda to process his resignation papers, met her outside company premises on
March 23, 2012 to sign a waiver and quitclaim and to receive his separation benefits.
In view of the lapse of considerable period between his resignation until the
execution of a quitclaim and receipt of his separation benefits about ten (10) days
later, the Court is inclined to rule that the filing of his complaint for illegal dismissal
on March 26, 2012 is a mere afterthought, if not a mere pretention.

Doble further cited the supposed propensity of ABB, Inc. to illegally dismiss its
employees, who had filed a complaint for illegal dismissal against the company and
were eventually awarded backwages and separation pay. Suffice it to state that
Doble failed to prove that he is similarly situated with his co-workers, and that they,
likewise, voluntarily executed a resignation letter and a waiver and quitclaim, and
received a reasonable separation pay, before filing their respective complaints for
illegal dismissal against the company. Instead of presenting copies of final decisions
of the labor tribunals to substantiate his claim, Doble merely submitted
photocopies   of vouchers and checks, showing that his co-workers were paid certain
42

amounts of money on account of their labor cases. Verily, such checks and vouchers
are inadequate to prove that he was illegally dismissed and should likewise be
awarded monetary claims.

It is curious to note that despite his allegations that "under the extreme pressure
and threat of Mrs. Miranda, he went to his office and prepared the letter of
resignation"  and that "she gave instruction to the security guard of the gate not to
43

allow him to go outside the company,"  Doble neither impleaded her as respondent
44

in the complaint for illegal dismissal nor sought to hold her jointly and severally
liable, together with the company and its President, for monetary claims and
damages. The Court is befuddled that Doble is not prosecuting his claim against HR
Manager Miranda, who was the only one who personally dealt with him during the
crucial moments before and after his claimed forced resignation on March 13, 2012,
as well as facilitated the release of his separation benefits upon his execution of a
waiver and quitclaim on March 23, 2012. Accordingly, the Court has no reason to
doubt and thus gives more credence to the affidavit of Miranda regarding the
circumstances of Doble's voluntary resignation rather than his version of constructive
dismissal and forced resignation, which are based on bare and self-serving
allegations.

Concededly, under prevailing jurisprudence, a deed of release of quitclaim does not

bar an employee from demanding benefits to which he is legally entitled.  Employees
45

who received their separation pay are not barred from contesting the legality of their
dismissal, and the acceptance of such benefits would not amount to estoppel. The
basic reason for this is that such quitclaims and/or complete releases are null and
void for being contrary to public policy.

Be that as it may, not all quitclaims are invalid and against public policy. "If the
agreement was voluntarily entered into and represents a reasonable settlement, it is
binding on the parties and may not later be disowned simply because of a change of
mind. It is only where there is a clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are unconscionable on its
face, that the law will step in to annul the questionable transaction. "  Cases abound
46
where the Court gave effect to quitclaims executed by the employees when the
employer is able to prove the following requisites: (1) the employee executes a deed
of quitclaim voluntarily; (2) there is no fraud or deceit on the part of any of the
parties; (3) the consideration of the quitclaim is credible and reasonable; and (4) the
contract is not contrary to law, public order, public policy, morals or goods customs,
or prejudicial to a third person with a right recognized by law.  ABB, Inc. and Desai
47

proved by substantial evidence the presence of all these requisites through the
following documents: (1) the affidavit of ABB, Inc. 's HR Manager Miranda;48 (2) the
Certificate of Employment;  (3) photocopy of Bank of the Philippine Islands
49

manager's check  in the amount of ₱2,009,822.72, representing the separation

50

benefit; (4) Employee Final Pay Computation,  showing payment of leave credits,
51

rice subsidy and bonuses, amounting to ₱805,399.35; and (5) the Receipt, Release
and Quitclaim for a consideration of the total sum of ₱2,815,222.07.  52

Doble can hardly claim that he was forced to execute the Receipt, Release and
Quitclaim on March 23, 2012, because he met Miranda alone outside company
premises at McDonalds, Alabang Town Center, Muntinlupa City. He cannot also claim
that there was fraud or deceit nor that the consideration for the waiver and quitclaim
was unjust and unreasonable. That no portion of his retirement pay will be released
or his urgent need for funds does not constitute the pressure or coercion
contemplated by law as a valid reason to nullify a quitclaim.   While "dire necessity"
53

may be an acceptable ground to annul quitclaims if the consideration is

unconscionably low and the employee was tricked into accepting it, the same is not
an acceptable ground for annulling the release when it is not shown that the
employee has been forced to execute it.   As aptly pointed out by the NLRC, Doble is
54

a Vice-President of the company, a highly educated person, i.e.,  a duly-licensed

engineer, who had worked with the company for almost 19 years, and the benefits
he received from his resignation in the total amount of P2,815,222.07 are
undisputedly more than that allowed under the company retirement plan. As a
person of high educational attainment and managerial employment stature, Doble is
expected to know the import of everything 'he executes,  and cannot be easily
55

duped into signing a quitclaim against his will.

There is also no merit in Doble's contention that the Receipt, Release and Quitclaim
is void because it was made to appear that he appeared before a notary public on
April 10, 2012 when in fact he already filed an illegal dismissal complaint on March
26, 2012. Regardless of the fact that it was improperly notarized, the said quitclaim
is a valid and binding contract between him and ABB, Inc., since the authenticity and
due execution thereof is undisputed. Such lack of proper notarization does not
render a private document void or without legal effect, but merely exposed the
notary public to prosecution for possible violation of notarial laws, as well as the one
who caused the same for falsification of public document.

Anent his monetary claims for 13th month pay, yearly bonus of about ₱750,000.00,
15 days vacation leave, 3 days long service leave, recreational allowance of
₱l80,000.00 per year, and rice subsidy of ₱20,400.00, Doble argued that he is
entitled thereto in light of the rule that where there is a finding of illegal dismissal,
an employee who is unjustly dismissed shall be entitled to reinstatement without loss
of seniority rights, benefits and other privileges or its monetary equivalent computed
from the time compensation was withheld up to the time of actual reinstatement.
Suffice it to stress that there being no illegal dismissal in this case, Doble's monetary
claims must be denied for lack of legal basis.

Finally, since the Decision of the NLRC finding Doble to have voluntarily resigned is
supported by substantial evidence and in accord with law and prevailing
jurisprudence, no grave abuse of discretion, amounting to lack or excess of
jurisdiction may be imputed against the NLRC for having dismissed his complaint for
illegal dismissal against ABB, Inc. and Desai.
WHEREFORE, the petition for review on certiorari is PARTLY GRANTED for being
impressed with merit on procedural issues and PARTLY DENIED for lacking merit
on substantial issues. Accordingly, the assailed Resolutions dated November 29,
2013 and November 28, 2014 of the Court of Appeals are REVERSED and SET
ASIDE, while the Decision dated June 26, 2013 and Resolution dated August 14,
2013 of the National Labor Relations Commission are AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA PERALTA

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

(On Official Leave)

MARVIC M.V.F. LEONEN
JOSE CATRAL MENDOZA *

Associate Justice
Associate Justice

(On Wellness Leave)

SAMUEL R. MARTIRES **

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.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to the 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.

MARIA LOURDES P.A. SERENO

Chief Justice