Labor Review Cases

FIRST DIVISION
[G.R. No. 110017. January 2, 1997]
RODOLFO FUENTES, RAINERIO DURON, JULIET VISTAL, ELENA

DELLOMES, LEODEGARIO BALHINON, ROGELIO MALINAO,
LILY BASANEZ, MALIZA ELLO, VILMA NOQUERA, JESSICA
CASTILLO, ROGELIO TABLADILLO, REMELDA VISCAYA,
MELANIA VISCAYA, CELIA LUBRICO, EDITH LLACUNA, ELPIDIO
FERRER, NORBERTO MIRANDA, FERNANDO MIRANDA,
CORDIO DUMAY, LEONARDO DELA VEGA, ISIDRO ALIDO,
AQUINO MACABEHA, LEOPOLDO ABAA, PAULINO ASIS, JR.,
REYNALDO BLANCO, MADILYN FABON, MARCIANA OSOK,
BEBIANO OSOK, FRANCISCO SEMULTA, MARCIA LLAMES,
PRINCIPE DANIEL, MARIA BAYA, NENITA RASONABLY,
SORIANO PENALOSA, JOSE PENALOSA, RODOLFO VILLAR,
REMEGIAS
DEMINGOY, TEODORO
TUGOGON, DIONISIO
APOLINARIO, EDYING DE LA CRUZ, RODOLFO BUTAUAN,
CRISPIN FABON, ARCADIO FABON, NENITA SARDINOLA, ALEX
LICAYAN, MARIO DAL, BADON EDUARDO, FELISA VILLAREL,
EMILY GARAN, ROGELIO GARAN, RODOLFO COLITE,
RODOLFO MENIANO, ROMERO TERRY, ZOILO VALLEJOS,
VIRGINIA BANDERA, BLANDINA LUNA, FLAXIANA CARLON,
CRESENCIO
CARLON,
NOTARTE
LEONARDA,
EFREN
CANTERE, ROWENA CAGUMAY, ALFONSO PARAJES, VIOLETA
MONTECLAR, NESTOR ALLADO, JR., APOLONIO CULATAS,
LANNIE CAPARAS, ANGELICO NUNEZ, JR., NICOLAS CANAL,
HERMOGENA TAGLOCOP, ALEJO BAUMBAD, CARLITO DE LA
PENA, AMANCIO ABOYLO, JERRY PARALES, LYDIA ALLADO,
AGAPITO ODAL, MAGNO BARIOS, FLORENDO MARIANO,
SOLATORIO BONIFACIO, RENE DEMINGOY, FELIMON ADORNO,
VIRGILLO INOCENCIO, RUEL INOCENCIO, AVELINO LUNA,
ALLAN MARCELLANA, FELIX SANCHEZ, AVELINO PANDI, VILLA
SORIO, NOEL LAS PENAS, FRANCISCO GARDO, ROGELIO
CULLABA, GEORGE RAGAR, CARMELITO CABRIADAS,
ANANIAS MELLORIA, ALFONSO ALLADO, MARLINO MARTINEZ,
LINO MARTINEZ, ERNESTO OLARAN, JOHNNY JOSAYAN,
ANECITO SOBIONO, MARGARITO DUMALAGAN, FRANCISCO
CABALES, FELIX ROCERO, PABLITO DAPAR, FRANCISCA
CABALHIN, FORTUNATA BAUMBAD, CARMEN RADAY,
NICOLAS TAMON, REYNALDO CANTORIA, ELMER NAPONE,
ANTONIO
VALLAR,
BERNADITH
TOLOZA,
EMETERIA
FERRER, CLANICA CABALES, CLAUDIO OJUYLAN, ERLINDA
BLANCO, ROSITA DURON, FRANCISCA ADLAWON, CARDINAL
MAGLISANG, JOVEN ASIS, JOSE FLORES, ALICIA FLORES,
JULIETO ADORNO, LORENZO CANINES, ISAAC CELLASAY,
ANDRES INDIABLE, ARSENIO DURON, NARCISA MALASPINA,

ROQUE SUBAAN, GRACE DURON, JAIME BALMORIA, PEDRO
PECASALES, PRIMITORAGAS and GRACE GOMA, petitioners,
vs. NATIONAL LABOR RELATIONS COMMISSION, 5TH DIVISION,
CAGAYAN DE ORO CITY, AGUSAN PLANTATION INC., AND/OR
CHANG CHEE KONG, respondents.
DECISION
BELLOSILLO, J.:
The State is bound under the Constitution to afford full protection to labor
and when conflicting interests of labor and capital are to be weighed on the
scales of social justice the heavier influence of the latter should be
counterbalanced with the sympathy and compassion the law accords the less
privileged workingman. This is only fair if the worker is to be given the
opportunity and the right to assert and defend his cause not as a subordinate
but as part of management with which he can negotiate on even plane. Thus
labor is not a mere employee of capital but its active and equal partner.
[1]
Petitioners, numbering seventy-five (75) in all, seek to set aside the

decision of respondent National Labor Relations Commission dated 27
November 1992 reversing that of the Labor Arbiter which granted their claims,
for having been rendered with grave abuse of discretion amounting to lack or
excess of jurisdiction.
Petitioners were regular employees of private respondent Agusan
Plantations, Inc., which was engaged in the operation of a palm tree plantation
in Trento, Agusan del Sur, since September 1982. Claiming that it was
suffering business losses which resulted in the decision of the head office in
Singapore to undertake retrenchment measures, private respondent sent
notices of termination to petitioners and the Department of Labor and
Employment (DOLE).
On 31 October 1990 petitioners filed with the DOLE office in Cagayan de
Oro City a complaint for illegal dismissal with prayer for reinstatement,
backwages and damages against private respondent Agusan Plantation, Inc.,
and/or Chang Chee Kong. In their answer respondents denied the allegations
of petitioners and contended that upon receipt of instructions from the head
office in Singapore to implement retrenchment, private respondents
conducted grievance conferences or meetings with petitioners' representative
labor organization, the Association of Trade Unions through its national
president Jorge Alegarbes, its local president and its board of directors.
Private respondents also contended that the 30-day notices of termination
were duly sent to petitioners.
After both parties submitted their position papers articulating their
respective theses, the Labor Arbiter rendered a decision on 27 May 1992 in
favor of petitioners ordering private respondents to pay the former separation
pay equivalent to fifteen (15) days pay for every year of service plus salary
differentials and attorney's fees.
On appeal by respondents to the National Labor Relations Commission,
the decision of the Labor Arbiter was reversed on 27 November 1992.
Petitioners elevated their plight to this Court on a special civil action for
certiorari under Rule 65 of the Rules of Court alleging that respondent NLRC
gravely abused its discretion amounting to lack or excess of jurisdiction in
ruling that petitioners were legally terminated from their employment. They
argued that their dismissal or retrenchment did not comply with the
requirements of Art. 283 of the Labor Code.
We sustain petitioners. The ruling of the Labor Arbiter that there was no
valid retrenchment is correct. Article 283 of the Labor Code clearly states:
Art 283. 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 the 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
case of closure 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.
Under Art. 283 therefore retrenchment may be valid only when the
following requisites are met: (a) it is to prevent losses; (b) written notices were
served on the workers and the Department of Labor and Employment (DOLE)
at least one (1) month before the effective date of retrenchment; and, (c)
separation pay is paid to the affected workers.
The closure of a business establishment is a ground for the termination of
the services of an employee unless the closing is for the purpose of
circumventing pertinent provisions of the Labor Code. But while business
reverses can be a just cause for terminating employees, they must be
sufficiently proved by the employer.
[2]
In the case before us, private respondents merely alleged in their answer
and position paper that after their officials from the head office had visited the
plantation respondent manager Chang Chee Kong received a letter from the
head office directing him to proceed immediately with the termination of
redundant workers and staff, and change the operations to contract system
against direct employment. They also alleged that after five (5) years of
operations, the return of investments of respondent company was meager;
that the coup attempt in August 1987 as well as that of December 1989
aggravated the floundering financial state of respondent company; that the
financial losses due to lack of capital funding resulted in the non-payment of
long-overdue accounts; that the untimely cut in the supply of fertilizers and
manuring materials and equipment parts delayed the payment of salaries and
the implementation of weekly job rotations by the workers. Except for these
allegations, private respondents did not present any other documentary proof
of their alleged losses which could have been easily proven in the financial
statements which unfortunately were not shown.
There is no question that an employer may reduce its work force to
prevent losses. However, these losses must be serious, actual and real.
Otherwise, this ground for termination of employment would be susceptible
to abuse by scheming employers who might be merely feigning losses in their
business ventures in order to ease out employees.
[3]
[4]
Indeed, private respondents failed to prove their claim of business

losses. What they submitted to the Labor Arbiter were mere self-serving
documents and allegations. Private respondents never adduced evidence
which would show clearly the extent of losses they suffered as a result of lack
of capital funding, which failure is fatal to their cause.
As regards the requirement of notices of termination to the employees, it is
undisputed that the Notice of Retrenchment was submitted to the Department
of Labor and Employment on 12 September 1990. The findings of both the
Labor Arbiter and NLRC show that petitioners were terminated on the
following dates in 1990 after they received their notices of termination, to wit:
[5]
Name of Employee
Date of Notice
Termination
of
Effectivity of Termination
1.Noquera, Vilma
22 Sept.
25 Sept.
2.Dumalagan, Margarito
22 Sept.
30 Sept.
3.Osok, Marciano
20 Sept.
30 Sept.
4.Abaa, Leopoldo
01 Sept.
30 Sept.
5.Aboylo, Amancio
01 Sept.
30 Sept.
6.Allado, Nestor Jr.
01 Sept.
30 Sept.
7.Bandera, Verginia
01 Sept.
30 Sept.
8.Basanez, Lily
01 Sept.
30 Sept.
9.Baumbad, Alejo
01 Sept.
30 Sept.
10.Blanco, Myrna
01 Sept.
30 Sept.
11.Blanco, Reynaldo
01 Sept.
30 Sept.
12.Canal, Marieto
01 Sept.
30 Sept.
13.Fabon, Madilyn
01 Sept.
30 Sept.
14.Ferrer, Elpidio
01 Sept.
30 Sept.
15.Meniano, Rodolfo
01 Sept.
30 Sept.
16.Nunez, Angelico
01 Sept.
30 Sept.
17.Osok, Bebiano
01 Sept.
30 Sept.
18.Penaloga, Jose Jr.
01 Sept.
30 Sept.
19.Taglocop, Hermogena
01 Sept.
30 Sept.
20.Allado, Lydio
22 Aug.
30 Sept.
21.Baya, Maria
22 Aug.
30 Sept.
22.Carlon, Flaviana
22 Aug.
30 Sept.
23.Carlon, Cresencio
22 Aug.
30 Sept.
24.Culaba, Rogelio
22 Aug.
30 Sept.
25.Cabriades, Carmelito
22 Aug.
30 Sept.
26.Dellomes, Elma
22 Aug.
30 Sept.
27.Fabon, Arcadio
22 Aug.
30 Sept.
28.Gordo, Francisco
22 Aug.
30 Sept.
29.Inocencio, Virgilio
22 Aug.
30 Sept.
30.Inocencio, Ruel
22 Aug.
30 Sept.
31.Luna, Blandina
22 Aug.
30 Sept.
32.Luna, Avelino
22 Aug.
30 Sept.
33.Lubrico, Celia
22 Aug.
30 Sept.
34.Monteclar, Violeta
22 Aug.
25 Sept.
35.Macabecha, Aquino
22 Aug.
25 Sept.
36.Melloria, Ananian
22 Aug.
25 Sept.
37.Malinao, Rogelio
22 Aug.
25 Sept.
38.Leonarda, Notarte
22 Aug.
25 Sept.
39.Parejas, Jerry
22 Aug.
25 Sept.
40.Parejas, Alfonso
22 Aug.
25 Sept.
41.Sardinola, Alfonso
22 Aug.
25 Sept.
42.Solaterio, Bonifacio
22 Aug.
25 Sept.
Culled from the above data, the termination of petitioners could not have
validly taken effect either on 25 or 30 September 1990. The one-month notice
of retrenchment filed with the DOLE and served on the workers before the
intended date thereof is mandatory. Private respondents failed to comply with
this requisite. The earliest possible date of termination should be 12 October
1990 or one (1) month after notice was sent to DOLE unless the notice of
termination was sent to the workers later than the notice to DOLE on 12
September 1990, in which case, the date of termination should be at least one
(1) month from the date of notice to the workers. Petitioners were terminated
less than a month after notice was sent to DOLE and to each of the workers.
We agree with the conclusion of the Labor Arbiter that the termination of
the services of petitioners was illegal as there was no valid retrenchment.
Respondent NLRC committed grave abuse of discretion in reversing the
findings of the Labor Arbiter and ruling that there was substantial compliance
with the law. This Court firmly holds that measures should be strictly
implemented to ensure that such constitutional mandate on protection to labor
is not rendered meaningless by an erroneous interpretation of applicable laws.
We uphold the monetary award of the Labor Arbiter for: (a) the balance of
the separation pay benefits of petitioners equivalent to fifteen (15) days for
every year of service after finding that reinstatement is no longer feasible
under the circumstances, and (b) the salary differentials for complainants who
were relieved during the pendency of the case before the Labor Arbiter and
full back wages for the rest of the complainants. This is in accord with Art. 279
of the Labor Code as amended by R.A. 6715 under which petitioners who
were unjustly dismissed from work shall be entitled to full back wages
inclusive of allowances and other benefits or their monetary equivalent
computed from the time their compensation was withheld up to the date of this
decision.
WHEREFORE, the Petition is GRANTED. The decision of the Labor
Arbiter of 27 March 1992 granting petitioners their claim for the balance of
their separation pay benefits equivalent to fifteen (15) days for every year of
service, and salary differentials for complainants who were relieved during the
pendency of the case before the Labor Arbiter, and full back wages for the rest
of the complainants is REINSTATED. Consequently, the decision of the
National Labor Relations Commission dated 27 September 1992 is
REVERSED and SET ASIDE.
SO ORDERED.
Padilla, (Chairman), Vitug, Kapunan, and Hermosisima, Jr., JJ., concur.
Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 110518 August 1, 1994
JOSE L. GARCIA, EDUARDO ALAS, NOEL APAYA, RICARDO, MARCOS AVEJERO, REYNALDO BANTIGUE, ROMEO BORRAS, MARGARITO CABICUELAS, ROLANDO CAMUA, JOSE DENNIS
CASTILLO, DICOROSO CARBO, FELIPE COSCULLA, EDUARDO DE GUZMAN, SEVILLA DEMLO, DIONALDO TEODOLFO, ADEMAR DUPINO, JOSE ESCOBAR, REYNALDO FLORES, DELFIN
GARCIA, FEDERICO GATDULA, FELOMINO GUTIERREZ, HILARIO EUGENIO, EUGENIO ILANO, JR., WILFREDO JALLA, RAMON LASQUITE, CESARIANO LIM, AUGUSTO LUMBANG, SALVADOR
MACARAEG, ERNESTO MARQUEZ, LAURO MIRAVALLES, FRED ONIA, REYNALDO ORTIZ, LEONIZA PALALIMPA, ALFREDO ROMEO, LECERIO ROSARIO, ARMANDO SABIDURIA, RONILO SACE,
REGONDOLA SANTOS, ERNESTO SALVATUS, ENRICO SANDOVAL, EUFEMIO SATURAY, VIRGILIO TINAMISAN, MACARIO VALDEZ, JOSE VILLARICA, SANTOS VIRAY, FLORENDO LOPEZ, JOSE
SEGISMUNDO, DIZON GERONIMO, RUPERTO CLAVIO, JR., SEFARIN DYTIOCO, FIDEL TAGULAM, and EDITHA R. JUAN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and NATIONAL SERVICE CORPORATION, respondents.
Samson S. Alcantara for petitioners.
Vidal Corpus & Associates for private respondent.
CRUZ, J.:
The main issue before the Court in this petition for certiorari is the validity of the retrenchment of the fifty-one petitioners by private respondent National Service Corporation (NASECO) as upheld by the Labor
Arbiter and later by the National Labor Relations Commission.
NASECO is a government-owned or controlled corporation engaged in providing manpower services such as security guards, radio operators, janitors and clerks, principally for the Philippine National Bank.
The petitioners were its employees who were either members of the NASECO Employees Union (NASECO-EU) or of the Alliance of Concerned Workers of NASECO (ACW-NASECO). On November 19, 1988,
they were among those who staged a strike and picketed the premises of the PNB.
On November 21, 1988, the PNB filed a complaint for damages with preliminary injunction against the labor unions with the Regional Trial Court of Manila. It was docketed as Civil Case No. 88-46938 in Branch
22. On December 5, 1988, the court granted the application for a preliminary injunction and issued the writ ordering the lifting of the picket.
NASECO also filed on November 21, 1988, a petition with the National Labor Relations Commission to declare the strike illegal. This was docketed as NLRC Case No. 00-11-04766-88. On February 17, 1989, the
The union officers who knowingly and actively participated in the strike, as well
as the members of the respondent union who committed illegal acts in the course of the strike, were
deemed to have legally lost their employment status.
NLRC rendered its decision sustaining NASECO. 1
The rest of the striking members, including the herein fifty-one petitioners, were ordered to report for work immediately.
The complaint of the labor union against the PNB for unfair labor practice and illegal lockout was dismissed on the ground that there was no employer-employee relationship between the PNB and the labor
unions. 2
On March 1, 1989, the petitioners reported for work at the NASECO office but they could not be given assignments because the PNB had meanwhile contracted with another company to fill the positions formerly
held by the petitioners.
NASECO inquired from the PNB whether or not the petitioners could still be accepted to their former positions in light of the Service Agreement between NASECO and the PNB giving the latter the right to reject
or replace any and all of NASECO's employees assigned to it, for inefficiency or other valid reasons.
In reply, the PNB manifested that it was no longer accepting the petitioners back to their former positions as these were no longer vacant.
NASECO then sought new assignments for the petitioners with its other clients, but the petitioners insisted on their reassignment to the PNB. In the meantime, starting April 1, 1989, NASECO paid the salaries
and other benefits of the petitioners although they were not actually working. 3
On October 13, 1989, the petitioners received notice of separation from NASECO, effective thirty days thereafter. The reason given was the financial losses NASECO was incurring at that time due mainly to the
salaries being paid to the employees who could not be posted despite efforts to place them. 4
Conformably to Art. 283 of the Labor Code, the Department of Labor and Employment was likewise given a 30-day notice of the intended retrenchment.
The management of NASECO even offered a better separation package equivalent to three-fourths of the estimated new basic monthly salary for every year of service, compared to the statutory requirement of
only 1/2 month pay for every year of service. 5
The petitioners refused to acknowledge receipt of the notice and instead, on October 26, 1989, filed with NLRC a complaint against NASECO for unfair labor practice, illegal dismissal, non-payment of wages and
damages. 6
On November 13, 1989, NASECO sent notice to the petitioners that their termination from the service would take effect not on November 16, 1989, but on November 30, 1989, for humanitarian considerations.
The effective date was again extended to December 15, 1989, and finally to December 31, 1989.
On June 22, 1990, Labor Arbiter Potenciano Canizares Jr. rendered a decision finding that the petitioners had been "fairly discharged by the respondent (NASECO) in a valid act of simple retrenchment." 7
On July 11, 1990, the petitioners appealed to the NLRC. On September 11, 1992, they filed a manifestation that the private respondent had been hiring new personnel, but no proof was offered to support the
charge.
A motion for reconsideration filed by the petitioners on

January 15, 1993, was denied by the NLRC on February 10, 1993.
On December 21, 1992, the NLRC issued a resolution affirming the decision of the labor arbiter. 8
It is now asserted in this petition that the NLRC gravely abused its discretion in holding that the petitioners were validly dismissed on the ground of retrenchment; that NASECO is not guilty of unfair labor practice;
and that their monetary claims for increases under Republic Acts 6640 and 6727, as well as for moral and exemplary damages and attorney's fees, should be denied.
On the first two issues, the petitioners fault the NLRC for completely disregarding the requisites of a valid retrenchment as laid down in Lopez Sugar Corporation vs. Federation of Free Workers.
10
The requisites are: 1) the losses expected should be substantial and not merely de minimis in extent; 2) the substantial losses apprehended must be reasonably imminent; 3) the retrenchment must be reasonably
necessary and likely to effectively prevent the expected losses; and 4) the alleged losses, if already incurred, and the expected imminent losses sought to be forestalled, must be proved by sufficient and
convincing evidence.
The petitioners assert that NASECO failed to show with convincing evidence that the incurred losses, if any, were substantial. The claimed losses were belied by the fact that NASECO hired new personnel before
and after the dismissal of the petitioners. NASECO also failed to pursue other measures to forestall losses, short of dismissing the petitioners. It did not follow the "first in, last out" rule that in cases of
retrenchment, employees with long years of service with the company, like the petitioners, should not be the first to be retrenched. They attribute their dismissal to their participation in the strike of November 19,
1988. Thus, their dismissal was an act of unfair labor practice for being discriminatory and violative of their rights to self-organization and to engage in concerted activities.
We have to disagree.
These losses were directly caused by the

salaries and other benefits paid to the petitioners during the period from April 1 to December 31, 1989.
The amount of these payments is not insubstantial in light of the economic difficulties of the country
during that year when several coups d' etat adversely affected the nation's economic growth.
The losses incurred by NASECO for the year 1989 amounted to P1,457,700.42 and were adequately proved by it. 11
It is also not true that respondent NASECO did not look for other measures to cut back on its losses. NASECO had in fact tried to place the petitioners with its other clients but it was the petitioners themselves
who refused reassignment.
The particular facts of this case preclude application of the "first in, last out" rule in the retrenchment of employees. There was no discrimination against the petitioners. NASECO could not compel the PNB to take
the petitioners back to their former positions in view of its contractual right to reject any employee of NASECO for inefficiency and other valid reasons. The PNB had already filled the vacated positions of the
petitioners during the strike, to ensure the continued operation of its business.
The monetary claim under RA 6640 and RA 6727 is another matter. RA 6640, which took effect on December 14, 1987, and RA 6727, which took effect on July 1, 1989, provide for P10.00 and a P25.00 increases
respectively in the minimum wage of laborers. The NLRC denied this claim on the ground that the petitioners had failed to include it in their basic complaint. This contention is not acceptable because the claim
was clearly included and prayed for in their position paper.
The Revised Rules of the NLRC provide under Sec. 3, Rule V, that parties should not be allowed to allege facts not referred to or included in the complaint, or position paper, affidavits and other documents. This
would mean that although not contained in the complaint, any claim can still be averred in the position paper, as was done by the petitioners, or in an affidavit or other documents.
We also hold that the increases in the petitioners' minimum wage under RA 6640 and RA 6720 should be granted since they became effective before the petitioners' retrenchment. Said increases should be
considered in the computation of their separation pay in accordance with Art. 283 of the Labor Code.
Moral damages are recoverable only where the dismissal of the employee was attended by bad faith or fraud or constituted an act oppressive to labor or was done in a manner contrary to morals, good customs
Exemplary damages may be awarded only if the dismissal was effected in a wanton, oppressive
or malevolent manner. None of these grounds has been proven. However, the Court will grant the claim
for attorney's fees in an amount equivalent to 10% of the total amount awarded to the petitioner as
authorized by the Labor Code.
or public policy.12
13
14
The constitutional policy of providing full protection to labor is not intended to oppress or destroy management. The employer cannot be compelled to retain employees it no longer needs, to be paid for work
unreasonably refused and not actually performed. NASECO bent over backward and exerted every effort to help the petitioners look for other work, postponed the effective date of their separation, and offered
them a generous termination pay package. The unflagging commitment of this Court to the cause of labor will not prevent us from sustaining the employer when it is in the right, as in this case.
WHEREFORE, the decision of the Labor Arbiter dated June 22, 1990, and the resolutions of the NLRC dated December 21, 1992, and February 10, 1993, are AFFIRMED, with the modification that the monetary
claim under RA 6640 and RA 6720, and for attorney's fees, should be and is hereby granted. The award of moral and exemplary damages is disallowed.
SO ORDERED.
Davide, Jr., Quiason and Kapunan, JJ., concur.
Bellosillo, J., on official leave.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-48926 December 14, 1987
MANUEL SOSITO, petitioner,

vs.
AGUINALDO DEVELOPMENT CORPORATION, respondent.
CRUZ, J.:
We gave due course to this petition and required the parties to file simultaneous memoranda on the sole question of whether or not the petitioner is entitled to separation pay under the retrenchment program of
the private respondent.
The facts are as follows:
Petitioner Manuel Sosito was employed in 1964 by the private respondent, a logging company, and was in charge of logging importation, with a monthly salary of P675.00,
1 when he went on
On July 20, 1976, the private respondent, through

its president, announced a retrenchment program and offered separation pay to employees in the active
service as of June 30, 1976, who would tender their resignations not later than July 31, 1976. The
petitioner decided to accept this offer and so submitted his resignation on July 29, 1976, "to avail himself
of the gratuity benefits" promised. However, his resignation was not acted upon and he was never given
the separation pay he expected. The petitioner complained to the Department of Labor, where he was
sustained by the labor arbiter. The company was ordered to pay Sosito the sum of P 4,387.50,
representing his salary for six and a half months. On appeal to the National Labor Relations Commission,
this decision was reversed and it was held that the petitioner was not covered by the retrenchment
program. The petitioner then came to us.
indefinite leave with the consent of the company on January 16, 1976.
For a better understanding of this case, the memorandum of the private respondent on its retrenchment program is reproduced in full as follows:
July 20, 1976
Memorandum To: ALL EMPLOYEES
Re: RETRENCHMENT PROGRAM
As you are all aware, the operations of wood-based industries in the Philippines for the last two (2) years were adversely affected by the worldwide decline in the demand for and
prices of logs and wood products. Our company was no exception to this general decline in the market, and has suffered tremendous losses. In 1975 alone, such losses amounted
to nearly P20,000,000.00.
The company has made a general review of its operations and has come to the unhappy decision of the need to make adjustments in its manpower strength if it is to survive. This
is indeed an unfortunate and painful decision to make, but it leaves the company no alternative but to reduce its tremendous and excessive overhead expense in order to prevent
an ultimate closure.
Although the law allows the Company, in a situation such as this, to drastically reduce it manpower strength without any obligation to pay separation benefits, we recognize the
need to provide our employees some financial assistance while they are looking for other jobs.
The Company therefore is adopting a retrenchment program whereby employees who are in the active service as of June 30, 1976 will be paid separation benefits in an amount
equivalent to the employee's one-half (1/2) month's basic salary multiplied by his/her years of service with the Company. Employees interested in availing of the separation
benefits offered by the Company must manifest such intention by submitting written letters of resignation to the Management not later than July 31, 1976. Those whose
resignations are accepted shall be informed accordingly and shall be paid their separation benefits.
After July 31, 1976, this offer of payment of separation benefits will no longer be available. Thereafter, the Company shall apply for a clearance to terminate the services of such
number of employees as may be necessary in order to reduce the manpower strength to such desired level as to prevent further losses.
(SGD.) JOSE
G. RICAFORT
President
N.B.
For additional information
and/or resignation forms,
please see Mr. Vic Maceda
or Atty. Ben Aritao. 6
It is clear from the memorandum that the offer of separation pay was extended only to those who were in the active service of the company as of June 30, 1976. It is equally clear that the petitioner was not
eligible for the promised gratuity as he was not actually working with the company as of the said date. Being on indefinite leave, he was not in the active service of the private respondent although, if one were to
be technical, he was still in its employ. Even so, during the period of indefinite leave, he was not entitled to receive any salary or to enjoy any other benefits available to those in the active service.
It seems to us that the petitioner wants to enjoy the best of two worlds at the expense of the private respondent. He has insulated himself from the insecurities of the floundering firm but at the same time would
demand the benefits it offers. Being on indefinite leave from the company, he could seek and try other employment and remain there if he should find it acceptable; but if not, he could go back to his former work
and argue that he still had the right to return as he was only on leave.
There is no claim that the petitioner was temporarily laid off or forced to go on leave; on the contrary, the record shows that he voluntarily sought the indefinite leave which the private respondent granted. It is
strange that the company should agree to such an open-ended arrangement, which is obviously one-sided. The company would not be free to replace the petitioner but the petitioner would have a right to resume
his work as and when he saw fit.
We note that under the law then in force the private respondent could have validly reduced its work force because of its financial reverses without the obligation to grant separation pay. This was permitted under
which was in force at the time. To its credit, however, the company voluntarily
offered gratuities to those who would agree to be phased out pursuant to the terms and conditions of its
retrenchment program, in recognition of their loyalty and to tide them over their own financial difficulties.
The Court feels that such compassionate measure deserves commendation and support but at the same
time rules that it should be available only to those who are qualified therefore. We hold that the petitioner
is not one of them.
the original Article 272(a), of the Labor Code,
While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will be automatically decided in favor of labor.
Management also has its own rights which, as such, are entitled to respect and enforcement in the interest of simple fair play. Out of its concern for those with less privileges in life, this Court has inclined more
often than not toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has not blinded us to the rule that justice is in every case for the deserving, to be dispensed in
the light of the established facts and the applicable law and doctrine.
WHEREFORE, the petition is DISMISSED and the challenged decision AFFIRMED, with costs against the petitioner.
SO ORDERED.
Teehankee, C.J., Narvasa, Paras and Gancayco, JJ., concur.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-53515 February 8, 1989
SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner,

vs.
HON. BLAS F. OPLE, as Minister of Labor and SAN MIGUEL CORPORATION, respondents.
Lorenzo F. Miravite for petitioner.
Isidro D. Amoroso for New San Miguel Corp. Sales Force Union.
Siguion Reyna, Montecillo & Ongsiako for private respondent.
GRIO-AQUINO, J.:
This is a petition for review of the Order dated February 28, 1980 of the Minister of Labor in Labor Case No. AJML-069-79, approving the private respondent's marketing scheme, known as the "Complementary
Distribution System" (CDS) and dismissing the petitioner labor union's complaint for unfair labor practice.
On April 17, 1978, a collective bargaining agreement (effective on May 1, 1978 until January 31, 1981) was entered into by petitioner San Miguel Corporation Sales Force Union (PTGWO), and the private
respondent, San Miguel Corporation, Section 1, of Article IV of which provided as follows:
Art. IV, Section 1. Employees within the appropriate bargaining unit shall be entitled to a basic monthly compensation plus commission based on their respective sales. (p. 6,
Annex A; p. 113, Rollo.)
In September 1979, the company introduced a marketing scheme known as the "Complementary Distribution System" (CDS) whereby its beer products were offered for sale directly to wholesalers through San
Miguel's sales offices.
The labor union (herein petitioner) filed a complaint for unfair labor practice in the Ministry of Labor, with a notice of strike on the ground that the CDS was contrary to the existing marketing scheme whereby the
Route Salesmen were assigned specific territories within which to sell their stocks of beer, and wholesalers had to buy beer products from them, not from the company. It was alleged that the new marketing
scheme violates Section 1, Article IV of the collective bargaining agreement because the introduction of the CDS would reduce the take-home pay of the salesmen and their truck helpers for the company would
be unfairly competing with them.
The complaint filed by the petitioner against the respondent company raised two issues: (1) whether the CDS violates the collective bargaining agreement, and (2) whether it is an indirect way of busting the union.
In its order of February 28, 1980, the Minister of Labor found:
... We see nothing in the record as to suggest that the unilateral action of the employer in inaugurating the new sales scheme was designed to discourage union organization or
diminish its influence, but rather it is undisputable that the establishment of such scheme was part of its overall plan to improve efficiency and economy and at the same time gain
profit to the highest. While it may be admitted that the introduction of new sales plan somewhat disturbed the present set-up, the change however was too insignificant as to
convince this Office to interpret that the innovation interferred with the worker's right to self-organization.
Petitioner's conjecture that the new plan will sow dissatisfaction from its ranks is already a prejudgment of the plan's viability and effectiveness. It is like saying that the plan will not
work out to the workers' [benefit] and therefore management must adopt a new system of marketing. But what the petitioner failed to consider is the fact that corollary to the
adoption of the assailed marketing technique is the effort of the company to compensate whatever loss the workers may suffer because of the new plan over and above than what
has been provided in the collective bargaining agreement. To us, this is one indication that the action of the management is devoid of any anti-union hues. (pp. 24-25, Rollo.)
The dispositive part of the Minister's Order reads:
WHEREFORE, premises considered, the notice of strike filed by the petitioner, San Miguel Brewery Sales Force Union-PTGWO is hereby dismissed. Management however is
hereby ordered to pay an additional three (3) months back adjustment commissions over and above the adjusted commission under the complementary distribution system. (p. 26,
Rollo.)
The petition has no merit.
Public respondent was correct in holding that the CDS is a valid exercise of management prerogatives:
Except 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. ... (NLU vs. Insular La Yebana Co., 2 SCRA 924; Republic Savings Bank vs. CIR 21 SCRA 226,
235.) (Perfecto V. Hernandez, Labor Relations Law, 1985 Ed., p. 44.) (Emphasis ours.)
Every business enterprise endeavors to increase its profits. In the process, it may adopt or devise means designed towards that goal. In Abbott Laboratories vs. NLRC, 154 SCRA 713, We ruled:
... Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The free will of
management to conduct its own business affairs to achieve its purpose cannot be denied.
So long as a company's management prerogatives 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, this Court will uphold them (LVN Pictures Workers vs. LVN, 35 SCRA 147; Phil. American Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634; Phil.
Refining Co. vs. Garcia, 18 SCRA 110). San Miguel Corporation's offer to compensate the members of its sales force who will be adversely affected by the implementation of the CDS by paying them a so-called
"back adjustment commission" to make up for the commissions they might lose as a result of the CDS proves the company's good faith and lack of intention to bust their union.
WHEREFORE, the petition for certiorari is dismissed for lack of merit.
SO ORDERED.
Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 89920 October 18, 1990
UNIVERSITY OF STO. TOMAS, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, UST FACULTY UNION, respondents.
Abad, Leao & Associates for petitioner.
Eduardo J. Mario, Jr. for private respondent.
GUTIERREZ, JR., J.:
May a university, pending resolution by the National Labor Relations Commission (NLRC) of its labor dispute with its union, comply with a readmission order by granting substantially equivalent academic
assignments, in lieu of actual reinstatement, to dismissed faculty members?
On June 19, 1989, the University of Sto. Tomas (UST), through its Board of Trustees, terminated the employment of all sixteen union officers and directors of respondent UST Faculty Union on the ground that "in
publishing or causing to be published in Strike Bulletin No. 5 dated August 4, 1987, the libelous and defamatory attacks against the Father Rector, (each of them) has committed the offenses of grave misconduct,
serious disrespect to a superior and conduct unbecoming a faculty member." (Rollo p. 41)
As a result of the dismissal of said employees, some faculty members staged mass leaves of absence on June 28, 1989 and several days thereafter, disrupting classes in all levels at the University. (Rollo, pp. 53,
92)
On July 5, 1989, the faculty union filed a complaint for illegal dismissal and unfair labor practice with the Department of Labor and Employment. (Rollo, p. 42)
On July 7, 1989, the labor arbiter, on a prima facie showing that the termination was causing a serious labor dispute, certified the matter to the Secretary of Labor and Employment for a possible suspension of the
effects of termination. (Rollo, p. 51)
Secretary Franklin Drilon subsequently issued an order dated July 11, 1989, the decretal portion of which reads as follows:
WHEREFORE, ABOVE PREMISES CONSIDERED, and in the interest of industrial peace and pursuant to Section 33 (b) of RA 6715, the effects of the termination of Ma. Melvyn
Alamis, Eduardo Marino, Jr., Urbano Agalabia, Anthony Cura, Norma Collantes, Fulvio Guerrero, Corinta Barranco, Porfirio Jose Guico, Lily Matias, Rene Sison, Henedino
Brondial, Myrna Hilario, Ronaldo Asuncion, Nilda Redoblado, Zenaida Burgos, and Milagros Nino are hereby suspended and management is likewise ordered to accept them back
to work under the same terms and conditions prevailing prior to their dismissal.
In furtherance of this Order, all faculty members are directed to immediately report back for work and for management to accept them back under the same terms and conditions
prevailing prior to the strike.
Labor Arbiter Nieves de Castro is hereby directed to proceed with the case pending before her and to expedite the resolution of the same.
Pending resolution, the parties are directed to cease and desist, from committing any and all acts that might exacerbate the situation. (Rollo, p. 54)
Petitioner UST filed a motion for reconsideration on July 12, 1989 asking the Secretary of Labor and Employment to either assume jurisdiction over the present case or certify it to the National Labor Relations
Commission (NLRC) for compulsory arbitration without suspending the effects of the termination of the 16 dismissed faculty members. (Rollo, pp. 55-64)
On July 18, 1989, Secretary Drilon, acting on said motion for reconsideration, issued another order modifying his previous order. The dispositive portion of the new order is quoted below:
WHEREFORE, ABOVE PREMISES CONSIDERED, the Order dated 11 July 1989 is hereby modified. Accordingly, this Office hereby certifies the labor dispute to the National
Labor Relations Commission for compulsory arbitration pursuant to Article 263(g) of the Labor Code, as amended by Section 27 of RA 6715.
In accordance with the above, the University of Santo Tomas is hereby ordered to readmit all its faculty members, including the sixteen (16) union officials, under the same terms
and conditions prevailing prior to the present dispute.
The NLRC is hereby instructed to immediately call the parties and expedite the resolution of the dispute.
The directive to the parties to cease and desist from committing any act that will aggravate the situation is hereby reiterated. (Rollo, p. 81)
The petitioner filed a motion for clarification dated July 20, 1989 which was subsequently withdrawn. (Rollo, p. 94)
On July 27, 1989, Secretary Drilon issued another order that contained the following dispositive portion:
WHEREFORE, ABOVE PREMISES CONSIDERED, the Order dated 18 July 1989 directing the readmission of all faculty members, including the 16 union officials, under the same
terms and conditions prevailing prior to the instant dispute is hereby affirmed.
The NLRC is hereby ordered to immediately call the parties and ensure the implementation of this Order.
No further motion of this and any nature shall be entertained. (Rollo, p. 103)
The NLRC subsequently caned the parties to a conference on August 11, 1989 before its Labor Arbiter Romeo Go. (Rollo, p. 9)
On August 14, 1989, the respondent union filed before the NLRC a motion to implement the orders of the Honorable Secretary of Labor and Employment dated July 11, 18 and 27, 1989 and to cite Atty. Joselito
Guianan Chan (the petitioner's in-house counsel) for contempt. (Rollo, p. 104) The petitioner, on August 25, 1989, filed its opposition to the private respondent's motion. (Rollo, p. 112)
On September 6, 1989, the NLRC issued a resolution, which is the subject of this petition for certiorari, set forth below:
Certified Case No. 0531 IN RE: LABOR DISPUTE at the University of Santo Tomas. Acting on the Motion to Implement the Orders of the Honorable Secretary of Labor and
Employment dated July 11, 18, and 27, 1989 and to cite Joselito Guianan Chan for Contempt dated August 14, 1989 and the Urgent Ex-parte Motion to Implement Certification
Orders of the Honorable Secretary of Labor and Employment dated July 18 and 17, (Sic) 1989 and the subsequent Manifestation dated September 4, 1989, all filed by the UST
Faculty Union; and considering the Opposition to Union's Motion to Cite Atty. Joselito Guianan Chan for Contempt and Comments on its Motion to Implement the Orders of the
Honorable Secretary of Labor and Employment dated July 11, 18 and 27, 1989 filed on August 25, 1989 by UST through its counsel, the Commission, after deliberation, resolved,
to wit:
a) The University is hereby directed to comply and faithfully abide with the July 11, 18 and 27, 1989 Orders of the Secretary of Labor and Employment by immediately reinstating
or readmitting the following faculty members under the same terms and conditions prevailing prior to the present dispute or merely reinstate them in the payroll:
a) Ronaldo Asuncion
b) Lily Matias
c) Nilda Redoblado
d) Zenaida Burgos
e) Eduardo Marino, Jr.
f) Milagros Nino
g) Porfirio Guico
b) To fully reinstate, by giving him additional units or through payroll reinstatement, Prof. Urbano Agalabia who was assigned only six (6) units;
c) To fully reinstate or reinstate through payroll, Prof. Fulvio Guerrero, who was assigned only three (3) units;
d) The University is directed to pay the above-mentioned faculty members full backwages starting from July 13, 1989, the date the faculty members presented themselves for
reinstatement up to the date of actual reinstatement or payroll reinstatement.
e) The payroll reinstatement of the above-named faculty members is hereby allowed only up to the end of the First semester 1989; Next semester, the University is directed to
actually reinstate the faculty members by giving them their normal teaching loads;
f) The University is directed to cease and desist from offering the aforementioned faculty members substantially equivalent academic assignments as this is not compliance in
good faith with the Orders of the Secretary of Labor and Employment. (Rollo, pp. 30-31)
Acting on an urgent motion for the issuance of a writ of preliminary injunction and/or restraining order, the Court resolved to issue a temporary restraining order dated October 25, 1989 enjoining respondents from
enforcing or executing the assailed NLRC resolution. (Rollo, p. 160)
The petitioner assigns the following errors:
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION (NLRC) GRAVELY ABUSED ITS DISCRETION IN A MANNER AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT ISSUED
THE ASSAILED RESOLUTION WHICH ORDERS THE ALTERNATIVE REMEDIES OF ACTUAL REINSTATEMENT OR PAYROLL REINSTATEMENT OF THE DISMISSED FACULTY MEMBERS.
II
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DIRECTED THE UNIVERSITY TO
PAY SOME OF THE DISMISSED FACULTY MEMBERS ASSIGNED TO HANDLE SUBSTANTIALLY EQUIVALENT ACADEMIC ASSIGNMENTS, 'FULL BACKWAGES STARTING FROM JULY 13, 1989, THE
DATE THE FACULTY MEMBERS PRESENTED THEMSELVES FOR REINSTATEMENT UP TO THE DATE OF ACTUAL REINSTATEMENT OR PAYROLL REINSTATEMENT.
III
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION AMOUNT ING TO LACK OR EXCESS OF JURISDICTION WHEN IT CONSIDERED AS 'NOT
COMPLIANCE IN GOOD FAITH WITH THE ORDERS OF THE SECRETARY OF LABOR AND EMPLOYMENT' THE UNIVERSITY'S ACT OF GRANTING TO SOME OF THE DISMISSED FACULTY MEMBERS,
SUBSTANTIALLY EQUIVALENT ACADEMIC ASSIGNMENTS.
IV
THE HONORABLE NLRC GRAVELY ABUSED ITS DISCRETION WHEN IT ARROGATED UPON ITSELF THE EXERCISE OF THE RIGHT AND PREROGATIVES REPOSED BY LAW TO THE PETITIONER
UNIVERSITY IN THE LATTER'S CAPACITY AS EMPLOYER. (Rollo, pp. 9-10)
We shall deal with the first and third assignment of errors jointly because they are interrelated.
The petitioner states in its petition that: a) It has already actually reinstated six of the dismissed faculty members, namely: Professors Alamis, Collantes, Hilario, Barranco, Brondial and Cura; b) As to Professors
Agalabia and Guerrero, whose teaching assignments were partially taken over by new faculty members, they were given back their remaining teaching loads (not taken by new faculty members) but were likewise
given substantially equivalent academic assignments corresponding to their teachings loads already taken over by new faculty members; c) The remaining seven faculty members, to wit: Professors Asuncion,
Marino Jr., Matias, Redoblado, Burgos, Nino and Guico, were given substantially equivalent academic assignments in lieu of actual teaching loads because all of their teaching loads originally assigned to them at
the start of the first semester of school year 1989-1990 were already taken over by new faculty members; d) One dismissed faculty member Rene Sison, had been "absent without official leave" or AWOL as early
as the start of the first semester. (Rollo, pp. 11-12).
The petitioner advances the argument that its grant of substantially equivalent academic assignments to some of the dismissed faculty members, instead of actual reinstatement, is well-supported by just and valid
reasons. It alleges that actual reinstatement of the dismissed faculty members whose teaching assignments were previously taken over by new faculty members is not feasible nor practicable since this would
compel the petitioner university to violate and terminate its contracts with the faculty members who were assigned to and had actually taken over the courses. The petitioner submits that it was never the intention
of the Secretary of Labor to force it to break employment contracts considering that those ordered temporarily reinstated could very well be accommodated with substantially equivalent academic assignments
without loss in rank, pay or privilege. Likewise, it claims that to change the faculty member when the semester is about to end would seriously impair and prejudice the welfare and interest of the students because
dislocation, confusion and loss in momentum, if not demoralization, will surely ensue once the change in faculty is effected. (Rollo, pp. 13-14)
The petitioner also avers that the faculty members who were given substantially equivalent academic assignments were told by their respective deans to report to the Office of Academic Affairs and Research for
their academic assignments but the said faculty members failed to comply with these instructions. (Rollo, p. 118) Thus, the petitioner postulates, mere payroll reinstatement which would give rise to the obligation
of the University to pay these faculty members, even if the latter are not working, would squarely run counter to the principle of "No Work, No Pay". (Rollo, p. 15)
The respondent UST Faculty Union, on the other hand, decries that the petitioner is using the supposed substantially equivalent academic assignments as a vehicle to embarrass and degrade the union leaders
and that the refusal of the petitioner to comply with the return-to-work order is calculated to deter, impede and discourage the union leaders from pursuing their union activities. (Rollo, pp. 246, 254)
It also claims that the dismissed faculty members were hired to perform teaching functions and, indeed, they have rendered dedicated teaching service to the University students for periods ranging from 12 to 39
years. Hence, they maintain, their qualifications are fitted for classroom activities and the assignment to them of non-teaching duties, such as (a) book analysis; (b) syllabi-making or revising; (c) test questions
construction; (d) writing of monographs and modules for students' use in learning "hard to understand" topics on the lectures; (e) designing modules, transparencies, charts, diagrams for students' use as learning
aids; and (f) other related assignments, is oppressive. (Rollo, pp. 243-244)
In resolving the contentions of both parties, this Court refers to Article 263 (g), first paragraph, of the Labor Code, as amended by Section 27 of Republic Act No. 6715, which provides:
(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, the Secretary of Labor and
Employment may assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or certification shall have
the effect of automatically enjoining the intended or impending strike or lockout as specified in the assumption or certification order. If one has already taken place at the time of
assumption or certification, all striking or locked out employees shall immediately return to work and the employer shall immediately resume operations and readmit all workers
under the same terms and conditions prevailing before the strike or lockout. The Secretary of Labor and Employment or the Commission may seek the assistance of law
enforcement agencies to ensure compliance with this provision as well as with such orders as he may issue to enforce the same. (Emphasis supplied.)
It was in compliance with the above provision that Secretary Drilon issued his July 18, 1989 order to "readmit all its faculty members, including the sixteen (16) union officials, under the same terms and conditions
prevailing prior to the present dispute." (Rollo, p. 81) And rightly so, since the labor controversy which brought about a temporary stoppage of classes in a university populated by approximately 40,000 students
affected national interest.
After the petitioner filed a motion for clarification which, however, was subsequently withdrawn, Secretary Drilon issued another order dated July 27, 1989 affirming his July 18 order and directing the NLRC to
immediately call the parties and "ensure the implementation of this order" (Rollo, p. 103)
The NLRC was thereby charged with the task of implementing a valid return-to-work order of the Secretary of Labor. As the implementing body, its authority did not include the power to amend the Secretary's
order. Since the Secretary's July 18 order specifically provided that the dismissed faculty members shall be readmitted under the same terms and conditions prevailing prior to the present dispute, the NLRC
should have directed the actual reinstatement of the concerned faculty members. It therefore erred in granting the alternative remedy of payroll reinstatement which, as it turned, only resulted in confusion. The
remedy of payroll reinstatement is nowhere to be found in the orders of the Secretary of Labor and hence it should not have been imposed by the public respondent NLRC. There is no showing that the facts
called for this type of alternative remedy.
For the same reason, we rule that the grant of substantially equivalent academic assignments can not be sustained. Clearly, the giving of substantially equivalent academic assignments, without actual teaching
loads, cannot be considered a reinstatement under the same terms and conditions prevailing before the strike. Within the context of Article 263(g), the phrase "under the same terms and conditions" contemplates
actual reinstatement or the return of actual teaching loads to the dismissed faculty members. There are academic assignments such as the research and writing of treatises for publication or full-time laboratory
work leading to exciting discoveries which professors yearn for as badges of honor and achievement. The assignments given to the reinstated faculty members do not fall under such desirable categories.
Article 263(g) was devised to maintain the status quo between the workers and management in a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national
interest, pending adjudication of the controversy. This is precisely why the Secretary of Labor, in his July 11, 1989 order, stated that "Pending resolution, the parties are directed to cease and desist from
committing any and all acts that might exacerbate the situation." (Rollo, p. 54) And in his order of July 18, he decreed that "The directive to the parties to cease and desist from committing any act that will
aggravate the situation is hereby reiterated." (Rollo, p. 81)
The grant of substantially equivalent academic assignments of the nature assigned by the petitioner would evidently alter the existing status quo since the temporarily reinstated teachers will not be given their
usual teaching loads. In fact, the grant thereof aggravated the present dispute since the teachers who were assigned substantially equivalent academic assignments refused to accept and handle what they felt
were degrading or unbecoming assignments, in turn prompting the petitioner University to withhold their salaries. (Rollo, p. 109)
We therefore hold that the public respondent NLRC did not commit grave abuse of discretion when it ruled that the petitioner should "cease and desist from offering the aforementioned faculty members
substantially equivalent academic assignments as this is not compliance in good faith with the order of the Secretary of Labor and Employment."
It was error for the NLRC to order the alternative remedies of payroll reinstatement or actual reinstatement. However, the order did not amount to grave abuse of discretion. Such error is merely an error of
judgment which is not correctible by a special civil action for certiorari. The NLRC was only trying its best to work out a satisfactory ad hoc solution to a festering and serious problem. In the light of our rulings on
the impropriety of the substantially equivalent academic assignments and the need to defer the changes of teachers until the end of the first semester, the payroll reinstatement will actually minimize the
petitioners problems in the payment of full backwages.
As to the second assignment of error, the petitioner contends that the NLRC committed grave abuse of discretion in awarding backwages from July 13, 1989, the date the faculty members presented themselves
for work, up to the date of actual reinstatement, arguing that the motion for reconsideration seasonably filed by the petitioner had effectively stayed the Secretary's order dated July 11, 1989.
The petitioner's stand is unmeritorious. A return-to-work order is immediately effective and executory despite the filing of a motion for reconsideration by the petitioner. As pointed out by the Court in Philippine Air
Lines Employees Association (PALEA) v. Philippine Air Lines, Inc. (38 SCRA 372 [1971]):
The very nature of a return-to-work order issued in a certified case lends itself to no other construction. The certification attests to the urgency of the matter affecting as it does an
industry indispensable to the national interest. The order is issued in the exercise of the court's compulsory power of arbitration, and therefore must be obeyed until set aside. To
say that its effectivity must wait affirmance in a motion for reconsideration is not only to emasculate it but indeed to defeat its import, for by then the deadline fixed for the return-towork would, in the ordinary course, have already passed and hence can no longer be affirmed insofar as the time element is concerned.
Additionally, although the Secretary's order of July 11 was modified by the July 18 order, the return-to-work portion of the earlier order which states that "the faculty members should be admitted under the same
terms and conditions prevailing prior to the dispute" was affirmed.
We likewise affirm the NLRC's finding that the dismissed teachers presented themselves for reinstatement on July 13, 1989 since the factual findings of quasi-judicial agencies like the NLRC are generally
accorded not only respect but even finality if such findings are supported by substantial evidence. (Mamerto v. Inciong, 118 SCRA 265 [1982]; Baby Bus, Inc. v. Minister of Labor, 158 SCRA 221 [1988]; Packaging
Products Corporation v. National Labor Relations Commission, 152 SCRA 210 [1987]; Talisay Employees' and Laborers Association (TELA) v. Court of Industrial Relations, 143 SCRA 213 [1986]). There is no
showing that such substantial evidence is not present.
The petitioner, however, stresses that since the faculty members who were given substantially equivalent academic assignments did not perform their assigned tasks, then they are not entitled to backwages.
(Rollo, p. 19) The petitioner is wrong. The reinstated faculty members' refusal to assume their substantially equivalent academic assignments does not contravene the Secretary's return-to-work order. They were
merely insisting on being given actual teaching loads, on the return-to-work order being followed. We find their persistence justified as they are rightfully and legally entitled to actual reinstatement. Since the
petitioner University failed to comply with the Secretary's order of actual reinstatement, we adjudge that the NLRC's award of backwages until actual reinstatement is correct.
With respect to the fourth assignment of error, the petitioner expostulates that as employer, it has the sole and exclusive right and prerogative to determine the nature and kind of work of its employees and to
control and manage its own operations. Thus, it objects to the NLRC's act of substituting its judgment for that of the petitioner in the conduct of its affairs and operations. (Rollo, pp. 23-24)
Again, we cannot sustain the petitioner's contention. The hiring, firing, transfer, demotion and promotion of employees are traditionally Identified as management prerogatives. However, these are not absolute
prerogatives. They are subject to limitations found in law, a collective bargaining agreement, or general principles of fair play and justice. (Abbott Laboratories [Phil.] Inc. v. NLRC, 154 SCRA 713 [1987])
Article 263(g) is one such limitation provided by law. To the extent that Art. 263(g) calls for the admission of all workers under the same terms and conditions prevailing before the strike, the petitioner University is
restricted from exercising its generally unbounded right to transfer or reassign its employees. The public respondent NLRC is not substituting its own judgment for that of the petitioner in the conduct of its own
affairs and operations; it is merely complying with the mandate of the law.
The petitioner manifests the fear that if the temporarily reinstated faculty members will be allowed to handle actual teaching assignments in the classroom, the latter would take advantage of the situation by
making the classroom the forum not for the purpose of imparting knowledge to the students but for the purpose of assailing and lambasting the administration. (Rollo, p. 330) There may be a basis for such a fear.
We can even state that such concern is not entirely unfounded nor farfetched. However, such a fear is speculative and does not warrant a deviation from the principle that the dismissed faculty members must be
actually reinstated pending resolution of the labor dispute. Unpleasant situations are sometimes aftermaths of bitter labor disputes. It is the function of Government to fairly apply the law and thereby minimize the
dispute's harmful effects. It is in this light that the return to work order should be viewed and obeyed.
One thing has not escaped this Court's attention. Professors Alamis, Cura, Collantes, Barranco, Brondial and Hilario were already reinstated by the petitioner in compliance with the Secretary's return-to-work
order. Knowing this to be a fact, the NLRC, in its assailed resolution, dealt only with the fate of the remaining faculty members who were given substantially equivalent academic assignments. The names of the
aforementioned faculty members appear nowhere in the disputed NLRC order. Inasmuch as these faculty members actually reinstated were not covered by the NLRC resolution, then it follows that they were
likewise not covered by the Court's temporary restraining order enjoining respondents from enforcing or executing the NLRC resolution. The effects of the temporary restraining order did not extend to them. Yet,
after the Court issued the temporary restraining order, the petitioner lost no time in recalling their actual teaching assignments and giving them, together with the rest of the dismissed faculty members,
substantially equivalent academic assignments.
The petitioner's dogmatic insistence in issuing substantially equivalent academic assignments stems from the fact that the teaching loads of the dismissed professors have already been assigned to other faculty
members. It wants us to accept this remedy as one resorted to in good faith. And yet, the petitioner's employment of the temporary restraining order as a pretext to enable it to substitute substantially equivalent
academic assignmentseven for those who were earlier already reinstated to their actual teaching loads runs counter to the dictates of fair play.
With respect to the private respondent's allegation of union busting by the petitioner, we do not at this time pass upon this issue. Its determination falls within the competence of the NLRC, as compulsory
arbitrator, before whom the labor dispute is under consideration. We are merely called upon to decide the propriety of the petitioner University's grant of substantially equivalent academic assignments pending
resolution of the complaint for unfair labor pratice and illegal dismissal filed by the private respondent.
Although we pronounce that the dismissed faculty members must be actually reinstated while the labor dispute is being resolved, we have to take into account the fact that at this time, the first semester for
schoolyear 1990-1991 is about to end. To change the faculty members around the time of final examinations would adversely affect and prejudice the students whose welfare and interest we consider to be of
primordial importance and for whom both the University and the faculty union must subordinate their claims and desires. This Court therefore resolves that the actual reinstatement of the non-reinstated faculty
members, pending resolution of the labor controversy before the NLRC, may take effect at the start of the second semester of the schoolyear 1990-1991 but not later. With this arrangement, the petitioner's
reasoning that it will be violating contracts with the faculty members who took over the dismissed professors' teaching loads becomes moot considering that, as it alleges in its petition, it operates on a semestral
basis.
Under the principle that no appointments can be made to fill items which are not yet lawfully vacant, the contracts of new professors cannot prevail over the right to reinstatement of the dismissed personnel.
However, we apply equitable principles for the sake of the students and order actual reinstatement at the start of the second semester.
WHEREFORE, the petition is hereby DISMISSED. However, the NLRC resolution dated September 6, 1989 is MODIFIED and the petitioner University of Sto. Tomas is directed to temporarily reinstate, pending
and without prejudice to the outcome of the labor dispute before the National Labor Relations Commission, the sixteen (16) dismissed faculty members to their actual teaching assignments, at the start of the
second semester of the schoolyear 1990-1991. Prior to their temporary reinstatement to their actual teaching loads, the said faculty members shall be entitled to fall wages, backwages, and other benefits. The
Temporary Restraining Order dated October 25, 1989 is hereby LIFTED. SO ORDERED. Fernan, C.J., (Chairman), Bidin and Cortes, JJ., concur. Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 146650
January 13, 2003
DOLE PHILIPPINES, INC., petitioner,

vs.
PAWIS NG MAKABAYANG OBRERO (PAMAO-NFL), respondent.
CORONA, J.:
Before us is a petition for review filed under Rule 45 of the 1997 Rules of Civil Procedure, assailing the January 9, 2001 resolution of the Court of Appeals which denied petitioners motion for reconsideration of its
September 22, 2000 decision1 which in turn upheld the Order issued by the voluntary arbitrator 2 dated 12 October 1998, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant. Respondent is hereby directed to extend the "free meal" benefit as provided for in Article XVIII,
Section 3 of the collective bargaining agreement to those employees who have actually performed overtime works even for exactly three (3) hours only.
SO ORDERED. 3
The core of the present controversy is the interpretation of the provision for "free meals" under Section 3 of Article XVIII of the 1996-2001 Collective Bargaining Agreement (CBA) between petitioner Dole
Philippines, Inc. and private respondent labor union PAMAO-NFL. Simply put, how many hours of overtime work must a Dole employee render to be entitled to the free meal under Section 3 of Article XVIII of the
1996-2001 CBA? Is it when he has rendered (a) exactly, or no less than, three hours of actual overtime work or (b) more than three hours of actual overtime work?
The antecedents are as follows:
On February 22, 1996, a new five-year Collective Bargaining Agreement for the period starting February 1996 up to February 2001, was executed by petitioner Dole Philippines, Inc., and private respondent Pawis
Ng Makabayang Obrero-NFL (PAMAO-NFL). Among the provisions of the new CBA is the disputed section on meal allowance under Section 3 of Article XVIII on Bonuses and Allowances, which reads:
Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of TEN PESOS (P10.00) to all employees who render at least TWO (2) hours or more of actual overtime
work on a workday, and FREE MEALS, as presently practiced, not exceeding TWENTY FIVE PESOS (P25.00) after THREE (3) hours of actual overtime work.4
Pursuant to the above provision of the CBA, some departments of Dole reverted to the previous practice of granting free meals after exactly three hours of actual overtime work. However, other departments
continued the practice of granting free meals only after more than three hours of overtime work. Thus, private respondent filed a complaint before the National Conciliation and Mediation Board alleging that
petitioner Dole refused to comply with the provisions of the 1996-2001 CBA because it granted free meals only to those who rendered overtime work for more than three hours and not to those who rendered
exactly three hours overtime work.
The parties agreed to submit the dispute to voluntary arbitration. Thereafter, the voluntary arbitrator, deciding in favor of the respondent, issued an order directing petitioner Dole to extend the "free meal" benefit to
those employees who actually did overtime work even for exactly three hours only.
Petitioner sought a reconsideration of the above order but the same was denied. Hence, petitioner elevated the matter to the Court of Appeals by way of a petition for review on certiorari.
On September 22, 2000, the Court of Appeals rendered its decision upholding the assailed order.
Thus, the instant petition.
Petitioner Dole asserts that the phrase "after three hours of actual overtime work" should be interpreted to mean after more than three hours of actual overtime work.
On the other hand, private respondent union and the voluntary arbitrator see it as meaning after exactly three hours of actual overtime work.
The "meal allowance" provision in the 1996-2001 CBA is not new. It was also in the 1985-1988 CBA and the 1990-1995 CBA. The 1990-1995 CBA provision on meal allowance was amended by the parties in the
1993-1995 CBA Supplement. The clear changes in each CBA provision on meal allowance were in the amount of the meal allowance and free meals, and the use of the words "after" and "after more than" to
qualify the amount of overtime work to be performed by an employee to entitle him to the free meal.
To arrive at a correct interpretation of the disputed provision of the CBA, a review of the pertinent section of past CBAs is in order.
The CBA covering the period 21 September 1985 to 20 September 1988 provided:
Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of FOUR (P4.00) PESOS to all employees who render at least TWO (2) hours or more of actual overtime
work on a workday, and FREE MEALS, as presently practiced, after THREE (3) hours of actual overtime work." 5
The CBA for 14 January 1990 to 13 January 1995 likewise provided:
Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of EIGHT PESOS (P8.00) to all employees who render at least TWO (2) hours or more of actual overtime
work on a workday, and FREE MEALS, as presently practiced, not exceeding SIXTEEN PESOS (P16.00) after THREE (3) hoursof actual overtime work."6
The provision above was later amended when the parties renegotiated the economic provisions of the CBA pursuant to Article 253-A of the Labor Code. Section 3 of Article XVIII of the 14 January 1993 to 13
January 1995 Supplement to the 1990-1995 CBA reads:
Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL SUBSIDY of NINE PESOS (P9.00) to all employees who render at least TWO (2) hours or more of actual overtime work
on a workday, and FREE MEALS, as presently practiced, not exceeding TWENTY ONE PESOS (P21.00) after more than THREE (3) hours of actual overtime work (Section 3, as amended)." 7
We note that the phrase "more than" was neither in the 1985-1988 CBA nor in the original 1990-1995 CBA. It was inserted only in the 1993-1995 CBA Supplement. But said phrase is again absent in Section 3 of
Article XVIII of the 1996-2001 CBA, which reverted to the phrase "after three (3) hours".
Petitioner asserts that the phrase "after three (3) hours of actual overtime work" does not mean after exactly three hours of actual overtime work; it means after more than three hours of actual overtime work.
Petitioner insists that this has been the interpretation and practice of Dole for the past thirteen years.
Respondent, on the other hand, maintains that "after three (3) hours of actual overtime work" simply means after rendering exactly, or no less than, three hours of actual overtime work.
The Court finds logic in private respondents interpretation.
The omission of the phrase "more than" between "after" and "three hours" in the present CBA spells a big difference.
No amount of legal semantics can convince the Court that "after more than" means the same as "after".
Petitioner asserts that the "more than" in the 1993-1995 CBA Supplement was mere surplusage because, regardless of the absence of said phrase in all the past CBAs, it had always been the policy of petitioner
corporation to give the meal allowance only after more than 3 hours of overtime work. However, if this were true, why was it included only in the 1993-1995 CBA Supplement and the parties had to negotiate its
deletion in the 1996-2001 CBA?
Clearly then, the reversion to the wording of previous CBAs can only mean that the parties intended that free meals be given to employees after exactly, or no less than, three hours of actual overtime work.
The disputed provision of the CBA is clear and unambiguous. The terms are explicit and the language of the CBA is not susceptible to any other interpretation. Hence, the literal meaning of "free meals after three
(3) hours of overtime work" shall prevail, which is simply that an employee shall be entitled to a free meal if he has rendered exactly, or no less than, three hours of overtime work, not "after more than" or "in
excess of" three hours overtime work.
Petitioner also invokes the well-entrenched principle of management prerogative that "the power to grant benefits over and beyond the minimum standards of law, or the Labor Code for that matter, belongs to the
employer x x x". According to this principle, even if the law is solicitous of the welfare of the employees, it must also protect the right of the employer to exercise what clearly are management
prerogatives.8 Petitioner claims that, being the employer, it has the right to determine whether it will grant a "free meal" benefit to its employees and, if so, under what conditions. To see it otherwise would amount
to an impairment of its rights as an employer.
We do not think so.
The exercise of management prerogative is not unlimited. It is subject to the limitations found in law, a collective bargaining agreement or the general principles of fair play and justice. 9 This situation constitutes
one of the limitations. The CBA is the norm of conduct between petitioner and private respondent and compliance therewith is mandated by the express policy of the law. 10
Petitioner Dole cannot assail the voluntary arbitrators interpretation of the CBA for the supposed impairment of its management prerogatives just because the same interpretation is contrary to its own.
WHEREFORE, petition is hereby denied.
SO ORDERED.
Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Carpio-Morales, JJ., concur.
Feliciano, J., is on leave.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 92009 February 17, 1993
MASTER IRON LABOR UNION (MILU), WILFREDO ABULENCIA, ROGELIO CABANA, LOPITO SARANILLA, JESUS MOISES, BASILIO DELA CRUZ, EDGAR ARANES, ELY BORROMEO, DANIEL
BACOLON, MATIAS PAJIMULA, RESTITUTO PAYABYAB, MELCHOR BOSE, TEOFILO ANTOLIN, ROBERT ASPURIA, JUSTINO BOTOR, ALFREDO FABROS, AGAPITO TABIOS, BENARDO ALFON,
BENIGNO BARCENA, BERNARDO NAVARRO, MOISES LABRADOR, ERNESTO DELA CRUZ, EDUARDO ESPIRITU, IGNACIO PAGTAMA, BAYANI PEREZ, SIMPLICIO PUASO, EDWIN VELARDE,
BEATO ABOGADO, DANILO SAN ANTONIO, BERMESI BORROMEO, and JOSE BORROMEO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MASTER IRON WORKS AND CONSTRUCTION CORPORATION, respondents.
Banzuela, Flores, Mirrales, Raeses, Sy, Taquio and Associates for petitioners.
Carlos L. Galarrita for private respondent.
MELO, J.:
The petition for certiorari before us seeks to annul and to set aside the decision of the National Labor Relations Commission (Second Division) dated July 12, 1986 which affirmed that of Labor Arbiter Fernando V.
Cinco declaring illegal the strike staged by petitioners and terminating the employment of the individual petitioners.
The Master Iron Works Construction Corporation (Corporation for brevity) is a duly organized corporate entity engaged in steel fabrication and other related business activities. Sometime in February 1987, the
Master Iron Labor Union (MILU) entered into a collective barganing agreement (CBA) with the Corporation for the three-year period between December 1, 1986 and November 30, 1989 ( Rollo, p. 7). Pertinent
provisions of the CBA state:
Sec. 1. That there shall be no strike and no lockout, stoppage or shutdown of work, or any other interference with any of the operation of the COMPANY during the term of this
AGREEMENT, unless allowed and permitted by law.
Sec. 2. Service Allowance The COMPANY agrees to continue the granting of service allowance of workers assigned to work outside the company plant, in addition to his daily
salary, as follows:
(a) For those assigned to work outside the plant within Metro Manila, the service allowance shall be P12.00;
(b) For those assigned to work outside Metro Manila, the service allowance shall be P25.00/day;
(c) The present practice of conveying to and from jobsites of workers assigned to work outside of the company plant shall be maintained.
Right after the signing of the CBA, the Corporation subcontracted outside workers to do the usual jobs done by its regular workers including those done outside of the company plant. As a result, the regular
workers were scheduled by the management to work on a rotation basis allegedly to prevent financial losses thereby allowing the workers only ten (10) working days a month ( Rollo, p. 8). Thus, MILU requested
implementation of the grievance procedure which had also been agreed upon in the CBA, but the Corporation ignored the request.
Consequently, on April 8, 1987, MILU filed a notice of strike (Rollo,

p. 54) with the Department of Labor and Employment. Upon the intervention of the DOLE, through one Atty. Bobot Hernandez, the Corporation and MILU reached an agreement whereby the Corporation acceded
to give back the usual work to its regular employees who are members of MILU (Rollo, p. 55).
Notwithstanding said agreement, the Corporation continued the practice of hiring outside workers. When the MILU president, Wilfredo Abulencia, insisted in doing his regular work of cutting steel bars which was
being done by casual workers, a supervisor reprimanded him, charged him with insubordination and suspended him for three (3) days (Rollo, pp. 9 & 51-52). Upon the request of MILU, Francisco Jose of the
DOLE called for conciliation conferences. The Corporation, however, insisted that the hiring of casual workers was a management prerogative. It later ignored subsequent scheduled conciliation conferences
(Rollo, pp. 51-52 & 57-58).
Hence, on July 9, 1987, MILU filed a notice of strike on the following grounds: (a) violation of CBA; (b) discrimination; (c) unreasonable suspension of union officials; and (d) unreasonable refusal to entertain
grievance (Rollo,
p. 9). On July 24, 1987, MILU staged the strike, maintaining picket lines on the road leading to the Corporation's plant entrance and premises.
At about 11 o'clock in the morning of July 28, 1987, CAPCOM soldiers, who had been summoned by the Corporation's counsel, came and arrested the picketers. They were brought to Camp Karingal and, the
following day, to the Caloocan City jail. Charges for illegal possession of firearms and deadly weapons were lodged against them. Later, however, those charges were dismissed for failure of the arresting
CAPCOM soldiers to appear at the investigation (Rollo, p. 10). The dispersal of the picketlines by the CAPCOM also resulted in the temporary lifting of the strike.
On August 4, 1987, the Corporation filed with the NLRC National Capital Region arbitration branch a petition to declare the strike illegal (Rollo,
p. 40). On September 7, 1987, MILU, with the assistance of the Alyansa ng Manggagawa sa Valenzuela (AMVA), re-staged the strike. Consequently, the Corporation filed a petition for injunction before the NLRC
which, on September 24, 1987, issued an order directing the workers to remove the barricades and other obstructions which prevented ingress to and egress from the company premises. The workers obliged on
October 1, 1987 (Rollo, p. 25). On October 22, 1987, through its president, MILU offered to return to work in a letter which states:
22 Okt. 1987
Mr. Elieze Hao
Master Iron Works & Construction Corp.
790 Bagbagin, Caloocan City
Dear Sir:
Ang unyon, sa pamamagitan ng nakalagda sa ibaba, ay nagmumungkahi, nagsusuhestiyon o nag-oofer sa inyong pangasiwaan ng aming kahilingan na bumalik na sa trabaho
dahilan din lang sa kalagayan na tuloy tuloy ang ating pag-uusap para sa ikatitiwasay ng ating relasyon. Gusto naming manatili ang ating magandang pagtitinginan bilang
magkasangga para sa ika-uunlad ng ating kumpanya. Sana ay unawain niyo kami dahil kailangan namin ng trabaho.
Gumagalang,
(Sgd.)
WILFREDO ABULENCIA
Pangulo
(Rollo, p. 590)
On October 30, 1987, MILU filed a position paper with counter-complaint before the NLRC. In said counter-complaint, the workers charged the Corporation with unfair labor practice for subcontracting work that
was normally done by its regular workers thereby causing the reduction of the latter's workdays; illegal suspension of Abulencia without any investigation; discrimination for hiring casual workers in violation of the
CBA, and illegal dispersal of the picket lines by CAPCOM agents (Rollo, pp. 26-27).
In due course, a decision dated March 16, 1988 was rendered by Labor Arbiter Fernando Cinco declaring illegal the strike staged by MILU. The dispositive portion of the decision reads:
WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered, as follows:
1. Declaring the strike by the respondents illegal and unlawful;
2. Ordering the cancellation of the registered permit of respondent union MILU for having committed an illegal strike;
3. Ordering the termination of employment status of the individual respondents, including the forfeiture of whatever benefits are due them under the law, for having actively
participated in an illegal strike, namely: Wilfredo Abulencia, President; Rogelio Cabana, Vice-President; Lopito Saranilla, Secretary; Jesus Moises, Treasurer; Basilio dela Cruz,
Auditor; as Members of the Board:Edgar Aranes, Melchor Bose, Restituto Payabyab, Matias Pajimula, Daniel Bacolon, and Ely Borromeo, as Members of the Union: Teofilo
Antolin, Robert Aspuria, Justino Botor, Alfredo Fabros, Agapito Tabios, Bernardo Alfon, Benigno Barcena, Bernardo Navaro, Moises Labrador, Ernesto dela Cruz, Eduardo
Espiritu, Ignacio Pagtama, Bayani Perez, Simplicio Puaso, Edwin Velarde, Beato Abogado, Danila San Antonio, Bermes Borromeo and Jose Borromeo.
The respondents as appearing in Annex "A" of the Petition, but not included as among those whose employment status were not terminated as above-mentioned, are given priority
of reinstatement, without backwages, in the event petitioner starts its normal operations, or shall be paid their separation pay according to law.
4. Ordering the respondents to cease and desist from further committing the illegal acts complained of;
5. Ordering Respondent Union to pay the amount of P10,000.00 to Petitioner's Counsel as attorney's fees;
6. Ordering the dismissal of the claim for damages for lack of merit; and
7. Ordering the dismissal of the counter-complaint in view of the filing of a separate complaint by the respondents.
SO ORDERED. (pp. 35-36, Rollo.)
On appeal to the NLRC, MILU and the individual officers and workers named in Labor Arbiter Cinco's decision alleged that said labor arbiter gravely abused his discretion and exhibited bias in favor of the
Corporation in disallowing their request to cross-examine the Corporation's witnesses, namely, Corporate Secretary Eleazar Hao, worker Daniel Ignacio and foreman Marcial Barcelon, who all testified on the
manner in which the strike was staged and on the coercion and intimidation allegedly perpetrated by the strikers (Rollo,
p. 151).
The Second Division of the NLRC affirmed with modifications the decision of the labor arbiter. The decision, which was promulgated on July 12, 1989 with Commissioners Domingo H. Zapanta and Oscar N.
Abella concurring and Commissioner Daniel M. Lucas, Jr. dissenting, disagreed with the labor arbiter on the "summary execution of the life of Master Iron Labor Union (MILU)" on the grounds that the Corporation
did not specifically pray for the cancellation of MILU's registration and that pursuant to Articles 239 and 240 of the Labor Code, only the Bureau of Labor Relations may cancel MILU's license or certificate of
registration. It also deleted the award of P10,000.00 as attorney's fees for lack of sufficient basis but it affirmed the labor arbiter with regard to the declaration of illegality of the strike and the termination of
employment of certain employees and the rest of the dispositive portion of the labor arbiter's decision (Rollo, pp. 48-49).
In his dissent, Commissioner Lucas stated that he is "for the setting aside of the decision appealed from, and remanding of the case to the labor arbiter of origin, considering the respondent's countercharge or
complaint for unfair labor practice was not resolved on the merits" (Rollo, p. 49).
MILU filed a motion for the reconsideration but the same was denied by the NLRC for lack of merit in its Resolution of August 9, 1989 (Rollo, p. 50). Hence, the instant petition. 1
Petitioners contend that notwithstanding the non-strike provision in the CBA, the strike they staged was legal because the reasons therefor are non-economic in nature. They assert that the NLRC abused its
discretion in holding that there was "failure to exhaust the provision on grievance procedure" in view of the fact that they themselves sought grievance meetings but the Corporation ignored such requests. They
charge the NLRC with bias in failing to give weight to the fact that the criminal charges against the individual petitioners were dismissed for failure of the CAPCOM soldiers to testify while the same individual
strikers boldly faced the charges against them. Lastly, they aver that the NLRC abused its discretion in holding that the workers' offer to return to work was conditional.
In holding that the strike was illegal, the NLRC relied solely on the no-strike no-lockout provision of the CBA aforequoted. As this Court has held in Philippine Metal Foundries, Inc. vs. CIR (90 SCRA 135 [1979]), a
no-strike clause in a CBA is applicable only to economic strikes. Corollarily, if the strike is founded on an unfair labor practice of the employer, a strike declared by the union cannot be considered a violation of the
no-strike clause.
An economic strike is defined as one which is to force wage or other concessions from the employer which he is not required by law to grant (Consolidated Labor Association of the Philippines vs. Marsman & Co.,
Inc., 11 SCRA 589 [1964]). In this case, petitioners enumerated in their notice of strike the following grounds: violation of the CBA or the Corporation's practice of subcontracting workers; discrimination; coercion
of employees; unreasonable suspension of union officials, and unreasonable refusal to entertain grievance.
Private respondent contends that petitioner's clamor for the implementation of Section 2, Article VIII of the CBA on service allowances granted to workers who are assigned outside the company premises is an
economic issue (Rollo, p. 70). On the contrary, petitioners decry the violation of the CBA, specifically the provision granting them service allowances. Petitioners are not, therefore, already asking for an economic
benefit not already agreed upon, but are merely asking for the implementation of the same. They aver that the Corporation's practice of hiring subcontractors to do jobs outside of the company premises was a
way "to dodge paying service allowance to the workers" (Rollo, pp. 61 & 70).
Much more than an economic issue, the said practice of the Corporation was a blatant violation of the CBA and unfair labor practice on the part of the employer under Article 248(i) of the Labor Code. Although
the end result, should the Corporation be required to observe the CBA, may be economic in nature because the workers would then be given their regular working hours and therefore their just pay, not one of the
said grounds is an economic demand within the meaning of the law on labor strikes. Professor Perfecto Fernandez, in his book Law on Strikes,Picketing and Lockouts (1981 edition, pp. 144-145), states that an
economic strike involves issues relating to demands for higher wages, higher pension or overtime rates, pensions, profit sharing, shorter working hours, fewer work days for the same pay, elimination of night
work, lower retirement age, more healthful working conditions, better health services, better sanitation and more safety appliances. The demands of the petitioners, being covered by the CBA, are definitely within
the power of the Corporation to grant and therefore the strike was not an economic strike.
The other grounds, i.e., discrimination, unreasonable suspension of union officials and unreasonable refusal to entertain grievance, had been ventilated before the Labor Arbiter. They are clearly unfair labor
The subsequent withdrawal of petitioners' complaint for unfair labor practice

(NLRC-NCR Case No. 00-11-04132-87) which was granted by Labor Arbiter Ceferina Diosana who also
considered the case closed and terminated (Rollo, pp. 97 & 109) may not, therefore, be considered as
having converted their other grievance into economic demands.
practices as defined in Article 248 of the Labor Code. 2
Moreover, petitioners staged the strike only after the Corporation had failed to abide by the agreement forged between the parties upon the intervention of no less than the DOLE after the union had complained of
the Corporation's unabated subcontracting of workers who performed the usual work of the regular workers. The Corporation's insistence that the hiring of casual employees is a management prerogative betrays
its attempt to coat with legality the illicit curtailment of its employees' rights to work under the terms of the contract of employment and to a fair implementation of the CBA.
While it is true that an employer's exercise of management prerogatives, with or without reason, does not per seconstitute unjust discrimination, such exercise, if clearly shown to be in grave abuse of discretion,
may be looked into by the courts (National Federation of Labor Unions vs. NLRC, 202 SCRA 346 [1991]). Indeed, the hiring, firing, transfer, demotion, and promotion of employees are traditionally identified as
management prerogatives. However, they are not absolute prerogatives. They are subject to limitations found in law, a collective bargaining agreement, or general principles of fair play and justice (University of
Sto. Tomas vs. NLRC, 190 SCRA 758 [1990] citing Abbott Laboratories [Phil.], Inc. vs. NLRC, 154 SCRA 713 [1987]). The Corporation's assertion that it was exercising a management prerogative in hiring outside
workers being contrary to the contract of employment which, of necessity, states the expected wages of the workers, as well as the CBA, is therefore untenable.
Private respondent's failure to traverse petitioners' allegations that the NLRC abused its discretion in holding that the provision on grievance procedure had not been exhausted clearly sustains such allegation and
upholds the petitioners' contention that the Corporation refused to undergo said procedure. It should be remembered that a grievance procedure is part of the continuous process of collective bargaining (Republic
Savings Bank. vs. CIR, et al., 21 SCRA 226 [1967]). It is intended to promote a friendly dialogue between labor and management as a means of maintaining industrial peace. The Corporation's refusal to heed
petitioners' request to undergo the grievance procedure clearly demonstrated its lack of intent to abide by the terms of the CBA.
Anent the NLRC's finding that Abulencia's offer to return to work is conditional, even a cursory reading of the letter aforequoted would reveal that no conditions had been set by petitioners. It is incongruous to
consider as a "condition" the statement therein that the parties would continue talks for a peaceful working relationship ("tuloy tuloy ang ating pag-uusap sa ikatitiwasay ng ating relasyon"). Conferences form part
of the grievance procedure and their mere mention in Abulencia's letter did not make the same "conditional".
In the same manner, the following findings of the Labor Arbiter showed the illegal breakup of the picket lines by the CAPCOM:
d) On 28 July 1987, CAPCOM soldiers, on surveillance mission, arrived at the picket line of respondents and searches were made on reported deadly weapons and firearms in the
possession of the strikers. Several bladed weapons and firearms in the possession of the strikers were confiscated by the CAPCOM soldiers, as a result of which, the
apprehended strikers were brought to Camp Tomas Karingal in Quezon City for proper investigation and filing of the appropriate criminal charges against them. The strikers who
were charged of illegal possession of deadly weapon and firearms were: Edgar Aranes, Wilfredo Abulencia, Ernesto dela Cruz, Beato Abogado, Lopito Saranilla, Restituto
Payabyab, Jose Borromeo and Rogelio Cabana. Criminal informations were filed by Inquest Fiscal, marked as Exhibits "E", "E-1 to E-8". These strikers were jailed for sometime
until they were ordered release after putting up the required bail bond. Other strikers were also arrested and brought to Camp Tomas Karingal, and after proper investigation as to
their involvement in the offense charged, they were released for lack of prima facie evidence. They were Edwin Velarde, Bayani Perez, Daniel Bacolon, Jesus Moises, Robert
Aspurias and Benigno Barcena.
After the strikers who were arrested were brought to Camp Tomas Karingal on 28 July 1987, the rest of the strikers removed voluntarily their human and material barricades which
were placed and posted at the road leading to the premises of the Company. (Rollo, p. 32)
The bringing in of CAPCOM soldiers to the peaceful picket lines without any reported outbreak of violence, was clearly in violation of the following prohibited activity under Article 264 of the Labor Code:
(d) No public official or employee, including officers and personnel of the New Armed Forces of the Philippines or the Integrated National Police, or armed person, shall bring in,
introduce or escort in any manner any individual who seeks to replace strikers in entering or leaving the premises of a strike area, or work in place of the strikers. The police force
shall keep out of the picket lines unless actual violence or other criminal acts occur therein; Provided, That nothing herein shall be interpreted to prevent any public officer from
taking any measure necessary to maintain peace and order, protect life and property, and/or enforce the law and legal order. (Emphasis supplied.)
As the Labor Arbiter himself found, no pervasive or widespread coercion or violence were perpetrated by the petitioners as to warrant the presence of the CAPCOM soldiers in the picket lines. In this regard, worth
quoting is the following excerpt of the decision in Shell Oil Workers' Union vs. Shell Company of the Philippines, Ltd., 39 SCRA 276 [1971], which was decided by the Court under the old Industrial Peace Act but
which excerpt still holds true:
. . . What is clearly within the law is the concerted activity of cessation of work in order that . . . employer cease and desist from an unfair labor practice. That the law recognizes as
a right. There is though a disapproval of the utilization of force to attain such an objective. For implicit in the very concept of the legal order is the maintenance of peaceful ways. A
strike otherwise valid, if violent in character, may be placed beyond the pale. Care is to be taken, however, especially where an unfair labor practice is involved, to avoid stamping
it with illegality just because it is tainted with such acts. To avoid rendering illusory the recognition of the right to strike, responsibility in such a case should be individual and not
collective. A different conclusion would be called for, of course, if the existence of force while the strike lasts is pervasive and widespread, consistently and deliberately resorted to
as a matter of policy. It could be reasonably concluded then that even if justified as to ends, it becomes illegal because of the means employed. (at p. 292.)
All told, the strike staged by the petitioners was a legal one even though it may have been called to offset what the strikers believed in good faith to be unfair labor practices on the part of the employer (Ferrer, et
al. vs. Court of Industrial Relations, et al., 17 SCRA 352 [1966]). Verily, such presumption of legality prevails even if the allegations of unfair labor practices are subsequently found out to be untrue (People's
Industrial and Commercial Employees and Workers Org. [FFW] vs. People's Industrial and Commercial Corporation, 112 SCRA 440 [1982]). Consonant with these jurisprudential pronouncements, is Article 263 of
the Labor Code which clearly states "the policy of the State to encourage free trade unionism and free collective bargaining". Paragraph (b) of the same article guarantees the workers' "right to engage in
concerted activities for purposes of collective bargaining or for their mutual benefit and protection" and recognizes the "right of legitimate labor organizations to strike and picket and of employers to lockout" so
long as these actions are "consistent with the national interest" and the grounds therefor do not involve inter-union and intra-union disputes.
The strike being legal, the NLRC gravely abused its discretion in terminating the employment of the individual petitioners, who, by operation of law, are entitled to reinstatement with three years backwages.
Republic Act No. 6715 which amended Art. 279 of the Labor Code by giving "full backwages inclusive of allowances" to reinstated employees, took effect fifteen days from the publication of the law on March 21,
1989. The decision of the Labor Arbiter having been promulgated on March 16, 1988, the law is not applicable in this case.
WHEREFORE, the questioned decision and resolution of the NLRC as well as the decision of the Labor Arbiter are hereby SET ASIDE and the individual petitioners are reinstated to their positions, with three
years backwages and without loss of seniority rights and other privileges. Further, respondent corporation is ordered to desist from subcontracting work usually performed by its regular workers.
SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.
Gutierrez, Jr., J., is on leave.

SUPREME COURT
Manila
EN BANC
G.R. No. L-64313 January 17, 1985
NATIONAL HOUSING CORPORATION, petitioner,

vs.
BENJAMIN JUCO AND THE NATIONAL LABOR RELATIONS COMMISSION, respondents.
Government Corporate Counsel for petitioner.
Amante A. Pimentel for respondents.
GUTIERREZ, JR., J.:
Are employees of the National Housing Corporation (NHC) covered by the Labor Code or by laws and regulations governing the civil service?
The background facts of this case are stated in the respondent-appellee's brief as follows:
The records reveal that private respondent (Benjamin C. Juco) was a project engineer of the National Housing Corporation (NHC) from November 16, 1970 to May 14, 1975. For
having been implicated in a crime of theft and/or malversation of public funds involving 214 pieces of scrap G.I. pipes owned by the corporation which was allegedly committed on
March 5, 1975. Juco's services were terminated by (NHC) effective as of the close of working hours on May 14, 1975. On March 25, 1977 he filed a complaint for illegal dismissal
against petitioner (NHC) with Regional Office No. 4, Department of Labor (now Ministry of Labor and Employment) docketed as R04-3-3309-77 (Annex A, Petition). The said
complaint was certified by Regional Branch No. IV of the NLRC for compulsory arbitration where it was docketed as Case No. RB-IV-12038-77 and assigned to Labor Arbiter Ernilo
V. Pealosa. The latter conducted the hearing. By agreement of the parties, the case was submitted for resolution upon submission of their respective position papers. Private
respondent (Juco) submitted his position paper on July 15, 1977. He professed innocence of the criminal acts imputed against him contending "that he was dismissed based on
purely fabricated charges purposely to harass him because he stood as a witness in the theft case filed against certain high officials of the respondent's establishment" (NHC) and
prayed for 'his immediate reinstatement to his former position in the (NHC) without loss of seniority rights and the consequent payment of his will back wages plus all the benefits
appertaining thereto. On July 28, 1977, the NHC also filed its position paper alleging that the Regional Office Branch IV, Manila, NLRC, "is without authority to entertain the case
for lack of jurisdiction, considering that the NHC is a government owned and controlled corporation; that even assuming that this case falls within the jurisdiction of this Office,
respondent firm (now petitioner) maintains that respondent (Juco), now private respondent, was separated from the service for valid and justified reasons, i.e., for having sold
company properties consisting of 214 pieces of scrap G.I. pipes at a junk shop in Alabang, Muntinlupa, Metro Manila, and thereafter appropriating the proceeds thereof to his own
benefit."
The pertinent portion of the decision of respondent National Labor Relations Commission (NLRC) reads:
The fact that in the early case of Fernandez v. Cedro (NLRC Case No. 201165-74, May 19, 1975) the Commission, (Second Division) ruled that the respondent National Housing
Corporation is a government-owned or controlled corporation does not preclude us from later taking a contrary stand if by doing so the ends of justice could better be served.
For although adherence to precedents (stare decisis) is a sum formula for achieving uniformity of action and conducive to the smooth operation of an office, Idolatrous reverence
for precedents which have outlived their validity and usefulness retards progress and should therefore be avoided. In fact, even courts do reverse themselves for reasons of justice
and equity. This Commission as an Administrative body performing quasi judicial function is no exception.
WHEREFORE, in the light of the foregoing, the decision appealed from is hereby, set aside. In view, however, of the fact that the Labor Arbiter did not resolve the issue of illegal
dismissal we have opted to remand this case to the Labor Arbiter a quo for resolution of the aforementioned issue.
The NHC is a one hundred percent (100%) government-owned corporation organized in accordance with Executive Order No. 399, the Uniform Charter of Government Corporations, dated January 5, 1951. Its
shares of stock are owned by the Government Service Insurance System the Social Security System, the Development Bank of the Philippines, the National Investment and Development Corporation, and the
People's Homesite and Housing Corporation. Pursuant to Letter of Instruction No. 118, the capital stock of NHC was increased from P100 million to P250 million with the five government institutions above
mentioned subscribing in equal proportion to the increased capital stock. The NHC has never had any private stockholders. The government has been the only stockholder from its creation to the present.
There should no longer be any question at this time that employees of government-owned or controlled corporations are governed by the civil service law and civil service rules and regulations.
Section 1, Article XII-B of the Constitution specifically provides:
The Civil Service embraces every branch, agency, subdivision, and instrumentality of the Government, including every government-owned or controlled corporation. ...
The 1935 Constitution had a similar provision in its Section 1, Article XI I which stated:
A Civil Service embracing all branches and subdivisions of the Government shall be provided by law.
The inclusion of "government-owned or controlled corporations" within the embrace of the civil service shows a deliberate effort of the framers to plug an earlier loophole which allowed government-owned or
controlled corporations to avoid the full consequences of the an encompassing coverage of the civil service system. The same explicit intent is shown by the addition of "agency" and "instrumentality" to branches
and subdivisions of the Government. All offices and firms of the government are covered.
The amendments introduced in 1973 are not Idle exercises or a meaningless gestures. They carry the strong message that t civil service coverage is broad and an- embracing insofar as employment in the
government in any of its governmental or corporate arms is concerned.
The constitutional provision has been implemented by statute. Presidential Decree No. 807 is unequivocal that personnel of government-owned or controlled corporations belong to the civil service and are subject
to civil service requirements.
It provides:
SEC. 56. Government-owned or Controlled Corporations Personnel. All permanent personnel of government-owned or controlled corporations whose positions are now
embraced in the civil service shall continue in the service until they have been given a chance to qualify in an appropriate examination, but in the meantime, those who do not
possess the appropriate civil service eligibility shag not be promoted until they qualify in an appropriate civil service examination. Services of temporary personnel may be
terminated any time.
The very Labor Code, P. D. No. 442 as amended, which the respondent NLRC wants to apply in its entirety to the private respondent provides:
ART. 277. Government employees. The terms and conditions of employment of all government employees, including employees of government-owned and controlled
corporations shall be governed by the Civil Service Law, rules and regulations. Their salaries shall be standardized by the National Assembly as provided for in the New
Constitution. However, there shall be reduction of existing wages, benefits and other terms and conditions of employment being enjoyed by them at the time of the adoption of the
Code.
Our decision in Alliance of Government Workers, et al v. Honorable Minister of Labor and Employment et all. (124 SCRA 1) gives the background of the amendment which includes government-owned or
controlled corporations in the embrace of the civil service.
We stated:
Records of the 1971 Constitutional Convention show that in the deliberation held relative to what is now Section 1(1), Article XII-B, supra, the issue of the inclusion of governmentowned or controlled corporations figured prominently.
The late delegate Roberto S. Oca, a recognized labor leader, vehemently objected to the inclusion of government-owned or controlled corporations in the Civil Service. He argued
that such inclusion would put asunder the right of workers in government corporations, recognized in jurisprudence under the 1935 Constitution, to form and join labor unions for
purposes of collective bargaining with their employers in the same manner as in the private section (see: records of 1971 Constitutional Convention).
In contrast, other labor experts and delegates to the 1971 Constitutional Convention enlightened the members of the Committee on Labor on the divergent situation of government
workers under the 1935 Constitution, and called for its rectification. Thus, in a Position Paper dated November 22, 197 1, submitted to the Committee on Labor, 1971
Constitutional Convention, then Acting Commissioner of Civil Service Epi Rey Pangramuyen declared:
It is the stand, therefore, of this Commission that by reason of the nature of the public employer and the peculiar character of the public service, it
must necessary regard the right to strike given to unions in private industry as not applying to public employees and civil service employees. It has
been stated that the Government, in contrast to the private employer, protects the interests of all people in the public service, and that accordingly,
such conflicting interests as are present in private labor relations could not exist in the relations between government and those whom they
employ.
Moreover, determination of employment conditions as well as supervision of the management of the public service is in the hands of legislative
bodies. It is further emphasized that government agencies in the performance of their duties have a right to demand undivided allegiance from
their workers and must always maintain a pronounced esprit de corps or firm discipline among their staff members. It would be highly incompatible
with these requirements of the public service, if personnel took orders from union leaders or put solidarity with members of the working class
above solidarity with the Government. This would be inimical to the public interest.
Moreover, it is asserted that public employees by joining labor unions may be compelled to support objectives which are political in nature and
thus jeopardize the fundamental principle that the governmental machinery must be impartial and non-political in the sense of party politics. (See:
Records of 1971 Constitutional Convention).
Similar, Delegate Leandro P. Garcia, expressing for the inclusion of government-owned or controlled corporations in the Civil Service, argued:
It is meretricious to contend that because Government-owned or controlled corporations yield profits, their employees are entitled to better wages
and fringe benefits than employees of Government other than Government-owned and controlled corporations which are not making profits. There
is no gainsaying the fact that the capital they use is the people's money. (see: Records of the 1971 Constitutional Convention).
Summarizing the deliberations of the 1971 Constitutional Convention on the inclusion of Government-owned or controlled corporation Dean Joaquin G. Bernas, SJ., of the Ateneo
de Manila University Professional School of Law, stated that government-owned corporations came under attack as g cows of a privileged few enjoying salaries far higher than
their counterparts in the various branches of government, while the capital of these corporations belongs to the Government and government money is pumped into them
whenever on the brink of disaster, and they should therefore come under the strict surveillance of the Civil Service System. (Bernas, The 1973 Philippine Constitution, Notes and
Cases, 1974 ed., p. 524).
Applying the pertinent provisions of the Constitution, the Labor Code as amended, and the Civil Service Decree as amended and the precedent in the Alliance of Government Workers decision, it is clear that the
petitioner National Housing Corporation comes under the jurisdiction of the Civil Service Commission, not the Ministry of Labor and Employment.
This becomes more apparent if we consider the fact that the NHC performs governmental functions and not proprietary ones.
The NHC was organized for the governmental objectives stated in its amended articles of incorporation as follows:
SECOND: That the purpose for which the corporation is organized is to assist and carry out the coordinated massive housing program of the government, principally but not limited
to low-cost housing with the integration cooperation and assistance of all governmental agencies concerned, through the carrying on of any or all the following activities:
l) The acquisition, development or reclamation of lands for the purpose of construction and building therein preferably low-cost housing so as to provide decent and durable
dwelling for the greatest number of inhabitants in the country;
2) The promotion and development of physical social and economic community growth through the establishment of general physical plans for urban, suburban and metropolitan
areas to be characterized by efficient land use patterns;
3) The coordination and implementation of all projects of the government for the establishment of nationwide and massive low cost housing;
4) The undertaking and conducting of research and technical studies of the development and promotion of construction of houses and buildings of sound standards of design
liability, durability, safety, comfort and size for improvement of the architectural and engineering designs and utility of houses and buildings with the utilization of new and/or native
materials economics in material and construction, distribution, assembly and construction and of applying advanced housing and building technology.
5) Construction and installation in these projects of low-cost housing privately or cooperatively owned water and sewerage system or waste disposal facilities, and the formulations
of a unified or officially coordinated urban transportation system as a part of a comprehensive development plan in these areas.
The petitioner points out that it was established as an instrumentality of the government to accomplish governmental policies and objectives and extend essential services to the people. It would be incongruous if
employees discharging essentially governmental functions are not covered by the same law and rules which govern those performing other governmental functions. If government corporations discharging
proprietary functions now belong to the civil service with more reason should those performing governmental functions be governed by civil service law.
The respondent NLRC cites a 1976 opinion of the Secretary of Justice which holds that the phrase "government-owned or controlled corporations" in Section 1, Article XII-B of the Constitution contemplates only
those government-owned or controlled corporations created by special law. The opinion states that since the Constitution provides for the organization or regulation of private corporations only by "general law",
expressly excluding government-owned or controlled corporations, it follows that whenever the Constitution mentions government-owned or controlled corporations, it must refer to those created by special law.
P.D. No. 868 which repeals all charters, laws, decrees, rules, and provisions exempting any branch, agency, subdivision, or instrumentality of the government, including government- owned or controlled
corporations from the civil service law and rules is also cited to show that corporations not governed by special charters or laws are not to be brought within civil service coverage. The discussions in the
Constitutional Convention are also mentioned. It appears that at the time the Convention discussed government-owned or controlled corporations, all such corporations were organized only under special laws or
charters.
The fact that "private" corporations owned or controlled by the government may be created by special charter does not mean that such corporations not created by special law are not covered by the civil service.
Nor does the decree repealing all charters and special laws granting exemption from the civil service law imply that government corporations not created by special law are exempt from civil service coverage.
These charters and statutes are the only laws granting such exemption and, therefore, they are the only ones which could be repealed. There was no similar exempting provision in the general law which called
for repeal. And finally, the fact that the Constitutional Convention discussed only corporations created by special law or charter cannot be an argument to exclude petitioner NHC from civil service coverage. As
stated in the cited speech delivered during the convention sessions of March 9, 1972, all government corporations then in existence were organized under special laws or charters. The convention delegates could
not possibly discuss government-owned or controlled corporations which were still non-existent or about whose existence they were unaware.
Section I of Article XII-B, Constitution uses the word "every" to modify the phrase "government-owned or controlled corporation."
"Every" means each one of a group, without exception It means all possible and all taken one by one. Of course, our decision in this case refers to a corporation created as a government-owned or controlled
entity. It does not cover cases involving private firms taken over by the government in foreclosure or similar proceedings. We reserve judgment on these latter cases when the appropriate controversy is brought to
this Court.
The infirmity of the respondents' position lies in its permitting a circumvention or emasculation of Section 1, Article XII-B of the Constitution It would be possible for a regular ministry of government to create a host
of subsidiary corporations under the Corporation Code funded by a willing legislature. A government-owned corporation could create several subsidiary corporations. These subsidiary corporations would enjoy
the best of two worlds. Their officials and employees would be privileged individuals, free from the strict accountability required by the Civil Service Decree and the regulations of the Commission on Audit. Their
incomes would not be subject to the competitive restraints of the open market nor to the terms and conditions of civil service employment. Conceivably, all government-owned or controlled corporations could be
created, no longer by special charters, but through incorporation under the general law. The constitutional amendment including such corporations in the embrace of the civil service would cease to have
application. Certainly, such a situation cannot be allowed to exist.
WHEREFORE, the petition is hereby GRANTED. The questioned decision of the respondent National Labor Relations Commission is SET ASIDE. The decision of the Labor Arbiter dismissing the case before it
for lack of jurisdiction is REINSTATED.
SO ORDERED. Fernando, C.J., Teehankee, Makasiar, Aquino, Concepcion, Jr., Melencio-Herrera, Plana, Escolin, Relova, De la Fuente and Cuevas, JJ., concur.

SUPREME COURT
Manila
EN BANC
G.R. No. 167614
March 24, 2009
ANTONIO M. SERRANO, Petitioner,

vs.
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families and communities out of poverty. Their earnings have built houses, provided health care, equipped schools and planted the seeds of
businesses. They have woven together the world by transmitting ideas and knowledge from country to country. They have provided the dynamic human link between cultures, societies and economies. Yet, only
recently have we begun to understand not only how much international migration impacts development, but how smart public policies can magnify this effect.
United Nations Secretary-General Ban Ki-Moon

Global Forum on Migration and Development
Brussels, July 10, 20071
For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of Section 10, Republic Act (R.A.) No. 8042, 2 to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the workers shall be entitled to the full reimbursement of his
placement fee with interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever
is less.
x x x x (Emphasis and underscoring supplied)
does not magnify the contributions of overseas Filipino workers (OFWs) to national development, but exacerbates the hardships borne by them by unduly limiting their entitlement in case of illegal dismissal to
their lump-sum salary either for the unexpired portion of their employment contract "or for three months for every year of the unexpired term, whichever is less" (subject clause). Petitioner claims that the last
clause violates the OFWs' constitutional rights in that it impairs the terms of their contract, deprives them of equal protection and denies them due process.
By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the December 8, 2004 Decision 3 and April 1, 2005 Resolution4 of the Court of Appeals (CA), which applied the subject clause,
entreating this Court to declare the subject clause unconstitutional.
Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. (respondents) under a Philippine Overseas Employment Administration (POEA)-approved Contract of Employment with the
following terms and conditions:
Duration of contract
12 months
Position
Chief Officer
Basic monthly salary
US$1,400.00
Hours of work
48.0 hours per week
Overtime
US$700.00 per month
Vacation leave with pay
7.00 days per month 5
On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded employment contract for the position of Second Officer with a monthly salary of US$1,000.00, upon the
assurance and representation of respondents that he would be made Chief Officer by the end of April 1998. 6
Respondents did not deliver on their promise to make petitioner Chief Officer.7 Hence, petitioner refused to stay on as Second Officer and was repatriated to the Philippines on May 26, 1998. 8
Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to March 19, 1999, but at the time of his repatriation on May 26, 1998, he had served only two (2) months and seven (7)
days of his contract, leaving an unexpired portion of nine (9) months and twenty-three (23) days.
Petitioner filed with the Labor Arbiter (LA) a Complaint 9 against respondents for constructive dismissal and for payment of his money claims in the total amount of US$26,442.73, broken down as follows:
May 27/31, 1998 (5 days) incl. Leave pay
US$ 413.90
June 01/30, 1998
2,590.00
July 01/31, 1998
2,590.00
August 01/31, 1998
2,590.00
Sept. 01/30, 1998
2,590.00
Oct. 01/31, 1998
2,590.00
Nov. 01/30, 1998
2,590.00
Dec. 01/31, 1998
2,590.00
Jan. 01/31, 1999
2,590.00
Feb. 01/28, 1999
2,590.00
Mar. 1/19, 1999 (19 days) incl. leave pay
1,640.00
-------------------------------------------------------------------------------25,382.23
Amount adjusted to chief mate's salary

(March 19/31, 1998 to April 1/30, 1998) +
1,060.5010
---------------------------------------------------------------------------------------------
TOTAL CLAIM
US$ 26,442.7311
as well as moral and exemplary damages and attorney's fees.
The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal and awarding him monetary benefits, to wit:
WHEREFORE, premises considered, judgment is hereby rendered declaring that the dismissal of the complainant (petitioner) by the respondents in the above-entitled case was illegal and the
respondents are hereby ordered to pay the complainant [petitioner], jointly and severally, in Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount
of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00), representing the complainants salary for three (3) months of the unexpired portion of the aforesaid
contract of employment.
1avvphi1
The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally, in Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount
of FORTY FIVE U.S. DOLLARS (US$ 45.00),12 representing the complainants claim for a salary differential. In addition, the respondents are hereby ordered to pay the complainant, jointly and
severally, in Philippine Currency, at the exchange rate prevailing at the time of payment, the complainants (petitioner's) claim for attorneys fees equivalent to ten percent (10%) of the total amount
awarded to the aforesaid employee under this Decision.
The claims of the complainant for moral and exemplary damages are hereby DISMISSED for lack of merit.
All other claims are hereby DISMISSED.
SO ORDERED.13 (Emphasis supplied)
In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on the salary period of three months only -- rather than the entire unexpired portion of nine months and 23
days of petitioner's employment contract - applying the subject clause. However, the LA applied the salary rate of US$2,590.00, consisting of petitioner's "[b]asic salary, US$1,400.00/month +
US$700.00/month, fixed overtime pay, + US$490.00/month, vacation leave pay = US$2,590.00/compensation per month." 14
Respondents appealed15 to the National Labor Relations Commission (NLRC) to question the finding of the LA that petitioner was illegally dismissed.
Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not applying the ruling of the Court in Triple Integrated Services, Inc. v. National Labor Relations Commission 17 that in
case of illegal dismissal, OFWs are entitled to their salaries for the unexpired portion of their contracts. 18
In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby ordered to pay complainant, jointly and severally, in Philippine currency, at the prevailing rate of exchange
at the time of payment the following:
1. Three (3) months salary

$1,400 x 3
2. Salary differential
US$4,200.00
45.00
US$4,245.00
3. 10% Attorneys fees
424.50
TOTAL
US$4,669.50
The other findings are affirmed.
SO ORDERED.19
The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by reducing the applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042 "does not provide for the
award of overtime pay, which should be proven to have been actually performed, and for vacation leave pay." 20
Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality of the subject clause. 21 The NLRC denied the motion.22
Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional challenge against the subject clause. 24 After initially dismissing the petition on a technicality, the CA eventually gave due course to
it, as directed by this Court in its Resolution dated August 7, 2003 which granted the petition for certiorari, docketed as G.R. No. 151833, filed by petitioner.
In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the applicable salary rate; however, the CA skirted the constitutional issue raised by petitioner. 25
His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this Court on the following grounds:
The Court of Appeals and the labor tribunals have decided the case in a way not in accord with applicable decision of the Supreme Court involving similar issue of granting unto the migrant worker back wages
equal to the unexpired portion of his contract of employment instead of limiting it to three (3) months
II
In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their interpretation of Section 10 of Republic Act No. 8042, it is submitted that the Court of Appeals gravely erred in law
when it failed to discharge its judicial duty to decide questions of substance not theretofore determined by the Honorable Supreme Court, particularly, the constitutional issues raised by the petitioner on the
constitutionality of said law, which unreasonably, unfairly and arbitrarily limits payment of the award for back wages of overseas workers to three (3) months.
III
Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042, the Court of Appeals gravely erred in law in excluding from petitioners award the overtime pay and vacation pay
provided in his contract since under the contract they form part of his salary.28
On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old and sickly, and he intends to make use of the monetary award for his medical treatment and medication. 29 Required to
comment, counsel for petitioner filed a motion, urging the court to allow partial execution of the undisputed monetary award and, at the same time, praying that the constitutional question be resolved. 30
Considering that the parties have filed their respective memoranda, the Court now takes up the full merit of the petition mindful of the extreme importance of the constitutional question raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not disputed. Likewise not disputed is the salary differential of US$45.00 awarded to petitioner in all three fora. What
remains disputed is only the computation of the lump-sum salary to be awarded to petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at the monthly rate of US$1,400.00 covering the period of three months out of the unexpired portion of nine months
and 23 days of his employment contract or a total of US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the US$4,200.00 awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a total of US$25,382.23,
equivalent to his salaries for the entire nine months and 23 days left of his employment contract, computed at the monthly rate of US$2,590.00. 31
The Arguments of Petitioner
Petitioner contends that the subject clause is unconstitutional because it unduly impairs the freedom of OFWs to negotiate for and stipulate in their overseas employment contracts a determinate employment
period and a fixed salary package.32 It also impinges on the equal protection clause, for it treats OFWs differently from local Filipino workers (local workers) by putting a cap on the amount of lump-sum salary to
which OFWs are entitled in case of illegal dismissal, while setting no limit to the same monetary award for local workers when their dismissal is declared illegal; that the disparate treatment is not reasonable as
there is no substantial distinction between the two groups; 33 and that it defeats Section 18,34 Article II of the Constitution which guarantees the protection of the rights and welfare of all Filipino workers, whether
deployed locally or overseas.35
Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line with existing jurisprudence on the issue of money claims of illegally dismissed OFWs. Though there are conflicting
rulings on this, petitioner urges the Court to sort them out for the guidance of affected OFWs. 36
Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves no other purpose but to benefit local placement agencies. He marks the statement made by the Solicitor General in
his Memorandum, viz.:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges
on its obligation. Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for the acts of the foreign employer. To protect them and to promote their continued
helpful contribution in deploying Filipino migrant workers, liability for money claims was reduced under Section 10 of R.A. No. 8042. 37 (Emphasis supplied)
Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause sacrifices the well-being of OFWs. Not only that, the provision makes foreign employers better off than local
employers because in cases involving the illegal dismissal of employees, foreign employers are liable for salaries covering a maximum of only three months of the unexpired employment contract while local
employers are liable for the full lump-sum salaries of their employees. As petitioner puts it:
In terms of practical application, the local employers are not limited to the amount of backwages they have to give their employees they have illegally dismissed, following well-entrenched and unequivocal
jurisprudence on the matter. On the other hand, foreign employers will only be limited to giving the illegally dismissed migrant workers the maximum of three (3) months unpaid salaries notwithstanding the
unexpired term of the contract that can be more than three (3) months. 38
Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives him of the salaries and other emoluments he is entitled to under his fixed-period employment contract. 39
The Arguments of Respondents
In their Comment and Memorandum, respondents contend that the constitutional issue should not be entertained, for this was belatedly interposed by petitioner in his appeal before the CA, and not at the earliest
opportunity, which was when he filed an appeal before the NLRC. 40
The Arguments of the Solicitor General
The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995, its provisions could not have impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042 having preceded
petitioner's contract, the provisions thereof are deemed part of the minimum terms of petitioner's employment, especially on the matter of money claims, as this was not stipulated upon by the parties. 42
Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their employment, such that their rights to monetary benefits must necessarily be treated differently. The OSG
enumerates the essential elements that distinguish OFWs from local workers: first, while local workers perform their jobs within Philippine territory, OFWs perform their jobs for foreign employers, over whom it is
difficult for our courts to acquire jurisdiction, or against whom it is almost impossible to enforce judgment; and second, as held in Coyoca v. National Labor Relations Commission 43 and Millares v. National Labor
Relations Commission,44 OFWs are contractual employees who can never acquire regular employment status, unlike local workers who are or can become regular employees. Hence, the OSG posits that there
are rights and privileges exclusive to local workers, but not available to OFWs; that these peculiarities make for a reasonable and valid basis for the differentiated treatment under the subject clause of the money
claims of OFWs who are illegally dismissed. Thus, the provision does not violate the equal protection clause nor Section 18, Article II of the Constitution. 45
Lastly, the OSG defends the rationale behind the subject clause as a police power measure adopted to mitigate the solidary liability of placement agencies for this "redounds to the benefit of the migrant workers
whose welfare the government seeks to promote. The survival of legitimate placement agencies helps [assure] the government that migrant workers are properly deployed and are employed under decent and
humane conditions."46
The Court's Ruling
The Court sustains petitioner on the first and second issues.
When the Court is called upon to exercise its power of judicial review of the acts of its co-equals, such as the Congress, it does so only when these conditions obtain: (1) that there is an actual case or controversy
involving a conflict of rights susceptible of judicial determination; 47 (2) that the constitutional question is raised by a proper party 48 and at the earliest opportunity;49 and (3) that the constitutional question is the very
lis mota of the case,50otherwise the Court will dismiss the case or decide the same on some other ground. 51
Without a doubt, there exists in this case an actual controversy directly involving petitioner who is personally aggrieved that the labor tribunals and the CA computed his monetary award based on the salary period
of three months only as provided under the subject clause.
The constitutional challenge is also timely. It should be borne in mind that the requirement that a constitutional issue be raised at the earliest opportunity entails the interposition of the issue in the pleadings before
acompetent court, such that, if the issue is not raised in the pleadings before that competent court, it cannot be considered at the trial and, if not considered in the trial, it cannot be considered on
appeal.52 Records disclose that the issue on the constitutionality of the subject clause was first raised, not in petitioner's appeal with the NLRC, but in his Motion for Partial Reconsideration with said labor
tribunal,53 and reiterated in his Petition forCertiorari before the CA.54 Nonetheless, the issue is deemed seasonably raised because it is not the NLRC but the CA which has the competence to resolve the
constitutional issue. The NLRC is a labor tribunal that merely performs a quasi-judicial function its function in the present case is limited to determining questions of fact to which the legislative policy of R.A. No.
8042 is to be applied and to resolving such questions in accordance with the standards laid down by the law itself; 55 thus, its foremost function is to administer and enforce R.A. No. 8042, and not to inquire into the
validity of its provisions. The CA, on the other hand, is vested with the power of judicial review or the power to declare unconstitutional a law or a provision thereof, such as the subject clause. 56Petitioner's
interposition of the constitutional issue before the CA was undoubtedly seasonable. The CA was therefore remiss in failing to take up the issue in its decision.
The third condition that the constitutional issue be critical to the resolution of the case likewise obtains because the monetary claim of petitioner to his lump-sum salary for the entire unexpired portion of his 12month employment contract, and not just for a period of three months, strikes at the very core of the subject clause.
Thus, the stage is all set for the determination of the constitutionality of the subject clause.
Does the subject clause violate Section 10,

Article III of the Constitution on non-impairment
of contracts?
The answer is in the negative.
Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on the term of his employment and the fixed salary package he will receive 57 is not tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws newly enacted have only a prospective operation, 58and cannot affect acts or contracts already perfected; 59 however, as to laws already in existence,
their provisions are read into contracts and deemed a part thereof. 60 Thus, the non-impairment clause under Section 10, Article II is limited in application to laws about to be enacted that would in any way derogate
from existing acts or contracts by enlarging, abridging or in any manner changing the intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution of the employment contract between petitioner and respondents in 1998. Hence, it cannot be argued that R.A. No.
8042, particularly the subject clause, impaired the employment contract of the parties. Rather, when the parties executed their 1998 employment contract, they were deemed to have incorporated into it all the
provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause may not be declared unconstitutional on the ground that it impinges on the impairment clause, for the law was enacted in the exercise of the
police power of the State to regulate a business, profession or calling, particularly the recruitment and deployment of OFWs, with the noble end in view of ensuring respect for the dignity and well-being of OFWs
wherever they may be employed.61 Police power legislations adopted by the State to promote the health, morals, peace, education, good order, safety, and general welfare of the people are generally applicable
not only to future contracts but even to those already in existence, for all private contracts must yield to the superior and legitimate measures taken by the State to promote public welfare. 62
Does the subject clause violate Section 1,

Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due process of law nor shall any person be denied the equal protection of the law.
Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector, without distinction as to place of deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to economic security and parity: all monetary benefits should be equally enjoyed by workers of similar category,
while all monetary obligations should be borne by them in equal degree; none should be denied the protection of the laws which is enjoyed by, or spared the burden imposed on, others in like circumstances. 65
Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it sees fit, a system of classification into its legislation; however, to be valid, the classification must comply with
these requirements: 1) it is based on substantial distinctions; 2) it is germane to the purposes of the law; 3) it is not limited to existing conditions only; and 4) it applies equally to all members of the class. 66
There are three levels of scrutiny at which the Court reviews the constitutionality of a classification embodied in a law: a) the deferential or rational basis scrutiny in which the challenged classification needs only
be shown to be rationally related to serving a legitimate state interest; 67 b) the middle-tier or intermediate scrutiny in which the government must show that the challenged classification serves an important state
interest and that the classification is at least substantially related to serving that interest; 68 and c) strict judicial scrutiny69 in which a legislative classification which impermissibly interferes with the exercise of a
fundamental right70 or operates to the peculiar disadvantage of a suspect class 71 is presumed unconstitutional, and the burden is upon the government to prove that the classification is necessary to achieve
a compelling state interest and that it is theleast restrictive means to protect such interest.72
Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications 73 based on race74 or gender75 but not when the classification is drawn along income categories. 76
It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas, 77 the constitutionality of a provision in the charter of the Bangko
Sentral ng Pilipinas (BSP), a government financial institution (GFI), was challenged for maintaining its rank-and-file employees under the Salary Standardization Law (SSL), even when the rank-and-file
employees of other GFIs had been exempted from the SSL by their respective charters. Finding that the disputed provision contained a suspect classification based on salary grade, the Court deliberately
employed the standard of strict judicial scrutiny in its review of the constitutionality of said provision. More significantly, it was in this case that the Court revealed the broad outlines of its judicial philosophy, to wit:
Congress retains its wide discretion in providing for a valid classification, and its policies should be accorded recognition and respect by the courts of justice except when they run afoul of the Constitution. The
deference stops where the classification violates a fundamental right, or prejudices persons accorded special protection by the Constitution. When these violations arise, this Court must discharge its
primary role as the vanguard of constitutional guaranties, and require a stricter and more exacting adherence to constitutional limitations. Rational basis should not suffice.
Admittedly, the view that prejudice to persons accorded special protection by the Constitution requires a stricter judicial scrutiny finds no support in American or English jurisprudence. Nevertheless, these foreign
decisions and authorities are not per se controlling in this jurisdiction. At best, they are persuasive and have been used to support many of our decisions. We should not place undue and fawning reliance upon
them and regard them as indispensable mental crutches without which we cannot come to our own decisions through the employment of our own endowments. We live in a different ambience and must decide
our own problems in the light of our own interests and needs, and of our qualities and even idiosyncrasies as a people, and always with our own concept of law and justice. Our laws must be construed in
accordance with the intention of our own lawmakers and such intent may be deduced from the language of each law and the context of other local legislation related thereto. More importantly, they must be
construed to serve our own public interest which is the be-all and the end-all of all our laws. And it need not be stressed that our public interest is distinct and different from others.
xxxx
Further, the quest for a better and more "equal" world calls for the use of equal protection as a tool of effective judicial intervention.
Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble proclaims "equality" as an ideal precisely in protest against crushing inequities in Philippine society. The
command to promote social justice in Article II, Section 10, in "all phases of national development," further explicitated in Article XIII, are clear commands to the State to take affirmative action in the direction of
greater equality. x x x [T]here is thus in the Philippine Constitution no lack of doctrinal support for a more vigorous state effort towards achieving a reasonable measure of equality.
Our present Constitution has gone further in guaranteeing vital social and economic rights to marginalized groups of society, including labor. Under the policy of social justice, the law bends over backward to
accommodate the interests of the working class on the humane justification that those with less privilege in life should have more in law. And the obligation to afford protection to labor is incumbent not only on the
legislative and executive branches but also on the judiciary to translate this pledge into a living reality. Social justice calls for the humanization of laws and the equalization of social and economic forces by the
State so that justice in its rational and objectively secular conception may at least be approximated.
xxxx
Under most circumstances, the Court will exercise judicial restraint in deciding questions of constitutionality, recognizing the broad discretion given to Congress in exercising its legislative power. Judicial scrutiny
would be based on the "rational basis" test, and the legislative discretion would be given deferential treatment.
But if the challenge to the statute is premised on the denial of a fundamental right, or the perpetuation of prejudice against persons favored by the Constitution with special protection, judicial scrutiny
ought to be more strict. A weak and watered down view would call for the abdication of this Courts solemn duty to strike down any law repugnant to the Constitution and the rights it enshrines. This is true
whether the actor committing the unconstitutional act is a private person or the government itself or one of its instrumentalities. Oppressive acts will be struck down regardless of the character or nature of the
actor.
xxxx
In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-employee status. It is akin to a distinction based on economic class and status, with the higher grades as recipients of
a benefit specifically withheld from the lower grades. Officers of the BSP now receive higher compensation packages that are competitive with the industry, while the poorer, low-salaried employees are limited to
the rates prescribed by the SSL. The implications are quite disturbing: BSP rank-and-file employees are paid the strictly regimented rates of the SSL while employees higher in rank - possessing higher and better
education and opportunities for career advancement - are given higher compensation packages to entice them to stay. Considering that majority, if not all, the rank-and-file employees consist of people whose
status and rank in life are less and limited, especially in terms of job marketability, it is they - and not the officers - who have the real economic and financial need for the adjustment . This is in accord with the
policy of the Constitution "to free the people from poverty, provide adequate social services, extend to them a decent standard of living, and improve the quality of life for all." Any act of Congress that runs counter
to this constitutional desideratum deserves strict scrutiny by this Court before it can pass muster. (Emphasis supplied)
Imbued with the same sense of "obligation to afford protection to labor," the Court in the present case also employs the standard of strict judicial scrutiny, for it perceives in the subject clause a suspect
classification prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs. However, a closer examination reveals that the subject clause has a discriminatory intent against, and an invidious
impact on, OFWs at two levels:
First, OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts ofone year or more;
Second, among OFWs with employment contracts of more than one year; and
Third, OFWs vis--vis local workers with fixed-period employment;
OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts of one year or more
As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor Relations Commission 79 (Second Division, 1999) that the Court laid down the following rules on the application of the
periods prescribed under Section 10(5) of R.A. No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally dismissed overseas contract worker, i.e., whether his salaries for the unexpired portion of his
employment contract or three (3) months salary for every year of the unexpired term, whichever is less, comes into play only when the employment contract concerned has a term of at least one
(1) year or more. This is evident from the words "for every year of the unexpired term" which follows the words "salaries x x x for three months." To follow petitioners thinking that private respondent is
entitled to three (3) months salary only simply because it is the lesser amount is to completely disregard and overlook some words used in the statute while giving effect to some. This is contrary to the wellestablished rule in legal hermeneutics that in interpreting a statute, care should be taken that every part or word thereof be given effect since the law-making body is presumed to know the meaning of the words
employed in the statue and to have used them advisedly. Ut res magis valeat quam pereat. 80 (Emphasis supplied)
In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but was awarded his salaries for the remaining 8 months and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings on Section 10(5). One was Asian Center for Career and Employment System and Services v. National Labor
Relations Commission(Second Division, October 1998),81 which involved an OFW who was awarded a two-year employment contract,but was dismissed after working for one year and two months. The LA
declared his dismissal illegal and awarded him SR13,600.00 as lump-sum salary covering eight months, the unexpired portion of his contract. On appeal, the Court reduced the award to SR3,600.00 equivalent to
his three months salary, this being the lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just, valid or authorized cause is entitled to his salary for the unexpired portion of his employment contract or for three
(3) months for every year of the unexpired term, whichever is less.
In the case at bar, the unexpired portion of private respondents employment contract is eight (8) months. Private respondent should therefore be paid his basic salary corresponding to three (3) months or a total
of SR3,600.82
Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third Division, December 1998),83 which involved an OFW (therein respondent Erlinda Osdana) who was originally
granted a 12-month contract, which was deemed renewed for another 12 months. After serving for one year and seven-and-a-half months, respondent Osdana was illegally dismissed, and the Court awarded her
salaries for the entire unexpired portion of four and one-half months of her contract.
The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:
Case Title
Contract Period
Period of Service
Unexpired Period
Period Applied in the

Computation of the Monetary
Award
Skippers v. Maguad84
6 months
2 months
4 months
4 months
Bahia Shipping v.
Reynaldo Chua 85
9 months
8 months
4 months
4 months
Centennial Transmarine v.
dela Cruz l86
9 months
4 months
5 months
5 months
Talidano v. Falcon87
12 months
3 months
9 months
3 months
Univan v. CA88
12 months
3 months
9 months
3 months
Oriental v. CA
89
12 months
more than 2 months
10 months
3 months
PCL v. NLRC90
12 months
more than 2 months
more or less 9 months
3 months
Olarte v. Nayona91
12 months
21 days
11 months and 9 days
3 months
JSS v.Ferrer92
Pentagon v. Adelantar
12 months
12 months
93
16 days
3 months
9 months and 7 days
Phil. Employ v. Paramio,

et al.94
12 months
10 months
2 months
Unexpired portion
Flourish Maritime v.
Almanzor 95
2 years
26 days
6 months or 3 months for each

year of contract
Athenna Manpower v.
Villanos 96
1 year, 10 months
and 28 days
1 month
1 year, 9 months and 28

days
6 months or 3 months for each

year of contract
As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories. The first category includes OFWs with fixed-period employment contracts of less than one year; in case of illegal
dismissal, they are entitled to their salaries for the entire unexpired portion of their contract. The second category consists of OFWs with fixed-period employment contracts of one year or more; in case of illegal
dismissal, they are entitled to monetary award equivalent to only 3 months of the unexpired portion of their contracts.
The disparity in the treatment of these two groups cannot be discounted. In Skippers, the respondent OFW worked for only 2 months out of his 6-month contract, but was awarded his salaries for the remaining 4
months. In contrast, the respondent OFWs in Oriental and PCL who had also worked for about 2 months out of their 12-month contracts were awarded their salaries for only 3 months of the unexpired portion of
their contracts. Even the OFWs involved in Talidano and Univan who had worked for a longer period of 3 months out of their 12-month contracts before being illegally dismissed were awarded their salaries for
only 3 months.
To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an employment contract of 10 months at a monthly salary rate of US$1,000.00 and a hypothetical OFW-B with an
employment contract of 15 months with the same monthly salary rate of US$1,000.00. Both commenced work on the same day and under the same employer, and were illegally dismissed after one month of
work. Under the subject clause, OFW-A will be entitled to US$9,000.00, equivalent to his salaries for the remaining 9 months of his contract, whereas OFW-B will be entitled to only US$3,000.00, equivalent to his
salaries for 3 months of the unexpired portion of his contract, instead of US$14,000.00 for the unexpired portion of 14 months of his contract, as the US$3,000.00 is the lesser amount.
The disparity becomes more aggravating when the Court takes into account jurisprudence that, prior to the effectivity of R.A. No. 8042 on July 14, 1995, 97 illegally dismissed OFWs, no matter how long the
period of their employment contracts, were entitled to their salaries for the entire unexpired portions of their contracts. The matrix below speaks for itself:
Case Title
Contract Period
Period of Service
Unexpired Period
Period Applied in the Computation

of the Monetary Award
2 years
2 months
22 months
22 months
2 years
7 days
23 months and 23
days
JGB v. NLC100
2 years
9 months
15 months
15 months
Agoy v. NLRC
2 years
2 months
22 months
22 months
2 years
5 months
19 months
19 months
12 months
4 months
8 months
8 months
12 months
6 months and 22
days
ATCI v. CA, et al.98

Phil. Integrated v. NLRC
99
101
EDI v. NLRC, et al.102

Barros v. NLRC, et al.
103
Philippine Transmarine v.
Carilla104
It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired portions thereof, were treated alike in terms of the computation of their monetary benefits in case of illegal dismissal.
Their claims were subjected to a uniform rule of computation: their basic salaries multiplied by the entire unexpired portion of their employment contracts.
The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of computation of the money claims of illegally dismissed OFWs based on their employment periods, in the process singling
out one category whose contracts have an unexpired portion of one year or more and subjecting them to the peculiar disadvantage of having their monetary awards limited to their salaries for 3 months or for the
unexpired portion thereof, whichever is less, but all the while sparing the other category from such prejudice, simply because the latter's unexpired contracts fall short of one year.
Among OFWs With Employment Contracts of More Than One Year
Upon closer examination of the terminology employed in the subject clause, the Court now has misgivings on the accuracy of the Marsaman interpretation.
The Court notes that the subject clause "or for three (3) months for every year of the unexpired term, whichever is less" contains the qualifying phrases "every year" and "unexpired term." By its ordinary meaning,
the word "term" means a limited or definite extent of time. 105 Corollarily, that "every year" is but part of an "unexpired term" is significant in many ways: first, the unexpired term must be at least one year, for if it
were any shorter, there would be no occasion for such unexpired term to be measured by every year; and second, the original term must be more than one year, for otherwise, whatever would be the unexpired
term thereof will not reach even a year. Consequently, the more decisive factor in the determination of when the subject clause "for three (3) months for every year of the unexpired term, whichever is less" shall
apply is not the length of the original contract period as held in Marsaman,106 but the length of the unexpired portion of the contract period -- the subject clause applies in cases when the unexpired portion of the
contract period is at least one year, which arithmetically requires that the original contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose contract periods are for more than one year: those who are illegally dismissed with less than one year left in their
contracts shall be entitled to their salaries for the entire unexpired portion thereof, while those who are illegally dismissed with one year or more remaining in their contracts shall be covered by the subject clause,
and their monetary benefits limited to their salaries for three months only.
To concretely illustrate the application of the foregoing interpretation of the subject clause, the Court assumes hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary rate of
US$1,000.00 per month. OFW-C is illegally dismissed on the 12th month, and OFW-D, on the 13th month. Considering that there is at least 12 months remaining in the contract period of OFW-C, the subject
clause applies to the computation of the latter's monetary benefits. Thus, OFW-C will be entitled, not to US$12,000,00 or the latter's total salaries for the 12 months unexpired portion of the contract, but to the
lesser amount of US$3,000.00 or the latter's salaries for 3 months out of the 12-month unexpired term of the contract. On the other hand, OFW-D is spared from the effects of the subject clause, for there are only
11 months left in the latter's contract period. Thus, OFW-D will be entitled to US$11,000.00, which is equivalent to his/her total salaries for the entire 11-month unexpired portion.
OFWs vis--vis Local Workers

With Fixed-Period Employment
As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary awards of illegally dismissed OFWs was in place. This uniform system was applicable even to local workers with
fixed-term employment.107
The earliest rule prescribing a uniform system of computation was actually Article 299 of the Code of Commerce (1888), 108 to wit:
Article 299. If the contracts between the merchants and their shop clerks and employees should have been made of a fixed period, none of the contracting parties, without the consent of the other, may withdraw
from the fulfillment of said contract until the termination of the period agreed upon.
Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the exception of the provisions contained in the following articles.
In Reyes v. The Compaia Maritima, 109 the Court applied the foregoing provision to determine the liability of a shipping company for the illegal discharge of its managers prior to the expiration of their fixed-term
employment. The Court therein held the shipping company liable for the salaries of its managers for the remainder of their fixed-term employment.
There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of Commerce which provides:
Article 605. If the contracts of the captain and members of the crew with the agent should be for a definite period or voyage, they cannot be discharged until the fulfillment of their contracts, except for reasons of
insubordination in serious matters, robbery, theft, habitual drunkenness, and damage caused to the vessel or to its cargo by malice or manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie, 110 in
which the Court held the shipping company liable for the salaries and subsistence allowance of its illegally dismissed employees for the entire unexpired portion of their employment contracts.
While Article 605 has remained good law up to the present, 111 Article 299 of the Code of Commerce was replaced by Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for a certain work cannot leave or be dismissed without sufficient cause, before the fulfillment of the contract.
(Emphasis supplied.)
Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as a conjunctive "and" so as to apply the provision to local workers who are employed for a time certain although for no
particular skill. This interpretation of Article 1586 was reiterated in Garcia Palomar v. Hotel de France Company. 113 And in both Lemoine and Palomar, the Court adopted the general principle that in actions for
wrongful discharge founded on Article 1586, local workers are entitled to recover damages to the extent of the amount stipulated to be paid to them by the terms of their contract. On the computation of the
amount of such damages, the Court in Aldaz v. Gay 114 held:
The doctrine is well-established in American jurisprudence, and nothing has been brought to our attention to the contrary under Spanish jurisprudence, that when an employee is wrongfully discharged it is his
duty to seek other employment of the same kind in the same community, for the purpose of reducing the damages resulting from such wrongful discharge. However, while this is the general rule, the burden of
showing that he failed to make an effort to secure other employment of a like nature, and that other employment of a like nature was obtainable, is upon the defendant. When an employee is wrongfully
discharged under a contract of employment his prima facie damage is the amount which he would be entitled to had he continued in such employment until the termination of the period . (Howard vs. Daly, 61 N.
Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich., 43.) 115 (Emphasis supplied)
On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term employment: Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor) and 3 (Contract for a
Piece of Work), Chapter 3, Title VIII, Book IV.116 Much like Article 1586 of the Civil Code of 1889, the new provisions of the Civil Code do not expressly provide for the remedies available to a fixed-term worker who
is illegally discharged. However, it is noted that in Mackay Radio & Telegraph Co., Inc. v. Rich, 117 the Court carried over the principles on the payment of damages underlying Article 1586 of the Civil Code of 1889
and applied the same to a case involving the illegal discharge of a local worker whose fixed-period employment contract was entered into in 1952, when the new Civil Code was already in effect. 118
More significantly, the same principles were applied to cases involving overseas Filipino workers whose fixed-term employment contracts were illegally terminated, such as in First Asian Trans & Shipping Agency,
Inc. v. Ople,119involving seafarers who were illegally discharged. In Teknika Skills and Trade Services, Inc. v. National Labor Relations Commission, 120 an OFW who was illegally dismissed prior to the expiration of
her fixed-period employment contract as a baby sitter, was awarded salaries corresponding to the unexpired portion of her contract. The Court arrived at the same ruling in Anderson v. National Labor Relations
Commission,121 which involved a foreman hired in 1988 in Saudi Arabia for a fixed term of two years, but who was illegally dismissed after only nine months on the job -- the Court awarded him salaries
corresponding to 15 months, the unexpired portion of his contract. In Asia World Recruitment, Inc. v. National Labor Relations Commission, 122 a Filipino working as a security officer in 1989 in Angola was awarded
his salaries for the remaining period of his 12-month contract after he was wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v. National Labor Relations Commission, 123 an OFW whose 12-month contract
was illegally cut short in the second month was declared entitled to his salaries for the remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were illegally discharged were treated alike in terms of the computation of their money claims: they were uniformly
entitled to their salaries for the entire unexpired portions of their contracts. But with the enactment of R.A. No. 8042, specifically the adoption of the subject clause, illegally dismissed OFWs with an unexpired
portion of one year or more in their employment contract have since been differently treated in that their money claims are subject to a 3-month cap, whereas no such limitation is imposed on local workers with
fixed-term employment.
The Court concludes that the subject clause contains a suspect classification in that, in the computation of the monetary benefits of fixed-term employees who are illegally discharged, it imposes a
3-month cap on the claim of OFWs with an unexpired portion of one year or more in their contracts, but none on the claims of other OFWs or local workers with fixed-term employment. The subject
clause singles out one classification of OFWs and burdens it with a peculiar disadvantage.
There being a suspect classification involving a vulnerable sector protected by the Constitution, the Court now subjects the classification to a strict judicial scrutiny, and determines whether it serves a compelling
state interest through the least restrictive means.
What constitutes compelling state interest is measured by the scale of rights and powers arrayed in the Constitution and calibrated by history. 124 It is akin to the paramount interest of the state 125 for which some
individual liberties must give way, such as the public interest in safeguarding health or maintaining medical standards, 126 or in maintaining access to information on matters of public concern. 127
In the present case, the Court dug deep into the records but found no compelling state interest that the subject clause may possibly serve.
The OSG defends the subject clause as a police power measure "designed to protect the employment of Filipino seafarers overseas x x x. By limiting the liability to three months [sic], Filipino seafarers have
better chance of getting hired by foreign employers." The limitation also protects the interest of local placement agencies, which otherwise may be made to shoulder millions of pesos in "termination pay." 128
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges
on its obligation. Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for the acts of the foreign employer. To protect them and to promote their continued
helpful contribution in deploying Filipino migrant workers, liability for money are reduced under Section 10 of RA 8042.
This measure redounds to the benefit of the migrant workers whose welfare the government seeks to promote. The survival of legitimate placement agencies helps [assure] the government that migrant workers
are properly deployed and are employed under decent and humane conditions. 129 (Emphasis supplied)
However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception of the state interest sought to be served by the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in sponsorship of House Bill No. 14314 (HB 14314), from which the law originated; 130 but the speech makes no reference to
the underlying reason for the adoption of the subject clause. That is only natural for none of the 29 provisions in HB 14314 resembles the subject clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit:
Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and
decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee relationship or by virtue of the complaint, the claim arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers for overseas employment including claims for actual, moral, exemplary and other forms of damages.
The liability of the principal and the recruitment/placement agency or any and all claims under this Section shall be joint and several.
Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of damages under this Section shall not be less than fifty percent (50%) of such money claims: Provided, That any
installment payments, if applicable, to satisfy any such compromise or voluntary settlement shall not be more than two (2) months. Any compromise/voluntary agreement in violation of this paragraph shall be null
and void.
Non-compliance with the mandatory period for resolutions of cases provided under this Section shall subject the responsible officials to any or all of the following penalties:
(1) The salary of any such official who fails to render his decision or resolution within the prescribed period shall be, or caused to be, withheld until the said official complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any appointive public office for five (5) years.
Provided, however, That the penalties herein provided shall be without prejudice to any liability which any such official may have incurred under other existing laws or rules and regulations as a consequence of
violating the provisions of this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of money claims.
A rule on the computation of money claims containing the subject clause was inserted and eventually adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined the rationale of the subject
clause in the transcripts of the "Bicameral Conference Committee (Conference Committee) Meetings on the Magna Carta on OCWs (Disagreeing Provisions of Senate Bill No. 2077 and House Bill No. 14314)."
However, the Court finds no discernible state interest, let alone a compelling one, that is sought to be protected or advanced by the adoption of the subject clause.
In fine, the Government has failed to discharge its burden of proving the existence of a compelling state interest that would justify the perpetuation of the discrimination against OFWs under the subject clause.
Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the employment of OFWs by mitigating the solidary liability of placement agencies, such callous and cavalier rationale will
have to be rejected. There can never be a justification for any form of government action that alleviates the burden of one sector, but imposes the same burden on another sector, especially when the favored
sector is composed of private businesses such as placement agencies, while the disadvantaged sector is composed of OFWs whose protection no less than the Constitution commands. The idea that private
business interest can be elevated to the level of a compelling state interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement agencies vis-a-vis their foreign principals, there are mechanisms already in place that can be employed to achieve
that purpose without infringing on the constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas Workers, dated February 4, 2002, imposes administrative disciplinary measures on erring foreign
employers who default on their contractual obligations to migrant workers and/or their Philippine agents. These disciplinary measures range from temporary disqualification to preventive suspension. The POEA
Rules and Regulations Governing the Recruitment and Employment of Seafarers, dated May 23, 2003, contains similar administrative disciplinary measures against erring foreign employers.
Resort to these administrative measures is undoubtedly the less restrictive means of aiding local placement agencies in enforcing the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right of petitioner and other OFWs to equal protection.
1avvphi1
Further, there would be certain misgivings if one is to approach the declaration of the unconstitutionality of the subject clause from the lone perspective that the clause directly violates state policy on labor under
Section 3,131Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed self-executing, 132 there are some which this Court has declared not judicially enforceable, Article XIII being one,133 particularly Section 3 thereof, the
nature of which, this Court, in Agabon v. National Labor Relations Commission, 134 has described to be not self-actuating:
Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as self-executing in the sense that these are automatically acknowledged and observed without need for any
enabling legislation. However, to declare that the constitutional provisions are enough to guarantee the full exercise of the rights embodied therein, and the realization of ideals therein expressed, would be
impractical, if not unrealistic. The espousal of such view presents the dangerous tendency of being overbroad and exaggerated. The guarantees of "full protection to labor" and "security of tenure", when examined
in isolation, are facially unqualified, and the broadest interpretation possible suggests a blanket shield in favor of labor against any form of removal regardless of circumstance. This interpretation implies an
unimpeachable right to continued employment-a utopian notion, doubtless-but still hardly within the contemplation of the framers. Subsequent legislation is still needed to define the parameters of these
guaranteed rights to ensure the protection and promotion, not only the rights of the labor sector, but of the employers' as well. Without specific and pertinent legislation, judicial bodies will be at a loss, formulating
their own conclusion to approximate at least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive enforceable right to stave off the dismissal of an employee for just cause owing to the failure to serve proper
notice or hearing. As manifested by several framers of the 1987 Constitution, the provisions on social justice require legislative enactments for their enforceability. 135 (Emphasis added)
Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable rights, for the violation of which the questioned clause may be declared unconstitutional. It may unwittingly risk opening the
floodgates of litigation to every worker or union over every conceivable violation of so broad a concept as social justice for labor.
It must be stressed that Section 3, Article XIII does not directly bestow on the working class any actual enforceable right, but merely clothes it with the status of a sector for whom the Constitution urges protection
through executive or legislative action and judicial recognition. Its utility is best limited to being an impetus not just for the executive and legislative departments, but for the judiciary as well, to protect the welfare
of the working class. And it was in fact consistent with that constitutional agenda that the Court in Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng
Pilipinas, penned by then Associate Justice now Chief Justice Reynato S. Puno, formulated the judicial precept that when the challenge to a statute is premised on the perpetuation of prejudice against persons
favored by the Constitution with special protection -- such as the working class or a section thereof -- the Court may recognize the existence of a suspect classification and subject the same to strict judicial
scrutiny.
The view that the concepts of suspect classification and strict judicial scrutiny formulated in Central Bank Employee Association exaggerate the significance of Section 3, Article XIII is a groundless
apprehension. Central Bank applied Article XIII in conjunction with the equal protection clause. Article XIII, by itself, without the application of the equal protection clause, has no life or force of its own as
elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's right to substantive due process, for it deprives him of property, consisting of monetary benefits, without any
existing valid governmental purpose.136
The argument of the Solicitor General, that the actual purpose of the subject clause of limiting the entitlement of OFWs to their three-month salary in case of illegal dismissal, is to give them a better chance of
getting hired by foreign employers. This is plain speculation. As earlier discussed, there is nothing in the text of the law or the records of the deliberations leading to its enactment or the pleadings of respondent
that would indicate that there is an existing governmental purpose for the subject clause, or even just a pretext of one.
The subject clause does not state or imply any definitive governmental purpose; and it is for that precise reason that the clause violates not just petitioner's right to equal protection, but also her right to substantive
due process under Section 1,137 Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire unexpired period of nine months and 23 days of his employment contract, pursuant to law and jurisprudence prior to the
enactment of R.A. No. 8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form part of the salary basis in the computation of his monetary award, because these are fixed benefits that have been stipulated into his contract.
Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner, DOLE Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in
which salary is understood as the basic wage, exclusive of overtime, leave pay and other bonuses; whereas overtime pay is compensation for all work "performed" in excess of the regular eight hours, and holiday
pay is compensation for any work "performed" on designated rest days and holidays.
By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and holiday pay in the computation of petitioner's monetary award, unless there is evidence that he performed work
during those periods. As the Court held in Centennial Transmarine, Inc. v. Dela Cruz,138
However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in Cagampan v. National Labor Relations Commission, to wit:
The rendition of overtime work and the submission of sufficient proof that said was actually performed are conditions to be satisfied before a seaman could be entitled to overtime pay which should be computed
on the basis of 30% of the basic monthly salary. In short, the contract provision guarantees the right to overtime pay but the entitlement to such benefit must first be established.
In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is unwarranted since the same is given during the actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for every year of the unexpired term, whichever is less" in the 5th paragraph of Section 10 of Republic Act No. 8042
is DECLAREDUNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005 Resolution of the Court of Appeals are MODIFIED to the effect that petitioner is AWARDED his salaries for the entire
unexpired portion of his employment contract consisting of nine months and 23 days computed at the rate of US$1,400.00 per month.
No costs.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

SUPREME COURT
Manila
SPECIAL FIRST DIVISION
G.R. No. 110524
July 29, 2002
DOUGLAS MILLARES and ROGELIO LAGDA, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, TRANS-GLOBAL MARITIME AGENCY, INC. and ESSO INTERNATIONAL SHIPPING CO., LTD. respondents.
RESOLUTION
KAPUNAN, J.:
On March 14, 2000, the Court promulgated its decision in the above-entitled case, ruling in favor of the petitioners. The dispositive portion reads, as follows:
WHEREFORE, premises considered, the assailed Decision, dated June 1, 1993, of the National Labor Relations Commission is hereby REVERSED and SET ASIDE and a new judgment is
hereby rendered ordering the private respondents to:
(1) Reinstate petitioners Millares and Lagda to their former positions without loss of seniority rights, and to pay full backwages computed from the time of illegal dismissal to the time of actual
reinstatement;
(2) Alternatively, if reinstatement is not possible, pay petitioners Millares and Lagda separation pay equivalent to one month's salary for every year of service; and,
(3) Jointly and severally pay petitioners One Hundred Percent (100%) of their total credited contributions as provided under the Consecutive Enlistment Incentive Plan.
SO ORDERED.1
A motion for reconsideration was consequently filed 2 by the private respondents to which petitioners filed an Opposition thereto. 3
In a Minute Resolution dated June 28, 2000, the Court resolved to deny the motion for reconsideration with finality. 4
Subsequently, the Filipino Association for Mariners Employment, Inc. (FAME) filed a Motion for Leave to Intervene and to Admit a Motion for Reconsideration in Intervention.
Private respondents, meanwhile, also filed a Motion for Leave to File a Second Motion for Reconsideration of our decision.
In both motions, the private respondents and FAME respectively pray in the main that the Court reconsider its ruling that "Filipino seafarers are considered regular employees within the context of Article 280 of the
Labor Code." They claim that the decision may establish a precedent that will adversely affect the maritime industry.
The Court resolved to set the case for oral arguments to enable the parties to present their sides.
To recall, the facts of the case are, as follows:
Petitioner Douglas Millares was employed by private respondent ESSO International Shipping Company LTD. (Esso International, for brevity) through its local manning agency, private respondent
Trans-Global Maritime Agency, Inc. (Trans-Global, for brevity) on November 16, 1968 as a machinist. In 1975, he was promoted as Chief Engineer which position he occupied until he opted to
retire in 1989. He was then receiving a monthly salary of US $1,939.00.
On June 13, 1989, petitioner Millares applied for a leave of absence for the period July 9 to August 7, 1989. In a letter dated June 14, 1989, Michael J. Estaniel, President of private respondent
Trans-Global, approved the request for leave of absence. On June 21, 1989, petitioner Millares wrote G.S. Hanly, Operations Manager of Exxon International Co., (now Esso International) through
Michael J. Estaniel, informing him of his intention to avail of the optional retirement plan under the Consecutive Enlistment Incentive Plan (CEIP) considering that he had already rendered more
than twenty (20) years of continuous service. On July 13, 1989 respondent Esso International, through W.J. Vrints, Employee Relations Manager, denied petitioner Millares' request for optional
retirement on the following grounds, to wit: (1) he was employed on a contractual basis; (2) his contract of enlistment (COE) did not provide for retirement before the age of sixty (60) years; and (3)
he did not comply with the requirement for claiming benefits under the CEIP, i.e., to submit a written advice to the company of his intention to terminate his employment within thirty (30) days from
his last disembarkation date.
On August 9, 1989, petitioner Millares requested for an extension of his leave of absence from August 9 to 24, 1989. On August 19, 1989, Roy C. Palomar, Crewing Manager, Ship Group A, Transglobal, wrote petitioner Millares advising him that respondent Esso International "has corrected the deficiency in its manpower requirement specifically in the Chief Engineer rank by promoting a
First Assistant Engineer to this position as a result of (his) previous leave of absence which expired last August 8, 1989. The adjustment in said rank was required in order to meet manpower
schedules as a result of (his) inability."
On September 26, 1989, respondent Esso International, through H. Regenboog, Personnel Administrator, advised petitioner Millares that in view of his absence without leave, which is equivalent
to abandonment of his position, he had been dropped from the roster of crew members effective September 1, 1989.
On the other hand, petitioner Lagda was employed by private respondent Esso International as wiper/oiler in June 1969. He was promoted as Chief Engineer in 1980, a position he continued to
occupy until his last COE expired on April 10, 1989. He was then receiving a monthly salary of US$1,939.00.
On May 16, 1989, petitioner Lagda applied for a leave of absence from June 19, 1989 up to the whole month of August 1989. On June 14, 1989, respondent Trans-Global's President, Michael J.
Estaniel, approved petitioner Lagda's leave of absence from June 22, 1989 to July 20, 1989 and advised him to report for re-assignment on July 21, 1989.
On June 26, 1989, petitioner Lagda wrote a letter to G.S. Stanley, Operations Manager of respondent Esso International, through respondent Trans-Global's President Michael J. Estaniel,
informing him of his intention to avail of the optional early retirement plan in view of his twenty (20) years continuous service in the complaint.
On July 13, 1989, respondent Trans-global denied petitioner Lagda's request for availment of the optional early retirement scheme on the same grounds upon which petitioner Millares request was
denied.
On August 3, 1989, he requested for an extension of his leave of absence up to August 26, 1989 and the same was approved. However, on September 27, 1989, respondent Esso International,
through H. Regenboog, Personnel Administrator, advised petitioner Lagda that in view of his "unavailability for contractual sea service," he had been dropped from the roster of crew members
effective September 1, 1989.
On October 5, 1989, petitioners Millares and Lagda filed a complaint-affidavit, docketed as POEA (M) 89-10-9671, for illegal dismissal and non-payment of employee benefits against private
respondents Esso International and Trans-Global, before the POEA. 5
On July 17, 1991, the POEA rendered a decision dismissing the complaint for lack of merit.
On appeal to the NLRC, the decision of the POEA was affirmed on June 1, 1993 with the following disquisition:
The first issue must be decided in the negative. Complainants-appellants, as seamen and overseas contract workers are not covered by the term "regular employment" as defined under Article
280 of the Labor Code. The POEA, which is tasked with protecting the rights of the Filipino workers for overseas employment to fair and equitable recruitment and employment practices and to
ensure their welfare, prescribes a standard employment contract for seamen on board ocean-going vessels for a fixed period but in no case to exceed twelve (12) months (Part 1, Sec. C). This
POEA policy appears to be in consonance with the international maritime practice. Moreover, the Supreme Court in Brent School, Inc. vs. Zamora, 181 SCRA 702, had held that a fixed term is
essential and natural appurtenance of overseas employment contracts to which the concept of regular employment with all that it implies is not applicable, Article 280 of the Labor Code
notwithstanding. There is, therefore, no reason to disturb the POEA Administrator's finding that complainants-appellants were hired on a contractual basis and for a definite period. Their
employment is thus governed by the contracts they sign each time they are re-hired and is terminated at the expiration of the contract period. 6
Undaunted, the petitioners elevated their case to this Court 7 and successfully obtained the favorable action, which is now vehemently being assailed.
At the hearing on November 15, 2000, the Court defined the issues for resolution in this case, namely:
I. ARE PETITIONERS REGULAR OR CONTRACTUAL EMPLOYEES WHOSE EMPLOYMENTS ARE TERMINATED EVERYTIME THEIR CONTRACTS OF EMPLOYMENT EXPIRE?
II. ASSUMING THAT PETITIONERS ARE REGULAR EMPLOYEES, WERE THEY DISMISSED WITHOUT JUST CAUSE SO AS TO BE ENTITLED TO REINSTATEMENT AND BACKWAGES,
INCLUDING PAYMENT OF 100% OF THEIR TOTAL CREDITED CONTRIBUTIONS TO THE CONSECUTIVE ENLISTMENT INCENTIVE PLAN (CEIP)?
III. DOES THE PROVISION OF THE POEA STANDARD CONTRACT FOR SEAFARERS ON BOARD FOREIGN VESSELS (SEC. C., DURATION OF CONTRACT) PRECLUDE THE
ATTAINMENT BY SEAMEN OF THE STATUS OF REGULAR EMPLOYEES?
IV. DOES THE DECISION OF THE COURT IN G.R. NO. 110524 CONTRAVENE INTERNATIONAL MARITIME LAW, ALLEGEDLY PART OF THE LAW OF THE LAND UNDER SECTION 2,
ARTICLE II OF THE CONSTITUTION?
V. DOES THE SAME DECISION OF THE COURT CONSTITUTE A DEPARTURE FROM ITS RULING INCOYOCA VS. NLRC (G.R. NO. 113658, March 31, 1995)?8
In answer to the private respondents' Second Motion for Reconsideration and to FAME's Motion for Reconsideration in Intervention, petitioners maintain that they are regular employees as found by the Court in
the March 14, 2000 Decision. Considering that petitioners performed activities which are usually necessary or desirable in the usual business or trade of private respondents, they should be considered as regular
employees pursuant to Article 280, Par. 1 of the Labor Code. 9 Other justifications for this ruling include the fact that petitioners have rendered over twenty (20) years of service, as admitted by the private
respondents;10 that they were recipients of Merit Pay which is an express acknowledgment by the private respondents that petitioners are regular and not just contractual employees; 11 that petitioners were
registered under the Social Security System (SSS).
The petitioners further state that the case of Coyoca v. NLRC12 which the private respondents invoke is not applicable to the case at bar as the factual milieu in that case is not the same. Furthermore, private
respondents' fear that our judicial pronouncement will spell the death of the manning industry is far from real. Instead, with the valuable contribution of the manning industry to our economy, these seafarers are
supposed to be considered as "Heroes of the Republic" whose rights must be protected. 13 Finally, the first motion for reconsideration has already been denied with finality by this Court and it is about time that the
Court should write finis to this case.
The private respondents, on the other hand, contend that: (a) the ruling holding petitioners as regular employees was not in accord with the decision in Coyoca v. NLRC, 243 SCRA 190; (b) Art. 280 is not
applicable as what applies is the POEA Rules and Regulations Governing Overseas Employment; (c) seafarers are not regular employees based on international maritime practice; (d) grave consequences would
result on the future of seafarers and manning agencies if the ruling is not reconsidered; (e) there was no dismissal committed; (f) a dismissed seafarer is not entitled to back wages and reinstatement, that being
not allowed under the POEA rules and the Migrant Workers Act; and, (g) petitioners are not entitled to claim the total amount credited to their account under the CEIP. 14
Meanwhile, Intervenor Filipino Association of Mariners Employment (FAME) avers that our decision, if not reconsidered, will have negative consequences in the employment of Filipino Seafarers overseas which,
in turn, might lead to the demise of the manning industry in the Philippines. As intervenor FAME puts it:
xxx
7.1 Foreign principals will start looking for alternative sources for seafarers to man their ships. AS reported by the BIMCO/ISF study, "there is an expectancy that there will be an increasing
demand for (and supply of) Chinese seafarers, with some commentators suggesting that this may be a long-term alternative to the Philippines." Moreover, "the political changes within the former
Eastern Bloc have made new sources of supply available to the international market." Intervenor's recent survey among its members shows that 50 Philippine manning companies had already lost
some 6,300 slots to other Asian, East Europe and Chinese competition for the last two years;
7.2 The Philippine stands to lose an annual foreign income estimated at U.S. DOLLARS TWO HUNDRED SEVENTY FOUR MILLION FIVE HUNDRED FORTY NINE THOUSAND (US$
274,549,000.00) from the manning industry and another US DOLLARS FOUR BILLION SIX HUNDRED FIFTY MILLION SEVEN HUNDRED SIX THOUSAND (US$ 4,650,760,000.00) from the
land-based sector if seafarers and equally situated land-based contract workers will be declared regular employees;
7.3 Some 195,917 (as of 1998) deployed overseas Filipino seafarers will be rendered jobless should we lose the market;
7.4 Some 360 manning agencies (as of 30 June 2000) whose principals may no longer be doing business with them will close their shops;
7.5 The contribution to the Overseas Worker's Welfare Administration by the sector, which is USD 25.00 per contract and translates to US DOLLARS FOUR MILLION (US$ 4,000,000.00)annually,
will be drastically reduced. This is not to mention the processing fees paid to POEA, Philippine Regulatory Commission (PRC), Department of Foreign Affairs (DFA) and Maritime Industry Authority
(MARINA) for the documentation of these seafarers;
7.6 Worst, some 195,917 (as of 1998) families will suffer socially and economically, as their breadwinners will be rendered jobless; and
7.7 It will considerably slow down the government's program of employment generation, considering that, as expected foreign employers will now avoid hiring Filipino overseas contract workers as
they will become regular employees with all its concomitant effects. 15
Significantly, the Office of the Solicitor General, in a departure from its original position in this case, has now taken the opposite view. It has expressed its apprehension in sustaining our decision and has called for
a re-examination of our ruling.16
Considering all the arguments presented by the private respondents, the Intervenor FAME and the OSG, we agree that there is a need to reconsider our position with respect to the status of seafarers which we
considered as regular employees under Article 280 of the Labor Code. We, therefore, partially grant the second motion for reconsideration.
In Brent School Inc. v. Zamora,17 the Supreme Court stated that Article 280 of the Labor Code does not apply to overseas employment.
In the light of the foregoing description of the development of the provisions of the Labor Code bearing on term or fixed-period employment that the question posed in the opening paragraph of this
opinion should now be addressed. Is it then the legislative intention to outlaw stipulations in employment contracts laying down a definite period therefor? Are such stipulations in essence contrary
to public policy and should not on this account be accorded legitimacy?
On the other hand, there is the gradual and progressive elimination of references to term or fixed-period employment in the Labor Code, and the specific statement of the rule that:
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 employee 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
actually exists.
There is, on the other hand, the Civil Code, which has always recognized, and continues to recognize, the validity and propriety of contracts and obligations with a fixed or definite period, and
imposes no restraints on the freedom of the parties to fix the duration of a contract, whatever its object, be it specific, goods or services, except the general admonition against stipulations contrary
to law, morals, good customs, public order or public policy. Under the Civil code, therefore, and as a general proposition, fixed-term employment contracts are not limited, as they are under the
present Labor Code, to those by natural seasonal or for specific projects with predetermined dates of completion; they also include those to which the parties by free choice have assigned a
specific date of termination.
Some familiar examples may be cited of employment contract which may be neither for seasonal work nor for specific projects, but to which a fixed term is an essential and natural
appurtenance: overseas employment contracts, for one, to which, whatever the nature of the engagement, the concept of regular employment with all that it implies does not appear
ever to have been applied.Article 280 of the Labor Code notwithstanding also appointments to the positions of dean, assistant dean, college secretary, principal, and other administrative offices
in educational institutions, which are by practice or tradition rotated among the faculty members, and where fixed terms are a necessity without which no reasonable rotation would be possible.
Similarly, despite the provisions of Article 280, Policy Instructions. No. 8 of the Minister of Labor implicitly recognize that certain company officials may be elected for what would amount to fix
periods, at the expiration of which they would have to stand down, in providing that these officials, xxx may lose their jobs as president, executive vice-president or vice-president, etc. because the
stockholders or the board of directors for one reason or another did not reelect them.
There can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the
employee, they should be struck down or disregard as contrary to public policy, morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise, where the reason for the
law does not exists, e.g., where it is indeed the employee himself who insists upon a period or where the nature of the engagement is such that, without being seasonal or for a specific project, a
definite date of termination is a sine qua non, would an agreement fixing a period be essentially evil or illicit, therefore anathema? Would such an agreement come within the scope of Article 280
which admittedly was enacted "to prevent the circumvention of the right of the employee to be secured in xxx his employment
As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of employment
contracts to which the lack of a fixed period would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate within his employer
the duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided. The law must be given a reasonable interpretation, to preclude absurdity in its
application. Outlawing the whole concept of term employment and subverting to boot the principle of freedom of contract to remedy the evil of employer's using it as a means to prevent their
employees from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping of the head.
It is a salutary principle in statutory construction that there exists a valid presumption that undesirable consequences were never intended by a legislative measure, and that a
construction of which the statute is fairly susceptible is favored, which will avoid all objectionable, mischievous, indefensible, wrongful, evil, and injurious consequences."
Nothing is better settled than that courts are not to give words a meaning which would lead to absurd or unreasonable consequences. That is a principle that goes back to In re
Allen decided on October 27, 1902, where it was held that a literal interpretation is to be rejected if it would be unjust or lead to absurd results. That is a strong argument against its
adoption. The words of Justice Laurel are particularly apt. Thus: "the appellants would lead to an absurdity is another argument for rejecting it."
xxx We have, here, then a case where the true intent of the law is clear that calls for the application of the cardinal rule of statutory construction that such intent of spirit must
prevail over the letter thereof, for whatever is within the spirit of a statute is within the statute, since adherence to the letter would result in absurdity, injustice and contradictions
and would defeat the plain and vital purpose of the statute.
Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor code clearly appears to have been, as already
observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral
agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out;
agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and
voluntarily 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
where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former
over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its
effects and apt to lead to absurd and unintended consequences.
Again, in Pablo Coyoca v. NLRC,18 the Court also held that a seafarer is not a regular employee and is not entitled to separation pay. His employment is governed by the POEA Standard Employment Contract for
Filipino Seamen.
x x x. In this connection, it is important to note that neither does the POEA standard employment contract for Filipino seamen provide for such benefits.
As a Filipino seaman, petitioner is governed by the Rules and Regulations Governing Overseas Employment and the said Rules do not provide for separation or termination
pay. What is embodied in petitioner's contract is the payment of compensation arising from permanent partial disability during the period of employment. We find that private respondent complied
with the terms of contract when it paid petitioner P42,315.00 which, in our opinion, is a reasonable amount, as compensation for his illness.
Lastly, petitioner claims that he eventually became a regular employee of private respondent and thus falls within the purview of Articles 284 and 95 of the Labor Code. In support of this
contention, petitioner cites the case of Worth Shipping Service, Inc., et al. v. NLRC, et al., wherein we held that the crew members of the shipping company had attained regular status and thus,
were entitled to separation pay. However, the facts of said case differ from the present. In Worth, we held that the principal and agent had "operational control and management" over the MV
Orient Carrier and thus, were the actual employers of their crew members.
From the foregoing cases, it is clear that seafarers are considered contractual employees. They can not be considered as regular employees under Article 280 of the Labor Code. Their employment is governed by
the contracts they sign everytime they are rehired and their employment is terminated when the contract expires. Their employment is contractually fixed for a certain period of time. They fall under the exception
of Article 280 whose employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the season. 19 We need not depart from the rulings of the Court in the two aforementioned cases which indeed
constitute stare decisis with respect to the employment status of seafarers.
Petitioners insist that they should be considered regular employees, since they have rendered services which are usually necessary and desirable to the business of their employer, and that they have rendered
more than twenty(20) years of service. While this may be true, the Brent case has, however, held that there are certain forms of employment which also require the performance of usual and desirable functions
and which exceed one year but do not necessarily attain regular employment status under Article 280. 20 Overseas workers including seafarers fall under this type of employment which are governed by the mutual
agreements of the parties.
In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen are governed by the Rules and Regulations of the POEA. The Standard Employment Contract governing the employment of All Filipino
seamen on Board Ocean-Going Vessels of the POEA, particularly in Part I, Sec. C specifically provides that the contract of seamen shall be for a fixed period. And in no case should the contract of seamen be
longer than 12 months. It reads:
Section C. Duration of Contract
The period of employment shall be for a fixed period but in no case to exceed 12 months and shall be stated in the Crew Contract. Any extension of the Contract period shall be subject to the
mutual consent of the parties.
Moreover, it is an accepted maritime industry practice that employment of seafarers are for a fixed period only. Constrained by the nature of their employment which is quite peculiar and unique in itself, it is for the
mutual interest of both the seafarer and the employer why the employment status must be contractual only or for a certain period of time. Seafarers spend most of their time at sea and understandably, they can
not stay for a long and an indefinite period of time at sea. 21 Limited access to shore society during the employment will have an adverse impact on the seafarer. The national, cultural and lingual diversity among
the crew during the COE is a reality that necessitates the limitation of its period. 22
Petitioners make much of the fact that they have been continually re-hired or their contracts renewed before the contracts expired (which has admittedly been going on for twenty (20) years). By such
circumstance they claim to have acquired regular status with all the rights and benefits appurtenant to it.
Such contention is untenable. Undeniably, this circumstance of continuous re-hiring was dictated by practical considerations that experienced crew members are more preferred. Petitioners were only given
priority or preference because of their experience and qualifications but this does not detract the fact that herein petitioners are contractual employees. They can not be considered regular employees. We quote
with favor the explanation of the NLRC in this wise:
xxx The reference to "permanent" and "probationary" masters and employees in these papers is a misnomer and does not alter the fact that the contracts for enlistment between complainantsappellants and respondent-appellee Esso International were for a definite periods of time, ranging from 8 to 12 months. Although the use of the terms "permanent" and "probationary" is
unfortunate, what is really meant is "eligible for-re-hire". This is the only logical conclusion possible because the parties cannot and should not violate POEA's requirement that a contract of
enlistment shall be for a limited period only; not exceeding twelve (12)months. 23
From all the foregoing, we hereby state that petitioners are not considered regular or permanent employees under Article 280 of the Labor Code. Petitioners' employment have automatically ceased upon the
expiration of their contracts of enlistment (COE). Since there was no dismissal to speak of, it follows that petitioners are not entitled to reinstatement or payment of separation pay or backwages, as provided by
law.
With respect to the benefits under the Consecutive Enlistment Incentive Plan (CEIP), we hold that the petitioners are still entitled to receive 100% of the total amount credited to him under the CEIP. Considering
that we have declared that petitioners are contractual employees, their compensation and benefits are covered by the contracts they signed and the CEIP is part and parcel of the contract.
The CEIP was formulated to entice seamen to stay long in the company. As the name implies, the program serves as an incentive for the employees to renew their contracts with the same company for as long as
their services were needed. For those who remained loyal to them, they were duly rewarded with this additional remuneration under the CEIP, if eligible. While this is an act of benevolence on the part of the
employer, it can not, however, be denied that this is part of the benefits accorded to the employees for services rendered. Such right to the benefits is vested upon them upon their eligibility to the program.
The CEIP provides that an employee becomes covered under the Plan when he completes thirty-six (36) months or an equivalent of three (3) years of credited service with respect to employment after June 30,
1973.24 Upon eligibility, an amount shall be credited to his account as it provides, among others:
III. Distribution of Benefits
A. Retirement, Death and Disability
When the employment of an employee terminates because of his retirement, death or permanent and total disability, a percentage of the total amount credited to his account will be distributed to
him (or his eligible survivor(s) in accordance with the following:
Reason for Termination
Percentage
a) Attainment of mandatory retirement age of 60.
100%
b) Permanent and total disability, while under contract, that is not due to accident or
misconduct.
100%
c) Permanent and total disability, while under contract, that is due to accident, and
not due to misconduct.
100%
xxx
B. Voluntary Termination
When an employee voluntary terminates his employment with at least 36 months of credited service without any misconduct on his part, 18 percent of the total amount credited to his account, plus
an additional of one percent for each month (up to a maximum of 164 months of credited service in excess of 36, will be distributed to him provided (1) the employee has completed his last
Contract of Enlistment and (2) employee advises the company in writing, within 30 days, from his last disembarkation date, of his intention to terminate his employment. (To advise the Company in
writing means that the original letter must be sent to the Company's agent in the Philippines, a copy sent to the Company in New York).
xxx
C. Other Terminations
When the employment of an employee is terminated by the Company for a reason other than one in A and B above, without any misconduct on his part, a percentage of the total amount credited
to his account will be distributed to him in accordance with the following.
Credited Service
Percentage
36 months
50%
48 "
75%
60 "
100%
When the employment of an employee is terminated due to his poor-performance, misconduct, unavailability, etc., or if employee is not offered re-engagement for similar reasons, no distribution of
any portion of employee's account will ever be made to him (or his eligible survivor[s]).
It must be recalled that on June 21, 1989, Millares wrote a letter to his employer informing his intention to avail of the optional retirement plan under the CEIP considering that he has rendered more than twenty
(20) years of continuous service. Lagda, likewise, manifested the same intention in a letter dated June 26, 1989. Private respondent, however, denied their requests for benefits under the CEIP since: (1) the
contract of enlistment (COE) did not provide for retirement before 60 years of age; and that (2) petitioners failed to submit a written notice of their intention to terminate their employment within thirty (30) days from
the last disembarkation date pursuant to the provision on Voluntary Termination of the CEIP. Petitioners were eventually dropped from the roster of crew members and on grounds of "abandonment" and
"unavailability for contractual sea service", respectively, they were disqualified from receiving any benefits under the CEIP.25
In our March 14, 2000 Decision, we, however, found that petitioners Millares and Lagda were not guilty of "abandonment" or "unavailability for contractual sea service," as we have stated:
The absence of petitioners was justified by the fact that they secured the approval of private respondents to take a leave of absence after the termination of their last contracts of enlistment.
Subsequently, petitioners sought for extensions of their respective leaves of absence. Granting arguendo that their subsequent requests for extensions were not approved, it cannot be said that
petitioners were unavailable or had abandoned their work when they failed to report back for assignment as they were still questioning the denial of private respondents of their desire to avail of
the optional early retirement policy, which they believed in good faith to exist. 26
Neither can we consider petitioners guilty of poor performance or misconduct since they were recipients of Merit Pay Awards for their exemplary performances in the company.
Anent the letters dated June 21, 1989 (for Millares) and June 26, 1989 (for Lagda) which private respondent considered as belated written notices of termination, we find such assertion specious. Notwithstanding,
we could conveniently consider the petitioners eligible under Section III-B of the CEIP (Voluntary Termination), but this would, however, award them only a measly amount of benefits which to our mind, the
petitioners do not rightfully deserve under the facts and circumstances of the case. As the CEIP provides:
III. Distribution of Benefits
xxx
E. Distribution of Accounts
When an employee terminates under conditions that would qualify for a distribution of more than one specified in A, B or C above, the largest single amount, only, will be distributed.
Since petitioners' termination of employment under the CEIP do not fall under Section III-A (Retirement, Death and Disability) or Section III-B (Voluntary Termination), nor could they be they be considered under
the second paragraph of Section III-C, as earlier discussed; it follows that their termination falls under the first paragraph of Section III-C for which they are entitled to 100% of the total amount credited to their
accounts. The private respondents can not now renege on their commitment under the CEIP to reward deserving and loyal employees as the petitioners in this case.
In taking cognizance of private respondent's Second Motion for Reconsideration, the Court hereby suspends the rules to make them comformable to law and justice and to subserve an overriding public interest.
IN VIEW OF THE FOREGOING, the Court Resolved to Partially GRANT Private Respondent's Second Motion for Reconsideration and Intervenor FAMES' Motion for Reconsideration in Intervention. The
Decision of the National Labor Relations Commission dated June 1, 1993 is hereby REINSTATED with MODIFICATION. The Private Respondents, Trans-Global Maritime Agency, Inc. and Esso International
Shipping Co., Ltd. are hereby jointly and severally ORDERED to pay petitioners One Hundred Percent (100%) of their total credited contributions as provided under the Consecutive Enlistment Incentive
Plan(CEIP).
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, and Ynares-Santiago, JJ., concur.

Austria-Martinez, J., no part. Did not participate in the Decision.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-79436-50 January 17, 1990
EASTERN ASSURANCE & SURETY CORPORATION, petitioner,

vs.
SECRETARY OF LABOR, PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, ELVIRA VENTURA, ESTER TRANGUILLAN, et al., respondents.
Tanjuatco, Oreta, Tanjuatco, Berenguer & San Vicente for petitioner.
NARVASA, J.:
In connection with the application with the Philippine Overseas Employment Administration (POEA) of J & B Manpower Specialist, Inc. for a license to engage in business as a recruitment agency, a surety bond
was filed on January 2, 1985 by the applicant and the Eastern Assurance and Surety Corporation, herein petitioner, in virtue of which they both held themselves
. . . firmly bound unto (said) Philippine Overseas Employment Administration, Ministry of Labor in the penal sum of PESOS ONE HUNDRED FIFTY THOUSAND ONLY . . .
(Pl50,000.00) for the payment of which will and truly to be made, . . . (they bound themselves, their) heirs, executors, administrators, successors and assigns, jointly and severally .
.
The bond stipulated that:
a) it was "conditioned upon the true and faithful performance and observance of the . . . principal (J & B Manpower Specialist, Inc.) of its duties and obligations in accordance with all the rules and regulations
promulgated by the Ministry of Labor Philippine Overseas Employment Administration and with the terms and conditions stipulated in the License;
b) the liability of the . . . Surety (petitioner) shall in no case exceed the sum of PESOS ONE HUNDRED FIFTY THOUSAND (P150,000.00) ONLY, PHILIPPINE CURRENCY;
c) notice to the Principal is also a notice to the Surety; and
d) LIABILITY of the surety . . . shall expire on JANUARY 02, 1986 and this bond shall be automatically cancelled ten (10) days after its expiration and the surety shall not be liable for any claim not discovered and
presented to it in writing within said period of . . . from expiration and the obligee hereby expressly waives the rights to file any court action against the Surety after termination of said period of . . . . above cited. 2
As narrated by respondent Secretary of Labor, the facts are as follows:
From June 1983 to December 1985 . . . thirty three (33) . . . (persons) applied for overseas employment with . . . (J & B). In consideration of promised deployment, complainants
paid respondent various amounts for various fees. Most of' the receipts issued were sighed by Mrs. Baby Bundalian, Executive Vice-President of . . . (J & B).
Because of non-deployment . . . (the applicants) filed separate complaints with the Licensing and Regulation Office of POEA against . . . (J & B) for violation of Articles 32 and 34
(a) of the Labor Code between the months of April to October 1985.
Despite summons/notices of hearing,, . . . (J & B) failed to file Answer nor appear in the hearings conducted.
In its separate Answer, . . . EASCO essentially disclaimed liability on the ground that the claims were not expressly covered by the bond, that POEA had no jurisdiction to order
forfeiture of the bond, that some of the claims were paid beyond or prior to the period of effectivity of the bond.
On September 8, 1986, the POEA Administrator issued the Order in favor of complainants ruling thus:
After careful evaluation, we find that the receipts and testimonies of complainants, in the absence of controverting evidence substantially establish
that respondent charged and collected fees from them in amounts exceeding what is prescribed by this Administration. Complainants' nondeployment strongly indicates that there was no employment obtained for them. Hence, violation of Articles 32 and 34 (a) of the Labor Code, as
amended, is established against respondent. The claims of complainants having arose (arisen) out of acts of the principal covered under the
surety (bond), the respondent surety is equally liable therefor.
Except for complainants Ramos, Samson, de Leon and Rizada, whose claims were transacted prior to the effectivity of the bond, . . . EASCO was declared jointly and severally
liable with . . . (J & B) to twenty-nine (29) complainants.
(The dispositive portion of the POEA Administrator's Order also contained the following statement and direction, viz.:
Respondent was suspended on May 23, 1985, June 26, 1985 and January 17, 1986 all for illegal exaction. Considering its track record of illegal
exaction activities and considering further the gross violation of recruitment rules and regulations established against it in the instant cases, and
the expiration of its license on February 15, 1985, it is hereby forever banned from participation in the overseas employment program. It is ordered
to cease and desist from further engaging in recruitment activities otherwise it shall be prosecuted for illegal recruitment.')
(J & B filed a motion for reconsideration). On December 19, 1986, the then deputy Minister of Labor and Employment denied the . . . Motion for Reconsideration for lack of merit
and affirmed the findings in the Order of the POEA Administrator finding no reversible error therein.
On appeal by EASCO J & B having as aforestated taken no part in the proceeding despite due service of summons the judgment was modified by the Secretary of Labor, by Order dated July 1, 1987,
disposing as follows: 4
WHEREFORE, in view of the foregoing, the Resolution of the then Deputy Minister of Labor dated December 19, 1986 affirming the Order of the POEA Administrator dated
September 8, 1986 is hereby MODIFIED. Respondent J & B Manpower Specialist is directed to refund all thirty-three (33) complainants as listed in the Order of September 8,
1986 in the amounts listed thereto with the modification that complainants Lucena Cabasal and Felix Rivero are both entitled only to P15,980 and not P15,980 each. Respondent
Eastern Assurance and Surety Corporation is hereby found jointly and severally liable with respondent J & B Manpower Specialist to refund nineteen (19) complainants in the
modified amounts . . . (particularly specified).
The other findings in the Order of the POEA Administrator dated September 8, 1986 affirmed in the Resolution of the then Deputy Minister . . . are also hereby AFFIRMED. This
Order is FINAL. No further Motion for Reconsideration hereof shall be entertained.
It is noteworthy that EASCO's liability for the refund, jointly and severally with its principal, was limited to 19 named complainants (in contrast to verdicts of the POEA and the Deputy Minister which both ordered
payment to no less than 33 complainants) and was correspondingly reduced from P308,751.75 and US $ 400.00
to the aggregate amount of P 140,817.75.
praying for the nullification of the POEA Administrator's Order of

September 8, 1986, the Resolution of the Deputy Minister of Labor of' December 19, 1986, and the Order
of the Secretary of Labor of July 1, 1987, It theorizes that:
The special civil action of certiorari at bar was thereafter instituted by EASCO
1) the POEA had no jurisdiction over the claims for refund filed by non-employees;
2) neither did the Secretary of Labor have jurisdiction of the claims;
3) assuming they had jurisdiction, both the POEA and Secretary of Labor also committed legal errors and acted with grave abuse of discretion when they ruled that petitioner is
liable on the claims.
EASCO contends that the POEA had no "adjudicatory jurisdiction" over the monetary claims in question because the same "did not arise from employer-employee relations." Invoked in support of the argument is
Section 4 (a) of EO 797 providing in part
that the POEA has
. . . original and exclusive jurisdiction over all cases, including money claims, involving employer-employee relations arising out of or by virtue of any law or contract involving
Filipino workers for overseas employment including seamen . . .
The complaints are however for violation of Articles 32 and 34 a) of the Labor Code. Article 32 and paragraph (a) of Article 34 read as follows:
Art. 32. Fees to be paid by workers.Any person applying with a private fee-charging employment agency for employment assistance shall not be charged any fee until he has
obtained employment through its efforts or has actually commenced employment. Such fee shall be always covered with the approved receipt clearly showing the amount paid.
The Secretary of Labor shall promulgate a schedule of allowable fees.
Art. 34. Prohibited practices.It shall be unlawful for any individual, entity, licensee, or holder of authority:
a) To charge or accept, directly or indirectly, any amount greater than that specified in the schedule of allowable fees prescribed by the Secretary of Labor, or to make a worker pay
any amount greater than actually received by him as a loan or advance; . . .
The penalties of suspension and cancellation of license or authority are prescribed for violations of the above quoted provisions, among others. And the Secretary of Labor has the power under Section 35 of the
law to apply these sanctions, as well as the authority, conferred by Section 36, not only, to "restrict and regulate the recruitment and placement activities of all agencies," but also to "promulgate rules and
"on its own

initiative or upon filing of a complaint or report or upon request for investigation by any aggrieved person, .
. . (authority to) conduct the necessary proceedings for the suspension or cancellation of the license or
authority of any agency or entity" for certain enumerated offenses including
regulations to carry out the objectives and implement the provisions" governing said activities. Pursuant to this rule-making power thus granted, the Secretary of Labor gave the POEA
1) the imposition or acceptance, directly or indirectly, of any amount of money, goods or services, or any fee or bond in excess of what is prescribed by the Administration, and
2) any other violation of pertinent provisions of the Labor Code and other relevant laws, rules and regulations.
10
The Administrator was also given the power to "order the dismissal of the case or the suspension of the license or authority of the respondent agency or contractor or recommend to the Minister
the cancellation thereof." 11
Implicit in these powers is the award of appropriate relief to the victims of the offenses committed by the respondent agency or contractor, specially the refund or reimbursement of such fees as may have been
fraudulently or otherwise illegally collected, or such money, goods or services imposed and accepted in excess of what is licitly prescribed. It would be illogical and absurd to limit the sanction on an offending
recruitment agency or contractor to suspension or cancellation of its license, without the concomitant obligation to repair the injury caused to its victims. It would result either in rewarding unlawful acts, as it would
leave the victims without recourse, or in compelling the latter to litigate in another forum, giving rise to that multiplicity of actions or proceedings which the law abhors.
Even more untenable is EASCO's next argument that the recruiter and its victims are in pari delicto the former for having required payment, and the latter for having voluntarily paid, "prohibited recruitment
fees" and therefore, said victims are barred from obtaining relief. The sophistical, if not callous, character of the argument is evident upon the most cursory reading thereof; it merits no consideration whatever.
The Court is intrigued by EASCO's reiteration of its argument that it should not be held liable for claims which accrued prior to or after the effectivity of its bond, considering that the respondent Secretary had
conceded the validity of part of said argument, at least. The Secretary ruled that EASCO's "contention that it should not be held liable for claims/payments made to respondent agency before the effectivity of the
surety bond on January 2, 1985 is well taken." According to the Secretary: 12
. . . A close examination of the records reveal(s) that respondent EASCO is not jointly and severally liable with respondent agency to refund complainants Lucena Cabasal, Felix
Rivero, Romulo del Rosario, Rogelio Banzuela, Josefina Ogatis, Francisco Sorato, Sonny Quiazon, Josefina Dictado, Mario del Guzman and Rogelio Mercado (10 in all). These
complainants paid respondent agency in 1984, or before the effectivity of the bond on January 2, 1985 as evidence by the reciept and their testimonies.
The related argument, that it is also not liable for claims filed after the expiry (on January 2, 1986) of the period stipulated in the surety bond for the filing of claims against the bond, must however be rejected, as
the Secretary did. The Court discerns no grave abuse of discretion in the Secretary's statement of his reasons for doing so, to wit:
. . . While it may be true that respondent EASCO received notice of their claims after the ten (10) day expiration period from cancellation or after January 12, 1986 as provided in
the surety bond, records show that . . . EASCO's principal, respondent agency, was notified/ summoned prior to the expiration period or before January 12, 1986. Respondent
agency received summons on July 24, 1985 with respect to claims of complainants Penarroyo, dela Cruz and Canti. It also received summons on November 26, 1985 with respect
to Giovanni Garbillons' claim. Respondent agency was likewise considered constructively notified of the claims of complainants Calayag, Danuco Domingo and Campena on
October 6, 1985. In this connection, it may be stressed that the surety bond provides that notice to the principal is notice to the surety. Besides, it has been held that the contract of
a compensated surety like respondent EASCO is to be interpreted liberally in the interest of the promises and beneficiaries rather than strictly in favor of the surety (Acoustics Inc.
v. American Surety, 74 Nev-6, 320 P2d. 626, 74 Am. Jur. 2d).
So, too, EASCO's claim that it had not been properly served with summons as regards a few of the complaints must be rejected, the issue being factual, and the Court having been cited to no grave error
invalidating the respondent Secretary's conclusion that summons had indeed been duly served.
Finally, EASCO's half-hearted argument that its liability should be limited to the maximum amount set in its surety bond, i.e., P150,000.00, is palpably without merit, since the aggregate liability imposed on it,
P140,817.75, supra, does not in fact exceed that limit.
WHEREFORE, the petition is DISMISSED for lack of merit, and this decision is declared to be immediately executory. Costs against petitioner.
SO ORDERED.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 73887 December 21, 1989
GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner,

vs.
HONORATO JUDICO and NATIONAL LABOR RELATIONS COMMISSION, respondents.
G.A. Fortun and Associates for petitioner.
Corsino B. Soco for private respondent.
PARAS J.:
Before us is a Petition for certiorari to review the decision of the National Labor Relations Commission (NLRC, for brevity) dated September 9, 1985 reversing the decision of Labor Arbiter Vito J. Minoria, dated
June 9, 1983, by 1) ordering petitioner insurance company, Great Pacific Life Assurance Corporation (Grepalife, for brevity) to recognize private respondent Honorato Judico, as its regular employee as defined
under Art. 281 of the Labor Code and 2) remanding the case to its origin for the determination of private respondent Judico's money claims.
The records of the case show that Honorato Judico filed a complaint for illegal dismissal against Grepalife, a duly organized insurance firm, before the NLRC Regional Arbitration Branch No. VII, Cebu City on
August 27, 1982. Said complaint prayed for award of money claims consisting of separation pay, unpaid salary and 13th month pay, refund of cash bond, moral and exemplary damages and attorney's fees.
Both parties appealed to the NLRC when a decision was rendered by the Labor Arbiter dismissing the complaint on the ground that the employer-employee relations did not exist between the parties but ordered
Grepalife to pay complainant the sum of Pl,000.00 by reason of Christian Charity.
On appeal, said decision was reversed by the NLRC ruling that complainant is a regular employee as defined under Art. 281 of the Labor Code and declaring the appeal of Grepalife questioning the legality of the
payment of Pl,000.00 to complainant moot and academic. Nevertheless, for the purpose of revoking the supersedeas bond of said company it ruled that the Labor Arbiter erred in awarding Pl,000.00 to
complainant in the absence of any legal or factual basis to support its payment.
Petitioner company moved to reconsider, which was denied, hence this petition for review raising four legal issues to wit:
I. Whether the relationship between insurance agents and their principal, the insurance company, is that of agent and principal to be governed by the Insurance Code and the Civil
Code provisions on agency, or one of employer-employee, to be governed by the Labor Code.
II. Whether insurance agents are entitled to the employee benefits prescribed by the Labor Code.
III. Whether the public respondent NLRC has jurisdiction to take cognizance of a controversy between insurance agent and the insurance company, arising from their agency
relations.
IV. Whether the public respondent acted correctly in setting aside the decision of Labor Arbiter Vito J. Minoria and in ordering the case remanded to said Labor Arbiter for further
proceedings.(p. 159, Rollo)
The crux of these issues boil down to the question of whether or not employer-employee relationship existed between petitioner and private respondent.
Petitioner admits that on June 9, 1976, private respondent Judico entered into an agreement of agency with petitioner Grepalife to become a debit agent attached to the industrial life agency in Cebu City.
Petitioner defines a debit agent as "an insurance agent selling/servicing industrial life plans and policy holders. Industrial life plans are those whose premiums are payable either daily, weekly or monthly and which
are collectible by the debit agents at the home or any place designated by the policy holder" (p. 156, Rollo). Such admission is in line with the findings of public respondent that as such debit agent, private
respondent Judico had definite work assignments including but not limited to collection of premiums from policy holders and selling insurance to prospective clients. Public respondent NLRC also found out that
complainant was initially paid P 200. 00 as allowance for thirteen (13) weeks regardless of production and later a certain percentage denominated as sales reserve of his total collections but not lesser than P
200.00. Sometime in September 1981, complainant was promoted to the position of Zone Supervisor and was given additional (supervisor's) allowance fixed at P110.00 per week. During the third week of
November 1981, he was reverted to his former position as debit agent but, for unknown reasons, not paid so-called weekly sales reserve of at least P 200.00. Finally on June 28, 1982, complainant was dismissed
by way of termination of his agency contract.
Petitioner assails the findings of the NLRC that private respondent is an employee of the former. Petitioner argues that Judico's compensation was not based on any fixed number of hours he was required to
devote to the service of petitioner company but rather it was the production or result of his efforts or his work that was being compensated and that the so-called allowance for the first thirteen weeks that Judico
worked as debit agent, cannot be construed as salary but as a subsidy or a way of assistance for transportation and meal expenses of a new debit agent during the initial period of his training which was fixed for
thirteen (13) weeks. Stated otherwise, petitioner contends that Judico's compensation, in the form of commissions and bonuses, was based on actual production, (insurance plans sold and premium collections).
Said contentions of petitioner are strongly rejected by private respondent. He maintains that he received a definite amount as his Wage known as "sales reserve" the failure to maintain the same would bring him
back to a beginner's employment with a fixed weekly wage of P 200.00 regardless of production. He was assigned a definite place in the office to work on when he is not in the field; and in addition to canvassing
and making regular reports, he was burdened with the job of collection and to make regular weekly report thereto for which an anemic performance would mean dismissal. He earned out of his faithful and
productive service, a promotion to Zone Supervisor with additional supervisor's allowance, (a definite or fixed amount of P110.00) that he was dismissed primarily because of anemic performance and not because
of the termination of the contract of agency substantiate the fact that he was indeed an employee of the petitioner and not an insurance agent in the ordinary meaning of the term.
That private respondent Judico was an agent of the petitioner is unquestionable. But, as We have held in Investment Planning Corp. vs. SSS, 21 SCRA 294, an insurance company may have two classes of
agents who sell its insurance policies: (1) salaried employees who keep definite hours and work under the control and supervision of the company; and (2) registered representatives who work on commission
basis. The agents who belong to the second category are not required to report for work at anytime, they do not have to devote their time exclusively to or work solely for the company since the time and the effort
they spend in their work depend entirely upon their own will and initiative; they are not required to account for their time nor submit a report of their activities; they shoulder their own selling expenses as well as
transportation; and they are paid their commission based on a certain percentage of their sales. One salient point in the determination of employer-employee relationship which cannot be easily ignored is the fact
that the compensation that these agents on commission received is not paid by the insurance company but by the investor (or the person insured). After determining the commission earned by an agent on his
sales the agent directly deducts it from the amount he received from the investor or the person insured and turns over to the insurance company the amount invested after such deduction is made. The test
therefore is whether the "employer" controls or has reserved the right to control the "employee" not only as to the result of the work to be done but also as to the means and methods by which the same is to be
accomplished.
Applying the aforementioned test to the case at bar, We can readily see that the element of control by the petitioner on Judico was very much present. The record shows that petitioner Judico received a definite
minimum amount per week as his wage known as "sales reserve" wherein the failure to maintain the same would bring him back to a beginner's employment with a fixed weekly wage of P 200.00 for thirteen
weeks regardless of production. He was assigned a definite place in the office to work on when he is not in the field; and in addition to his canvassing work he was burdened with the job of collection. In both
cases he was required to make regular report to the company regarding these duties, and for which an anemic performance would mean a dismissal. Conversely faithful and productive service earned him a
promotion to Zone Supervisor with additional supervisor's allowance, a definite amount of P110.00 aside from the regular P 200.00 weekly "allowance". Furthermore, his contract of services with petitioner is not
for a piece of work nor for a definite period.
On the other hand, an ordinary commission insurance agent works at his own volition or at his own leisure without fear of dismissal from the company and short of committing acts detrimental to the business
interest of the company or against the latter, whether he produces or not is of no moment as his salary is based on his production, his anemic performance or even dead result does not become a ground for
dismissal. Whereas, in private respondent's case, the undisputed facts show that he was controlled by petitioner insurance company not only as to the kind of work; the amount of results, the kind of performance
but also the power of dismissal. Undoubtedly, private respondent, by nature of his position and work, had been a regular employee of petitioner and is therefore entitled to the protection of the law and could not
just be terminated without valid and justifiable cause.
Premises considered, the appealed decision is hereby AFFIRMED in toto.
SO ORDERED.
Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ ., concur.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 84484 November 15, 1989
INSULAR LIFE ASSURANCE CO., LTD., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.
Tirol & Tirol for petitioner.
Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.
NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T. Basiao entered into a contract
by which:
1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in accordance with the existing rules and regulations" of the Company;
2. he would receive "compensation, in the form of commissions ... as provided in the Schedule of Commissions" of the contract to "constitute a part of the consideration of ... (said)
agreement;" and
3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and those which may from time to time be promulgated by it, ..." were made part
of said contract.
The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts prohibited to him, and the modes of termination of the agreement, viz.:
RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and means of soliciting insurance. Nothing herein contained shall
therefore be construed to create the relationship of employee and employer between the Agent and the Company. However, the Agent shall observe and conform to all rules and
regulations which the Company may from time to time prescribe.
ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in any form, or from making any misrepresentation or over-selling, and,
in general, from doing or committing acts prohibited in the Agent's Manual and in circulars of the Office of the Insurance Commissioner.
TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent, for or on account of ... (explicitly specified causes). ...
Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become ipso facto cancelled if the Insurance Commissioner should revoke a
Certificate of Authority previously issued or should the Agent fail to renew his existing Certificate of Authority upon its expiration. The Agent shall not have any right to any
commission on renewal of premiums that may be paid after the termination of this agreement for any cause whatsoever, except when the termination is due to disability or death in
line of service. As to commission corresponding to any balance of the first year's premiums remaining unpaid at the termination of this agreement, the Agent shall be entitled to it if
the balance of the first year premium is paid, less actual cost of collection, unless the termination is due to a violation of this contract, involving criminal liability or breach of trust.
ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall be valid without the prior consent in writing of the Company. ...
Some four years later, in April 1972, the parties entered into another contract an Agency Manager's Contract and to implement his end of it Basiao organized an agency or office to which he gave the name
M. Basiao and Associates, while concurrently fulfilling his commitments under the first contract with the Company. 2
In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao sued the Company in a civil action and this, he was later to claim, prompted the latter to
terminate also his engagement under the first contract and to stop payment of his commissions starting April 1, 1980. 3
against the Company and its president. Without contesting the

termination of the first contract, the complaint sought to recover commissions allegedly unpaid
thereunder, plus attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's claim,
asserting that he was not the Company's employee, but an independent contractor and that the Company
had no obligation to him for unpaid commissions under the terms and conditions of his contract.
Basiao thereafter filed with the then Ministry of Labor a complaint
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had established an employer-employee relationship between him and the Company, and this
conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's decision directed payment of his unpaid commissions "... equivalent to the balance of the first year's premium remaining unpaid,
at the time of his termination, of all the insurance policies solicited by ... (him) in favor of the respondent company ..." plus 10% attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission.
Hence, the present petition for certiorari and
prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue of the contract invoked by him, thereby placing his claim for unpaid commissions within
or, contrarily, as the Company would have it,

that under said contract Basiao's status was that of an independent contractor whose claim was thus
cognizable, not by the Labor Arbiter in a labor case, but by the regular courts in an ordinary civil action.
the original and exclusive jurisdiction of the Labor Arbiter under the provisions of Section 217 of the Labor Code,
The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and Basiao, is drawn from the terms of the contract they had entered into, which, either
expressly or by necessary implication, made Basiao the master of his own time and selling methods, left to his judgment the time, place and means of soliciting insurance, set no accomplishment quotas and
compensated him on the basis of results obtained. He was not bound to observe any schedule of working hours or report to any regular station; he could seek and work on his prospects anywhere and at anytime
he chose to, and was free to adopt the selling methods he deemed most effective.
Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company, the respondents contend that they do not constitute the decisive determinant of the nature of
his engagement, invoking precedents to the effect that the critical feature distinguishing the status of an employee from that of an independent contractor is control, that is, whether or not the party who engages
the services of another has the power to control the latter's conduct in rendering such services. Pursuing the argument, the respondents draw attention to the provisions of Basiao's contract obliging him to "...
observe and conform to all rules and regulations which the Company may from time to time prescribe ...," as well as to the fact that the Company prescribed the qualifications of applicants for insurance,
processed their applications and determined the amounts of insurance cover to be issued as indicative of the control, which made Basiao, in legal contemplation, an employee of the Company. 9
It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan 10
... In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees' conduct although the latter is the most important element (35 Am. Jur. 445). ...
Indeed, it is without question a valid test of the character of a contract or

agreement to render service. It should, however, be obvious that not every form of control that the hiring
party reserves to himself over the conduct of the party hired in relation to the services rendered may be
accorded the effect of establishing an employer-employee relationship between them in the legal or
technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an
employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract
of service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in
his performance of the engagement.
has been followed and applied in later cases, some fairly recent.
11
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and
those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that
Rules and regulations

governing the conduct of the business are provided for in the Insurance Code and enforced by the
Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a
set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and
what it requires or prohibits. Of such a character are the rules which prescribe the qualifications of
persons who may be insured, subject insurance applications to processing and approval by the Company,
and also reserve to the Company the determination of the premiums to be paid and the schedules of
payment. None of these really invades the agent's contractual prerogative to adopt his own selling
methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to
establish an employer-employee relationship between him and the company.
account subject to regulation by the State with respect, not only to the relations between insurer and insured but also to the internal affairs of the insurance company.
12
There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors, instead of employees of the parties for whom they worked. In Mafinco Trading Corporation vs.
the Court ruled that a person engaged to sell soft drinks for another, using a truck supplied by the
latter, but with the right to employ his own workers, sell according to his own methods subject only to
prearranged routes, observing no working hours fixed by the other party and obliged to secure his own
licenses and defray his own selling expenses, all in consideration of a peddler's discount given by the
other party for at least 250 cases of soft drinks sold daily, was not an employee but an independent
contractor.
Ople,13
a case almost on all fours with the present one, this Court held
that there was no employer-employee relationship between a commission agent and an investment
company, but that the former was an independent contractor where said agent and others similarly placed
were: (a) paid compensation in the form of commissions based on percentages of their sales, any
balance of commissions earned being payable to their legal representatives in the event of death or
registration; (b) required to put up performance bonds; (c) subject to a set of rules and regulations
governing the performance of their duties under the agreement with the company and termination of their
services for certain causes; (d) not required to report for work at any time, nor to devote their time
exclusively to working for the company nor to submit a record of their activities, and who, finally,
shouldered their own selling and transportation expenses.
In Investment Planning Corporation of the Philippines us. Social Security System
14
it was held that one who had been engaged by a rice miller to buy and sell rice and
palay without compensation except a certain percentage of what he was able to buy or sell, did work at
his own pleasure without any supervision or control on the part of his principal and relied on his own
resources in the performance of his work, was a plain commission agent, an independent contractor and
not an employee.
More recently, in Sara vs. NLRC, 15
The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and conform to such rules and regulations as the latter might from time to time prescribe. No
showing has been made that any such rules or regulations were in fact promulgated, much less that any rules existed or were issued which effectively controlled or restricted his choice of methods or the
methods themselves of selling insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were imposed on the express provision of the contract leaving Basiao "... free to
exercise his own judgment as to the time, place and means of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-five years. Whatever this is meant to imply, the obvious reply would be that what is germane
here is Basiao's status under the contract of July 2, 1968, not the length of his relationship with the Company.
The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should
have been litigated in an ordinary civil action. The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's
decision. This conclusion renders it unnecessary and premature to consider Basiao's claim for commissions on its merits.
WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No
pronouncement as to costs.
SO ORDERED.
Cruz, Gancayco, Grio-Aquino, and Medialdea, JJ., concur.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-72654-61 January 22, 1990
ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN, NICANOR FRANCISCO, PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES and/or ARSENIO DE GUZMAN, respondents.
J.C. Espinas & Associates for petitioners.
Tomas A. Reyes for private respondent.
FERNAN, C.J.:
The issue to be resolved in the instant case is whether or not the fishermen-crew members of the trawl fishing vessel 7/B Sandyman II are employees of its owner-operator, De Guzman Fishing Enterprises, and if
so, whether or not they were illegally dismissed from their employment.
Records show that the petitioners were the fishermen-crew members of 7/B Sandyman II, one of several fishing vessels owned and operated by private respondent De Guzman Fishing Enterprises which is
primarily engaged in the fishing business with port and office at Camaligan, Camarines Sur. Petitioners rendered service aboard said fishing vessel in various capacities, as follows: Alipio Ruga and Jose Parma
patron/pilot; Eladio Calderon, chief engineer; Laurente Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor Francisco, second fisherman; Philip Cervantes and Eleuterio Barbin, fishermen.
For services rendered in the conduct of private respondent's regular business of "trawl" fishing, petitioners were paid on percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier of private
respondent. As agreed upon, they received thirteen percent (13%) of the proceeds of the sale of the fish-catch if the total proceeds exceeded the cost of crude oil consumed during the fishing trip, otherwise, they
received ten percent (10%) of the total proceeds of the sale. The patron/pilot, chief engineer and master fisherman received a minimum income of P350.00 per week while the assistant engineer, second
fisherman, and fisherman-winchman received a minimum income of P260.00 per week. 1
On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman, president of private respondent, to proceed to the police station at Camaligan, Camarines Sur, for investigation
on the report that they sold some of their fish-catch at midsea to the prejudice of private respondent. Petitioners denied the charge claiming that the same was a countermove to their having formed a labor union
and becoming members of Defender of Industrial Agricultural Labor Organizations and General Workers Union (DIALOGWU) on September 3, 1983.
During the investigation, no witnesses were presented to prove the charge against petitioners, and no criminal charges were formally filed against them. Notwithstanding, private respondent refused to allow
petitioners to return to the fishing vessel to resume their work on the same day, September 11, 1983.
On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-payment of 13th month pay, emergency cost of living allowance and service incentive pay, with the then Ministry
They uniformly contended that

they were arbitrarily dismissed without being given ample time to look for a new job.
(now Department) of Labor and Employment, Regional Arbitration Branch No. V, Legaspi City, Albay, docketed as Cases Nos. 1449-83 to 1456-83.
On October 24, 1983, private respondent, thru its operations manager, Conrado S. de Guzman, submitted its position paper denying the employer-employee relationship between private respondent and
petitioners on the theory that private respondent and petitioners were engaged in a joint venture. 3
After the parties failed to reach an amicable settlement, the Labor Arbiter scheduled the case for joint hearing furnishing the parties with notice and summons. On December 27, 1983, after two (2) previously
scheduled joint hearings were postponed due to the absence of private respondent, one of the petitioners herein, Alipio Ruga, the pilot/captain of the 7/B Sandyman II, testified, among others, on the manner the
fishing operations were conducted, mode of payment of compensation for services rendered by the fishermen-crew members, and the circumstances leading to their dismissal. 4
dismissing all the complaints of petitioners

on a finding that a "joint fishing venture" and not one of employer-employee relationship existed between
private respondent and petitioners.
On March 31, 1984, after the case was submitted for resolution, Labor Arbiter Asisclo S. Coralde rendered a joint decision
From the adverse decision against them, petitioners appealed to the National Labor Relations Commission.
affirming the decision of the labor arbiter that a "joint fishing

venture" relationship existed between private respondent and petitioners.
On May 30, 1985, the National Labor Relations Commission promulgated its resolution
Hence, the instant petition.
Petitioners assail the ruling of the public respondent NLRC that what exists between private respondent and petitioners is a joint venture arrangement and not an employer-employee relationship. To stress that
there is an employer-employee relationship between them and private respondent, petitioners invite attention to the following: that they were directly hired by private respondent through its general manager,
Arsenio de Guzman, and its operations manager, Conrado de Guzman; that, except for Laurente Bautu, they had been employed by private respondent from 8 to 15 years in various capacities; that private
respondent, through its operations manager, supervised and controlled the conduct of their fishing operations as to the fixing of the schedule of the fishing trips, the direction of the fishing vessel, the volume or
number of tubes of the fish-catch the time to return to the fishing port, which were communicated to the patron/pilot by radio (single side band); that they were not allowed to join other outfits even the other
vessels owned by private respondent without the permission of the operations manager; that they were compensated on percentage commission basis of the gross sales of the fish-catch which were delivered to
them in cash by private respondent's cashier, Mrs. Pilar de Guzman; and that they have to follow company policies, rules and regulations imposed on them by private respondent.
Disputing the finding of public respondent that a "joint fishing venture" exists between private respondent and petitioners, petitioners claim that public respondent exceeded its jurisdiction and/or abused its
discretion when it added facts not contained in the records when it stated that the pilot-crew members do not receive compensation from the boat-owners except their share in the catch produced by their own
efforts; that public respondent ignored the evidence of petitioners that private respondent controlled the fishing operations; that public respondent did not take into account established jurisprudence that the
relationship between the fishing boat operators and their crew is one of direct employer and employee.
Aside from seeking the dismissal of the petition on the ground that the decision of the labor arbiter is now final and executory for failure of petitioners to file their appeal with the NLRC within 10 calendar days from
receipt of said decision pursuant to the doctrine laid down in Vir-Jen Shipping and Marine Services, Inc. vs. NLRC, 115 SCRA 347 (1982), the Solicitor General claims that the ruling of public respondent that a
"joint fishing venture" exists between private respondent and petitioners rests on the resolution of the Social Security System (SSS) in a 1968 case, Case No. 708 (De Guzman Fishing Enterprises vs. SSS),
exempting De Guzman Fishing Enterprises, private respondent herein, from compulsory coverage of the SSS on the ground that there is no employer-employee relations between the boat-owner and the
fishermen-crew members following the doctrine laid down inPajarillo vs. SSS, 17 SCRA 1014 (1966). In applying to the case at bar the doctrine in Pajarillo vs. SSS, supra, that there is no employer-employee
relationship between the boat-owner and the pilot and crew members when the boat-owner supplies the boat and equipment while the pilot and crew members contribute the corresponding labor and the parties
get specific shares in the catch for their respective contribution to the venture, the Solicitor General pointed out that the boat-owners in the Pajarillo case, as in the case at bar, did not control the conduct of the
fishing operations and the pilot and crew members shared in the catch.
We rule in favor of petitioners.
Fundamental considerations of substantial justice persuade Us to decide the instant case on the merits rather than to dismiss it on a mere technicality. In so doing, we exercise the prerogative accorded to this
Court enunciated in Firestone Filipinas Employees Association, et al. vs. Firestone Tire and Rubber Co. of the Philippines, Inc., 61 SCRA 340 (1974), thus "the well-settled doctrine is that in labor cases before this
Tribunal, no undue sympathy is to be accorded to any claim of a procedural misstep, the idea being that its power be exercised according to justice and equity and substantial merits of the controversy."
in the
open sea performing their job to earn a living to support their families, convince Us to adopt a more liberal
attitude in applying to petitioners the 10-calendar day rule in the filing of appeals with the NLRC from the
decision of the labor arbiter.
Circumstances peculiar to some extent to fishermen-crew members of a fishing vessel regularly engaged in trawl fishing, as in the case of petitioners herein, who spend one (1) whole week or more
Records reveal that petitioners were informed of the labor arbiter's decision of March 31, 1984 only on July 3,1984 by their non-lawyer representative during the arbitration proceedings, Jose Dialogo who received
the decision eight (8) days earlier, or on June 25, 1984. As adverted to earlier, the circumstances peculiar to petitioners' occupation as fishermen-crew members, who during the pendency of the case
understandably have to earn a living by seeking employment elsewhere, impress upon Us that in the ordinary course of events, the information as to the adverse decision against them would not reach them
within such time frame as would allow them to faithfully abide by the 10-calendar day appeal period. This peculiar circumstance and the fact that their representative is a non-lawyer provide equitable justification
to conclude that there is substantial compliance with the ten-calendar day rule of filing of appeals with the NLRC when petitioners filed on July 10, 1984, or seven (7) days after receipt of the decision, their appeal
with the NLRC through registered mail.
We have consistently ruled that in determining the existence of an employer-employee relationship, the elements that are generally considered are the following (a) the selection and engagement of the employee;
The
employment relation arises from contract of hire, express or implied. In the absence of hiring, no actual
employer-employee relation could exist.
(b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect to the means and methods by which the work is to be accomplished.
where the person for whom the services are

performed reserves a right to control not only the end to be achieved but also the means to be used in
reaching such end. The test calls merely for the existence of the right to control the manner of doing the
work, not the actual exercise of the right.
From the four (4) elements mentioned, We have generally relied on the so-called right-of-control test
10
11
The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that a "joint fishing venture" existed between private respondent and petitioners is not applicable in the instant
case. There is neither light of control nor actual exercise of such right on the part of the boat-owners in the Pajarillo case, where the Court found that the pilots therein are not under the order of the boat-owners as
regards their employment; that they go out to sea not upon directions of the boat-owners, but upon their own volition as to when, how long and where to go fishing; that the boat-owners do not in any way control
the crew-members with whom the former have no relationship whatsoever; that they simply join every trip for which the pilots allow them, without any reference to the owners of the vessel; and that they only
share in their own catch produced by their own efforts.
The aforementioned circumstances obtaining in Pajarillo case do not exist in the instant case. The conduct of the fishing operations was undisputably shown by the testimony of Alipio Ruga, the patron/pilot of 7/B
Sandyman II, to be under the control and supervision of private respondent's operations manager. Matters dealing on the fixing of the schedule of the fishing trip and the time to return to the fishing port were
While performing the fishing operations, petitioners received instructions via a

single-side band radio from private respondent's operations manager who called the patron/pilot in the
morning. They are told to report their activities, their position, and the number of tubes of fish-catch in one
day. Clearly thus, the conduct of the fishing operations was monitored by private respondent thru the
patron/pilot of 7/B Sandyman II who is responsible for disseminating the instructions to the crew
members.
shown to be the prerogative of private respondent.
12
13
The conclusion of public respondent that there had been no change in the situation of the parties since 1968 when De Guzman Fishing Enterprises, private respondent herein, obtained a favorable judgment in
Case No. 708 exempting it from compulsory coverage of the SSS law is not supported by evidence on record. It was erroneous for public respondent to apply the factual situation of the parties in the 1968 case to
the instant case in the light of the changes in the conditions of employment agreed upon by the private respondent and petitioners as discussed earlier.
Records show that in the instant case, as distinguished from the Pajarillo case where the crew members are under no obligation to remain in the outfit for any definite period as one can be the crew member of an
outfit for one day and be the member of the crew of another vessel the next day, the herein petitioners, on the other hand, were directly hired by private respondent, through its general manager, Arsenio de
Guzman, and its operations manager, Conrado de Guzman and have been under the employ of private respondent for a period of 8-15 years in various capacities, except for Laurente Bautu who was hired on
August 3, 1983 as assistant engineer. Petitioner Alipio Ruga was hired on September 29, 1974 as patron/captain of the fishing vessel; Eladio Calderon started as a mechanic on April 16, 1968 until he was
promoted as chief engineer of the fishing vessel; Jose Parma was employed on September 29, 1974 as assistant engineer; Jaime Barbin started as a pilot of the motor boat until he was transferred as a master
fisherman to the fishing vessel 7/B Sandyman II; Philip Cervantes was hired as winchman on August 1, 1972 while Eleuterio Barbin was hired as winchman on April 15, 1976.
While tenure or length of employment is not considered as the test of employment, nevertheless the hiring of petitioners to perform work which is necessary or desirable in the usual business or trade of private
respondent for a period of 8-15 years since 1968 qualify them as regular employees within the meaning of Article 281 of the Labor Code as they were indeed engaged to perform activities usually necessary or
desirable in the usual fishing business or occupation of private respondent. 14
Aside from performing activities usually necessary and desirable in the business of private respondent, it must be noted that petitioners received compensation on a percentage commission based on the gross
sale of the fish-catch i.e. 13% of the proceeds of the sale if the total proceeds exceeded the cost of the crude oil consumed during the fishing trip, otherwise only 10% of the proceeds of the sale. Such
compensation falls within the scope and meaning of the term "wage" as defined under Article 97(f) of the Labor Code, thus:
(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 included the fair and reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to the employee. . . .
The claim of private respondent, which was given credence by public respondent, that petitioners get paid in the form of share in the fish-catch which the patron/pilot as head of the team distributes to his crew
is not supported by recorded evidence. Except that such claim appears as an

allegation in private respondent's position paper, there is nothing in the records showing such a sharing
scheme as preferred by private respondent.
members in accordance with their own understanding
15
Furthermore, the fact that on mere suspicion based on the reports that petitioners allegedly sold their fish-catch at midsea without the knowledge and consent of private respondent, petitioners were unjustifiably
not allowed to board the fishing vessel on September 11, 1983 to resume their activities without giving them the opportunity to air their side on the accusation against them unmistakably reveals the disciplinary
power exercised by private respondent over them and the corresponding sanction imposed in case of violation of any of its rules and regulations. The virtual dismissal of petitioners from their employment was
characterized by undue haste when less extreme measures consistent with the requirements of due process should have been first exhausted. In that sense, the dismissal of petitioners was tainted with illegality.
Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private respondent virtually resulting in their dismissal evidently contradicts private respondent's theory of "joint fishing
venture" between the parties herein. A joint venture, including partnership, presupposes generally a parity of standingbetween the joint co-venturers or partners, in which each party has an equal proprietary
and where each party exercises equal lights in the conduct of the business. It
would be inconsistent with the principle of parity of standing between the joint co-venturers as regards the
conduct of business, if private respondent would outrightly exclude petitioners from the conduct of the
business without first resorting to other measures consistent with the nature of a joint venture
undertaking, Instead of arbitrary unilateral action, private respondent should have discussed with an open
mind the advantages and disadvantages of petitioners' action with its joint co-venturers if indeed there is
a "joint fishing venture" between the parties. But this was not done in the instant case. Petitioners were
arbitrarily dismissed notwithstanding that no criminal complaints were filed against them. The lame
excuse of private respondent that the non-filing of the criminal complaints against petitioners was for
humanitarian reasons will not help its cause either.
interest in the capital or property contributed
16
17
We have examined the jurisprudence on the matter and find the same to be supportive of petitioners' stand. InNegre vs. WCC 135 SCRA 653 (1985), we held that fishermen crew members who were recruited by
one master fisherman locally known as "maestro" in charge of recruiting others to complete the crew members are considered employees, not industrial partners, of the boat-owners. In an earlier case of Abong
vs. WCC, 54 SCRA 379 (1973) where petitioner therein, Dr. Agustin Abong, owner of the fishing boat, claimed that he was not the employer of the fishermen crew members because of an alleged partnership
agreement between him, as financier, and Simplicio Panganiban, as his team leader in charge of recruiting said fishermen to work for him, we affirmed the finding of the WCC that there existed an employeremployee relationship between the boat-owner and the fishermen crew members not only because they worked for and in the interest of the business of the boat-owner but also because they were subject to the
control, supervision and dismissal of the boat-owner, thru its agent, Simplicio Panganiban, the alleged "partner" of Dr. Abong; that while these fishermen crew members were paid in kind, or by "pakiao basis" still
that fact did not alter the character of their relationship with Dr. Abong as employees of the latter.
In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA 159 (1982), we held that the employer-employee relationship between the crew members and the owners of
the fishing vessels engaged in deep sea fishing is merely suspended during the time the vessels are drydocked or undergoing repairs or being loaded with the necessary provisions for the next fishing trip. The
said ruling is premised on the principle that all these activities i.e., drydock, repairs, loading of necessary provisions, form part of the regular operation of the company fishing business.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the National Labor Relations Commission dated May 30,1985 is hereby REVERSED and SET ASIDE. Private
respondent is ordered to reinstate petitioners to their former positions or any equivalent positions with 3-year backwages and other monetary benefits under the law. No pronouncement as to costs.
SO ORDERED.
Gutierrez, Jr., Bidin and Corts, JJ., concur.
Feliciano, J., concurs in the result.

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 121605
February 2, 2000
PAZ MARTIN JO and CESAR JO, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and PETER MEJILA, respondents.
QUISUMBING, J.:
This petition for certiorari seeks to set aside the Decision1 of National Labor Relations Commission (Fifth Division) promulgated on November 21, 1994, and its Resolution dated June 7, 1995, which denied
petitioners' motion for reconsideration.
Private respondent Peter Mejila worked as barber on a piece rate basis at Dina's Barber Shop. In 1970, the owner, Dina Tan, sold the barbershop to petitioners Paz Martin Jo and Cesar Jo. All the employees,
including private respondent, were absorbed by the new owners. The name of the barbershop was changed to Windfield Barber Shop.
The owners and the barbers shared in the earnings of the barber shop. The barbers got two-thirds (2/3) of the fee paid for every haircut or shaving job done, while one-third (1/3) went to the owners of the shop.
In 1977, petitioners designated private respondent as caretaker of the shop because the former caretaker became physically unfit. Private respondent's duties as caretaker, in addition to his being a barber, were:
(1) to report to the owners of the barbershop whenever the airconditioning units malfunctioned and/or whenever water or electric power supply was interrupted, (2) to call the laundry woman to wash dirty linen; (3)
to recommend applicants for interview and hiring; (4) to attend to other needs of the shop. For this additional job, he was given an honorarium equivalent to one-third (1/3) of the net income of the shop.
1wphi1.nt
When the building occupied by the shop was demolished in 1986, the barbershop closed. But soon a place nearby was rented by petitioners and the barbershop resumed operations as Cesar's Palace
Barbershop and Massage Clinic. In this new location, private respondent continued to be a barber and caretaker, but with a fixed monthly honorarium as caretaker, to wit: from February 1986 to 1990 P700;
from February 1990 to March 1991 P800; and from July 1992 P1,300.
In November 1992, private respondent had an altercation with his co-barber, Jorge Tinoy. The bickerings, characterized by constant exchange of personal insults during working hours, became serious so that
private respondent reported the matter to Atty. Allan Macaraya of the labor department. The labor official immediately summoned private respondent and petitioners to a conference. Upon investigation, it was
found out that the dispute was not between private respondent and petitioners; rather, it was between the former and his fellow barber. Accordingly, Atty. Macaraya directed petitioners' counsel, Atty. Prudencio
Abragan, to thresh out the problem.
During the mediation meeting held at Atty. Abragan's office a new twist was added. Despite the assurance that he was not being driven out as caretaker-barber, private respondent demanded payment for several
thousand pesos as his separation pay and other monetary benefits. In order to give the parties enough time to cool off, Atty. Abragan set another conference but private respondent did not appear in such meeting
anymore.
Meanwhile, private respondent continued reporting for work at the barbershop. But, on January 2, 1993, he turned over the duplicate keys of the shop to the cashier and took away all his belongings therefrom. On
January 8, 1993, he began working as a regular barber at the newly opened Goldilocks Barbershop also in Iligan City.
On January 12, 1993, private respondent filed a complaint 2 for illegal dismissal with prayer for payment of separation pay, other monetary benefits, attorney's fees and damages. Significantly, the complaint did not
seek reinstatement as a positive relief.
In a Decision dated June 15, 1993, the Labor Arbiter found that private respondent was an employee of petitioners, and that private respondent was not dismissed but had left his job voluntarily because of his
misunderstanding with his co-worker.3 The Labor Arbiter dismissed the complaint, but ordered petitioners to pay private respondent his 13th month pay and attorney's fees.
Both parties appealed to the NLRC. In a Decision dated November 21, 1994, it set aside the labor arbiter's judgment. The NLRC sustained the labor arbiter's finding as to the existence of employer-employee
relationship between petitioners and private respondent, but it ruled that private respondent was illegally dismissed. Hence, the petitioners were ordered to reinstate private respondent and pay the latter's
backwages, 13th month pay, separation pay and attorney's fees, thus:
For failure of respondents to observe due process before dismissing the complainant, We rule and hold that he was illegally terminated. Consequently, he should be reinstated and paid his
backwages starting from January 1, 1993 up , the time of his reinstatement and payment of separation pay, should reinstatement not be feasible on account of a strained employer-employee
relationship.
As complainant's income was mixed, (commission and caretaker), he becomes entitled to 13th month pay only in his capacity as caretaker at the last rate pay given to him.
With respect to separation pay, even workers paid on commission are given separation pay as they are considered employees of the company. Complainant should be adjudged entitled to
separation pay reckoned from 1970 up to the time he was dismissed on December 31, 1992 at one-half month pay of his earnings as a barbers; and as a caretaker the same should be reckoned
from 1977 up to December 31, 1992.
As complainant has been assisted by counsel not only in the preparation of the complaint, position paper but in hearings before the Labor Arbiter a quo attorney's fees equivalent to 10% of the
money awards should likewise be paid to complainant.
WHEREFORE, the decision appealed from is Vacated and Set Aside and a new one entered in accordance with the above-findings and awards.
SO ORDERED.4
Its motion for reconsideration having been denied in a Resolution dated June 7, 1995, petitioners filed the instant petition.
The issues for resolution are as follows:
1. Whether or not there exists an employee-employee relationship between petitioners and private respondent.
2. Whether or not private respondent was dismissed from or had abandoned his employment.
Petitioners contend that public respondent gravely erred in declaring that private respondent was their employee. They claim that private respondent was their "partner in trade" whose compensation was based
on a sharing arrangement per haircut or shaving job done. They argue that private respondent's task as caretaker could be considered an employment because the chores are very minimal.
At the outset, we reiterate 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 the NLRC shall be accorded not
only respect but even finality when supported by ample evidence. 5
In determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by
whatever means; and (4) the power to control the worker's conduct, with the latter assuming primacy in the overall consideration. The power of control refers to the existence of the power and not necessarily to
the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that the employer has the right to wield that power. 6
Absent a clear showing that petitioners and private respondent had intended to pursue a relationship of industrial partnership, we entertain no doubt that private respondent was employed by petitioners as
caretaker-barber. Initially, petitioners, as new owners of the barbershop, hired private respondent as barber by absorbing the latter in their employ. Undoubtedly, the services performed by private respondent as
barber is related to, and in the pursuit of the principal business activity of petitioners. Later on, petitioners tapped private respondent to serve concurrently as caretaker of the shop. Certainly, petitioners had the
power to dismiss private respondent being the ones who engaged the services of the latter. In fact, private respondent sued petitioners for illegal dismissal, albeit contested by the latter. As a caretaker, private
respondent was paid by petitioners wages in the form of honorarium, originally, at the rate of one-third (1/3) of the shop's net income but subsequently pegged at a fixed amount per month. As a barber, private
respondent earned two-thirds (2/3) of the fee paid per haircut or shaving job done. Furthermore, the following facts indubitably reveal that petitioners controlled private respondent's work performance, in that: (1)
private respondent had to inform petitioners of the things needed in the shop; (2) he could only recommend the hiring of barbers and masseuses, with petitioners having the final decision; (3) he had to be at the
shop at 9:00 a.m. and could leave only at 9:00 p.m. because he was the one who opened and closed it, being the one entrusted with the key. 7 These duties were complied with by the private respondent upon
instructions of petitioners. Moreover, such task was far from being negligible as claimed by petitioners. On the contrary, it was crucial to the business operation of petitioners as shown in the preceding discussion.
Hence, there was enough basis to declare private respondent an employee of petitioners. Accordingly, there is no cogent reason to disturb the findings of the labor arbiter and NLRC on the existence of employeremployee relationship between herein private parties.
With regard to the second issue, jurisprudence has laid out the rules and valid ground for termination of employment. To constitute abandonment, there must be concurrence of the intention to abandon and some
overt acts from which it may be inferred that the employee concerned has no more interest in working. 8 In other words, there must be a clear, deliberate and unjustified refusal to resume employment and a clear
intention to sever the employer-employee relationship on the part of the employee. 9
In the case at bar, the labor arbiter was convinced that private respondent was not dismissed but left his work on his own volition because he could no longer bear the incessant squabbles with his co-worker.
Nevertheless, public respondent did not give credence to petitioners' claim that private respondent abandoned his job. On this score, public respondent gravely erred as hereunder discussed.
At the outset, we must stress that where the findings of the NLRC contradict those of the labor arbiter, the Court, in the exercise of its equity jurisdiction, may look into the records of the case and reexamine the
questioned findings.10
In this case, the following circumstances clearly manifest private respondent's intention to sever his ties with petitioners. First, private respondent even bragged to his co-workers his plan to quit his job at Cesar's
Palace Barbershop and Massage Clinic as borne out by the affidavit executed by his former co-workers. 11 Second, he surrendered the shop's keys and took away all his things from the shop. Third, he did not
report anymore to the shop without giving any valid and justifiable reason for his absence. Fourth, he immediately sought a regular employment in another barbershop, despite previous assurance that he could
remain in petitioners' employ. Fifth, he filed a complaint for illegal dismissal without praying for reinstatement.
Moreover, public respondent's assertion that the institution of the complaint for illegal dismissal manifests private respondent's lack of intention to abandon his job 12 is untenable. The rule that abandonment of work
is inconsistent with the filing of a complainant for illegal dismissal is not applicable in this case. Such rule applies where the complainant seeks reinstatement as a relief. Corollarily, it has no application where the
complainant does not pray for reinstatement and just asks for separation pay instead 13 as in the present case. It goes without saying that the prayer for separation pay, being the alternative remedy to
reinstatement, 14 contradicts private respondent's stance. That he was illegally dismissed is belied by his own pleadings as well as contemporaneous conduct.
We are, therefore, constrained to agree with the findings of the Labor Arbiter that private respondent left his job voluntarily for reasons not attributable to petitioners. It was error and grave abuse of discretion for
the NLRC to hold petitioners liable for illegal dismissal of private respondent.
WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of public respondent NLRC are reversed and set aside. The decision of the Labor Arbiter dated June 15, 1993, is hereby
reinstated. No costs.
SO ORDERED.
1wphi1.nt
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 147816
May 9, 2003
EFREN P. PAGUIO, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, METROMEDIA TIMES CORPORATION, ROBINA Y. GOKONGWEI, LIBERATO GOMEZ, JR., YOLANDA E. ARAGON, FREDERICK D. GO and ALDA
IGLESIA,respondents.
VITUG, J.:
On 22 June 1992, respondent Metromedia Times Corporation entered, for the fifth time, into an agreement with petitioner Efren P. Paguio, appointing the latter to be an account executive of the firm. 1 Again,
petitioner was to solicit advertisements for "The Manila Times," a newspaper of general circulation, published by respondent company. Petitioner, for his efforts, was to receive compensation consisting of a 15%
commission on direct advertisements less withholding tax and a 10% commission on agency advertisements based on gross revenues less agency commission and the corresponding withholding tax. The
commissions, released every fifteen days of each month, were to be given to petitioner only after the clients would have paid for the advertisements. Apart from commissions, petitioner was also entitled to a
monthly allowance of P2,000.00 as long as he met the P30,000.00-monthly quota. Basically, the contentious points raised by the parties had something to do with the following stipulations of the agreement; viz:
"12. You are not an employee of the Metromedia Times Corporation nor does the company have any obligations towards anyone you may employ, nor any responsibility for your operating
expenses or for any liability you may incur. The only rights and obligations between us are those set forth in this agreement. This agreement cannot be amended or modified in any way except
with the duly authorized consent in writing of both parties.
"13. Either party may terminate this agreement at any time by giving written notice to the other, thirty (30) days prior to effectivity of termination." 2
On 15 August 1992, barely two months after the renewal of his contract, petitioner received the following notice from respondent firm -
"Dear Mr. Paguio,
"Please be advised of our decision to terminate your services as Account Executive of Manila Times effective September 30, 1992.
"This is in accordance with our contract signed last July 1, 1992." 3
Apart from vague allegations of misconduct on which he was not given the opportunity to defend himself, i.e., pirating clients from his co-executives and failing to produce results, no definite cause for petitioner's
termination was given. Aggrieved, petitioner filed a case before the labor arbiter, asking that his dismissal be declared unlawful and that his reinstatement, with entitlement to backwages without loss of seniority
rights, be ordered. Petitioner also prayed that respondent company officials be held accountable for acts of unfair labor practice, for P500,000.00 moral damages and for P200,000.00 exemplary damages.
In their defense, respondent Metromedia Times Corporation asserted that it did not enter into any agreement with petitioner outside of the contract of services under Articles 1642 and 1644 of the Civil Code of the
Philippines.4Asserting their right to terminate the contract with petitioner, respondents pointed to the last provision thereof stating that both parties could opt to end the contract provided that either party would
serve, thirty days prior to the intended date of termination, the corresponding notice to the other.
The labor arbiter found for petitioner and declared his dismissal illegal. The arbiter ordered respondent Metromedia Times Corporation and its officers to reinstate petitioner to his former position, without loss of
seniority rights, and to pay him his commissions and other remuneration accruing from the date of dismissal on 15 August 1992 up until his reinstatement. He likewise adjudged that Liberato I. Gomez, general
manager of respondent corporation, be held liable to petitioner for moral damages in the amount of P20,000.00.
On appeal, the National Labor Relations Commission (NLRC) reversed the ruling of the labor arbiter and declared the contractual relationship between the parties as being for a fixed-term employment. The
NLRC declared a fixed-term employment to be lawful as long as "it was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the
worker and absent any other circumstances vitiating his consent." 5 The finding of the NLRC was primarily hinged on the assumption that petitioner, on account of his educated stature, having indeed personally
prepared his pleadings without the aid of counsel, was an unlikely victim of a lopsided contract. Rejecting the assertion of petitioner that he was a regular employee, the NLRC held: "The decisive determinant
would not be the activities that the employee (was) called upon to perform but rather, 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 (would) necessarily come, although it (might) not be known when." 6
Petitioner appealed the ruling of the NLRC before the Court of Appeals which upheld in toto the findings of the commission. In his petition for review on certiorari, petitioner raised the following issues for
resolution:
"WHETHER OR NOT PETITIONER'S CONTRACT WITH PRIVATE RESPONDENT'S COMPANY IS FOR A FIXED PERIOD.
"WHETHER OR NOT PETITIONER'S DISMISSAL IS LEGAL.
"WHETHER OR NOT PETITIONER IS ENTITLED TO BACKWAGES AND MORAL DAMAGES." 7
The crux of the matter would entail the determination of the nature of contractual relationship between petitioner and respondent company - was it or was it not one of regular employment?
A "regular employment," whether it is one or not, is aptly gauged from the concurrence, or the non-concurrence, of the following factors - a) the manner of selection and engagement of the putative employee, b)
the mode of payment of wages, c) the presence or absence of the power of dismissal; and d) the presence or absence of the power to control the conduct of the putative employee or the power to control the
employee with respect to the means or methods by which his work is to be accomplished. 8 The "control test" assumes primacy in the overall consideration. Under this test, an employment relation obtains where
work is performed or services are rendered under the control and supervision of the party contracting for the service, not only as to the result of the work but also as to the manner and details of the performance
desired.9
An indicum of regular employment, rightly taken into account by the labor arbiter, was the reservation by respondent Metromedia Times Corporation not only of the right to control the results to be achieved but
likewise the manner and the means used in reaching that end. 10 Metromedia Times Corporation exercised such control by requiring petitioner, among other things, to submit a daily sales activity report and also a
monthly sales report as well. Various solicitation letters would indeed show that Robina Gokongwei, company president, Alda Iglesia, the advertising manager, and Frederick Go, the advertising director, directed
and monitored the sales activities of petitioner.
The Labor Code, in Article 280 thereof, provides:
"ART. 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
services 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 proceeding 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."
Thus defined, a regular employee is one who is engaged to perform activities which are necessary and desirable in the usual business or trade of the employer as against those which are undertaken for a
specific project or are seasonal. Even in these latter cases, where such person has rendered at least one year of service, regardless of the nature of the activity performed or of whether it is continuous or
intermittent, the employment is considered regular as long as the activity exists, it not being indispensable that he be first issued a regular appointment or be formally declared as such before acquiring a regular
status.11
That petitioner performed activities which were necessary and desirable to the business of the employer, and that the same went on for more than a year, could hardly be denied. Petitioner was an account
executive in soliciting advertisements, clearly necessary and desirable, for the survival and continued operation of the business of respondent corporation. Robina Gokongwei, its President, herself admitted that
the income generated from paid advertisements was the lifeblood of the newspaper's existence. Implicitly, respondent corporation recognized petitioner's invaluable contribution to the business when it renewed,
not just once but five times, its contract with petitioner.
Respondent company cannot seek refuge under the terms of the agreement it has entered into with petitioner. The law, in defining their contractual relationship, does so, not necessarily or exclusively upon the
terms of their written or oral contract, but also on the basis of the nature of the work petitioner has been called upon to perform. 12 The law affords protection to an employee, and it will not countenance any attempt
to subvert its spirit and intent. A stipulation in an agreement can be ignored as and when it is utilized to deprive the employee of his security of tenure. 13 The sheer inequality that characterizes employer-employee
relations, where the scales generally tip against the employee, often scarcely provides him real and better options.
The real question that should thus be posed is whether or not petitioner has been justly dismissed from service. A lawful dismissal must meet both substantive and procedural requirements; in fine, the dismissal
must be for a just or authorized cause and must comply with the rudimentary due process of notice and hearing. It is not shown that respondent company has fully bothered itself with either of these requirements
in terminating the services of petitioner. The notice of termination recites no valid or just cause for the dismissal of petitioner nor does it appear that he has been given an opportunity to be heard in his defense.
The evidence, however, found by the appellate court is wanting that would indicate bad faith or malice on the part of respondents, particularly by respondent Liberato I. Gomez, and the award of moral damages
must thus be deleted.
WHEREFORE, the instant petition is GRANTED. The decision of the Court of Appeals in C.A. G.R. SP No. 527773 and that of the National Labor Relations Commission are hereby SET ASIDE and that of the
Labor Arbiter is REINSTATED except with respect to the P20,000.00 moral damages adjudged against respondent Liberato I. Gomez which award is deleted.
SO ORDERED.
Davide, Jr., C.J., Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 72409 December 29, 1986
MAMERTO S. BESA, doing business under the name and style of BESA'S CUSTOMBUILT SHOES,petitioner,
vs.
THE HONORABLE CRESENCIANO B. TRAJANO, DIRECTOR OF THE BUREAU OF LABOR RELATIONS, MINISTRY OF LABOR AND EMPLOYMENT, AND KAISAHAN NG MANGGAGAWANG PILIPINO
(KAMPIL-KATIPUNAN), respondents.
De Asis and Hernando Law Office for petitioner.
Estebal M. Mendoza for private respondent.
PARAS, J.:
This petition questions the decision of the Director of the Bureau of Labor Relations in BLR Case No. A-8-165-85, which affirmed the appealed order of the Med-Arbiter, Labor Relations Division, NCR in NCRLRD-M-1-044-85, a certification election case. More specifically, petitioner seeks the resolution of the question as to whether or not an employer-employee relationship exists between herein petitioner and the
seventeen (17) shoeshiners-members of the respondent union, who, if the relationship does exist, should be entitled to the rights, privileges and benefits of an employee as provided in the Labor Code.
Sometime in January, 1985, private respondent Kaisahan ng Mangagawang Pilipino KAMPIL for short) a legitimate labor union duly registered with the Ministry of Labor and Employment (MOLE, for short), filed a
Petition for Certification Election, docketed as NCR-LRD-M-1-044-85 in the National Labor Relations Division of the National Capital Region. Petitioner opposed it alleging that
1. There is no employer-employee relationship between Besa's and the petitioners-signatories to the petition;
2. The subject of the present petition had previously been decided by the defunct Court of Industrial Relations, and is therefore barred under the principle of res judicata;
3. The petition fails to comply with the mandatory formal requirements under Sec. 2, Book V, of the Omnibus Rules Implementing the Labor Code; and
4. This Hon. Commission has no jurisdiction over the subject matter and parties to the petition.
Acting on the Petition, the Opposition thereto, and the Reply to the Opposition, the Med-Arbiter on June 27, 1985, issued an order declaring that there was an employer-employee relationship between the parties
and directed that an election be conducted.
Petitioner appealed the order to the Director of BLR citing among others the following reasons
1. That the subject of the present petition has previously been decided by the defunct Court of Industrial Relations, and is therefore barred under the principle of res judicata (CIR Case Nos. 2783,
2751 and 2949 ULP December 21, 1965);
2. That on May 28, 1985, Director Severo Pucan of the Ministry of Labor and Employment, in dismissing the case for underpayment of commissions and non-payment of ECOLA, filed by the
shoeshiners against Besas Custombuilt Shoes, for lack of jurisdiction petition, declared that there was no employer-employee relationship between the shoeshiners and petitioner Besas (Order in
NCR-LSED1-020-85);
Director Pucan's findings were based on a letter-opinion of the Director of the Bureau of Working Conditions of the MOLE (Annex "B-2", Petition for Certiorari). The legal ground therein cited
was res judicata.
xxx xxx xxx
Appeal was dismissed by the Director of BLR as contained in his decision dated Sept. 27, 1985 upholding the finding of the Med-Arbiter that supervisors were appointed to oversee the bootblacks' performance. It
declared that such is a finding of fact that is entitled to respect and that res judicata does not he as the parties and the causes of action in the certification election case are different from the parties and causes of
action in CIR Cases Nos. 2783-ULP 2751-ULP and 2949 ULP
Thus the Petition of the Union (KAMPIL) before the Med-Arbiter for the holding of the certification election was granted. While the pre-election conference was in progress, petitioner herein BESAS filed with Us
with petition for certiorari with Prohibition and simultaneously filed with the Med-Arbiter a motion to suspend the pre-election conference. The petition filed before Us was dismissed for lack of merit but was
reconsidered upon Motion of petitioner. In its Motion for Reconsideration, petitioner raised the following grounds:
THE INSTANT PETITION PRESENTS QUESTIONS OF LAW AND SUBSTANCE TO MERIT THE CONSIDERATION OF THIS HONORABLE COURT.
II
THE QUESTIONED DECISION OF THE RESPONDENT DIRECTOR WAS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE AND THE SAME IS PURELY BASED ON SPECULATIONS,
SURMISES AND CONJECTURES.
III
THE QUESTIONED DECISION OF THE RESPONDENT DIRECTOR IS CONTRARY TO LAW AND APPLICABLE DECI SIONS OF THE SUPREME COURT ON THE MATTER.
IV
THE PETITION FOR CERTIFICATION ELECTION FILED BY RESPONDENT UNION WITH THE MINISTRY OF LABOR AND EMPLOYMENT FAILED TO COMPLY WITH THE MANDATORY
REQUIREMENTS UNDER ARTICLE 258 OF THE LABOR CODE, AS AMENDED, AND ITS IMPLEMENTING RULES.
THE RESPONDENT DIRECTOR ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DECIDING THAT THERE EXISTS AN EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN THE PETITIONER AND THE SHOESHINER-MEMBERS OF THE RESPONDENT UNION,
VI
THE RESPONDENT DIRECTOR ACTED WITHOUT JURISDICTION IN TAKING COGNIZANCE OF THE BASIC PETITION CONSIDERING THAT THE SUBJECT MATTER AND THE PARTIES
THEREOF HAVE BEEN DECIDED BY THE DEFUNCT COURT OF INDUSTRIAL RELATIONS AND IS THEREFORE BABRED BY THE PRINCIPLE OF RES ADJUDICATA.
The main thrust of the instant petition is the question of employer-employee relationship between petitioner BESAS and 17 of the members of the herein respondent Union who are designated as shoeshiners.
During the certification election held on Nov. 26, 1985 at BESAS of the 53 eligible voters, 49 cast their votes. 33 voted for the union while 16 voted for no union. Among the 33 voters who opted for a union 17
persons are shoeshiners while 16 persons are non-shoeshiners.
The question of employer-employee relationship became a primodial consideration in resolving whether or not the subject shoeshiners have the juridical personality and standing to present a petition for
certification election as well as to vote i therein. It is the position of petitioner that if the shoeshiners are not considered as employees of Besa's the basic petition for certification election must necessarily be
dismissed for failure to comply with the mandatory requirements of the Labor Code, as amended, that at least thirty (30%) percent of the employees must support the petition for certification election and that in
order to be certified as the sole and exclusive bargaining agent, the union must be obtained a majority of the valid votes cast by eligible voters. In the instant case, if the 17 shoeshiners are declared ineligible and
their votes are consequently nullified the result of the certification election would be 16 "Yes" votes (33 minus 17) and 16 "No" votes, which is a tie. Since the respondent union did not obtain a clear majority for the
"Yes" votes as required under Rule IV Sec. 8(f) of the Omnibus Rules of the Labor Code, it necessarily follows that the respondent union cannot be certified as the sole and exclusive bargaining agent of the
workers of Besa's.
The present petition merits Our consideration. The records of the case reveal that an employer-employee relationship does not exist between the 17 shoeshiners and petitioner.
Be it noted that the defunct CIR in dismissing the cases for unfair labor practice filed by the shoeshiners against herein petitioner BESA declared in its Decision dated December 21, 1965 that:
The shoe shiner is distinct from a piece worker because while the latter is paid for work accomplished, he does not, however, contribute anything to the capital of the employer other than his
service. It is the employer of the piece worker who pays his wages, while the shoe shiner in this instance is paid directly by his customer. The piece worker is paid for work accomplished without
regard or concern to the profit as derived by his employer, but in the case of the shoe shiners, the proceeds derived from the trade are always divided share and share alike with respondent
BESA. The shoe shiner can take his share of the proceeds everyday if he wanted to or weekly as is the practice of qqqBesas The employer of the piece worker supervises and controls his work,
but in the case of the shoe shiner, respondent BESA does not exercise any degree of control or supervision over their person and their work. All these are not obtaining in the case of a piece
worker as he is in fact an employee in contemplation of law, distinct from the shoe shiner in this instance who, in relation to respondent MAMERTO B. BESA, is a partner in the trade.
Consequently, employer-employee relationship between members of the Petitioning union and respondent MAMERTO B. BESA being absent the latter could not be held guilty of the unfair tabor
practice acts imputed against him. (p. 6, Annex "B1 " of said Decision).
<re||an1w>
Then too on Dec. 27, 1983, then Director Augusto Sanchez of the Bureau of Working Conditions, MOLE, in response to a letter of petitioner relative to the implementation of wage Order No. 2 which provided for
an increase both in minimum wage and cost of living allowance, opined as follows:
Entitlement of the minimum requirements of the law particularly on wages and allowances presupposes the existence of employer-employee relationship which is determined by the concurrence
of the following conditions:
1. right to hire
2. payment of wages
3. right to fire; and
4. control and supervision
The most important condition to be considered is the exercise of control and supervision over the employees, per our conversation, the persons concerned under your query are the shoe shiners
and based on the decision rendered by Associate Judge Emiliano Tabigne of the defunct Court of Industrial Relations, these shoe shiners are not employees of the company, but are partners
instead. This is due to the fact that the owner/manager does not exercise control and supervision over the shoe shiners. That the shiners have their own customers from whom they charge the fee
and divide the proceeds equally with the owner, which make the owner categorized them as on purely commission basis. The attendant circumstances clearly show that there is no employer-
employee relationship existing, and such the owner/manager is not by law, under obligation to extend to those on purely commission basis the benefit of Wage Order No. 2. However, the law does
not preclude the employer in giving such benefit to all its employees including those which may not be covered by the mandate of the law.
(Letter dated December 27, 1985 addressed to petitioner Annex B-2, Petition)
The Office of the Solicitor General as counsel for public respondent agrees that in the present case, no employer-employee relationship exists.
The Supreme Court in the Rosario Brothers case ruled that;
A basic factor underlying the exercise of rights under the Labor Code is the status of employment. It is important in the determination of who shall be included in a proposed bargaining unit
because it is sine qua non. The fundamental and essential condition that a bargaining unit be composed of employees. Failure to establish this juridical relationship between the union members
and the employer affects the legality of the union itself. It means the ineligibility of the union members to present a petition for certification election as well as to vote therein.
Existence of employer-employee relationship is determined by the following elements, namely, a] selection and engagement of the employee; b] payment of wages; c] powers of dismissal; and d]
power to control the employee's conduct although the latter is the most important element (Rosario Brothers Inc, vs. Ople, 131 SCRA 72, 1984)
WHEREFORE, judgment is hereby rendered giving due course to the Petition and declaring VOID the decision of the Director of the Bureau of Labor Relations dated September 27, 1985. The Petition in BLR
Case No. A-8-165-85 (NCR-LRD-M1-044-85) is therefore hereby DISMISSED.
SO ORDERED.
Feria (Chairman), Fernan, Alampay, Gutierrez, Jr., JJ., concur.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 118892 March 11, 1998
FILIPINAS BROADCASTING NETWORK, INC.,

vs.
NATIONAL LABOR RELATIONS COMMISSION and SIMEON MAPA JR., respondents.
PANGANIBAN, J.:
As a rule, factual findings of the NLRC are binding on this Court. However, when the findings of the NLRC and the labor arbiter are contradictory, this Court may review questions of fact. Where the evidence clearly shows the absence of an
employer-employee relationship, a claim for unpaid wages, thirteenth month pay, holiday and rest pay and other employment benefits must necessarily fail.
The Case
in Case No. 05-08-00348-92, entitled "Simeon M.

Mapa Jr., v. DZRC Radio Station." The dispositive portion of the challenged Decision reads:
Before us is a petition for certiorari assailing the April 29, 1994 Decision of the National Labor Relations Commission, 1
WHEREFORE, premises considered, the appealed decision is set aside, and a new judgement is entered, declaring that complainant is an employee of respondent and is entitled to his claims for the payment
of his services from March 11, 1990 to January 16, 1992. 2
Petitioner also impugns the November 9, 1994 Resolution 3
The October 13, 1993 decision of the labor arbiter, 4
of the NLRC denying the motion for reconsideration.
which the NLRC reversed and set aside, disposed as follows:
This Arbitration Branch, based on the facts and circumstances established by the parties in this case is inclined to believe that complainant Simeon M. Mapa, Jr., had not been an employee of the respondent
He was but a volunteer reporter when accommodated to air his

report on the respondent radio station as his application for employment with the
respondent as field reporter had not been accepted yet or approved before
February, 1992. There was no employer-employee relations that existed between
the complainant and the respondent since March 11, 1990 until February 16, 1992.
The complainant is not entitled to his claim for any salaries, premium pay for
holiday and rest day, holiday pay and 13th month pay against the respondent
DZRC Radio Station/Salvio Fortuno.
DZRC Radio Station before February 16, 1992. 5
WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered dismissing the complaint in this case for lack of merit. 6
The Facts
Version of Private Respondent
Petitioner and private respondent submitted different versions of the facts. The facts as viewed by private respondent are as follows: 7
The complainant (herein private respondent) began to work for the respondent as a radio reporter starting March 11, 1990. On May 14, 1990, upon being informed by then respondent's Station Manager, Mr.
Plaridel Brocales, that complainant's employment with respondent is being blocked by Ms. Brenda Bayona of DZGB, complainant's previous employer, the said complainant took a leave of absence. In the first
week of June, 1990, the respondent thru Mr. Antonio Llarena, then an employee of the respondent, asked the complainant to return to work even as he was assured that his salaries will be paid to him already.
Thus, the complainant continued to work for the respondent since then. On September 5, 1991, again the complainant took a leave of absence because of his desperation over the failure of respondent to
make good its promise of payment of salaries. He was reinstated on January 16, 1992 and resigned on February 27, 1992 when he decided to run for an elective office in the town of Daraga, Albay.
Unfortunately, the respondent paid salary to the complainant only for the period from January 16, 1992 up to February 27, 1992. Respondent did not pay the complainant for all the services rendered by the
latter from March 11, 1990 up to January 16, 1992.
As may be gleaned from its memorandum, 8
petitioner's version of the facts is as follows:
1. On or before April 1990, Mapa was dismissed from his employment with PBN-DZGB Legaspi. At this time, Mapa filed a case for illegal dismissal against PBN-DZGB Legaspi docketed as RAV V Case No. 0504-00120-90 entitled "Simeon Mapa, Jr. v. People's Broadcasting Network-DZGB Legaspi, Jorge Bayona and Arturo Osia";
2. On or about May 1990, Mapa sought employment from DZRC as a radio reporter. However, DZRC required of private respondent the submission of a clearance from his former employer. Otherwise, his
application would not be acted upon;
3. On May 14, 1990, Mapa was informed by DZRC's then station manager, Mr. Plaridel "Larry" Brocales, that his application for employment was "being blocked by Ms. Brenda Bayona of DZGB, Mapa's former
employer." This fact is supported by Mapa's position paper before the Honorable Labor Arbiter . . . ;
4. Taking pity on Mapa and pending the issuance of the clearance from PBN-DZGB Legaspi, Mr. Larry Brocales granted the request of Mapa to be accommodated only as a volunteer reporter of DZRC on a parttime basis. As a volunteer reporter, Mapa was not to be paid wages as an employee of DZRC but he was permitted to find sponsors whose business establishments will be advertised every time he goes on the
air. Most importantly, Mapa's only work consisted of occasional newsbits or on-the-spot reporting of incidents or newsworthy occurrences, which was very seldom.
5. Mapa's friends, who were also in the same situation as he was, declared in an affidavit dated June 10, 1993 that:
WE, ALLAN ALMARIO and ELMER ANONUEVO, of legal age, single, with postal address at Washington Drive, Legaspi City, under oath, depose and state:
1. We personally know Simeon "Jun" Mapa, a former volunteer reporter at DZRC just like us;
2. As volunteer reporters we know that we will not receive any salary or allowance from DZRC because our work was purely voluntary;
3. As incentive for us, the management of DZRC allowed us to get our own sponsors whose business establishment we mention[ed] every after field report was made by us;
4. The management did not require or oblige us to render a report. We were on our own. We ma[d]e or render[ed] a report as we [saw] fit;
5. During our stint as volunteer reporters we had several sponsors each who paid us P300.00 per month (each).
xxx xxx xxx
6. Having no radio gadgets to begin with, DZRC loaned Mapa the necessary equipment such as handheld radios and reporting gadgets. Mapa was to do occasional reporting only, i.e., a few minutes each day
at an irregular time period at Mapa's own convenience. Mapa advertised his sponsors and pocketed the payment of these sponsors for his advertising services. In addition, DZRC had no control over the
manner by [sic] which he was to make his reports. Nor were the said reports subject to editing by DZRC;
7. In an Affidavit dated June 10, 1993 executed by one of Mapa's sponsors, the same reads as follows:
I, CARLITO V. BAYLON, of legal age, married, resident of Dona Maria Subdivision, Daraga, Albay, under oath, depose and state:
1. I am a lawyer by profession. At the same time, I am owner of "Kusina ni Manoy" a restaurant situated in Daraga, Albay;
2. I personally know Simeon "Jun" Mapa. Sometime in May, 1990 he went to me and asked if I could be one of his sponsors because he was accommodated by DZRC as volunteer reporter. He explained to me
that, he will not be receiving any salary from DZRC[;] hence, he was soliciting my support;
3. Taking pity on him, I agreed to be one of his sponsors. The condition was, I will have to pay him P300.00/month. In exchange thereto, he will have to mention the name of my restaurant every time he renders
a report on the air;
4. My sponsorship lasted for about (5) months after which I discontinued it when I rarely heard Jun Mapa in DZRC program.
xxx xxx xxx
8. On November 7, 1990, in his testimony against his former employer, Mapa declared under oath, to wit:
ATTY. LOBRIGO:
On paragraph 14 of the same affidavit it states and I quote: 13. Having been left with an empty stomach, I was compelled to apply for employment with another radio station. On March 11, 1990, I applied for
employment with DZRC. Unfortunately, my application would not yet be acted [upon] favorably because of the malicious and oppressive imputations to me by my former employer.
My question is what is now the status of your employment with DZRC?
WITNESS:
I am at present on a volunteer status because my former employer at DZGB did not give me clearance and I am required to submit that clearance to DZRC. (Emphasis supplied).
See p. 2 of Position Paper of DZRC before the Labor Arbiter and pp. 4-5 of the Transcript of Stenographer Notes dated November 7, 1990, attached and marked as Annex "F" and Annex "F-1 ", Petition
for Certiorari;
9. It cannot be overstressed that Mapa's application for employment could not have been acted upon because of the lack of the pre-requisite clearance.
10. Lacking in sponsors, Mapa soon failed to provide petitioner with newsbits, finding it unprofitable to continue since he had no available sources of funding. Sometime in September 1991, Mapa quit his parttime endeavor with DZRC, as attested to by the Office of Supervisor/Traffic Manager Ignacio Casi in an Affidavit dated June 10, 1992, to wit:
1. I am the Office Supervisor/Traffic Manager of DZRC-AM;
2. Sometime in May, 1990 Simeon "Jun" Mapa went to my office inside our radio station. He asked me if he could be accommodated as Radio Reporter of DZRC, as he was dismissed from DZGB. I referred him
to Larry Brocales, our Station Manager then;
3. Larry Brocales told Jun Mapa that he cannot be accommodated because he has no clearance from DZGB. Jun Mapa, almost teary eyed, pleaded to Larry Brocales that he be accommodated as volunteer
reporter, that is, he will not receive any salary but that he intimated that he be allowed to look for sponsors whose business establishment, for a fee, will have to be mentioned after every report is made. Larry
Brocales took pity on Jun Mapa and accommodated him;
4. Jun Mapa, just like the other volunteer reporters, was not obliged to render field reports, at a particular time and in a particular program. They render report as they wish or see fit;
5. The management (DZRC) does not collect anything from the sponsors of Jun Mapa. They (sponsors) pay directly to him;.
6. Being the Office Supervisor, I know for a fact that Jun Mapa seldom renders report on the air. He has no assigned program either. He was on and off the air, so to speak;
7. Finally, some time in September, 1991, Jun Mapa told me that he is quitting already because his sponsors were no longer paying him of his monthly contract with them. (Emphasis supplied).
(See Annex "G", Petition for Certiorari);
11. Subsequently, Mapa sent a letter dated October 7, 1991 to Ms. Diana C. Gozum, General Manager of petitioner FBN. In the said letter, Mapa wrote and admitted that:
I am [sic] Mr. Simeon Mapa, Jr. respectfully request your good office to reconsider my previous application submitted last March 1990 as a reporter of DZRC AM.
May I inform you that since the submission of such application I worked until September 6, 1991 for free of services [sic]. Hoping that I'll be given the chance to be recognized as a regular reporter.
With this, I respectfully wish to follow up my application for recognition.
May I also inform you that the case I have with my previous job with the other company has commenced.
Attached herewith is my resume.
I am once again submitting myself for an interview with your office at a time convenient to you.
Thank you.
(See Annex "H", Petition for Certiorari);
12. Reacting to the letter mentioned in the immediately preceding paragraph, DZRC favorably acted upon the application of Mapa and accepted him as a radio reporter on January 16, 1992;
13. On February 27, 1992, Mapa resigned as a radio reporter in order to run for an elective office in the May 1992 elections and was paid all his salaries and benefits for the period of his employment
commencing from January 16, 1992 until February 27, 1992;
14. Having no work to do and no employment in sight, Mapa filed a complaint against FBN-DZRC on August 1992, claiming the payment of salaries, premium pay, holiday pay as well as 13th month pay for the
period 28 February 1990 until January 16, 1992;
On October 13, 1993, Labor Arbiter Emeterio Ranola dismissed the complaint for lack of merit, finding that no employer-employee relationship existed between Mapa and DZRC during the period March 11, 1990 to February 16, 1992. 9
Findings of the NLRC
In holding that there was an employer-employee relationship, the NLRC set aside the labor arbiter's findings:
In his appeal, complainant insists that there was an employer-employee relationship between him and the respondent. In support of his contention, he cites the payroll for February 16 to 29, 1992, the ID card
issued to him as employee and regular reporter by the respondent: [sic] the program schedules of DZRC showing the regular program of the station indicating his name: [sic] the affidavit of Antonio Llarena,
program supervisor of DZRC, stating that he [was] a regular reporter under his supervision and the list of reporting gadgets issued to regular reporter.
The existence of employer employee relationship is determined by the following elements, namely: 1) selection and engagement of the employee; 2) the payment of wages; 3) the power of dismissal; and 4) the
power to control employees' conduct although the latter is the most important element. (Rosario Brothers, Inc. vs. Ople, 131 SCRA 72)
Considering the totality of the evidence adduced by the parties, we are of the opinion that the complainant is a regular reporter of the respondent. Firstly, the work of the complainant is being supervised by
the program supervisor of the respondent; secondly, the complainant uses the reporting gadgets of the respondent. Thirdly, he has no reporting gadgets of his own; Fourthly, the program schedule is
prepared by the respondent; and Lastly, he was paid salary for the period from February 16 to 29, 1992 and covered under the Social Security System. There is no showing in the record that his work from
February 16, 1992 was different from his work before said period. 10
The NLRC subsequently denied petitioner's motion for reconsideration 11
on November 9, 1994. Hence, this petition.

12
13
Issue
Petitioner alleges that Public Respondent NLRC committed grave abuse of discretion as follows:
14
. . . in declaring Mapa as an employee of petitioner before January 16, 1992. The test of an employer-employee relationship was erroneously applied to the facts of this case.
II
. . . in disregarding significant facts which clearly and convincingly show that the private respondent was not an employee of the petitioner before 16 January 1992.
In the main, the issue in this case is whether private respondent was an employee of petitioner for the period March 11, 1990 to January 15, 1992.
The Court's Ruling
The petition is meritorious.
Main Issue:
Private Respondent Was Not an Employee
During the Period in Controversy
As a rule, the NLRC's findings are accorded great respect, even finality, by this Court. This rule, however, is not without qualification. This Court held Jimenez v. NLRC 15
As a rule, this Court does not

review supposed errors in the decision of the NLRC which raise factual issues,
because factual findings of agencies exercising quasi-judicial functions are
accorded not only respect but even finality, aside from the consideration that the
Court is essentially not a trier of facts. However, in the case at bar, a review of the
records thereof with an assessment of the facts is necessary since the factual
findings of the NLRC and the labor arbiter are at odds with each other.
The review of labor cases elevated to us on certiorari is confined to questions of jurisdiction or grave abuse of discretion.
16
17
Worse, the facts alleged by the private

respondent and relied upon by the public respondent do not prove an employer-employee
relationship. In this light, we will review and overrule the findings of the NLRC.
In the present case, a review of the factual findings of the public respondent is in order, for said findings differ from those of the labor arbiter. 18
19
The following are generally considered in the determination of the existence of an employer-employee relationship: (1) the manner of selection and engagement, (2) the payment of wages, (3) the presence or absence of the power of dismissal, and
(4) the presence or absence of the power of control; of these four, the last one is the most important. 20
Engagement and Payment of Wages
Let us consider the circumstances of the private respondent's engagement in DZRC before January 16, 1992. Petitioner did not act on his application for employment as a radio reporter because private respondent admittedly failed to present a
clearance from his former employer. Nevertheless, private respondent "volunteered" his services, knowing that he would not be paid wages, and that he had to rely on financial sponsorships of business establishments that would be advertised in
his reports. In other words, private respondent willingly acted as a volunteer reporter, fully cognizant that he was not an employee and that he would not receive any compensation directly from the petitioner, but only from his own advertising
sponsors.
The nature of private respondent's engagement is evident from the affidavit of Allan Almario and Elmer Anonuevo who served under identical circumstances. The two affirmed the following:
1. We personally know Simeon "Jun" Mapa, a volunteer reporter at DZRC just like us;
2. As volunteer reporters we know [sic] that we will not receive any salary or allowance from DZRC because our work was purely voluntary;
3. As incentive for us, the management of DZRC allowed us to get our own sponsors whose business establishments we mention every after [sic] field report was made by us;
xxx xxx xxx
4. During our stint as volunteer reporters we had several sponsors each who paid us P300.00 per month. 21
The above statement is corroborated by Carlito Baylon, one of private respondent's advertising sponsors. In his affidavit dated June 10, 1993, he averred:
2. I personally know Simeon "Jun" Mapa.
Sometime in May, 1990 he went to me and asked if I could be one of his sponsors because he was accommodated by DZRC as volunteer reporter. He explained to me that, he will not be receiving any salary
from DZRC[,] hence, he was soliciting my support;
3. Taking pity on him, I agreed to be one of his sponsors. The condition was, I will have to pay him P300.00/month. In exchange thereto, he will have to mention the name of my restaurant everytime he renders
a report on the air;
4. My sponsorship lasted for about five (5) months after which I discontinued it when I rarely heard Jun Mapa in DZRC program.
22
Indeed, private respondent himself admitted that he worked under the said circumstances. The bio-data sheet signed by Mapa himself, in which he acknowledged that he was not an employee, states in part:
Work experiences:
DWGW Reporter/Newscaster 1970-1980
DZGB Reporter 1983-1990
DZRC Reporter 1990-1991
for free not recognized due to no appointment. 23
(Emphasis supplied.)
In his letter dated October 7, 1991, which he sent to the general manager of Filipinas Broadcasting Network (owner of DZRC), Mapa again acknowledged in the following words that he was not an employee:
I am [sic] Mr. Simeon Mapa, Jr. respectfully request your good office to reconsider my previous application submitted last March 1990 as a reporter of DZRC AM.
May I inform you that since the submission of such application I worked until September 6, 1991 for free of services [sic]. Hoping that I'll be given the chance to be recognized as a regular reporter.
With this, I respectfully wish to follow up my application for recognition. [Emphasis supplied.]
There is no indication that these two admissions were made under duress. Indeed, private respondent himself did not dispute their voluntariness or veracity. It is clear that he rendered services knowing that he was not an employee. Aware that he
would not be paid wages, he described himself as a "volunteer reporter" who was, as evident from his letter, hoping for "the chance to be recognized as a regular reporter." In fact, petitioner acted favorably on this letter and accepted his
application as an employee effective on January 16, 1992.
Power of Dismissal
Likewise, the evidence on record shows that petitioner did not exercise the power to dismiss private respondent during the period in question. In September 1991, Private Respondent Mapa ceased acting as a volunteer reporter, not because he
was fired, but because he stopped sending his reports. Ignacio Casi, Office Supervisor of DZRC, declared in his affidavit that Mapa told him that "he [was] quitting already because his sponsors were no longer paying him of [sic] his monthly
contract with them." Mapa did not controvert this statement. In fact, his aforesaid letter of October 17, 1991 expressed his hope of being "given the chance to be recognized as a regular reporter." Private respondent's attitude in said letter is
inconsistent with the notion that he had been dismissed.
Mapa Was Not Subject

to Control of Petitioner
The most crucial test the control test demonstrates all too clearly the absence of an employer-employee relationship. No one at the DZRC had the power to regulate or control private respondents' activities or inputs. Unlike the regular
reporters, he was not subject to any supervision by petitioner or its officials. Regular reporters "are required by the petitioner to adhere to a program schedule which delineates the time when they are to render their reports, as well as the topic to
be reported upon. The substance of their reports are [sic] oftentimes screened by the station prior to [their] actual airing. In contrast, volunteer reporters are never given such a program schedule but are merely advised to inform the station of the
reports they would make from time to time." 24
Indeed, DZRC, the petitioner's radio station, exercised no editorial rights over his reports. He had no fixed day or time for making his reports; in fact, he was not required to report anything at all. Whether he would air anything depended entirely
on him and his convenience.
The absence of petitioner's control over private respondent is manifest from the sworn statement of the traffic manager of petitioner, Ignacio Casi, who deposed in part:
xxx xxx xxx
4. Jun Mapa, just like the other volunteer reporters, was not obliged to render field reports, at a particular time and in a particular program. They render report as they wish or see fit;
5. The management (DZRC) does not collect anything from the sponsors of Jun Mapa. They (sponsors) pay directly to him;
6. Being the Office Supervisor, I Know for a fact that Jun Mapa seldom renders report on the air. He has no assigned program either. He was on and off the air, so to speak;
7. Finally, some time in September, 1991, Jun Mapa told me that he is quitting already because his sponsors were no longer paying him of his monthly contract with them.
we reiterated that there could be no employer-employee relationship where

"the element of control is absent; where a person who works for another does so more or less at
his own pleasure and is not subject to definite hours or conditions of work[;] and in turn is
compensated according to the result of his efforts and not the, amount thereof, we should not find
that the relationship of employer-employee exists." In the present case, private respondent
worked at his "own pleasure and [was] not subject to definite hours or conditions of work."
In Encyclopedia Britannica (Philippines) Inc., v. NLRC, 25
"Evidence" Found by NLRC Not Applicable
holding that there was an employer-employee relationship, the NLRC relied on the
following:
In its two-page 26
(1) the payroll for February 16 to 29, 1992,
(2) the ID card issued to him as employee and regular reporter by the respondent,
(3) the program schedules of DZRC showing the regular program of the station indicating his name:
(4) the affidavit of Antonio Llarena, program supervisor of DZRC, stating that he [was] under his supervision, and
(5) the list of reporting gadgets issued to regular reporter.
Other than the items enumerated above, no other document was considered by the NLRC. In other words, its conclusion was based solely on these alleged pieces of evidence. It dearly committed grave abuse of discretion in its factual findings,
because all the above documents relate to the period January 16, 1992 to February 28, 1992 and not to the period March 11, 1990 to January 15, 1992 which are the inclusive dates in controversy.
from February 16, 1992 to February 27, 1992 does not demonstrate that private respondent
was an employee prior to said period. Lest it be forgotten, the question in this case pertains to the
status of private respondent from March 11, 1990 to January 15, 1992. The said payroll may prove
that private respondent was an employee during said days in February 1992, but not for the period
which is the subject of the present controversy.
The payroll 27
Furthermore, neither the identification cards nor the SSS number printed at the back thereof indicate the date of issuance. Likewise, the SSS number does not show that he was a member during the period in controversy; much less, that he
became so by reason of his employment with petitioner.
which allegedly showed the regular program of the station and indicated the
name of private respondent as an employee. The document is a mere photocopy of a typewritten
schedule. There is absolutely no indicium of its authenticity. Moreover, it is undated; hence, it
does not indicate whether such schedule pertained to the period in dispute, that is, March 11, 1990
to January 15, 1992. Worse, the heading thereof was entitled "Radio DZRC
Programming Proposal. [emphasis supplied]" A proposal is "put forth merely for consideration
and acceptance." It cannot, by itself, prove that such program was implemented and that private
respondent acted as an employee of petitioner.
Similarly inapplicable is the program schedule 28
29
Neither does the list of returned gadgets support the conclusion of the NLRC. It must be stressed that such gadgets were essential to enable the private respondent to access the specific radio frequency and facilities of the radio station. Being
exclusive properties of the radio station, such, gadgets could not have been purchased, as they were not commercially available. In any event, the list of returned gadgets was dated February 27, 1992 again, a date not in controversy. Such
document, by itself, does not prove that private respondent was an employee from March 20, 1990 to January 15, 1992.
, an employee of DZRC, stating that the private respondent was under his
supervision, is vague, even misleading; it declared merely that Llarena was "in charge" of said
respondent. Such language could not be construed to mean that he exercised supervision and
control over private respondent.
The affidavit of Antonio Llarena 30
Indubitably the NLRC based its findings of employer-employee relationship from the circumstances attendant when the private respondent was already a regular employee. Uncontroverted is the statement that the private respondent was a
regular employee from January 16, 1992 to February 28, 1992, for which period he received all employee benefits. But such period, it must be stressed again, is not covered by private respondent's complaint.
In sum, the evidence, which Public Respondent NLRC, relies upon, does not justify the reversal of the labor arbiter's ruling which, in turn, we find amply supported by the records. Clearly, private respondent was not an employee during the period
in question.
WHEREFORE, the petition is hereby GRANTED and the assailed Decision and Resolution are hereby SET ASIDE. The Order of the Labor Arbiter dated October 13, 1993 dismissing the case for lack of merit is hereby REINSTATED. No costs.
SO ORDERED.
David, Jr., Bellosillo, Vitug and Quisumbing, JJ., concur.

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FIRST DIVISION

[G.R. No. 110017. January 2, 1997]

RODOLFO FUENTES, RAINERIO DURON, JULIET VISTAL, ELENA

ANDRES INDIABLE, ARSENIO DURON, NARCISA MALASPINA,

Petitioners, numbering seventy-five (75) in all, seek to set aside the

Indeed, private respondents failed to prove their claim of business

6.Allado, Nestor Jr.

18.Penaloga, Jose Jr.

Republic of the Philippines

G.R. No. 110518 August 1, 1994

Samson S. Alcantara for petitioners.

Vidal Corpus & Associates for private respondent.

A motion for reconsideration filed by the petitioners on

These losses were directly caused by the

Davide, Jr., Quiason and Kapunan, JJ., concur.

Bellosillo, J., on official leave.

Republic of the Philippines

G.R. No. L-48926 December 14, 1987

MANUEL SOSITO, petitioner,

The facts are as follows:

On July 20, 1976, the private respondent, through

July 20, 1976

Memorandum To: ALL EMPLOYEES

Re: RETRENCHMENT PROGRAM

For additional information

and/or resignation forms,

please see Mr. Vic Maceda

or Atty. Ben Aritao. 6

Teehankee, C.J., Narvasa, Paras and Gancayco, JJ., concur.

Republic of the Philippines

G.R. No. L-53515 February 8, 1989

SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner,

Lorenzo F. Miravite for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

In its order of February 28, 1980, the Minister of Labor found:

The dispositive part of the Minister's Order reads:

The petition has no merit.

WHEREFORE, the petition for certiorari is dismissed for lack of merit.

Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

Republic of the Philippines

G.R. No. 89920 October 18, 1990

UNIVERSITY OF STO. TOMAS, petitioner,

Abad, Leao & Associates for petitioner.

Eduardo J. Mario, Jr. for private respondent.

GUTIERREZ, JR., J.:

e) Eduardo Marino, Jr.

The petitioner assigns the following errors:

G.R. No. 146650

January 13, 2003

DOLE PHILIPPINES, INC., petitioner,

The antecedents are as follows:

Thus, the instant petition.

The CBA for 14 January 1990 to 13 January 1995 likewise provided:

The Court finds logic in private respondents interpretation.

We do not think so.

WHEREFORE, petition is hereby denied.

Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Carpio-Morales, JJ., concur.

Feliciano, J., is on leave.

Republic of the Philippines

G.R. No. 92009 February 17, 1993

Carlos L. Galarrita for private respondent.

Consequently, on April 8, 1987, MILU filed a notice of strike (Rollo,

Mr. Elieze Hao

Master Iron Works & Construction Corp.