G.R. No.
L-48645 January 7, 1987 On their part, respondents moved for the dismissal of the complaint on the
"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES,
ANTONIO CASBADILLO, PROSPERO TABLADA, ERNESTO BENGSON,
PATRICIO SERRANO, ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO
PARINAS, NORBERTO GALANG, JUANITO NAVARRO, NESTORIO
MARCELLANA, TEOFILO B. CACATIAN, RUFO L. EGUIA, CARLOS SUMOYAN,
LAMBERTO RONQUILLO, ANGELITO AMANCIO, DANILO B. MATIAR, ET
AL., petitioners,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL
AFFAIRS, OFFICE OF THE PRESIDENT, HON. AMADO G. INCIONG,
UNDERSECRETARY OF LABOR, SAN MIGUEL CORPORATION, GENARO
OLIVES, ENRIQUE CAMAHORT, FEDERICO OÑATE, ERNESTO VILLANUEVA,
ANTONIO BOCALING and GODOFREDO CUETO, respondents.
GUTIERREZ, JR., J.:
The elemental question in labor law of whether or not an employer-
employee relationship exists between petitioners-members of the
"Brotherhood Labor Unit Movement of the Philippines" (BLUM) and
respondent San Miguel Corporation, is the main issue in this petition. The
disputed decision of public respondent Ronaldo Zamora, Presidential
Assistant for legal Affairs, contains a brief summary of the facts involved:
1. The records disclose that on July 11, 1969, BLUM filed a complaint with
the now defunct Court of Industrial Relations, charging San Miguel
Corporation, and the following officers: Enrique Camahort, Federico Ofiate
Feliciano Arceo, Melencio Eugenia Jr., Ernesto Villanueva, Antonio Bocaling
and Godofredo Cueto of unfair labor practice as set forth in Section 4 (a),
sub-sections (1) and (4) of Republic Act No. 875 and of Legal dismissal. It
was alleged that respondents ordered the individual complainants to
disaffiliate from the complainant union; and that management dismissed
the individual complainants when they insisted on their union membership.
grounds that the complainants are not and have never been employees of
respondent company but employees of the independent contractor; that
respondent company has never had control over the means and methods
followed by the independent contractor who enjoyed full authority to hire
and control said employees; and that the individual complainants are barred
by estoppel from asserting that they are employees of respondent company.
While pending with the Court of Industrial Relations CIR pleadings and
testimonial and documentary evidences were duly presented, although the
actual hearing was delayed by several postponements. The dispute was
taken over by the National Labor Relations Commission (NLRC) with the
decreed abolition of the CIR and the hearing of the case intransferably
commenced on September 8, 1975.
On February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants
which was concurred in by the NLRC in a decision dated June 28, 1976. The
amount of backwages awarded, however, was reduced by NLRC to the
equivalent of one (1) year salary.
On appeal, the Secretary in a decision dated June 1, 1977, set aside the
NLRC ruling, stressing the absence of an employer-mployee relationship as
borne out by the records of the case. ...
The petitioners strongly argue that there exists an employer-employee
relationship between them and the respondent company and that they
were dismissed for unionism, an act constituting unfair labor practice "for
which respondents must be made to answer."
Unrebutted evidence and testimony on record establish that the petitioners
are workers who have been employed at the San Miguel Parola Glass
Factory since 1961, averaging about seven (7) years of service at the time of
their termination. They worked as "cargadores" or "pahinante" at the SMC
Plant loading, unloading, piling or palleting empty bottles and woosen shells
to and from company trucks and warehouses. At times, they accompanied
the company trucks on their delivery routes.
The petitioners first reported for work to Superintendent-in-Charge
Camahort. They were issued gate passes signed by Camahort and were
provided by the respondent company with the tools, equipment and
paraphernalia used in the loading, unloading, piling and hauling operation.
Job orders emanated from Camahort. The orders are then transmitted to an
assistant-officer-in-charge. In turn, the assistant informs the warehousemen
and checkers regarding the same. The latter, thereafter, relays said orders to
the capatazes or group leaders who then give orders to the workers as to
where, when and what to load, unload, pile, pallet or clean.
Work in the glass factory was neither regular nor continuous, depending
wholly on the volume of bottles manufactured to be loaded and unloaded,
as well as the business activity of the company. Work did not necessarily
mean a full eight (8) hour day for the petitioners. However, work,at times,
exceeded the eight (8) hour day and necessitated work on Sundays and
holidays. For this, they were neither paid overtime nor compensation for
work on Sundays and holidays.
Petitioners were paid every ten (10) days on a piece rate basis, that is,
according to the number of cartons and wooden shells they were able to
load, unload, or pile. The group leader notes down the number or volume of
work that each individual worker has accomplished. This is then made the
basis of a report or statement which is compared with the notes of the
checker and warehousemen as to whether or not they tally. Final approval
of report is by officer-in-charge Camahort. The pay check is given to the
group leaders for encashment, distribution, and payment to the petitioners
in accordance with payrolls prepared by said leaders. From the total
earnings of the group, the group leader gets a participation or share of ten
(10%) percent plus an additional amount from the earnings of each
individual.
The petitioners worked exclusive at the SMC plant, never having been
assigned to other companies or departments of SMC plant, even when the
volume of work was at its minimum. When any of the glass furnaces
suffered a breakdown, making a shutdown necessary, the petitioners work
was temporarily suspended. Thereafter, the petitioners would return to
work at the glass plant.
Sometime in January, 1969, the petitioner workers — numbering one
hundred and forty (140) organized and affiliated themselves with the
petitioner union and engaged in union activities. Believing themselves
entitled to overtime and holiday pay, the petitioners pressed management,
airing other grievances such as being paid below the minimum wage law,
inhuman treatment, being forced to borrow at usurious rates of interest and
to buy raffle tickets, coerced by withholding their salaries, and salary
deductions made without their consent. However, their gripes and
grievances were not heeded by the respondents.
On February 6, 1969, the petitioner union filed a notice of strike with the
Bureau of Labor Relations in connection with the dismissal of some of its
members who were allegedly castigated for their union membership and
warned that should they persist in continuing with their union activities they
would be dismissed from their jobs. Several conciliation conferences were
scheduled in order to thresh out their differences, On February 12, 1969,
union member Rogelio Dipad was dismissed from work. At the scheduled
conference on February 19, 1969, the complainant union through its officers
headed by National President Artemio Portugal Sr., presented a letter to the
respondent company containing proposals and/or labor demands together
with a request for recognition and collective bargaining.
San Miguel refused to bargain with the petitioner union alleging that the
workers are not their employees.
On February 20, 1969, all the petitioners were dismissed from their jobs
and, thereafter, denied entrance to respondent company's glass factory
despite their regularly reporting for work. A complaint for illegal dismissal
and unfair labor practice was filed by the petitioners.
The case reaches us now with the same issues to be resolved as when it had
begun.
The question of whether an employer-employee relationship exists in a
certain situation continues to bedevil the courts. Some businessmen try to
avoid the bringing about of an employer-employee relationship in their
enterprises because that judicial relation spawns obligations connected with
workmen's compensation, social security, medicare, minimum wage,
termination pay, and unionism. (Mafinco Trading Corporation v. Ople, 70
SCRA 139).
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; (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.
It. is the called "control test" that is the most important element
(Investment Planning Corp. of the Phils. v. The Social Security System, 21
SCRA 924; Mafinco Trading Corp. v. Ople, supra,and Rosario Brothers, Inc. v.
Ople, 131 SCRA 72).
Applying the above criteria, the evidence strongly indicates the existence of
an employer-employee relationship between petitioner workers and
respondent San Miguel Corporation. The respondent asserts that the
petitioners are employees of the Guaranteed Labor Contractor, an
independent labor contracting firm.
The facts and evidence on record negate respondent SMC's claim.
The existence of an independent contractor relationship is generally
established by the following criteria: "whether or not the contractor is
carrying on an independent business; the nature and extent of the work; the
skill required; the term and duration of the relationship; the right to assign
the performance of a specified piece of work; the control and supervision of
the work to another; the employer's power with respect to the hiring, firing
and payment of the contractor's workers; the control of the premises; the
duty to supply the premises tools, appliances, materials and labor; and the
mode, manner and terms of payment" (56 CJS Master and Servant, Sec. 3(2),
46; See also 27 AM. Jur. Independent Contractor, Sec. 5, 485 and Annex 75
ALR 7260727)
None of the above criteria exists in the case at bar.
Highly unusual and suspect is the absence of a written contract to specify
the performance of a specified piece of work, the nature and extent of the
work and the term and duration of the relationship. The records fail to show
that a large commercial outfit, such as the San Miguel Corporation, entered
into mere oral agreements of employment or labor contracting where the
same would involve considerable expenses and dealings with a large
number of workers over a long period of time. Despite respondent
company's allegations not an iota of evidence was offered to prove the same
or its particulars. Such failure makes respondent SMC's stand subject to
serious doubts.
Uncontroverted is the fact that for an average of seven (7) years, each of the
petitioners had worked continuously and exclusively for the respondent
company's shipping and warehousing department. Considering the length of
time that the petitioners have worked with the respondent company, there
is justification to conclude that they were engaged to perform activities
necessary or desirable in the usual business or trade of the respondent, and
the petitioners are, therefore regular employees (Phil. Fishing Boat Officers
and Engineers Union v. Court of Industrial Relations, 112 SCRA 159 and RJL
Martinez Fishing Corporation v. National Labor Relations Commission, 127
SCRA 454).
As we have found in RJL Martinez Fishing Corporation v. National Labor
Relations Commission (supra):
... [T]he employer-employee relationship between the parties herein is not
coterminous with each loading and unloading job. As earlier shown,
respondents are engaged in the business of fishing. For this purpose, they
have a fleet of fishing vessels. Under this situation, respondents' activity of
catching fish is a continuous process and could hardly be considered as
seasonal in nature. So that the activities performed by herein complainants,
i.e. unloading the catch of tuna fish from respondents' vessels and then
loading the same to refrigerated vans, are necessary or desirable in the
business of respondents. This circumstance makes the employment of
complainants a regular one, in the sense that it does not depend on any
specific project or seasonable activity. (NLRC Decision, p. 94,
Rollo).lwphl@itç
so as it with petitioners in the case at bar. In fact, despite past shutdowns of
the glass plant for repairs, the petitioners, thereafter, promptly returned to
their jobs, never having been replaced, or assigned elsewhere until the
present controversy arose. The term of the petitioners' employment appears
indefinite. The continuity and habituality of petitioners' work bolsters their
claim of employee status vis-a-vis respondent company,
Even under the assumption that a contract of employment had indeed been
executed between respondent SMC and the alleged labor contractor,
respondent's case will, nevertheless, fail.
Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code
provides:
Job contracting. — There is job contracting permissible under the Code if the
following conditions are met:
(1) The contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to
his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the
work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are
necessary in the conduct of his business.
We find that Guaranteed and Reliable Labor contractors have neither
substantial capital nor investment to qualify as an independent contractor
under the law. The premises, tools, equipment and paraphernalia used by
the petitioners in their jobs are admittedly all supplied by respondent
company. It is only the manpower or labor force which the alleged
contractors supply, suggesting the existence of a "labor only" contracting
scheme prohibited by law (Article 106, 109 of the Labor Code; Section 9(b),
Rule VIII, Book III, Implementing Rules and Regulations of the Labor Code).
In fact, even the alleged contractor's office, which consists of a space at
respondent company's warehouse, table, chair, typewriter and cabinet, are
provided for by respondent SMC. It is therefore clear that the alleged
contractors have no capital outlay involved in the conduct of its business, in
the maintenance thereof or in the payment of its workers' salaries.
The payment of the workers' wages is a critical factor in determining the
actuality of an employer-employee relationship whether between
respondent company and petitioners or between the alleged independent
contractor and petitioners. It is important to emphasize that in a truly
independent contractor-contractee relationship, the fees are paid directly to
the manpower agency in lump sum without indicating or implying that the
basis of such lump sum is the salary per worker multiplied by the number of
workers assigned to the company. This is the rule inSocial Security System v.
Court of Appeals (39 SCRA 629, 635).
The alleged independent contractors in the case at bar were paid a lump
sum representing only the salaries the workers were entitled to, arrived at
by adding the salaries of each worker which depend on the volume of work
they. had accomplished individually. These are based on payrolls, reports or
statements prepared by the workers' group leader, warehousemen and
checkers, where they note down the number of cartons, wooden shells and
bottles each worker was able to load, unload, pile or pallet and see whether
they tally. The amount paid by respondent company to the alleged
independent contractor considers no business expenses or capital outlay of
the latter. Nor is the profit or gain of the alleged contractor in the conduct of
its business provided for as an amount over and above the workers' wages.
Instead, the alleged contractor receives a percentage from the total earnings
of all the workers plus an additional amount corresponding to a percentage
of the earnings of each individual worker, which, perhaps, accounts for the
petitioners' charge of unauthorized deductions from their salaries by the
respondents.
Anent the argument that the petitioners are not employees as they worked
on piece basis, we merely have to cite our rulings in Dy Keh Beng v.
International Labor and Marine Union of the Philippines (90 SCRA 161), as
follows:
"[C]ircumstances must be construed to determine indeed if payment by the
piece is just a method of compensation and does not define the essence of
the relation. Units of time . . . and units of work are in establishments like
respondent (sic) just yardsticks whereby to determine rate of compensation,
to be applied whenever agreed upon. We cannot construe payment by the
piece where work is done in such an establishment so as to put the worker
completely at liberty to turn him out and take in another at pleasure."
Article 106 of the Labor Code provides the legal effect of a labor only
contracting scheme, to wit:
... the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.
Firmly establishing respondent SMC's role as employer is the control
exercised by it over the petitioners that is, control in the means and
methods/manner by which petitioners are to go about their work, as well as
in disciplinary measures imposed by it.
Because of the nature of the petitioners' work as cargadores or pahinantes,
supervision as to the means and manner of performing the same is
practically nil. For, how many ways are there to load and unload bottles and
wooden shells? The mere concern of both respondent SMC and the alleged
contractor is that the job of having the bottles and wooden shells brought to
and from the warehouse be done. More evident and pronounced is
respondent company's right to control in the discipline of petitioners.
Documentary evidence presented by the petitioners establish respondent
SMC's right to impose disciplinary measures for violations or infractions of
its rules and regulations as well as its right to recommend transfers and
dismissals of the piece workers. The inter-office memoranda submitted in
evidence prove the company's control over the petitioners. That respondent
SMC has the power to recommend penalties or dismissal of the piece
workers, even as to Abner Bungay who is alleged by SMC to be a
representative of the alleged labor contractor, is the strongest indication of
respondent company's right of control over the petitioners as direct
employer. There is no evidence to show that the alleged labor contractor
had such right of control or much less had been there to supervise or deal
with the petitioners.
The petitioners were dismissed allegedly because of the shutdown of the
glass manufacturing plant. Respondent company would have us believe that
this was a case of retrenchment due to the closure or cessation of
operations of the establishment or undertaking. But such is not the case
here. The respondent's shutdown was merely temporary, one of its furnaces
needing repair. Operations continued after such repairs, but the petitioners
had already been refused entry to the premises and dismissed from
respondent's service. New workers manned their positions. It is apparent
that the closure of respondent's warehouse was merely a ploy to get rid of
the petitioners, who were then agitating the respondent company for
benefits, reforms and collective bargaining as a union. There is no showing
that petitioners had been remiss in their obligations and inefficient in their
jobs to warrant their separation.
As to the charge of unfair labor practice because of SMC's refusal to bargain
with the petitioners, it is clear that the respondent company had an existing
collective bargaining agreement with the IBM union which is the recognized
collective bargaining representative at the respondent's glass plant.
There being a recognized bargaining representative of all employees at the
company's glass plant, the petitioners cannot merely form a union and
demand bargaining. The Labor Code provides the proper procedure for the
recognition of unions as sole bargaining representatives. This must be
followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The
San Miguel Corporation is hereby ordered to REINSTATE petitioners, with
three (3) years backwages. However, where reinstatement is no longer
possible, the respondent SMC is ordered to pay the petitioners separation
pay equivalent to one (1) month pay for every year of service.

SO ORDERED.

G.R. No. 87700 June 13, 1990

SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, DANIEL S.L.

BORBON II, HERMINIA REYES, MARCELA PURIFICACION, ET
AL., petitioners,
vs.
HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS PRESIDING JUDGE OF
BRANCH 166, RTC, PASIG, and SAN MIGUEL CORPORATION, respondents.
Romeo C. Lagman for petitioners.
Jardeleza, Sobrevinas, Diaz, Mayudini & Bodegon for respondents.
MELENCIO-HERRERA, J.:
Respondent Judge of the Regional Trial Court of Pasig, Branch 166, is taken
to task by petitioners in this special civil action for certiorari and Prohibition
for having issued the challenged Writ of Preliminary Injunction on 29 March
1989 in Civil Case No. 57055 of his Court entitled "San Miguel Corporation
vs. SMCEU-PTGWO, et als."
Petitioners' plea is that said Writ was issued without or in excess of
jurisdiction and with grave abuse of discretion, a labor dispute being
involved. Private respondent San Miguel Corporation (SanMig. for short), for
its part, defends the Writ on the ground of absence of any employer-
employee relationship between it and the contractual workers employed by
the companies Lipercon Services, Inc. (Lipercon) and D'Rite Service
Enterprises (D'Rite), besides the fact that the Union is bereft of personality
to represent said workers for purposes of collective bargaining. The Solicitor
General agrees with the position of SanMig.
The antecedents of the controversy reveal that:
Sometime in 1983 and 1984, SanMig entered into contracts for
merchandising services with Lipercon and D'Rite (Annexes K and I, SanMig's
Comment, respectively). These companies are independent contractors duly
licensed by the Department of Labor and Employment (DOLE). SanMig
entered into those contracts to maintain its competitive position and in
keeping with the imperatives of efficiency, business expansion and diversity
of its operation. In said contracts, it was expressly understood and agreed
that the workers employed by the contractors were to be paid by the latter
and that none of them were to be deemed employees or agents of SanMig.
There was to be no employer-employee relation between the contractors
and/or its workers, on the one hand, and SanMig on the other.
Petitioner San Miguel Corporation Employees Union-PTWGO (the Union, for
brevity) is the duly authorized representative of the monthly paid rank-and-
file employees of SanMig with whom the latter executed a Collective
Bargaining Agreement (CBA) effective 1 July 1986 to 30 June 1989 (Annex A,
SanMig's Comment). Section 1 of their CBA specifically provides that
"temporary, probationary, or contract employees and workers are excluded
from the bargaining unit and, therefore, outside the scope of this
Agreement."
In a letter, dated 20 November 1988 (Annex C, Petition), the Union advised
SanMig that some Lipercon and D'Rite workers had signed up for union
membership and sought the regularization of their employment with SMC.
The Union alleged that this group of employees, while appearing to be
contractual workers supposedly independent contractors, have been
continuously working for SanMig for a period ranging from six (6) months to
fifteen (15) years and that their work is neither casual nor seasonal as they
are performing work or activities necessary or desirable in the usual
business or trade of SanMig. Thus, it was contended that there exists a
"labor-only" contracting situation. It was then demanded that the
employment status of these workers be regularized.
On 12 January 1989 on the ground that it had failed to receive any favorable
response from SanMig, the Union filed a notice of strike for unfair labor
practice, CBA violations, and union busting (Annex D, Petition).
On 30 January 1989, the Union again filed a second notice of strike for unfair
labor practice (Annex F, Petition).
As in the first notice of strike. Conciliatory meetings were held on the second
notice. Subsequently, the two (2) notices of strike were consolidated and
several conciliation conferences were held to settle the dispute before the
National Conciliation and Mediation Board (NCMB) of DOLE (Annex G,
Petition).
Beginning 14 February 1989 until 2 March 1989, series of pickets were
staged by Lipercon and D'Rite workers in various SMC plants and offices.
On 6 March 1989, SMC filed a verified Complaint for Injunction and
Damages before respondent Court to enjoin the Union from:
a. representing and/or acting for and in behalf of the employees of
LIPERCON and/or D'RITE for the purposes of collective bargaining;
b. calling for and holding a strike vote, to compel plaintiff to hire the
employees or workers of LIPERCON and D'RITE;
c. inciting, instigating and/or inducing the employees or workers of
LIPERCON and D'RITE to demonstrate and/or picket at the plants and offices
of plaintiff within the bargaining unit referred to in the CBA,...;
d. staging a strike to compel plaintiff to hire the employees or workers of
LIPERCON and D'RITE;
e. using the employees or workers of LIPERCON AND D'RITE to man the
strike area and/or picket lines and/or barricades which the defendants may
set up at the plants and offices of plaintiff within the bargaining unit referred
to in the CBA ...;
f. intimidating, threatening with bodily harm and/or molesting the other
employees and/or contract workers of plaintiff, as well as those persons
lawfully transacting business with plaintiff at the work places within the
bargaining unit referred to in the CBA, ..., to compel plaintiff to hire the
employees or workers of LIPERCON and D'RITE;
g. blocking, preventing, prohibiting, obstructing and/or impeding the free
ingress to, and egress from, the work places within the bargaining unit
referred to in the CBA .., to compel plaintiff to hire the employees or
workers of LIPERCON and D'RITE;
h. preventing and/or disrupting the peaceful and normal operation of
plaintiff at the work places within the bargaining unit referred to in the CBA,
Annex 'C' hereof, to compel plaintiff to hire the employees or workers of
LIPERCON and D'RITE. (Annex H, Petition)
Respondent Court found the Complaint sufficient in form and substance and
issued a Temporary Restraining Order for the purpose of maintaining
the status quo, and set the application for Injunction for hearing.
In the meantime, on 13 March 1989, the Union filed a Motion to Dismiss
SanMig's Complaint on the ground of lack of jurisdiction over the
case/nature of the action, which motion was opposed by SanMig. That
Motion was denied by respondent Judge in an Order dated 11 April 1989.
After several hearings on SanMig's application for injunctive relief, where
the parties presented both testimonial and documentary evidence on 25
March 1989, respondent Court issued the questioned Order (Annex A,
Petition) granting the application and enjoining the Union from Committing
the acts complained of, supra. Accordingly, on 29 March 1989, respondent
Court issued the corresponding Writ of Preliminary Injunction after SanMig
had posted the required bond of P100,000.00 to answer for whatever
damages petitioners may sustain by reason thereof.
In issuing the Injunction, respondent Court rationalized:
The absence of employer-employee relationship negates the existence of
labor dispute. Verily, this court has jurisdiction to take cognizance of
plaintiff's grievance.
The evidence so far presented indicates that plaintiff has contracts for
services with Lipercon and D'Rite. The application and contract for
employment of the defendants' witnesses are either with Lipercon or D'Rite.
What could be discerned is that there is no employer-employee relationship
between plaintiff and the contractual workers employed by Lipercon and
D'Rite. This, however, does not mean that a final determination regarding
the question of the existence of employer-employee relationship has
already been made. To finally resolve this dispute, the court must
extensively consider and delve into the manner of selection and
engagement of the putative employee; the mode of payment of wages; the
presence or absence of a power of dismissal; and the Presence or absence
of a power to control the putative employee's conduct. This necessitates a
full-blown trial. If the acts complained of are not restrained, plaintiff would,
undoubtedly, suffer irreparable damages. Upon the other hand, a writ of
injunction does not necessarily expose defendants to irreparable damages.
Evidently, plaintiff has established its right to the relief demanded. (p. 21,
Rollo)
Anchored on grave abuse of discretion, petitioners are now before us
seeking nullification of the challenged Writ. On 24 April 1989, we issued a
Temporary Restraining Order enjoining the implementation of the Injunction
issued by respondent Court. The Union construed this to mean that "we can
now strike," which it superimposed on the Order and widely circulated to
entice the Union membership to go on strike. Upon being apprised thereof,
in a Resolution of 24 May 1989, we required the parties to "RESTORE
the status quo ante declaration of strike" (p. 2,62 Rollo).
In the meantime, however, or on 2 May 1989, the Union went on strike.
Apparently, some of the contractual workers of Lipercon and D'Rite had
been laid off. The strike adversely affected thirteen (13) of the latter's plants
and offices.
On 3 May 1989, the National Conciliation and Mediation Board (NCMB)
called the parties to conciliation. The Union stated that it would lift the
strike if the thirty (30) Lipercon and D'Rite employees were recalled, and
discussion on their other demands, such as wage distortion and
appointment of coordinators, were made. Effected eventually was a
Memorandum of Agreement between SanMig and the Union that "without
prejudice to the outcome of G.R. No. 87700 (this case) and Civil Case No.
57055 (the case below), the laid-off individuals ... shall be recalled effective
8 May 1989 to their former jobs or equivalent positions under the same
terms and conditions prior to "lay-off" (Annex 15, SanMig Comment). In
turn, the Union would immediately lift the pickets and return to work.
After an exchange of pleadings, this Court, on 12 October 1989, gave due
course to the Petition and required the parties to submit their memoranda
simultaneously, the last of which was filed on 9 January 1990.
The focal issue for determination is whether or not respondent Court
correctly assumed jurisdiction over the present controversy and properly
issued the Writ of Preliminary Injunction to the resolution of that question,
is the matter of whether, or not the case at bar involves, or is in connection
with, or relates to a labor dispute. An affirmative answer would bring the
case within the original and exclusive jurisdiction of labor tribunals to the
exclusion of the regular Courts.
Petitioners take the position that 'it is beyond dispute that the controversy in
the court a quo involves or arose out of a labor dispute and is directly
connected or interwoven with the cases pending with the NCMB-DOLE, and
is thus beyond the ambit of the public respondent's jurisdiction. That the
acts complained of (i.e., the mass concerted action of picketing and the
reliefs prayed for by the private respondent) are within the competence of
labor tribunals, is beyond question" (pp. 6-7, Petitioners' Memo).
On the other hand, SanMig denies the existence of any employer-employee
relationship and consequently of any labor dispute between itself and the
Union. SanMig submits, in particular, that "respondent Court is vested with
jurisdiction and judicial competence to enjoin the specific type of strike
staged by petitioner union and its officers herein complained of," for the
reasons that:
A. The exclusive bargaining representative of an employer unit cannot strike
to compel the employer to hire and thereby create an employment
relationship with contractual workers, especially were the contractual
workers were recognized by the union, under the governing collective
bargaining agreement, as excluded from, and therefore strangers to, the
bargaining unit.
B. A strike is a coercive economic weapon granted the bargaining
representative only in the event of a deadlock in a labor dispute over
'wages, hours of work and all other and of the employment' of the
employees in the unit. The union leaders cannot instigate a strike to compel
the employer, especially on the eve of certification elections, to hire
strangers or workers outside the unit, in the hope the latter will help re-elect
them.
C. Civil courts have the jurisdiction to enjoin the above because this specie
of strike does not arise out of a labor dispute, is an abuse of right, and
violates the employer's constitutional liberty to hire or not to hire. (SanMig's
Memorandum, pp. 475-476, Rollo).
We find the Petition of a meritorious character.
A "labor dispute" as defined in Article 212 (1) of the Labor Code includes
"any controversy or matter concerning terms and conditions of employment
or the association or representation of persons in negotiating, fixing,
maintaining, changing, or arranging the terms and conditions of
employment, regardless of whether the disputants stand in the proximate
relation of employer and employee."
While it is SanMig's submission that no employer-employee relationship
exists between itself, on the one hand, and the contractual workers of
Lipercon and D'Rite on the other, a labor dispute can nevertheless exist
"regardless of whether the disputants stand in the proximate relationship of
employer and employee" (Article 212 [1], Labor Code, supra) provided the
controversy concerns, among others, the terms and conditions of
employment or a "change" or "arrangement" thereof (ibid). Put differently,
and as defined by law, the existence of a labor dispute is not negative by the
fact that the plaintiffs and defendants do not stand in the proximate relation
of employer and employee.
That a labor dispute, as defined by the law, does exist herein is evident. At
bottom, what the Union seeks is to regularize the status of the employees
contracted by Lipercon and D'Rite in effect, that they be absorbed into the
working unit of SanMig. This matter definitely dwells on the working
relationship between said employees vis-a-vis SanMig. Terms, tenure and
conditions of their employment and the arrangement of those terms are
thus involved bringing the matter within the purview of a labor dispute.
Further, the Union also seeks to represent those workers, who have signed
up for Union membership, for the purpose of collective bargaining. SanMig,
for its part, resists that Union demand on the ground that there is no
employer-employee relationship between it and those workers and because
the demand violates the terms of their CBA. Obvious then is that
representation and association, for the purpose of negotiating the
conditions of employment are also involved. In fact, the injunction sought by
SanMig was precisely also to prevent such representation. Again, the matter
of representation falls within the scope of a labor dispute. Neither can it be
denied that the controversy below is directly connected with the labor
dispute already taken cognizance of by the NCMB-DOLE (NCMB-NCR- NS-01-
021-89; NCMB NCR NS-01-093-83).
Whether or not the Union demands are valid; whether or not SanMig's
contracts with Lipercon and D'Rite constitute "labor-only" contracting and,
therefore, a regular employer-employee relationship may, in fact, be said to
exist; whether or not the Union can lawfully represent the workers of
Lipercon and D'Rite in their demands against SanMig in the light of the
existing CBA; whether or not the notice of strike was valid and the strike
itself legal when it was allegedly instigated to compel the employer to hire
strangers outside the working unit; — those are issues the resolution of
which call for the application of labor laws, and SanMig's cause's of action in
the Court below are inextricably linked with those issues.
The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April 1965, 13
SCRA 738) relied upon by SanMig is not controlling as in that case there was
no controversy over terms, tenure or conditions, of employment or the
representation of employees that called for the application of labor laws. In
that case, what the petitioning union demanded was not a change in
working terms and conditions, or the representation of the employees, but
that its members be hired as stevedores in the place of the members of a
rival union, which petitioners wanted discharged notwithstanding the
existing contract of the arrastre company with the latter union. Hence, the
ruling therein, on the basis of those facts unique to that case, that such a
demand could hardly be considered a labor dispute.
As the case is indisputably linked with a labor dispute, jurisdiction belongs to
the labor tribunals. As explicitly provided for in Article 217 of the Labor
Code, prior to its amendment by R.A. No. 6715 on 21 March 1989, since the
suit below was instituted on 6 March 1989, Labor Arbiters have original and
exclusive jurisdiction to hear and decide the following cases involving all
workers including "1. unfair labor practice cases; 2. those that workers may
file involving wages, hours of work and other terms and conditions of
employment; ... and 5. cases arising from any violation of Article 265 of this
Code, including questions involving the legality of striker and lockouts. ..."
Article 217 lays down the plain command of the law.
WHEREFORE, the Writ of certiorari is GRANTED and the Orders of
respondent Judge of 25 March 1989 and 29 March 1989 are SET ASIDE. The
Writ of Prohibition is GRANTED and respondent Judge is enjoined from
taking any further action in Civil Case No. 57055 except for the purpose of
dismissing it. The status quo ante declaration of strike ordered by the Court
on 24 May 1989 shall be observed pending the proceedings in the National
Conciliation Mediation Board-Department of Labor and Employment,
docketed as NCMB-NCR-NS-01-02189 and NCMB-NCR-NS-01-093-83. No
costs.
SO ORDERED.

The claim of SanMig that the action below is for damages under Articles 19,
20 and 21 of the Civil Code would not suffice to keep the case within the
jurisdictional boundaries of regular Courts. That claim for damages is
interwoven with a labor dispute existing between the parties and would
have to be ventilated before the administrative machinery established for
the expeditious settlement of those disputes. To allow the action filed below
to prosper would bring about "split jurisdiction" which is obnoxious to the
orderly administration of justice (Philippine Communications, Electronics
and Electricity Workers Federation vs. Hon. Nolasco, L-24984, 29 July 1968,
24 SCRA 321).

We recognize the proprietary right of SanMig to exercise an inherent

management prerogative and its best business judgment to determine
whether it should contract out the performance of some of its work to
independent contractors. However, the rights of all workers to self-
organization, collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law (Section 3,
Article XIII, 1987 Constitution) equally call for recognition and protection.
Those contending interests must be placed in proper perspective and G.R. No. 87211 March 5, 1991
equilibrium.
JOVENCIO L. MAYOR petitioner,
vs.
HON. CATALINO MACARAIG, HON. GUILLERMO CARAGUE, HON. RIZALINA
CAJUCOM, HON. FRANKLIN DRILON, respondents. LOURDES A. SALES and
RICARDO OLAIREZ, petitioners-intervenors.
G.R. No. 90044 March 5, 1991
PASCUAL V. REYES, petitioner,
vs.
HON. FRANKLIN DRILON, respondent.
G.R. No. 91547 March 5, 1991
CEFERINO E. DULAY, ROSARIO G. ENCARNACION and DANIEL LUCAS,
JR., petitioners,
vs.
HON. CATALINO MACARAIG, JR., as Executive Secretary, HON. GUILLERMO
N. CARAGUE, as Secretary of Budget and Management, HON. DIONISIO DE
LA SERNA, as Acting Secretary of Labor & Employment, BARTOLOME
CARALE, VICENTE S.E. VELOSO III, ROMEO B. TUOMO, EDNA BONTO PEREZ,
DOMINGO H. ZAPANTA, RUSTICO L. DIOKNO, LOURDES C. JAVIER, IRINEO
B. BARNALDO, ROGELIO I. RAYALA, ERNESTO G. LADRINO III, IRENEA E.
CENIZA, BERNABE S. BATUHAN, MUSIB M. BUAT, L.B. GONZAGA, JR. and
OSCAR ABELLA, respondents.
G.R. No. 91730 March 5, 1991
CONRADO B. MAGLAYA, petitioner,
vs.
HON. CATALINO MACARAEG, HON. GUILLERMO CARAGUE, HON. RIZALINA
CAJOCUM, and the HONORABLE SECRETARY OF LABOR, respondents.
G.R. No. 94518 March 5, 1991
NARVASA, J.:p
Five (5) special civil actions are hereby jointly decided because they involve
one common, fundamental issue, the constitutionality of Republic Act No.
6715, effective March 21, 1989, in so far as it declares vacant "all positions
of the Commissioners, Executive Labor Arbiters and Labor Arbiters of the
National Labor Relations Commission," and operates to remove the
incumbents upon the appointment and qualification of their successors. The
law is entitled, "AN ACT TO EXTEND PROTECTION TO LABOR, STRENGTHEN
THE CONSTITUTIONAL RIGHTS OF WORKERS TO SELF-ORGANIZATION,
COLLECTIVE BARGAINING AND PEACEFUL CONCERTED ACTIVITIES, FOSTER
INDUSTRIAL PEACE AND HARMONY, PROMOTE THE PREFERENTIAL USE OF
VOLUNTARY MODES OF SETTLING LABOR DISPUTES AND RE-ORGANIZE THE
NATIONAL LABOR RELATIONS COMMISSION, AMENDING PRESIDENTIAL
DECREE NO. 441, AS AMENDED, OTHERWISE KNOWN AS THE LABOR CODE
OF THE PHILIPPINES, APPROPRIATING FUNDS THEREFOR AND FOR OTHER
PURPOSES." 1 The provision directly dealing with the reorganization of the
National Labor Relations Commission is Section 35. It reads as follows: 2
Sec. 35. Equity of the Incumbent. — Incumbent career officials and rank-and-
file employees of the National labor Relations Commission not otherwise
affected by the Act shall continue to hold office without need of
reappointment. However, consistent with the need to professionalize the
higher levels of officialdom invested with adjudicatory powers and
functions, and to upgrade their qualifications, ranks, and salaries or
emoluments, all positions of the Commissioners, Executive Labor Arbiters
and Labor Arbiters of the present National Labor Relations Commission are
hereby declared vacant. However, subject officials shall continue to
temporarily discharge their duties and functions until their successors shall
have been duly appointed and qualified.

ROLANDO D. GAMBITO, petitioner, The first of these five consolidated cases was filed by Labor Arbiter Jovencio
vs. Ll. Mayor on March 8, 1989. In the year that followed, eight other officers of
THE SECRETARY OF LABOR AND EMPLOYMENT and THE EXECUTIVE the Commission, as initiators of their own separate actions or as intervenors,
SECRETARY, respondents. joined Mayor in the attempt to invalidate the reorganization and to be
reinstated to their positions in the Government service.
G.R. No. 87211: Jovencio Mayor; and Intervenors Lourdes A. Sales and
Ricardo Olairez
Jovencio Ll. Mayor, a member of the Philippine Bar for fifteen (15) years, was
appointed Labor Arbiter in 1986 after he had, according to him, met the
prescribed qualifications and passed "a rigid screening process." Fearing that
he would be removed from office on account of the expected
reorganization, he filed in this Court the action now docketed as G.R. No.
87211. His fears proved groundless, however. He was in fact reappointed a
Labor Arbiter on March 8, 1990. Hence, as he himself says, the case became
moot as to him.
Like Mayor, both intervenors Lourdes A. Sales and Ricardo N. Olairez were
appointed Labor Arbiters in 1986, but unlike Mayor, were not among the
one hundred fifty-one (151) Labor Arbiters reappointed by the President on
March 8, 1990.
G.R. No. 90044; Pascual Y Reyes; and Intervenor Eugenio L Sagmit, Jr.
At the time of the effectivity of R.A. No. 6715, Pascual Y. Reyes was holding
the office of Executive Director of the National Labor Relations Commission
in virtue of an appointment extended to him on May 30, 1975. As specified
by Administrative Order No. 10 of the Secretary of Labor, dated July 14,
1975, the functions of his office were "to take charge of all administrative
matters of the Commission and to have direct supervision overall units and
personnel assigned to perform administrative tasks;" and Article 213 of the
Labor Code, as amended, declared that the "Executive Director, assisted by a
Deputy Executive Director, shall exercise the administrative functions of the
Commission." Reyes states that he has been "a public servant for 42 years,"
and "is about to retire at sixty-five (65)," in 1991.
The petitioner-in-intervention, Eugenio I. Sagmit, Jr., was Reyes' Deputy
Executive Director, appointed as such on October 27, 1987 after twenty-five
(25) years of government service.
Both Reyes and Sagmit were informed that they had been separated from
employment upon the effectivity of R.A. No. 6715, pursuant to a
Memorandum-Order issued by then Secretary of Labor Franklin Drilon on
August 17, 1989 to the effect that the offices of Executive Director and
Deputy Executive Director had been abolished by Section 35, in relation to
Section 5 of said Act, and "their functions transferred to the Chairman, aided
by the Executive Clerk.
Reyes moved for reconsideration on August 29, 1989, but when no action
was allegedly taken thereon, he instituted the action at bar, G.R. No. 90044.
Sagmit was afterwards granted leave to intervene in the action.
G.R. No. 91547: Ceferino Dulay, Rosario G. Encarnacion, and Daniel M. Lucas
Petitioners Rosario G. Encarnacion and Daniel M. Lucas, Jr. were appointed
National Labor Relations Commissioners on October 20, 1986, after the
Commission was reorganized pursuant to Executive Order No. 47 of
President Aquino. Later, or more precisely on November 19, 1986, Lucas was
designated Presiding Commissioner of the Commission's Second Division;
and Commissioner Ceferino E. Dulay was appointed Presiding Commissioner
of the Third Division.
Executive Order No. 252, issued by the President on July 25, 1987, amended
Article 215 of the Labor Code by providing that "the Commissioners
appointed under Executive Order No. 47 dated September 10, 1986 shall
hold office for a term of six (6) years . . . (but of those thus appointed) three
shall hold office for four (4) years, and three for two (2) years . . . without
prejudice to reappointment." Under Executive Order No. 252, the terms of
Encarnacion and Lucas would expire on October 23, 1992, and that of Dulay,
on December 18, 1992.
On November 18, 1989, R.A. No. 6715 being then already in effect, the
President extended to Encarnacion, Lucas and Dulay new appointments as
Commissioners of the NLRC despite the fact that, according to them, they
had not been served with notice of the termination of their services as
incumbent commissioners, and no vacancy existed in their positions. Their
new appointments were submitted to Congress, but since Congress
adjourned on December 22, 1989 without approving their appointments,
said appointments became functus officio.
No other appointments were thereafter extended to Encarnacion and Dulay.
Lucas was however offered the position of Assistant Regional Director by
Secretary Drilon and then by Acting Secretary Dionisio de la Serna (by letter
dated January 9, 1990 which referred to his appointment as such Assistant
Regional Director supposedly "issued by the President on November 8,
1989"). Lucas declined the offer, believing it imported a demotion.
They all pray that their removal be pronounced unconstitutional and void
and they be declared Commissioners lawfully in office, or, alternatively, that
they be paid all salaries, benefits and emoluments accruing to them for the
unexpired portions of their six-year terms and allowed to enjoy retirement
benefits under applicable laws (pursuant to R.A. 910 and the Resolution re
Judge Mario Ortiz, G. R. No. 78951, June 28, 1988).
Of the incumbent Commissioners as of the effectivity of R.A. 6715, six (6)
were reappointed, namely: (1) Hon. Edna Bonto Perez (as Presiding
Commissioner, Second Division NCR]), (2) Domingo H. Zapanta (Associate
Commissioner, Second Division), (3) Lourdes C. Javier (Presiding
Commissioner, Third Division [Luzon except NCR]), (4) Ernesto G. Ladrido III
(Presiding Commissioner, Fourth Division [Visayas]), (5) Musib M. Buat
(Presiding Commissioner, Fifth Division [Mindanao]), and (6) Oscar N. Abella
(Associate Commissioner, Fifth Division). Other members appointed to the
reorganized Commission were Vicente S.E. Veloso III, Romeo B. Putong,
Rustico L. Diokno, Ireneo B. Bernardo, Rogelio I. Rayala, Irenea E. Ceniza,
Bernabe S. Batuhan, and Leon G. Gonzaga, Jr. Appointed Chairman was Hon.
Bartolome Carale, quondam Dean of the College of Law of the University of
the Philippines.
G.R. No. 91730: Conrado Maglaya
Petitioner Conrado Maglaya alleges that he has been "a member of the
Philippine Bar for thirty-six (36) years of which 31 years . . . (had been)
devoted to public service, the last 24 years in the field of labor relations
law;" that he was appointed Labor Arbiter on May 30, 1975 and "was
retained in such position despite the reorganization under the Freedom
Constitution of 1986 . . . (and) later promoted to and appointed by the
President as Commissioner of the . . . (NLRC) First Division on October 23,
1986." He complains that he was effectively removed from his position as a
result of the designation of the full complement of Commissioners in and to
all Five Divisions of the NLRC by Administrative Order No. 161 dated
November 18, 1989, issued by Labor Secretary Drilon.
G.R. No. 94518: Rolando D. Gambito
Rolando Gambito passed the bar examinations in 1971, joined the
Government service in 1974, serving for sixteen years in the Department of
Health, and as Labor Arbiter in the Department of Labor and Employment
from October, 1986. He was not included in the list of newly appointed
Labor Arbiters released on March 8, 1990; and his attempt to obtain a
recosideration of his exclusion therefrom and bring about his reinstatement
as Labor Arbiter was unavailing.
The Basic Issue
A number of issues have been raised and ventilated by the petitioners in
their separate pleadings. They may all be reduced to one basic question,
relating to the constitutionality of the provisions of Republic Act No. 6715
DECLARING VACANT "all positions of the Commissioners, Executive Labor
Arbiters and Labor Arbiters of the present National Labor Relations
Commission," 3 according to which the public respondents —
1) considered as effectively separated from the service inter alia, all holders
of said positions at the time of the effectivity of said Republic Act No. 6715,
including the positions of Executive Director and Deputy Executive
Director of the Commission, and
2) consequently, thereafter caused the appointment of other persons to the
new positions specified in said statute: of Chairman Commissioners,
Executive Clerk, Deputy Executive Clerk, and Labor Arbiters of the
reorganized National Labor Relations Commission. The old positions were
declared vacant because, as the statute states, of "the need to
professionalize the higher levels of officialdom invested with adjudicatory
powers and functions, and to upgrade their qualifications, ranks, and
salaries or emoluments."
As everyone knows, security of tenure is a protected right under the
Constitution. The right is secured to all employees in privates as well as in
public employment. "No officer or employee in the civil service," the
Constitution declares, "shall be removed or suspended except for cause
provided by law." 4 There can scarcely be any doubt that each of the
petitioners — commissioner, administrative officer, or labor arbiter — falls
within the concept of an "officer or employee in the civil service" since the
civil service "embraces all branches, subdivisions, instrumentalities, and
agencies of the Government, including government—owned or controlled
corporations with original charters." 5 The Commissioners thus had the right
to remain of office until the expiration of the terms for which they had been
appointed, unless sooner removed "for cause provided by law." So, too, the
Executive Director and Deputy Executive Director, and the Labor Arbiters
had the right to retain their positions until the age of compulsory
retirement, unless sooner removed "for cause provided by law." None of
them could be deemed to be serving at the pleasure of the President.
Now, a recognized cause for several or termination of employment of a
Government officer or employee is the abolition by law of his office as a
result of reorganization carried out by reason of economy or to remove
redundancy of functions, or clear and explicit constitutional mandate for
such termination of employment. 6Abolition of an office is obviously not the
same as the declaration that that office is vacant. While it is undoubtedly a
prerogative of the legislature to abolish certain offices, it can not be
conceded the power to simply pronounce those offices vacant and thereby
effectively remove the occupants or holders thereof from the civil service.
Such an act would constitute, on its face, an infringement of the
constitutional guarantee of security of tenure, and will have to be struck
down on that account. It can not be justified by the professed "need to
professionalize the higher levels of officialdom invested with adjudicatory
powers and functions, and to upgrade their qualifications, ranks, and
salaries or emoluments."
The Constitution does not, of course, ordain the abolition of the petitioners'
positions of their removal from their offices; and there is no claim that the
petitioners' separation from the service is due to a cause other than RA
6715. The inquiry therefore should be whether or not RA 6715 has worked
such an abolition of the petitioners' offices, expressly or impliedly. This is the
only mode by which, under the circumstances, the petitioners' removal from
their positions may be defended and sustained.
It is immediately apparent that there is no express abolition in RA 6715 of
the petitioners' positions. So, justification must be sought, if at all, in an
implied abolition thereof; i.e., that resulting from an irreconcilable
inconsistency between the nature, duties and functions of the petitioners'
offices under the old rules and those corresponding thereof under the new
law. An examination of the relevant provisions of RA 6715, with a view to
discovering the changes thereby effected on the nature, composition,
powers, duties and functions of the Commission and the Commissioners,
the Executive Director, the Deputy Executive Director, and the labor Arbiters
under the prior legislation, fails to disclose such essential inconsistencies.
1. Amendments as Regards the NLRC and the Commissioners
First, as regards the National Labor Relations Commissioners.
A. Nature and Composition of the Commission, Generally
1. Prior to its amendment by RA 6715, Article 213 of the Labor Code
envisaged the NLRC as being an integral part of the Department of labor and
Employment. "There shall," it said, "be a National Labor Relations
Commissionin the Department of Labor and Employment . . . ." RA 6715
would appear to have made the Commission somewhat more autonomous.
Article 213 now declares that, "There shall be a National labor Relations
Commission which shall be attached to the Department of labor and
Employment for program coordination only . . . ."
2. Tripartite representation was to a certain extent restored in the
Commission. The same Section 213, as amended, now provides that the
Chairman and fourteen (14) members composing the NLRC shall be chosen
from the workers', employers' and the public sectors, as follows:
Five (5) members each shall be chosen from among the nominees of the
workers and employers organization, respectively. The Chairman and the
four (4) remaining members shall come from the public sector, with the
latter to be chosen from among the recommendees of the Secretary of
Labor and Employment.
However, once they assume office," the members nominated by the workers
and employers organizations shall divest themselves of any affiliations with
or interest in the federation or association to which they belong."
B. Allocation of Powers Between NLRC En Banc and its Divisions
Another amendment was made in respect of the allocation of powers and
functions between the Commission en banc, on the one hand, and its
divisions, on the other. Both under the old and the amended law, the
Commission was vested with rule-making and administrative authority, as
well as adjudicatory and other powers, functions and duties, and could
sit en banc or in divisions of three (3) members each. But whereas under the
old law, the cases to be decided en banc and those by a division were
determined by rules laid down by the Commission with the approval of
the ex officio, Chairman (the Secretary of labor) — said Commission, in other
words, then exerciseboth administrative and adjudicatory powers — the law
now, as amended by RA 6715, provides that —
1) the Commission "shall sit en banc only for purposes of promulgating rules
and regulations governing the hearing and disposition of cases before any of
its divisions and regional branches and formulating policies affecting its
administration and operations;" but
2) it "shall exercise its adjudicatory and all other powers, functions and
duties through its divisions."
C. Official Stations, and Appellate Jurisdiction over Fixed Territory
Other changes related to the official station of the Commission and its
divisions, and the territory over which the divisions could exercise exclusive
appellate jurisdiction.
1. Under the old law, the Commission en banc and its divisions had their
main office in Metropolitan Manila; and appeals could be taken to them
from decisions of Labor Arbiters regardless of the regional office whence the
case originated.
2. Under the law now, the First and Second Divisions have their official
station in Metropolitan Manila and "handle cases coming from the National
Capital Region;" the Third Division has its main office also in Metropolitan
Manila but would have appellate jurisdiction over "cases from other parts of
Luzon;" and the Fourth and Fifth Divisions have their main offices in Cebu
and Cagayan de Oro City, and exercise jurisdiction over cases "from the
Visayas and Mindanao," respectively; and the appellate authority of the
divisions is exclusive "within their respective territorial jurisdiction."
D. Qualifications and Tenure of Commissioners
Revisions were also made by RA 6715 with respect to the qualifications and
tenure of the National Labor Relations Commissioners.
Prescribed by the old law as qualifications for commissioners — appointed
for a term of six (6) years — were that they (a) by members of the Philippine
bar, and (b) have at least five years' experience in handling labor-
management relations. 7
RA 6715, on the other hand, requires (a) membership in the bar, (b)
engagement in the practice of law for at least 15 years, (c) at least five years'
experience or exposure in the field of labor-management relations, and (d)
preferably, residence in the region where the commissioner is to hold office.
The commissioners appointed shall hold office during good behavior until
they reach the age of sixty-five (65) years, unless they are sooner removed
for cause as provided by law or become incapacited to discharge the duties
of their office.
2. Amendments Regarding Executive Labor Arbiters and Labor Arbiters
A. Qualifications
The old provided for one hundred fifty (150) labor arbiters assigned to the
different regional offices or branches of the Department of Labor and
Employment (including sub-regional branches or provincial extension units),
each regional branch being headed by an Executive Labor Arbiter. RA 6715
does not specify any fixed number of labor arbiters, but simply provides that
there shall be as many labor arbiters as may be necessary for the effective
and efficient operation of the Commission.
The old law declared that Executive Labor Arbiters and Labor Arbiters should
be members of the Bar, with at least two (2) years experience in the field of
labor management relations. They were appointed by the President upon
recommendation of the Chairman, and were "subject to the Civil Service
Law, rules and regulations."
On the other hand, RA 6715 requires that the "Executive Labor Arbiters and
Labor Arbiters shall likewise be members of the Philippine Bar," but in
addition "must have been in the practice of law in the Philippines for at least
seven (7) years, with at least three (3) years experience or exposure in the
field of labor-management relations." For "purposes of reappointment,"
however, "incumbent Executive Labor Arbiters and Labor Arbiters who have
been engaged in the practice of law for at least five (5) years may be
considered as already qualified." They are appointed by the President, on
recommendation of the Secretary of Labor and Employment, and are
subject to the Civil Service Law, rules and regulations.
B. Exclusive Original Jurisdiction
Before the effectivity of RA 6715, the exclusive original jurisdiction of labor
arbiters comprehended the following cases involving all workers, whether
agricultural or non-agricultural:
(1) Unfair labor practice cases;
(2) Those that workers may file involving wages, hours of work and other
terms and conditions of employment;
(3) All money claims of workers, including those based on non-payment or
underpayment of wages, overtime compensation, separation pay and other
benefits provided by law or appropriate agreement, except claims for
employees' compensation, social security, medicare and maternity benefits;
(4) Cases involving household services; and
(5) Cases arising from any violation of Article 265 of this Code, including
questions involving the legality of strikes and lockouts.
Some changes were introduced by RA 6715, indicated by italics in the
enumeration which shortly follows. The exclusive, original jurisdiction of
Labor Arbiters now embraces the following involving all workers, whether
agricultural or non-agricultural:
(1) Unfair labor practice cases;
(2) Termination disputes;
(3) If accompanies with a claim for reinstatement, those cases that workers
may file involving wages, rates of pay, hours of work and other terms and
conditions of employment;
(4) Claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations;8
(5) Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts;
(6) Except claims for employees compensation, social security, medicare and
maternity benefits, all other claims arising from employer-employee
relations, including those of persons in domestic or household
service, involving an amount exceeding five thousand pesos (P5,000.00),
whether or not accompanies with a claim for reinstatement.
Now, as before, the Labor Arbiters are given thirty (30) calendar days after
the submission of the case by the parties to decide the case, without
extension, except that the present statute stresses that "even in the absence
of stenographic notes," the period to decide is still thirty days, without
extension.
Furthermore, RA 6715 provides that "Cases arising from the interpretation
or implementation of collective bargaining agreements and those arising
from the interpretation or enforcement of company personnel policies shall
be disposed of by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may be provided in said
agreements."
3. Amendments as Regards the Executive Director and Deputy Executive
Director
Prior to RA 6715, there was, as earlier stated, an Executive Director, assisted
by a Deputy Executive Director, who was charged with the "exercise (of) the
administrative functions of the Commission." 9 More particularly, his chief
functions were "to take charge of all administrative matters of the
Commission and to have direct supervision over all units and personnel
assigned to perform administrative tasks." 10 Although not so stated in the
law, in the performance of their functions, the Executive Director and the
Deputy Executive Director were obviously themselves subject to the
supervision and control of the head of office, the ex officio Chairman of the
National Labor Relations Commission (the Secretary of Labor), or the
Commission itself.
Under RA 6715, the Secretary of Labor is no longer ex officio Chairman of
the Commission. There has been created the office of Chairman, who "shall
have the administrative supervision over the Commission and its regional
branches and all its personnel, including the Executive Labor Arbiters and
Labor Arbiters." In this function, the law says, he shall be "aided by the
Executive Clerk of the Commission."
The Executive Clerk appears to be the officer who used to be known under
the old law as the Executive Director. The office of Executive Director is
nowhere mentioned in RA 6715. Said Executive Clerk is given the additional
responsibility of assisting the Commission en banc and the First Division, in
performing "such similar or equivalent functions and duties as are
discharged by the Clerk of Court . . . of the Court of Appeals." The position of
Deputy Executive Clerks have also been created whose main role is to assist
the other divisions of the Commission (the second, third, fourth and fifth)
"in the performance of such similar or equivalent functions and duties as are
discharged by the . . . Deputy Clerk(s) of the Court of Appeals."
Summing up —
1. Republic Act No. 6715 did not abolish the NLRC, or change its essential
character as a supervisory and adjudicatory body. Under said Act, as under
the former law, the NLRC continues to act collegially, whether it performs
administrative or rule-making functions or exercises appellate jurisdiction to
review decisions and final orders of the Labor Arbiters. The provisions
conferring a somewhat greater measure of autonomy; requiring that its
membership be drawn from tripartite sectors (workers, employees and the
public sector); changing the official stations of the Commission's divisions,
and even those prescribing higher or other qualifications for the positions of
Commissioner which, if at all, should operate only prospectively, not to
mention the fact that the petitioners (in G.R. No. 91547) have asserted
without dispute that they possess the new qualifications — none of these
can be said to work so essential or radical a revision of the nature, powers
and duties of the NLRC as to justify a conclusion that the Act in truth did not
merely declare vacant but actually abolished the offices of commissioners
and created others in their place.
2. Similar considerations yield the same conclusion as far as the positions of
Labor Arbiters are concerned, there being no essential inconsistency on that
score between Republic Act No. 6715 and the old law. The Labor Arbiters
continue to exercise the same basic power and function: the adjudication, in
the first instance, of certain classes of labor disputes. Their original and
exclusive jurisdiction remains substantially the same under both the old law
and the new. Again, their incumbents' constitutionally guaranteed security
of tenure cannot be defeated by the provision for higher or other
qualifications than were prescribed under the old law; said provision can
only operate prospectively and as to new appointees to positions regularly
vacated; and there is, besides, also no showing that the petitioning Arbiters
do not qualify under the new law.
3. The position titles of "Executive Clerk" and "Deputy Executive Clerk(s)"
provided for in RA 6715 are obviously not those of newly-created offices,
but new appellations or designations given to the existing positions of
Executive Director and Deputy Executive Director. There is no essential
change from the prescribed and basically administrative duties of these
positions and, at the same time, no mention in the Act of the former titles,
from which the logical conclusion is that what was intended was merely a
change in nomenclature, not an express or implied abolition. Neither does
the Act specify the qualifications for Executive Clerk and Deputy Executive
Clerks. There is no reason to suppose that these could be higher than those
for Executive Director and Deputy Executive Director, or that anything
inheres in these positions that would preclude their incumbents from being
named Executive Clerk and Deputy Executive Clerks.
WHEREFORE, the petitions are, as they must be, GRANTED , and the
following specific dispositions are hereby RENDERED:
No. 910 and this Court's Resolution in Ortiz vs. Commission on Elections, G.R.
No. 79857, 161 SCRA 812;
This disposition does not involve or apply to respondent Hon. Bartolome
Carale, who replaced the Secretary of Labor as ex officio Chairman of the
NLRC pursuant to RA 6715, none of the petitioners having been affected or
in any manner prejudiced by his appointment and incumbency as such;
2. In G.R. No. 90044, the removal of petitioner Pascual Y. Reyes and
petitioner-in-intervention Eugenio L. Sagmit, Jr. as NLRC Executive Director
and Deputy Executive Director, respectively, is likewise declared
unconstitutional and void, and they are ordered reinstated as Executive
Clerk and Deputy Executive Clerk, respectively, unless they opt for
retirement, in either case with full back salaries, emoluments and benefits
from the date of their removal to that of their reinstatement; and
3. In G.R. Nos. 87211, and 94518, petitioners-intervenors Lourdes A. Sales
and Ricardo Olairez and petitioner Rolando D. Gambito, having also been
illegally removed as Labor Arbiters, are ordered reinstated to said positions
with full back salaries, emoluments and benefits from the dates of their
removal up to the time they are reinstated.
No pronouncement as to costs.
SO ORDERED.

1. In G.R. No. 91547, and G.R. No. 91730, the removal of petitioners Rosario
G. Encarnacion, Daniel M. Lucas, Jr., Ceferino E. Dulay, and Conrado Maglaya
as Commissioners of the NLRC is ruled unconstitutional and void; however,
to avoid displacement of any of the incumbent Commissioners now serving,
it not appearing that any of them is unfit or has given cause for removal, and
conformably to the alternative prayer of the petitioners themselves, it is
ORDERED that said petitioners be paid all salaries, benefits and emoluments G.R. No. 91636 April 23, 1992
accruing to them for the unexpired portions of their six-year terms and
allowed to enjoy retirement benefits under applicable laws, pursuant to RA
PETER JOHN D. CALDERON, petitioner,
vs.
BARTOLOME CARALE, in his capacity as Chairman of the National Labor
Relations Commission, EDNA BONTO PEREZ, LOURDES C. JAVIER, ERNESTO
G. LADRIDO III, MUSIB M. BUAT, DOMINGO H. ZAPANTA, VICENTE S.E.
VELOSO III, IRENEO B. BERNARDO, IRENEA E. CENIZA, LEON G. GONZAGA,
JR., ROMEO B. PUTONG, ROGELIO I. RAYALA, RUSTICO L. DIOKNO,
BERNABE S. BATUHAN and OSCAR N. ABELLA, in their capacity as
Commissioners of the National Labor Relations Commission, and
GUILLERMO CARAGUE, in his capacity as Secretary of Budget and
Management, respondents.
PADILLA, J.:
Controversy is focused anew on Sec. 16, Art. VII of the 1987 Constitution
which provides:
Sec. 16. The President shall nominate and, with the consent of the
Commission on Appointments, appoint the heads of the executive
departments, ambassadors, other public ministers and consuls, or officers of
the armed forces from the rank of colonel or naval captain, and other
officers whose appointments are vested in him in this Constitution. He shall
also appoint all other officers of the Government whose appointments are
not otherwise provided for by law, and those whom he may be authorized
by law to appoint. The Congress may, by law, vest the appointment of other
officers lower in rank in the President alone, in the courts, or in the heads of
departments, agencies, commissions, or boards.
The President shall have the power to make appointments during the recess
of the Congress, whether voluntary or compulsory, but such appointments
shall be effective only until disapproval by the Commission on Appointments
or until the next adjournment of the Congress. 1
The power of the Commission on Appointments (CA for brevity) to confirm
appointments, contained in the aforequoted paragraph 1 of Sec. 16, Art. VII,
was first construed in Sarmiento III vs. Mison 2 as follows:
. . . it is evident that the position of Commissioner of the Bureau of Customs
(a bureau head) is not one of those within the first group of appointments
where the consent of the Commission on Appointments is required. As a
matter of fact, as already pointed out, while the 1935 Constitution includes
"heads of bureaus" among those officers whose appointments need the
consent of the Commission on Appointments, the 1987 Constitution, on the
other hand, deliberately excluded the position of "heads of bureaus" from
appointments that need the consent (confirmation) of the Commission on
Appointments.
. . . Consequently, we rule that the President of the Philippines acted within
her constitutional authority and power in appointing respondent Salvador
Mison, Commissioner of the Bureau of Customs, without submitting his
nomination to the Commission on Appointments for confirmation. . . .
. . . In the 1987 Constitution, however, as already pointed out, the clear and
expressed intent of its framers was to exclude presidential appointments
from confirmation by the Commission on Appointments, except
appointments to offices expressly mentioned in the first sentence of Sec. 16,
Art. VII. Consequently, there was no reason to use in the third sentence of
Sec. 16, Article VII the word "alone" after the word "President" in providing
that Congress may by law vest the appointment of lower-ranked officers in
the President alone, or in the courts, or in the heads of departments,
because the power to appoint officers whom he (the president) may be
authorized by law to appoint is already vested in the President, without
need of confirmation by the Commission on Appointments, in the second
sentence of the same Sec. 16, Article VII." (emphasis supplied)
Next came Mary Concepcion Bautista v. Salonga, 3 this time involving the
appointment of the Chairman of the Commission on Human Rights.
Adhering to the doctrine in Mison, the Court explained:
. . . Since the position of Chairman of the Commission on Human Rights is
not among the positions mentioned in the first sentence of Sec. 16, Art. VII
of the 1987 Constitution, appointments to which are to be made with the
confirmation of the Commission on Appointments, it follows that the
appointment by the President of the Chairman of the CHR is to be made
without the review or participation of the Commission on Appointments. To
be more precise, the appointment of the Chairman and Members of the
Commission on Human Rights is not specifically provided for in the
Constitution itself, unlike the Chairmen and Members of the Civil Service
Commission, the Commission on Elections and the Commission on Audit,
whose appointments are expressly vested by the Constitution in the
president with the consent of the Commission on Appointments. The
president appoints the Chairman and Members of The Commission on
Human Rights pursuant to the second sentence in Section 16, Art. VII, that
is, without the confirmation of the Commission on Appointments because
they are among the officers of government "whom he (the President) may
be authorized by law to appoint." And Section 2(c), Executive Order No. 163,
5 May 1987, authorizes the President to appoint the Chairman and
Members of the Commission on Human Rights.
Consistent with its rulings in Mison and Bautista, in Teresita Quintos Deles,
et al. v. The Commission on Constitutional Commissions, et al., 4 the power of
confirmation of the Commission on Appointments over appointments by the
President of sectoral representatives in Congress was upheld because:
. . . Since the seats reserved for sectoral representatives in paragraph 2,
Section 5, Art. VI may be filled by appointment by the President by express
provision of Section 7, Art. XVIII of the Constitution, it is indubitable that
sectoral representatives to the House of Representatives are among the
"other officers whose appointments are vested in the President in this
Constitution," referred to in the first sentence of Section 16, Art. VII whose
appointments are subject to confirmation by the Commission on
Appointments.
From the three (3) cases above-mentioned, these doctrines are deducible:
1. Confirmation by the Commission on Appointments is required only for
presidential appointees mentioned in the first sentence of Section 16, Article
VII, including, those officers whose appointments are expressly vested by
the Constitution itself in the president (like sectoral representatives to
Congress and members of the constitutional commissions of Audit, Civil
Service and Election).
2. Confirmation is not required when the President appoints other
government officers whose appointments are not otherwise provided for by
law or those officers whom he may be authorized by law to appoint (like the
Chairman and Members of the Commission on Human Rights). Also, as
observed in Mison, when Congress creates inferior offices but omits to
provide for appointment thereto, or provides in an unconstitutional manner
for such appointments, the officers are considered as among those whose
appointments are not otherwise provided for by law.
Sometime in March 1989, RA 6715 (Herrera-Veloso Law), amending the
Labor Code (PD 442) was approved. It provides in Section 13 thereof as
follows:
xxx xxx xxx
The Chairman, the Division Presiding Commissioners and other
Commissioners shall all be appointed by the President, subject to
confirmation by the Commission on Appointments. Appointments to any
vacancy shall come from the nominees of the sector which nominated the
predecessor. The Executive Labor Arbiters and Labor Arbiters shall also be
appointed by the President, upon recommendation of the Secretary of Labor
and Employment, and shall be subject to the Civil Service Law, rules and
regulations. 5
Pursuant to said law (RA 6715), President Aquino appointed the Chairman
and Commissioners of the NLRC representing the public, workers and
employers sectors. The appointments stated that the appointees may
qualify and enter upon the performance of the duties of the office. After
said appointments, then Labor Secretary Franklin Drilon issued
Administrative Order No. 161, series of 1989, designating the places of
assignment of the newly appointed commissioners.
This petition for prohibition questions the constitutionality and legality of
the permanent appointments extended by the President of the Philippines
to the respondents Chairman and Members of the National Labor Relations
Commission (NLRC), without submitting the same to the Commission on
Appointments for confirmation pursuant to Art. 215 of the Labor Code as
amended by said RA 6715.
Petitioner insists on a mandatory compliance with RA 6715 which has in its
favor the presumption of validity. RA 6715 is not, according to petitioner, an
encroachment on the appointing power of the executive contained in
Section 16, Art. VII, of the Constitution, as Congress may, by law, require
confirmation by the Commission on Appointments of other officers
appointed by the President additional to those mentioned in the first
sentence of Section 16 of Article VII of the Constitution. Petitioner claims
that the Mison and Bautista rulings are not decisive of the issue in this case
for in the case at bar, the President issued permanent appointments to the
respondents without submitting them to the CA for confirmation despite
passage of a law (RA 6715) which requires the confirmation by the
Commission on Appointments of such appointments.
The Solicitor General, on the other hand, contends that RA 6715 which
amended the Labor Code transgressesSection 16, Article VII by expanding
the confirmation powers of the Commission on Appointments without
constitutional basis. Mison and Bautista laid the issue to rest, says the
Solicitor General, with the following exposition:
As interpreted by this Honorable Court in the Mison case, confirmation by
the Commission on Appointments is required exclusively for the heads of
executive departments, ambassadors, public ministers, consuls, officers of
the armed forces from the rank of colonel or naval captain, and other
officers whose appointments are vested in the President by the Constitution,
such as the members of the various Constitutional Commissions. With
respect to the other officers whose appointments are not otherwise
provided for by the law and to those whom the President may be authorized
by law to appoint, no confirmation by the Commission on Appointments is
required.
Had it been the intention to allow Congress to expand the list of officers
whose appointments must be confirmed by the Commission on
Appointments, the Constitution would have said so by adding the phrase
"and other officers required by law" at the end of the first sentence, or the
phrase, "with the consent of the Commission on Appointments" at the end
of the second sentence. Evidently, our Constitution has significantly omitted
to provide for such additions.
The original text of Section 16 of Article VII of the present Constitution as
embodied in Resolution No. 517 of the Constitutional Commission reads as
follows:
"The President shall nominate and, with the consent of the Commission on
Appointments, shall appoint the heads of the executive departments and
bureaus, ambassadors, other public ministers and consuls, or officers of the
armed forces from the rank of captain or commander, and all other officers
of the Government whose appointments are not herein otherwise provided
for by law, and those whom he may be authorized by law to appoint. The
Congress may by law vest the appointment of inferior officers in the
President alone, in the courts or in the heads of the department."
Three points should be noted regarding sub-section 3 of Section 10 of Article
VII of the 1935 Constitution and in the original text of Section 16 of Article
VII of the present Constitution as proposed in Resolution No. 517.
First, in both of them, the appointments of heads of bureaus were required
to be confirmed by the Commission on Appointments.
Second, in both of them, the appointments of other officers, "whose
appointments are not otherwise provided for by law to appoint" are
expressly made subject to confirmation by the Commission on
Appointments. However, in the final version of Resolution No. 517, as
embodied in Section 16 of Article VII of the present Constitution, the
appointment of the above mentioned officers (heads of bureaus; other
officers whose appointments are not provided for by law; and those whom
he may be authorized by law to appoint) are excluded from the list of those
officers whose appointments are to be confirmed by the Commission on
Appointments. This amendment, reflected in Section 16 of Article VII of the
Constitution, clearly shows the intent of the framers to exclude such
appointments from the requirement of confirmation by the Commission on
Appointments.
Third, under the 1935 Constitution the word "nominate" qualifies the entire
Subsection 3 of Section 10 of Article VII thereof.
Respondent reiterates that if confirmation is required, the three (3) stage
process of nomination, confirmation and appointment operates. This is only
true of the first group enumerated in Section 16, but the word nominate
does not any more appear in the 2nd and 3rd sentences. Therefore, the
president's appointment pursuant to the 2nd and 3rd sentences needs no
confirmation. 6
The only issue to be resolved by the Court in the present case is whether or
not Congress may, by law, require confirmation by the Commission on
Appointments of appointments extended by the president to government
officers additional to those expressly mentioned in the first sentence of Sec.
16, Art. VII of the Constitution whose appointments require confirmation by
the Commission on Appointments.
To resolve the issue, we go back to Mison where the Court stated:
. . . there are four (4) groups of officers whom the President shall appoint.
These four (4) groups, to which we will hereafter refer from time to time,
are:
First, the heads of the executive departments, ambassadors, other public
ministers and consuls, officers of the armed forces from the rank of colonel
or naval captain, and other officers whose appointments are vested in him in
this Constitution;
Second, all other officers of the Government whose appointments are not
otherwise provided for by law;
Third, those whom the president may be authorized by law to appoint;
Fourth, officers lower in rank whose appointments the Congress may by law
vest in the President alone. 7
Mison also opined:
In the course of the debates on the text of Section 16, there were two (2)
major changes proposed and approved by the Commission. These were (1)
the exclusion of the appointments of heads of bureaus from the
requirement of confirmation by the Commission on Appointments; and (2)
the exclusion of appointments made under the second sentence of the
section from the same requirement. . . .
The second sentence of Sec. 16, Art. VII refers to all other officers of the
government whose appointments are not otherwise provided for by law and
those whom the President may be authorized by law to appoint.
Indubitably, the NLRC Chairman and Commissioners fall within the second
sentence of Section 16, Article VII of the Constitution, more specifically
under the "third groups" of appointees referred to in Mison, i.e. those
whom the President may be authorized by law to appoint. Undeniably, the
Chairman and Members of the NLRC are not among the officers mentioned
in the first sentence of Section 16, Article VII whose appointments requires
confirmation by the Commission on Appointments. To the extent that RA
6715 requires confirmation by the Commission on Appointments of the
appointments of respondents Chairman and Members of the National Labor
Relations Commission, it is unconstitutional because:
1) it amends by legislation, the first sentence of Sec. 16, Art. VII of the
Constitution by adding thereto appointments requiring confirmation by the
Commission on Appointments; and
2) it amends by legislation the second sentence of Sec. 16, Art. VII of the
Constitution, by imposing the confirmation of the Commission on
Appointments on appointments which are otherwise entrusted only with
the President.
Deciding on what laws to pass is a legislative prerogative. Determining their
constitutionality is a judicial function. The Court respects the laudable
intention of the legislature. Regretfully, however, the constitutional infirmity
of Sec. 13 of RA 6715 amending Art. 215 of the Labor Code, insofar as it
requires confirmation of the Commission on Appointments over
appointments of the Chairman and Member of the National Labor Relations
Commission (NLRC) is, as we see it, beyond redemption if we are to render
fealty to the mandate of the Constitution in Sec. 16, Art. VII thereof.
Supreme Court decisions applying or interpreting the Constitution shall form
part of the legal system of the Philippines. 8 No doctrine or principle of law
laid down by the Court in a decision rendered en banc or in division may be
modified or reversed except by the Court sitting en banc. 9
. . . The interpretation upon a law by this Court constitutes, in a way, a part
of the law as of the date that law was originally passed, since this Court's
construction merely establishes the contemporaneous legislative intent that
the law thus construed intends to effectuate. The settled rule supported by
numerous authorities is a restatement of the legal maxim "legis interpretado
legis vim obtinent" — the interpretation placed upon the written law by a
competent court has the force of law. 10
The rulings in Mison, Bautista and Quintos-Deles have interpreted Art. VII,
Sec. 16 consistently in one manner. Can legislation expand a constitutional
provision after the Supreme Court has interpreted it?
In Endencia and Jugo vs. David, 11 the Court held:
By legislative fiat as enunciated in Section 13, Republic Act No. 590,
Congress says that taxing the salary of a judicial officer is not a decrease of
compensation. This is a clear example of interpretation or ascertainment of
the meaning of the phrase "which shall not be diminished during their
continuance in office," found in Section 9, Article VIII of the Constitution,
referring to the salaries of judicial officers.
xxx xxx xxx
The rule is recognized elsewhere that the legislature cannot pass any
declaratory act, or act declaratory of what the law was before its passage, so
as to give it any binding weight with the courts. A legislative definition of a
word as used in a statute is not conclusive of its meaning as used elsewhere;
otherwise, the legislature would be usurping a judicial function in defining a
term. (11 Am. Jur., 914, emphasis supplied).
The legislature cannot, upon passing law which violates a constitutional
provision, validate it so as to prevent an attack thereon in the courts, by a
declaration that it shall be so construed as not to violate the constitutional
inhibition. (11 Am., Jur., 919, emphasis supplied).
We have already said that the Legislature under our form of government is
assigned the task and the power to make and enact laws, but not to
interpret them. This is more true with regard to the interpretation of the
basic law, the Constitution, which is not within the sphere of the Legislative
department. If the Legislature may declare what a law means, or what a
specific portion of the Constitution means, especially after the courts have in
actual case ascertained its meaning by interpretation and applied it in a
decision, this would surely cause confusion and instability in judicial
processes and court decisions. Under such a system, a final court
determination of a case based on a judicial interpretation of the law or of
the Constitution may be undermined or even annulled by a subsequent and
different interpretation of the law or of the Constitution by the Legislative
department that would be neither wise nor desirable, being clearly violative
of the fundamental principles of our constitutional system of government,
particularly those governing the separation of powers. 14 (Emphasis
supplied)
Congress, of course, must interpret the Constitution, must estimate the
scope of its constitutional powers when it sets out to enact legislation and it
must take into account the relevant constitutional prohibitions. 15
. . . The Constitution did not change with public opinion.
It is not only the same words, but the same in meaning . . . and as long as it
it speaks not only in the same words, but with the same meaning and intent
with which it spoke when it came from the hands of its framers, and was
voted and adopted by the people . . . 16
The function of the Court in passing upon an act of Congress is to "lay the
article of the Constitution which is invoked beside the statute which is
challenged and to decide whether the latter squares with the former" and to
"announce its considered judgment upon the question." 17
It can not be overlooked that Sec. 16, Art. VII of the 1987 Constitution was
deliberately, not unconsciously, intended by the framers of the 1987
Constitution to be a departure from the system embodied in the 1935
Constitution where the Commission on Appointments exercised the power
of confirmation over almost all presidential appointments, leading to many
cases of abuse of such power of confirmation. Subsection 3, Section 10, Art.
VII of the 1935 Constitution provided:
3. The President shall nominate and with the consent of the Commission on
Appointments, shall appoint the heads of the executive departments and
bureaus, officers of the Army from the rank of colonel, of the Navy and Air
Forces from the rank of captain or commander, and all other officers of the
Government whose appointments are not herein otherwise provided for,
and those whom he may be authorized by law to appoint; . . .
The deliberate limitation on the power of confirmation of the Commission
on Appointments over presidential appointments, embodied in Sec. 16, Art.
VII of the 1987 Constitution, has undoubtedly evoked the displeasure and
disapproval of members of Congress. The solution to the apparent problem,
if indeed a problem, is not judicial or legislative but constitutional. A future
constitutional convention or Congress sitting as a constituent (constitutional)
assembly may then consider either a return to the 1935 Constitutional
provisions or the adoption of a hybrid system between the 1935 and 1987
constitutional provisions. Until then, it is the duty of the Court to apply the
1987 Constitution in accordance with what it says and not in accordance
with how the legislature or the executive would want it interpreted.
WHEREFORE, the petition is DISMISSED. Art. 215 of the Labor Code as
amended by RA 6715 insofar as it requires the confirmation of the
Commission on Appointments of appointments of the Chairman and
Members of the National Labor Relations Commission (NLRC) is hereby
declared unconstitutional and of no legal force and effect.
SO ORDERED.
Narvasa, C.J., Melencio-Herrera, Paras, Feliciano, Bidin, Griño-Aquino,
Medialdea, Regalado, Davide, Jr., Romero and Nocon, JJ., concur.
Bellosillo, J., took no part.
Separate Opinions
GUTIERREZ, JR., concurring:
When the issues in this petition were first raised in Sarmiento III
v. Mison (156 SCRA 549 [1987]), I joined Justice Cruz in a dissent because I
felt that the interpretation of Section 16, Article VII by the majority of the
Court results in absurd or irrational consequences. The framers could not
have intended what the majority ruled to be the meaning of the provision.
When the question was again raised in Bautista v. Salonga (172 SCRA 160
[1989]), I reiterated my dissent and urged a re-examination of the doctrine everytime a high government official is appointed without confirmation by
stated in Sarmiento v. Mison. the Commission on Appointments, another petition is filed with this Court.

The issue is again before us. Even as I continue to believe that the majority
was wrong in the Sarmiento andBautista cases, I think it is time to finally
accept the majority opinion as the Court's ruling on the matter and one
which everybody should respect. There will be no end to litigation if,
everytime a high government official is appointed without confirmation by
the Commission on Appointments, another petition is filed with this Court.
I, therefore, VOTE with the majority to DISMISS the PETITION.
I, therefore, VOTE with the majority to DISMISS the PETITION.
CRUZ, J., dissenting:
I dissent on the basis of my dissent in Sarmiento v. Mison, which I believe
should be re-examined instead of being automatically re-affirmed simply
because of its original adoption. I do not believe we should persist in error
on the ground merely of adherence to judicial precedent, however unsound.

CRUZ, J., dissenting:

I dissent on the basis of my dissent in Sarmiento v. Mison, which I believe

should be re-examined instead of being automatically re-affirmed simply
because of its original adoption. I do not believe we should persist in error
on the ground merely of adherence to judicial precedent, however unsound.

Separate Opinion

GUTIERREZ, JR., J., concurring:

When the issues in this petition were first raised in Sarmiento III
v. Mison (156 SCRA 549 [1987]), I joined Justice Cruz in a dissent because I
felt that the interpretation of Section 16, Article VII by the majority of the
Court results in absurd or irrational consequences. The framers could not
have intended what the majority ruled to be the meaning of the provision.
When the question was again raised in Bautista v. Salonga (172 SCRA 160
[1989]), I reiterated my dissent and urged a re-examination of the doctrine
stated in Sarmiento v. Mison.

The issue is again before us. Even as I continue to believe that the majority
was wrong in the Sarmiento andBautista cases, I think it is time to finally
accept the majority opinion as the Court's ruling on the matter and one
which everybody should respect. There will be no end to litigation if,

G.R. No. 106231 November 16, 1994

HAWAIIAN-PHILIPPINE COMPANY, petitioner,
vs.
REYNALDO J. GULMATICO, Labor Arbiter, Regional Arbitration Branch No.
VI, AND NATIONAL FEDERATION OF SUGAR WORKERS-FOOD AND
GENERAL TRADES representing all the sugar farm workers of the
HAWAIIAN PHILIPPINE MILLING DISTRICT, respondents.
Angara, Abella, Concepcion, Regala & Cruz for petitioner.
Manlapao, Ymballa and Chaves for private respondent.
BIDIN, J.:
This petition for certiorari and prohibition with preliminary injunction seeks
to annul the Order dated June 29, 1992 issued by public respondent Labor
Arbiter Reynaldo J. Gulmatico denying petitioner's motion for "Claims on
R.A. 809" in RAB VI Case No. 06-07-10256-89, the dispositive portion of
which reads, in part:
WHEREFORE, premises considered, the motion to dismiss dated July 31,
1989 and the supplement thereto dated September 19, 1989 filed by
respondent company together with the motion to dismiss filed by
respondent Ramon Jison dated August 27, 1990 and Francisco Jison dated
September 20, 1990, respectively, are hereby DENIED.
xxx xxx xxx
(Rollo, p. 59)
The antecedent facts are as follows:
On July 4, 1989, respondent union, the National Federation of Sugar
Workers-Food and General Trades (NFSW-FGT) filed RAB VI Case No. 06-07-
10256-89 against herein petitioner Hawaiian-Philippine Company for claims
under Republic Act 809 (The Sugar Act of 1952). Respondent union claimed
that the sugar farm workers within petitioner's milling district have never
availed of the benefits due them under the law.
Under Section 9 of R.A 809, otherwise known as the Sugar Act of 1952, it is
provided, to wit:
Sec. 9. In addition to the benefits granted by the Minimum Wage Law, the
proceeds of any increase in participation granted to planters under this Act
and above their present share shall be divided between the planter and his
laborers in the following proportions;
Sixty per centum of the increase participation for the laborers and forty per
centum for the planters. The distribution of the share corresponding to the
laborers shall be made under the supervision of the Department of Labor.
xxx xxx xxx
(Emphasis supplied.)
On July 31, 1989, petitioner filed a "Motion to Dismiss," followed by a
"Supplemental Motion to Dismiss" on September 19, 1989. Petitioner
contended that public respondent Labor Arbiter has no jurisdiction to
entertain and resolve the case, and that respondent union has no cause of
action against petitioner.
On August 23, 1989, respondent union filed an "Opposition to Motion to
Dismiss."
On October 3,1989, petitioner applied a "Reply to Opposition" followed by a
"Citation of Authorities in Support of Motion to Dismiss."
On December 20, 1989, respondent union filed an amended complaint
additionally impleading as complainants Efren Elaco, Bienvenido Gulmatico,
Alberto Amacio, Narciso Vasquez, Mario Casociano and all the other farm
workers of the sugar planters milling with petitioner from 1979 up to the
present, and as respondents, Jose Maria Regalado, Ramon Jison, Rolly
Hernaez, Rodolfo Gamboa, Francisco Jison and all other sugar planters
milling their canes with petitioner from 1979 up to the present.
On August 27, 1990, Ramon Jison, one of the respondents impleaded in the
amended complaint, filed a "Motion to Dismiss and/or to Include Necessary
Parties," praying for the inclusion as co-respondents of the Asociacion de
Hacenderos de Silan-Saravia, Inc. and the Associate Planters of Silay-Saravia,
Inc.
On June 29, 1992, public respondent promulgated the assailed Order
denying petitioner's Motion to Dismiss and Supplemental Motion to Dismiss.
Hence, this petition filed by Hawaiian-Philippine Company.
Petitioner reasserts the two lesson earlier raised in its Motion to Dismiss
which public respondent unfavorably resolved in the assailed Order.
These two issues are first, whether public respondent Labor Arbiter has
jurisdiction to hear and decide the case against petitioner; and the second,
whether respondent union and/or the farm workers represented by it have a
cause of action against petitioner.
Petitioner contends that the complaint filed against it cannot be categorized
under any of the cases falling within the jurisdiction of the Labor Arbiter as
enumerated in Article 217 of the Labor Code, as amended, considering that
no employer-employee relationship exists between petitioner milling
company and the farm workers represented by respondent union. Article
217 of the Labor Code provides:
Art. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) Except as
otherwise provided under this Code, the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide, within thirty (30) calendar days
after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers
may file involving wages, rates of pay, hours of work and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising
from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and
6. Except claims for employees' compensation, social security, medicare
from maternity benefits, all other claims arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount exceeding Five Thousand Pesos (P5,000.00), whether or
not accompanied with a claim for reinstatement. (Emphasis supplies)
In support of the contention that the Labor Arbiter has no jurisdiction to
hear and decide the case against petitioner, the latter cites the ruling in San
Miguel Corporation vs. NLRC, 161 SCRA 719 [1988], wherein it was held that
a single unifying element runs through the cases and disputes falling under
the jurisdiction of the Labor Arbiter and that is that all the enumerated
cases and disputes arise out of or are in connection with an employer-
employee relationship, or some aspect or incident of such relationship.
Likewise, in Federation of Free Farmers vs. Court of Appeals, 107 SCRA 411
[1981], this Court held that:
. . . . From the beginning of the sugar industry, the centrals have never had
any privity with the plantation laborers, since they had their own laborers to
take care of. . . . Nowhere in Republic Act 809 (the Sugar Act of 1952) can we
find anything that creates any relationship between the laborers of the
planters and the centrals. . . .
. . . Under no principle of law or equity can we impose on the central . . . any
liability to the plantation laborers. . . . (Emphasis supplied)
On the strength of the aforecited authorities, petitioner contends that it is
not a proper party and has no involvement in the case filed by respondent
union as it is not the employer of the respondent sugar workers.
Furthermore, to bolster its contention, petitioner cites the Rules and
Regulations Implementing RA 809 issued by the then Wage Administration
Service pursuant to the Administrative Order of the Labor Secretary dated
October 1, 1952. Section 1 thereof states:
Sec. 1. The payment of the proceeds derived from the sixty per centum of
any increase in the participation due the laborers shall be directly paid to
the individual laborer concerned at the end of each milling season by his
respective planter under the Supervision of the Secretary of Labor or his duly
authorized representative by means of payrolls prepared by said planter.
(Emphasis supplied)
In addition, under Letter of Instruction No. 854 dated May 1, 1979, it is
provided:
1. Payment subject to supervision. The workers' share shall be paid directly
by the planter concerned to the workers or claimants entitled thereto
subject to the supervision of the Minister of Labor or his duly designated
representative.
The responsibility for the payment of the sugar workers' benefits under R.A.
809 was categorically ruled upon in the Federation of Free
Farmers case, supra., to wit:
. . . the matter of paying the plantation laborers of the respective planters
becomes exclusively the concern of the planters, the laborers and the
Department of Labor. Under no principle of law or equity can we impose on
the Central — here VICTORIAS any liability to the respective plantation
laborers, should any of their respective planters-employers fail to pay their
legal share. After all, since under the law it is the Department of Labor
which is the office directly called upon to supervise such payment, it is but
reasonable to maintain that if any blame is to be fixed for the unfortunate
situation of the unpaid laborers, the same should principally be laid on the
planters and secondarily on the Department of Labor, but surely never on
the central.
Whatever liability there exists between favor of the plantation laborers
should be pinned on the PLANTERS, their respective employers. (Emphasis
supplied)
On the other hand, public respondent and respondent union maintain the
position that privity exists between petitioner and the sugar workers.
Actually, public respondent, in resolving petitioner's Motion to Dismiss,
skirted the issue of whether an employer-employee relationship indeed
exists between petitioner milling company and the sugar workers. He did
not categorically rule thereon but instead relied on the observation that
when petitioner delivered to its planters the quedans representing its share,
petitioner did not first ascertain whether the shares of all workers or
claimants were fully paid/covered pursuant to LOI No. 854, and that
petitioner did not have the necessary certification from the Department of
Labor attesting to such fact of delivery. In view of these observations, public
respondent subscribed to the possibility that petitioner may still have a
liability vis-a-vis the workers' share. Consequently, in order that the workers
would not have to litigate their claim separately, which would be
tantamount to tolerating the splitting of a cause of action, public respondent
held that petitioner should still be included in this case as an indispensable
party without which a full determination of this case would not be obtained.
We find for petitioner.
The Solicitor General, in its adverse Comment, correctly agreed with
petitioner's contention that while the jurisdiction over controversies
involving agricultural workers has been transferred from the Court of
Agrarian Relations to the Labor Arbiters under the Labor Code as amended,
the said transferred jurisdiction is however, not without limitations. The
dispute or controversy must still fall under one of the cases enumerated
under Article 217 of the Labor Code, which cases, as ruled in San Miguel,
supra., arise out of or are in connection with an employer-employee
relationship.
In the case at bar, it is clear that there is no employer-employee relationship
between petitioner milling company and respondent union and/or its
members-workers, a fact which, the Solicitor General notes, public
respondent did not dispute or was silent about. Absent the jurisdictional
requisite of an employer-employee relationship between petitioner and
private respondent, the inevitable conclusion is that public respondent is
without jurisdiction to hear and decide the case with respect to petitioner.
Anent the issue of whether respondent union and/or its members-workers
have a cause of action against petitioner, the same must be resolved in the
negative. To have a cause of action, the claimant must show that he has a
legal right and the respondent a correlative duty in respect thereof, which
the latter violated by some wrongful act or omission (Marquez vs. Varela, 92
Phil. 373 [1952]). In the instant case, a simple reading of Section 9 of R.A.
809 and Section 1 of LOI 845 as aforequoted, would show that the payment
of the workers' share is a liability of the planters-employers, and not of the
milling company/sugar central. We thus reiterate Our ruling on this matter,
as enunciated in Federation of Free Farmers, supra., to wit:
. . . . Nowhere in Republic Act No. 809 can we find anything that creates any
relationship between the laborers of the planters and the centrals. Under
the terms of said Act, the old practice of the centrals issuing the quedans to
the respective PLANTERS for their share of the proceeds of milled sugar per
their milling contracts has not been altered or modified. In other words, the
language of the Act does not in any manner make the central the insurer on
behalf of the plantation laborers that the latter's respective employers-
planters would pay them their share. . . .
. . . . Accordingly, the only obligation of the centrals (under Section 9 of the
Act), like VICTORIAS, is to give to the respective planters, like PLANTERS
herein, the planters' share in the proportion stipulated in the milling
contract which would necessarily include the portion of 60% pertaining to
the laborers. Once this has been done, the central is already out of the
picture. . . . (Emphasis supplied)
In the case at bar, it is disputed that petitioner milling company has already
distributed to its planters their respective shares. Consequently, petitioner
has fulfilled its part and has nothing more to do with the subsequent
distribution by the planters of the workers' share.
Public respondent's contention that petitioner is an indispensable party is
not supported by the applicable provisions of the Rules of Court. Under
Section 7, Rule 3 thereof, indispensable parties are "parties in interest"
without whom no final determination of the action can be obtained. In this
case, petitioner cannot be deemed as a party in interest since there is no
privity or legal obligation linking it to respondent union and/or its members-
workers.
In order to further justify petitioner's compulsory joinder as a party to this
case, public respondent relies on petitioners' lack of certification from the
Department of Labor of its delivery of the planters' shares as evidence of an
alleged "conspicuous display of concerted conspiracy between the
respondent sugar central (petitioner) and its adherent planters to deprive
the workers or claimants of their shares in the increase in participation of
the adherent planters." (Rollo, p. 56)
The assertion is based on factual conclusions which have yet to be proved.
And even assuming for the sake of argument that public respondent's
conclusions are true, respondent union's and/or its workers' recourse lies
with the Secretary of Labor, upon whom authority is vested under RA 809 to
supervise the payment of the workers' shares. Any act or omission involving
the legal right of the workers to said shares may be acted upon by the Labor
Secretary either motu proprio or at the instance of the workers. In this case
however, no such action has been brought by the subject workers, thereby
raising the presumption that no actionable violation has been committed.
Public respondent is concerned that the respondent planters may easily put
up the defense that the workers' share is with petitioner milling company,
giving rise to multiplicity of suits. The Solicitor General correctly postulates
that the planters cannot legally set up the said defense since the payment of
the workers' share is a direct obligation of the planters to their workers that
cannot be shifted to the miller/central. Furthermore, the Solicitor General
notes that there is nothing in RA 809 which suggests directly or indirectly
that the obligation of the planter to pay the workers' share is dependent
upon his receipt from the miller of his own share. If indeed the planter did
not receive his just and due share from the miller, he is not without legal
remedies to enforce his rights. The proper recourse against a reneging miller
or central is for the planter to implead the former not as an indispensable
party but as a third party defendant under Section 12, Rule 6 of the Rules of
Court. In such case, herein petitioner milling company would be a proper
third party dependent because it is directly liable to the planters (the
original defendants) for all or part of the workers' claim. However, the
planters involved in this controversy have not filed any complaint of such a
nature against petitioner, thereby lending credence to the conclusion that
petitioner has fulfilled its part vis-a-vis its obligation under RA 809.

WHEREFORE, premises considered, the petition is GRANTED. Public

respondent Reynaldo J. Gulmatico is hereby ORDERED to DISMISS RAB VI
Case No. 06-07-10256-89 with respect to herein petitioner Hawaiian-
Philippine Company and to PROCEED WITH DISPATCH in resolving the said
case.

SO ORDERED.

G.R. No. 124193 March 6, 1998

WILLIAM DAYAG, EDUARDO CORTON, EDGARDO CORTON, LEOPOLDO

NAGMA, ALOY FLORES, ROMEO PUNAY and EDWIN DAYAG, petitioners,
vs.
HON. POTENCIANO S. CANIZARES, JR., NATIONAL LABOR RELATIONS
COMMISSION and YOUNG'S CONSTRUCTION CORPORATION, respondents.
ROMERO, J.:
On March 11, 1993, petitioners William Dayag, Edwin Dayag, Eduardo
Corton, Edgardo Corton, Leopoldo Nagma, Aloy Flores, and Romeo Punay
filed a complaint for illegal dismissal, non-payment of wages, overtime pay,
premium pay, holiday pay, service incentive leave, 13th month pay, and
actual, moral and exemplary damages against Alfredo Young, a building
contractor doing business under the firm name Young's Construction. They
filed the complaint with the National Capital Region Arbitration Branch of
the NLRC which docketed the same as NLRC-NCR-Case No. 00-03-01891-93.
The case was subsequently assigned to Labor Arbiter Potenciano Canizares,
Jr.
Petitioners alleged that they were hired in 1990 by Young to work as tower
crane operators at the latter's construction site at Platinum 2000 in San
Juan, Metro Manila. In November 1991, they were transferred to Cebu City
to work at the construction of his Shoemart Cebu project. Petitioners
worked in Cebu until February 1993, except for Punay who stayed up to
September 29, 1992 only and Nagma, until October 21, 1992.
On January 30, 1993, William Dayag asked for permission to go to Manila to
attend to family matters. He was allowed to do so but was not paid for the
period January 23-30, 1993, allegedly due to his accountability for the loss of
certain construction tools. Eduardo Corton had earlier left on January 16,
1993, purportedly due to harassment by Young. In February 1993, Edgardo
Corton, Aloy Flores and Edwin Dayag also left Cebu for Manila, allegedly for
the same reason. Thereafter, petitioners banded together and filed the
complaint previously mentioned.
Instead of attending the initial hearings set by the labor arbiter, Young filed,
on July 6, 1993, a motion to transfer the case to the Regional Arbitration
Branch, Region VII of the NLRC. He claimed that the workplace where
petitioners were regularly assigned was in Cebu City and that, in consonance
with Section 1(a) of Rule IV of the New Rules of Procedure of the NLRC, 1 the
case should have been filed in Cebu City. Young submitted in evidence a
certificate of registration of business name showing his company's address
as "Corner Sudlon-España Streets, Pari-an, Cebu City"; its business permit
issued by the Office of the Mayor of Cebu City and a certification by the
Philippine National Police-Cebu City Police Station 2 that petitioners had
been booked therein for qualified theft upon the complaint of Young's
Construction.
Petitioners opposed the same, arguing that all of them, except for Punay,
were, by that time, residents of Metro Manila and that they could not afford
trips to Cebu City. Besides, they claimed that respondent had its main office
at Corinthian Gardens in Quezon City. Young, in reply, declared that the
Corinthian Gardens address was not his principal place of business, but
actually his residence, which he also used as a correspondent office for his
construction firm.
Agreeing that petitioners' workplace when the cause of action accrued was
Cebu City, the labor arbiter, on September 8, 1993, granted Young's motion
and ordered the transmittal of the case to the regional arbitration branch of
Region VII. Petitioners promptly appealed said order to the NLRC, which,
however, dismissed the same on January 31, 1995, for lack of merit.
Citing Nestle Philippines, Inc. vs. NLRC 2 and Cruzvale,
Inc. vs. Laguesma 3 petitioners moved for a reconsideration of the January
31, 1995 resolution of the Commission. Acting favorably on said motion, the
Commission, on August 25, 1995, annulled and set aside its resolution of
January 31, 1995, and remanded the case to the original arbitration branch
of the National Capital Region for further proceedings. This prompted
Young, in turn, to file his own motion for reconsideration seeking the
reversal of the August 25, 1995 resolution of the Commission. Finding the
two above-cited cases to be inapplicable to instant case, the Commission
made a volte-face and reconsidered its August 25, 1995 resolution. It
reinstated the resolution of January 31, 1995, directing the transfer of the
case to Cebu City. In addition, it ruled that no further motion of a similar
nature would be entertained. Hence, the recourse to this Court by
petitioners, who raise the following as errors:
1. THE LABOR ARBITER A QUO ERRED IN ISSUING THE DISPUTED ORDER
DATED SEPTEMBER 8, 1993 WHEN, OBVIOUSLY, THE SAID MOTION TO
TRANSFER VENUE WAS FILED IN VIOLATION OF SECTIONS 4 AND 5 OF RULE
15 OF THE REVISED RULES OF COURT.
2. PUBLIC RESPONDENTS ERRED IN ISSUING THE DISPUTED JUDGMENT
WHEN, OBVIOUSLY, THE RESPONDENT, BY FILING ITS POSITION PAPER, HAS
WAIVED ITS RIGHT TO QUESTION THE VENUE OF THE INSTANT CASE.
3. THE PUBLIC RESPONDENTS ERRED IN CONCLUDING THAT THE
WORKPLACE OF THE COMPLAINANTS IS AT CEBU CITY AND IN DECLARING
THAT THE PROPER VENUE IS AT CEBU CITY.
Petitioner contends that the labor arbiter acted with grave abuse of
discretion when it entertained Young's motion to transfer venue since it did
not specify the time and date when it would be heard by the labor arbiter.
They raise the suppletory application of the Rules of Court, specifically
Sections 4 and 5 of Rule 15, 4 in relation to Section 3 of Rule I of the New
Rules of Procedure of the NLRC, in support of their contention.
We find no merit in petitioners' argument. In a long line of decisions, 5 this
Court has consistently ruled that the application of technical rules of
procedure in labor cases may be relaxed to serve the demands of substantial
justice. As provided by Article 221 of the Labor Code "rules of evidence
prevailing in courts of law or equity shall not be controlling and it is the spirit
and intention of this Code that the Commission and its members and the
Labor Arbiters shall use every and all reasonable means to ascertain the
facts in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due process."
Furthermore, while it is true that any motion that does not comply with the
requirements of Rule 15 should not be accepted for filing and, if filed, is not
entitled to judicial cognizance, this Court has likewise held that where a rigid
application of the rule will result in a manifest failure or miscarriage of
justice, technicalities may be disregarded in order to resolve the case.
Litigations should, as much as possible, be decided on the merits and not on
technicalities. 6 Lastly, petitioners were able to file an opposition to the
motion to transfer venue which, undisputedly, was considered by the labor
arbiter when he issued the disputed order of September 8, 1993. There is,
hence, no showing that petitioners have been unduly prejudiced by the
motion's failure to give notice of hearing.
Given the foregoing, it seems improper to nullify Young's motion on a mere
technicality. Petitioners' averments should be given scant consideration to
give way to the more substantial matter of equitably determining the rights
and obligations of the parties. It need not be emphasized that rules of
procedure must be interpreted in a manner that will help secure and not
defeat justice. 7
Likewise, petitioners harp on Young's so-called "waiver" of his right to
contest the venue of the instant case. They argue that Young is estopped
from questioning the venue herein as his motion to transfer venue was
actually a position paper, a close scrutiny of the same purportedly showing
that he admitted and denied certain allegations found in petitioners'
complaint.
Petitioners' contention rings hollow. Even if the questioned motion was at
the same time a position paper, Section 1(c) of Rule IV provides: "(w)hen
improper venue is not objected to before or at the time of the filing of
position papers, such question shall be deemed waived" (Emphasis
supplied). Consequently, there is no waiver of improper venue if a party
questions venue simultaneously with the filing of a position paper.
Moreover, nowhere in the New Rules of Procedure of the NLRC is there a
requirement that a party must object solely to venue, on penalty of waiving
the same. In fact, Section 1(d) provides that:
The venue of an action may be changed or transferred to a different
Regional Arbitration Branch other than where the complaint was filed by
written agreement of the parties or when the Commission or Labor Arbiter
before whom the case is pending so orders, upon motion by the proper
party in meritorious cases (Emphasis supplied).
Young's acts are in consonance with this provision, for he seasonably made
representations to transfer the venue of the action in the proper motion.
Finally, while it is true that objections to venue are deemed waived if the
respondent, through conduct, manifests satisfaction with the venue until
after the trial, or abides by it until the matter has proceeded to a
hearing, 8 no waiver of the defense of venue on the ground of estoppel by
conduct can be attributed to Young, who consistently and persistently
contested the same even before trial.
Similarly, petitioners' reliance on Nestle 9 and Cruzvale 10 is likewise
misplaced. While Nestle ruled that Rule IV of the New Rules of Procedure of
the NLRC does not constitute a complete rule on venue in cases cognizable
by labor arbiters, Section 2, Rule 4 of the Rules of Court 11 having suppletory
effect, it also held that the foregoing provision of the Rules of Court applies
only where the petitioners are labor unions or where a single act of an
employer gives rise to a cause of action common to many of its employees
working in different branches or workplaces of the former. It is not denied
that petitioners herein are not represented by a union; nor were they
assigned to different workplaces by Young. Likewise, Cruzvale is inapplicable
to the case at bar, the issue involved therein being the propriety of the DOLE
Region IV Office's taking cognizance of a petition for certification election
when the company's place of business was in Cubao, Quezon City, while the
workplace of the petitioning union was elsewhere. The instant case does not
involve any certification election; nor are the workplace of the employees
and place of business of the employer different.
Young cannot, however, derive comfort from the foregoing, this petition
having been overtaken by events. In the recent case of Sulpicio Lines,
Inc. vs. NLRC 12 this Court held that the question of venue essentially
pertains to the trial and relates more to the convenience of the parties
rather than upon the substance and merits of the case. It underscored the
fact that the permissive rules underlying provisions on venue are intended
to assure convenience for the plaintiff and his witnesses and to promote the
ends of justice. With more reason does the principle find applicability in
cases involving labor and management because of the doctrine well-
entrenched in our jurisdiction that the State shall afford full protection to
labor. The Court held that Section 1(a), Rule IV of the NLRC Rules of
Procedure on Venue was merely permissive. In its words:
This provision is obviously permissive, for the said section uses the word
"may," allowing a different venue when the interests of substantial justice
demand a different one. In any case, as stated earlier, the Constitutional
protection accorded to labor is a paramount and compelling factor, provided
the venue chosen is not altogether oppressive to the employer.
The rationale for the rule is obvious. The worker, being the economically-
disadvantaged party—whether as complainant/petitioner or as respondent,
as the case may be, the nearest governmental machinery to settle the
dispute must be placed at his immediate disposal, and the other party is not
to be given the choice of another competent agency sitting in another place
as this will unduly burden the former. 13 In fact, even in cases where venue
has been stipulated by the parties, this Court has not hesitated to set aside
the same if it would lead to a situation so grossly inconvenient to one party
as to virtually negate his claim. Again, in Sulpicio Lines, this Court,
citing Sweet Lines vs. Teves, 14 held that:
An agreement will not be held valid where it practically negates the action of
the claimant, such as the private respondents herein. The philosophy
underlying the provisions on transfer of venue of actions is the convenience
of the plaintiffs as well as his witnesses and to promote the ends of justice.
Considering the expense and trouble a passenger residing outside Cebu City
would incur to prosecute a claim in the City of Cebu, he would probably
decide not to file the action at all. The condition will thus defeat, instead of
enhance, the ends of justice. Upon the other hand, petitioner had branches
or offices in the respective ports of call of the vessels and could afford to
litigate in any of these places. Hence, the filing of the suit in the CFI of
Misamis Oriental, as was done in the instant case will not cause
inconvenience to, much less prejudice petitioner.
In the case at hand, the ruling specifying the National Capital Region
Arbitration Branch as the venue of the present action cannot be considered
oppressive to Young. His residence in Corinthian Gardens also serves as his
correspondent office. Certainly, the filing of the suit in the National Capital
Region Arbitration Branch in Manila will not cause him as much
inconvenience as it would the petitioners, who are now residents of Metro
Manila, if the same was heard in Cebu. Hearing the case in Manila would
clearly expedite proceedings and bring about the speedy resolution of
instant case.

WHEREFORE, premises considered, the resolution of February 12, 1996, of

public respondent NLRC, transferring the instant case to the Seventh
Regional Arbitration Branch, Cebu City, is SET ASIDE. Instead, its resolution
dated August 25, 1995, remanding the case to the Arbitration Branch of
Origin, is hereby REINSTATED and AFFIRMED.

SO ORDERED.

G.R. No. L-56431 January 19, 1988

NATIONAL UNION OF BANK EMPLOYEES, In Its Own Right And In Behalf Of

CBTC EMPLOYEES Affiliated With It; CBTC EMPLOYEES UNION, In Its Own
Right And Interest And In Behalf Of All CBTC Rank And File Employees
Including Its Members, BENJAMIN GABAT, BIENVENIDO MORALEDA,
ELICITA GAMBOA, FAUSTINO TEVES, SALVADOR LISING, and NESTOR DE
LOS SANTOS, petitioners,
vs.
THE HON. JUDGE ALFREDO M. LAZARO, CFI-MANILA BRANCH XXXV;
COMMERCLKL BANK AND TRUST COMPANY OF THE PHILIPPINES; BANK OF
THE PHILIPPINE ISLANDS; AYALA CORPORATION; MANUEL J. MARQUEZ;
ENRIQUE ZOBEL; ALBERTO VILLA-ABRILLE; VICENTE A. PACIS, JR.; and
DEOGRACIAS A. FERNANDO, respondents.
SARMIENTO, J.:
The sole issue in this special civil action for certiorari is whether or not the
courts may take cognizance of claims for damages arising from a labor
controversy.
The antecedent facts are not disputed.
On July 1, 1977, the Commercial Bank and Trust Company, a Philippine
banking institution, entered into a collective bargaining agreement with the
Commercial Bank and Trust Company Union, representing the rank and file
of the bank with a membership of over one thousand employees, and an
affiliated local of the National Union of Bank Employees, a national labor
organization.
The agreement was effective until June 30, 1980, with an automatic renewal
clause until the parties execute a new agreement.
On May 20, 1980, the union, together with the National Union of Bank
Employees, submitted to the bank management proposals for the
renegotiation of a new collective bargaining agreement. The following day,
however, the bank suspended negotiations with the union. The bank had
meanwhile entered into a merger with the Bank of the Philippine Islands,
another Philippine banking institution, which assumed all assets and
liabilities thereof.
As a consequence, the union went to the then Court of First Instance of
Manila, presided over by the respondent Judge, on a complaint for specific
performance, damages, and preliminary injunction against the private
respondents. Among other things, the complaint charged:
xxx xxx xxx
51. In entering in to such arrangement for the termination of the CURRENT
CBA, and the consequent destruction to existing rights, interests and
benefits thereunder,CBTC is liable for wilful injury to the contract and
property rights thereunder as provided in Article 2220 of the Civil Code of
the Philippines;
52. By arranging for the termination of the CURRENT CBA in the manner
above described, CBTC committed breach of said contract in bad faith, in
that CBTC had taken undue advantage of its own employees, by concealing
and hiding the negotiations towards an agreement on the sales and merger,
when it was under a statutory duty to disclose and bargain on the effects
thereof, according to law;
xxx xxx xxx
54. In virtually suppressing the collective bargaining rights of plaintiffs under
the law and as provided in the CURRENT CBA, through shadow bargaining,
calculated delay, suspension of negotiations, concealment of bargainable
issues and high-handed dictation, the CBTC and its defendant officials, as
well as the BANK OF P.I. and its defendant officials, were all actuated by a
dishonest purpose to secure an undue advantage; on the part of the CBTC it
was to avoid fresh and additional contractual commitments, which would
substantially lessen and diminish the profitability of the sale; and on the part
of the BANKOF P.I., it was to avoid having to face higher compensation rates
of CBTC employees in the course of integration and merger which could
force the upgrading of the benefit package for the personnel of the merged
operations, and thereby pushed personnel costs upwards; substantial
outlays and costs thereby entailed were all deftly avoided and evaded,
through the expedient of deliberate curtailment and suppression of
contractual bargaining rights;
55. All the other defendants have actively cooperated with and abetted the
CBTC and its defendant officers in negotiating, contriving and effecting the
above arrangements for the attainment of its dishonest purpose, for abuse
of its rights, and for taking undue advantage of its very own employees,
through the secret sale and scheduled merger; the collective participation
therein evinces machination, deceit, wanton attitude, bad faith, and
oppressive intent, wilfully causing loss or injury to plaintiffs in a manner that
is contrary to law, morals, good customs and public policy, in violation of
Articles 21 and 28 of the Civil Code; 1
xxx xxx xxx
Predictably, the private respondents moved for the dismissal of the case on
the ground, essentially, of lack of jurisdiction of the court.
On November 26, 1980, the respondent Judge issued an order, dismissing
the case for lack of jurisdiction. According to the court, the complaint
partook of an unfair labor practice dispute notwithstanding the incidental
claim for damages, jurisdiction over which is vested in the labor arbiter. This
order, as well as a subsequent one denying reconsideration, is now alleged
as having been issued 'in excess of his jurisdiction amounting to a grave
abuse of discretion."
We sustain the dismissal of the case, which is, as correctly held by the
respondent court, an unfair labor practice controversy within the original
and exclusive jurisdiction of the labor arbiters and the exclusive appellate
jurisdiction of the National Labor Relations Commission. The claim against
the Bank of Philippine Islands — the principal respondent according to the
petitioners — for allegedly inducing the Commercial Bank and Trust
Company to violate the existing collective bargaining agreement in the
process of re-negotiation, consists mainly of the civil aspect of the unfair
labor practice charge referred to under Article 247 2 of the Labor Code.
Under Article 248 3 of the Labor Code, it shall be an unfair labor practice:
(a) To interfere with, restrain or coerce employees in the exercise of their
right to self-organization;
xxx xxx xxx
(g) To violate the duty to bargain collectively as prescribed by this Code;
xxx xxx xxx
The act complained of is broad enough to embrace either provision. Since it
involves collective bargaining — whether or not it involved an accompanying
violation of the Civil Code — it may rightly be categorized as an unfair labor
practice. The civil implications thereof do not defeat its nature as a
fundamental labor offense.
As we stated, the damages (allegedly) suffered by the petitioners only form
part of the civil component of the injury arising from the unfair labor
practice. Under Article 247 of the Code, "the civil aspects of all cases
involving unfair labor practices, which may include claims for damages and
other affirmative relief, shall be under the jurisdiction of the labor arbiters. 4
The petitioners' claimed injury as a consequence of the tort allegedly
committed by the private respondents, specifically, the Bank of the
Philippine Islands, under Article 1314 of the Civil Code, 5 does not
necessarily give the courts jurisdiction to try the damage suit. Jurisdiction is
conferred by law 6 and not necessarily by the nature of the action. Civil
controversies are not the exclusive domain of the courts. In the case at bar,
Presidential Decree No. 442, as amended by Batas Blg. 70, has vested such a
jurisdiction upon the labor arbiters, a jurisdiction the courts may not
assume.
Jurisdiction over unfair labor practice cases, moreover, belongs generally to
the labor department of the government, never the courts. In Associated
Labor Union v. Gomez, 7 we said:
A rule buttressed upon statute and reason that is frequently reiterated in
jurisprudence is that labor cases involving unfair practice are within the
exclusive jurisdiction of the CIR. By now, this rule has ripened into dogma. It
thus commands adherence, not breach.
The fact that the Bank of the Philippine Islands is not a party to the
collective bargaining agreement, for which it "cannot be sued for unfair
labor practice at the time of the action," 8 cannot bestow on the respondent
court the jurisdiction it does not have. In Cebu Portland Cement Co. v.
Cement Workers' Union, 9 we held:
xxx xxx xxx
There is no merit in the allegation. In the first place, it must be remembered
that jurisdiction is conferred by law; it is not determined by the existence of
an action in another tribunal. In other words, it is not filing of an unfair labor
case in the Industrial Court that divests the court of first instance jurisdiction
over actions properly belonging to the former. It is the existence of a
controversy that properly falls within the exclusive jurisdiction of the
Industrial Court and to which the civil action is linked or connected that
removes said civil case from the competence of the regular courts. It is for
this reason that civil actions found to be intertwined with or arising out of, a
dispute exclusively cognizable by the Court of Industrial Relations were
dismissed, even if the cases were commenced ahead of the unfair labor
practice proceeding, and jurisdiction to restrain picketing was decreed to
belong to the Court of Industrial Relations although no unfair labor practice
case has as yet been instituted. For the court of first instance to lose
authority to pass upon a case, therefore, it is enough that unfair labor
practice case is in fact involved in or attached to the action, such fact of
course being established by sufficient proof. 10
xxx xxx xxx
Furthermore, to hold that the alleged tortious act now attributed to the
Bank of the Philippine Islands may be the subject of a separate suit is to
sanction split jurisdiction long recognized to be an offense against the
orderly administration of justice. As stated in Nolganza v. Apostol: 11
xxx xxx xxx
As far back as Associated Labor Union vs. Gomez [L-25999, February 9, 1967,
19 SCRA 304] the exclusive jurisdiction of the Court of Industrial Relations in
disputes of this character was upheld. "To hold otherwise," as succinctly
stated by the ponente, Justice Sanchez, "is to sanction split jurisdiction-
which is obnoxious to the orderly administration of justice." Then, in
Progressive Labor Association vs. Atlas Consolidated Mining and
Development Corporation [L-27585, May 29, 1970, 33 SCRA 349] decided
three years later, Justice J.B.L. Reyes, speaking for the Court, stressed that to
rule that such demand for damages is to be passed upon by the regular
courts of justice, instead of leaving the matter to the Court of Industrial
Relations, 'would be to sanction split jurisdiction, which is prejudicial to the
orderly administration of justice'. Thereafter, this Court, in the cases of
Leoquinco vs. Canada Dry Bottling Co. [L-28621, February 22, 1971, 37 SCRA
535] and Associated Labor Union v. Cruz ([L-28978, September 22, 1971, 41
SCRA 12], with the opinions coming from the same distinguished jurist,
adhered to such a doctrine. The latest case in point, as noted at the outset,
is the Goodrich Employees Association decision [L-30211, October 5, 1976,
73 SCRA 297].
xxx xxx xxx
The petitioners' reliance upon Calderon v. Court of Appeals 12 is not well-
taken. Calderon has since lost its persuasive force, beginning with our ruling
in PEPSI-COLA BOTTLING COMPANY v. MARTINEZ, 13 EBON v. DE
GUZMAN, 14 and AGUSAN DEL NORTE ELECTRIC COOP., INC. v. SUAREZ, 15 and
following the promulgation of Presidential Decree No. 1691, restoring the
jurisdiction to decide money claims unto the labor arbiters.
Neither does the fact that the Bank of the Philippine Islands "was not an
employer at the time the act was committed' abate a recourse to the labor
arbiter. It should be noted indeed that the Bank of the Philippine Islands
assumed "all the assets and liabilities" 16 of the Commercial Bank and Trust
Company. Moreover, under the Corporation Code:
xxx xxx xxx
5. The surviving or consolidated corporation shall be responsible and liable
for all the liabilities and obligations of each of the constituent corporations
in the same manner as if such surviving or consolidated corporation had
itself incurred such liabilities or obligations; and any claim, action or
proceeding pending by or against any of such constituent corporations may
be prosecuted by or against the surviving or consolidated corporation, as the
case may be. Neither the rights of creditors nor any lien upon the property
of any of such constituent corporations shall be impaired by such merger or
consolidation. 17

xxx xxx xxx

In sum, the public respondent has not acted with grave abuse of discretion.

WHEREFORE, the petition is DISMISSED. No costs.

G.R. No. L-68544 October 27, 1986

LORENZO C. DY, ZOSIMO DY, SR., WILLIAM IBERO, RICARDO GARCIA AND
RURAL BANK OF AYUNGON, INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND EXECUTIVE LABOR
ARBITER ALBERTO L. DALMACION, AND CARLITO H.
VAILOCES, respondents.
Marcelino C. Maximo and Ramon Barrameda for petitioners.
Carlito H. Vailoces for private respondent.
NARVASA, J.:
Petitioners assail in this Court the resolution of the National Labor Relations
Commission (NLRC) dismissing their appeal from the decision of the
Executive Labor Arbiter 1 in Cebu City which found private respondent to
have been illegally dismissed by them.
Said private respondent, Carlito H. Vailoces, was the manager of the Rural
Bank of Ayungon (Negros Oriental), a banking institution duly organized
under Philippine laws. He was also a director and stockholder of the bank.
On June 4, 1983, a special stockholders' meeting was called for the purpose
of electing the members of the bank's Board of Directors. Immediately after
the election the new Board proceeded to elect the bank's executive officers.
Pursuant to Article IV of the bank's by-laws, 2 providing for the election by
the entire membership of the Board of the executive officers of the bank,
i.e., the president, vice-president, secretary, cashier and bank manager, in
that board meeting of June 4, 1983, petitioners Lorenzo Dy, William Ibero
and Ricardo Garcia were elected president, vice-president and corporate
secretary, respectively. Vailoces was not re-elected as bank
manager, 3 Because of this development, the Board, on July 2, 1983, passed
Resolution No. 5, series of 1983, relieving him as bank manager.
On August 3, 1983, Vailoces filed a complaint for illegal dismissal and
damages with the Ministry of Labor and Employment against Lorenzo Dy
and Zosimo Dy, Sr. The complaint was amended on September 22, 1983 to
include additional respondents-William Ibero, Ricardo Garcia and the Rural
Bank of Ayungon, and additional causes of action for underpayment of
salary and non-payment of living allowance.
In his complaint and position paper, Vailoces asserted that Lorenzo Dy, after
obtaining control of the majority stock of the bank by buying the shares of
Marcelino Maximo, called an illegal stockholders' meeting and elected a
Board of Directors controlled by him; that after its illegal constitution, said
Board convened on July 2, 1983 and passed a resolution dismissing him as
manager, without giving him the opportunity to be heard first; that his
dismissal was motivated by Lorenzo Dy's desire to take over the
management and control of the bank, not to mention the fact that he (Dy)
harbored ill feelings against Vailoces on account of the latter's filing of a
complaint for violation of the corporation code against him and another
complaint for compulsory recognition of natural child with damages against
Zosimo Dy, Sr. 4
In their answer, Lorenzo Dy, et al. denied the charge of illegal dismissal. They
pointed out that Vailoces' position was an elective one, and he was not re-
elected as bank manager because of the Board's loss of confidence in him
brought about by his absenteeism and negligence in the performance of his
duties; and that the Board's action was taken to protect the interest of the
bank and was "designed as an internal control measure to secure the check
and balance of authority within the organization." 5
The Executive Labor Arbiter found that Vailoces was:
(a) Illegally dismissed, first not because of absenteeism and negligence, but
of the resentment of petitioners against Vailoces which arose from the
latter's filing of the cases for recognition as natural child against Zosimo Dy,
Sr. and for violation of the corporation code against Lorenzo Dy; and second,
because he was not afforded the due process of law when he was dismissed
during the Board meeting of July 2, 1983 the validity of which is seriously
doubted;
(b) Not paid his cost of living allowance; and
(c) Underpaid with only P500 monthly salary,
and consequently ordered the individual petitioners — Lorenzo Dy and
Zosimo Dy-but not the Bank itself, to:
(a) Pay Vailoces jointly and severally, the sum of P111,480.60 representing
his salary differentials, cost of living allowances, back wages from date of
dismissal up to the date of the decision (November 29, 1983), moral and
exemplary damages, and attorney's fees; and
(b) Reinstate Vailoces to his position as bank manager, with additional
backwages from December 1, 1983 on the adjusted salary rate of P620.00 r
month until he is actually reinstated, plus cost-of-living allowance. 6
Lorenzo Dy, et al. appealed to the NLRC, assigning error to the decision of
the Labor Arbiter on various grounds, among them: that Vailoces was not
entitled to notice of the Board meeting of July 2, 1983 which decreed his
relief because he was no longer a member of the Board on said date; that he
nonetheless had the opportunity to refute the charges against him and seek
a formal investigation because he received a copy of the minutes of said
meeting while he was still the bank manager (his removal was to take effect
only on August 15, 1983), instead of which he simply abandoned the work
he was supposed to perform up to the effective date of his relief; and that
the matter of his relief was within the adjudicatory powers of the Securities
and Exchange Commission. 7
The NLRC, however bypassed the issues raised and simply dismissed the
appeal for having been filed late. It ruled that:
The record shows that a copy of the decision sent by registered mail to
respondents' counsel, Atty. Edmund Tubio, was received on January 11, 1984
by a certain Atty. Ramon Elesteria, a law office partner of Atty. Tubio. ... This
fact is corroborated by the certification issued by the Postmaster of
Dumaguete City... Moreover, the same is admitted by no less than Atty.
Ramon Elesteria himself in his affidavit. It further appears in the record that
on January 30, 1984 a certain Atty. Francisco Zerna, a new lawyer engaged
by the respondents for the appeal, received a copy of the decision in this
case as certified by Julia Pepito in an affidavit subscribed before the Senior
Labor Arbitration Specialist. The appeal was filed only on February 17, 1984.
Considering that it was a law partner of the respondents' counsel who
received on January 11, 1984 the registered letter, his actual receipt thereof
completes the service. ... And even assuming that such was not a valid
service, since the respondents received another copy of the decision on
January 30, 1984, through their newly engaged counsel, it is therefore our
opinion that the appeal herein was filed out of time, whether the time is
reckoned from the receipt by Atty. Elesteria or Atty. Zerna, and, for this
reason, we can not give due course to his appeal. 8
In this Court, petitioners assail said ruling as an arbitrary deprivation of their
right to appeal through unreasonable adherence to procedural technicality.
They argue that they should not be bound by the service of the Labor
Arbiter's decision by Atty. Elesteria on January 11, 1984 or by Atty. Zerna on
January 30, 1984, because neither lawyer was authorized to accept service
for their counsel Atty. Tubio, and that their 10 day period of appeal should
be counted from February 10, 1984 when they actually received the copy of
the decision from Atty. Zerna. On the merits, they assert that the Arbiter's
finding of illegal dismissal was without evidentiary basis, that it was error to
impose the obligation to pay damages upon the individual petitioners,
instead of the Rural Bank of Ayungon, which was Vailoces' real employer,
and that the damages awarded are exorbitant and oppressive.
While the comment of Vailoces traverses the averments of the petition, that
of the Solicitor General on behalf of public respondents perceives the matter
as an intracorporate controversy of the class described in Section 5, par. (c),
of Presidential Decree No. 902-A, namely:
(c) Controversies in the election or appointments of directors, trustees,
officers or managers of such corporations, partnerships or associations.
explicitly declared to be within the original and exclusive jurisdiction of the
Securities and Exchange Commission, and recommends that the questioned
resolution of the NLRC as well as the decision of the Labor Arbiter be set
aside as null and void. 9
In truth, the issue of jurisdiction is decisive and renders unnecessary
consideration of the other questions raised.
There is no dispute that the position from which private respondent Vailoces
claims to have been illegally dismissed is an elective corporate office. He
himself acquired that position through election by the bank's Board of
Directors at the organizational meeting of November 17, 1979. 10 He lost
that position because the Board that was elected in the special stockholders'
meeting of June 4, 1983 did not re-elect him. And when Vailoces, in his
position paper submitted to the Labor Arbiter, impugned said stockholders'
meeting as illegally convoked and the Board of Directors thereby elected as
illegally constituted, 11 he made it clear that at the heart of the matter was
the validity of the directors' meeting of June 4, 1983 which, by not re-
electing him to the position of manager, in effect caused termination of his
services.
The case thus falls squarely within the purview of Section 5, par. (c), No.
902-A just cited. In PSBA vs. Leaño, 12 this Court, confronted with a similar
controversy, ruled that the Securities and Exchange Commission, not the
NLRC, has jurisdiction:
It was at a Board regular monthly meeting held on August 1, 1981, that
three directors were elected to fill vacancies. And, it was at the regular
Board meeting of September 5, 1981 that all corporate positions were
declared vacant in order to effect a reorganization, and at the ensuing
election of officers, Tan was not re-elected as Executive Vice-President.
Basically, therefore, the question is whether the election of directors on
August 1, 1981 and the election of officers on September 5, 1981, which
resulted in Tan's failure to be re-elected, were validly held. This is the crux of
the question that Tan has raised before the SEC. Even in his position paper
before the NLRC, Tan alleged that the election on August 1, 1981 of the
three directors was in contravention of the PSBA By-Laws providing that any
vacancy in the Board shall be filled by a majority vote of the stockholders at
a meeting specially called for the purpose. Thus, he concludes, the Board
meeting on September 5, 1981 was tainted with irregularity on account of
the presence of illegally elected directors without whom the results could
have been different.
Tan invoked the same allegations in his complaint filed with the SEC. So
much so, that on December 17, 1981, the SEC (Case No. 2145) rendered a
Partial Decision annulling the election of the three directors and ordered the
convening of a stockholders' meeting for the purpose of electing new
members of the Board. The correctness of d conclusion is not for us to pass
upon in this case. Tan was present at said meeting and again sought the
issuance of injunctive relief from the SEC.
The foregoing indubitably show that, fundamentally, the controversy is intra-
corporate in nature. It revolves around the election of directors, officers or
managers of the PSBA, the relation between and among its stockholders,
and between them and the corporation. Private respondent also contends
that his "ouster" was a scheme to intimidate him into selling his shares and
to deprive him of his just and fair return on his investment as a stockholder
received through his salary and allowances as Executive Vice-President. Vis-
a-vis the NLRC, these matters fall within the jurisdiction of the SEC.
Presidential Decree No. 902-A vests in the Securities and Exchange
Commission:
... Original and exclusive jurisdiction to hear and decide cases involving:
a) Devices or schemes employed by or any acts, of the board of directors,
business associates, its officers or partners, amounting to fraud and
misrepresentation) which may be detrimental to the interest of the public
and/or of the stockholders, partners, members of associations or
organizations registered with the Commission.
b) Controversies arising out of intracorporate or partnership relations,
between and among stockholders, members or associates; between any of
all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such
corporation, partnership or association and the state insofar as it concerns
their individual franchise or right to exist as such entity;
c) Controversies in the election or appointments of directors, trustees,
officers or managers of such corporations, partnership or associations.
This is not a case of dismissal. The situation is that of a corporate office
having been declared vacant, and of Tan's not having been elected
thereafter. The matter of whom to elect is a prerogative that belongs to the
Board, and involves the exercise of deliberate choice and the faculty of
discriminative selection. Generally speaking, the relationship of a person to
corporation, whether as officer or as agent or employee, is not determined
by the nature of the services performed, but by the incidents of the
relationship as they actually exist.
Respondent Vailoces' invocation of estoppel as against petitioners with
respect to the issue of jurisdiction is unavailing. In the first place, it is not
quite correct to state that petitioners did not raise the point in the lower
tribunal. Although rather off handedly, in their appeal to the NLRC they
called attention to the Labor Arbiter's lack of jurisdiction to rule on the
validity of the meeting of July 2, 1983, but the dismissal of the appeal for
alleged tardiness effectively precluded consideration of that or any other
question raised in the appeal. More importantly, estoppel cannot be invoked
to prevent this Court from taking up the question of jurisdiction, which has
been apparent on the face of the pleadings since the start of litigation
before the Labor Arbiter. It is well settled that the decision of a tribunal not
vested with appropriate jurisdiction is null and void. Thus, in Calimlim vs.
Ramirez, 13 this Court held:
A rule that had been settled by unquestioned acceptance and upheld in
decisions so numerous to cite is that the jurisdiction of a court over the
subject matter of the action is a matter of law and may not be conferred by
consent or agreement of the parties. The lack of jurisdiction of a court may
be raised at any stage of the proceedings, even on appeal. This doctrine has
been qualified by recent pronouncements which stemmed principally from
the ruling in the cited case of Sibonghanoy. It is to be regretted, however,
that the holding in said case had been applied to situations which were
obviously not contemplated therein. The exceptional circumstances involved
in Sibonghanoy which justified the departure from the accepted concept of
non-waivability of objection to jurisdiction has been ignored and, instead a
blanket doctrine had been repeatedly upheld that rendered the supposed
ruling in Sibonghanoy not as the exception, but rather the general rule,
virtually overthrowing altogether the time-honored principle that the issue
of jurisdiction is not lost by waiver or by estoppel.
xxx xxx xxx
It is neither fair nor legal to bind a party by the result of a suit or proceeding
which was taken cognizance of in a court which lacks jurisdiction over the
same irrespective of the attendant circumstances. The equitable defense of
estoppel requires knowledge or consciousness of the facts upon which it is
based . The same thing is true with estoppel by conduct which may be
asserted only when it is shown, among others, that the representation must
have been made with knowledge of the facts and that the party to whom it
was made is ignorant of the truth of the matter (De Castro vs. Gineta, 27
SCRA 623). The filing of an action or suit in a court that does not possess
jurisdiction to entertain the same may not be presumed to be deliberate
and intended to secure a ruling which could later be annulled if not
favorable to the party who filed such suit or proceeding in a court that lacks
jurisdiction to take cognizance of the same, such act may not at once be
deemed sufficient basis of estoppel. It could have been the result of an
honest mistake or of divergent interpretation of doubtful legal provisions. If
any fault is to be imputed to a party taking such course of action, part of the
blame should be placed on the court which shall entertain the suit, thereby
lulling the parties into believing that they pursued their remedies in the
correct forum. Under the rules, it is the duty of the court to dismiss an
action 'whenever it appears that court has no jurisdiction over the subject
matter.' (Section 2, Rule 9, Rules of Court) Should the Court render a
judgment without jurisdiction, such judgment may be impeached or
annulled for lack of jurisdiction (Sec. 30, Rule 132, Ibid), within ten (10) years
from the finality of the same (Art. 1144, par. 3, Civil Code).
To be sure, petitioners failed to raise the issue of jurisdiction in their petition
before this Court. But this, too, is no hindrance to the Court's considering
said issue.
complaint for illegal dismissal, etc., basis of said decision and Resolution, is
ordered dismissed, without prejudice to private respondent's seeking
recourse in the appropriate forum.
SO ORDERED.

The failure of the appellees to invoke anew the aforementioned solid ground
of want of jurisdiction of the lower court in this appeal should not prevent
this Tribunal to take up that issue as the lack of jurisdiction of the lower
court is apparent upon the face of the record and it is fundamental that a
court of justice could only validly act upon a cause of action or subject
matter of a case over which it has jurisdiction and said jurisdiction is one
conferred only by law; and cannot be acquired through, or waived by, any
act or omission of the parties (Lagman vs. CA, 44 SCRA 234 [1972]); hence
may be considered by this court motu proprio (Gov't. vs. American Surety
Co., 11 Phil. 203 [1908])... 14

These considerations make inevitable the conclusion that the judgment of

the Labor Arbiter and the resolution of the NLRC are void for lack of cause of
jurisdiction, and this Court must set matters aright in the exercise of its
judicial power. It is of no moment that Vailoces, in his amended complaint,
seeks other relief which would seemingly fan under the jurisdiction of the
Labor Arbiter, because a closer look at these-underpayment of salary and
non-payment of living allowance-shows that they are actually part of the
perquisites of his elective position, hence, intimately linked with his relations
with the corporation. The question of remuneration, involving as it does, a
person who is not a mere employee but a stockholder and officer, an
integral part, it might be said, of the corporation, is not a simple labor
problem but a matter that comes within the area of corporate affairs and
management, and is in fact a corporate controversy in contemplation of the
Corporation Code.

WHEREFORE, the questioned decision of the Labor Arbiter and the G.R. No. 79762 January 24, 1991
Resolution of the NLRC dismissing petitioners' appeal from said decision are
hereby set aside because rendered without jurisdiction. The amended
FORTUNE CEMENT CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (First Division) and ANTONIO
M. LAGDAMEO, respondents.
De Leon, Diokno & Associates Law Offices for petitioner.
Romarie G. Villonco and George C. Nograles for private respondent.
GRIÑO-AQUINO, J.:p
This is a petition for certiorari with prayer to annul the resolution dated May
29, 1987 of respondent National Labor Relations Commission (NLRC)
reversing the order dated December 3, 1985 of the Labor Arbiter which
dismissed private respondent Antonio M. Lagdameo's (Lagdameo for
brevity) complaint for Illegal Dismissal (NLRC NCR Case No. 1-228-85) against
petitioner Fortune Cement Corporation (FCC for brevity) for lack of
jurisdiction.
Lagdameo is a registered stockholder of FCC.
On October 14, 1975, at the FCC Board of Directors' regular monthly
meeting, he was elected Executive Vice-President of FCC effective November
1, 1975 (p. 3, Rollo).
Some eight (8) years later, or on February 10, 1983, during a regular
meeting, the FCC Board resolved that all of its incumbent corporate officers,
including Lagdameo, would be "deemed" retained in their respective
positions without necessity of yearly reappointments, unless they resigned
or were terminated by the Board (p. 4, Rollo).
At subsequent regular meetings held on June 14 and 21, 1983, the FCC
Board approved and adopted a resolution dismissing Lagdameo as Executive
Vice-President of the company, effective immediately, for loss of trust and
confidence (p. 4, Rollo).
On June 21, 1983, Lagdameo filed with the National Labor Relations
Commission (NLRC), National Capital Region, a complaint for illegal dismissal
against FCC (NLRC-NCR Case No. 1-228-85) alleging that his dismissal was
done without a formal hearing and investigation and, therefore, without due
process (p. 63, Rollo).
On August 5, 1985, FCC moved to dismiss Lagdameo's complaint on the
ground that his dismiss as a corporate officer is a purely intra-corporate
controversy over which the Securities and Exchange Commission (SEC) has
original and exclusive jurisdiction.
The Labor Arbiter granted the motion to dismiss (p. 22, Rollo). On appeal,
however, the NLRC set aside the Labor Arbiter's order and remanded the
case to the Arbitration Branch "for appropriate proceedings" (NLRC
Resolution dated April 30, 1987). The NLRC denied FCC's motion for
reconsideration (p. 5, Rollo). Dissatisfied, FCC filed this petition for certiorari.
We find merit in the petition.
The sole issue to be resolved is whether or not the NLRC has jurisdiction
over a complaint filed by a corporate executive vice-president for illegal
dismissal, resulting from a board resolution dismissing him as such officer.
Section 5 of Presidential Decree No. 902-A vests in the SEC original and
exclusive jurisdiction over this controversy:
Sec. 5. In addition to the regulatory and adjudicative functions of the
Securities and Exchange Commission over corporations, partnerships and
other forms of associations registered with it as expressly granted under
existing laws and decrees, it shall have original and exclusive jurisdiction to
hear and decide cases involving:
a) Devices and schemes employed by or any acts, of the board of
directors, business associates, its officers or partners, amounting to fraud
and misrepresentation which may be detrimental to the interest of the
public and/or stockholders, partners, members of associations or
organization registered with the Commission;
b) Controversies arising out of intra-corporate or partnership relations,
between and among stockholders, members, or associates; between any or
all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such
corporation, partnership or association and the state insofar as it concerns
their individual franchise or right to exist as such entity;
c) Controversies in the election or appointments of directors, trustees,
officers or managers of such corporations, partnership or associations."
(Section 5, P.D. 902-A; Emphasis supplied.)
In reversing the decision of Labor Arbiter Porfirio E. Villanueva, respondent
NLRC held:
. . . . It is not disputed that complainant Lagdameo was an employee of
respondent Fortune Cement Corporation, being then the Executive Vice-
President. For having been dismissed for alleged loss of trust and
confidence, complainant questioned his dismissal on such ground and the
manner in which he was dismissed, claiming that no investigation was
conducted, hence, there was and is denial of due process. Predicated on the
above facts, it is clear to Us that a labor dispute had arisen between the
appellant and the respondent corporation, a dispute which falls within the
original and exclusive jurisdiction of the NLRC. A labor dispute as defined in
the Labor Code includes any controversy or matter concerning terms or
conditions of employment or the association or representation of persons in
negotiating, fixing, maintaining, changing or arranging the terms and
conditions of employment regardless of whether or not the disputants stand
in the proximate relations of employers and employees." (pp. 16-17, Rollo).
The Solicitor General, declining to defend public respondent in its pleading
entitled "Manifestation in Lieu of Comment," aptly observed:
The position of "Executive Vice-President," from which private respondent
Lagdameo claims to have been illegally dismissed, is an elective corporate
office. He himself acquired that position through election by the
corporation's Board of Directors, although he also lost the same as a
consequence of the latter's resolution.
Indeed the election, appointment and/or removal of an executive vice-
president is a prerogative vested upon a corporate board.
And it must be, not only because it is a practice observed in petitioner
Fortune Cement Corporation, but more so, because of an express mandate
of law. (p. 65, Rollo.)
The Solicitor General pointed out that "a corporate officer's dismissal is
always a corporate act and/or intra-corporate controversy and that nature is
not altered by the reason or wisdom which the Board of Directors may have
in taking such action." The dispute between petitioner and Lagdameo is of
the class described in Section 5, par. (c) of Presidential Decree No. 902-A,
hence, within the original and exclusive jurisdiction of the SEC. The Solicitor
General recommended that the petition be granted and NLRC-NCR Case No.
1-228-85 be dismissed by respondent NLRC for lack of jurisdiction (p.
95, Rollo).
In PSBA vs. Leaño (127 SCRA 778), this Court, confronted with a similar
controversy, ruled that the SEC, not the NLRC, has jurisdiction:
This is not a case of dismissal. The situation is that of a corporate office
having been declared vacant, and of Tan's not having been elected
thereafter. The matter of whom to elect is a prerogative that belongs to the
Board, and involves the exercise of deliberate choice and the faculty of
discriminative selection. Generally speaking, the relationship of a person to
a corporation, whether as officer or as agent or employee is not determined
by the nature of the services performed, but by the incidents of the
relationship as they actually exist.
Lagdameo claims that his dismissal was wrongful, illegal, and arbitrary,
because the "irregularities" charged against him were not investigated (p.
85, Rollo); that the case of PSBA vs. Leaño (supra) cited by the Labor Arbiter
finds no application to his case because it is not a matter of corporate office
having been declared vacant but one where a corporate officer was
dismissed without legal and factual basis and without due process; that the
power of dismissal should not be confused with the manner of exercising
the same; that even a corporate officer enjoys security of tenure regardless
of his rank (p. 97, Rollo); and that the SEC is without power to grant the
reliefs prayed for in his complaint (p. 106, Rollo).

The issue of the SEC's power or jurisdiction is decisive and renders

unnecessary a consideration of the other questions raised by Lagdameo.
Thus did this Court rule in the case of Dy vs. National Labor Relations
Commission (145 SCRA 211) which involved a similar situation:

It is of no moment that Vailoces, in his amended complaint, seeks other

reliefs which would seemingly fall under the jurisdiction of the Labor Arbiter,
because a closer look at these — underpayment of salary and non-payment
of living allowance — shows that they are actually part of the perquisites of
his elective position, hence, intimately linked with his relations with the
corporation. The question of remuneration, involving as it does, a person
who is not a mere employee but a stockholder and officer, an integral part, it
might be said, of the corporation, is not a simple labor problem but a matter
that comes within the area of corporate affairs and management, and is in
fact a corporate controversy in contemplation of the Corporation Code.
(Emphasis ours.)

WHEREFORE, the questioned Resolution of the NLRC reversing the decision

of the Labor Arbiter, having been rendered without jurisdiction, is hereby
reversed and set aside. The decision of the Labor Arbiter dated December 3,
1985 dismissing NLRC-NCR Case No. 1-228-85 is affirmed, without prejudice
to private respondent Antonio M. Lagdameo's seeking recourse in the
appropriate forum. No costs.

SO ORDERED.
G.R. No. 118088 November 23, 1995

MAINLAND CONSTRUCTION, CO., INC., and/or LUCITA LU CARABUENA,

ROBERT L. CARABUENA, ELLEN LU CARABUENA, and MARTIN
LU, petitioners,
vs.
MILA MOVILLA, ERNESTO MOVILLA, JR., MILA JUDITH C. MOVILLA, JUDE
BRIX C. MOVILLA, JONARD ELLERY C. MOVILLA, AND MAILA JONAH M.
QUIMBO, surviving heirs of ERNESTO MOVILLA, and THE HONORABLE
COMMISSIONER of the NATIONAL LABOR RELATIONS COMMISSION-5TH
DIVISION,respondents.
HERMOSISIMA, JR., J.:
Petitioners urge this Court to set aside the Decision of the National Labor
Relations Commission (NLRC), dated May 30, 1994, in NLRC-CA No.
M-000949-92 for having been rendered with grave abuse of discretion
amounting to lack of jurisdiction. This reversed the decision of the Labor
Arbiter in case No. RAB-11-10-99883-91. Petitioners' motion for
reconsideration of the NLRC decision was denied in a Resolution, dated
August 31, 1994.
Mainland Construction Co., Inc. is a domestic corporation, duly organized
and existing under Philippine laws, having been issued a certificate of
registration by the Securities and Exchange Commission (SEC) on July 26,
1977, under Registry Number 74691. Its principal line of business is the
general construction of roads and bridges and the operation of a service
shop for the maintenance of equipment. Respondents on the other hand,
are the surviving heirs of complainant, Ernesto Movilla, who died during the
pendency of the action with the Labor Arbiter.
Records show that Ernesto Movilla, who was a Certified Public Accountant
during his lifetime, was hired as such by Mainland in 1977. Thereafter, he
was promoted to the position of Administrative Officer with a monthly
salary of P4,700.00. 1
Ernesto Movilla, recorded as receiving a fixed salary of P4,700.00 a month,
was registered with the Social Security System (SSS) as an employee of
petitioner Corporation. His contributions to the SSS, Medicare and
Employees Compensation Commission (ECC) were deducted from his
monthly earnings by his said employer. 2
On April 12, 1987, during petitioner corporation's annual meeting of
stockholders, the following were elected members of the Board of
Directors, viz.: Robert L. Carabuena, Ellen L. Carabuena, Lucita Lu Carabuena,
Martin G. Lu and Ernesto L. Movilla.
On the same day, an organizational meeting was held and the Board of
Directors elected Ernesto Movilla as Administrative Manager. 3 He occupied
the said position up to the time of his death.
On April 2, 1991, the Department of Labor and Employment (DOLE)
conducted a routine inspection on petitioner corporation and found that it
committed such irregularities in the conduct of its business as:
1. Underpayment of wages under R.A. 6727 and RTWPB-XI-01;
2. Non-implementation of Wage Order No. RTWPB-XI-02;
3. Unpaid wages for 1989 and 1990;
4. Non-payment of holiday pay and service incentive leave pay; and
5. Unpaid 13th month pay (remaining balance for 1990). 4
On the basis of this finding, petitioner corporation was ordered by DOLE to
pay to its thirteen employees, which included Movilla, the total amount of
P309,435.89, representing their salaries, holiday pay, service incentive leave
pay differentials, unpaid wages and 13th month pay.
All the employees listed in the DOLE's order were paid by petitioner
corporation, except Ernesto Movilla.
On October 8, 1991, Ernesto Movilla filed a case against petitioner
corporation and/or Lucita, Robert, and Ellen, all surnamed Carabuena, for
unpaid wages, separation pay and attorney's fees, with the Department of
Labor and Employment, Regional Arbitration, Branch XI, Davao City.
On February 29, 1992, Ernesto Movilla died while the case was being tried
by the Labor Arbiter and was promptly substituted by his heirs, private
respondents herein, with the consent of the Labor Arbiter.
The Labor Arbiter rendered judgment on June 26, 1992, dismissing the
complaint on the ground of lack of jurisdiction. Specifically, the Labor Arbiter
made the following ratiocination:
It is clear that in the case at bar, the controversy presented by complainant is
intra-corporate in nature and is within the jurisdiction of the Securities and
Exchange Commission, pursuant to P.D. 902-A (Phil. School of Business
Administration, et al. v. Leano, G.R. No. L-58468, February 24, 1984; Dy et al.
v. NLRC, et al., G.R. No. L-68544, October 27, 1986). What Movilla is claiming
against respondents are his alleged unpaid salaries and separation pay as
Administrative Manager of the corporation for which position he was
appointed by the Board of Directors. His claims therefore fall under the
jurisdiction of the Securities and Exchange Commission because this is not a
simple labor problem; but a matter that comes within the area of corporate
affairs and management, and is in fact a corporate controversy in
contemplation of the Corporation Code. (Fortune Cement Corporation v.
NLRC, et al., G.R. No. 79762, January 24, 1991). 5
Aggrieved by this decision, respondents appealed to the National Labor
Relations Commission (NLRC). The NLRC ruled that the issue in the case was
one which involved a labor dispute between an employee and petitioner
corporation and, thus, the NLRC had jurisdiction to resolve the case. The
dispositive portion of the NLRC decision reads:
WHEREFORE, the assailed decision is Reversed and Set Aside. Respondents
are ordered to pay the heirs of complainant the following:
1. Unpaid salaries from January 1989 to September 1991 in the sum of
P155,100.00;
2. Separation pay in the sum of P65,800.00;
3. Moral damages in the sum of P10,000.00;
4. Indemnity in the sum of P3,000.00; and,
5. Attorney's fees equivalent to 10% of the total award. 6
The pivotal issue in this case is which of the two agencies of the government
— the NLRC or the SEC — has jurisdiction over the controversy.
As we stated earlier, it is of course the contention of petitioners that the
NLRC committed grave abuse of discretion when it nullified the decision of
the Labor Arbiter which dismissed the complaint of Movilla for unpaid
wages, separation pay and attorney's fees on the ground of lack of
jurisdiction. Petitioners take the position that, since Ernesto Movilla was a
corporate officer, the controversy as to his compensation is within the
jurisdiction of the SEC as mandated by P.D. 902-A and not with the NLRC.
We find for the respondents, it appearing that petitioners' contention is
bereft of merit.
In order that the SEC can take cognizance of a case, the controversy must
pertain to any of the following relationships: a) between the corporation,
partnership or association and the public; b) between the corporation,
partnership or association and its stockholders, partners, members or
officers;
c) between the corporation, partnership or association and the State as far
as its franchise, permit or license to operate is concerned; and d) among the
stockholders, partners or associates themselves. 7 The fact that the parties
involved in the controversy are all stockholders or that the parties involved
are the stockholders and the corporation does not necessarily place the
dispute within the ambit of the jurisdiction of SEC. The better policy to be
followed in determining jurisdiction over a case should be to consider
concurrent factors such as the status or relationship of the parties or the
nature of the question that is the subject of their controversy. 8 In the
absence of any one of these factors, the SEC will not have jurisdiction.
Furthermore, it does not necessarily follow that every conflict between the
corporation and its stockholders would involve such corporate matters as
only the SEC can resolve in the exercise of its adjudicatory or quasi-
judicial powers. 9
In the case at bench, the claim for unpaid wages and separation pay filed by
the complainant against petitioner corporation involves a labor dispute. It
does not involve an intra-corporate matter, even when it is between a
stockholder and a corporation. It relates to an employer-employee
relationship which is distinct from the corporate relationship of one with the
other. Moreover, there was no showing of any change in the duties being
performed by complainant as an Administrative Officer and as an
Administrative Manager after his election by the Board of Directors. What
comes to the fore is whether there was a change in the nature of his
functions and not merely the nomenclature or title given to his job.
Indeed, Ernesto Movilla worked as an administrative officer of the company
for several years and was given a fixed salary every month. To further sustain
this assertion Movilla also submitted a joint affidavit executed by Juanito S.
Malubay and Delia S. Luciano, Project Engineer and Personnel-In-Charge,
respectively, of petitioner corporation, attesting that they personally knew
Movilla and that he was employed in the company. A Premium Certification
issued by an authorized representative of petitioners was also presented to
show his actual monthly earnings as well as his monthly contributions to the
SSS, Medicare and ECC. 10 Movilla's registration in the SSS by petitioner
corporation added strength to the conclusion that he was petitioner
corporation's employee as coverage by the said law is predicated on the
existence of an employer-employee relationship. 11 Furthermore, petitioner
corporation failed to present evidence which showed that, after his election
as Administrative Manager, he was excluded from the coverage of the SSS,
Medicare and ECC.
He also presented, appearing to be relevant to the issue, the result of the
investigation conducted by DOLE which found that petitioner corporation
has transgressed several labor standard laws against its employees.
As correctly ruled by the NLRC:
The claims for unpaid salaries/monetary benefits and separation pay, are
not a corporate conflict as respondents presented them to be. If
complainant is not an employee, respondent should have contested the
DOLE inspection report, What they did was to exclude complainant from the
order of payment . . . and worse, he was not both given responsibilities and
paid his salaries for the succeeding months . . . . This is a clear case of
constructive dismissal without due process . . . 12
The existence of an employer-employee relationship is a factual question
and public respondent's findings are accorded great weight and respect as
the same are supported by substantial evidence. 13 Hence, we uphold the
conclusion of public respondent that Ernesto Movilla was an employee of
petitioner corporation.
It is pertinent to note that petitioner corporation is not prohibited from
hiring its corporate officers to perform services under a circumstance which
will make him an employee. 14 Moreover, although a director of a
corporation is not, merely by virtue of his position, its employee, said
director may act as an employee or accept duties that make him also an
employee. 15
Since Ernesto Movilla's complaint involves a labor dispute, it is the NLRC,
under Article 217 of the Labor Code of the Philippines, which has jurisdiction
over the case at bench.
WHEREFORE, the petition is DISMISSED for lack of showing of any grave
abuse of discretion on the part of public respondent NLRC. The assailed
decision of public respondent is thus AFFIRMED.
SO ORDERED.
G.R. No. 121143 January 21, 1997
PURIFICACION G. TABANG, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PAMANA GOLDEN CARE
MEDICAL CENTER FOUNDATION, INC., respondents.

REGALADO, J.:
This is a petition for certiorari which seeks to annul the resolution of the
National Labor Relations Commission (NLRC), dated June 26, 1995,
affirming in toto the order of the labor arbiter, dated April 26, 1994, which
dismissed petitioner's complaint for illegal dismissal with money claims for
lack of jurisdiction.
The records show that petitioner Purificacion Tabang was a founding
member, a member of the Board of Trustees, and the corporate secretary of
private respondent Pamana Golden Care Medical Center Foundation, Inc., a
non-stock corporation engaged in extending medical and surgical services.
On October 30, 1990, the Board of Trustees issued a memorandum
appointing petitioner as Medical Director and Hospital Administrator of
private respondent's Pamana Golden Care Medical Center in Calamba,
Laguna.
Although the memorandum was silent as to the amount of remuneration for
the position, petitioner claims that she received a monthly retainer fee of
five thousand pesos (P5,000.00) from private respondent, but the payment
thereof was allegedly stopped in November, 1991.
As medical director and hospital administrator, petitioner was tasked to run
the affairs of the aforesaid medical center and perform all acts of
administration relative to its daily operations.
On May 1, 1993, petitioner was allegedly informed personally by Dr. Ernesto
Naval that in a special meeting held on April 30, 1993, the Board of Trustees
passed a resolution relieving her of her position as Medical Director and
Hospital Administrator, and appointing the latter and Dr. Benjamin Donasco
as acting Medical Director and acting Hospital Administrator, respectively.
Petitioner averred that she thereafter received a copy of said board
resolution.
On June 6, 1993, petitioner filled a complaint for illegal dismissal and non-
payment of wages, allowances and 13th month pay before the labor arbiter.
Respondent corporation moved for the dismissal of the complaint on the
ground of lack of jurisdiction over the subject matter. It argued that
petitioner's position as Medical Director and Hospital Administrator was
interlinked with her position as member of the Board of Trustees, hence, her
dismissal is an intra-corporate controversy which falls within the exclusive
jurisdiction of the Securities and Exchange Commission (SEC).
Petitioner opposed the motion to dismiss, contending that her position as
Medical Director and Hospital Administrator was separate and distinct from
her position as member of the Board of Trustees. She claimed that there is
no intra-corporate controversy involved since she filed the complaint in her
capacity as Medical Director and Hospital Administrator, or as an employee
of private respondent.
On April 26, 1994, the labor arbiter issued an order dismissing the complaint
for lack of jurisdiction. He ruled that the case falls within the jurisdiction of
the SEC, pursuant to Section 5 of Presidential Decree No.
902-A. 1
Petitioner's motion for reconsideration was treated as an appeal by the
labor arbiter who consequently ordered the elevation of the entire records
of the case to public respondent NLRC for appellate review. 2
On appeal, respondent NLRC affirmed the dismissal of the case on the
additional ground that "the position of a Medical Director and Hospital
Administrator is akin to that of an executive position in a corporate ladder
structure." hence, petitioner's removal from the said position was an intra-
corporate controversy within the original and exclusive jurisdiction of the
SEC. 3
Aggrieved by the decision, petitioner filed the instant petition which we find,
however, to be without merit.
We agree with the findings of the NLRC that it is the SEC which has
jurisdiction over the case at bar. The charges against herein private
respondent partake of the nature of an intra-corporate controversy.
Similarly, the determination of the rights of petitioner and the concomitant
liability of private respondent arising from her ouster as a medical director
and/or hospital administrator, which are corporate offices, is an intra-
corporate controversy subject to the jurisdiction of the SEC.
Contrary to the contention of petitioner, a medical director and a hospital
administrator are considered as corporate officers under the by-laws of
respondent corporation. Section 2(i), Article I thereof states that one of the
powers of the Board of Trustees is "(t)o appoint a Medical Director,
Comptroller/Administrator, Chiefs of Services and such other officers as it
may deem necessary and prescribe their powers and duties." 4
The president, vice-president, secretary and treasurer are commonly
regarded as the principal or executive officers of a corporation, and modern
corporation statutes usually designate them as the officers of the
corporation. 5 However, other offices are sometimes created by the charter
or by-laws of a corporation, or the board of directors may be empowered
under the by-laws of a corporation to create additional offices as may be
necessary. 6 It has been held that an "office'' is created by the charter of the
corporation and the officer is elected by the directors or stockholders. 7 On
the other hand, an "employee" usually occupies no office and generally is
employed not by action of the directors or stockholders but by the
managing officer of the corporation who also determines the compensation
to be paid to such employee. 8
In the case at bar, considering that herein petitioner, unlike an ordinary
employee, was appointed by respondent corporation's Board of Trustees in
its memorandum of October 30, 1990, 9 she is deemed an officer of the
corporation. Perforce, Section 5(c) of Presidential Decree No. 902-A, which
provides that the SEC exercises exclusive jurisdiction over controversies in
the election appointment of directors, trustees, officers or managers of
corporations, partnerships or associations, applies in the present dispute.
Accordingly, jurisdiction over the same is vested in the SEC, and not in the
Labor Arbiter or the NLRC.
Moreover, the allegation of petitioner that her being a member of the Board
of Trustees was not one of the considerations for her appointment is belied
by the tenor of the memorandum itself. It states: "We hope that you will
uphold and promote the mission of our foundation," 10 and this cannot be
construed other than in reference to her position or capacity as a corporate
trustee.
A corporate officer's dismissal is always a corporate act, or an intra-
corporate controversy, and the nature is not altered by the reason or
wisdom with which the Board of Directors may have in taking such
action. 11 Also, an intra-corporate controversy is one which arises between a
stockholder and the corporation. There is no distinction, qualification, nor
any exemption whatsoever. The provision is broad and covers all kinds of
controversies between stockholders and corporations. 12
With regard to the amount of P5,000,00 formerly received by herein
petitioner every month, the same cannot be considered as compensation for
her services rendered as Medical Director and Hospital Administrator. The
vouchers 13 submitted by petitioner show that the said amount was paid to
her by PAMANA, Inc., a stock corporation which is separate and distinct from
herein private respondent. Although the payments were considered
advances to Pamana Golden Care, Calamba branch, there is no evidence to
show that the Pamana Golden Care stated in the vouchers refers to herein
respondent Pamana Golden Care Medical Center Foundation, Inc.
Pamana Golden Care is a division of Pamana, Inc., while respondent Pamana
Golden Care Medical Center Foundation, Inc. is a non-stock, non-profit
corporation. It is stated in the memorandum of petitioner that Pamana, Inc.
is a stock and profit corporation selling pre-need plan for education, pension
and health care. The health care plan is called Pamana Golden Care Plan and
the holders are called Pamana Golden Care Card Holders or, simply, Pamana
Members. 14
It is an admitted fact that herein petitioner is a retained physician of
Pamana, Inc., whose patients are holders of the Pamana Golden Care Card.
In fact, in her complaint 15 filed before the Regional Trial Court of Calamba,
herein petitioner is asking among others, for professional fees and/or
retainer fees earned for her treatment of Pamana Golden Care card
holders. 16 Thus, at most, said vouchers can only be considered as proof of
payment of retainer fees made by Pamana, Inc. to herein petitioner as a
retained physician of Pamana Golden Care.

Moreover, even assuming that the monthly payment of P5,000.00 was a

valid claim against respondent corporation, this would not operate to
effectively remove this case from the jurisdiction of the SEC. In the case
ofCagayan de Oro Coliseum, Inc. vs. Office of the Minister of Labor and
Employment, etc., et al., 17 we ruled that "(a)lthough the reliefs sought by
Chavez appear to fall under the jurisdiction of the labor arbiter as they are
claims for unpaid salaries and other remunerations for services rendered, a
close scrutiny thereof shows that said claims are actually part of the
perquisites of his position in, and therefore interlinked with, his relations
with the corporation. In Dy, et al., vs. NLRC, et al., the Court said: "(t)he
question of remuneration involving as it does, a person who is not a mere
employee but a stockholder and officer, an integral part, it might be said, of
the corporation, is not a simple labor problem but a matter that comes
within the area of corporate affairs and management and is in fact a
corporate controversy in contemplation of the Corporation Code."

WHEREFORE, the questioned resolution of the NLRC is hereby AFFIRMED,

without prejudice to petitioner's taking recourse to and seeking relief
through the appropriate remedy in the proper forum.

SO ORDERED.

G.R. No. 144767 March 21, 2002

DILY DANY NACPIL, petitioner,

vs.
INTERNATIONAL BROADCASTING CORPORATION, respondent.
KAPUNAN, J.:
This is a petition for review on certiorari under Rule 45, assailing the
Decision of the Court of Appeals dated November 23, 1999 in CA-G.R. SP No.
527551 and the Resolution dated August 31, 2000 denying petitioner Dily
Dany Nacpil's motion for reconsideration. The Court of Appeals reversed the
decisions promulgated by the Labor Arbiter and the National Labor Relations
Commission (NLRC), which consistently ruled in favor of petitioner.
Petitioner states that he was Assistant General Manager for
Finance/Administration and Comptroller of private respondent
Intercontinental Broadcasting Corporation (IBC) from 1996 until April 1997.
According to petitioner, when Emiliano Templo was appointed to replace IBC
President Tomas Gomez III sometime in March 1997, the former told the
Board of Directors that as soon as he assumes the IBC presidency, he would
terminate the services of petitioner. Apparently, Templo blamed petitioner,
along with a certain Mr. Basilio and Mr. Gomez, for the prior
mismanagement of IBC. Upon his assumption of the IBC presidency, Templo
allegedly harassed, insulted, humiliated and pressured petitioner into
resigning until the latter was forced to retire. However, Templo refused to
pay him his retirement benefits, allegedly because he had not yet secured
the clearances from the Presidential Commission on Good Government and
the Commission on Audit. Furthermore, Templo allegedly refused to
recognize petitioner's employment, claiming that petitioner was not the
Assistant General Manager/Comptroller of IBC but merely usurped the
powers of the Comptroller. Hence, in 1997, petitioner filed with the Labor
Arbiter a complaint for illegal dismissal and non-payment of
benefits.1âwphi1.nêt
Instead of filing its position paper, IBC filed a motion to dismiss alleging that
the Labor Arbiter had no jurisdiction over the case. IBC contended that
petitioner was a corporate officer who was duly elected by the Board of
Directors of IBC; hence, the case qualifies as an intra-corporate dispute
falling within the jurisdiction of the Securities and Exchange Commission
(SEC). However, the motion was denied by the Labor Arbiter in an Order
dated April 22, 1998.2
On August 21, 1998, the Labor Arbiter rendered a Decision stating that
petitioner had been illegally dismissed. The dispositive portion thereof
reads:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered in
favor of the complainant and against all the respondents, jointly and
severally, ordering the latter:
1. To reinstate complainant to his former position without diminution of
salary or loss of seniority rights, and with full backwages computed from the
time of his illegal dismissal on May 16, 1997 up to the time of his actual
reinstatement which is tentatively computed as of the date of this decision
on August 21, 1998 in the amount of P1,231,750.00 (i.e., P75,000.00 a
month x 15.16 months = P1,137,000.00 plus 13 th month pay equivalent to
1/12 of P 1,137,000.00 = P94,750.00 or the total amount of P 1,231,750.00).
Should complainant be not reinstated within ten (10) days from receipt of
this decision, he shall be entitled to additional backwages until actually
reinstated.
2. Likewise, to pay complainant the following:
a) P 2 Million as and for moral damages;
b) P500,000.00 as and for exemplary damages; plus and (sic)
c) Ten (10%) percent thereof as and for attorney's fees.
SO ORDERED.3
IBC appealed to the NLRC, but the same was dismissed in a Resolution dated
March 2, 1999, for its failure to file the required appeal bond in accordance
with Article 223 of the Labor Code. 4 IBC then filed a motion for
reconsideration that was likewise denied in a Resolution dated April 26,
1999.5
IBC then filed with the Court of Appeals a petition for certiorari under Rule
65, which petition was granted by the appellate court in its Decision dated
November 23, 1999. The dispositive portion of said decision states:
WHEREFORE, premises considered, the petition for Certiorari is GRANTED.
The assailed decisions of the Labor Arbiter and the NLRC are REVERSED and
SET ASIDE and the complaint is DISMISSED without prejudice.
SO ORDERED.6
Petitioner then filed a motion for reconsideration, which was denied by the
appellate court in a Resolution dated August 31, 2000.
Hence, this petition.
Petitioner Nacpil submits that:
I.
THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER WAS
APPOINTED BY RESPONDENT'S BOARD OF DIRECTORS AS COMPTROLLER.
THIS FINDING IS CONTRARY TO THE COMMON, CONSISTENT POSITION AND
ADMISSION OF BOTH PARTIES. FURTHER, RESPONDENT'S BY-LAWS DOES
NOT INCLUDE COMPTROLLER AS ONE OF ITS CORPORATE OFFICERS.
II.
THE COURT OF APPEALS WENT BEYOND THE ISSUE OF THE CASE WHEN IT
SUBSTITUTED THE NATIONAL LABOR RELATIONS COMMISSION'S DECISION
TO APPLY THE APPEAL BOND REQUIREMENT STRICTLY IN THE INSTANT CASE.
THE ONLY ISSUE FOR ITS DETERMINATION IS WHETHER NLRC COMMITTED
GRAVE ABUSE OF DISCRETION IN DOING THE SAME. 7
The issue to be resolved is whether the Labor Arbiter had jurisdiction over
the case for illegal dismissal and non-payment of benefits filed by petitioner.
The Court finds that the Labor Arbiter had no jurisdiction over the same.
Under Presidential Decree No. 902-A (the Revised Securities Act), the law in
force when the complaint for illegal dismissal was instituted by petitioner in
1997, the following cases fall under the exclusive of the SEC:
a) Devices or schemes employed by or any acts of the board of directors,
business associates, its officers or partners, amounting to fraud and
misrepresentation which may be detrimental to the interest of the public
and/or of the stockholders, partners, members of associations or
organizations registered with the Commission;
b) Controversies arising out of intra-corporate or partnership relations,
between and among stockholders, members or associates; between any or
all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such
corporation, partnership or association and the State insofar as it concerns
their individual franchise or right to exist as such entity;
c) Controversies in the election or appointment of directors, trustees,
officers, or managers of such corporations, partnerships or associations;
d) Petitions of corporations, partnerships, or associations to be declared in
the state of suspension of payments in cases where the corporation,
partnership or association possesses property to cover all of its debts but
foresees the impossibility of meeting them when they respectively fall due
or in cases where the corporation, partnership or association has no
sufficient assets to cover its liabilities, but is under the Management
Committee created pursuant to this decree. (Emphasis supplied.)
The Court has consistently held that there are two elements to be
considered in determining whether the SEC has jurisdiction over the
controversy, to wit: (1) the status or relationship of the parties; and (2) the
nature of the question that is the subject of their controversy. 8
Petitioner argues that he is not a corporate officer of the IBC but an
employee thereof since he had not been elected nor appointed as
Comptroller and Assistant Manager by the IBC's Board of Directors. He
points out that he had actually been appointed as such on January 11, 1995
by the IBC's General Manager, Ceferino Basilio. In support of his argument,
petitioner underscores the fact that the IBC's By-Laws does not even include
the position of comptroller in its roster of corporate officers. 9 He therefore
contends that his dismissal is a controversy falling within the jurisdiction of
the labor courts.10
Petitioner's argument is untenable. Even assuming that he was in fact
appointed by the General Manager, such appointment was subsequently
approved by the Board of Directors of the IBC. 11 That the position of
Comptroller is not expressly mentioned among the officers of the IBC in the
By-Laws is of no moment, because the IBC's Board of Directors is
empowered under Section 25 of the Corporation Code 12 and under the
corporation's By-Laws to appoint such other officers as it may deem
necessary. The By-Laws of the IBC categorically provides:
XII. OFFICERS
The officers of the corporation shall consist of a President, a Vice-President,
a Secretary-Treasurer, a General Manager, and such other officers as the
Board of Directors may from time to time does fit to provide for. Said
officers shall be elected by majority vote of the Board of Directors and shall
have such powers and duties as shall hereinafter provide (Emphasis
supplied).13
The Court has held that in most cases the "by-laws may and usually do
provide for such other officers,"14 and that where a corporate office is not
specifically indicated in the roster of corporate offices in the by-laws of a
corporation, the board of directors may also be empowered under the by-
laws to create additional officers as may be necessary. 15
An "office" has been defined as a creation of the charter of a corporation,
while an "officer" as a person elected by the directors or stockholders. On
the other hand, an "employee" occupies no office and is generally employed
not by action of the directors and stockholders but by the managing officer
of the corporation who also determines the compensation to be paid to
such employee.16
As petitioner's appointment as comptroller required the approval and
formal action of the IBC's Board of Directors to become valid, 17 it is clear
therefore holds that petitioner is a corporate officer whose dismissal may be
the subject of a controversy cognizable by the SEC under Section 5(c) of P.D.
902-A which includes controversies involving both election
and appointment of corporate directors, trustees, officers, and
managers.18 Had petitioner been an ordinary employee, such board action
would not have been required.
Thus, the Court of Appeals correctly held that:
Since complainant's appointment was approved unanimously by the Board
of Directors of the corporation, he is therefore considered a corporate
officer and his claim of illegal dismissal is a controversy that falls under the
jurisdiction of the SEC as contemplated by Section 5 of P.D. 902-A. The rule is
that dismissal or non-appointment of a corporate officer is clearly an intra-
corporate matter and jurisdiction over the case properly belongs to the SEC,
not to the NLRC.19
As to petitioner's argument that the nature of his functions is
recommendatory thereby making him a mere managerial officer, the Court
has previously held that the relationship of a person to a corporation,
whether as officer or agent or employee is not determined by the nature of
the services performed, but instead by the incidents of the relationship as
they actually exist.20
It is likewise of no consequence that petitioner's complaint for illegal
dismissal includes money claims, for such claims are actually part of the
perquisites of his position in, and therefore linked with his relations with,
the corporation. The inclusion of such money claims does not convert the
issue into a simple labor problem. Clearly, the issues raised by petitioner
against the IBC are matters that come within the area of corporate affairs
and management, and constitute a corporate controversy in contemplation
of the Corporation Code.21
Petitioner further argues that the IBC failed to perfect its appeal from the
Labor Arbiter's Decision for its non-payment of the appeal bond as required
under Article 223 of the Labor Code, since compliance with the requirement
of posting of a cash or surety bond in an amount equivalent to the monetary
award in the judgment appealed from has been held to be both mandatory
and jurisdictional.22 Hence, the Decision of the Labor Arbiter had long
become final and executory and thus, the Court of Appeals acted with grave
abuse of discretion amounting to lack or excess of jurisdiction in giving due
course to the IBC's petition for certiorari, and in deciding the case on the
merits.

The IBC's failure to post an appeal bond within the period mandated under
Article 223 of the Labor Code has been rendered immaterial by the fact that
the Labor Arbiter did not have jurisdiction over the case since as stated
earlier, the same is in the nature of an intra-corporate controversy. The
Court has consistently held that where there is a finding that any decision
was rendered without jurisdiction, the action shall be dismissed. Such
defense can be interposed at any time, during appeal or even after final
judgment.23 It is a well-settled rule that jurisdiction is conferred only by the
Constitution or by law. It cannot be fixed by the will of the parties; it cannot
be acquired through, enlarged or diminished by, any act or omission of the
parties.24

Considering the foregoing, the Court holds that no error was committed by
the Court of Appeals in dismissing the case filed before the Labor Arbiter,
without prejudice to the filing of an appropriate action in the proper
court. 1âwphi1.nêt

It must be noted that under Section 5.2 of the Securities Regulation Code
(Republic Act No. 8799) which was signed into law by then President Joseph
Ejercito Estrada on July 19, 2000, the SEC's jurisdiction over all cases
enumerated in Section 5 of P.D. 902-A has been transferred to the Regional
G.R. No. 141093 February 20, 2001
Trial Courts.25
PRUDENTIAL BANK and TRUST COMPANY, petitioner,
WHEREFORE, the petition is hereby DISMISSED and the Decision of the
vs.
Court of Appeals in CA-G.R. SP No. 52755 is AFFIRMED.
CLARITA T. REYES, respondent.
SO ORDERED.
GONZAGA-REYES, J.:
Before the Court is a petition for review on certiorari of the Decision,1 dated
October 15, 1999 of the Court of Appeals in C.A.-G.R. SP No. 30607 and of its
Resolution, dated December 6, 1999 denying petitioner's motion for
reconsideration of said decision. The Court of Appeals reversed and set
aside the resolution2 of the National Labor Relations Commission (NLRC) in
NLRC NCR CA No.009364-95, reversing and setting aside the labor arbiter's
decision and dismissing for lack of merit private respondent's complaint. 3
The case stems from NLRC NCR Case No.00-06-03462-92, which is a
complaint for illegal suspension and illegal dismissal with prayer for moral
and exemplary damages, gratuity, fringe benefits and attorney's fees filed by
Clarita Tan Reyes against Prudential Bank and Trust Company (the Bank)
before the labor arbiter. Prior to her dismissal, private respondent Reyes
held the position of Assistant Vice President in the foreign department of
the Bank, tasked with the duties, among others, to collect checks drawn
against overseas banks payable in foreign currency and to ensure the
collection of foreign bills or checks purchased, including the signing of
transmittal letters covering the same.
After proceedings duly undertaken by the parties, judgment was rendered
by labor Arbiter Cornelio L. Linsangan, the dispositive portion of which
reads:
"WHEREFORE, finding the dismissal of complainant to be without factual
and legal basis, judgment is hereby rendered ordering the respondent bank
to pay her back wages for three (3) years in the amount of P540,000.00
(P15,000.00 x 36 mos.). In lieu of reinstatement, the respondent is also
ordered to pay complainant separation pay equivalent to one month salary
for every year of service, in the amount of P420,000.00 (P15,000 x 28 mos.).
In addition, the respondent should. also pay complainant profit sharing and
unpaid fringe benefits. Attorney's fees equivalent to ten (10%) percent of
the total award should likewise be paid by respondent.
SO ORDERED."4
Not satisfied, the Bank appealed to the NLRC which, as mentioned at the
outset, reversed the Labor Arbiter's decision in its Resolution dated 24
March 1997. Private respondent sought reconsideration which, however,
was denied by the NLRC in its Resolution of 28 July 1998. Aggrieved, private
respondent commenced on October 28, 1998, a petition for certiorari before
the Supreme Court.5 The subject petition was referred to the Court of
Appeals for appropriate action and disposition per resolution of this Court
dated November 25, 1998, in accordance with the ruling in St. Marlin
Funeral Homes vs. NLRC.6
In its assailed decision, the Court of Appeals adopted the following
antecedent facts leading to Reyes's dismissal as summarized by the NLRC:
"The auditors of the Bank discovered that two checks, No.011728-7232-146,
in the amount of US$109,650.00, and No. 011730-7232-146, in the amount
of US$115,000.00, received by the Bank on April 6, 1989, drawn ,by the
Sanford Trading against Hongkong and Shanghai Banking Corporation,
Jurong Branch, Singapore, in favor of Filipinas Tyrom, were not sent out for
collection to Hongkong Shanghai Banking Corporation on the alleged order
of the complainant until the said checks became stale.
The Bank created a committee to investigate the findings of the auditors
involving the two checks which were not collected and became stale.
On March 8, 1991, the president of the Bank issued a memorandum to the
complainant informing her of the findings of the auditors and asked her to
give her side. In reply, complainant requested for an extension of one week
to submit her explanation. In a "subsequent letter, dated March 14, 1991, to
the president, complainant stated that in view of the refusal of the Bank that
she be furnished copies of the pertinent documents she is requesting and
the refusal to grant her a reasonable period to prepare her answer, she was
constrained to make a general denial of any misfeasance or malfeasance on
her part and asked that a formal investigation be made.
As the complainant failed to attend and participate in the formal
investigation conducted by the Committee on May 24, 1991, despite due
notice, the Committee proceeded with its hearings and heard the
testimonies of several witnesses.
The Committee's findings were:
'a) The two (2) HSBC checks were received by the Foreign Department on 6
April 1989. On the same day, complainant authorized the crediting of the
account of Filipinas Tyrom in the amount of P4,780,102.70 corresponding to
the face value of the checks, (Exhibits 6, 22 to 22-A and 23 to 23-A). On the
following day, a transmittal letter was prepared by Ms. Cecilia Joven, a
remittance clerk then assigned in the Foreign Department, for the purpose
of sending out the two (2) HSBC checks for collection. She then requested
complainant to sign the said transmittal letters (Exhibits 1, 7 and 25; TSN, 11
March 1993, pp. 42-52), as it is complainant who gives her instructions
directly concerning the transmittal of foreign bills purchased. All other
transmittal letters are in fact signed by complainant.
b) After Ms. Joven delivered the transmittal letters and the checks to the
Accounting Section of the Foreign Department, complainant instructed her
to withdraw the same for the purpose of changing the addressee thereon
from American Express Bank to Bank of Hawaii (ibid.) under a special
collection scheme (Exhibits 4 and 5 to 5-B).
c) After complying with complainant's instruction, Ms. Joven then returned
to complainant for the latter to sign the new transmittal letters. However,
complainant told Ms. Joven to just hold on to the letters and checks and
await further instructions (ibid.). Thus, the new transmittal letters remained
unsigned. (See Exhibits 5 to 5-B).
d) In June 1989, Ms. Joven was transferred to another department. Hence,
her duties, responsibilities and functions, including the responsibility over
the two (2) HSBC checks, were turned over to another remittance clerk, Ms.
Analisa Castillo (Exhibit 14; TSN, 4 June 1993, pp. 27-29).
e) When asked by Ms. Castillo about the two (2) HSBC checks, Ms. Joven
relayed to the latter complainant's instruction (Exhibit 14; TSN, 4 June 1993,
p. 42).
f) About fifteen (15) months after the HSBC checks were received by the
Bank, the said checks were discovered in the course of an audit conducted
by the Bank's auditors. Atty. Pablo Magno, the Bank's legal counsel, advised
complainant to send the checks for collection despite the lapse of fifteen
(15) months.
g) Complainant, however, deliberately withheld Atty. Magno's advice from
her superior, the Senior Vice-President, Mr. Renato Santos and falsely
informed the latter that Atty . Magno advised that a demand letter be sent
instead, thereby further delaying the collection of the HSBC checks.
h) On 10 July 1990, the HSBC checks were finally sent for collection, but
were returned on 16 July 1990 for the reason 'account closed' (Exhibits 2-A
and 3-A).'
After a review of the Committee's findings, the Board of Directors of the
Bank resolved not to re-elect complainant any longer to the position of
assistant president pursuant to the Bank's By-laws.
On July 19, 1991, complainant was informed of her termination of
employment from the Bank by Senior Vice President Benedicto L. Santos, in
a letter the text of which is quoted in full:
'Dear Mrs. Reyes:
After a thorough investigation and appreciation of the charges against you as
contained in the Memorandum of the President dated March 8, 1991, the
Fact Finding Committee which was created to investigate the commission
and/or omission of the acts alluded therein, has found the following:
1. You have deliberately held the clearing of Checks Nos. 11728 and 11730
of Hongkong and Shanghai Banking Corporation in the total amount of
US$224,650.00 by giving instructions to the collection clerk not to send the
checks for collection. In view thereof, when the said checks were finally sent
to clearing after the lapse of 15 months from receipt of said checks, they
were returned for the reason 'Account closed.' To date, the value of said
checks have not been paid by Filipinas Tyrom, which as payee of the checks,
had been credited with their peso equivalent;
2. You tried to influence the decision of Atty. Pablo P. Magno, Bank legal
counsel, by asking him to do something allegedly upon instructions of a
Senior Vice President of the Bank or else lose his job when in truth and in
fact no such instructions was given; and
3. You deliberately withheld from Mr. Santos, Senior Vice President, the
advice given by the legal counsel of the Bank which Mr. Santos had asked
you to seek. As a matter of fact, you even relayed a false advice which
delayed further the sending of the two checks for collection. Likewise, you
refused to heed the advice of the Bank's legal counsel to send the checks for
collection.
These findings have given rise to the Bank's loss of trust and confidence in
you, the same being acts of serious misconduct in the performance of your
duties resulting in monetary loss to the Bank. In view thereof, the Board has
resolved not to re-elect you to the position of Assistant Vice President of the
Bank. Accordingly, your services are terminated effective immediately. In
relation thereto, your monetary and retirement benefits are forfeited except
those that have vested in you.'
In her position paper, complainant alleged that the real reason for her
dismissal was her filing of the criminal cases against the bank president, the
vice president and the auditors of the Bank, such filing not being a valid
ground for her dismissal. Furthermore, she alleged that it would be self-
serving for the respondent to state that she was found guilty of gross
misconduct in deliberately withholding the clearing of the two dollar checks.
She further alleged that she was not afforded due process as she was not
given the chance to refute the charges mentioned in the letter of dismissal.
Hence, she was illegally dismissed.
On the other hand, respondent argues that there were substantial bases for
the bank to lose its trust and confidence on the complainant and,
accordingly, had just cause for terminating her services. Moreover, for filing
the clearly unfounded suit against the respondent's officers, complainant is
liable to pay moral and exemplary damages and attorney's fees." 7
The Court of Appeals found that the NLRC committed grave abuse of
discretion in ruling that the dismissal of Reyes is valid. In effect, the Court of
Appeals reinstated the judgment of the labor arbiter with modification as
follows:
"WHEREFORE, in the light of the foregoing, the decision appealed from is
hereby REVERSED and SET ASIDE. In lieu thereof, judgment is hereby
rendered ordering respondent Bank as follows:
1. To pay petitioner full backwages and other benefits from July 19, 1991 up
to the finality of this judgment;
2. To pay petitioner separation pay equivalent to one (1) month salary for
every year of service in lieu of reinstatement; and
3. To pay attorney's fee equivalent to ten (10%) percent of the total award.
SO ORDERED."8
Hence, the Bank's recourse to this Court contending in its memorandum
that:
"IN SETTING ASIDE THE DECISION DATED 24 MARCH 1997 AND THE
RESOLUTION DATED 28 JULY 1998 OF THE NLRC AND REINSTATING WITH
MODIFICATION THE DECISION DATED 20 JULY 1995 OF LABOR ARBITER
CORNELIO L. LINSANGAN, THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED, IN VIEW OF THE FOLLOWING:
I.
IT IS THE SEC (NOW THE REGIONAL TRIAL COURT) AND NOT THE NLRC
WHICH HAS ORIGINAL AND EXCLUSIVE JURISDICTION OVER CASES
INVOLVING THE REMOVAL FROM OFFICE OF CORPORATE OFFICERS.
II.
EVEN ASSUMING ARGUENDO THAT THE NLRC HAS JURISDICTION, THERE
WAS SUBSTANTIAL EVIDENCE OF RESPONDENT'S MISCONDUCT JUSTIFYING
THE BANK'S LOSS OF TRUST AND CONFIDENCE ON (sic) HER.
III.
EVEN ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO
BACKWAGES, THE HONORABLE COURT OF APPEALS ERRED IN AWARDING
UNLIMITED AND UNQUALIFIED BACKWAGES THEREBY GOING FAR BEYOND
THE LABOR ARBITER'S DECISION LIMITING THE SAME TO THREE YEARS,
WHICH DECISION RESPONDENT HERSELF SOUGHT TO EXECUTE." 9
In sum, the resolution of this petition hinges on (1) whether the NLRC has
jurisdiction over the complaint for illegal dismissal; (2) whether complainant
Reyes was illegally dismissed; and (3) whether the amount of back wages
awarded was proper.
On the first issue, petitioner seeks refuge behind the argument that the
dispute is an intra-corporate controversy concerning as it does the non-
election of private respondent to the position of Assistant Vice-President of
the Bank which falls under the exclusive and original, jurisdiction of the
Securities and Exchange Commission (now the Regional Trial Court) under
Section 5 of Presidential Decree No. 902-A. More specifically, petitioner
contends that complainant is a corporate officer, an elective position under
the corporate by-laws and her non-election is an intra-corporate controversy
cognizable by the SEC invoking lengthily a number of this Court's decisions. 10
Petitioner Bank can no longer raise the issue of jurisdiction under the
principle of estoppel. The Bank participated in the proceedings from start to
finish. It filed its position paper with the Labor Arbiter. When the decision of
the Labor Arbiter was adverse to it, the Bank appealed to the NLRC. When
the NLRC decided in its favor, the bank said nothing about jurisdiction. Even
before the Court of Appeals, it never questioned the proceedings on the
ground of lack of jurisdiction. It was only when the Court of Appeals ruled in
favor of private respondent did it raise the issue of jurisdiction. The Bank
actively participated in the proceedings before the Labor Arbiter, the NLRC
and the Court of Appeals. While it is true that jurisdiction over the subject
matter of a case may be raised at any time of the proceedings, this rule
presupposes that laches or estoppel has not supervened. In this
regard, Bañaga vs. Commission on the Settlement of Land Problems, 11 is
most enlightening. The Court therein stated:
"This Court has time and again frowned upon the undesirable practice of a
party submitting his case for decision and then accepting the judgment, only
if favorable, and attacking it for lack of jurisdiction when adverse. Here, the
principle of estoppel lies. Hence, a party may be estopped or barred from
raising the question of jurisdiction for the first time in a petition
before the Supreme Court when it failed to do so in the early stages of the
proceedings."
Undeterred, the Bank also contends that estoppel cannot lie considering
that "from the beginning, petitioner Bank has consistently asserted in all its
pleadings at all stages of the proceedings that respondent held the position
of Assistant Vice President, an elective position which she held by virtue of
her having been elected as such by the Board of Directors." As far as the
records before this Court reveal however, such an assertion was made only
in the appeal to the NLRC and raised again before the Court of Appeals, not
for purposes of questioning jurisdiction but to establish that private
respondent's tenure was subject to the discretion of the Board of Directors
and that her non-reelection was a mere expiration of her term. The Bank
insists that private respondent was elected Assistant Vice President
sometime in 1990 to serve as such for only one year. This argument will not
do either and must be rejected.
It appears that private respondent was appointed Accounting Clerk by the
Bank on July 14, 1963. From that position she rose to become supervisor.
Then in 1982, she was appointed Assistant Vice-President which she
occupied until her illegal dismissal on July 19, 1991. The bank's contention
that she merely holds an elective position and that in effect she is not a
regular employee is belied by the nature of her work and her length of
service with the Bank. As earlier stated, she rose from the ranks and has
been employed with the Bank since 1963 until the termination of her
employment in 1991. As Assistant Vice President of the foreign department
of the Bank, she is tasked, among others, to collect checks drawn against
overseas banks payable in foreign currency and to ensure the collection of
foreign bills or checks purchased, including the signing of transmittal letters
covering the same. It has been stated that "the primary standard of
determining regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual trade
or business of the employer. 12 Additionally, "an employee is regular because
of the nature of work and the length of service, not because of the mode or
even the reason for hiring them." 13 As Assistant Vice-President of the
Foreign Department of the Bank she performs tasks integral to the
operations of the bank and her length of service with the bank totaling 28
years speaks volumes of her status as a regular employee of the bank. In
fine, as a regular employee, she is entitled to security of tenure; that is, her
services may be terminated only for a just or authorized cause. 14 This being
in truth a case of illegal dismissal, it is no wonder then that the Bank
endeavored to the very end to establish loss of trust and confidence and
serious misconduct on the part of private respondent but, as will be
discussed later, to no avail.
This brings us to the second issue wherein the Bank insists that it has
presented substantial evidence to prove the breach of trust on the part of
private respondent warranting her dismissal. On this point, the Court of
Appeals disagreed and set aside the findings of the NLRC that Reyes
deliberately withheld the release of the two dollar checks; that she is guilty
of conflict of interest that she waived her right to due process for not
attending the hearing; and that she was dismissed based on loss of trust and
confidence. We quote pertinent portions of the decision, to wit:
"FIRST: Respondent Bank heavily relied on the testimony and affidavit of
Remittance Clerk Joven' in trying to establish loss of confidence. However,
Joven's allegation that petitioner instructed her to hold the subject two
dollar checks amounting to $224,650.00 falls short of the requisite proof to
warrant petitioner's dismissal. Except for Joven's bare assertion to withhold
the dollar checks per petitioner's instruction, respondent Bank failed to
adduce convincing evidence to prove bad faith and malice. It bears
emphasizing that respondent Bank's witnesses merely corroborate Joven's
testimony.
Upon this point, the rule that proof beyond reasonable doubt is not required
to terminate an employee on the charge of loss of confidence and that it is
sufficient that there is some basis for such loss of confidence, is not
absolute. The right of an employer to dismiss employees on the ground that
it has lost its trust and confidence in him must not be exercised arbitrarily
and without just cause. For loss of trust and confidence to be valid ground
for an employee's dismissal, it must be substantial and not arbitrary, and
must be founded on clearly established facts sufficient to warrant the
employee's separation from work (Labor vs. NLRC, 248 SCRA 183).
SECOND. Respondent Bank's charge of deliberate withholding of the two
dollar checks finds no support in the testimony of Atty. Jocson, Chairman of
the Investigating Committee. On cross examination, Atty. Jocson testified
that the documents themselves do not show any direct withholding (pp.
186-187, Rollo). There being conflict in the statement of witnesses, the court
must adopt the testimony which it believes to be true (U.S. vs. Losada, 18
Phil. 90).
THIRD. Settled is the rule that when the conclusions of the Labor Arbiter are
sufficiently substantiated by the evidence on record, the same should be
respected by appellate tribunals since he is in a better position to assess and
evaluate the credibility of the contending parties (Ala Mode Garments,
Inc. vs. NLRC, 268 SCRA 497). In this regard, the Court quotes with approval
the following disquisition of Labor Arbiter Linsangan, thus:
This Office has repeatedly gone over the records of the case and
painstakingly examined the testimonies of respondent bank's witnesses.
One thing was clearly established: that the legality of complainant's
dismissal based on the first ground stated in respondent's letter of
termination (exh. 25-J, supra) will rise or fall on the credibility of Miss Joven
who undisputedly is the star witness for the bank. It will be observed that
the testimonies of the bank's other witnesses, Analiza Castillo, Dante Castor
and Antonio Ragasa pertaining to the non-release of the dollar checks and
their corresponding transmittal letters were all anchored on what was told
them by Ms. Joven, that is: she was instructed by complainant to hold the
release of subject checks. In a nutshell, therefore, the issue boils down to
who between complainant and Ms. Joven is more credible.
After painstakingly examining the testimonies of Ms. Joven and respondent's
other witnesses' this Office finds the evidence still wanting in proof of
complainant's guilt. This Office had closely observed the demeanor of Ms.
Joven while testifying on the witness stand and was not impressed by her
assertions. The allegation of Ms. Joven in that her non-release of the dollar
checks was upon the instruction of complainant Reyes is extremely doubtful.
In the first place, the said instruction constitutes a gross violation of the
bank's standard operating procedure. Moreover, Ms. Joven was fully aware
that the instruction, if carried out, will greatly prejudice her employer bank.
It was incumbent upon Ms. Joven not only to disobey the instruction but
even to report the matter to management, if same was really given to her by
complainant.
Our doubt on the veracity of Ms. Joven's allegation even deepens as we
consider the fact that when the non-release of the checks was discovered by
Ms. Castillo the former contented herself by continuously not taking any
action on the two dollar checks. Worse, Ms. Joven even impliedly told by
Ms. Castillo (sic) to ignore the two checks and just withhold their release. In
her affidavit Ms. Castillo said:
'4. When I asked Cecille Joven what I was supposed to do with those checks,
she said the same should be held as per instruction of Mrs. Reyes.' (Exh.
"14", supra).
The evidence shows that it was only on 16 May 1990 that Ms. Joven broke
her silence on the matter despite the fact that on 15 November 1989, at
about 8:00 p.m. the complainant, accompanied by driver Celestino Banito,
went to her residence and confronted her regarding the non-release of the
dollar checks. It took Ms. Joven eighteen (18) months before she explained
her side on the controversy. As to what prompted her to make her letter of
explanation was not even mentioned.
On the other hand, the actions taken by the complainant were spontaneous.
When complainant was informed by Mr. Castor and Ms. Castillo regarding
the non-release of the checks sometime in November, 1989 she immediately
reported the matter to Vice President Santos, Head of the Foreign
Department. And as earlier mentioned, complainant went to the residence
of Ms. Joven to confront her. In this regard, Celestino Bonito, complainant's
driver, stated in his affidavit, thus:
'1. Sometime on November 15, 1989 at about 7:00 o'clock in the evening,
Mrs. Clarita Tan Reyes and I were in the residence of one Ms. Cecille Joven,
then a Processing Clerk in the Foreign Department of Prudential Bank;
2. Ms. Cecille Joven, her mother, myself, and Mrs. Clarita Tan Reyes were
seated in the sala when the latter asked the former, Ms. Cecille Joven, how it
came about that the two dollar checks which she was then holding with the
transmittal letters, were found in a plastic envelope kept day-to-day by the
former;
3. Hesitatingly, Cecille Joven said: "Eh, Mother (Mrs. Tan Reyes had been
intimately called Mother in the Bank) akala ko bouncing checks yon mga
yon.
4. Mrs. Clarita Tan Reyes, upon hearing those words, was surprised and she
said: "Ano, papaano mong alam na bouncing na hindi mo pa pinadadala:
5. Mrs. Cecille Joven turned pale and was not able to answer.'
There are other factors that constrain this Office to doubt even more the
legality of complainant's dismissal based on the first ground stated in the
letter of dismissal. The non-release of the dollar checks was reported to top
management sometime on 15 November 1989 when complainant,
accompanied by Supervisor Dante Castor and Analiza Castillo, reported the
matter to Vice President Santos. And yet, it was only on 08 March 1991,
after a lapse of sixteen (16) months from the time the non-release of the
checks was reported to the Vice President, that complainant was issued a
memorandum directing her to submit an explanation. And it took the bank
another four (4) months before it dismissed complainant.
The delayed action taken by respondent against complainant lends credence
to the assertion of the latter that her dismissal was a mere retaliation to the
criminal complaints she filed against the bank's top officials.
It clearly appears from the foregoing that the complainant herein has no
knowledge of, much less participation in, the non-release of the dollar
checks under discussion. Ms. Joven is solely responsible for the same.
Incidentally, she was not even reprimanded by the bank.
FOURTH. Respondent Bank having failed to furnish petitioner necessary
documents imputing loss of confidence, petitioner was not amply afforded
opportunity to prepare an intelligent answer. The Court finds nothing
confidential in the auditor's report and the affidavit of Transmittal Clerk
Joven. Due process dictates that management accord the employees every
kind of assistance to enable him to prepare adequately for his defense,
including legal representation.
The issue of conflict of interest not having been covered by the investigation,
the Court finds it irrelevant to the charge." 15
We uphold the findings of the Court of Appeals that the dismissal of private
respondent on the ground of loss of trust and confidence was without basis.
The charge was predicated on the testimony of Ms. Joven and we defer to
the findings of the Labor Arbiter as confirmed and adopted by the Court of
Appeals on the credibility of said witness. This Court is not a trier of facts
and will not weigh anew the evidence already passed upon by the Court of
Appeals.16
On the third issue, the Bank questions the award of full backwages and
other benefits from July 19, 1991 up to the finality of this judgment;
separation pay equivalent to one (1) month salary for every year of service
in lieu of reinstatement; and attorney's fees equivalent to ten (10%) percent
of the total award. The Bank argues, in the main, that private respondent is
not entitled to full backwages in view of the fact that she did not bother to
appeal that portion of the labor arbiter's judgment awarding back wages
limited to three years. It must be stressed that private respondent filed a
special civil action for certiorari to review the decision of the NLRC 17 and not
an ordinary appeal. An ordinary appeal is distinguished from the remedy of
certiorari under Rule 65 of the Revised Rules of Court in that in ordinary
appeals it is settled that a party who did not appeal cannot seek affirmative
relief other than the ones granted in the decision of the court below. 18 On
the other hand, resort to a judicial review of the decisions of the National
Labor Relations Commission in a petition for certiorari under Rule 65 of
Rules of Court is confined to issues of want or excess of jurisdiction and
grave abuse of discretion.19 In the instant case, the Court of Appeals found
that the NLRC gravely abused its discretion in finding that the private
respondent's dismissal was valid and so reversed the same. Corollary to the
foregoing, the appellate court awarded backwages in accordance with
current jurisprudence.
Indeed, jurisprudence is clear on the amount of backwages recoverable in
cases of illegal dismissal. Employees illegally dismissed prior to the
effectivity of Republic Act No. 6715 on March 21, 1989 are entitled to
backwages up to three (3) years without deduction or qualification, while
those illegally dismissed after are granted full backwages inclusive of
allowances and other benefits or their monetary equivalent from the time
their actual compensation was withheld from them up to the time of their
actual reinstatement. 20 Considering that private respondent was terminated
on July 19, 1991, she is entitled to full backwages from the time her actual
compensation was withheld from her (which, as a rule, is from the time of
her illegal dismissal) up to the finality of this judgment (instead of
reinstatement) considering that reinstatement is no longer feasible as
correctly pointed out by the Court of Appeals on account of the strained
relations brought about by the litigation in this case. Since reinstatement is
no longer viable, she is also entitled to separation pay equivalent to one (1)
month salary for every year of service. 21 Lastly, since private respondent was
compelled to file an action for illegal dismissal with the labor arbiter, she is
likewise entitled to attorney's fees22 at the rate above-mentioned. There is
no room to argue, as the Bank does here, that its liability should be
mitigated on account of its good faith and that private respondent is not
entirely blameless. There is no showing that private respondent is partly at
fault or that the Bank acted in good faith in terminating an employee of
twenty-eight years. In any event, Article 279 of Republic Act No.
671523 clearly and plainly provides for "full backwages" to illegally dismissed
employees.1âwphi1.nêt

WHEREFORE, the instant petition for review on certiorari is DENIED, and the
assailed Decision of the Court of Appeals, dated October 15, 1999,
is AFFIRMED.

SO ORDERED.

G.R. No. L-58877 March 15, 1982

PEPSI-COLA BOTTLING COMPANY, COSME DE ABOITIZ, and ALBERTO M.

DACUYCUY, petitioners,
vs.
HON. JUDGE ANTONIO M. MARTINEZ, in his official capacity, and
ABRAHAM TUMALA, JR., respondents.
ESCOLIN, J.:
This petition for certiorari, prohibition and mandamus raises anew the legal
question often brought to this Court: Which tribunal has exclusive
jurisdiction over an action filed by an employee against his employer for
recovery of unpaid salaries, separation benefits and damages — the court of
general jurisdiction or the Labor Arbiter of the National Labor Relations
Commission [NLRC]?
The facts that gave rise to this petition are as follows:
On September 19, 1980, respondent Abraham Tumala, Jr. filed a complaint
in the Court of First Instance of Davao, docketed as Civil Case No. 13494,
against petitioners Pepsi-Cola Bottling Co., Inc., its president Cosme de
Aboitiz and other company officers. Under the first cause of action, the
complaint averred inter alia that Tumala was a salesman of the company in
Davao City from 1977 up to August 21, 1980; that in the annual "Sumakwel"
contest conducted by the company in 1979, Tumala was declared winner of
the "Lapu-Lapu Award" for his performance as top salesman of the year, an
award which entitled him to a prize of a house and lot; and that petitioners,
despite demands, have unjustly refused to deliver said prize Under the
second cause of action, it was alleged that on August 21, 1980, petitioners,
"in a manner oppressive to labor" and "without prior clearance from the
Ministry of Labor", "arbitrarily and ilegally" terminated his employment. He
prayed that petitioners be ordered, jointly and severally, to deliver his prize
of house and lot or its cash equivalent, and to pay his back salaries and
separation benefits, plus moral and exemplary damages, attorney's fees and
litigation expenses. He did not ask for reinstatement.
Petitioners moved to dismiss the complaint on grounds of lack of jurisdiction
and cause of action. Petitioners further alleged that Tumala was not entitled
to the "Sumakwel" prize for having misled the company into declaring him
top salesman for 1979 through various deceitful and fraudulent
manipulations and machinations in the performance of his duties as
salesman and depot in-charge of the bottling company in Davao City, which
manipulations consisted of "unremitted cash collections, fictitious
collections of trade accounts, fictitious loaned empties, fictitious product
deals, uncollected loaned empties, advance sales confirmed as fictitious,
and route shortages which resulted to the damage and prejudice of the
bottling company in the amount of P381,851.76." The alleged commission of
these fraudulent acts was also advanced by petitioners to justify Tumala's
dismissal.
The court below, sustaining its jurisdiction over the case, denied the motion
for reconsideration. Hence the present recourse.
We rule that the Labor Arbiter has exclusive jurisdiction over the case.
Jurisdiction over the subject matter in a judicial proceeding is conferred by
the sovereign authority which organizes the court; and it is given only by
law. 1 Jurisdiction is never presumed; it must be conferred by law in words
that do not admit of doubt. 2
Since the jurisdiction of courts and judicial tribunals is derived exclusively
from the statutes of the forum, the issue efore Us should be resolved on the
basis of the law or statute now in force. We find that law in Presidential
Decree 1691 which took effect on May 1, 1980, Section 3 of which reads as
follows:
SEC. 3. Article 217, 222 and 262 of Book V of the Labor Code are hereby
amended to read as follows:
Article 217. Jurisdiction of Labor Arbiters and the Commission. — The Labor
Arbiters shall have the original and exclusive jurisdiction to hear and decide
the following cases involving all workers, whether agricultural or non-
agricultural:
1. Unfair labor practice cases;
2. Unresolved issues in collective bargaining, including those that involve
waged hours of work and other terms and conditions of employment;
3. All money claims of workers, including those based on non-payment or
underpayment of wages, overtime compensation, separation pay and other
benefits provided by law or appropriate agreement, except claims for
employees' compensation, social security, medicare and maternity benefits;
4. Cases involving household services; and
5. All other claims arising from employer-employee relations, unless
expressly excluded by this Code.
Under paragraphs 3 and 5 of the above Presidential Decree, the case is
exclusively cognizable by the Labor Arbiters of the National Labor Relations
Commission.
It is to be noted that P.D. 1691 is an exact reproduction of Article 217 of the
Labor Code (P.D. 442), which took effect on May 1, 1974. In Garcia vs.
Martinez 3, an action filed on August 2, 1976 in the Court of First Instance of
Davao by a dismissed employee against his employer for actual, moral and
exemplary damages, We held that under Article 217 of the Labor Code, the
law then in force, the case was within the exclusive jurisdiction of the Labor
Arbiters and the National Labor Relations Commission [NLRC]. This Court,
per Justice Aquino, rational this holding thus:
The provisions of paragraph 3 and 5 of Article 217 are broad and
comprehensive enough to cover Velasco's [employee's] claim for damages
allegedly arising from his unjustified dismissal by Garcia [employer]. His
claim was a consequence of the termination of their employer-employee
relations [Compare with Ruby Industrial Corporation vs. Court of First
Instance of Manila, L- 38893, August 31, 1977, 78 SCRA 499].
Article 217 of the Labor Code words amended by P.D. 1367, which was
promulgated on May 1, 1978, the full text of which is quoted as follows:
SECTION 1. Paragraph [a] of Art, 217 of the Labor Code as amended is
hereby further amended to read as follows:
[a] The Labor Arbiters shall have exclusive jurisdiction hear and decide the
following cases involving all workers, whether agricultural or non-
agricultural:
1] Unfair labor practice cases;
2] Unresolved issues in collective bargaining, including those which involve
wages, hours of work, and other terms conditions of employment; and
3] All other cases arising from employer-employee relations duly indorsed by
the Regional Directors in accordance with the provisions of this Code.
Provided, that the Regional Directors shall not indorse and Labor Arbiters
shall not entertain claims for moral or other forms of damages.
It will be noted that paragraphs 3 and 5 of Article 217 were deleted from the
text of the above decree and a new provision incorporated therein, to wit:
"Provided that the Regional Directors shall not indorse and Labor Arbiters
shall not en certain claims for moral or other forms of damages." This
amendatory act thus divested the Labor Arbiters of their competence to
pass upon claims for damages by employees against their employers.
However, on May 1, 1980, Article 217, as amended by P.D. 1367, was
amended anew by P.D. 1691. This last decree, which is a verbatim
reproduction of the original test of Article 217 of the Labor Code, restored to
the Labor Arbiters of the NLRC exclusive jurisdiction over claims, money or
otherwise, arising from employer-employee relations, except those
expressly excluded therefrom.
In sustaining its jurisdiction over the case at bar, the respondent court relied
on Calderon vs. Court of Appeals 4 , where We ruled that an employee's
action for unpaid salaries, alowances and other reimbursable expenses and
damages was beyond the periphery of the jurisdictional competence of the
Labor Arbiters. Our ruling in Calderon, however, no longer applaies to this
case because P.D. 1367, upon which said decision was based, had already
been superceded by P.D. 1691. As heretofore stated, P.D. 1691 restored to
the Labor Arbiters their exlcusive jurisdiction over said classes of claims.
Respondent Tumala maintains that his action for delivery of the house and
lot, his prize as top salesman of the company for 1979, is a civil controversy
triable exclusively by the court of the general jurisdiction. We do not share
this view. The claim for said prize unquestionably arose from an employer-
employee relation and, therefore, falls within the coverage of par. 5 of P.D.
1691, which speaks of "all claims arising from employer-employee relations,
unless expressly excluded by this Code." Indeed, Tumala would not have
qualitfied for the content, much less won the prize, if he was not an
employee of the company at the time of the holding of the contest. Besides,
the cause advanced by petitioners to justify their refusal to deliver the prize
—the alleged fraudulent manipulations committed by Tumala in connection
with his duties as salesman of the company—involves an inquiry into his
actuations as an employee.

Besides, to hold that Tumala's claim for the prize should be passed upon by
the regular court of justice, independently and separately from his claim for
back salaries, retirement benefits and damages, would be to sanction split
juridiction and multiplicity of suits which are prejudicial to the orderly
administration of justice.

One last point. Petitioners content that Tumala has no cause of action to as
for back salaries and damages because his dimissal was authorized by the
Regional Director of the MInistry of Labor. This question calls for the
presentaiton of evidence and the same may well be entilated before the
labor Arbiter who has jurisdiction over the case. Besides, the issue raised is
not for Us to determine in this certiorari proceeding. The extraordinary
remedy of certiorari proceeding. The extraordinary remedy of certiorari
offers only a limited form of review and its principal function is to keep an G.R. No. 80774 May 31, 1988
inferior tribunal within its jurisdiction. 5
SAN MIGUEL CORPORATION, petitioner,
WHEREFORE, the petition is granted, and respondent judge is hereby vs.
directed to dismiss Civil Case No. 13494, without prejudice to the right of NATIONAL LABOR RELATIONS COMMISSION and RUSTICO
respondent Tumala to refile the same with the Labor Arbiter. No costs. VEGA, respondents.

SO ORDERED. Siguion Reyna, Montecillo & Ongsiako Law Offices for petitioner.

The Solicitor General for public respondent.

FELICIANO, J.:
In line with an Innovation Program sponsored by petitioner San Miguel
Corporation ("Corporation;" "SMC") and under which management
undertook to grant cash awards to "all SMC employees ... except [ED-HO
staff, Division Managers and higher-ranked personnel" who submit to the
Corporation Ideas and suggestions found to be beneficial to the Corporation,
private respondent Rustico Vega submitted on 23 September 1980 an
innovation proposal. Mr. Vega's proposal was entitled "Modified Grande
Pasteurization Process," and was supposed to eliminate certain alleged
defects in the quality and taste of the product "San Miguel Beer Grande:"
Title of Proposal
Modified Grande Pasteurization Process
Present Condition or Procedure
At the early stage of beer grande production, several cases of beer grande
full goods were received by MB as returned beer fulls (RBF). The RBF's were
found to have sediments and their contents were hazy. These effects are
usually caused by underpasteurization time and the pasteurzation units for
beer grande were almost similar to those of the steinie.
Proposed lnnovation (Attach necessary information)
In order to minimize if not elienate underpasteurization of beer grande,
reduce the speed of the beer grande pasteurizer thereby, increasing the
pasteurization time and the pasteurization acts for grande beer. In this way,
the self-life (sic) of beer grande will also be increased. 1
Mr. Vega at that time had been in the employ of petitioner Corporation for
thirteen (1 3) years and was then holding the position of "mechanic in the
Bottling Department of the SMC Plant Brewery situated in Tipolo, Mandaue
City.
Petitioner Corporation, however, did not find the aforequoted proposal
acceptable and consequently refused Mr. Vega's subsequent demands for a
cash award under the Innovation Program. On 22 February 1983., a
Complaint2 (docketed as Case No. RAB-VII-0170-83) was filed against
petitioner Corporation with Regional Arbitration Branch No. VII (Cebu City)
of the then.", Ministry of Labor and Employment. Frivate respondent Vega
alleged there that his proposal "[had] been accepted by the methods analyst
and implemented by the Corporation [in] October 1980," and that the same
"ultimately and finally solved the problem of the Corporation in the
production of Beer Grande." Private respondent thus claimed entitlement to
a cash prize of P60,000.00 (the maximum award per proposal offered under
the Innovation Program) and attorney's fees.
In an Answer With Counterclaim and Position Paper, 3 petitioner Corporation
alleged that private respondent had no cause of action. It denied ever
having approved or adopted Mr. Vega's proposal as part of the Corporation's
brewing procedure in the production of San Miguel Beer Grande. Among
other things, petitioner stated that Mr. Vega's proposal was tumed down by
the company "for lack of originality" and that the same, "even if
implemented [could not] achieve the desired result." Petitioner further
alleged that the Labor Arbiter had no jurisdiction, Mr. Vega having
improperly bypassed the grievance machinery procedure prescribed under a
then existing collective bargaining agreement between management and
employees, and available administrative remedies provided under the rules
of the Innovation Program. A counterclaim for moral and exemplary
damages, attorney's fees, and litigation expenses closed out petitioner's
pleading.
In an Order 4 dated 30 April 1986, the Labor Arbiter, noting that the money
claim of complainant Vega in this case is "not a necessary incident of his
employment" and that said claim is not among those mentioned in Article
217 of the Labor Code, dismissed the complaint for lack of jurisdiction.
However, in a gesture of "compassion and to show the government's
concern for the workingman," the Labor Arbiter also directed petitioner to
pay Mr. Vega the sum of P2,000.00 as "financial assistance."
The Labor Arbiter's order was subsequently appealed by both parties,
private respondent Vega assailing the dismissal of his complaint for lack of
jurisdiction and petitioner Corporation questioning the propriety of the
award of "financial assistance" to Mr. Vega. Acting on the appeals, the public
respondent National Labor Relations Commission, on 4 September 1987,
rendered a Decision, 5 the dispositive portion of which reads:
WHEREFORE, the appealed Order is hereby set aside and another udgment
entered, order the respondent to pay the complainant the amount of
P60,000.00 as explained above.
SO ORDERED.
In the present Petition for certiorari filed on 4 December 1987, petitioner
Corporation, invoking Article 217 of the Labor Code, seeks to annul the
Decision of public respondent Commission in Case No. RAB-VII-01 70-83
upon the ground that the Labor Arbiter and the Commission have no
jurisdiction over the subject matter of the case.
The jurisdiction of Labor Arbiters and the National Labor Relations
Commission is outlined in Article 217 of the Labor Code, as last amended by
Batas Pambansa Blg. 227 which took effect on 1 June 1982:
ART. 217. Jurisdiction of Labor Arbiters and the commission. (a) The Labor
Arbiters shall have theoriginal and exclusive jurisdiction to hear and decide
within thirty (30) working days after submission of the case by the parties
for decision, the following cases involving are workers, whether agricultural
or non-agricultural:
1. Unfair labor practice cases;
2. Those that workers may file involving wages, hours of work and other
terms and conditions of employment;
3. All money claims of workers, including those based on non-payment or
underpayment of wages, overtime compensation, separation pay and other
benefits provided by law or appropriate agreement, except claims for
employees' compensation, social security, medicare and maternity benefits;
4. Cases involving household services; and
5. Cases arising from any violation of Article 265 of this; Code, including
questions involving the legality of strikes and lockouts.
(b) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters. (Emphasis supplied)
While paragraph 3 above refers to "all money claims of workers," it is not
necessary to suppose that the entire universe of money claims that might be
asserted by workers against their employers has been absorbed into the
original and exclusive jurisdiction of Labor Arbiters. In the first place,
paragraph 3 should be read not in isolation from but rather within the
context formed by paragraph 1 related to unfair labor practices), paragraph
2 (relating to claims concerning terms and conditions of employment),
paragraph 4 (claims relating to household services, a particular species of
employer-employee relations), and paragraph 5 (relating to certain activities
prohibited to employees or to employers).<äre||anº•1àw> It is evident that
there is a unifying element which runs through paragraphs 1 to 5 and that is,
that they all refer to cases or disputes arising out of or in connection with an
employer-employee relationship. This is, in other words, a situation where
the rule of noscitur a sociis may be usefully invoked in clarifying the scope of
paragraph 3, and any other paragraph of Article 217 of the Labor Code, as
amended. We reach the above conclusion from an examination of the terms
themselves of Article 217, as last amended by B.P. Blg. 227, and even though
earlier versions of Article 217 of the Labor Code expressly brought within
the jurisdiction of the Labor Arbiters and the NLRC "cases arising from
employer employee relations," 6 which clause was not expressly carried over,
in printer's ink, in Article 217 as it exists today. For it cannot be presumed
that money claims of workers which do not arise out of or in connection
with their employer-employee relationship, and which would therefore fall
within the general jurisdiction of the regular courts of justice, were intended
by the legislative authority to be taken away from the jurisdiction of the
courts and lodged with Labor Arbiters on an exclusive basis. The Court,
therefore, believes and so holds that the money claims of workers" referred
to in paragraph 3 of Article 217 embraces money claims which arise out of
or in connection with the employer-employee relationship, or some aspect
or incident of such relationship. Put a little differently, that money claims of
workers which now fall within the original and exclusive jurisdiction of Labor
Arbiters are those money claims which have some reasonable causal
connection with the employer-employee relationship.
Applying the foregoing reading to the present case, we note that petitioner's
Innovation Program is an employee incentive scheme offered and open only
to employees of petitioner Corporation, more specifically to employees
below the rank of manager. Without the existing employer-employee
relationship between the parties here, there would have been no occasion
to consider the petitioner's Innovation Program or the submission by Mr.
Vega of his proposal concerning beer grande; without that relationship,
private respondent Vega's suit against petitioner Corporation would never
have arisen. The money claim of private respondent Vega in this case,
therefore, arose out of or in connection with his employment relationship
with petitioner.
The next issue that must logically be confronted is whether the fact that the
money claim of private respondent Vega arose out of or in connection with
his employment relation" with petitioner Corporation, is enough to bring
such money claim within the original and exclusive jurisdiction of Labor
Arbiters.
In Molave Motor Sales, Inc. v. Laron, 7 the petitioner was a corporation
engaged in the sale and repair of motor vehicles, while private respondent
was the sales Manager of petitioner. Petitioner had sued private respondent
for non-payment of accounts which had arisen from private respondent's
own purchases of vehicles and parts, repair jobs on cars personally owned
by him, and cash advances from the corporation. At the pre-trial in the lower
court, private respondent raised the question of lack of jurisdiction of the
court, stating that because petitioner's complaint arose out of the employer-
employee relationship, it fell outside the jurisdiction of the court and
consequently should be dismissed. Respondent Judge did dismiss the case,
holding that the sum of money and damages sued for by the employer arose
from the employer-employee relationship and, hence, fell within the
jurisdiction of the Labor Arbiter and the NLRC. In reversing the order of
dismissal and requiring respondent Judge to take cognizance of the case
below, this Court, speaking through Mme. Justice Melencio-Herrera, said:
Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under
paragraph 5 of Article 217 of the Labor Code had jurisdiction over" all other
cases arising from employer-employee relation, unless, expressly excluded
by this Code." Even then, the principle followed by this Court was that,
although a controversy is between an employer and an employee, the Labor
Arbiters have no jurisdiction if the Labor Code is not involved. In Medina vs.
Castro-Bartolome, 11 SCRA 597, 604, in negating jurisdiction of the Labor
Arbiter, although the parties were an employer and two employees, Mr.
Justice Abad Santos stated:
The pivotal question to Our mind is whether or not the Labor Code has any
relevance to the reliefs sought by the plaintiffs. For if the Labor Code has no
relevance, any discussion concerning the statutes amending it and whether
or not they have retroactive effect is unnecessary.
It is obvious from the complaint that the plaintiffs have not alleged any
unfair labor practice. Theirs is a simple action for damages for tortious acts
allegedly committed by the defendants. Such being the case, the governing
statute is the Civil Code and not the Labor Code. It results that the orders
under review are based on a wrong premise.
And in Singapore Airlines Limited v. Paño, 122 SCRA 671, 677, the following
was said:
Stated differently, petitioner seeks protection under the civil laws and claims
no benefits under the Labor Code. The primary relief sought is for liquidated
damages for breach of a contractual obligation. The other items demanded
are not labor benefits demanded by workers generally taken cognizance of
in labor disputes, such as payment of wages, overtime compensation or
separation pay. The items claimed are the natural consequences flowing
from breach of an obligation, intrinsically a civil dispute.
In the case below, PLAINTIFF had sued for monies loaned to DEFENDANT,
the cost of repair jobs made on his personal cars, and for the purchase price
of vehicles and parts sold to him. Those accounts have no relevance to the
Labor Code. The cause of action was one under the civil laws, and it does not
breach any provision of the Labor Code or the contract of employment of
DEFENDANT. Hence the civil courts, not the Labor Arbiters and the NLRC
should have jurisdiction. 8
It seems worth noting that Medina v. Castro-Bartolome, referred to in the
above excerpt, involved a claim for damages by two (2) employees against
the employer company and the General Manager thereof, arising from the
use of slanderous language on the occasion when the General Manager
fired the two (2) employees (the Plant General Manager and the Plant
Comptroller). The Court treated the claim for damages as "a simple action
for damages for tortious acts" allegedly committed by private respondents,
clearly if impliedly suggesting that the claim for damages did not necessarily
arise out of or in connection with the employer-employee
relationship.Singapore Airlines Limited v. Paño, also cited in Molave,
involved a claim for liquidated damages not by a worker but by the
employer company, unlike Medina. The important principle that runs
through these three (3) cases is that where the claim to the principal relief
sought 9 is to be resolved not by reference to the Labor Code or other labor
relations statute or a collective bargaining agreement but by the general civil
law, the jurisdiction over the dispute belongs to the regular courts of justice
and not to the Labor Arbiter and the NLRC. In such situations, resolution of
the dispute requires expertise, not in labor management relations nor in
wage structures and other terms and conditions of employment, but rather
in the application of the general civil law. Clearly, such claims fall outside the
area of competence or expertise ordinarily ascribed to Labor Arbiters and
the NLRC and the rationale for granting jurisdiction over such claims to these
agencies disappears.
Applying the foregoing to the instant case, the Court notes that the SMC
Innovation Program was essentially an invitation from petitioner
Corporation to its employees to submit innovation proposals, and that
petitioner Corporation undertook to grant cash awards to employees who
accept such invitation and whose innovation suggestions, in the judgment of
the Corporation's officials, satisfied the standards and requirements of the
Innovation Program 10 and which, therefore, could be translated into some
substantial benefit to the Corporation. Such undertaking, though unilateral
in origin, could nonetheless ripen into an enforceable contractual (facio ut
des) 11 obligation on the part of petitioner Corporation under certain
circumstances. Thus, whether or not an enforceable contract, albeit implied
arid innominate, had arisen between petitioner Corporation and private
respondent Vega in the circumstances of this case, and if so, whether or not
it had been breached, are preeminently legal questions, questions not to be
resolved by referring to labor legislation and having nothing to do with
wages or other terms and conditions of employment, but rather having
recourse to our law on contracts.
WEREFORE, the Petition for certiorari is GRANTED. The decision dated 4
September 1987 of public respondent National Labor Relations Commission
is SET ASIDE and the complaint in Case No. RAB-VII-0170-83 is hereby
DISMISSED, without prejudice to the right of private respondent Vega to file
a suit before the proper court, if he so desires. No pronouncement as to
costs. SO ORDERED.
G.R. No. L-50459 August 25, 1989
LEONARDO D. SUARIO, petitioner,
vs.
BANK OF THE PHILIPPINE ISLANDS, Davao Branch or The Manager/Cashier
and NATIONAL LABOR RELATIONS COMMISSION, respondents.
Leonardo D. Suario for and in his own behalf.
Canete Tolentino, Buyo, Caballero and Fuentes for respondent BPI.
GUTIERREZ, JR., J.:
The petitioner, with himself as his own counsel, filed this petition for review
of the decision of the National Labor Relations Commission (NLRC) which
denied his claim for damages arising from an alleged illegal dismissal. In
addition to the separation pay already awarded to him, the petitioner asks
for P9,995.00 actual damages, P300,000.00 moral damages, P200,000.00
exemplary damages, and attorney's fees to be determined by the Court.
On August 4,1977, petitioner Leonardo D. Suario filed a complaint for
separation pay, damages and attorney's fees against the Bank of the
Philippine Islands, Davao Branch/ or the Manager and Assistant
Manager/Cashier alleging:
xxx xxx xxx
2. That complainant has been a loyal employee of the respondent bank since
March, 1969, first assigned as a saving clerk, then rose to become the head
of the loan section in 1976 with an official designation as Credit Investigator
Appraiser-Credit Analyst;
3. That during the time of the complainant's employment with the
respondent bank, he pursued his studies of law without criticism or adverse
comments from the respondent bank but instead praises were showered
and incentives and considerations were bestowed in view of the
complainant's determination for intellectual advancement;
4. That sometime in March, 1976, the complainant verbally requested the
then Asst. Vice-President and Branch Manager, Mr. Armando N. Guilatco, for
a 6-month leave of absence without pay purposely to take the 1976 pre-bar
review in Manila and that the said Mr. Guilatco informed the complainant
that there would be no problem as regards the requested leave of absence;
5. That sometime in May, 1976, the complainant received a verbal notice
from the new Branch Manager, Mr. Vicente Casino, that the respondent's
Head Office approved only a 30-day leave of absence without pay but that
Mr. Guilatco, then assigned in Head Office as Vice President, advised him
(Casino) to inform the complainant to just avail of the 30-day leave of
absence first and then proceed to Manila for the review since the request
would be ultimately granted;
6. That complainant never suspected that his application would be
disapproved, much less any bad faith on the part of the respondent bank to
discriminate union member (sic), since it has been the policy of the
respondent bank to grant request of this nature as shown in the case of four
(4) former employees who were all granted leave of absence without pay.
Copies of the affidavits of Judge Juan Montejo and Atty. Bienvenido Banez
and xerox copies of the payroll of Jose Ledesma and Antonio Tan are hereto
attached as ANNEXES 'A', 'B', 'C', and 'D' and made an integral part hereof;
7. That on May 10, 1976, the complainant wrote a formal letter to the
President of the respondent bank, Mr. Alberto Villa Abrille, asking for a
formal reconsideration and caused the same to be received by Mr. Vicente
Casino but the latter advised instead the complainant to address to him
(Casino) a letter of mild tenor since any reconsideration should be coursed
through the proper channel; and that Mr. Casino advised the complainant to
just file his 30-day leave of absence without pay as approved and then
proceed to Manila since the request would ultimately be granted. A Xerox
copy of the said letter is hereto attached as ANNEX 'E' to be made an
integral part hereof;
8. That acting on the said advice of Vicente Casino, the complainant, with
utmost good faith, wrote a letter addressed to Mr. Casino aid at the same
time, filed a 30-day leave of absence. Copies of the letter and Application for
Leave of Absence are hereto attached as ANNEXES 'F' and 'G' to be made an
integral part hereof,
9. That on May 17, 1976, the complainant proceeded to Manila for the pre-
bar review and even went to the extent of going to the respondent's Head
Office to seek an audience with the Personnel Manager with an alternative
of working with any of the Metro Manila Branches of the respondent bank if
and when the request would not be granted and that the Personnel
Manager promised to take up the matter with Mr. Alberto Villa Abrille;
10. That during the first week of August, 1976, the complainant received a
letter from the Asst. Manager/Cashier, Mr. Douglas E. Aurelio, ordering the
complainant to report back for work since the complainant's request was
allegedly disapproved and that failure to report back for work would be a
conclusive proof that the complainant is no longer interested to continue
working and therefore considered resigned. ...
11. That upon receipt of the letter, complainant's review was unduly
interrupted since sleepless nights were spent in order to arrive at the proper
decision and that the complainant has decided not to report back because
of the considerable expenses already incurred in Manila after he has been
led to believe that the request would ultimately be granted;
12. That during the last week of August, 1976, the complainant received
another letter from Douglas E. Aurelio, attaching a xerox copy of the
application for a Clearance to terminate on the ground of resignation/ or
abandonment. ...
13. That the complainant failed to file his opposition since as above averred
to, he was already in Manila taking up the review and was then very busy
since the bar examination was only two months shy;
14. That sometime during the first week of December, 1976, the
complainant went to the respondent bank but was verbally informed that he
was already dismissed;
15. That on December 13, 1976, the complainant formally wrote a letter to
the respondent bank requesting for a written and formal advise as to his real
status and that on December 14, 1976, the respondent bank replied that the
matter was still referred to the Personnel Department at Head Office leading
again the complainant to believe that his case was not yet hopeless. ...
16. That on December 21, 1976, the complainant wrote another letter
pressing for a categorical answer and on December 23, 1976, the lawyers of
the respondent bank replied that as far as the bank is concerned the
services of the complainant was considered terminated effective July 19,
1976 contrary to the respondent bank's manifestation that his case was still
pending before the Personnel Department. ...
17. That the dismissal of the complainant was clearly illegal and without just
cause, being discriminatory in character he being an active union member
and in fact the Vice President of the ALU-BPI Chapter until his dismissal in
view of the uneven application of the respondent's policy; ... (Rollo, pp. 15-
19)
The case was set for conciliation but since the parties could not agree on any
settlement, the case was certified to the Labor Arbiter. Thereafter, the
Executive Labor Arbiter required the parties to submit their position papers.
Based on the position papers submitted, a decision was rendered on
December 7, 1977. The dispositive portion reads as follows:
WHEREFORE, premises considered, respondent is hereby ordered to pay
complainant's claim for separation pay in the amount of P11,813.36. His
claim for moral, actual, and exemplary damages and attorney's fees are
hereby dismissed for lack of merit. (Rollo, p. 46)
The decision of the Executive Labor Arbiter was affirmed on appeal to the
National Labor Relations Commission on October 9, 1978. A motion for
reconsideration was likewise denied. Hence, this petition.
The petitioner alleges that the public respondent committed the following:
I
THAT THE NATIONAL LABOR RELATIONS COMMISSION IN ITS DECISION
DATED OCTOBER 9, 1978 (ANNEX F OF THE PETITION) ERRED IN NOT
GRANTING THE CLAIM OF DAMAGES PRAYED FOR BY PETITIONER DESPITE
FINDINGS THAT THE DISMISSAL WAS CLEARLY ILLEGAL; and
II
THAT THE NATIONAL LABOR RELATIONS COMMISSION ERRED IN DISMISSING
PETITIONER'S MOTION FOR RECONSIDERATION BASED MAINLY ON PD NOS.
1367 AND 1391 IN ITS DECISION DATED FEBRUARY 9, 1979. (Rollo, p. 139).
The main issue in this case is whether or not the NLRC committed grave
abuse of discretion in denying the petitioner's claim for actual, moral and
exemplary damages plus attorney's fees in addition to his separation pay.
On the matter of NLRC jurisdiction over claims for damages, it clearly
appears that the complaint was filed on August 4, 1977 and decided by the
Labor Arbiter on December 7, 1977; hence, the applicable law is Article 217
of the Labor Code which took effect on October 1, 1974, and which
provides:
xxx xxx xxx
ART. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) The Labor
Arbiters shall have exclusive jurisdiction to hear and decide the following
cases involving all workers, whether agricultural or non-agricultural:
(1) Unfair labor practice cases;
(2) Unresolved issues in collective bargaining including those which involve
wages, hours of work, and other terms and conditions of employment duly
indorsed by the Bureau in accordance with the provisions of this Code;
(3) All money claims of workers involving non-payment or underpayment of
wages, overtime or premium compensation, maternity or service incentive
leave, separation pay and other money claims arising from employer-
employee relation, except claims for employee's compensation, social
security and medicare benefits and as otherwise provided in Article 128 of
this Code;
(4) Cases involving household services; and
(5) All other cases arising from employer-employee relationship unless
expressly excluded by this Code.
(b) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters, compulsory arbitrators, and voluntary arbitrators
in appropriate casino provided in Article 263 of this Code. ...
The contention of private respondent that the NLRC is not clothed with
authority to entertain claims for moral and other forms of damages is based
on PD 1367 which took effect on May 1, 1979 and which amended Article
217 by specifically providing that "Regional Directors shall not indorse and
Labor Arbiters shall not entertain claims for moral or other forms of
damages."
This limitation on jurisdiction did not last long. This Court in the case
of Ebon v. De Guzman, (113 SCRA 52 [1982]) explained:
Evidently, the lawmaking authority had second thoughts about depriving the
Labor Arbiters and the NLRC of the jurisdiction to award damages in labor
cases because that set up would mean duplicity of suits, splitting the cause
of action and possible conflicting findings and conclusions by two tribunals
on one and the same claim.
So, on May 1, 1980, Presidential Decree No. 1691 (which substantially
reenacted Article 217 in its original form) nullified Presidential Decree No.
1367 and restored to the Labor Arbiters and the NLRC their jurisdiction to
award all kinds of damages in cases arising from employer-employee
relations (Pepsi-Cola Bottling Company of the Philippines v. Martinez, G.R.
No. 58877).
It is now well settled that money claims of workers provided by law over
which the labor arbiter has original and exclusive jurisdiction are
comprehensive enough to include claims for moral damages of a dismissed
employee against his employer. (Vargas v. Akai Phil. Inc., 156 SCRA 531
[1987]).
On the issue whether or not the petitioner is entitled to his claim for moral
damages, we are constrained to decide in the negative. The case of Primero
v. Intermediate Appellate Court, (156 SCRA 435 [1987]) expounded on this
matter, to wit:
xxx xxx xxx
The legislative intent appears clear to allow recovery in proceedings before
Labor Arbiters of moral and other forms of damages, in all cases or matters
arising from employer-employee relations. This would no doubt include,
particularly, instances where an employee has been unlawfully dismissed. In
such a case the Labor Arbiter has jurisdiction to award to the dismissed
employee not only the reliefs specifically provided by labor laws, but also
moral and the forms of damages governed by the Civil Code. Moral damages
would be recoverable, for example, where the dismissal of the employee
was not only effected without authorized cause and/or due process — for
which relief is granted by the Labor Code — but 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 or public policy-for which the obtainable
relief is determined by 'the Civil Code (not the Labor
Code).lâwphî1.ñèt Stated otherwise, if the evidence adduced by the
employee before the Labor Arbiter should establish that the employer did
indeed terminate the employee's services without just cause or without
according him due process, the Labor Arbiter's judgment shall be for the
employer to reinstate the employee and pay him his back wages, or
exceptionally, for the employee simply to receive separation pay. These are
reliefs explicitly prescribed by the Labor Code. But any award of moral
damages by the Labor Arbiter obviously cannot be based on the Labor Code
but should be grounded on the Civil Code. Such an award cannot be justified
solely upon the premise (otherwise sufficient for redress under the Labor
Code) that the employer fired his employee without just cause or due
process. Additional facts must be pleaded and proven to warrant the grant
of moral damages under the Civil Code, these being, to repeat, that the act
of dismissal was attended by bad faith or fraud, or was oppressive to labor,
or done in a manner contrary to morals, good customs, or public policy; and,
of course, that social humiliation, wounded feelings, grave anxiety, etc.,
resulted therefrom. (pp. 443-444, emphasis supplied)
The case of Primero v. IAC states the distinction between the two seemingly
disparate causes of action, to wit:
It is clear that the question of the legality of the act of dismissal is intimately
related to the issue of the legality of the manner by which that act of
dismissal was performed. But while the Labor Code treats of the nature of,
and the remedy available as regards the first the employee's separation
from employment it does not at all deal with the second the manner of that
separation which is governed exclusively by the Civil Code. In addressing the
first issue, the Labor Arbiter applies the Labor Code; in addressing the
second, the Civil Code. And this appears to be the plain and patent
intendment of the law. For apart from the reliefs expressly set out in the
Labor Code flowing from illegal dismiss from employment, no other
damages may be awarded to an illegally dismiss employee other than those
specified by the Civil Code. Hence, the fact that the issue of whether or not
moral or other damages were suffered by an employee and in the
affirmative, the amount that should properly be awarded to him in the
circumstances is determined under the provisions of the Civil Code and not
the Labor Code. ... (P. 445)
In the case of Guita v. Court of Appeals (139 SCRA 576 [1985]), we stated
that:
Moral damages may be awarded to compensate one for diverse injuries
such as mental anguish, besmirched reputation, wounded feelings and social
humiliation. It is however not enough that such injuries have arisen; it is
essential that they have sprung from a wrongful act or omission of the
defendant which was the proximate cause thereof.
Moral damages include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of pecuniary computation,
moral damages may be recovered if they are the proximate result of the
defendant's wrongful act or omission. (Civil Code, Article 2217).
In a long line of cases, we have consistently ruled that in the absence of a
wrongful act or omission or of fraud or bad faith, moral damages cannot be
awarded. . . (R & B Surety and Insurance Co., Inc. v. IAC, 129 SCRA 736, 743.)
(p. 580)
We do not find any bad faith or fraud on the part of the bank officials who
denied the petitioner's request for a six months' leave of absence without
pay. If the petitioner was made to believe that his request would be granted,
we can not fault the branch manager or his subsequent replacement for
giving their assurances. They were merely personal assurances which could
be reconsidered on the basis of later developments or upon consultation
with higher authorities and which are not binding. Certainly, the bank
officials who gave their verbal assurances had only the petitioner's
paramount welfare in their minds. There is no evidence to show that they
meant to deceive the petitioner. They themselves thought that such a
request would be granted. Unfortunately, company policy had to be
followed. The fact that the petitioner's request for six months' leave of
absence was denied does not ipso facto entitle him to damages.
As held in the case of Rubio v. Court of Appeals (141 SCRA 488 [1986]):
xxx xxx xxx
In a long line of cases, we have consistently ruled that in the absence of a
wrongful act or omission or of fraud or bad faith, moral damages cannot be
awarded and that the adverse result of an action does not per se make the
action wrongful and subject the actor to have payment of damages, for the
law could not have meant to impose a penalty on the right to litigate. ... (p.
516)
It is incumbent upon the petitioner to prove that there was malice or bad
faith on the part of the private respondents in terminating him On the
contrary, the records of this petition show that the private respondent acted
in accordance with law before effecting the dismissal. The records also show
that there was a prior application with the Ministry of Labor to terminate
the petitioner's employment. A copy of said application was furnished to the
petitioner. The petitioner, however, did not oppose such application nor did
he do anything to preserve his right.
More pertinent is the fact that the petitioner knew as early as May 6, 1976
that he was granted only a one month study leave (rollo, p. 98). He may have
asked for a reconsideration but notwithstanding its denial, the petitioner
proceeded with his review. Whether or not his request for six months' leave
without pay would be granted, the petitioner was set on continuing with his
review.
Neither can we consider the private respondents' response to the
petitioner's query regarding his status as having given him false hopes. The
referral to the personnel department was merely a part of the formal
procedure undertaken by the bank. Such referral does not show that the
bank acted in a wanton or willful manner.
In the light of the foregoing, we sustain the Labor Arbiter's finding that the
petitioner's claim for damages must be dismissed for lack of sufficient basis.
WHEREFORE, the petition is hereby DISMISSED for lack of merit.
SO ORDERED.
G.R. No. 157010 June 21, 2005
PHILIPPINE NATIONAL BANK, petitioner,
vs.
FLORENCE O. CABANSAG, respondent.
DECISION
PANGANIBAN, J.:
The Court reiterates the basic policy that all Filipino workers, whether
employed locally or overseas, enjoy the protective mantle of Philippine labor
and social legislations. Our labor statutes may not be rendered ineffective by
laws or judgments promulgated, or stipulations agreed upon, in a foreign
country.
The Case
Before us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of
Court, seeking to reverse and set aside the July 16, 2002 Decision 2 and the
January 29, 2003 Resolution3 of the Court of Appeals (CA) in CA-GR SP No.
68403. The assailed Decision dismissed the CA Petition (filed by herein
petitioner), which had sought to reverse the National Labor Relations
Commission (NLRC)’s June 29, 2001 Resolution,4 affirming Labor Arbiter Joel
S. Lustria’s January 18, 2000 Decision.5
The assailed CA Resolution denied herein petitioner’s Motion for
Reconsideration.
The Facts
The facts are narrated by the Court of Appeals as follows:
"In late 1998, [herein Respondent Florence Cabansag] arrived in Singapore
as a tourist. She applied for employment, with the Singapore Branch of the
Philippine National Bank, a private banking corporation organized and
existing under the laws of the Philippines, with principal offices at the PNB
Financial Center, Roxas Boulevard, Manila. At the time, the Singapore PNB
Branch was under the helm of Ruben C. Tobias, a lawyer, as General
Manager, with the rank of Vice-President of the Bank. At the time, too, the
Branch Office had two (2) types of employees: (a) expatriates or the regular
employees, hired in Manila and assigned abroad including Singapore, and
(b) locally (direct) hired. She applied for employment as Branch Credit
Officer, at a total monthly package of $SG4,500.00, effective upon
assumption of duties after approval. Ruben C. Tobias found her eminently
qualified and wrote on October 26, 1998, a letter to the President of the
Bank in Manila, recommending the appointment of Florence O. Cabansag,
for the position.
xxxxxxxxx
"The President of the Bank was impressed with the credentials of Florence
O. Cabansag that he approved the recommendation of Ruben C. Tobias. She
then filed an ‘Application,’ with the Ministry of Manpower of the
Government of Singapore, for the issuance of an ‘Employment Pass’ as an
employee of the Singapore PNB Branch. Her application was approved for a
period of two (2) years.
"On December 7, 1998, Ruben C. Tobias wrote a letter to Florence O.
Cabansag offering her a temporary appointment, as Credit Officer, at a basic
salary of Singapore Dollars 4,500.00, a month and, upon her successful
completion of her probation to be determined solely, by the Bank, she may
be extended at the discretion of the Bank, a permanent appointment and
that her temporary appointment was subject to the following terms and
conditions:
‘1. You will be on probation for a period of three (3) consecutive months
from the date of your assumption of duty.
‘2. You will observe the Bank’s rules and regulations and those that may be
adopted from time to time.
‘3. You will keep in strictest confidence all matters related to transactions
between the Bank and its clients.
‘4. You will devote your full time during business hours in promoting the
business and interest of the Bank.
‘5. You will not, without prior written consent of the Bank, be employed in
anyway for any purpose whatsoever outside business hours by any person,
firm or company.
‘6. Termination of your employment with the Bank may be made by either
party after notice of one (1) day in writing during probation, one month
notice upon confirmation or the equivalent of one (1) day’s or month’s
salary in lieu of notice.’
"Florence O. Cabansag accepted the position and assumed office. In the
meantime, the Philippine Embassy in Singapore processed the employment
contract of Florence O. Cabansag and, on March 8, 1999, she was issued by
the Philippine Overseas Employment Administration, an ‘Overseas
Employment Certificate,’ certifying that she was a bona fide contract worker
for Singapore.
xxxxxxxxx
"Barely three (3) months in office, Florence O. Cabansag submitted to Ruben
C. Tobias, on March 9, 1999, her initial ‘Performance Report.’ Ruben C.
Tobias was so impressed with the ‘Report’ that he made a notation and, on
said ‘Report’: ‘GOOD WORK.’ However, in the evening of April 14, 1999,
while Florence O. Cabansag was in the flat, which she and Cecilia Aquino,
the Assistant Vice-President and Deputy General Manager of the Branch and
Rosanna Sarmiento, the Chief Dealer of the said Branch, rented, she was
told by the two (2) that Ruben C. Tobias has asked them to tell Florence O.
Cabansag to resign from her job. Florence O. Cabansag was perplexed at the
sudden turn of events and the runabout way Ruben C. Tobias procured her
resignation from the Bank. The next day, Florence O. Cabansag talked to
Ruben C. Tobias and inquired if what Cecilia Aquino and Rosanna Sarmiento
had told her was true. Ruben C. Tobias confirmed the veracity of the
information, with the explanation that her resignation was imperative as a
‘cost-cutting measure’ of the Bank. Ruben C. Tobias, likewise, told Florence
O. Cabansag that the PNB Singapore Branch will be sold or transformed into
a remittance office and that, in either way, Florence O. Cabansag had to
resign from her employment. The more Florence O. Cabansag was
perplexed. She then asked Ruben C. Tobias that she be furnished with a
‘Formal Advice’ from the PNB Head Office in Manila. However, Ruben C.
Tobias flatly refused. Florence O. Cabansag did not submit any letter of
resignation.
"On April 16, 1999, Ruben C. Tobias again summoned Florence O. Cabansag
to his office and demanded that she submit her letter of resignation, with
the pretext that he needed a Chinese-speaking Credit Officer to penetrate
the local market, with the information that a Chinese-speaking Credit Officer
had already been hired and will be reporting for work soon. She was warned
that, unless she submitted her letter of resignation, her employment record
will be blemished with the notation ‘DISMISSED’ spread thereon. Without
giving any definitive answer, Florence O. Cabansag asked Ruben C. Tobias
that she be given sufficient time to look for another job. Ruben C. Tobias
told her that she should be ‘out’ of her employment by May 15, 1999.
"However, on April 19, 1999, Ruben C. Tobias again summoned Florence O.
Cabansag and adamantly ordered her to submit her letter of resignation.
She refused. On April 20, 1999, she received a letter from Ruben C. Tobias
terminating her employment with the Bank.
xxxxxxxxx
"On January 18, 2000, the Labor Arbiter rendered judgment in favor of the
Complainant and against the Respondents, the decretal portion of which
reads as follows:
‘WHEREFORE, considering the foregoing premises, judgment is hereby
rendered finding respondents guilty of Illegal dismissal and devoid of due
process, and are hereby ordered:
1. To reinstate complainant to her former or substantially equivalent
position without loss of seniority rights, benefits and privileges;
2. Solidarily liable to pay complainant as follows:
a) To pay complainant her backwages from 16 April 1999 up to her actual
reinstatement. Her backwages as of the date of the promulgation of this
decision amounted to SGD 40,500.00 or its equivalent in Philippine Currency
at the time of payment;
b) Mid-year bonus in the amount of SGD 2,250.00 or its equivalent in
Philippine Currency at the time of payment;
c) Allowance for Sunday banking in the amount of SGD 120.00 or its
equivalent in Philippine Currency at the time of payment;
d) Monetary equivalent of leave credits earned on Sunday banking in the
amount of SGD 1,557.67 or its equivalent in Philippine Currency at the time
of payment;
e) Monetary equivalent of unused sick leave benefits in the amount of SGD
1,150.60 or its equivalent in Philippine Currency at the time of payment.
f) Monetary equivalent of unused vacation leave benefits in the amount of
SGD 319.85 or its equivalent in Philippine Currency at the time of payment.
g) 13th month pay in the amount of SGD 4,500.00 or its equivalent in
Philippine Currency at the time of payment;
3. Solidarily to pay complainant actual damages in the amount of SGD
1,978.00 or its equivalent in Philippine Currency at the time of payment, and
moral damages in the amount of PhP 200,000.00, exemplary damages in the
amount of PhP 100,000.00;
4. To pay complainant the amount of SGD 5,039.81 or its equivalent in
Philippine Currency at the time of payment, representing attorney’s fees.
SO ORDERED." 6 [Emphasis in the original.]
PNB appealed the labor arbiter’s Decision to the NLRC. In a Resolution dated
June 29, 2001, the Commission affirmed that Decision, but reduced the
moral damages to P100,000 and the exemplary damages to P50,000. In a
subsequent Resolution, the NLRC denied PNB’s Motion for Reconsideration.
Ruling of the Court of Appeals
In disposing of the Petition for Certiorari, the CA noted that petitioner bank
had failed to adduce in evidence the Singaporean law supposedly governing
the latter’s employment Contract with respondent. The appellate court
found that the Contract had actually been processed by the Philippine
Embassy in Singapore and approved by the Philippine Overseas Employment
Administration (POEA), which then used that Contract as a basis for issuing
an Overseas Employment Certificate in favor of respondent.
According to the CA, even though respondent secured an employment pass
from the Singapore Ministry of Employment, she did not thereby waive
Philippine labor laws, or the jurisdiction of the labor arbiter or the NLRC
over her Complaint for illegal dismissal. In so doing, neither did she submit
herself solely to the Ministry of Manpower of Singapore’s jurisdiction over
disputes arising from her employment. The appellate court further noted
that a cursory reading of the Ministry’s letter will readily show that no such
waiver or submission is stated or implied.
Finally, the CA held that petitioner had failed to establish a just cause for the
dismissal of respondent. The bank had also failed to give her sufficient
notice and an opportunity to be heard and to defend herself. The CA ruled
that she was consequently entitled to reinstatement and back wages,
computed from the time of her dismissal up to the time of her
reinstatement.
Hence, this Petition.7
Issues
Petitioner submits the following issues for our consideration:
"1. Whether or not the arbitration branch of the NLRC in the National
Capital Region has jurisdiction over the instant controversy;
"2. Whether or not the arbitration of the NLRC in the National Capital
Region is the most convenient venue or forum to hear and decide the
instant controversy; and
"3. Whether or not the respondent was illegally dismissed, and therefore,
entitled to recover moral and exemplary damages and attorney’s fees." 8
In addition, respondent assails, in her Comment, 9 the propriety of Rule 45 as
the procedural mode for seeking a review of the CA Decision affirming the
NLRC Resolution. Such issue deserves scant consideration. Respondent
miscomprehends the Court’s discourse in St. Martin Funeral Home v.
NLRC,10 which has indeed affirmed that the proper mode of review of NLRC
decisions, resolutions or orders is by a special civil action for certiorari under
Rule 65 of the Rules of Court. The Supreme Court and the Court of Appeals
have concurrent original jurisdiction over such petitions for certiorari. Thus,
in observance of the doctrine on the hierarchy of courts, these petitions
should be initially filed with the CA.11
Rightly, the bank elevated the NLRC Resolution to the CA by way of a
Petition for Certiorari. In seeking a review by this Court of the CA Decision --
on questions of jurisdiction, venue and validity of employment termination
-- petitioner is likewise correct in invoking Rule 45. 12
It is true, however, that in a petition for review on certiorari, the scope of
the Supreme Court’s judicial review of decisions of the Court of Appeals is
generally confined only to errors of law. It does not extend to questions of
fact. This doctrine applies with greater force in labor cases. Factual
questions are for the labor tribunals to resolve. 13In the present case, the
labor arbiter and the NLRC have already determined the factual issues. Their
findings, which are supported by substantial evidence, were affirmed by the
CA. Thus, they are entitled to great respect and are rendered conclusive
upon this Court, absent a clear showing of palpable error or arbitrary
disregard of evidence.14
The Court’s Ruling
The Petition has no merit.
First Issue:
Jurisdiction
The jurisdiction of labor arbiters and the NLRC is specified in Article 217 of
the Labor Code as follows:
"ART. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as
otherwise provided under this Code the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide, within thirty (30) calendar days
after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers
may file involving wage, rates of pay, hours of work and other terms and
conditions of employment
4. Claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee
relations, including those of persons in domestic or household service,
involving an amount of exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for reinstatement.
(b) The commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters.
x x x x x x x x x."
More specifically, Section 10 of RA 8042 reads in part:
"SECTION 10. Money Claims. — Notwithstanding any provision of law to the
contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and decide,
within ninety (90) calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue of any law or
contract involving Filipino workers for overseas deployment including claims
for actual, moral, exemplary and other forms of damages.
x x x x x x x x x"
Based on the foregoing provisions, labor arbiters clearly have original and
exclusive jurisdiction over claims arising from employer-employee relations,
including termination disputes involving all workers, among whom are
overseas Filipino workers (OFW).15
We are not unmindful of the fact that respondent was directly hired, while
on a tourist status in Singapore, by the PNB branch in that city state. Prior to
employing respondent, petitioner had to obtain an employment pass for her
from the Singapore Ministry of Manpower. Securing the pass was a
regulatory requirement pursuant to the immigration regulations of that
country.16
Similarly, the Philippine government requires non-Filipinos working in the
country to first obtain a local work permit in order to be legally employed
here. That permit, however, does not automatically mean that the non-
citizen is thereby bound by local laws only, as averred by petitioner. It does
not at all imply a waiver of one’s national laws on labor. Absent any clear
and convincing evidence to the contrary, such permit simply means that its
holder has a legal status as a worker in the issuing country.1avvphil.zw+
Noteworthy is the fact that respondent likewise applied for and secured an
Overseas Employment Certificate from the POEA through the Philippine
Embassy in Singapore. The Certificate, issued on March 8, 1999, declared
her a bona fide contract worker for Singapore. Under Philippine law, this
document authorized her working status in a foreign country and entitled
her to all benefits and processes under our statutes. Thus, even
assuming arguendothat she was considered at the start of her employment
as a "direct hire" governed by and subject to the laws, common practices
and customs prevailing in Singapore 17 she subsequently became a contract
worker or an OFW who was covered by Philippine labor laws and policies
upon certification by the POEA. At the time her employment was illegally
terminated, she already possessed the POEA employment Certificate.
Moreover, petitioner admits that it is a Philippine corporation doing
business through a branch office in Singapore. 18 Significantly, respondent’s
employment by the Singapore branch office had to be approved by
Benjamin P. Palma Gil,19 the president of the bank whose principal offices
were in Manila. This circumstance militates against petitioner’s contention
that respondent was "locally hired"; and totally "governed by and subject to
the laws, common practices and customs" of Singapore, not of the
Philippines. Instead, with more reason does this fact reinforce the
presumption that respondent falls under the legal definition of migrant
worker, in this case one deployed in Singapore. Hence, petitioner cannot
escape the application of Philippine laws or the jurisdiction of the NLRC and
the labor arbiter.
In any event, we recall the following policy pronouncement of the Court
in Royal Crown Internationale v. NLRC:20
"x x x. Whether employed locally or overseas, all Filipino workers enjoy the
protective mantle of Philippine labor and social legislation, contract
stipulations to the contrary notwithstanding. This pronouncement is in
keeping with the basic public policy of the State to afford protection to labor,
promote full employment, ensure equal work opportunities regardless of
sex, race or creed, and regulate the relations between workers and
employers.1awphi1.net For the State assures the basic rights of all workers
to self-organization, collective bargaining, security of tenure, and just and
humane conditions of work [Article 3 of the Labor Code of the
Philippines; See also Section 18, Article II and Section 3, Article XIII, 1987
Constitution]. This ruling is likewise rendered imperative by Article 17 of the
Civil Code which states that laws ‘which have for their object public order,
public policy and good customs shall not be rendered ineffective by laws or
judgments promulgated, or by determination or conventions agreed upon in
a foreign country.’"
Second Issue:
Proper Venue
Section 1(a) of Rule IV of the NLRC Rules of Procedure reads:
"Section 1. Venue – (a) All cases which Labor Arbiters have authority to hear
and decide may be filed in the Regional Arbitration Branch having
jurisdiction over the workplace of the complainant/petitioner; Provided,
however that cases of Overseas Filipino Worker (OFW) shall be filed before
the Regional Arbitration Branch where the complainant resides or where the
principal office of the respondent/employer is situated, at the option of the
complainant.
"For purposes of venue, workplace shall be understood as the place or
locality where the employee is regularly assigned when the cause of action
arose. It shall include the place where the employee is supposed to report
back after a temporary detail, assignment or travel. In the case of field
employees, as well as ambulant or itinerant workers, their workplace is
where they are regularly assigned, or where they are supposed to regularly
receive their salaries/wages or work instructions from, and report the
results of their assignment to their employers."
Under the "Migrant Workers and Overseas Filipinos Act of 1995" (RA 8042),
a migrant worker "refers to a person who is to be engaged, is engaged or has
been engaged in a remunerated activity in a state of which he or she is not a
legal resident; to be used interchangeably with overseas Filipino
worker."21 Undeniably, respondent was employed by petitioner in its branch
office in Singapore. Admittedly, she is a Filipino and not a legal resident of
that state. She thus falls within the category of "migrant worker" or
"overseas Filipino worker."
As such, it is her option to choose the venue of her Complaint against
petitioner for illegal dismissal. The law gives her two choices: (1) at the
Regional Arbitration Branch (RAB) where she resides or (2) at the RAB where
the principal office of her employer is situated. Since her dismissal by
petitioner, respondent has returned to the Philippines -- specifically to her
residence at Filinvest II, Quezon City. Thus, in filing her Complaint before the
RAB office in Quezon City, she has made a valid choice of proper venue.
Third Issue:
Illegal Dismissal
The appellate court was correct in holding that respondent was already a
regular employee at the time of her dismissal, because her three-month
probationary period of employment had already ended. This ruling is in
accordance with Article 281 of the Labor Code: "An employee who is
allowed to work after a probationary period shall be considered a regular
employee." Indeed, petitioner recognized respondent as such at the time it
dismissed her, by giving her one month’s salary in lieu of a one-month
notice, consistent with provision No. 6 of her employment Contract.
Notice and Hearing Not Complied With
As a regular employee, respondent was entitled to all rights, benefits and
privileges provided under our labor laws. One of her fundamental rights is
that she may not be dismissed without due process of law. The twin
requirements of notice and hearing constitute the essential elements of
procedural due process, and neither of these elements can be eliminated
without running afoul of the constitutional guarantee. 22
In dismissing employees, the employer must furnish them two written
notices: 1) one to apprise them of the particular acts or omissions for which
their dismissal is sought; and 2) the other to inform them of the decision to
dismiss them. As to the requirement of a hearing, its essence lies simply in
the opportunity to be heard.23
The evidence in this case is crystal-clear. Respondent was not notified of the
specific act or omission for which her dismissal was being sought. Neither
was she given any chance to be heard, as required by law. At any rate, even
if she were given the opportunity to be heard, she could not have defended
herself effectively, for she knew no cause to answer to.
All that petitioner tendered to respondent was a notice of her employment
termination effective the very same day, together with the equivalent of a
one-month pay. This Court has already held that nothing in the law gives an
employer the option to substitute the required prior notice and opportunity
to be heard with the mere payment of 30 days’ salary. 24
Well-settled is the rule that the employer shall be sanctioned for
noncompliance with the requirements of, or for failure to observe, due
process that must be observed in dismissing an employee. 25
No Valid Cause for Dismissal
Moreover, Articles 282,26 28327 and 28428 of the Labor Code provide the valid
grounds or causes for an employee’s dismissal. The employer has the burden
of proving that it was done for any of those just or authorized causes. The
failure to discharge this burden means that the dismissal was not justified,
and that the employee is entitled to reinstatement and back wages. 29
Notably, petitioner has not asserted any of the grounds provided by law as a
valid reason for terminating the employment of respondent. It merely insists
that her dismissal was validly effected pursuant to the provisions of her
employment Contract, which she had voluntarily agreed to be bound to.
Truly, the contracting parties may establish such stipulations, clauses, terms
and conditions as they want, and their agreement would have the force of
law between them. However, petitioner overlooks the qualification that
those terms and conditions agreed upon must not be contrary to law,
morals, customs, public policy or public order. 30 As explained earlier, the
employment Contract between petitioner and respondent is governed by
Philippine labor laws. Hence, the stipulations, clauses, and terms and
conditions of the Contract must not contravene our labor law provisions.
Moreover, a contract of employment is imbued with public interest. The
Court has time and time again reminded parties that they "are not at liberty
to insulate themselves and their relationships from the impact of labor laws
and regulations by simply contracting with each other." 31 Also, while a
contract is the law between the parties, the provisions of positive law that
regulate such contracts are deemed included and shall limit and govern the
relations between the parties.32
Basic in our jurisprudence is the principle that when there is no showing of
any clear, valid, and legal cause for the termination of employment, the law
considers the matter a case of illegal dismissal. 33
Awards for Damages Justified
Finally, moral damages are recoverable when the dismissal of an employee
is attended by bad faith or constitutes an act oppressive to labor or is done
in a manner contrary to morals, good customs or public policy. 34 Awards for
moral and exemplary damages would be proper if the employee was
harassed and arbitrarily dismissed by the employer. 35
In affirming the awards of moral and exemplary damages, we quote with
approval the following ratiocination of the labor arbiter:
"The records also show that [respondent’s] dismissal was effected by
[petitioners’] capricious and high-handed manner, anti-social and
oppressive, fraudulent and in bad faith, and contrary to morals, good
customs and public policy. Bad faith and fraud are shown in the acts
committed by [petitioners] before, during and after [respondent’s] dismissal
in addition to the manner by which she was dismissed. First, [respondent]
was pressured to resign for two different and contradictory reasons, namely,
cost-cutting and the need for a Chinese[-]speaking credit officer, for which
no written advice was given despite complainant’s request. Such wavering
stance or vacillating position indicates bad faith and a dishonest purpose.
Second, she was employed on account of her qualifications, experience and
readiness for the position of credit officer and pressured to resign a month
after she was commended for her good work. Third, the demand for
[respondent’s] instant resignation on 19 April 1999 to give way to her
replacement who was allegedly reporting soonest, is whimsical, fraudulent
and in bad faith, because on 16 April 1999 she was given a period of [sic]
until 15 May 1999 within which to leave. Fourth, the pressures made on her
to resign were highly oppressive, anti-social and caused her absolute
torture, as [petitioners] disregarded her situation as an overseas worker
away from home and family, with no prospect for another job. She was not
even provided with a return trip fare. Fifth, the notice of termination is an
utter manifestation of bad faith and whim as it totally disregards
[respondent’s] right to security of tenure and due process. Such notice
together with the demands for [respondent’s] resignation contravenes the
fundamental guarantee and public policy of the Philippine government on
security of tenure.
"[Respondent] likewise established that as a proximate result of her
dismissal and prior demands for resignation, she suffered and continues to
suffer mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock and social humiliation. Her standing in the
social and business community as well as prospects for employment with
other entities have been adversely affected by her dismissal. [Petitioners]
are thus liable for moral damages under Article 2217 of the Civil Code.

xxxxxxxxx

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

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

The Court also affirms the award of attorney’s fees. It is settled that when an
action is instituted for the recovery of wages, or when employees are forced
to litigate and consequently incur expenses to protect their rights and G.R. Nos. L-53364-65 March 16, 1987
interests, the grant of attorney’s fees is legally justifiable. 37
DOMICIANO SOCO, petitioner,
WHEREFORE, the Petition is DENIED and the assailed Decision and vs.
Resolution AFFIRMED. Costs against petitioner. MERCANTILE CORPORATION OF DAVAO AND THE HONORABLE AMADO G.
INCIONG, DEPUTY MINISTER, MINISTRY OF LABOR, respondents.
SO ORDERED.
Antonio Ladlao for petitioner.

Rodolfo A. Ta-asan for private respondent.

ALAMPAY, J.:

Petition for certiorari to annul the order dated October 25, 1979 of the
former Deputy Minister of Labor in Case No. ROXI-C-209-79 and Case No.
LR-30-79, which affirmed the order dated May 31, 1979 of the Regional
Director, granting the application of private respondent Mercantile
Corporation of Davao (MERCO), for clearance to terminate petitioner
Domiciano Soco and dismissing the latter's complaint for unfair labor
practice.
Private respondent is engaged in the sale and distribution of ice cream in
Davao City. Petitioner who was employed as driver of MERCO's delivery van,
was the President of the MERCO Employees Labor Union (MELU), an affiliate
of the Federation of Free Workers (FFW). In the last week of January, 1979,
the personnel officer of private respondent conducted an investigation due
to reports that petitioner was carrying on his union MELU activities during
his working hours for the purpose of transferring his Union's affiliation from
the FFW to the Southern Philippines Federation of Labor (SPFL) and for this
purpose he was even utilizing the company vehicle of MERCO, in violation of
the Company's Rule No. 19(a) which prescribes a penalty of suspension of
15 days for the first offense and dismissal for succeeding offenses.
It appears that on January 25, 1979, petitioner was ordered to deliver ice
cream to the Imperial Hotel and Maguindanao Hotel at CM Recto Avenue
and to Your Goody Mart at Anda Street, all in Davao City, but he deviated
from the usual route and went to Kiosk No. 4 on San Pedro Street to talk to
Bartolome Calago, a co-employee, but who was then off-duty. The personnel
officer of MERCO advised petitioner to report to his office to explain his
unauthorized deviation in connection with said incident but petitioner did
not comply. On January 30, 1979, MERCO wrote the FFW to which MELU
was affiliated and wherein petitioner Domiciano Soco was the President
asking for a grievance conference to be scheduled not later than February
13, 1979. When petitioner manifested his unwillingness to attend the
grievance conference in his belief that such is not necessary, FFW relayed
this information to MERCO. Due to the refusal of petitioner to submit
himself to a formal conference, MERCO, in a memorandum dated February
13, 1979 suspended petitioner for five (5) days, effective February 15, 1979,
for violation of Company Rule No. 19(a). Then a report of this action taken
was filed with the Ministry of Labor.
On February 13, 1979, at 10:30 A.M., petitioner was instructed to deliver ice
cream to the New City Commercial Corporation at R. Magsaysay Avenue and
Gempesaw Store at Gempesaw Street, Davao City. After making these
deliveries, petitioner then proceeded to the Office of SPFL Union at the
Puericulture Center building located on Alvarez Street. John Ferrazzini,
Manager of MERCO saw the company vehicle parked along the street, After
verifying that petitioner was the driver of the MERCO Ford Fiera van, he
then called for Rogelio Galagar, Secretary of the MELU and another
employee and in their presence, the MERCO manager took out the rotor of
the van. Later that morning, when petitioner came out of the building he
was unable to start the engine of the vehicle and he called for company
assistance. An officer of MERCO advised petitioner to report to his office
because of the said incident in order to explain his unauthorized deviation
but petitioner did not do so. On February 14, 1979, respondent MERCO
wrote the FFW to which MELU was affiliated and the petitioner herein was
the President, for a grievance conference on February 15, 1979, but this was
reset to February 21, 1979 to afford FFW sufficient time to notify petitioner
Domiciano Soco. On February 20, 1979, FFW informed MERCO that the
requested grievance conference would not be held because petitioner
Domiciano Soco finds it unnecessary to do so.
On his part, petitioner filed on February 14, 1979 a complaint for unfair
labor practice against MERCO, docketed by the Regional Office of the
Ministry of Labor, Davao City, as LRD Case No. LR-30-79. Petitioner alleged
therein that the five (5) days suspension imposed on him by respondent
Company, was on account of his union activities.
On February 21, 1979, petitioner was placed on preventive suspension
pending the approval of MERCO's application for clearance to terminate the
services of the former. This application was filed with the Ministry of Labor
on February 22, 1979 and docketed therein as LRD Case No. ROXI-C-209-79.
MERCO's application for clearance to terminate was opposed by petitioner
even as MERCO filed its Answer to the complaint against it for unfair labor
practice, on March 7, 1979.
The two cases were consolidated and tried jointly as agreed to by the
contending parties. In an order dated May 21, 1979, the Regional Director
granted private respondent's application to terminate the employment of
petitioner. He upheld the preventive suspension imposed by MERCO on
herein petitioner and dismissed the latter's complaint for unfair labor
practice. Said order was then appealed by herein petitioner but the Deputy
Minister of Labor, on October 25, 1979, affirmed the appealed order. The
dismissal of petitioner's appeal led to the filing of the instant petition for
certiorari.
Petitioner assails the action taken by the respondent Deputy Minister of
Labor as done with grave abuse of discretion amounting to lack of or in
excess of jurisdiction. Petitioner contends that Policy Instruction No. 6 of the
Ministry of Labor and Employment (MOLE) indicates that the Regional
Director has no jurisdiction to hear and decide unfair labor practice cases
because the exclusive original jurisdiction over such labor cases belongs to
the Conciliation Section of the Regional Office of the MOLE. Petitioner avers,
that such cases, therefore, should be first resolved by the Labor Arbiter and
not the Regional Director.
This contention is undeserving of the Court's favor.
The fact appears that at the initial hearing conducted on March 7, 1979 by
the Regional Director, it was agreed upon by the parties to consolidate the
two cases being litigated considering that both cases concern the same
parties and the issues involved are interrelated (Decision of the Regional
Director, p. 20, Rollo). Petitioner obviously accepted the jurisdiction of the
Regional Director by presenting his evidence. By having asked for affirmative
relief, without challenging the Regional Director's power to hear and try his
complaint for unfair labor practice, he cannot rightfully now challenge the
resolution made in said cases by the same Director, based on the latter's
alleged lack of jurisdiction.
In the case of Tijam vs. Sibonghanoy, 23 SCRA 29, it has been stated that
"after voluntarily submitting a cause and encountering an adverse decision
on the merits, it is too late for the loser to question the jurisdiction or power
of the court." Therein, We stated that the Court "frowns upon the
undesirable practice of a party submitting his case for decision and then
accepting the judgment, only if favorable, and attacking it for lack of
jurisdiction when adverse."
In Ching vs. Ramolete, 51 SCRA 14, this view was reiterated, and We quote:
xxx xxx xxx
Having invoked the jurisdiction of the trial court to secure an affirmative
relief against his opponents, petitioner may not now be allowed to
repudiate or question the same jurisdiction after failing to obtain such relief.
While jurisdiction of a tribunal may be challenged at any time, sound public
policy bars petitioner from doing so after having procured that jurisdiction
himself, speculating on the fortunes of litigation.
Petitioner avers that respondent Minister of Labor erred in affirming the
findings of the Regional Director that he violated Company Rules No. 19(a)
twice and his dismissal was, therefore, unwarranted. This issue raised by
petitioner relates to questions of fact. It has been held, however, in
numerous cases, that as a general rule, the findings of fact of the trial court
or quasi-judicial bodies are binding on this Court. This principle should be
applied in the instant cases, considering that the findings of respondent
Deputy Minister of Labor are supported by the evidence he appreciated. As
a matter of fact, the petitioner was caught for the second time by no less
than the Manager of respondent's company, in actual violation of the rule
prohibiting the use of the company vehicle for private purposes.
Lastly, petitioner asserts that in affirming his dismissal, the Deputy Minister
of Labor violated the constitutional provision of the security of tenure of
employees and that assuming that he indeed violated the company rule, the
fact remains that the damage caused by him, if any, to the company, is only
very minimal which should not warrant the imposition of a penalty of
dismissal. Petitioner submits that he has been employed in the company for
eighteen (18) years. Petitioner avers that the damage inflicted on MERCO by
his activities due to his misuse of the company vehicle during working hours
did not hamper the smooth business operations of MERCO.
However, what should not be overlooked is the prerogative of an employer separation pay, equivalent to one month salary for every year of his service
company to prescribe reasonable rules and regulations necessary or proper to said Company.
for the conduct of its business and to provide certain disciplinary measures
WHEREFORE, the petition is hereby DISMISSED but respondent Mercantile
in order to implement said rules and to assure that the same would be
complied with. A rule prohibiting employees from using company vehicles Corporation of Davao (MERCO) is, nevertheless, ordered to grant the
petitioner herein separation pay, equivalent to one (1) month salary for
for private purpose without authority from management is, from our
viewpoint, a reasonable one. This regulation cannot be faulted by petitioner every year of his service.
because this is proper and necessary even if only for an orderly conduct of No pronouncement as to costs.
MERCO's business. From the evidence presented, petitioner twice used the
company vehicle in pursuing his own personal interests, on company time SO ORDERED.
and deviating from his authorized route, all without permission. To cap off
his infractions, petitioners stubbornly declined even to satisfy MERCO's
request for an explanation or to attend a grievance conference to discuss
violations. Certainly, to condone petitioner's own conduct will erode the
discipline that an employer should uniformly apply so that it can expect
compliance to the same rules and regulations by its other employees.
Otherwise, the rules necessary and proper for the operation of its business,
would be gradually rendered ineffectual, ignored, and eventually become
meaningless.
G.R. No. 104269 November 11, 1993
The Court agrees fully with the comment made by the respondent Deputy
Minister of Labor, represented by the office of the Solicitor General, that- DEPARTMENT OF AGRICULTURE, petitioner,
vs.
xxx xxx xxx THE NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.

The filing by petitioner of the complaint for Unfair Labor Practice case on Roy Lago Salcedo for private respondents.
February 14, 1979 was brought about by the fact that he was caught for the
second time on February 13, 1979 violating Company Rule 19(a). It was
more of an anticipatory move on the part of petitioner. (Rollo, pp. 82-83).
VITUG, J.:
The Court is not unmindful of the fact that petitioner has, as he says, been
For consideration are the incidents that flow from the familiar doctrine of
employed with petitioner Company for eighteen (18) years. On this singular
non-suability of the state.
consideration, the Court deems it proper to afford some equitable relief to
petitioner due to the past services rendered by him to MERCO. Thus, it is but In this petition for certiorari, the Department of Agriculture seeks to nullify
appropriate that petitioner should be given by respondent MERCO, the Resolution, 1 dated 27 November 1991, of the National Labor Relations
Commission (NLRC), Fifth Division, Cagayan de Oro City, denying the petition
for injunction, prohibition and mandamus that prays to enjoin permanently
the NLRC's Regional Arbitration Branch X and Cagayan de Oro City Sheriff
from enforcing the decision 2 of 31 May 1991 of the Executive Labor Arbiter
and from attaching and executing on petitioner's property.
The Department of Agriculture (herein petitioner) and Sultan Security
Agency entered into a contract 3 on 01 April 1989 for security services to be
provided by the latter to the said governmental entity. Save for the increase
in the monthly rate of the guards, the same terms and conditions were also
made to apply to another contract, dated 01 May 1990, between the same
parties. Pursuant to their arrangements, guards were deployed by Sultan
Agency in the various premises of the petitioner.
On 13 September 1990, several guards of the Sultan Security Agency filed a
complaint for underpayment of wages, non-payment of 13th month pay,
uniform allowances, night shift differential pay, holiday pay and overtime
pay, as well as for damages, 4 before the Regional Arbitration Branch X of
Cagayan de Oro City, docketed as NLRC Case No. 10-09-00455-90 (or 10-10-
00519-90, its original docket number), against the Department of
Agriculture and Sultan Security Agency.
The Executive Labor Arbiter rendered a decision on 31 May finding herein
petitioner and jointly and severallyliable with Sultan Security Agency for the
payment of money claims, aggregating P266,483.91, of the complainant
security guards. The petitioner and Sultan Security Agency did not appeal
the decision of the Labor Arbiter. Thus, the decision became final and
executory.
On 18 July 1991, the Labor Arbiter issued a writ of execution. 5 commanding
the City Sheriff to enforce and execute the judgment against the property of
the two respondents. Forthwith, or on 19 July 1991, the City Sheriff levied
on execution the motor vehicles of the petitioner, i.e. one (1) unit Toyota Hi-
Ace, one (1) unit Toyota Mini Cruiser, and one (1) unit Toyota Crown. 6 These
units were put under the custody of Zacharias Roa, the property custodian
of the petitioner, pending their sale at public auction or the final settlement
of the case, whichever would come first.
A petition for injunction, prohibition and mandamus, with prayer for
preliminary writ of injunction was filed by the petitioner with the National
Labor Relations Commission (NLRC), Cagayan de Oro, alleging, inter alia, that
the writ issued was effected without the Labor Arbiter having duly acquired
jurisdiction over the petitioner, and that, therefore, the decision of the Labor
Arbiter was null and void and all actions pursuant thereto should be deemed
equally invalid and of no legal, effect. The petitioner also pointed out that
the attachment or seizure of its property would hamper and jeopardize
petitioner's governmental functions to the prejudice of the public good.
On 27 November 1991, the NLRC promulgated its assailed resolution; viz:
WHEREFORE, premises considered, the following orders are issued:
1. The enforcement and execution of the judgments against petitioner in
NLRC RABX Cases Nos. 10-10-00455-90; 10-10-0481-90 and 10-10-00519-90
are temporarily suspended for a period of two (2) months, more or less, but
not extending beyond the last quarter of calendar year 1991 to enable
petitioner to source and raise funds to satisfy the judgment awards against
it;
2. Meantime, petitioner is ordered and directed to source for funds within
the period above-stated and to deposit the sums of money equivalent to the
aggregate amount. it has been adjudged to pay jointly and severally with
respondent Sultan Security Agency with the Regional Arbitration Branch X,
Cagayan de Oro City within the same period for proper dispositions;
3. In order to ensure compliance with this order, petitioner is likewise
directed to put up and post sufficient surety and supersedeas
bond equivalent to at least to fifty (50%) percent of the total monetary
award issued by a reputable bonding company duly accredited by the
Supreme Court or by the Regional Trial Court of Misamis Oriental to answer
for the satisfaction of the money claims in case of failure or default on the
part of petitioner to satisfy the money claims;
4. The City Sheriff is ordered to immediately release the properties of
petitioner levied on execution within ten (10) days from notice of the
posting of sufficient surety or supersedeas bond as specified above. In the
meanwhile, petitioner is assessed to pay the costs and/or expenses incurred
by the City Sheriff, if any, in connection with the execution of the judgments
in the above-stated cases upon presentation of the appropriate claims or
vouchers and receipts by the city Sheriff, subject to the conditions specified
in the NLRC Sheriff, subject to the conditions specified in the NLRC Manual
of Instructions for Sheriffs;
5. The right of any of the judgment debtors to claim reimbursement against
each other for any payments made in connection with the satisfaction of the
judgments herein is hereby recognized pursuant to the ruling in the Eagle
Security case, (supra). In case of dispute between the judgment debtors, the
Executive Labor Arbiter of the Branch of origin may upon proper petition by
any of the parties conduct arbitration proceedings for the purpose and
thereby render his decision after due notice and hearings;
7. Finally, the petition for injunction is Dismissed for lack of basis. The writ of
preliminary injunction previously issued is Lifted and Set Aside and in lieu
thereof, a Temporary Stay of Execution is issued for a period of two (2)
months but not extending beyond the last quarter of calendar year 1991,
conditioned upon the posting of a surety or supersedeas bond by petitioner
within ten (10) days from notice pursuant to paragraph 3 of this disposition.
The motion to admit the complaint in intervention isDenied for lack of merit
while the motion to dismiss the petition filed by Duty Sheriff is Noted
SO ORDERED.
In this petition for certiorari, the petitioner charges the NLRC with grave
abuse of discretion for refusing to quash the writ of execution. The
petitioner faults the NLRC for assuming jurisdiction over a money claim
against the Department, which, it claims, falls under the exclusive
jurisdiction of the Commission on Audit. More importantly, the petitioner
asserts, the NLRC has disregarded the cardinal rule on the non-suability of
the State.
The private respondents, on the other hand, argue that the petitioner has
impliedly waived its immunity from suit by concluding a service contract
with Sultan Security Agency.
The basic postulate enshrined in the constitution that "(t)he State may not
be sued without its consent," 7 reflects nothing less than a recognition of the
sovereign character of the State and an express affirmation of the unwritten
rule effectively insulating it from the jurisdiction of courts. 8 It is based on
the very essence of sovereignty. As has been aptly observed, by Justice
Holmes, a sovereign is exempt from suit, not because of any formal
conception or obsolete theory, but on the logical and practical ground that
there can be no legal right as against the authority that makes the law on
which the right depends. 9 True, the doctrine, not too infrequently, is
derisively called "the royal prerogative of dishonesty" because it grants the
state the prerogative to defeat any legitimate claim against it by simply
invoking its non-suability. 10 We have had occasion, to explain in its defense,
however, that a continued adherence to the doctrine of non-suability cannot
be deplored, for the loss of governmental efficiency and the obstacle to the
performance of its multifarious functions would be far greater in severity
than the inconvenience that may be caused private parties, if such
fundamental principle is to be abandoned and the availability of judicial
remedy is not to be accordingly restricted. 11
The rule, in any case, is not really absolute for it does not say that the state
may not be sued under any circumstances. On the contrary, as correctly
phrased, the doctrine only conveys, "the state may not be sued without its
consent;" its clear import then is that the State may at times be sued. 12 The
States' consent may be given expressly or impliedly. Express consent may be
made through a general law 13 or a special law. 14 In this jurisdiction, the
general law waiving the immunity of the state from suit is found in Act No.
3083, where the Philippine government "consents and submits to be sued
upon any money claims involving liability arising from contract, express or
implied, which could serve as a basis of civil action between private
parties." 15 Implied consent, on the other hand, is conceded when the State
itself commences litigation, thus opening itself to a counterclaim 16 or when
it enters into a contract. 17 In this situation, the government is deemed to
have descended to the level of the other contracting party and to have
divested itself of its sovereign immunity. This rule, relied upon by the NLRC
and the private respondents, is not, however, without qualification. Not all
contracts entered into by the government operate as a waiver of its non-
suability; distinction must still be made between one which is executed in
the exercise of its sovereign function and another which is done in its
proprietary capacity. 18
In the Unites States of America vs. Ruiz, 19 where the questioned transaction
dealt with improvements on the wharves in the naval installation at Subic
Bay, we held:
The traditional rule of immunity exempts a State from being sued in the
courts of another State without its consent or waiver. This rule is a necessary
consequence of the principles of independence and equality of States.
However, the rules of International Law are not petrified; they are constantly
developing and evolving. And because the activities of states have
multiplied, it has been necessary to distinguish them — between sovereign
and governmental acts ( jure imperii) and private, commercial and
proprietary act ( jure gestionisis). The result is that State immunity now
extends only to acts jure imperii. The restrictive application of State
immunity is now the rule in the United States, the United Kingdom and
other states in Western Europe.
xxx xxx xxx
The restrictive application of State immunity is proper only when the
proceedings arise out of commercial transactions of the foreign sovereign,
its commercial activities or economic affairs. Stated differently, a state may
be said to have descended to the level of an individual and can this be
deemed to have actually given its consent to be sued only when it enters
into business contracts. It does not apply where the contracts relates to the
exercise of its sovereign functions. In this case the projects are an integral
part of the naval base which is devoted to the defense of both the United
States and the Philippines, indisputably a function of the government of the
highest order; they are not utilized for not dedicated to commercial or
business purposes.
In the instant case, the Department of Agriculture has not pretended to
have assumed a capacity apart from its being a governmental entity when it
entered into the questioned contract; nor that it could have, in fact,
performed any act proprietary in character.
But, be that as it may, the claims of private respondents, i.e. for
underpayment of wages, holiday pay, overtime pay and similar other items,
arising from the Contract for Service, clearly constitute money claims. Act
No. 3083, aforecited, gives the consent of the State to be "sued upon any
moneyed claim involving liability arising from contract, express or implied, . .
. Pursuant, however, to Commonwealth Act ("C.A.") No. 327, as amended by
Presidential Decree ("P.D.") No. 1145, the money claim first be brought to
the Commission on Audit. Thus, inCarabao, Inc., vs. Agricultural Productivity
Commission, 20 we ruled:
(C)laimants have to prosecute their money claims against the Government
under Commonwealth Act 327, stating that Act 3083 stands now merely as
the general law waiving the State's immunity from suit, subject to the
general limitation expressed in Section 7 thereof that "no execution shall
issue upon any judgment rendered by any Court against the Government of
the (Philippines), and that the conditions provided in Commonwealth Act
327 for filing money claims against the Government must be strictly
observed."
We fail to see any substantial conflict or inconsistency between the
provisions of C.A. No. 327 and the Labor Code with respect to money claims
against the State. The Labor code, in relation to Act No. 3083, provides the
legal basis for the State liability but the prosecution, enforcement or
satisfaction thereof must still be pursued in accordance with the rules and
procedures laid down in C.A. No. 327, as amended by P.D. 1445.
When the state gives its consent to be sued, it does thereby necessarily
consent to unrestrained execution against it. tersely put, when the State
waives its immunity, all it does, in effect, is to give the other party an
opportunity to prove, if it can, that the State has a liability. 21 In Republic vs.
Villasor 22 this Court, in nullifying the issuance of an alias writ of execution
directed against the funds of the Armed Forces of the Philippines to satisfy a
final and executory judgment, has explained, thus —

The universal rule that where the State gives its consent to be sued by
private parties either by general or special law, it may limit the claimant's
action "only up to the completion of proceedings anterior to the stage of
execution" and that the power of the Courts ends when the judgment is
rendered, since government funds and properties may not be seized under
writs or execution or garnishment to satisfy such judgments, is based on
obvious considerations of public policy. Disbursements of public funds must
be covered by the correspondent appropriation as required by law. The
functions and public services rendered by the State cannot be allowed to be
paralyzed or disrupted by the diversion of public funds from their legitimate
and specific objects, as appropriated by law. 23
G.R. No. 116347 October 3, 1996
WHEREFORE, the petition is GRANTED. The resolution, dated 27 November
1991, is hereby REVERSED and SET ASIDE. The writ of execution directed NATIVIDAD PONDOC, petitioner,
against the property of the Department of Agriculture is nullified, and the vs.
public respondents are hereby enjoined permanently from doing, issuing NATIONAL LABOR RELATIONS COMMISSION (Fifth Division, Cagayan de Oro
and implementing any and all writs of execution issued pursuant to the City) and EMILIO PONDOC,respondents.
decision rendered by the Labor Arbiter against said petitioner.

SO ORDERED.
DAVIDE, JR., J.:p

The novel issue that confronts us in this case is whether the Fifth Division of
the National Labor Relations Commission (NLRC) can validly defeat a final
judgment of the Labor Arbiter in favor of the complainant in a labor case by:
(a) entertaining a petition for injunction and damages, and an appeal from
the Labor Arbiter's denial of a claim for set-off based on an alleged
indebtedness of the laborer and order of execution of the final judgment;
and, (b) thereafter, by receiving evidence and adjudging recovery on such
indebtedness and authorizing it to offset the Labor Arbiter's final award.
The petitioner takes the negative view. In its Manifestation and Motion in On June 17, 1993, Labor Arbiter Esteban Abecia rendered a Decision finding
Lieu of Comment, 1 the Office of the Solicitor General joins her in her plea, the existence of [an] employer-employee relationship between the parties.
hence we required the NLRC to file its own comment. The dispositive portion of the Decision reads:

We resolved to give due course to the petition after the filing by the NLRC WHEREFORE, judgment is hereby rendered: (a) ordering respondent Eulalio
and the private respondent of their separate comments. Pondoc to pay complainant the following claims:

Petitioner Natividad Pondoc was the legitimate wife of Andres Pondoc. Atter (1) Salary differential for
her death on 5 December 1994, she was substituted by Hipolito Pondoc, her reason of underpayment P35,776.00;
only legitimate son. 2 —————

The Office of the Solicitor General summarized the factual antecedents of (2) Regular holiday and
this case in its Manifestation and Motion in Lieu of Comment: premium pay for holiday services 902.00;
————
Private respondent Eulalio Pondoc is the owner-proprietor of Melleonor
General Merchandise and Hardware Supply located at Poblacion, Sindangan, (3) Premium pay for rest day
Zamboanga del Norte. Respondent is engaged, among others, in the services 3,840.00;
business of buying and selling copra, rice, corn, "binangkol," junk iron and ————
empty bottles. He has in his employ more than twenty (20) regular workers
(4) 13th month pay 3,600.00
(Records, pp. 9-11)
————
Records disclose that Andres Pondoc was employed by Eulalio Pondoc as a
or the total amount of FORTY-FOUR [sic] THOUSAND AND ONE HUNDRED
laborer from October 1990 up to December 1991, receiving a wage rate of
P20.00 per day. He was required to work twelve (12) hours a day from 7:00 EIGHTEEN PESOS (P44,118.00).
AM to 8:00 PM, Monday to Sunday. Despite working on his rest days and Other claims are denied for lack of merit.
holidays, he was not paid his premium pay as required by law (Ibid).
SO ORDERED (Records, pp. 323-324).
Consequently, on May 14, 1992, Natividad Pondoc, on behalf of her
husband, filed a complaint for salary differential, overtime pay, 13th month On his last day to perfect an appeal, private respondent filed a Manifestation
pay, holiday pay and other money claims before the Sub-Regional before the Labor Arbiter praying that his liabilities be set-off against
Arbitration Branch No. 9 of the NLRC, docketed as Sub-RAB Case No. 09-05- petitioner's alleged indebtedness to him (Records, pp. 325-327). The Labor
10102-92 (Records, p.1). Arbiter denied, however, the compensation, and, instead, issued a writ of
execution as prayed for by petitioner (Records, p. 328).
In his position paper, private respondent questioned, among others, the
existence of [an] employer-employee relationship between them. He further Before the execution order could be implemented, however, private
averred that Melleonor General Merchandise and Hardware Supply is a respondent was able to obtain a restraining order from the NLRC, where he
fictitious establishment (Records, pp. 64-68).
filed a Petition for "Injunction and Damages," docketed as NLRC Case No.
ICM-000065.
On February 28, 1994, public respondent NLRC allowed compensation
between petitioner's monetary award and her alleged indebtedness to
private respondent. It disposed:
WHEREFORE, the appealed order is hereby vacated and set aside. A new one
is entered declaring the setting-off of complainant's indebtedness which
allegedly amounted to P41,051.35 against the complainant's monetary
award in the amount of P44,118.00. The additional amount of P5,000.00
which complainant allegedly got from respondent on 10 July 1993 could not
be credited in view of appellant's failure to submit evidence to prove that
complainant was really paid P5,000.00.
Accordingly, respondent Eulalio Pondoc is hereby directed to pay
complainant Natividad Pondoc the amount of P3,066.65.
The Temporary restraining order issued herein is hereby made permanent.
SO ORDERED (Annex "D" of Petition). 3
Her motion for reconsideration of the judgment having been denied by the
NLRC, the petitioner instituted this special civil action for certiorari under
Rule 65 of the Rules of Court wherein she prays this Court annul the
challenged decision of the NLRC, Fifth Division (Cagayan de Oro City), in
NLRC Case No. IC No. M-000065, and direct the enforcement of the writ of
execution in NLRC Case No. SRAB-09-05-10102-92, on the ground that the
NLRC, Fifth Division, acted without or in excess of jurisdiction or with grave
abuse of discretion when it proceeded to determine the alleged
indebtedness of the petitioner and set-off the same against the liabilities of
the private respondent. The petitioner asserts that the decision of the Labor
Arbiter in NLRC Case No. SRAB-09-05-10102-92 was already final and
executory when the private respondent tried to defeat the judgment by
asserting an alleged indebtedness of Andres Pondoc as a set-off, a claim not
pleaded before the Labor Arbiter at any time before judgment, hence
deemed waived. Moreover the indebtedness "did not evolve out [sic]
employer-employee relationship, hence, purely civil in aspect."
The Office of the Solicitor General agreed with the petitioner and stressed
further that the asserted indebtedness was never proven to have arisen out
of or in connection with the employer-employee relationship between the
private respondent and the late Andres Pondoc, or to have any causal
connection thereto. Accordingly, both the Labor Arbiter and the NLRC did
not have jurisdiction over the private respondent's claim.
As expected, the private respondent and the NLRC prayed for the dismissal
of this case.
We rule for the petitioner.
The proceedings before the NLRC were fatally flawed.
In the first place, the NLRC should not have entertained the private
respondent's separate or independent petition for "Injunction and
Damages" (NLRC IC No. M-000065). It was obvious that the petition was a
scheme to defeat or obstruct the enforcement of the judgment in NLRC Case
No. SRAB-09-05-10102-92 where, in fact, a writ of execution had been
issued. Article 218(e) of the Labor Code does not provide blanket authority
to the NLRC or any of its divisions to issue writs of injunction, while Rule XI
of the New Rules of Procedure of the NLRC makes injunction only an
ancillary remedy in ordinary labor disputes such as the one brought by the
petitioner in NLRC Case No. SRAB-09-05-10102-92. This is clear from Section
1 of the said Rule which pertinently provides as follows:
Sec. 1. Injunction in Ordinary Labor Disputed. — A preliminary injunction or
a restraining order may be granted by the Commission through its divisions
pursuant to the provisions of paragraph (e) of Article 218 of the Labor Code,
as amended, when it is established on the bases of the sworn allegations in
the petition that the acts complained of, involving or arising from any labor
dispute before the Commission, which, if not restrained or performed
forthwith, may cause grave or irreparable damage to any party or render
ineffectual any decision in favor of such party.
xxx xxx xxx damages arising from employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
The foregoing ancillary power may be exercised by the Labor Arbiters only including questions involving the legality of strikes and
as an incident to the cases pending before them in order to preserve the lockouts; and
rights of the parties during the pendency of the case, but excluding labor 6. Except claims for Employees Compensation, Social
disputes involving strike or lockout. (emphasis supplied). Security, Medicare and maternity benefits, all other claims,
Hence, a petition or motion for preliminary injunction should have been arising from employer-employee relations, including those
filed in the appeal interposed by the private respondent, i.e., in NLRC Case of persons in domestic or household service, involving an
No. SRAB-09-05-10102-92. This matter, however, became academic when amount exceeding five thousand pesos (P5,000.00)
the NLRC consolidated the two cases as shown by the captions in its regardless of whether accompanies with a claim for
challenged decision of 28 February 1994 and resolution of 6 May 1994. reinstatement.

Secondly, the appeal of the private respondent in NLRC Case No. SRAB-09-
05-10102-92 was not from the decision therein, but from the order of the
Labor Arbiter denying the set-off insisted upon by the private respondent
and directing the execution of the judgment. Therefore, the private
respondent admitted the final and executory character of the judgment.
The Labor Arbiter, in denying the set-off, reasoned "[i]t could have been
considered if it was presented before the decision of this case." 4 While this
is correct, there are stronger reasons why the set-off should, indeed, be
denied. As correctly contended by the Office of the Solicitor General, there
is a complete want of evidence that the indebtedness asserted by the
private respondent against Andres Pondoc arose out of or was incurred in
connection with the employer-employee relationship between them. The
Labor Arbiter did not then have jurisdiction over the claim as under
paragraph (a) of Article 217 of the Labor Code, Labor Arbiters have exclusive
and original jurisdiction only in the following cases:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases
that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
4. Claim for actual, moral, exemplary and other forms of
On the other hand, under paragraph (b) thereof, the NLRC has exclusive
appellate jurisdiction over all cases decided by the Labor Arbiters. This
simply means that the NLRC does not have original jurisdiction over the
cases enumerated in paragraph (a) and that if a claim does not fall within
the exclusive original jurisdiction of the Labor Arbiter, the NLRC cannot have
appellate jurisdiction thereon.
The conclusion then is inevitable that the NLRC was without jurisdiction,
either original or appellate, to receive evidence on the alleged indebtedness,
render judgment thereon, and direct that its award be set-off against the
final judgment of the Labor Arbiter.
Finally, even assuming arguendo that the claim for the alleged indebtedness
fell within the exclusive original jurisdiction of the Labor Arbiter, it was
deemed waived for not having been pleaded as an affirmative defense or
barred for not having been set up as a counterclaim before the Labor Arbiter
at any appropriate time prior to the rendition of the decision in NLRC Case
No. SRAB-09-05-10102-92. Under the Rules of Court, which is applicable in a
suppletory character in labor cases before the Labor Arbiters or the NLRC
pursuant to Section 3, Rule I of the New Rules of Procedure of the NLRC,
defenses which are not raised either in a motion to dismiss or in the answer
are deemed waived 5 and counterclaims not set up in the answer are
barred. 6 Set-off or compensation is one of the modes of extinguishing
obligations 7 and extinguishment is an affirmative defense and a ground for a
motion to dismiss. 8

We do not then hesitate to rule that the NLRC acted without jurisdiction or
with grave abuse of discretion in entertaining an independent action for
injunction and damages (NLRC IC No. M-000065), in receiving evidence and
rendering judgment on the alleged indebtedness of Andres Pondoc, and in
ordering such judgment to offset the final award of the Labor Arbiter in
NLRC Case No. SRAB-09-05-10102-92.

WHEREFORE, the instant petition is GRANTED and the challenged decision of

28 February 1994 and resolution of 6 May 1994 of the National Labor
Relations Commission in NLRC Case No. IC No. M-000065 and NLRC Case No.
SRAB-09-05-10102-92 are ANNULLED and SET ASIDE. The judgment of the
Labor Arbiter in NLRC Case No. SRAB-09-05-10102-92 should forthwith be
enforced without any further delay, the award therein bearing interest at
the rate of twelve per centum (12%) per annum from the finality of such
judgment until it shall have been fully paid. G.R. No. 120567 March 20, 1998

Costs against the private respondent. PHILIPPINE AIRLINES, INC., petitioner,

vs.
SO ORDERED.
NATIONAL LABOR RELATIONS COMMISSION, FERDINAND PINEDA and
GOGFREDO CABLING, respondents.

MARTINEZ, J.:

Can the National Labor Relations Commission (NLRC), even without a

complaint for illegal dismissal tiled before the labor arbiter, entertain an
action for injunction and issue such writ enjoining petitioner Philippine
Airlines, inc. from enforcing its Orders of dismissal against private
respondents, and ordering petitioner to reinstate the private respondents to
their previous positions?

This is the pivotal issue presented before us in this petition

for certiorari under Rule 65 of the Revised Rules of Court which seeks the
nullification of the injunctive writ dated April 3, 1995 issued by the NLRC and
the Order denying petitioner's motion for reconsideration on the ground
that the said Orders were issued in excess of jurisdiction.
Private respondents are flight stewards of the petitioner. Both were
dismissed from the service for their alleged involvement in the April 3, 1993
currency smuggling in Hong Kong.
Aggrieved by said dismissal, private respondents filed with the NLRC a
petition 1 for injunction praying that:
I. Upon filing of this Petition, a temporary restraining order be issued,
prohibiting respondents (petitioner herein) from effecting or enforcing the
Decision dated Feb. 22, 1995, or to reinstate petitioners temporarily while a
hearing on the propriety of the issuance of a writ of preliminary injunction is
being undertaken;
II. After hearing, a writ of preliminary mandatory injunction be issued
ordering respondent to reinstate petitioners to their former positions
pending the hearing of this case, or, prohibiting respondent from enforcing
its Decision dated February 22, 1995 while this case is pending adjudication;
III. After hearing, that the writ of preliminary injunction as to the reliefs
sought for be made permanent, that petitioners be awarded full backwages,
moral damages of PHP 500,000.00 each and exemplary damages of PHP
500,000.00 each, attorney's fees equivalent to ten percent of whatever
amount is awarded, and the costs of suit.
On April 3, 1995, the NLRC issued a temporary mandatory
injunction 2 enjoining petitioner to cease and desist from enforcing its
February 22, 1995 Memorandum of dismissal. In granting the writ, the NLRC
considered the following facts, to wit:
. . . that almost two (2) years ago, i.e. on April 15, 1993, the petitioners were
instructed to attend an investigation by respondent's "Security and Fraud
Prevention Sub-Department" regarding an April 3, 1993 incident in
Hongkong at which Joseph Abaca, respondent's Avionics Mechanic in
Hongkong "was intercepted by the Hongkong Airport Police at Gate 05 . . .
the ramp area of the Kai Tak International Airport while . . . about to exit said
gate carrying a . . . bag said to contain some 2.5 million pesos in Philippine
Currencies. That at the Police Station. Mr. Abaca claimed that he just found
said plastic bag at the Skybed Section of the arrival flight PR300/03 April 93,"
where petitioners served as flight stewards of said flight PR300; . . the
petitioners sought "a more detailed account of what this HKG incident is all
about"; but instead, the petitioners were administratively charged, "a
hearing" on which "did
not push through" until almost two (2) years after, i.e, "on January 20, 1995 .
. . where a confrontation between Mr. Abaca and petitioners herein was
compulsorily arranged by the respondent's disciplinary board" at which
hearing, Abaca was made to identify petitioners as co-conspirators; that
despite the fact that the procedure of identification adopted by
respondent's Disciplinary Board was anomalous "as there was no one else in
the line-up (which could not be called one) but petitioners . . . Joseph Abaca
still had difficulty in identifying petitioner Pineda as his co-conspirator, and
as to petitioner Cabling, he was implicated and pointed by Abaca only after
respondent's Atty. Cabatuando pressed the former to identify petitioner
Cabling as co-conspirator"; that with the hearing reset to January 25, 1995,
"Mr. Joseph Abaca finally gave exculpating statements to the board in that
he cleared petitioners from any participation or from being the owners of
the currencies, and at which hearing Mr. Joseph Abaca volunteered the
information that the real owner of said money was one who frequented his
headquarters in Hongkong to which information, the Disciplinary Board
Chairman, Mr. Ismael Khan," opined "for the need for another hearing to go
to the bottom of the incident"; that from said statement, it appeared "that
Mr. Joseph Abaca was the courier, and had another mechanic in Manila who
hid the currency at the plane's skybed for Abaca to retrieve in Hongkong,
which findings of how the money was found was previously confirmed by
Mr. Joseph Abaca himself when he was first investigated by the Hongkong
authorities"; that just as petitioners "thought that they were already fully
cleared of the charges, as they no longer received any summons/notices on
the intended "additional hearings" mandated by the Disciplinary Board,"
they were surprised to receive "on February 23, 1995. . . a Memorandum
dated February 22, 1995" terminating their services for alleged violation of
respondent's Code of Discipline "effective immediately"; that sometime . . .
first week of March, 1995, petitioner Pineda received another Memorandum
from respondent Mr. Juan Paraiso, advising him of his termination effective
February 3, 1995, likewise for violation of respondent's Code of Discipline; . .
.
3. . . . in ordering the reinstatement of private respondents on the basis of
their mere allegations, in violation of PAL's right to due process:
4. . . . in arrogating unto itself management prerogative to discipline its
employees and divesting the labor arbiter of its original and exclusive
jurisdiction over illegal dismissal cases;

In support of the issuance of the writ of temporary injunction, the NLRC 5. . . . in suspending the effects of termination when such action is
exclusively within the jurisdiction of the Secretary of Labor;
adapted the view that: (1) private respondents cannot be validly dismissed
on the strength of petitioner's Code of Discipline which was declared illegal 6. . . . in issuing the temporary injunction in the absence of any irreparable
by this Court in the ease at PAL, Inc. vs. NLRC, (G.R. No. 85985), promulgated or substantial injury to both private respondents.
August 13, 1993, for the reason that it was formulated by the petitioner
without the participation of its employees as required in R.A. 6715, On May 31, 1995, the NLRC denied petitioner's motion for reconsideration,
amending Article 211 of the Labor Code; (2) the whimsical, baseless and ruling:
premature dismissals of private respondents which "caused them grave and
"The respondent (now petitioner), for one, cannot validly claim that we
irreparable injury" is enjoinable as private respondents are left "with no
cannot exercise our injunctive power under Article 218 (e) of the Labor Code
speedy and adequate remedy at law" except the issuance of a temporary
on the pretext that what we have here is not a labor dispute as long as it
mandatory injunction; (3) the NLRC is empowered under Article 218 (e) of
concedes that as defined by law, a" (l) "Labor Dispute" includes any
the Labor Code not only to restrain any actual or threatened commission of
controversy or matter concerning terms or conditions of employment." If
any or all prohibited or unlawful acts but also to require the performance of
security of tenure, which has been breached by respondent and which,
a particular act in any labor dispute, which, if not restrained or performed
precisely, is sought to be protected by our temporary mandatory injunction
forthwith, may cause grave or irreparable damage to any party; and (4) the
(the core of controversy in this case) is not a "term or condition of
temporary power of the NLRC was recognized by this Court in the case
employment", what then is?
of Chemo-Technische Mfg., Inc.Employees Union, DFA, et. al. vs. Chemo-
Technische Mfg., Inc. [G.R. No. 107031, January 25, 1993]. xxx xxx xxx
On May 4, 1995, petitioner moved for reconsideration 3 arguing that the Anent respondent's second argument . . . . Article 218 (e) of the Labor Code .
NLRC erred: . . empowered the Commission not only to issue a prohibitory injunction,
but a mandatory ("to require the performance") one as well. Besides, as
1. . . . in granting a temporary injunction order when it has no jurisdiction to
earlier discussed, we already exercised (on August 23, 1991) this temporary
issue an injunction or restraining order since this may be issued only under
mandatory injunctive power in the case of "Chemo-Technische Mfg., Inc.
Article 218 of the Labor Code if the case involves or arises from labor
Employees Union-DFA et. al. vs. Chemo-Technische Mfg., Inc., et. al." (supra)
disputes;
and effectively enjoined one (1) month old dismissals by Chemo-Technische
2. . . . in granting a temporary injunction order when the termination of and that our aforesaid mandatory exercise of injunctive power, when
private respondents have long been carried out;
questioned through a petition for certiorari, was sustained by the Third
Division of the Supreme court per its Resolution dated January 25, 1993.
xxx xxx xxx
Respondent's fourth argument that petitioner's remedy for their dismissals
is "to file an illegal dismissal case against PAL which cases are within the
original and exclusive jurisdiction of the Labor Arbiter' is ignorant. In
requiring as a condition for the issuance of a "temporary or permanent
injunction" — "(4) That complainant has no adequate remedy at law;"
Article 218 (e) of the Labor Code clearly envisioned adequacy, and not
plain availability of a remedy at law as an alternative bar to the issuance of
an injunction. An illegal dismissal suit (which takes, on its expeditious side,
three (3) years before it can be disposed of) while available as a remedy
under Article 217 (a) of the Labor Code, is certainly not an "adequate;
remedy at law, Ergo, it cannot as an alternative remedy, bar our exercise of
that injunctive power given us by Article 218 (e) of the Code.
xxx xxx xxx
Thus, Article 218 (e), as earlier discussed [which empowers this Commission
"to require the performance of a particular act" (such as our requiring
respondent "to cease and desist from enforcing" its whimsical memoranda
of dismissals and "instead to reinstate petitioners to their respective
position held prior to their subject dismissals") in "any labor dispute which,
if not . . . performed forthwith, may cause grave and irreparable damage to
any party"] stands as the sole "adequate remedy at law" for petitioners
here.
Finally, the respondent, in its sixth argument claims that even if its acts of
dismissing petitioners "may be great, still the same is capable of
compensation", and that consequently, "injunction need not be issued
where adequate compensation at law could be obtained". Actually,
what respondent PAL argues here is that we need not interfere in its
whimsical dismissals of petitioners as, after all, it can pay the latter its
backwages. . . .
But just the same, we have to stress that Article 279 does not speak alone of
backwages as an obtainable relief for illegal dismissal; that reinstatement as
well is the concern of said law, enforceable when necessary, through Article
218 (e) of the Labor Code (without need of an illegal dismissal suit under
Article 217 (a) of the Code) if such whimsical and capricious act of illegal
dismissal will "cause grave or irreparable injury to a party". . . . . 4
Hence, the present recourse.
Generally, injunction is a preservative remedy for the protection of one's
substantive rights or interest. It is not a cause of action in itself but merely a
provisional remedy, an adjunct to a main suit. It is resorted to only when
there is a pressing necessity to avoid injurious consequences which cannot
be remedied under any standard of compensation. The application of the
injunctive writ rests upon the existence of an emergency or of a special
reason before the main case be regularly heard. The essential conditions for
granting such temporary injunctive relief are that the complaint alleges facts
which appear to be sufficient to constitute a proper basis for injunction and
that on the entire showing from the contending parties, the injunction is
reasonably necessary to protect the legal rights of the plaintiff pending the
litigation. 5 Injunction is also a special equitable relief granted only in cases
where there is no plain, adequate and complete remedy at law. 6
In labor cases, Article 218 of the Labor Code empowers the NLRC —
(e) To enjoin or restrain any actual or threatened commission of any or all
prohibited or unlawful acts or to require the performance of a particular
act in any labor dispute which, if not restrained or performed forthwith, may
cause grave or irreparable damage to any party or render ineffectual any
decision in favor of such party; . . ." (Emphasis Ours)
Complementing the above-quoted provision, Sec. 1, Rule XI of the New
Rules of Procedure of the NLRC, pertinently provides as follows:
Sec. 1. Injunction in Ordinary Labor Dispute. — A preliminary injunction or a
restraining order may be granted by the Commission through its divisions
pursuant to the provisions of paragraph (e) of Article 218 of the Labor Code,
as amended, when it is established on the bases of the sworn allegations in
the petition that the acts complained of, involving or arising from any labor
dispute before the Commission, which, if not restrained or performed
forthwith, may cause grave or irreparable damage to any party or render
ineffectual any decision in favor of such party.
xxx xxx xxx
The foregoing ancillary power may be exercised by the Labor Arbiters only
as an incident to the cases pending before them in order to preserve the
rights of the parties during the pendency of the case, but excluding labor
disputes involving strikes or lockout. 7 (Emphasis Ours)
From the foregoing provisions of law, the power of the NLRC to issue an
injunctive writ originates from "any labor dispute" upon application by a
party thereof, which application if not granted "may cause grave or
irreparable damage to any party or render ineffectual any decision in favor
of such party."
The term "labor dispute" is defined as "any controversy or matter
concerning terms and conditions of employment or the association or
representation of persons in negotiating, fixing. maintaining, changing, or
arranging the terms and conditions of employment regardless of whether or
not the disputants stand in the proximate relation of employers and
employees." 8
The term "controversy" is likewise defined as "a litigated
question; adversary proceeding in a court of law; a civil action or suit, either
at law or in equity; a justiciable dispute." 9
A "justiciable controversy" is "one involving an active antagonistic assertion
of a legal right on one side and a denial thereof on the other concerning a
real, and not a mere theoretical question or issue." 10
Taking into account the foregoing definitions, it is an essential requirement
that there must first be a labor dispute between the contending parties
before the labor arbiter. In the present case, there is no labor dispute
between the petitioner and private respondents as there has yet been no
complaint for illegal dismissal filed with the labor arbiter by the private
respondents against the petitioner.
The petition for injunction directly filed before the NLRC is in reality an
action for illegal dismissal. This is clear from the allegations in the petition
which prays for; reinstatement of private respondents; award of full
backwages, moral and exemplary damages; and attorney's fees. As such, the
petition should have been filed with the labor arbiter who has the original
and exclusive jurisdiction to hear and decide the following cases involving all
workers, whether agricultural or non-agricultural:
(1) Unfair labor practice;
(2) Termination disputes;
(3) If accompanied with a claim for reinstatement, those cases that workers
may file involving wages, rates of pay, hours of work and other terms and
conditions of employment;
(4) Claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations;
(5) Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and
(6) Except claims for employees compensation, social security, medicare and
maternity benefits, all other claims arising from employer- employee
relations, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00), whether or
not accompanied with a claim for reinstatement. 11
The jurisdiction conferred by the foregoing legal provision to the labor
arbiter is both original and exclusive, meaning, no other officer or tribunal
can take cognizance of, hear and decide any of the cases therein
enumerated. The only exceptions are where the Secretary of Labor and
Employment or the NLRC exercises the power of compulsory arbitration, or
the parties agree to submit the matter to voluntary arbitration pursuant to
Article 263 (g) of the Labor Code, the pertinent portions of which reads:
(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 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.
On the other hand, the NLRC shall have exclusive appellate jurisdiction over
all cases decided by labor arbiters as provided in Article 217(b) of the Labor
Code. In short, the jurisdiction of the NLRC in illegal dismissal cases is
appellate in nature and, therefore, it cannot entertain the private
respondents' petition for injunction which challenges the dismissal orders of
petitioner. Article 218(e) of the Labor Code does not provide blanket
authority to the NLRC or any of its divisions to issue writs of injunction,
considering that Section 1 of Rule XI of the New Rules of Procedure of the
NLRC makes injunction only an ancillary remedy in ordinary labor
disputes." 12
Thus, the NLRC exceeded its jurisdiction when it issued the assailed Order
granting private respondents' petition for injunction and ordering the
petitioner to reinstate private respondents.
The argument of the NLRC in its assailed Order that to file an illegal dismissal
suit with the labor arbiter is not an "adequate" remedy since it takes three
(3) years before it can be disposed of, is patently erroneous. An "adequate"
remedy at law has been defined as one "that affords relief with reference to
the matter in controversy, and which is appropriate to the particular
circumstances of the case." 13 It is a remedy which is equally, beneficial,
speedy and sufficient which will promptly relieve the petitioner from the
injurious effects of the acts complained of. 14
Under the Labor Code, the ordinary and proper recourse of an illegally
dismissed employee is to file a complaint for illegal dismissal with the labor
arbiter. 15 In the case at bar, private respondents disregarded this rule and
directly went to the NLRC through a petition for injunction praying that
petitioner be enjoined from enforcing its dismissal orders. In Lamb
vs. Phipps, 16 we ruled that if the remedy is specifically provided by law, it is
presumed to be adequate. Moreover, the preliminary mandatory injunction
prayed for by the private respondents in their petition before the NLRC can
also be entertained by the labor arbiter who, as shown earlier, has the
ancillary power to issue preliminary injunctions or restraining orders as an
incident in the cases pending before him in order to preserve the rights of
the parties during the pendency of the case. 17
Furthermore, an examination of private respondents' petition for injunction
reveals that it has no basis since there is no showing of any urgency or
irreparable injury which the private respondents might suffer. An injury is
considered irreparable if it is of such constant and frequent recurrence that
no fair and reasonable redress can be had therefor in a court of law, 18 or
where there is no standard by which their amount can be measured with
reasonable accuracy, that is, it is not susceptible of mathematical
computation. It is considered irreparable injury when it cannot be
adequately compensated in damages due to the nature of the injury itself or
the nature of the right or property injured or when there exists no certain
pecuniary standard for the measurement of damages. 19
In the case at bar, the alleged injury which private respondents stand to
suffer by reason of their alleged illegal dismissal can be adequately
compensated and therefore, there exists no "irreparable injury," as defined
above which would necessitate the issuance of the injunction sought for.
Article 279 of the Labor Code provides that an employee who is unjustly
dismissed from employment shall be entitled to reinstatement, without loss
of seniority rights and other privileges, and to the payment of full Commission (First Division), in NLRC NCR IC No. 000563-95, are hereby
backwages, inclusive of allowances, and to other benefits or their monetary REVERSED and SET ASIDE.
equivalent computed from the time his compensation was withheld from
SO ORDERED.
him up to the time of his actual reinstatement.

The ruling of the NLRC that the Supreme Court upheld its power to issue
temporary mandatory injunction orders in the case of Chemo-Technische
Mfg., Inc. Employees Union-DFA, et. al. vs. Chemo-Technische Mfg.,
Inc. et. al., docketed as G.R. No. 107031, is misleading. As correctly argued
by the petitioner, no such pronouncement was made by this Court in said
case. On January 25, 1993, we issued a Minute Resolution in the subject
case stating as follows:

Considering the allegations contained, the issues raised and the arguments G.R. No. L-46496 February 27, 1940
adduced in the petition for certiorari, as well as the comments of both
public and private respondents thereon, and the reply of the petitioners to ANG TIBAY, represented by TORIBIO TEODORO, manager and propietor,
private respondent's motion to dismiss the petition, the Court Resolved to and
DENY the same for being premature. NATIONAL WORKERS BROTHERHOOD, petitioners,
vs.
It is clear from the above resolution that we did not in anyway sustain the THE COURT OF INDUSTRIAL RELATIONS and NATIONAL LABOR UNION,
action of the NLRC in issuing such temporary mandatory injunction but INC., respondents.
rather we dismissed the petition as the NLRC had yet to rule upon the
motion for reconsideration filed by petitioner. Thus, the minute resolution Office of the Solicitor-General Ozaeta and Assistant Attorney Barcelona for
denying the petition for being prematurely filed. the Court of Industrial Relations.
Antonio D. Paguia for National Labor Unon.
Finally, an injunction, as an extraordinary remedy, is not favored in labor law Claro M. Recto for petitioner "Ang Tibay".
considering that it generally has not proved to be an effective means of Jose M. Casal for National Workers' Brotherhood.
settling labor disputes. 20 It has been the policy of the State to encourage the
parties to use the non-judicial process of negotiation and compromise, LAUREL, J.:
mediation and arbitration. 21 Thus, injunctions may be issued only in cases of
The Solicitor-General in behalf of the respondent Court of Industrial
extreme necessity based on legal grounds clearly established, after due
Relations in the above-entitled case has filed a motion for reconsideration
consultations or hearing and when all efforts at conciliation are exhausted
and moves that, for the reasons stated in his motion, we reconsider the
which factors, however, are clearly absent in the present case.
following legal conclusions of the majority opinion of this Court:
WHEREFORE, the petition is hereby GRANTED. The assailed Orders dated
1. Que un contrato de trabajo, asi individual como colectivo, sin termino fijo
April 3, 1995 and May 31, 1995, issued by the National Labor Relations
de duracion o que no sea para una determinada, termina o bien por
voluntad de cualquiera de las partes o cada vez que ilega el plazo fijado para
el pago de los salarios segun costumbre en la localidad o cunado se termine
la obra;
2. Que los obreros de una empresa fabril, que han celebrado contrato, ya
individual ya colectivamente, con ell, sin tiempo fijo, y que se han visto
obligados a cesar en sus tarbajos por haberse declarando paro forzoso en la
fabrica en la cual tarbajan, dejan de ser empleados u obreros de la misma;
3. Que un patrono o sociedad que ha celebrado un contrato colectivo de
trabajo con sus osbreros sin tiempo fijo de duracion y sin ser para una obra
determiminada y que se niega a readmitir a dichos obreros que cesaron
como consecuencia de un paro forzoso, no es culpable de practica injusta in
incurre en la sancion penal del articulo 5 de la Ley No. 213 del
Commonwealth, aunque su negativa a readmitir se deba a que dichos
obreros pertenecen a un determinado organismo obrero, puesto que tales
ya han dejado deser empleados suyos por terminacion del contrato en
virtud del paro.
The respondent National Labor Union, Inc., on the other hand, prays for the
vacation of the judgement rendered by the majority of this Court and the
remanding of the case to the Court of Industrial Relations for a new trial,
and avers:
1. That Toribio Teodoro's claim that on September 26, 1938, there was
shortage of leather soles in ANG TIBAY making it necessary for him to
temporarily lay off the members of the National Labor Union Inc., is entirely
false and unsupported by the records of the Bureau of Customs and the
Books of Accounts of native dealers in leather.
2. That the supposed lack of leather materials claimed by Toribio Teodoro
was but a scheme to systematically prevent the forfeiture of this bond
despite the breach of his CONTRACT with the Philippine Army.
3. That Toribio Teodoro's letter to the Philippine Army dated September 29,
1938, (re supposed delay of leather soles from the States) was but a scheme
to systematically prevent the forfeiture of this bond despite the breach of
his CONTRACT with the Philippine Army.
4. That the National Worker's Brotherhood of ANG TIBAY is a company or
employer union dominated by Toribio Teodoro, the existence and functions
of which are illegal. (281 U.S., 548, petitioner's printed memorandum, p. 25.)
5. That in the exercise by the laborers of their rights to collective bargaining,
majority rule and elective representation are highly essential and
indispensable. (Sections 2 and 5, Commonwealth Act No. 213.)
6. That the century provisions of the Civil Code which had been (the)
principal source of dissensions and continuous civil war in Spain cannot and
should not be made applicable in interpreting and applying the salutary
provisions of a modern labor legislation of American origin where the
industrial peace has always been the rule.
7. That the employer Toribio Teodoro was guilty of unfair labor practice for
discriminating against the National Labor Union, Inc., and unjustly favoring
the National Workers' Brotherhood.
8. That the exhibits hereto attached are so inaccessible to the respondents
that even with the exercise of due diligence they could not be expected to
have obtained them and offered as evidence in the Court of Industrial
Relations.
9. That the attached documents and exhibits are of such far-reaching
importance and effect that their admission would necessarily mean the
modification and reversal of the judgment rendered herein.
The petitioner, Ang Tibay, has filed an opposition both to the motion for
reconsideration of the respondent National Labor Union, Inc.
In view of the conclusion reached by us and to be herein after stead with
reference to the motion for a new trial of the respondent National Labor
Union, Inc., we are of the opinion that it is not necessary to pass upon the
motion for reconsideration of the Solicitor-General. We shall proceed to
dispose of the motion for new trial of the respondent labor union. Before
doing this, however, we deem it necessary, in the interest of orderly
procedure in cases of this nature, in interest of orderly procedure in cases of
this nature, to make several observations regarding the nature of the powers
of the Court of Industrial Relations and emphasize certain guiding principles
which should be observed in the trial of cases brought before it. We have re-
examined the entire record of the proceedings had before the Court of
Industrial Relations in this case, and we have found no substantial evidence
that the exclusion of the 89 laborers here was due to their union affiliation
or activity. The whole transcript taken contains what transpired during the
hearing and is more of a record of contradictory and conflicting statements
of opposing counsel, with sporadic conclusion drawn to suit their own views.
It is evident that these statements and expressions of views of counsel have
no evidentiary value.
The Court of Industrial Relations is a special court whose functions are
specifically stated in the law of its creation (Commonwealth Act No. 103). It
is more an administrative than a part of the integrated judicial system of the
nation. It is not intended to be a mere receptive organ of the Government.
Unlike a court of justice which is essentially passive, acting only when its
jurisdiction is invoked and deciding only cases that are presented to it by the
parties litigant, the function of the Court of Industrial Relations, as will
appear from perusal of its organic law, is more active, affirmative and
dynamic. It not only exercises judicial or quasi-judicial functions in the
determination of disputes between employers and employees but its
functions in the determination of disputes between employers and
employees but its functions are far more comprehensive and expensive. It
has jurisdiction over the entire Philippines, to consider, investigate, decide,
and settle any question, matter controversy or dispute arising between,
and/or affecting employers and employees or laborers, and regulate the
relations between them, subject to, and in accordance with, the provisions
of Commonwealth Act No. 103 (section 1). It shall take cognizance or
purposes of prevention, arbitration, decision and settlement, of any
industrial or agricultural dispute causing or likely to cause a strike or lockout,
arising from differences as regards wages, shares or compensation, hours of
labor or conditions of tenancy or employment, between landlords and
tenants or farm-laborers, provided that the number of employees, laborers
or tenants of farm-laborers involved exceeds thirty, and such industrial or
agricultural dispute is submitted to the Court by the Secretary of Labor or by
any or both of the parties to the controversy and certified by the Secretary
of labor as existing and proper to be by the Secretary of Labor as existing
and proper to be dealth with by the Court for the sake of public interest.
(Section 4, ibid.) It shall, before hearing the dispute and in the course of such
hearing, endeavor to reconcile the parties and induce them to settle the
dispute by amicable agreement. (Paragraph 2, section 4, ibid.) When
directed by the President of the Philippines, it shall investigate and study all
industries established in a designated locality, with a view to determinating
the necessity and fairness of fixing and adopting for such industry or locality
a minimum wage or share of laborers or tenants, or a maximum "canon" or
rental to be paid by the "inquilinos" or tenants or less to landowners.
(Section 5, ibid.) In fine, it may appeal to voluntary arbitration in the
settlement of industrial disputes; may employ mediation or conciliation for
that purpose, or recur to the more effective system of official investigation
and compulsory arbitration in order to determine specific controversies
between labor and capital industry and in agriculture. There is in reality here
a mingling of executive and judicial functions, which is a departure from the
rigid doctrine of the separation of governmental powers.
In the case of Goseco vs. Court of Industrial Relations et al., G.R. No. 46673,
promulgated September 13, 1939, we had occasion to joint out that the
Court of Industrial Relations et al., G. R. No. 46673, promulgated September
13, 1939, we had occasion to point out that the Court of Industrial Relations
is not narrowly constrained by technical rules of procedure, and the Act
requires it to "act according to justice and equity and substantial merits of
the case, without regard to technicalities or legal forms and shall not be
bound by any technicalities or legal forms and shall not be bound by any
technical rules of legal evidence but may inform its mind in such manner as
it may deem just and equitable." (Section 20, Commonwealth Act No. 103.)
It shall not be restricted to the specific relief claimed or demands made by
the parties to the industrial or agricultural dispute, but may include in the
award, order or decision any matter or determination which may be deemed
necessary or expedient for the purpose of settling the dispute or of
preventing further industrial or agricultural disputes. (section 13, ibid.) And
in the light of this legislative policy, appeals to this Court have been
especially regulated by the rules recently promulgated by the rules recently
promulgated by this Court to carry into the effect the avowed legislative
purpose. The fact, however, that the Court of Industrial Relations may be
said to be free from the rigidity of certain procedural requirements does not
mean that it can, in justifiable cases before it, entirely ignore or disregard
the fundamental and essential requirements of due process in trials and
investigations of an administrative character. There are primary rights which
must be respected even in proceedings of this character:
(1) The first of these rights is the right to a hearing, which includes the right
of the party interested or affected to present his own case and submit
evidence in support thereof. In the language of Chief Hughes, in Morgan v.
U.S., 304 U.S. 1, 58 S. Ct. 773, 999, 82 Law. ed. 1129, "the liberty and
property of the citizen shall be protected by the rudimentary requirements
of fair play.
(2) Not only must the party be given an opportunity to present his case and
to adduce evidence tending to establish the rights which he asserts but the
tribunal must consider the evidence presented. (Chief Justice Hughes in
Morgan v. U.S. 298 U.S. 468, 56 S. Ct. 906, 80 law. ed. 1288.) In the language
of this court inEdwards vs. McCoy, 22 Phil., 598, "the right to adduce
evidence, without the corresponding duty on the part of the board to
consider it, is vain. Such right is conspicuously futile if the person or persons
to whom the evidence is presented can thrust it aside without notice or
consideration."
(3) "While the duty to deliberate does not impose the obligation to decide
right, it does imply a necessity which cannot be disregarded, namely, that of
having something to support it is a nullity, a place when directly attached."
(Edwards vs. McCoy, supra.) This principle emanates from the more
fundamental is contrary to the vesting of unlimited power anywhere. Law is
both a grant and a limitation upon power.
(4) Not only must there be some evidence to support a finding or conclusion
(City of Manila vs. Agustin, G.R. No. 45844, promulgated November 29,
1937, XXXVI O. G. 1335), but the evidence must be "substantial."
(Washington, Virginia and Maryland Coach Co. v. national labor Relations
Board, 301 U.S. 142, 147, 57 S. Ct. 648, 650, 81 Law. ed. 965.) It means such
relevant evidence as a reasonable mind accept as adequate to support a
conclusion." (Appalachian Electric Power v. National Labor Relations Board,
4 Cir., 93 F. 2d 985, 989; National Labor Relations Board v. Thompson
Products, 6 Cir., 97 F. 2d 13, 15; Ballston-Stillwater Knitting Co. v. National
Labor Relations Board, 2 Cir., 98 F. 2d 758, 760.) . . . The statute provides that
"the rules of evidence prevailing in courts of law and equity shall not be
controlling.' The obvious purpose of this and similar provisions is to free
administrative boards from the compulsion of technical rules so that the
mere admission of matter which would be deemed incompetent inn judicial
proceedings would not invalidate the administrative order. (Interstate
Commerce Commission v. Baird, 194 U.S. 25, 44, 24 S. Ct. 563, 568, 48 Law.
ed. 860; Interstate Commerce Commission v. Louisville and Nashville R. Co.,
227 U.S. 88, 93 33 S. Ct. 185, 187, 57 Law. ed. 431; United States v. Abilene
and Southern Ry. Co. S. Ct. 220, 225, 74 Law. ed. 624.) But this assurance of
a desirable flexibility in administrative procedure does not go far as to justify
orders without a basis in evidence having rational probative force. Mere
uncorroborated hearsay or rumor does not constitute substantial evidence.
(Consolidated Edison Co. v. National Labor Relations Board, 59 S. Ct. 206, 83
Law. ed. No. 4, Adv. Op., p. 131.)"
(5) The decision must be rendered on the evidence presented at the
hearing, or at least contained in the record and disclosed to the parties
affected. (Interstate Commence Commission vs. L. & N. R. Co., 227 U.S. 88,
33 S. Ct. 185, 57 Law. ed. 431.) Only by confining the administrative tribunal
to the evidence disclosed to the parties, can the latter be protected in their
right to know and meet the case against them. It should not, however,
detract from their duty actively to see that the law is enforced, and for that
purpose, to use the authorized legal methods of securing evidence and
informing itself of facts material and relevant to the controversy. Boards of
inquiry may be appointed for the purpose of investigating and determining
the facts in any given case, but their report and decision are only advisory.
(Section 9, Commonwealth Act No. 103.) The Court of Industrial Relations
may refer any industrial or agricultural dispute or any matter under its
consideration or advisement to a local board of inquiry, a provincial fiscal. a
justice of the peace or any public official in any part of the Philippines for
investigation, report and recommendation, and may delegate to such board
or public official such powers and functions as the said Court of Industrial
Relations may deem necessary, but such delegation shall not affect the
exercise of the Court itself of any of its powers. (Section 10, ibid.)
(6) The Court of Industrial Relations or any of its judges, therefore, must act
on its or his own independent consideration of the law and facts of the
controversy, and not simply accept the views of a subordinate in arriving at a
decision. It may be that the volume of work is such that it is literally
Relations personally to decide all controversies coming before them. In the
United States the difficulty is solved with the enactment of statutory
authority authorizing examiners or other subordinates to render final
decision, with the right to appeal to board or commission, but in our case
there is no such statutory authority.
(7) The Court of Industrial Relations should, in all controversial questions,
render its decision in such a manner that the parties to the proceeding can
know the various issues involved, and the reasons for the decision rendered.
The performance of this duty is inseparable from the authority conferred
upon it.
In the right of the foregoing fundamental principles, it is sufficient to
observe here that, except as to the alleged agreement between the Ang
Tibay and the National Worker's Brotherhood (appendix A), the record is
barren and does not satisfy the thirst for a factual basis upon which to
predicate, in a national way, a conclusion of law.
This result, however, does not now preclude the concession of a new trial
prayed for the by respondent National Labor Union, Inc., it is alleged that
"the supposed lack of material claimed by Toribio Teodoro was but a scheme
adopted to systematically discharged all the members of the National Labor
Union Inc., from work" and this avernment is desired to be proved by the
petitioner with the "records of the Bureau of Customs and the Books of
Accounts of native dealers in leather"; that "the National Workers
Brotherhood Union of Ang Tibay is a company or employer union dominated
by Toribio Teodoro, the existence and functions of which are illegal."
Petitioner further alleges under oath that the exhibits attached to the
petition to prove his substantial avernments" are so inaccessible to the
respondents that even within the exercise of due diligence they could not be
expected to have obtained them and offered as evidence in the Court of
Industrial Relations", and that the documents attached to the petition "are
of such far reaching importance and effect that their admission would
necessarily mean the modification and reversal of the judgment rendered
herein." We have considered the reply of Ang Tibay and its arguments
against the petition. By and large, after considerable discussions, we have
come to the conclusion that the interest of justice would be better served if
the movant is given opportunity to present at the hearing the documents
referred to in his motion and such other evidence as may be relevant to the
main issue involved. The legislation which created the Court of Industrial
Relations and under which it acts is new. The failure to grasp the
fundamental issue involved is not entirely attributable to the parties
adversely affected by the result. Accordingly, the motion for a new trial
should be and the same is hereby granted, and the entire record of this case
shall be remanded to the Court of Industrial Relations, with instruction that
it reopen the case, receive all such evidence as may be relevant and
otherwise proceed in accordance with the requirements set forth
hereinabove. So ordered.
G.R. No. 157634 May 16, 2005

MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO

LAM, petitioners,
vs.
ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE, EDUARDO
ALAMARES, AMADO ALAMARES, EDGARDO TORREFRANCA, LOURDES
CAMIGLA, TEODORO LAURENARIA, WENEFREDO LOVERES, LUIS GUADES,
AMADO MACANDOG, PATERNO LLARENA, GREGORIO NICERIO, JOSE
ATRACTIVO, MIGUEL TORREFRANCA, and SANTOS BROÑOLA, respondents.

DECISION

PUNO, J.:

This is a petition for certiorari to reverse and set aside the Decision issued by
the Court of Appeals (CA)1 in CA-G.R. SP No. 68642, entitled "Rolando
Adana, Wenefredo Loveres, et. al. vs. National Labor Relations Commission
(NLRC), Mayon Hotel & Restaurant/Pacita O. Po, et al.," and the
Resolution2 denying petitioners' motion for reconsideration. The assailed CA
decision reversed the NLRC Decision which had dismissed all of respondents'
complaints,3 and reinstated the Joint Decision of the Labor Arbiter 4 which
ruled that respondents were illegally dismissed and entitled to their money
claims.

The facts, culled from the records, are as follows: 5

Petitioner Mayon Hotel & Restaurant is a single proprietor business Due to the expiration and non-renewal of the lease contract for the rented
registered in the name of petitioner Pacita O. Po, 6 whose mother, petitioner space occupied by the said hotel and restaurant at Rizal Street, the hotel
Josefa Po Lam, manages the establishment. 7 The hotel and restaurant operations of the business were suspended on March 31, 1997. 9 The
employed about sixteen (16) employees. operation of the restaurant was continued in its new location at Elizondo
Street, Legazpi City, while waiting for the construction of a new Mayon Hotel
Records show that on various dates starting in 1981, petitioner hotel and & Restaurant at Peñaranda Street, Legazpi City. 10 Only nine (9) of the sixteen
restaurant hired the following people, all respondents in this case, with the (16) employees continued working in the Mayon Restaurant at its new site. 11
following jobs:8
On various dates of April and May 1997, the 16 employees filed complaints
1. Wenefredo Loveres Accountant and Officer-in-charge for underpayment of wages and other money claims against petitioners, as
2. Paterno Llarena Front Desk Clerk follows:12

3. Gregorio Nicerio
4. Amado Macandog
5. Luis Guades
6. Santos Broñola
7. Teodoro Laurenaria
8. Eduardo Alamares
9. Lourdes Camigla
10. Chona Bumalay
11. Jose Atractivo
12. Amado Alamares
13. Roger Burce
Supervisory Waiter Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for
illegal dismissal, underpayment of wages, nonpayment of holiday and rest
Roomboy day pay; service incentive leave pay (SILP) and claims for separation pay plus
damages;
Utility/Maintenance Worker
Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for
Roomboy
underpayment of wages; nonpayment of cost of living allowance (COLA) and
Waiter overtime pay; premium pay for holiday and rest day; SILP; nightshift
differential pay and separation pay plus damages;
Roomboy/Waiter
Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment
Cashier of wages; nonpayment of holiday and rest day pay and SILP;
Cashier Rolando Adana, Roger Burce and Amado Alamares for underpayment of
Technician wages; nonpayment of COLA, overtime, holiday, rest day, SILP and nightshift
differential pay;
Dishwasher and Kitchen Helper
Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest
Cook day and SILP and night shift differential pay;

14. Rolando Adana
15. Miguel Torrefranca
16. Edgardo Torrefranca
Waiter Santos Broñola for illegal dismissal, underpayment of wages, overtime pay,
rest day pay, holiday pay, SILP, and damages; 13 and
Cook
Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and
Cook
overtime pay; premium pay for holiday and rest day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a
Joint Decision in favor of the employees. The Labor Arbiter awarded
substantially all of respondents' money claims, and held that respondents
Loveres, Macandog and Llarena were entitled to separation pay, while
respondents Guades, Nicerio and Alamares were entitled to their retirement
pay. The Labor Arbiter also held that based on the evidence presented,
Josefa Po Lam is the owner/proprietor of Mayon Hotel & Restaurant and the
proper respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and
all the complaints were dismissed.
Respondents filed a motion for reconsideration with the NLRC and when this
was denied, they filed a petition forcertiorari with the CA which rendered
the now assailed decision.
After their motion for reconsideration was denied, petitioners now come to
this Court, seeking the reversal of the CA decision on the following grounds:
I. The Honorable Court of Appeals erred in reversing the decision of the
National Labor Relations Commission (Second Division) by holding that the
findings of fact of the NLRC were not supported by substantial evidence
despite ample and sufficient evidence showing that the NLRC decision is
indeed supported by substantial evidence;
II. The Honorable Court of Appeals erred in upholding the joint decision of
the labor arbiter which ruled that private respondents were illegally
dismissed from their employment, despite the fact that the reason why
private respondents were out of work was not due to the fault of petitioners
but to causes beyond the control of petitioners.
III. The Honorable Court of Appeals erred in upholding the award of
monetary benefits by the labor arbiter in his joint decision in favor of the
private respondentS, including the award of damages to six (6) of the private
respondents, despite the fact that the private respondents have not proven
by substantial evidence their entitlement thereto and especially the fact that
they were not illegally dismissed by the petitioners.
IV. The Honorable Court of Appeals erred in holding that Pacita Ong Po is the
owner of the business establishment, petitioner Mayon Hotel and
Restaurant, thus disregarding the certificate of registration of the business
establishment ISSUED by the local government, which is a public document,
and the unqualified admissions of complainants-private respondents. 14
In essence, the petition calls for a review of the following issues:
1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner
of petitioner Mayon Hotel & Restaurant, and the proper respondent in this
case?
2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and
Nicerio illegally dismissed?
3. Are respondents entitled to their money claims due to underpayment of
wages, and nonpayment of holiday pay, rest day premium, SILP, COLA,
overtime pay, and night shift differential pay?
It is petitioners' contention that the above issues have already been
threshed out sufficiently and definitively by the NLRC. They therefore assail
the CA's reversal of the NLRC decision, claiming that based on the ruling
in Castillo v. NLRC,15 it is non sequitur that the CA should re-examine the
factual findings of both the NLRC and the Labor Arbiter, especially as in this
case the NLRC's findings are allegedly supported by substantial evidence.
We do not agree.
There is no denying that it is within the NLRC's competence, as an appellate
agency reviewing decisions of Labor Arbiters, to disagree with and set aside
the latter's findings.16 But it stands to reason that the NLRC should state an
acceptable cause therefore, otherwise it would be a whimsical, capricious,
oppressive, illogical, unreasonable exercise of quasi-judicial prerogative,
subject to invalidation by the extraordinary writ of certiorari.17 And when the
factual findings of the Labor Arbiter and the NLRC are diametrically opposed
and this disparity of findings is called into question, there is, necessarily, a
re-examination of the factual findings to ascertain which opinion should be
sustained.18 As ruled in Asuncion v. NLRC,19
Although, it is a legal tenet that factual findings of administrative bodies are
entitled to great weight and respect, we are constrained to take a second
look at the facts before us because of the diversity in the opinions of the
Labor Arbiter and the NLRC. A disharmony between the factual findings of
the Labor Arbiter and those of the NLRC opens the door to a review thereof
by this Court.20
The CA, therefore, did not err in reviewing the records to determine which
opinion was supported by substantial evidence.
Moreover, it is explicit in Castillo v. NLRC21 that factual findings of
administrative bodies like the NLRC are affirmed only if they are supported
by substantial evidence that is manifest in the decision and on the records.
As stated in Castillo:
[A]buse of discretion does not necessarily follow from a reversal by the NLRC
of a decision of a Labor Arbiter. Mere variance in evidentiary assessment
between the NLRC and the Labor Arbiter does not automatically call for a
full review of the facts by this Court. The NLRC's decision, so long as it is not
bereft of substantial support from the records, deserves respect from this
Court. As a rule, the original and exclusive jurisdiction to review a decision
or resolution of respondent NLRC in a petition for certiorari under Rule 65 of
the Rules of Court does not include a correction of its evaluation of the
evidence but is confined to issues of jurisdiction or grave abuse of
discretion. Thus, the NLRC's factual findings, if supported by substantial
evidence, are entitled to great respect and even finality, unless petitioner is
able to show that it simply and arbitrarily disregarded the evidence before it
or had misappreciated the evidence to such an extent as to compel a
contrary conclusion if such evidence had been properly appreciated.
(citations omitted)22
After careful review, we find that the reversal of the NLRC's decision was in
order precisely because it was not supported by substantial evidence.
1. Ownership by Josefa Po Lam
The Labor Arbiter ruled that as regards the claims of the employees,
petitioner Josefa Po Lam is, in fact, the owner of Mayon Hotel & Restaurant.
Although the NLRC reversed this decision, the CA, on review, agreed with
the Labor Arbiter that notwithstanding the certificate of registration in the
name of Pacita Po, it is Josefa Po Lam who is the owner/proprietor of Mayon
Hotel & Restaurant, and the proper respondent in the complaints filed by
the employees. The CA decision states in part:
[Despite] the existence of the Certificate of Registration in the name of
Pacita Po, we cannot fault the labor arbiter in ruling that Josefa Po Lam is
the owner of the subject hotel and restaurant. There were conflicting
documents submitted by Josefa herself. She was ordered to submit
additional documents to clearly establish ownership of the hotel and
restaurant, considering the testimonies given by the [respondents] and the
non-appearance and failure to submit her own position paper by Pacita Po.
But Josefa did not comply with the directive of the Labor Arbiter. The ruling
of the Supreme Court in Metropolitan Bank and Trust Company v. Court of
Appeals applies to Josefa Po Lam which is stated in this wise:
When the evidence tends to prove a material fact which imposes a liability
on a party, and he has it in his power to produce evidence which from its
very nature must overthrow the case made against him if it is not founded
on fact, and he refuses to produce such evidence, the presumption arises
that the evidence[,] if produced, would operate to his prejudice, and
support the case of his adversary.
Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and
restaurant, the labor arbiter relied also on the testimonies of the witnesses,
during the hearing of the instant case. When the conclusions of the labor
arbiter are sufficiently corroborated by evidence on record, the same should
be respected by appellate tribunals, since he is in a better position to assess
and evaluate the credibility of the contending parties. 23 (citations omitted)
Petitioners insist that it was error for the Labor Arbiter and the CA to have
ruled that petitioner Josefa Po Lam is the owner of Mayon Hotel &
Restaurant. They allege that the documents they submitted to the Labor
Arbiter sufficiently and clearly establish the fact of ownership by petitioner
Pacita Po, and not her mother, petitioner Josefa Po Lam. They contend that
petitioner Josefa Po Lam's participation was limited to merely (a) being the
overseer; (b) receiving the month-to-month and/or year-to-year financial
reports prepared and submitted by respondent Loveres; and (c) visitation of
the premises.24 They also put emphasis on the admission of the respondents
in their position paper submitted to the Labor Arbiter, identifying petitioner
Josefa Po Lam as the manager, and Pacita Po as the owner. 25 This, they claim,
is a judicial admission and is binding on respondents. They protest the
reliance the Labor Arbiter and the CA placed on their failure to submit
additional documents to clearly establish ownership of the hotel and
restaurant, claiming that there was no need for petitioner Josefa Po Lam to
submit additional documents considering that the Certificate of Registration
is the best and primary evidence of ownership.
We disagree with petitioners. We have scrutinized the records and find the
claim that petitioner Josefa Po Lam is merely the overseer is not borne out
by the evidence.
First. It is significant that only Josefa Po Lam appeared in the proceedings
with the Labor Arbiter. Despite receipt of the Labor Arbiter's notice and
summons, other notices and Orders, petitioner Pacita Po failed to appear in
any of the proceedings with the Labor Arbiter in these cases, nor file her
position paper.26 It was only on appeal with the NLRC that Pacita Po signed
the pleadings.27 The apathy shown by petitioner Pacita Po is contrary to
human experience as one would think that the owner of an establishment
would naturally be concerned when all her employees file complaints
against her.
Second. The records of the case belie petitioner Josefa Po Lam's claim that
she is merely an overseer. The findings of the Labor Arbiter on this question
were based on credible, competent and substantial evidence. We again
quote the Joint Decision on this matter:
Mayon Hotel and Restaurant is a [business name] of an enterprise. While
[petitioner] Josefa Po Lam claims that it is her daughter, Pacita Po, who owns
the hotel and restaurant when the latter purchased the same from one
Palanos in 1981, Josefa failed to submit the document of sale from said
Palanos to Pacita as allegedly the sale was only verbal although the license
to operate said hotel and restaurant is in the name of Pacita which, despite
our Order to Josefa to present the same, she failed to comply (p. 38, tsn.
August 13, 1998). While several documentary evidences were submitted by
Josefa wherein Pacita was named therein as owner of the hotel and
restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,] there were documentary
evidences also that were submitted by Josefa showing her ownership of said
enterprise (pp. 468 to 469; vol. II, rollo). While Josefa explained her
participation and interest in the business as merely to help and assist her
daughter as the hotel and restaurant was near the former's store, the
testimonies of [respondents] and Josefa as well as her demeanor during the
trial in these cases proves (sic) that Josefa Po Lam owns Mayon Hotel and
Restaurant. [Respondents] testified that it was Josefa who exercises all the
acts and manifestation of ownership of the hotel and restaurant like
transferring employees from the Greatwall Palace Restaurant which she and
her husband Roy Po Lam previously owned; it is Josefa to whom the
employees submits (sic) reports, draws money for payment of payables and
for marketing, attending (sic) to Labor Inspectors during ocular inspections.
Except for documents whereby Pacita Po appears as the owner of Mayon
Hotel and Restaurant, nothing in the record shows any circumstance or
manifestation that Pacita Po is the owner of Mayon Hotel and Restaurant.
The least that can be said is that it is absurd for a person to purchase a hotel
and restaurant in the very heart of the City of Legazpi verbally. Assuming this
to be true, when [petitioners], particularly Josefa, was directed to submit
evidence as to the ownership of Pacita of the hotel and restaurant,
considering the testimonies of [respondents], the former should [have]
submitted the lease contract between the owner of the building where
Mayon Hotel and Restaurant was located at Rizal St., Legazpi City and Pacita
Po to clearly establish ownership by the latter of said enterprise. Josefa
failed. We are not surprised why some employers employ schemes to
mislead Us in order to evade liabilities. We therefore consider and hold
Josefa Po Lam as the owner/proprietor of Mayon Hotel and Restaurant and
the proper respondent in these cases.28
Petitioners' reliance on the rules of evidence, i.e., the certificate of
registration being the best proof of ownership, is misplaced.
Notwithstanding the certificate of registration, doubts were cast as to the
true nature of petitioner Josefa Po Lam's involvement in the enterprise, and
the Labor Arbiter had the authority to resolve this issue. It was therefore
within his jurisdiction to require the additional documents to ascertain who
was the real owner of petitioner Mayon Hotel & Restaurant.
Article 221 of the Labor Code is clear: technical rules are not binding, and
the application of technical rules of procedure may be relaxed in labor cases
to serve the demand of substantial justice. 29 The rule of evidence prevailing
in court of law or equity shall not be controlling in labor cases and it is the
spirit and intention of the Labor Code that the Labor Arbiter shall use every
and all reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in
the interest of due process.30 Labor laws mandate the speedy administration
of justice, with least attention to technicalities but without sacrificing the
fundamental requisites of due process.31
Similarly, the fact that the respondents' complaints contained no allegation
that petitioner Josefa Po Lam is the owner is of no moment. To apply the
concept of judicial admissions to respondents — who are but lowly
employees - would be to exact compliance with technicalities of law that is
contrary to the demands of substantial justice. Moreover, the issue of
ownership was an issue that arose only during the course of the proceedings
with the Labor Arbiter, as an incident of determining respondents' claims,
and was well within his jurisdiction.32
Petitioners were also not denied due process, as they were given sufficient
opportunity to be heard on the issue of ownership. 33 The essence of due
process in administrative proceedings is simply an opportunity to explain
one's side or an opportunity to seek reconsideration of the action or ruling
complained of.34 And there is nothing in the records which would suggest
that petitioners had absolute lack of opportunity to be heard. 35 Obviously,
the choice not to present evidence was made by petitioners themselves. 36
But more significantly, we sustain the Labor Arbiter and the CA because
even when the case was on appeal with the NLRC, nothing was submitted to
negate the Labor Arbiter's finding that Pacita Po is not the real owner of the
subject hotel and restaurant. Indeed, no such evidence was submitted in the
proceedings with the CA nor with this Court. Considering that petitioners
vehemently deny ownership by petitioner Josefa Po Lam, it is most telling
that they continue to withhold evidence which would shed more light on
this issue. We therefore agree with the CA that the failure to submit could
only mean that if produced, it would have been adverse to petitioners'
case.37
Thus, we find that there is substantial evidence to rule that petitioner Josefa
Po Lam is the owner of petitioner Mayon Hotel & Restaurant.
2. Illegal Dismissal: claim for separation pay
Of the sixteen employees, only the following filed a case for illegal dismissal:
respondents Loveres, Llarena, Nicerio, Macandog, Guades, Atractivo and
Broñola.38
The Labor Arbiter found that there was illegal dismissal, and granted
separation pay to respondents Loveres, Macandog and Llarena. As
respondents Guades, Nicerio and Alamares were already 79, 66 and 65 years
old respectively at the time of the dismissal, the Labor Arbiter granted
retirement benefits pursuant to Article 287 of the Labor Code as
amended.39 The Labor Arbiter ruled that respondent Atractivo was not
entitled to separation pay because he had been transferred to work in the
restaurant operations in Elizondo Street, but awarded him damages.
Respondents Loveres, Llarena, Nicerio, Macandog and Guades were also
awarded damages.40
The NLRC reversed the Labor Arbiter, finding that "no clear act of
termination is attendant in the case at bar" and that respondents "did not
submit any evidence to that effect, but the finding and conclusion of the
Labor Arbiter [are] merely based on his own surmises and conjectures." 41 In
turn, the NLRC was reversed by the CA.
It is petitioners contention that the CA should have sustained the NLRC
finding that none of the above-named respondents were illegally dismissed,
or entitled to separation or retirement pay. According to petitioners, even
the Labor Arbiter and the CA admit that when the illegal dismissal case was
filed by respondents on April 1997, they had as yet no cause of action.
Petitioners therefore conclude that the filing by respondents of the illegal
dismissal case was premature and should have been dismissed outright by
the Labor Arbiter.42 Petitioners also claim that since the validity of
respondents' dismissal is a factual question, it is not for the reviewing court
to weigh the conflicting evidence.43
We do not agree. Whether respondents are still working for petitioners is a
factual question. And the records are unequivocal that since April 1997,
when petitioner Mayon Hotel & Restaurant suspended its hotel operations
and transferred its restaurant operations in Elizondo Street, respondents
Loveres, Macandog, Llarena, Guades and Nicerio have not been permitted
to work for petitioners. Respondent Alamares, on the other hand, was also
laid-off when the Elizondo Street operations closed, as were all the other
respondents. Since then, respondents have not been permitted to work nor
recalled, even after the construction of the new premises at Peñaranda
Street and the reopening of the hotel operations with the restaurant in this
new site. As stated by the Joint Decision of the Labor Arbiter on July 2000, or
more than three (3) years after the complaint was filed: 44
[F]rom the records, more than six months had lapsed without [petitioner]
having resumed operation of the hotel. After more than one year from the
temporary closure of Mayon Hotel and the temporary transfer to another
site of Mayon Restaurant, the building which [petitioner] Josefa allege[d]
w[h]ere the hotel and restaurant will be transferred has been finally
constructed and the same is operated as a hotel with bar and restaurant
nevertheless, none of [respondents] herein who were employed at Mayon
Hotel and Restaurant which was also closed on April 30, 1998 was/were
recalled by [petitioner] to continue their services...
Parenthetically, the Labor Arbiter did not grant separation pay to the other
respondents as they had not filed an amended complaint to question the
cessation of their employment after the closure of Mayon Hotel &
Restaurant on March 31, 1997.45
The above factual finding of the Labor Arbiter was never refuted by
petitioners in their appeal with the NLRC. It confounds us, therefore, how
the NLRC could have so cavalierly treated this uncontroverted factual finding
by ruling that respondents have not introduced any evidence to show that
they were illegally dismissed, and that the Labor Arbiter's finding was based
on conjecture.46 It was a serious error that the NLRC did not inquire as to
thelegality of the cessation of employment. Article 286 of the Labor Code is
clear — there is termination of employment when an otherwise bona
fide suspension of work exceeds six (6) months. 47 The cessation of
employment for more than six months was patent and the employer has the
burden of proving that the termination was for a just or authorized cause. 48
Moreover, we are not impressed by any of petitioners' attempts to exculpate
themselves from the charges. First, in the proceedings with the Labor
Arbiter, they claimed that it could not be illegal dismissal because the lay-off
was merely temporary (and due to the expiration of the lease contract over
the old premises of the hotel). Theyspecifically invoked Article 286 of the
Labor Code to argue that the claim for separation pay was premature and
without legal and factual basis. 49 Then, because the Labor Arbiter had ruled
that there was already illegal dismissal when the lay-off had exceeded the
six-month period provided for in Article 286, petitioners raise this novel
argument, to wit:
It is the firm but respectful submission of petitioners that reliance on Article
286 of the Labor Code is misplaced, considering that the reason why private
respondents were out of work was not due to the fault of petitioners. The
failure of petitioners to reinstate the private respondents to their former
positions should not likewise be attributable to said petitioners as the
private respondents did not submit any evidence to prove their alleged
illegal dismissal. The petitioners cannot discern why they should be made
liable to the private respondents for their failure to be reinstated
considering that the fact that they were out of work was not due to the fault
of petitioners but due to circumstances beyond the control of petitioners,
which are the termination and non-renewal of the lease contract over the
subject premises. Private respondents, however, argue in their Comment
that petitioners themselves sought the application of Article 286 of the
Labor Code in their case in their Position Paper filed before the Labor
Arbiter. In refutation, petitioners humbly submit that even if they invoke
Article 286 of the Labor Code, still the fact remains, and this bears stress and
emphasis, that the temporary suspension of the operations of the
establishment arising from the non-renewal of the lease contract did not
result in the termination of employment of private respondents and,
therefore, the petitioners cannot be faulted if said private respondents were
out of work, and consequently, they are not entitled to their money claims
against the petitioners.50
It is confounding how petitioners have fashioned their arguments. After
having admitted, in effect, that respondents have been laid-off since April
1997, they would have this Court excuse their refusal to reinstate
respondents or grant them separation pay because these same respondents
purportedly have not proven the illegality of their dismissal.
Petitioners' arguments reflect their lack of candor and the blatant attempt to
use technicalities to muddle the issues and defeat the lawful claims of their
employees. First, petitioners admit that since April 1997, when hotel
operations were suspended due to the termination of the lease of the old
premises, respondents Loveres, Macandog, Llarena, Nicerio and
Guades have not been permitted to work. Second, even after six monthsof
what should have been just a temporary lay-off, the same respondents
were still not recalled to work. As a matter of fact, the Labor Arbiter even
found that as of the time when he rendered his Joint Decision on July 2000
— or more than three (3) years after the supposed "temporary lay-off," the
employment of all of the respondents with petitioners had ceased,
notwithstanding that the new premises had been completed and the same
operated as a hotel with bar and restaurant. This is clearly dismissal — or
the permanent severance or complete separation of the worker from the
service on the initiative of the employer regardless of the reasons therefor. 51
On this point, we note that the Labor Arbiter and the CA are in accord that
at the time of the filing of the complaint, respondents had no cause of
action to file the case for illegal dismissal. According to the CA and the Labor
Arbiter, the lay-off of the respondents was merely temporary, pending
construction of the new building at Peñaranda Street. 52
While the closure of the hotel operations in April of 1997 may have been
temporary, we hold that the evidence on record belie any claim of
petitioners that the lay-of of respondents on that same date was merely
temporary. On the contrary, we find substantial evidence that petitioners
intended the termination to be permanent. First, respondents Loveres,
Macandog, Llarena, Guades, Nicerio and Alamares filed the complaint for
illegal dismissalimmediately after the closure of the hotel operations in Rizal
Street, notwithstanding the alleged temporary nature of the closure of the
hotel operations, and petitioners' allegations that the employees assigned to
the hotel operations knew about this beforehand. Second, in their position
paper submitted to the Labor Arbiter, petitioners invoked Article 286 of the
Labor Code to assert that the employer-employee relationship was merely
suspended, and therefore the claim for separation pay was premature and
without legal or factual basis. 53 But they made no mention of any intent to
recall these respondents to work upon completion of the new premises.
Third,the various pleadings on record show that petitioners held
respondents, particularly Loveres, as responsible for mismanagement of the
establishment and for abuse of trust and confidence. Petitioner Josefa Po
Lam's affidavit on July 21, 1998, for example, squarely blamed respondents,
specifically Loveres, Bumalay and Camigla, for abusing her leniency and
causing petitioner Mayon Hotel & Restaurant to sustain "continuous losses
until it is closed." She then asserts that respondents "are not entitled to
separation pay for they were not terminated and if ever the business ceased
to operate it was because of losses." 54 Again, petitioners make the same
allegation in their memorandum on appeal with the NLRC, where they
alleged that three (3) years prior to the expiration of the lease in 1997, the
operation of the Hotel had been sustaining consistent losses, and these
were solely attributed to respondents, but most especially due to Loveres's
mismanagement and abuse of petitioners' trust and confidence. 55 Even the
petition filed in this court made reference to the separation of the
respondents due to "severe financial losses and reverses," again imputing it
to respondents' mismanagement.56 The vehemence of petitioners'
accusation of mismanagement against respondents, especially against
Loveres, is inconsistent with the desire to recall them to work. Fourth,
petitioners' memorandum on appeal also averred that the case was filed
"not because of the business being operated by them or that they were
supposedly not receiving benefits from the Labor Code which is true, but
because of the fact that the source of their livelihood, whether legal or
immoral, was stopped on March 31, 1997, when the owner of the building
terminated the Lease Contract." 57Fifth, petitioners had inconsistencies in
their pleadings (with the NLRC, CA and with this Court) in referring to the
closure,58 i.e., in the petition filed with this court, they assert that there is no
illegal dismissal because there was "only a temporary cessation or
suspension of operations of the hotel and restaurant due to circumstances
beyond the control of petitioners, and that is, the non-renewal of the lease
contract..."59 And yet, in the same petition, they also assert that: (a) the
separation of respondents was due to severe financial losses and reverses
leading to the closure of the business; and (b) petitioner Pacita Po had to
close shop and was bankrupt and has no liquidity to put up her own building
to house Mayon Hotel & Restaurant. 60 Sixth, and finally, the uncontroverted
finding of the Labor Arbiter that petitioners terminated all the other
respondents, by not employing them when the Hotel and Restaurant
transferred to its new site on Peñaranda Street. 61 Indeed, in this same
memorandum, petitioners referred to all respondents as "former employees
of Mayon Hotel & Restaurant."62
These factors may be inconclusive individually, but when taken together,
they lead us to conclude that petitioners really intended to dismiss all
respondents and merely used the termination of the lease (on Rizal Street
premises) as a means by which they could terminate their employees.
Moreover, even assuming arguendo that the cessation of employment on
April 1997 was merely temporary, itbecame dismissal by operation of law
when petitioners failed to reinstate respondents after the lapse of six (6)
months, pursuant to Article 286 of the Labor Code.
We are not impressed by petitioners' claim that severe business losses
justified their failure to reinstate respondents. The evidence to prove this
fact is inconclusive. But more important, serious business losses do not
excuse the employer from complying with the clearance or report required
under Article 283 of the Labor Code and its implementing rules before
terminating the employment of its workers. 63 In the absence of justifying
circumstances, the failure of petitioners to observe the procedural
requirements set out under Article 284, taints their actuations with bad
faith, especially since they claimed that they have been experiencing losses
in the three years before 1997. To say the least, if it were true that the lay-
off was temporary but then serious business losses prevented the
reinstatement of respondents, then petitioners should have complied with
the requirements of written notice. The requirement of law mandating the
giving of notices was intended not only to enable the employees to look for
another employment and therefore ease the impact of the loss of their jobs
and the corresponding income, but more importantly, to give the
Department of Labor and Employment (DOLE) the opportunity to ascertain
the verity of the alleged authorized cause of termination. 64
And even assuming that the closure was due to a reason beyond the control
of the employer, it still has to accord its employees some relief in the form of
severance pay.65
While we recognize the right of the employer to terminate the services of an
employee for a just or authorized cause, the dismissal of employees must be
made within the parameters of law and pursuant to the tenets of fair
play.66 And in termination disputes, the burden of proof is always on the
employer to prove that the dismissal was for a just or authorized
cause.67 Where there is no showing of a clear, valid and legal cause for
termination of employment, the law considers the case a matter of illegal
dismissal.68
Under these circumstances, the award of damages was proper. As a rule,
moral damages are recoverable 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 or public
policy.69 We believe that the dismissal of the respondents was attended with
bad faith and meant to evade the lawful obligations imposed upon an
employer.
To rule otherwise would lead to the anomaly of respondents being
terminated from employment in 1997 as a matter of fact, but without legal
redress. This runs counter to notions of fair play, substantial justice and the
constitutional mandate that labor rights should be respected. If doubts exist
between the evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter — the employer must
affirmatively show rationally adequate evidence that the dismissal was for a
justifiable cause.70 It is a time-honored rule that in controversies between a
laborer and his master, doubts reasonably arising from the evidence, or in
the interpretation of agreements and writing should be resolved in the
former's favor.71 The policy is to extend the doctrine to a greater number of
employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid and
protection of labor.72
We therefore reinstate the Labor Arbiter's decision with the following
modifications:
(a) Separation pay for the illegal dismissal of respondents Loveres,
Macandog and Llarena; (Santos Broñola cannot be granted separation pay as
he made no such claim);
(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at
the time of dismissal were entitled to their retirement benefits pursuant to
Article 287 of the Labor Code as amended;73 and
(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio,
Atractivo, and Broñola.
3. Money claims
The CA held that contrary to the NLRC's ruling, petitioners had not
discharged the burden of proving that the monetary claims of the
respondents have been paid.74 The CA thus reinstated the Labor Arbiter's
grant of respondents' monetary claims, including damages.
Petitioners assail this ruling by repeating their long and convoluted
argument that as there was no illegal dismissal, then respondents are not
entitled to their monetary claims or separation pay and damages.
Petitioners' arguments are not only tiring, repetitive and unconvincing, but
confusing and confused — entitlement to labor standard benefits is a
separate and distinct concept from payment of separation pay arising from
illegal dismissal, and are governed by different provisions of the Labor Code.
We agree with the CA and the Labor Arbiter. Respondents have set out with
particularity in their complaint, position paper, affidavits and other
documents the labor standard benefits they are entitled to, and which they
alleged that petitioners have failed to pay them. It was therefore petitioners'
burden to prove that they have paid these money claims. One who pleads
payment has the burden of proving it, and even where the employees must
allege nonpayment, the general rule is that the burden rests on the
defendant to prove nonpayment, rather than on the plaintiff to prove non
payment.75 This petitioners failed to do.
We also agree with the Labor Arbiter and the CA that the documents
petitioners submitted, i.e., affidavits executed by some of respondents
during an ocular inspection conducted by an inspector of the DOLE; notices
of inspection result and Facility Evaluation Orders issued by DOLE, are not
sufficient to prove payment.76 Despite repeated orders from the Labor
Arbiter,77 petitioners failed to submit the pertinent employee files, payrolls,
records, remittances and other similar documents which would show that
respondents rendered work entitling them to payment for overtime work,
night shift differential, premium pay for work on holidays and rest day, and
payment of these as well as the COLA and the SILP – documents which are
not in respondents' possession but in the custody and absolute control of
petitioners.78 By choosing not to fully and completely disclose information
and present the necessary documents to prove payment of labor standard
benefits due to respondents, petitioners failed to discharge the burden of
proof.79 Indeed, petitioners' failure to submit the necessary documents
which as employers are in their possession, inspite of orders to do so, gives
rise to the presumption that their presentation is prejudicial to its
cause.80 As aptly quoted by the CA:
[W]hen the evidence tends to prove a material fact which imposes a liability
on a party, and he has it in his power to produce evidence which from its
very nature must overthrow the case made against him if it is not founded
on fact, and he refuses to produce such evidence, the presumption arises
that the evidence, if produced, would operate to his prejudice, and support
the case of his adversary. 81
Petitioners next claim that the cost of the food and snacks provided to
respondents as facilities should have been included in reckoning the
payment of respondents' wages. They state that although on the surface
respondents appeared to receive minimal wages, petitioners had granted
respondents other benefits which are considered part and parcel of their
wages and are allowed under existing laws. 82 They claim that these benefits
make up for whatever inadequacies there may be in
compensation.83 Specifically, they invoked Sections 5 and 6, Rule VII-A, which
allow the deduction of facilities provided by the employer through an
appropriate Facility Evaluation Order issued by the Regional Director of the
DOLE.84 Petitioners also aver that they give five (5) percent of the gross
income each month as incentives. As proof of compliance of payment of
minimum wages, petitioners submitted the Notice of Inspection Results
issued in 1995 and 1997 by the DOLE Regional Office. 85
The cost of meals and snacks purportedly provided to respondents cannot
be deducted as part of respondents' minimum wage. As stated in the Labor
Arbiter's decision:86
While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol.
II, rollo) issued by the DOLE Regional Office whereby the cost of meals given
by [petitioners] to [respondents] were specified for purposes of considering
the same as part of their wages, We cannot consider the cost of meals in the
Orders as applicable to [respondents]. [Respondents] were not interviewed
by the DOLE as to the quality and quantity of food appearing in the
applications of [petitioners] for facility evaluation prior to its approval to
determine whether or not [respondents] were indeed given such kind and
quantity of food. Also, there was no evidence that the quality and quantity
of food in the Orders were voluntarily accepted by [respondents]. On the
contrary; while some [of the respondents] admitted that they were given
meals and merienda, the quality of food serve[d] to them were not what
were provided for in the Orders and that it was only when they filed these
cases that they came to know about said Facility Evaluation Orders (pp. 100;
379[,] vol. II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner] Josefa herself,
who applied for evaluation of the facility (food) given to [respondents],
testified that she did not inform [respondents] concerning said Facility
Evaluation Orders (p. 34, tsn[,] August 13, 1998).
Even granting that meals and snacks were provided and indeed constituted
facilities, such facilities could not be deducted without compliance with
certain legal requirements. As stated in Mabeza v. NLRC,87 the employer
simply cannot deduct the value from the employee's wages without
satisfying the following: (a) proof that such facilities are customarily
furnished by the trade; (b) the provision of deductible facilities is voluntarily
accepted in writing by the employee; and (c) the facilities are charged at fair
and reasonable value. The records are clear that petitioners failed to comply
with these requirements. There was no proof of respondents' written
authorization. Indeed, the Labor Arbiter found that while the respondents
admitted that they were given meals and merienda, the quality of food
served to them was not what was provided for in the Facility Evaluation
Orders and it was only when they filed the cases that they came to know of
this supposed Facility Evaluation Orders. 88 Petitioner Josefa Po Lam
herself admitted that she did not inform the respondents of the facilities she
had applied for.89
Considering the failure to comply with the above-mentioned legal
requirements, the Labor Arbiter therefore erred when he ruled that the cost
of the meals actually provided to respondents should be deducted as part of
their salaries, on the ground that respondents have availed themselves of
the food given by petitioners. 90 The law is clear that mere availment is not
sufficient to allow deductions from employees' wages.
More important, we note the uncontroverted testimony of respondents on
record that they were required to eat in the hotel and restaurant so that
they will not go home and there is no interruption in the services of Mayon
Hotel & Restaurant. As ruled in Mabeza, food or snacks or other
convenience provided by the employers are deemed as supplements if they
are granted for the convenience of the employer. The criterion in making a
distinction between a supplement and a facility does not so much lie in the
kind (food, lodging) but the purpose. 91 Considering, therefore, that hotel
workers are required to work different shifts and are expected to be
available at various odd hours, their ready availability is a necessary matter
in the operations of a small hotel, such as petitioners' business. 92 The
deduction of the cost of meals from respondents' wages, therefore, should
be removed.
We also do not agree with petitioners that the five (5) percent of the gross
income of the establishment can be considered as part of the respondents'
wages. We quote with approval the Labor Arbiter on this matter, to wit:
While complainants, who were employed in the hotel, receive[d] various
amounts as profit share, the same cannot be considered as part of their
wages in determining their claims for violation of labor standard benefits.
Although called profit share[,] such is in the nature of share from service
charges charged by the hotel. This is more explained by [respondents] when
they testified that what they received are not fixed amounts and the same
are paid not on a monthly basis (pp. 55, 93, 94, 103, 104; vol. II, rollo). Also,
[petitioners] failed to submit evidence that the amounts received by
[respondents] as profit share are to be considered part of their wages and
had been agreed by them prior to their employment. Further, how can the
amounts receive[d] by [respondents] be considered as profit share when the
same [are] based on the gross receipt of the hotel[?] No profit can as yet be
determined out of the gross receipt of an enterprise. Profits are realized
after expenses are deducted from the gross income.
On the issue of the proper minimum wage applicable to respondents, we
sustain the Labor Arbiter. We note that petitioners themselves have
admitted that the establishment employs "more or less sixteen (16)
employees,"93therefore they are estopped from claiming that the applicable
minimum wage should be for service establishments employing 15
employees or less.
As for petitioners repeated invocation of serious business losses, suffice to
say that this is not a defense to payment of labor standard benefits. The
employer cannot exempt himself from liability to pay minimum wages
because of poor financial condition of the company. The payment of
minimum wages is not dependent on the employer's ability to pay. 94
Thus, we reinstate the award of monetary claims granted by the Labor
Arbiter.
4. Conclusion
There is no denying that the actuations of petitioners in this case have been
reprehensible. They have terminated the respondents' employment in an
underhanded manner, and have used and abused the quasi-judicial and
judicial processes to resist payment of their employees' rightful claims,
thereby protracting this case and causing the unnecessary clogging of
dockets of the Court. They have also forced respondents to unnecessary
hardship and financial expense. Indeed, the circumstances of this case
would have called for exemplary damages, as the dismissal was effected in a
wanton, oppressive or malevolent manner, 95 and public policy requires that
these acts must be suppressed and discouraged. 96
Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary
damages of P10,000.00 each to all respondents. While it is true that other
forms of damages under the Civil Code may be awarded to illegally
dismissed employees,97 any award of moral damages by the Labor Arbiter
cannot be based on the Labor Code but should be grounded on the Civil
Code.98 And the law is clear that exemplary damages can only be awarded if
plaintiff shows proof that he is entitled to moral, temperate or
compensatory damages.99
As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo
and Broñola specifically claimed damages from petitioners, then only they
are entitled to exemplary damages.sjgs1
The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the
total monetary benefits awarded and due to the employees concerned in
accordance with the decision. The Labor Arbiter is ORDERED to submit his
compliance thereon within thirty (30) days from notice of this decision, with
copies furnished to the parties.
SO ORDERED.

Finally, we rule that attorney's fees in the amount to P10,000.00 should be

granted to each respondent. It is settled that in actions for recovery of
wages or where an employee was forced to litigate and incur expenses to
protect his rights and interest, he is entitled to an award of attorney's
fees.100 This case undoubtedly falls within this rule.

IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January

17, 2003 of the Court of Appeals in CA-G.R. SP No. 68642 upholding the
Joint Decision of July 14, 2000 of the Labor Arbiter in RAB V Case Nos. 04-
00079-97 and 04-00080-97 is AFFIRMED, with the following
MODIFICATIONS:

(1) Granting separation pay of one-half (1/2) month for every year of service
to respondents Loveres, Macandog and Llarena;

(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;

(3) Removing the deductions for food facility from the amounts due to all
respondents;

(4) Awarding moral damages of P20,000.00 each for respondents Loveres,

Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola;

(5) Deleting the award of exemplary damages of P10,000.00 from all

respondents except Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo,
and Broñola; and

(6) Granting attorney's fees of P10,000.00 each to all respondents.

G.R. No. 76988 January 31, 1989

GENERAL RUBBER AND FOOTWEAR CORPORATION, petitioner,

vs.
THE HON. FRANKLIN DRILON IN HIS CAPACITY AS THE MINISTER OF LABOR
& EMPLOYMENT and THE GENERAL RUBBER WORKERS' UNION-
NATU, respondents.

Paez & Pascual Law Office for petitioners.

The Solicitor General for public respondent.

Marcelino Lontok, Jr. for private respondent.

RESOLUTION

FELICIANO, J.:

The present petition involves the question of whether or not union

members who did not ratify a waiver of accrued wage differentials are
bound by the ratification made by a majority of the union members.

On 26 December 1984, Wage Order No. 6 was issued, increasing the

statutory minimum wage rate (by P2.00) and the mandatory cost of living
allowance (by P3.00 for non-agricultural workers) in the private sector, to
take effect on 1 November 1984, Petitioner General Rubber and Footwear
Corporation applied to the National Wages Council ("Council") for
exemption from the provisions of Wage Order No. 6. The Council, in an
Order dated 4 March 1985, denied petitioner's application, stating in part
that:

[Y]ou are hereby ordered to pay your covered employees the daily increase
in statutory minimum wage rate of P 2.00 and living allowance of P3.00
effective November 1, 1984. ...

This decision is final. 1 (Emphasis supplied)

Petitioner filed a Motion for Reconsideration of this Order on 27 May 1985.
On 25 May 1985, some members of respondent General Rubber Workers'
Union-NATU, led by one Leopoldo Sto. Domingo, declared a strike against
petitioner. 2 Three (3) days later, on 28 May 1985, petitioner and Sto.
Domingo, the latter purporting to represent the striking workers, entered
into a Return-to-Work Agreement ("Agreement"), Article 4 of which
provided:
4. The COMPANY agrees to implement in full Wage Order No. 6 effective
May 30, 1985, and agrees to withdraw the Motion for Reconsideration
which it filed with the National Wages Council in connection with the
Application for Exemption. In consideration, the UNION, its officers and
members, agrees not to demand or ask from the COMPANY the
corresponding differential pay from November 1, 1984 to May 29
1985 arising out of the non-compliance of said wage order during the said
period. 3 (Emphasis supplied)
This agreement was subsequently ratified on 30 July 1985 in a document
entitled "Sama-samang Kapasyahan sa Pagpapatibay ng Return-to-Work
Agreement" 4 by some two hundred and sixty-eight (268) members of
respondent union, each member signing individually the instrument of
ratification.
Before the ratification of the Agreement, petitioner filed, on 5 June 1985, a
Motion with the Council withdrawing its pending Motion for
Reconsideration of the Council's Order of 4 March 1985. By a letter dated 13
June 1985, the Council allowed the withdrawal of petitioner's Motion for
Reconsideration, which letter in part stated:
In view of your compliance with Wage Order No. 6 effective May 30,
1985 pursuant to the Return to Work Agreement ... , this Council interposes
no objection to your Motion to Withdraw ... 5 (Emphasis supplied)
Meanwhile, there were some one hundred (100) members of the union who
were unhappy over the Agreement, who took the view that the Council's
Order of 4 March 1985 bad become final and executory upon the
withdrawal of petitioner's Motion for Reconsideration and who would not
sign the instrument ratifying the Agreement. On 10 July 1985, these
minority union members with respondent union acting on their behalf,
applied for a writ of execution of the Council's Order. 6
Petitioner opposed the Motion for a writ of execution, contending that the
Council's approval of its deferred compliance with the implementation of
the Wage Order, 7 together with the majority ratification of the Agreement
by the individual workers, 8 bound the non-ratifying union members
represented by respondent union.
Respondent union countered that the Agreement — despite the majority
ratification — was not binding on the union members who had not
consented thereto, upon the ground that ratification or non-ratification of
the Agreement, involving as it did money claims, was a personal right under
the doctrine of "Kaisahan ng Manggagawa sa La Campana v. Honorable
Judge Ulpiano Sarmiento and La Campana." 9
Finding for the Union members represented by respondent union, the then
Ministry (now Department) of Labor and Employment, in an order dated 20
September 1985 issued by National Capital Region Director Severo M.
Pucan, directed the issuance of a writ of execution and required petitioner
to pay the minority members of respondent union their claims for
differential pay under Wage Order No. 6, which totalled P90,090.00. 10
Petitioner then moved to quash the writ of execution upon the ground that
the Council's order could not be the subject of a writ of execution, having
been superseded by the Agreement. 11 In another Order dated 15 January
1986. Director Pucan, reversed his previous order and sustained petitioner's
contention that the minority union members represented by respondent
union were bound by the majority ratification, holding that the Council's 20
September 1985 Order sought to be enforced by writ of execution should
not have been issued. 12
Respondent union filed a Motion for Reconsideration, which was treated as
an appeal to the Minister of Labor. In a decision dated 19 December 1986,
the Minister of Labor set aside the appealed Order of Director Pucan. The
Minister's decision held that:
It is undisputed that the 100 numbers did not sign and ratify the Return-to-
Work Agreement and therefore they cannot be bound by the waiver of
benefits therein. This, in essence, is the ruling of the High Tribunal in the La
Campana case. Accordingly, the benefits under Wage Order No. 6 due them
by virtue of the final and executory Order of the National Wages Council
dated March 4, 1985 subsists in their favor and can be subject for execution.
xxx xxx xxx
The writ of execution dated September 20, 1985 ... was clearly based on the
final Order of the National Wages Council sought to be enforced in a Motion
for Execution filed by the union. While the Return-to-Work Agreement was
mentioned in the writ, the respondent allegedly failing 'to comply with the
above-stated Agreement which had become final and executory,' we find
the Agreement indeed not the basis for the issuance of the writ.
WHEREFORE, the Order of the Director dated January 15, 1986 is hereby set
aside. Let a writ of execution be issued immediately to enforce the payment
of the differential pay under Wage Order No. 6 from November 1, 1984 to
May 29, 1985 of the 100 workers who did not sign any waiver, in compliance
with the final Order of the National Wages Council. The entire record is
hereby remanded to the Regional Director, National Capital Region for this
purpose.
SO ORDERED . 13 (Emphasis supplied)
Not pleased with the adverse decision of the Minister, petitioner filed the
instant Petition for Certiorari.
Petitioner argues once again that the National Wages Council's Order of 4
March 1985 did not become final and executory because it had been
superseded by the Return-to-Work Agreement signed by petitioner
corporation and the union. At the same time, petitioner also argues that the
Return-to-Work Agreement could not be enforced by a writ of execution,
because it was a contractual document and not the final and executory
award of a public official or agency. Petitioner's contention is more clever
than substantial. The core issue is whether or not Article 4 of the Return-to-
Work Agreement quoted above, could be deemed as binding upon all
members of the union, without regard to whether such members had or had
not in fact individually signed and ratified such Agreement. Article 4 of that
Agreement provided for, apparently, a quid pro quo arrangement: petitioner
agreed to implement in full Wage Order No. 6 starting 30 May 1985 (and
not 1 November 1984, as provided by the terms of Wage Order No. 6) and
to withdraw its previously filed Motion for Reconsideration with the
National Wages Council; in turn, the union and its members would refrain
from requiring the company to pay the differential pay (increase in pay) due
under Wage Order No. 6 corresponding to the preceding seven-month
period from 1 November 1984 to 29 May 1985.
Thus, Kaisahan ng Mangagawa sa La Campana v. Sarmiento, (supra) is
practically on all fours with the instant case. In La Campana, what was at
stake was the validity of a compromise agreement entered into between the
union and the company. In that compromise agreement, the union
undertook to dismiss and withdraw the case it had filed with the then Court
of Industrial Relations, and waived its right to execute any final judgment
rendered in that case. The CIR had in that case, rendered a judgment
directing reinstatement of dismissed workers and payment of ten (10) years
backwages. The Secretary of Labor held that that compromise agreement
was void for lack of ratification by the individual members of the union. The
Supreme Court upheld the decision of the Secretary of Labor, stating among
other things that:
Generally, a judgment on a compromise agreement puts an end to a
litigation and is immediately executory. However, the Rules [of Court] require
a special authority before an attorney can compromise the litigation of [his]
clients. The authority to compromise cannot lightly be presumed and should
be duly established by evidence. (Esso Philippine, Inc. v. MME, 75 SCRA 91).
As aptly held by the Secretary of Labor, the records are bereft of showing
that the individual members consented to the said agreement. Now were
the members informed of the filing of the civil case before the Court of First
Instance. If the parties to said agreement acted in good faith, why did they
not furnish the Office of the president with a copy of the agreement when
they knew all the while that the labor case was then pending appeal
therein? Undoubtedly, the compromise agreement was executed to the
prejudice of the complainants who never consented thereto, hence, it is null
and void. The judgment based on such agreement does not bind the
individual members or complainants who are not parties thereto nor
signatories therein.
Money claims due to laborers cannot be the object of settlement or
compromise effected by a union or counsel without the specific individual
consent of each laborer concerned. The beneficiaries are the individual
complainants themselves. The union to which they belong can only assist
them but cannot decide for them.Awards in favor of laborers after long years
of litigation must be attended to with mutual openness and in the best of
faith. (Danao Development Corp. v. NLRC, 81 SCRA 487-505). Only thus can
we really give meaning to the constitutional mandate of giving laborers
maximum protection and security. It is about time that the judgment in Case
No. 584-V(7) be fully implemented considering the unreasonable delay in
the satisfaction thereof. This unfortunate incident may only weaken the
workingmen's faith in the judiciary's capacity to give them justice when
due. 14
xxx xxx xxx
(Emphasis supplied)
In the instant case, there is no dispute that private respondents had not
ratified the Return-to-Work Agreement. It follows, and we so hold, that
private respondents cannot be held bound by the Return-to-Work
Agreement. The waiver of money claims, which in this case were accrued
money claims, by workers and employees must be regarded as a personal
right, that is, a right that must be personally exercised. For a waiver thereof
to be legally effective, the individual consent or ratification of the workers or
employees involved must be shown. Neither the officers nor the majority of
the union had any authority to waive the accrued rights pertaining to the
dissenting minority members, even under a collective bargaining agreement
which provided for a "union shop." The same considerations of public policy
which impelled the Court to reach the conclusion it did in La Campana, are
equally compelling in the present case. The members of the union need the
protective shield of this doctrine not only vis-a-vis their employer but also,
at times, vis-a-vis the management of their own union, and at other times
even against their own imprudence or impecuniousness.
It should perhaps be made clear that the Court is not here saying that
accrued money claims can never be effectively waived by workers and
employees. What the Court is saying is that, in the present case, the private
respondents never purported to waive their claims to accrued differential
pay. Assuming that private respondents had actually and individually
purported to waive such claims, a second question would then have arisen:
whether such waiver could be given legal effect or whether, on the contrary,
it was violative of public policy. 15 Fortunately, we do not have to address this
second question here.
Since Article 4 of the Return-to-Work Agreement was not enforceable
against the non-consenting union members, the Order of the National
Wages Council dated 4 March 1985 requiring petitioner to comply with
Wage Order No. 6 from 1 November 1984 onward must be regarded as
having become final and executory insofar as the non-consenting union
members were concerned. Enforcement by writ of execution of that Order
was, therefore, proper. It follows further that the decision of 19 December
1986 of the respondent Minister of Labor, far from constituting a grave
abuse of discretion or an act without or in excess of jurisdiction, was fully in
accordance with law as laid down in La Campana and here reiterated.
WHEREFORE, the Court Resolved to DISMISS the Petition for certiorari for
lack of merit. Costs against petitioner.
 RUBBERWORLD [PHILS.], INC., and JULIE YAO ONG, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, AQUINO MAGSALIN, PEDRO
MAÑIBO, RICARDO BORJA, ALICIA M. SAN PEDRO AND FELOMENA B.
TOLIN, respondents.

DECISION

PARDO, J.:

What is before the Court for resolution is a petition to annul the resolution
of the National Labor Relations Commission (NLRC), 1 affirming the labor-
arbiter's award but deleting the moral and exemplary damages.

The facts are as follows:

Petitioner Rubberworld (Phils.), Inc. [hereinafter Rubberworld], a

corporation established in 1965, was engaged in manufacturing footwear,
bags and garments.

Aquilino Magsalin, Pedro Manibo, Ricardo Borja, Benjamin Camitan, Alicia

M. San Pedro, and Felomena Tolin were employed as dispatcher,
warehouseman, issue monitor, foreman, jacks cementer and outer sole
attacher, respectively.

On August 26, 1994, Rubberworld filed with the Department of Labor and
Employment a notice of temporary shutdown of operations to take effect on
September 26, 1994. Before the effectivity date, however, Rubberworld was
forced to prematurely shutdown its operations.

On November 11, 1994, private respondents filed with the National Labor
Relations Commission a complaint 2against petitioner for illegal dismissal and
non-payment of separation pay.

On November 22, 1994, Rubberworld filed with the Securities and Exchange
Commission (SEC) a petition for declaration of suspension of payments with
G.R. No. 128003 July 26, 2000 a proposed rehabilitation plan.3
On December 28, 1994, SEC issued the following order:
"Accordingly, with the creation of the Management Committee, all actions
for claims against Rubberworld Philippines, Inc. pending before any court,
tribunal, office, board, body, Commission or sheriff are hereby deemed
SUSPENDED.
On February 5, 1996, petitioners appealed to the National Labor Relations
Commission (NLRC) alleging abuse of discretion and serious errors in the
findings of facts of the labor arbiter.
On August 30, 1996, NLRC issued a resolution, the dispositive portion of
which reads:

"Consequently, all pending incidents for preliminary injunctions, writ or "PREMISES CONSIDERED, the decision appealed from is hereby, AFFIRMED
attachments, foreclosures and the like are hereby rendered moot and with MODIFICATION in that the award of moral and exemplary damages is
academic. hereby, DELETED.

"SO ORDERED."4 SO ORDERED."6

On January 24, 1995, petitioners submitted to the labor arbiter a motion to On November 20, 1996, NLRC denied petitioners' motion for
suspend the proceedings invoking the SEC order dated December 28, 1994. reconsideration.
The labor arbiter did not act on the motion and ordered the parties to
submit their respective position papers. Hence, this petition.7

The issue is whether or not the Department of Labor and Employment, the
On December 10, 1995, the labor arbiter rendered a decision, which
provides: Labor Arbiter and the National Labor Relations Commission may legally act
on the claims of respondents despite the order of the Securities and
"In the light of the foregoing, respondents are hereby declared guilty of Exchange Commission suspending all actions against a company under
ILLEGAL SHUTDOWN and that respondents are ordered to pay complainants rehabilitation by a management committee created by the Securities and
their separation pay equivalent to one (1) month pay for every year of Exchange Commission.
service.
Presidential Decree No. 902-A is clear that "all actions for claims against
Considering the malicious act of closing the business precipitately without corporations, partnerships or associations under management or
due regard to the rights of complainants, moral damages and exemplary receivership pending before any court, tribunal, board or body shall be
damage in the sum of P 50,000.00 and P 30,000.00 respectively is hereby suspended accordingly." The law did not make any exception in favor of
awarded for each of the complainants. labor claims.8

Finally 10 % of all sums owing to complainants is hereby adjudged as "The justification for the automatic stay of all pending actions for claims is to
attorney's fees. enable the management committee or the rehabilitation receiver to
effectively exercise its/his powers free from any judicial or extra judicial
SO ORDERED."5 interference that might unduly hinder or prevent the 'rescue' of the debtor
company. To allow such other actions to continue would only add to the
burden of the management committee or rehabilitation receiver, whose
time, effort and resources would be wasted in defending claims against the
corporation instead of being directed toward its restructuring and
rehabilitation."9
Thus, the labor case would defeat the purpose of an automatic
stay.1âwphi1 To rule otherwise would open the floodgates to numerous
claims and would defeat the rescue efforts of the management committee.
Besides, even if an award is given to private respondents, the ruling could
not be enforced as long as petitioner is under management committee. 10
This finds ratiocination in that the power to hear and decide labor disputes
is deemed suspended when the Securities and Exchange Commission puts
the corporation under rehabilitation.
Thus, when NLRC proceeded to decide the case despite the SEC suspension
order, the NLRC acted without or in excess of its jurisdiction to hear and
decide cases. As a consequence, any resolution, decision or order that it
rendered or issued without jurisdiction is a nullity.
WHEREFORE, the petition is hereby GRANTED. The decision of the labor
arbiter dated December 10, 1995 and the NLRC resolution dated August 30,
1996, are SET ASIDE.
No costs.
SO ORDERED.
G.R. No. 126625 September 18, 1997
KANLAON CONSTRUCTION ENTERPRISES CO., INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, 5TH DIVISION, and BENJAMIN
RELUYA, JR., EDGARDO GENAYAS, ERNESTO CANETE, PROTACIO ROSALES,
NESTOR BENOYA, RODOLFO GONGOB, DARIO BINOYA, BENJAMIN
BASMAYOR, ABELARDO SACURA, FLORENCIO SACURA, ISABELO MIRA,
NEMESIO LACAR, JOSEPH CABIGKIS, RODRIGO CILLON, VIRGILIO QUIZON,
GUARINO EVANGELISTA, ALEJANDRO GATA, BENEDICTO CALAGO, NILO
GATA, DIONISIO PERMACIO, JUANITO SALUD, ADOR RIMPO, FELIPE ORAEZ,
JULIETO TEJADA, TEOTIMO LACIO, ONOFRE QUIZON, RUDY ALVAREZ,
CRESENCIO FLORES, ALFREDO PERMACIO, CRESENCIO ALVIAR, HERNANI
SURILLA, DIOSDADO SOLON, CENON ALBURO, ZACARIAS ORTIZ, EUSEBIO
BUSTILLO, GREGORIO BAGO, JERRY VARGAS, EDUARDO BUENO, PASCUAL
HUDAYA, ROGELIO NIETES, and REYNALDO NIETES, respondents.
PUNO, J.:
In this petition for certiorari, petitioner Kanlaon Construction Enterprises
Co., Inc. seeks to annul the decision of respondent National Labor Relations
Commission, Fifth Division and remand the cases to the Arbitration Branch
for a retrial on the merits.
Petitioner is a domestic corporation engaged in the construction business
nationwide with principal office at No. 11 Yakan St., La Vista Subdivision,
Quezon City. In 1988, petitioner was contracted by the National Steel
Corporation to construct residential houses for its plant employees in
Steeltown, Sta. Elena, Iligan City. Private respondents were hired by
petitioner as laborers in the project and worked under the supervision of
Engineers Paulino Estacio and Mario Dulatre. In 1989, the project neared its
completion and petitioner started terminating the services of private
respondents and its other employees.
In 1990, private respondents filed separate complaints against petitioner
before Sub-Regional Arbitration Branch XII, Iligan City. Numbering forty-one
(41) in all, they claimed that petitioner paid them wages below the by evidence." (Yu Chin Piao v. Lim Tuaco, 33 Phil. 92; Benedicto v. Yulo, 26
minimum and sought payment of their salary differentials and thirteenth- Phil. 160)
month pay. Engineers Estacio and Dulatre were named co-respondents.
WHEREFORE, premises considered, the respondent is hereby ordered to pay
Some of the cases were assigned to Labor Arbiter Guardson A. Siao while the individual claims of the above-named complainants representing their
the others were assigned to Labor Arbiter Nicodemus G. Palangan. wage differentials within ten (10) days from receipt of this order.
Summonses and notices of preliminary conference were issued and served
on the two engineers and petitioner through Engineer Estacio. The The Fiscal Examiner II of this Branch is likewise hereby ordered to compute
the individual claims of the herein complainants.
preliminary conferences before the labor arbiters were attended by
Engineers Estacio and Dulatre and private respondents. At the conference of SO ORDERED. 3
June 11, 1990 before Arbiter Siao, Engineer Estacio admitted petitioner's
liability to private respondents and agreed to pay their wage differentials On June 29, 1990, Arbiter Palangan issued a similar order, thus:
and thirteenth-month pay on June 19, 1990. As a result of this agreement,
When the above-entitled cases were called for hearing on June 19, 1990 at
Engineer Estacio allegedly waived petitioner's right to file its position
10:00 a.m. respondent thru their representative manifested that they were
paper. 1 Private respondents declared that they, too, were dispensing with
willing to pay the claims of the complainants and promised to pay the same
their position papers and were adopting their complaints as their position
on June 28, 1990 at 10:30 a.m.
paper. 2
However, when these cases were called purposely to materialize the
On June 19, 1990, Engineer Estacio appeared but requested for another
promise of the respondent, the latter failed to appear without any valid
week to settle the claims. Labor Arbiter Siao denied this request. On June
reason.
21, 1990, Arbiter Siao issued an order granting the complaint and directing
petitioner to pay private respondents' claims. Arbiter Siao held: Considering therefore that the respondent has already admitted the claims
of the complainants, we believe that the issues raised herein have become
xxx xxx xxx
moot and academic.
Considering the length of time that has elapsed since these cases were filed,
WHEREFORE premises considered, the above-entitled cases are hereby
and what the complainants might think as to how this branch operates
ordered Closed and Terminated, however, the respondent is hereby ordered
and/or conducts its proceedings as they are now restless, this Arbiter has no
to pay the complainants their differential pay and 13th-month pay within a
other alternative or recourse but to order the respondent to pay the claims
period of ten (10) days from receipt hereof based on the employment
of the complainants, subject of course to the computation of the Fiscal
record on file with the respondent.
Examiner II of this Branch pursuant to the oral manifestation of respondent.
The Supreme Court ruled: "Contracts though orally made are binding on the SO ORDERED. 4
parties." (Lao Sok v. Sabaysabay, 138 SCRA 134).
Petitioner appealed to respondent National Labor Relations Commission. It
Similarly, this Branch would present in passing that "a court cannot decide a alleged that it was denied due process and that Engineers Estacio and
case without facts either admitted or agreed upon by the parties or proved
Dulatre had no authority to represent and bind petitioner. Petitioner's
appeal was filed by one Atty. Arthur Abundiente.
In a decision dated April 27, 1992, respondent Commission affirmed the
orders of the Arbiters.
Petitioner interposed this petition alleging that the decision of respondent
Commission was rendered without jurisdiction and in grave abuse of
discretion. Petitioner claims that:
I Service of summons in cases filed before the labor arbiters is governed by
THE QUESTIONED DECISION RENDERED BY THE HONORABLE COMMISSION
IS A NULLITY, IT HAVING BEEN ISSUED WITHOUT JURISDICTION;
II
PUBLIC RESPONDENT NATIONAL LABOR RELATIONS COMMISSION GRAVELY
ABUSED ITS DISCRETION IN ARBITRARILY, CAPRICIOUSLY AND WHIMSICALLY
MAKING THE FOLLOWING CONCLUSIONS BASED NOT ON FACTS AND BUT
ON SPECULATION, SURMISE AND EVIDENCE CONJECTURE:
A. Petitioner was deprived of the constitutional right to due process of law
when it was adjudged by the NLRC liable without trial on the merits and
without its knowledge;
B. The NLRC erroneously, patently and unreasonably interpreted the
principle that the NLRC and its Arbitration Branch are not strictly bound by
the rules of evidence;
C. There is no legal nor actual basis in the NLRC's ruling that petitioner is
already in estoppel to disclaim the authority of its alleged representatives.
D. The NLRC committed manifest error in relying merely on private,
respondents' unsubstantiated complaints to hold petitioner liable for
damages. 5
In brief, petitioner alleges that the decisions of the labor arbiters and
respondent Commission are void for the following reasons: (1) there was no
valid service of summons; (2) Engineers Estacio and Dulatre and Atty.
Abundiente had no authority to appear and represent petitioner at the
hearings before the arbiters and on appeal to respondent Commission; (3)
the decisions of the arbiters and respondent Commission are based on
unsubstantiated and self-serving evidence and were rendered in violation of
petitioner's right to due process.
Sections 4 and 5 of Rule IV of the New Rules of Procedure of the NLRC. They
provide:
Sec. 4. Service of Notices and Resolutions. — (a) Notices or summons and
copies of orders, resolutions or decisions shall be served on the parties to
the case personally by the bailiff or duly authorized public officer within
three (3) days from receipt thereof or by registered mail; Provided that
where a party is represented by counsel or authorized representative,
service shall be made on such counsel or authorized
representative; provided further that in cases of decision and final awards,
copies thereof shall be served on both the parties and their counsel;
provided finally, that in case where the parties are so numerous, service
shall be made on counsel and upon such number of complainants as may be
practicable, which shall be considered substantial compliance with Article
224 (a) of the Labor Code, as amended.
xxx xxx xxx
Sec. 5. Proof and completeness of service. — The return is prima facie proof
of the facts indicated therein.Service by registered mail is complete upon
receipt by the addressee or his agent. . . .
Under the NLRC Rules of Procedure, summons on the respondent shall be
served personally or by registered mail on the party himself. If the party is
represented by counsel or any other authorized representative or agent,
summons shall be served on such person.
It has been established that petitioner is a private domestic corporation with
principal address in Quezon City. The complaints against petitioner were
filed in Iligan City and summonses therefor served on Engineer Estacio in
Iligan City. The question now is whether Engineer Estacio was an agent and
authorized representative of petitioner.
To determine the scope or meaning of the term "authorized representative"
or "agent" of parties on whom summons may be served, the provisions of
the Revised Rules of Court may be resorted to. 6
Under the Revised Rules of Court, 7 service upon a private domestic
corporation or partnership must be made upon its officers, such as the
president, manager, secretary, cashier, agent, or any of its directors. These
persons are deemed so integrated with the corporation that they know their
responsibilities and immediately discern what to do with any legal papers
served on them. 8
In the case at bar, Engineer Estacio, assisted by Engineer Dulatre, managed
and supervised the construction project. 9 According to the Solicitor General
and private respondents, Engineer Estacio attended to the project in Iligan
City and supervised the work of the employees thereat. As manager, he had
sufficient responsibility and discretion to realize the importance of the legal
papers served on him and to relay the same to the president or other
responsible officer of petitioner. Summons for petitioner was therefore
validly served on him.
Engineer Estacio's appearance before the labor arbiters and his promise to
settle the claims of private respondents is another matter.
The general rule is that only lawyers are allowed to appear before the labor
arbiter and respondent Commission in cases before them. The Labor Code
and the New Rules of Procedure of the NLRC, nonetheless, lists three (3)
exceptions to the rule, viz:
Sec. 6. Appearances. — . . . .
A non-lawyer may appear before the Commission or any Labor Arbiter only
if:
(a) he represents himself as party to the case;
(b) he represents the organization or its members, provided that he shall be
made to present written proof that he is properly authorized; or
(c) he is a duly-accredited member of any legal aid office duly recognized by
the Department of Justice or the Integrated Bar of the Philippines in cases
referred thereto by the latter. . . . 10
A non-lawyer may appear before the labor arbiters and the NLRC only if: (a)
he represents himself as a party to the case; (b) he represents an
organization or its members, with written authorization from them: or (c) he
is a duly-accredited member of any legal aid office duly recognized by the
Department of Justice or the Integrated Bar of the Philippines in cases
referred to by the latter. 11
Engineers Estacio and Dulatre were not lawyers. Neither were they duly-
accredited members of a legal aid office. Their appearance before the labor
arbiters in their capacity as parties to the cases was authorized under the
first exception to the rule. However, their appearance on behalf of petitioner
required written proof of authorization. It was incumbent upon the arbiters
to ascertain this authority especially since both engineers were named co-
respondents in the cases before the arbiters. Absent this authority, whatever
statements and declarations Engineer Estacio made before the arbiters
could not bind petitioner.
The appearance of Atty. Arthur Abundiente in the cases appealed to
respondent Commission did not cure Engineer Estacio's representation. Atty.
Abundiente, in the first place, had no authority to appear before the
respondent Commission. The appellants' brief he filed was verified by him,
not by petitioner. 12 Moreover, respondent Commission did not delve into
the merits of Atty. Abundiente's appeal and determine whether Engineer
Estacio was duly authorized to make such promise. It dismissed the appeal
on the ground that notices were served on petitioner and that the latter was
estopped from denying its promise to pay.
Nevertheless, even assuming that Engineer Estacio and Atty. Abundiente
were authorized to appear as representatives of petitioner, they could bind
the latter only in procedural matters before the arbiters and respondent
Commission. Petitioner's liability arose from Engineer Estacio's alleged
promise to pay. A promise to pay amounts to an offer to compromise and
requires a special power of attorney or the express consent of petitioner.
The authority to compromise cannot be lightly presumed and should be duly
established by evidence.13 This is explicit from Section 7 of Rule III of the
NLRC Rules of Procedure, viz:
Sec. 7. Authority to bind party. — Attorneys and other representatives of
parties shall have authority to bind their clients in all matters of procedure;
but they cannot, without a special power of attorney or express consent,
enter into a compromise agreement with the opposing party in full or partial
discharge of a client's claim.
The promise to pay allegedly made by Engineer Estacio was made at the
preliminary conference and constituted an offer to settle the case amicably.
The promise to pay could not be presumed to be a single unilateral act,
contrary to the claim of the Solicitor General. 14 A defendant's promise to pay
and settle the plaintiff's claims ordinarily requires a reciprocal obligation
from the plaintiff to withdraw the complaint and discharge the defendant
from liability. 15 In effect, the offer to pay was an offer to compromise the
cases.
In civil cases, an offer to compromise is not an admission of any liability, and
is not admissible in evidence against the offeror. 16 If this rule were
otherwise, no attempt to settle litigation could safely be made. 17 Settlement
of disputes by way of compromise is an accepted and desirable practice in
courts of law and administrative tribunals. 18 In fact, the Labor Code
mandates the labor arbiter to exert all efforts to enable the parties to arrive
at an amicable settlement of the dispute within his jurisdiction on or before
the first hearing. 19
Clearly, respondent Commission gravely abused its discretion in affirming
the decisions of the labor arbiters which were not only based on
unauthorized representations, but were also made in violation of
petitioner's right to due process.
Section 3 of Rule V of the NLRC Rules of Procedure provides:
Sec. 3. Submission of Position Papers/Memorandum. — Should the parties
fail to agree upon an amicable settlement, in whole or in part, during the
conferences, the Labor Arbiter shall issue an order stating therein the
matters taken up and agreed upon during the conferences and directing the
parties to simultaneously file their respective verified position papers
xxx xxx xxx
After petitioner's alleged representative failed to pay the workers' claims as
promised, Labor Arbiters Siao and Palangan did not order the parties to file
their respective position papers. The arbiters forthwith rendered a decision
on the merits without at least requiring private respondents to substantiate
their complaints. The parties may have earlier waived their right to file
position papers but petitioner's waiver was made by Engineer Estacio on the
premise that petitioner shall have paid and settled the claims of private
respondents at the scheduled conference. Since petitioner reneged on its
"promise," there was a failure to settle the case amicably. This should have
prompted the arbiters to order the parties to file their position papers.
Article 221 of the Labor Code mandates that in cases before labor arbiters
and respondent Commission, they "shall use every and all reasonable means
to ascertain the facts in each case speedily and objectively and without
regard to technicalities of law or procedure, all in the interest of due
process." The rule that respondent Commission and the Labor Arbiters are
not bound by technical rules of evidence and procedure should not be
interpreted so as to dispense with the fundamental and essential right of
due process. 20 And this right is satisfied, at the very least, 'when the parties
are given the opportunity to submit position papers. 21 Labor Arbiters Siao
and Palangan erred in dispensing with this requirement.
Indeed, the labor arbiters and the NLRC must not, at the expense of due
process, be the first to arbitrarily disregard specific provisions of the Rules
which are precisely intended to assist the parties in obtaining the just,
expeditious and inexpensive settlement of labor disputes. 22
IN VIEW WHEREOF, the petition for certiorari is granted. The decision of the
National Labor Relations Commission, Fifth Division, is annulled and set
aside and the case is remanded to the Regional Arbitration Branch, Iligan
City for further proceedings.
SO ORDERED.
G.R. No. 116568. September 3, 1999]
DELFIN GARCIA, doing business under the name NAPCO-LUZMART,
Inc., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and
CARLITO LACSON, respondents.
DECISION
GONZAGA-REYES, J.:
Before us is a Petition for Certiorari under Rule 65 of the Rules of Court to
annul and set aside the decision of the National Labor Relations
Commission[1] in NLRC CA No. L-001268 dated April 12, 1994 which affirmed
the decision of the Sub-Regional Arbitration Branch No. I in Dagupan City
finding that the private respondent Carlito Lacson was constructively
dismissed by the petitioner Delfin Garcia doing business under the name
NAPCO-LUZMART, Inc. and awarding respondent backwages and separation
pay.
The following facts as adopted by the National Labor Relations Commission
(NLRC) are uncontroverted:
“Complainant Carlito Lacson was employed on March 5, 1987 as boiler
operator technician by Northwest Agro-Marine Products Corporation
(NAPCO). On December 12, 1990 respondent Luzmart, Inc., acquired
NAPCO in a foreclosure sale. Both companies were managed by respondent
Delfin Garcia.
On January 28, 1993, there was a mauling incident which involved the
complainant and Julius Z. Viray, his immediate supervisor and allegedly a
friend and compadre of respondent Garcia. As complainant suffered injuries
as a result thereof he reported the matter to police authorities and he
sought treatment at the Teofilo Sison Memorial Provincial Hospital. Both
the complainant and Viray were asked to explain their sides. After the
submission of the written explanations, Delfin Garcia suspended both of
them from work for a period of one month effective April 15, 1993. In the
same suspension order, complainant was further directed to explain in
writing why he should not be dealt with disciplinary action or terminated for
his continued absences from February 15, 1993 up to the date of the
memorandum order. Complainant filed a complaint for illegal dismissal and
other monetary claims but the same was dismissed without prejudice. On
September 1, 1993, the complainant refiled this case.” [2]
The Labor Arbiter[3] ruled in favor of the respondent Carlito Lacson
(LACSON). Petitioner NAPCO-Luzmart (LUZMART) appealed to the NLRC
which affirmed the decision of the Labor Arbiter after finding that the Labor
Arbiter did not commit any reversible error. The NLRC however deleted the
award of attorney’s fees in favor of LACSON. Its decision, which adopted the
conclusions of the Labor Arbiter, reads:
“In finding for the complainant, the Labor Arbiter ruled:
‘The issues to be resolved in this case are: (1) whether or not the
complainant was dismissed from his employment; (2) whether or not he is
entitled to his claim for overtime services, separation pay, 13 th month pay,
premium pay for working on holidays and rest days, separation pay,
13th month pay and service incentive leave pay; and, (3) whether or not the
complainant is considered an employee of the respondents since March
1987.
The first issue: Respondent Delfin Garcia insists that he did not dismiss the
complainant and that he can return to his work after his one month
suspension, (affidavit of respondent Garcia, marked as Annex “H” of his
position paper). On the other hand, complainant Lacson maintains that he
reported for work several times but respondent Garcia refused to take him
back and that the former told him to look for another job.
Let us scrutinize the evidence. The incident involving the complainant and
Julius Viray, also an employee of the respondents, wherein Viray allegedly
mauled the complainant, happened on January 28, 1993. On February
1993, the complainant submitted his handwritten explanation blaming Viray
as the aggressor. According to the complainant, Viray was drunk at the time
of the incident and although he avoided Viray, the latter armed with a lead
pipe, followed him and wanted to kill him (Annex “C” – complainant). Viray
also submitted his handwritten explanation on February 2, 1993 (see Annex
“E-1” of respondent’s position paper). Viray only stated that a “heated
argument transpired”. On March 31, 1993, respondent Garcia issued a
Memorandum suspending both the complainant and Viray for one (1)
month effective April 15, 1993 and at the same time required the
complainant to explain why he should not be terminated for being absent
from Feb. 15, 1993, (Annex “F”, respondents). The question is, why did it
take respondent Delfin Garcia one (1) month or more to decide and issue an
order suspending the complainant and Viray? Why did he not suspend the
two immediately after the incident? This leads credence to the
complainant’s allegation that he reported for work after submitting his
explanation but respondent Garcia refused to admit him back and told him
to take a vacation or to look for another work, hence he decided to file a
complaint against him on Feb. 4, 1993, which was later dismissed without
prejudice, the reason for the dismissal of which was not explained to us by
the complainant. Moreover, it is true that the complainant failed to report
for work since Feb. 15, 1993, why did respondent Garcia not issue an order
or memorandum after the complainant failed to report for a number of days
and directing the complainant to report immediately otherwise his
employment will be terminated? We also agree with the complainant’s
argument that the respondents should not have asked him to explain his
alleged failure to report for work since Feb. 15, 1993, because he has
already filed a complaint against Garcia earlier.
The second issue; Annexes “G”, “G-1” to “G-14” of the respondents, which
are samples of respondents payroll, show that whenever the complainant
rendered overtime services, he was paid accordingly. Is he entitled to his
claim for 13th monthpay, service incentive leave pay, vacation in sick leave
pay and separation pay? Respondents maintain that since the complainant
was employed by them only on February 1, 1991, he has no right to claim
benefits that arose before his employment with them. That since he was
not dismissed from his employment, he is not also entitled to his claim for
separation pay. (The resolution of this issue will also resolve the second
issue)
Respondents argue that the services of the complainant with NAPCO since
March 1987, cannot be credited or counted to his length of service with
LUZMART because his subsequent employment with LUZMART is a new
employment as shown in his employment contract (Annex “D” respondents)
with LUZMART.
In the case of MDII Supervisors and Confidential Employees Association
(FFW) vs. Presidential Assistant on Legal Affairs, 79 SCRA 40 (1977), the
Supreme Court ruled that:
‘xxx And there is no law which requires the purchaser to absorb the
employees of the selling corporation.
As there is no such law, the most that the purchasing company may do, for
purposes of public policy and social justice, is to give preference to the
qualified separated employees of the selling company, who in their
judgment are necessary in the continued operation of the business
establishment. This RCAM did. It required private respondents to reapply as
new employees as a condition for rehiring subject to the usual probationary
status, the latter’s past services with the petitioners, transferors not
recognized (San Felipe Neri School of Mandaluyong, Inc., et. Al. Vs. NLRC,
Roman Catholic Archbishop of Manila (RCAM), et. al., G.R. No. 78350, Sept.
11, 1991.).’
Except for his bare allegation that LUZMART was only organized by the
controlling stockholders of NAPCO to acquire or gain control of the latter,
the complainant did not present sufficient evidence to prove his allegation,
LUZMART is an entirely new corporation or entity with a distinct personality
from NAPCO, and is not an alter ego of NAPCO. Therefore, LUZMART is not
under obligation to absorb the workers of NAPCO or to absorb the length of
service earned by its employees.
The respondents are therefore correct in their assertion that they should not
be answerable for the complainant’s claim for benefits that may be due him
before January 1, 1991.
As we have discussed earlier, the complainant herein was constructively
dismissed from his employment by respondent Delfin Garcia because of the
latter’s refusal to admit him back to work inspite of the complainant’s
insistence to resume his work after he has given his explanation.’
On appeal, respondent contends that the Labor Arbiter erred in awarding
backwages to the complainant from February 1, 1993 up to the date of the
promulgation of the decision, and in awarding separation pay of one month
pay for every year of service.
We are in full accord with the Labor Arbiter’s conclusion that the
complainant was constructively dismissed by the respondent Delfin Garcia
when he refused to admit the complainant despite his insistence to go back
to work.
However, we delete the award of attorney’s fees as this is not a case of
unlawful withholding of wages.
WHEREFORE, premises considered, the appealed decision is modified by
deleting the award of attorney’s fees. In all other respect, the same is
affirmed.
SO ORDERED.”[4]
LUZMART’s motion for reconsideration [5] was denied hence, this petition
wherein LUZMART claims that the NLRC committed grave abuse of
discretion in holding that LACSON was illegally dismissed.
In support of its petition, LUZMART claims that LACSON was not dismissed
but was merely suspended as shown by the March 31, 1993 memorandum.
[6]
His suspension was a consequence of the imposition of disciplinary
measures on him as fighting within the company premises constitutes
serious misconduct and disorderly behavior. The fact that LUZMART did not
immediately suspend him after the fighting incident does not establish that
he was dismissed from his employment as there is no law which requires an
employer to immediately rule on any infraction under investigation after the
filing of the explanation of the person under investigation. Neither is
LACSON entitled to backwages nor separation pay as these are only granted
to employees who have been illegally dismissed from work and not to
employees like LACSON who abandoned his employment as he failed to
report to work from February 15, 1993 to March 31, 1993. [7]
We resolve to affirm the judgment of the NLRC.
LUZMART’s claim that LACSON was merely suspended and was still
employed by LUZMART does not convince us that LACSON was not
dismissed from his employment. Said claim was a mere afterthought to
preempt or thwart the impending illegal dismissal case filed by LACSON
against LUZMART. As found by the labor arbiter, LACSON’s failure to report
to work was due to LUZMART’s refusal to admit him back. In fact, LUZMART
told him to go on vacation or to look for other work. [8]
LACSON’s dismissal is clearly established by the following chronology of
events: The mauling incident occurred on January 28, 1993. LACSON
submitted his written explanation of the event on February 1, 1993. On
February 4, 1993, LACSON attempted to report for work but LUZMART
refused to admit him. On February 11, 1993, LACSON filed an action for
illegal dismissal with the NLRC. [9] On April 13, 1993, LUZMART sent LACSON
the memorandum ordering LACSON’s suspension dated on March 31,
1993. By this time, LUZMART already knew of the pending illegal dismissal
case against it as it was already directed by the NLRC to submit its position
paper on April 5, 1993. LUZMART’s reliance on the March 31, 1993
memorandum[10] and the February 1-15, 1993 payroll [11] to prove that
LACSON was merely suspended is therefore unavailing. The March 31, 1993
memorandum is at most self-serving; a ploy to cover up the dismissal of
LACSON since this was issued after LUZMART had knowledge of the illegal
dismissal case filed against it by LACSON on February 11, 1993. Likewise,
the veracity of the February 1-15, 1993 payroll that purportedly shows that
LACSON was included in LUZMART’s payroll is of doubtful probative
value. First of all, it does not contain a certification by Charito Fernandez at
its back page, unlike the other payrolls [12] attached as annexes to LUZMART’s
petition. Secondly, said payroll does not contain the signatures of the other
employees as proof that they received their salaries for the said
period. Given these circumstances, both documents appear to have been
prepared in contemplation of the pending illegal dismissal case filed against
LUZMART.
The contention that LACSON abandoned his employment is also without
merit. Mere absence or failure to report for work, after notice to return, is
not enough to amount to such abandonment. [13] For a valid finding of
abandonment, two factors must be present, viz; (1) the failure to report for
work or absence without valid or justifiable reason; and (2) a clear intention
to sever the employer-employee relationship, [14] with the second element as
the more determinative factor being manifested by some overt acts.
[15]
There must be a concurrence of the intention to abandon and some overt
acts from which an employee may be deduced as having no more intention
to work.[16] Such intent to discontinue the employment must be shown by
clear proof that it was deliberate and unjustified.[17]
LACSON’s absence from work was not without a valid reason. It was
petitioner who did not allow him to work and in fact told him to go on
vacation or to look for other work. This is tantamount to a constructive
dismissal which is defined as a “quitting because continued employment is
rendered impossible, unreasonable or unlikely; as an offer involving a
demotion in rank and diminution in pay”[18] Since LACSON was denied entry
into his workplace, it was impossible for him to return to work. It would be
unjust to allow herein petitioners to claim as a ground for abandonment a
situation which they themselves had brought about. [19] Moreover, LACSON’s
filing of the complaint for illegal dismissal on February 11, 1993, or seven
days after his alleged abandonment, negates said charge. It is highly illogical
for an employee to “abandon” his employment and thereafter file a
complaint for illegal dismissal.[20]
We also do not agree with LUZMART that LACSON gave just cause for the
imposition of disciplinary measures upon him. Although fighting within
company premises may constitute serious misconduct under Article
282[21] of the Labor Code and may be a just cause to terminate one’s
employment[22], every fight within company premises in which an employee
is involved would not warrant his dismissal. This is especially true when the
employee concerned did not instigate the fight and was in fact the victim
who was constrained to defend himself. In the present case, it appears that
LACSON was assaulted by Julius Viray (VIRAY), a co-employee, after they
were questioned about missing diesel fuel. LACSON attempted to avoid the
conflict since VIRAY was intoxicated but VIRAY followed him and after an
exchange of words, VIRAY punched him while saying “Papatayin Kita” (I will
kill you). After being punched a second time, LACSON punched back. He
thereafter ran towards the dressing plant after his companion, a certain
DANNY, told him to run. VIRAY was persistent and followed LACSON and
continued delivering punches at him. LACSON ran away for a second time
but VIRAY still pursued him and even armed himself with a lead
pipe. LACSON sustained wounds on his head and forehead due to VIRAY’s
use of the lead pipe. The Medico-Legal Certificate [23] issued by the Gov.
Teofilo Sison Memorial Hospital corroborates LACSON’s injuries. Given the
above circumstances, it is not difficult to understand why LACSON had to
defend himself.
Even assuming that there was just cause to dismiss LACSON, strict
compliance by the employer with the demands of both procedural and
substantive due process is a condition sine qua non for the termination to be
declared valid. The law requires that the employer must furnish the worker
sought to be dismissed with two written notices before termination of
employment can be legally effected:
requirement; to inform LACSON of the decision to dismiss him. Such failure
to comply with said requirements taints LACSON’s dismissal with illegality.
An illegally dismissed employee is entitled to 1) either reinstatement or
separation pay if reinstatement is no longer viable, and 2) backwages. [25] In
the present case, LACSON is entitled to be reinstated, as there is no
evidence to show that reinstatement is no longer possible considering
LUZMART’s position in this appeal is that LACSON was never dismissed but
merely suspended. He is also entitled to backwages computed from the
time of illegal dismissal, in this case on February 4, 1993 [26] (not February 1,
1993 as found by the NLRC) up to the time of actual reinstatement, without
qualification or deduction[27]
WHEREFORE, the assailed decision of the NLRC is AFFIRMED and the instant
petition is hereby DISMISSED with the MODIFICATION that LUZMART
reinstate LACSON to his former position and pay him backwages computed
from the date of illegal dismissal on February 4, 1993 up to the time of
actual reinstatement.
No pronouncement as to costs.
SO ORDERED.

1. notice which apprises the employee of the particular acts or omissions for
which his dismissal is sought; and

2. the subsequent notice which informs the employee of the employer’s

decision to dismiss him.[24]

It is unclear whether LUZMART complied with the first required written

notice; apparently, LACSON was able to give his account of the
fight. However, even assuming that LUZMART complied with the first
written notice i.e. the charge against LACSON with fighting within company
premises, the evidence fails to show compliance with the second notice
G.R. No. 87297 August 5, 1991

ALFREDO VELOSO and EDITO LIGUATON petitioners,

vs.
DEPARTMENT OF LABOR AND EMPLOYMENT, NOAH'S ARK SUGAR
CARRIERS AND WILSON T. GO,respondents.

CRUZ, J.:p

The law looks with disfavor upon quitclaims and releases by employees who
are inveigled or pressured into signing them by unscrupulous employers
seeking to evade their legal responsibilities. On the other hand, there are
legitimate waivers that represent a voluntary settlement of laborer's claims
that should be respected by the courts as the law between the parties.

In the case at bar, the petitioners claim that they were forced to sign their
respective releases in favor of their employer, the herein private respondent,
by reason of their dire necessity. The latter, for its part, insists that the
petitioner entered into the compromise agreement freely and with open
eyes and should not now be permitted to reject their solemn commitments.

The controversy began when the petitioners, along with several co-
employees, filed a complaint against the private respondent for unfair labor
practices, underpayment, and non-payment of overtime, holiday, and other
benefits. This was decided in favor of the complainants on October 6,1987.
The motion for reconsideration, which was treated as an appeal, was
dismissed in a resolution dated February 17, 1988, the dispositive portion of
which read as follows:

WHEREFORE, the instant appeal is hereby DISMISSED and the questioned

Order affirmed with the modification that the monetary awards to Jeric
Dequito, Custodio Ganuhay Conrado Mori and Rogelio Veloso are hereby
deleted for being settled. Let execution push through with respect to the
awards to Alfredo Veloso and Edito Liguaton.

On February 23, 1988, the private respondent filed a motion for

reconsideration and recomputation of the amount awarded to the
petitioners. On April 15, 1988, while the motion was pending, petitioner
Alfredo Veloso, through his wife Connie, signed a Quitclaim and Release for
and in consideration of P25,000.00, 1 and on the same day his counsel, Atty.
Gaga Mauna, manifested "Satisfaction of Judgment" by receipt of the said
sum by Veloso. 2 For his part, petitioner Liguaton filed a motion to dismiss
dated July 16, 1988, based on a Release and Quitclaim dated July
19,1988 , 3 for and in consideration of the sum of P20,000.00 he
acknowledged to have received from the private respondent. 4
These releases were later impugned by the petitioners on September 20,
1988, on the ground that they were constrained to sign the documents
because of their "extreme necessity." In an Order dated December 16, 1988,
the Undersecretary of Labor rejected their contention and ruled:
IN VIEW THEREOF, complainants Motion to Declare Quitclaim Null and Void
is hereby denied for lack of merit and the compromise
agreements/settlements dated April 15, 1988 and July 19, 1988 are hereby
approved. Respondents' motion for reconsideration is hereby denied for
being moot and academic.
Reconsideration of the order having been denied on March 7, 1989, the
petitioners have come to this Court oncertiorari. They ask that the
quitclaims they have signed be annulled and that writs of execution be
issued for the sum of P21,267.92 in favor of Veloso and the sum of
P26,267.92 in favor of Liguaton in settlement of their claims.
Their petition is based primarily on Pampanga Sugar Development Co., Inc.
v. Court of Industrial Relations, 5where it was held:
... while rights may be waived, the same must not be contrary to law, public
order, public policy, morals or good customs or prejudicial to a third person
with a right recognized by law. (Art. 6, New Civil Code) ...
... The above-quoted provision renders the quitclaim agreements void ab
initio in their entirety since they obligated the workers concerned to forego
their benefits, while at the same time, exempted the petitioner from any
liability that it may choose to reject. This runs counter to Art. 22 of the new
Civil Code which provides that no one shall be unjustly enriched at the
expense of another.
The Court had deliberated on the issues and the arguments of the parties
and finds that the petition must fail. The exception and not the rule shall be
applied in this case.
The case cited is not apropos because the quitclaims therein invoked were
secured by the employer after it had already lost in the lower court and
were subsequently rejected by this Court when the employer invoked it in a
petition for certiorari. By contrast, the quitclaims in the case before us were
signed by the petitioners while the motion for reconsideration was still
pending in the DOLE, which finally deemed it on March 7, 1989.
Furthermore, the quitclaims in the cited case were entered into without
leave of the lower court whereas in the case at bar the quitclaims were
made with the knowledge and approval of the DOLE, which declared in its
order of December 16, 1988, that "the compromise agreement/settlements
dated April 15, 1988 and July 19, 1988 are hereby approved."
It is also noteworthy that the quitclaims were voluntarily and knowingly
made by both petitioners even if they may now deny this. In the case of
Veloso, the quitclaim he had signed carried the notation that the sum stated
therein had been paid to him in the presence of Atty. Gaga Mauna, his
counsel, and the document was attested by Atty. Ferdinand Magabilin, Chief
of the Industrial Relations Division of the National Capitol Region of the
DOLE. In the case of Liguaton, his quitclaim was made with the assistance of
his counsel, Atty. Leopoldo Balguma, who also notarized it and later
confirmed it with the filing of the motion to dismiss Liguaton's complaint.
The same Atty. Balguma is the petitioners' counsel in this proceeding.
Curiously, he is now challenging the very same quitclaim of Liguaton that he
himself notarized and invoked as the basis of Liguaton's motion to dismiss,
but this time for a different reason. whereas he had earlier argued for
Liguaton that the latter's signature was a forgery, he has abandoned that
contention and now claims that the quitclaim had been executed because of
the petitioners' dire necessity.
"Dire necessity" is not an acceptable ground for annulling the releases,
especially since it has not been shown that the employees had been forced
to execute them. It has not even been proven that the considerations for the
quitclaims were unconscionably low and that the petitioners had been
tricked into accepting them. While it is true that the writ of execution dated
November 24, 1987, called for the collection of the amount of P46,267.92
each for the petitioners, that amount was still subject to recomputation and
modification as the private respondent's motion for reconsideration was still
pending before the DOLE. The fact that the petitioners accepted the lower
amounts would suggest that the original award was exorbitant and they
were apprehensive that it would be adjusted and reduced. In any event, no
deception has been established on the part of the Private respondent that
would justify the annulment of the Petitioners' quitclaims.
The applicable law is Article 227 of the Labor Code providing clearly as
follows:
Art. 227. Compromise agreements. — Any compromise settlement, including
those involving labor standard laws, voluntarily agreed upon by the parties
with the assistance of the Bureau or the regional office of the Department of
Labor, shall be final and binding upon the parties. The National Labor
Relations Commission or any court shall not assume jurisdiction over issues
involved therein except in case of non-compliance thereof or if there
is prima facie evidence that the settlement was obtained through fraud,
misrepresentation or coercion.
The petitioners cannot renege on their agreement simply because they may
now feel they made a mistake in not awaiting the resolution of the private
respondent's motion for reconsideration and recomputation. The possibility
that the original award might have been affirmed does not justify the
invalidation of the perfectly valid compromise agreements they had entered
into in good faith and with full voluntariness. In General Rubber and
Footwear Corp. vs. Drilon, 6 we "made clear that the Court is not saying that
accrued money claims can never be effectively waived by workers and
employees." As we later declared in Periquet v. NLRC: 7
Not all waivers and quitclaims are invalid as against public policy. If the
agreement was voluntarily entered into and represents a reasonable
settlement, it is binding on the parties and may not later be disowned simply
because of a change of mind. It is only where there is clear proof that the
waiver was wangled from an unsuspecting or gullible person, or the terms of
settlement are unconscionable on its face, that the law will step in to annul
the questionable transaction. But where it is shown that the person making
the waiver did so voluntarily, with full understanding of what he was doing,
and the consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and binding undertaking. As in this
case.
We find that the questioned quitclaims were voluntarily and knowingly
executed and that the petitioners should not be relieved of their waivers on
the ground that they now feel they were improvident in agreeing to the
compromise. What they call their "dire necessity" then is no warrant to
nullify their solemn undertaking, which cannot be any less binding on them
simply because they are laborers and deserve the protection of the
Constitution. The Constitution protects the just, and it is not the petitioners
in this case.
WHEREFORE, the petition is DISMISSED, with costs against the petitioners. It
is so ordered.
 JAG & HAGGAR JEANS AND SPORTSWEAR CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LAKAS MANGGA-GAWA SA
JAG, DOMINGO NAMIA, RIZALDE FLORES, JULIETA ADRIANO, ROBERTO
ALAMO, JOSE BALDELOBAR, LILIBETH BIDES, NARCISO GARBIN, AMELITA
LEBRIAS, MARIBEL MADRID, VERONICA MAGPILI, IMELDA NEPOMUCENO,
AND DAN VILLAMOR,respondents.

QUIASON, J.:

This is a petition for certiorari to set aside the Decision dated February 26,
1992 of the National Labor Relations Commission (NLRC) in NCR Case No.
00-09-04050-88 and its Resolution dated April 22, 1992, denying petitioner's
motion for reconsideration. The decision held that the members of the
Union who did not ratify or avail of the benefits under the Compromise
Agreement entered into between petitioner and the Union were not bound
thereby (Rollo, pp. 32-41). In our Resolution dated June 29, 1992, we issued
a temporary restraining order.

In September 1988, the Lakas Manggagawa sa Jag (Union) composed of the

rank-and-file employees of Jag & Haggar Jeans and Sportswear Corporation,
petitioner herein, staged a strike. Petitioner filed a petition to declare the
strike illegal.

On November 29, 1988, Labor Arbiter Eduardo Madriaga rendered a

decision, declaring the strike illegal and ordering the dismissal of the
officers, as well as the members of the Union who took part in the illegal
strike. The dispositive portion of said decision reads as follows:

WHEREFORE, premises considered, the strike conducted by respondent

union and individual respondents on September 22, 1988 and subsisting to
date, is hereby declared to be illegal for failure to observe the cooling-off
G.R. No. 105710 February 23, 1995
period as agreed upon by the parties and the conduct of the strike vote as
required by law, as well as for commission of illegal acts in the staging of the
said strike as averred in the affidavits of witnesses for petitioner.
Accordingly, the officers of the union, to wit:
xxx xxx xxx
are hereby declared to have legally lost their employment status.
Likewise, for commission of illegal acts as averred in the affidavits of
witnesses for petitioner which were not controverted by respondents, the
following rank-and-file employees, to wit:
xxx xxx xxx
are hereby declared to have legally lost their employment status.
The rest of the striking workers are hereby ordered to immediately
dismantle their pickets and barricades and return to work within seventy-
two (72) hours from receipt of copy of this Decision.
Finally, both parties are hereby enjoined to maintain the status quo prior to
the strike staged by respondents (Rollo, pp. 12-14).
The affected officers and members of the Union appealed the decision to
NLRC. On August 31, 1989, NLRC rendered its decision setting aside the
Labor Arbiter's decision and ordering the reinstatement of the affected
employees (Rollo, pp. 14-15).
Acting on the motion for reconsideration filed by petitioner, NLRC, on May
31, 1990 modified its earlier decision as follows:
WHEREFORE, premises considered, the Commission's Decision dated 31
August 1989, is hereby modified as follows:
1. The following officers of the Union Norma Jocson-President Narciso Sinag-
Vice President; Gloria Gavis-Treasurer; Luzviminda Guspid-Secretary; and
Apolinario Sta. Ana-PRO are hereby declared to have lost their employment;
2. The Union Board Members and Shop Stewards may be dismissed by
respondent-appellee subject to the payment of separation pay equivalent to
one-half month for every year of service; and
3. The mere union members are directed to report for work within ten (10)
days from receipt of this Decision and management is ordered to accept
them to their former or equivalent position. (Rollo, p. 15)
Again, the aggrieved officers and members of the Union filed a motion for
reconsideration while petitioner filed a Manifestation/Motion for
Clarification (Rollo, p. 15).
Pending resolution of the two motions by NLRC, both parties agreed to
negotiate a settlement and to defer the enforcement of the decision.
On July 30, 1990, the two motions were dismissed by the NLRC (Rollo, p. 15).
On October 23, 1990, a compromise agreement was executed and signed by
petitioner and the Union represented by its officers (Rollo, pp. 16-18). The
parties agreed that:
1. The Company shall pay to the officers and members of the Union named
in the aforesaid decision separation pay equivalent to one-half (1/2) month
basic pay for every year of service.
2. Additionally, the Company shall pay to the officers of the Union
mentioned in item No. 2 of the Decision, namely the Union Board members,
and Shop Stewards financial assistance in the amount of One Thousand
(P1,000.00) Pesos.
3. The Company shall also pay to the members of the Union mentioned in
item No. 3 of the Decision, namely those who should be allowed to work,
financial assistance in the amount of Two Thousand (P2,000.00) Pesos.
xxx xxx xxx
Out of a total of 114 affected employees, 90 of them availed of the benefits
provided for under the Compromise Agreement (Rollo, pp. 16-19).
On May 15, 1991, 24 of the affected employees moved for the execution of
the May 31, 1990 Decision of NLRC (Rollo, p. 19).
Petitioner filed an opposition, citing the Compromise Agreement, which had
been availed of by 90 of the affected employees (Rollo, p. 19)
On September 12, 1991, Labor Arbiter Salimathar Nambi issued an order,
denying the motion for execution (Rollo, p. 19). In the meantime, 12 of the
24 affected employees also availed of the benefits under the Compromise
Agreement. The remaining 12 employees appealed to NLRC from the denial
of their motion for execution. On February 26, 1992, NLRC set aside the
order of Labor Arbiter Nambi and directed petitioner to accept the union
members to their former or equivalent position with back wages from July
30, 1990 until they were reinstated (Rollo, p. 40).
A motion for reconsideration was filed by petitioner but this was denied on
April 22, 1992 (Rollo, p. 42).
On May 19, 1992, petitioner filed with this Court a petition
for certiorari with prayer for issuance of a restraining order and/or writ of
preliminary injunction docketed as G.R. No. 105184. However, the petition
was dismissed by the First Division in a resolution dated May 27, 1992 for
failure to comply with the Revised Rules of Court and Circular Nos. 1-88 and
28-91 (G.R. No. 105184, Rollo, p. 35).
On June 19, 1992, petitioner filed a motion for leave to refile its petition
for certiorari (G.R. No. 105710). In a resolution dated June 29, 1992, the
Third Division of this Court granted the petition and resolved to issue a
temporary restraining order (Rollo, p. 44). The case was reassigned to the
First Division.
II
The main issue to be resolved is whether or not the Compromise Agreement
entered into by petitioner and the Union is binding upon private
respondents.
Petitioner contends that the Compromise Agreement was deemed ratified
by the union members considering that 102 out of the 114 affected
employees already availed of and received the benefits under the said
agreement and that private respondents were represented in all stages of
the proceedings without them questioning the authority of their union
officers and their counsel. It cites the case of Betting Ushers Union (PLUM)
v. Jai-alai, 101 Phil. 822 (1957) wherein we ruled that the "will of the
majority should prevail over the minority" and which ruling was reiterated
in Dionela v. Court of Industrial Relations, 8 SCRA 832 (1963) and Chua
v. National Labor Relations Commison, 190 SCRA 558 (1990).
On the other hand, private respondents allege that for a compromise
agreement to be binding upon them, a special power of attorney or their
express consent was necessary for what was being waived or surrendered
under the agreement was their right to an employment. Such right is
protected under the security of tenure provision of the Labor Code of the
Philippines and cannot be lost without due process of law (Rollo, p. 62).
"Settlement of disputes by way of compromise whereby the parties, by
making reciprocal concessions, avoid a litigation or put an end to one
already commenced, is an accepted, nay desirable practice encouraged by
the courts of law and administrative tribunals" (Santiago v. De Guzman, 177
SCRA 344 [1989]).
The authority of attorneys to bind their clients is governed by Section 7, Rule
IV of the New Rules of Procedure of the National Labor Relations
Commission, which provides:
Authority to bind party. — Attorneys and other representatives of
parties shall have authority to bind their clients in all matters of procedure;
but they cannot, without a special power of attorney or express consent,
enter into a compromise agreement with the opposing party in full or partial
discharge of a client's claim (Emphasis supplied).
It will be noted that the Compromise Agreement provides in paragraphs 2
and 3 thereof that:
2. The union Board Members and Shop Stewards may be dismissed by
respondent-appellee subject to the payment of separation pay equivalent to
one-half month for every year of service; and
3. The mere union members are directed to report for work within 10 days
from receipt of this Decision and management is ordered to accept them to
their former or equivalent position (Rollo, pp. 16-17).
The Decision dated May 8, 1990 ordered the reinstatement of the union
members to their former or equivalent position while in the case of the
Union board members and shop stewards, petitioner was given the option
to dismiss them subject to the payment of separation pay. However, in the
Compromise Agreement, not only the union officers, board members and
shop stewards were considered dismissed from the service but also the
union members subject to the payment of separation pay and financial
assistance.
The waiver of reinstatement, like waivers of money claims, must be regarded
as a personal right which must be exercised personally by the workers
themselves. "For a waiver thereof to be legally effective, the individual
consent or ratification of the workers or employees involved must be shown.
Neither the officers nor the majority of the union had any authority to waive
the accrued rights pertaining to the dissenting minority members, . . . . The
members of the union need the protective shield of this doctrine not
only vis-a-vis their employer but also, at times,vis-a-vis the management of
their own union, and at other times even against their own imprudence or
impecuniousaess" (General Rubber and Footwear Corporation v. Drilon, 169
SCRA 808 [1989]).
The authority to compromise cannot lightly be presumed and should be duly
established by evidence (General Rubber and Footwear Corporation v.
Drilon, supra; Kaisahan ng mga Manggagawa sa La Campana v. Sarmiento,
133 SCRA 220, [1984]).
We also find no reason for the union members to enter into a compromise
when the decision of NLRC ordering their reinstatement is more
advantageous to them than their being dismissed from their jobs under said
Compromise Agreement.
The Compromise Agreement does not apply to private respondents who did
not sign the Compromise Agreement, nor avail of its benefits.
However, while respondents Domingo Namia and Rizalde Flores are not
bound by the terms of the Compromise Agreement, they are bound by the
amended decision of NLRC rendered on May 3, 1990 which provides that
members of the board of directors of the union may be dismissed by
petitioner subject to the payment of separation pay. The two respondents
did not appeal the amended decision after the denial by NLRC of their
motion for reconsideration thereof.
WHEREFORE, the Decision dated February 26, 1992 of the NLRC is
AFFIRMED with the modification stated above with respect to respondents
Domingo Namia and Rizalde Flores. The temporary restraining order is lifted
except with respect to aforementioned respondents.
SO ORDERED.

We have ruled that ". . . when it comes to individual benefits accruing to

members of a union from a favorable final judgment of any court, the
members themselves become the real parties in interest and it is for them,
rather than for the union, to accept or reject individually the fruits of
litigation" (Esso Philippines, Inc. v. Malayang Manggagawa sa Esso (MME),
75 SCRA 73 [1977]).
 MARLENE MELQIADES, IRENE JACINTO, NANCY GARCIA, IMELDA
SARMIENTO, LENITA VIRAY, GINA JACINTO, ROSEMARIE DEL ROSARIO,
CATHERINE ASPURNA, WINNIE PENA, VIVIAN BAA, EMILY LAGMAN, LILIAN
MARFIL, NANCY DERACO, JANET DERACO, MELODY JACINTO, CAROLYN
DIZON, IMELDA MANALOTO, NORY VIRAY, ELIZA SALAZAR, GIGI
MANALOTO, JOSEFINA BASILIO, MARY ANN MAYATI, ZENAIDA GARCIA,
MERLY CANLAS, ERLINDA MANALANG, ANGELINA QUIAMBAO, LANIE
GARCIA, ELVIRA PIEDRA, LOURDES PANLILIO, LUISA PANLILIO, LERIZA
PANLILIO, ALMA CASTRO, ALDA DAVID, MYRA T. OLALIA, MARIFE PINLAC,
NENITA DE GUZMAN, JULIE GACAD, EVELYN MANALO, NORA PATIO,
JANETH CARREON, ROWENA MENDOZA, ROWENA MANALO, LENY
GARCIA, FELISISIMA PATIO, SUSANA SALOMON, JOYDEE LANSANGAN,
REMEDIOS AGUAS, JEANIE LANSANGAN, ELIZABETH MERCADO, JOSELYN
MANALESE, BERNADETH RALAR, LOLITA ESPIRITU, AGNES SALAS, VIRGINIA
MENDIOLA, GLENDA SALITA, JANETH RALAR, ERLINDA BASILIO, CORA
PATIO, ANTONIA CALMA, AGNES CARESO, GEMMA BONUS, MARITESS
OCAMPO, LIBERTY GELISANGA, JANETH MANARANG, AMALIA DELA CRUZ,
EVA CUEVAS, TERESA MANIAGO, ARCELY PEREZ, LOIDA BIE, ROSITA
CANLAS, ANALIZA ESGUERRA, LAILA MANIAGO, JOSIE MANABAT, ROSARIO
DIMATULAC, NYMPA TUAZON, DAIZY TUASON, ERLINDA NAVARRO, EMILY
MANARANG, EMELITA CAYANAN, MERCY CAYANAN, LUZVIMINDA
CAYANAN, ANABEL MANALO, SONIA DIZON, ERNA CANLAS, MARIAN
BENEDICTA, DOLORES DOLETIN, JULIE DAVID, GRACE VILLANUEVA,
VIRGINIA MAGBAG, CORAZON RILLION, PRECY MANALILI, ELENA RONOZ,
IMELDA MENDOZA, EDNA CANLAS and ANGELA CANLAS, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, EMPIRE FOOD PRODUCTS, its
Proprietor/President & Manager, MR. GONZALO KEHYENG and MRS.
EVELYN KEHYENG, respondents.

G.R. No. 123938 May 21, 1998 DAVIDE, JR., J.:

LABOR CONGRESS OF THE PHILIPPINES (LCP) for and in behalf of its In this special civil action for certiorari under Rule 65, petitioners seek to
members, ANA MARIE OCAMPO, MARY INTAL, ANNABEL CARESO, reverse the 29 March 1995 resolution 1of the National Labor Relations
Commission (NLRC) in NLRC RAB III Case No. 01-1964-91 which affirmed the
Decision 2 of Labor Arbiter Ariel C. Santos dismissing their complaint for
utter lack of merit.
The antecedents of this case, as summarized by the Office of the Solicitor
General in its Manifestation and Motion in Lieu of Comment, 3 are as
follows:
The 99 persons named as petitioners in this proceeding were rank-and-file
employees of respondent Empire Food Products, which hired them on
various dates (Paragraph 1, Annex "A" of Petition, Annex "B;" Page 2, Annex
"F" of Petition).
Petitioners filed against private respondents a complaint for payment of
money claim[s] and for violation of labor standard[s] laws (NLRC Case No.
RAB-111-10-1817-90). They also filed a petition for direct certification of
petitioner Labor Congress of the Philippines as their bargaining
representative (Case No. R0300-9010-RU-005).
On October 23, 1990, petitioners represented by LCP President Benigno B.
Navarro, Sr. and private respondents Gonzalo Kehyeng and Evelyn Kehyeng
in behalf of Empire Food Products, Inc. entered into a Memorandum of
Agreement which provided, among others, the following:
1. That in connection with the pending Petition for Direct Certification filed
by the Labor Congress with the DOLE, Management of the Empire Food
Products has no objection [to] the direct certification of the LCP Labor
Congress and is now recognizing the Labor Congress of the Philippines (LCP)
and its Local Chapter as the SOLE and EXCLUSIVE Bargaining Agent and
Representative for all rank and file employees of the Empire Food Products
regarding "WAGES, HOURS Of WORK, AND OTHER TERMS AND CONDITIONS
OF EMPLOYMENT;"
2. That with regards [sic] to NLRC CASE NO. RAB-III-10-1817-90 pending with
the NLRC parties jointly and mutually agreed that the issues thereof, shall be
discussed by the parties and resolve[d] during the negotiation of the
Collective Bargaining Agreement;
3. That Management of the Empire Food Products shall make the proper
adjustment of the Employees Wages within fifteen (15) days from the
signing of this Agreement and further agreed to register all the employees
with the SSS;
4. That Employer, Empire Food Products thru its Management agreed to
deduct thru payroll deduction UNION DUES and other Assessment[s] upon
submission by the LCP Labor Congress individual Check-Off Authorization[s]
signed by the Union Members indicating the amount to be deducted and
further agreed all deduction[s] made representing Union Dues and
Assessment[s] shall be remitted immediately to the LCP Labor Congress
Treasurer or authorized representative within three (3) or five (5) days upon
deductions [sic], Union dues not deducted during the period due, shall be
refunded or reimbursed by the Employer/Management.
Employer/Management further agreed to deduct Union dues from non-
union members the same amount deducted from union members without
need of individual Check-Off Authorizations [for] Agency Fee;
5. That in consideration [of] the foregoing covenant, parties jointly and
mutually agreed that NLRC CASE NO. RAB-III-10-1817-90 shall be considered
provisionally withdrawn from the Calendar of the National Labor Relations
Commission (NLRC), while the Petition for direct certification of the LCP
Labor Congress parties jointly move for the direct certification of the LCP
Labor Congress;
6. That parties jointly and mutually agreed that upon signing of this
Agreement, no Harassments [sic], Threats, Interferences [sic] of their
respective rights under the law, no Vengeance or Revenge by each partner
nor any act of ULP which might disrupt the operations of the business;
7. Parties jointly and mutually agreed that pending negotiations or
formalization of the propose[d] CBA, this Memorandum of Agreement shall
govern the parties in the exercise of their respective rights involving the
Management of the business and the terms and condition[s] of
employment, and whatever problems and grievances may arise by and
between the parties shall be resolved by them, thru the most cordial and
good harmonious relationship by communicating the other party in writing
indicating said grievances before taking any action to another forum or
government agencies;
8. That parties [to] this Memorandum of Agreement jointly and mutually
agreed to respect, abide and comply with all the terms and conditions
hereof. Further agreed that violation by the parties of any provision herein
shall constitute an act of ULP. (Annex "A" of Petition).
In an Order dated October 24, 1990, Mediator Arbiter Antonio Cortez
approved the memorandum of agreement and certified LCP "as the sole and
exclusive bargaining agent among the rank-and-file employee of Empire
Food Products for purposes of collective bargaining with respect to wages,
hours of work and other terms and conditions of employment" (Annex "B"
of Petition).
On November 9, 1990, petitioners through LCP President Navarro submitted
to private respondents a proposal for collective bargaining (Annex "C" of
Petition).
On January 23, 1991, petitioners filed a complaint docketed as NLRC Case
No. RAB-III-01-1964-91 against private respondents for:
a. Unfair Labor Practice by way of Illegal Lockout and/or Dismissal;
b. Union busting thru Harassments [sic], threats, and interfering with the
rights of employees to self-organization;
c. Violation of the Memorandum of Agreement dated October 23, 1990;
d. Underpayment of Wages in violation of R.A. No. 6640 and R.A. No. 6727,
such as Wages promulgated by the Regional Wage Board;
e. Actual, Moral and Exemplary Damages. (Annex "D" of Petition)
After the submission by the parties of their respective position papers and
presentation of testimonial evidence, Labor Arbiter Ariel C. Santos absolved
private respondents of the charges of unfair labor practice, union busting,
violation of the memorandum of agreement, underpayment of wages and
denied petitioners' prayer for actual, moral and exemplary damages. Labor
Arbiter Santos, however, directed the reinstatement of the individual
complainants:
The undersigned Labor Arbiter is not oblivious to the fact that respondents
have violated a cardinal rule in every establishment that a payroll and other
papers evidencing hours of work, payments, etc. shall always be maintained
and subjected to inspection and visitation by personnel of the Department
of Labor and Employment. As such penalty, respondents should not escape
liability for this technicality, hence, it is proper that all individual
complainants except those who resigned and executed quitclaim[s] and
releases prior to the filing of this complaint should be reinstated to their
former position[s] with the admonition to respondents that any harassment,
intimidation, coercion or any form of threat as a result of this immediately
executory reinstatement shall be dealt with accordingly.
SO ORDERED. (Annex "G" of petition)
On appeal, the National Labor Relations Commission vacated the Decision
dated April 14, 1972 [sic] and remanded the case to the Labor Arbiter for
further proceedings for the following reasons:
The Labor Arbiter, through his decision, noted that ". . . complainant did not
present any single witness while respondent presented four (4) witnesses in
the persons of Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng and Elvira
Bulagan . . ." (p. 183, Records), that ". . . complainant before the National
Labor Relations Commission must prove with definiteness and clarity the
offense charged. . . ." (Record, p. 183); that ". . . complainant failed to
specify under what provision of the Labor Code particularly Art. 248 did
respondents violate so as to constitute unfair labor practice . . ." (Record, p.
183); that "complainants failed to present any witness who may describe in
what manner respondents have committed unfair labor practice . . ."
(Record, p. 185); that ". . . complainant LCP failed to present anyone of the
so-called 99 complainants in order to testify who committed the threats and
intimidation . . ." (Record, p. 185).
Upon review of the minutes of the proceedings on record, however, it
appears that complainant presented witnesses, namely, BENIGNO
NAVARRO, JR. (28 February 1991, RECORD, p. 91; 8 March 1991, RECORD,
p. 92, who adopted its POSITION PAPER AND CONSOLIDATED AFFIDAVIT, as
Exhibit "A" and the annexes thereto as Exhibit "B", "B-1" to "B-9",
inclusive. Minutes of the proceedings on record show that complainant
further presented other witnesses, namely: ERLINDA BASILIO (13 March
1991, RECORD, p. 93; LOURDES PANTILLO, MARIFE PINLAC, LENIE GARCIA
(16 April 1991, Record, p. 96, see back portion thereof ; 2 May 1991, Record,
p. 102; 16 May 1991, Record, p. 103, 11 June 1991, Record, p. 105). Formal
offer of Documentary and Testimonial Evidence was made by complainant
on June 24, 1991 (Record, p. 106-109)
The Labor Arbiter must have overlooked the testimonies of some of the
individual complainants which are now on record. Other individual
complainants should have been summoned with the end in view of receiving
their testimonies. The complainants should be afforded the time and
opportunity to fully substantiate their claims against the respondents.
Judgment should be rendered only based on the conflicting positions of the
parties. The Labor Arbiter is called upon to consider and pass upon the
issues of fact and law raised by the parties.
Toward this end, therefore, it is Our considered view [that] the case should
be remanded to the Labor Arbiter of origin for further proceedings. (Annex
"H" of Petition)
In a Decision dated July 27, 1994, Labor Arbiter Santos made the following
determination:
Complainants failed to present with definiteness and clarity the particular
act or acts constitutive of unfair labor practice.
It is to be borne in mind that a declaration of unfair labor practice connotes
a finding of prima facieevidence of probability that a criminal offense may
have been committed so as to warrant the filing of a criminal information
before the regular court. Hence, evidence which is more than a scintilla is
required in order to declare respondents/employers guilty of unfair labor
practice. Failing in this regard is fatal to the cause of complainants. Besides,
even the charge of illegal lockout has no leg to stand on because of the
testimony of respondents through their guard Orlando Cairo (TSN, July 31,
1991 hearing; p. 5-35) that on January 21, 1991, complainants refused and
failed to report for work, hence guilty of abandoning their post without
permission from respondents. As a result of complainants['] failure to report
for work, the cheese curls ready for repacking were all spoiled to the
prejudice of respondents. Under cross-examination, complainants failed to
rebut the authenticity of respondents' witness testimony.
As regards the issue of harassments [sic], threats and interference with the
rights of employees to self-organization which is actually an ingredient of
unfair labor practice, complainants failed to specify what type of threats or
intimidation was committed and who committed the same. What are the
acts or utterances constitutive of harassments [sic] being complained of?
These are the specifics which should have been proven with definiteness
and clarity by complainants who chose to rely heavily on its position paper
through generalizations to prove their case.
Insofar as violation of [the] Memorandum of Agreement dated October 23,
1990 is concerned, both parties agreed that:
2 — That with regards [sic] to the NLRC Case No. RAB III-10-1817-90 pending
with the NLRC, parties jointly and mutually agreed that the issues thereof
shall be discussed by the parties and resolve[d] during the negotiation of the
CBA.
The aforequoted provision does not speak of [an] obligation on the part of
respondents but on a resolutory condition that may occur or may not
happen. This cannot be made the basis of an imposition of an obligation
over which the National Labor Relations Commission has exclusive
jurisdiction thereof.
Anent the charge that there was underpayment of wages, the evidence
points to the contrary. The enumeration of complainants' wages in their
consolidated Affidavits of merit and position paper which implies
underpayment has no leg to stand on in the light of the fact that
complainants' admission that they are piece workers or paid on
a pakiao [basis] i.e. a certain amount for every thousand pieces of cheese
curls or other products repacked. The only limitation for piece workers
or pakiao workers is that they should receive compensation no less than the
minimum wage for an eight (8) hour work [sic]. And compliance therewith
was satisfactorily explained by respondent Gonzalo Kehyeng in his testimony
(TSN, p. 12-30) during the July 31, 1991 hearing. On cross-examination,
complainants failed to rebut or deny Gonzalo Kehyeng's testimony that
complainants have been even receiving more than the minimum wage for
an average workers [sic]. Certainly, a lazy worker earns less than the
minimum wage but the same cannot be attributable to respondents but to
the lazy workers.
Finally, the claim for moral and exemplary damages has no leg to stand on
when no malice, bad faith or fraud was ever proven to have been
perpetuated by respondents.
WHEREFORE, premises considered, the complaint is hereby DISMISSED for
utter lack of merit. (Annex "I" of Petition). 4
On appeal, the NLRC, in its Resolution dated 29 March 1995, 5 affirmed in
toto the decision of Labor Arbiter Santos. In so doing, the NLRC sustained
the Labor Arbiter's findings that: (a) there was a dearth of evidence to prove
the existence of unfair labor practice and union busting on the part of
private respondents; (b) the agreement of 23 October 1990 could not be
made the basis of an obligation within the ambit of the NLRC's jurisdiction,
as the provisions thereof, particularly Section 2, spoke of a resolutory
condition which could or could not happen; (c) the claims for underpayment
of wages were without basis as complainants were
admittedly"pakiao" workers and paid on the basis of their output subject to
the lone limitation that the payment conformed to the minimum wage rate
for an eight-hour workday; and (d) petitioners were not underpaid.
Their motion for reconsideration having been denied by the NLRC in its
Resolution of 31 October 1995, 6petitioners filed the instant special civil
action for certiorari raising the following issues:
I
WHETHER OR NOT THE PUBLIC RESPONDENT NATIONAL LABOR RELATIONS
COMMISSION GRAVELY ABUSED ITS DISCRETION WHEN IT DISREGARDED OR
IGNORED NOT ONLY THE EVIDENCE FAVORABLE TO HEREIN PETITIONERS,
APPLICABLE JURISPRUDENCE BUT ALSO ITS OWN DECISIONS AND THAT OF
THIS HONORABLE HIGHEST TRIBUNAL WHICH [WAS] TANTAMOUNT NOT
ONLY TO THE DEPRIVATION OF PETITIONERS' RIGHT TO DUE PROCESS BUT
WOULD RESULT [IN] MANIFEST INJUSTICE.
II
WHETHER OR NOT THE PUBLIC RESPONDENT GRAVELY ABUSED ITS
DISCRETION WHEN IT DEPRIVED THE PETITIONERS OF THEIR
CONSTITUTIONAL RIGHT TO SELF-ORGANIZATION, SECURITY OF TENURE,
PROTECTION TO LABOR, JUST AND HUMANE CONDITIONS OF WORK AND
DUE PROCESS.
III
WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY EASED OUT [OF] OR
CONSTRUCTIVELY DISMISSED FROM THEIR ONLY MEANS OF LIVELIHOOD.
IV
WHETHER OR NOT PETITIONERS SHOULD BE REINSTATED FROM THE DATE
OF THEIR DISMISSAL UP TO THE TIME OF THEIR REINSTATEMENT, WITH
BACKWAGES, STATUTORY BENEFITS, DAMAGES AND ATTORNEY'S FEES. 7
We required respondents to file their respective Comments.
In their Manifestation and Comment, private respondents asserted that the
petition was filed out of time. As petitioners admitted in their Notice to File
Petition for Review on Certiorari that they received a copy of the resolution
(denying their motion for reconsideration) on 13 December 1995, they had
only until 29 December 1995 to file the petition. Having failed to do so, the
NLRC thus already entered judgment in private respondents' favor.
In their Reply, petitioners averred that Mr. Navarro, a non-lawyer who filed
the notice to file a petition for review on their behalf, mistook which
reglementary period to apply. Instead of using the "reasonable time"
criterion forcertiorari under Rule 65, he used the 15-day period for petitions
for review on certiorari under Rule 45. They hastened to add that such was a
mere technicality which should not bar their petition from being decided on
the merits in furtherance of substantial justice, especially considering that
respondents neither denied nor contradicted the facts and issues raised in
the petition.
In its Manifestation and Motion in Lieu of Comment, the Office of the
Solicitor General (OSG) sided with petitioners. It pointed out that the Labor
Arbiter, in finding that petitioners abandoned their jobs, relied solely on the
testimony of Security Guard Rolando Cairo that petitioners refused to work
on 21 January 1991, resulting in the spoilage of cheese curls ready for
repacking. However, the OSG argued, this refusal to report for work for a
single day did not constitute abandonment, which pertains to a clear,
deliberate and unjustified refusal to resume employment, and not mere
absence. In fact, the OSG stressed, two days after allegedly abandoning their
work, petitioners filed a complaint for, inter alia, illegal lockout or illegal
dismissal. Finally, the OSG questioned the lack of explanation on the part of
Labor Arbiter Santos as to why he abandoned his original decision to
reinstate petitioners.
In view of the stand of the OSG, we resolved to require the NLRC to file its
own Comment.
In its Comment, the NLRC invokes the general rule that factual findings of an
administrative agency bind a reviewing court and asserts that this case does
not fall under the exceptions. The NLRC further argues that grave abuse of
discretion may not be imputed to it, as it affirmed the factual findings and
legal conclusions of the Labor Arbiter only after carefully reviewing,
weighing and evaluating the evidence in support thereof, as well as the
pertinent provisions of law and jurisprudence.
In their Reply, petitioners claim that the decisions of the NLRC and the Labor
Arbiter were not supported by substantial evidence; that abandonment was
not proved; and that much credit was given to self-serving statements of
Gonzalo Kehyeng, owner of Empire Foods, as to payment of just wages.
On 7 July 1997, we gave due course to the petition and required the parties
to file their respective memoranda. However, only petitioners and private
respondents filed their memoranda, with the NLRC merely adopting its
Comment as its Memorandum.
We find for petitioners.
Invocation of the general rule that factual findings of the NLRC bind this
Court is unavailing under the circumstances. Initially, we are unable to
discern any compelling reason justifying the Labor Arbiter's volte facefrom
his 14 April 1992 decision reinstating petitioners to his diametrically
opposed 27 July 1994 decision, when in both instances, he had before him
substantially the same evidence. Neither do we find the 29 March 1995
NLRC resolution to have sufficiently discussed the facts so as to comply with
the standard of substantial evidence. For one thing, the NLRC confessed its
reluctance to inquire into the veracity of the Labor Arbiter's factual findings,
staunchly declaring that it was "not about to substitute [its] judgment on
matters that are within the province of the trier of facts." Yet, in the 21 July
1992 NLRC resolution, 8 it chastised the Labor Arbiter for his errors both in
judgment and procedure; for which reason it remanded the records of the
case to the Labor Arbiter for compliance with the pronouncements therein.
What cannot escape from our attention is that the Labor Arbiter did not
heed the observations and pronouncements of the NLRC in its resolution of
21 July 1992, neither did he understand the purpose of the remand of the
records to him. In said resolution, the NLRC summarized the grounds for the
appeal to be:
1. that there is a prima facie evidence of abuse of discretion and acts of
gross incompetence committed by the Labor Arbiter in rendering the
decision.
2. that the Labor Arbiter in rendering the decision committed serious errors
in the findings of facts.
After which, the NLRC observed and found:
Complainant alleged that the Labor Arbiter disregarded the testimonies of
the 99 complainants who submitted their Consolidated Affidavit of Merit
and Position Paper which was adopted as direct testimonies during the
hearing and cross-examined by respondents' counsel.
The Labor Arbiter, through his decision, noted that ". . . complainant did not
present any single witness while respondent presented four (4) witnesses in
the persons of Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng and Elvira
Bulagan . . ." (Records, p. 183), that ". . . complainant before the National
Labor Relations Commission must prove with definiteness and clarity the
offense charged. . . ." (Record, p. 183; that ". . . complainant failed to specify
under what provision of the Labor Code particularly Art. 248 did
respondents violate so as to constitute unfair labor practice . . ." (Record, p.
183); that "complainants failed to present any witness who may describe in
what manner respondents have committed unfair labor practice . . ."
(Record, p. 185); that ". . . complainant a [sic] LCP failed to present anyone
of the so called 99 complainants in order to testify who committed the
threats and intimidation . . ." (Record, p.185).
Upon review of the minutes of the proceedings on record, however, it
appears that complainant presented witnesses, namely BENIGNO NAVARRO,
JR. (28 February 1991, RECORD, p. 91; 8 March 1991, RECORD, p. 92), who
adopted its POSITION PAPER AND CONSOLIDATED AFFIDAVIT as Exhibit A
and the annexes thereto as Exhibit B, B-1 to B-9, inclusive. Minutes of the
proceedings on record show that complainant further presented other
witnesses, namely: ERLINDA BASILIO (13 March 1991, RECORD, p. 93;
LOURDES PANTILLO, MARIFE PINLAC, LENI GARCIA (16 April 1991, Record, p.
96, see back portion thereof; 2 May 1991, Record, p. 102; 16 May 1991,
Record, p. 103; 11 June 1991, Record, p. 105). Formal offer of Documentary
and Testimonial Evidence was made by the complainant on June 24, 1991
(Record, p.106-109).
The Labor Arbiter must have overlooked the testimonies of some of the
individual complainants which are now on record. Other individual
complainants should have been summoned with the end in view of receiving
their testimonies. The complainants should [have been] afforded the time
and opportunity to fully substantiate their claims against the respondents.
Judgment should [have been] rendered only based on the conflicting
positions of the parties. The Labor Arbiter is called upon to consider and
pass upon the issues of fact and law raised by the parties.
Toward this end, therefore, it is Our considered view the case should be
remanded to the Labor Arbiter of origin for further proceedings.
Further, We take note that the decision does not contain a dispositive
portion or fallo. Such being the case, it may be well said that the decision
does not resolve the issues at hand. On another plane, there is no portion of
the decision which could be carried out by way of execution.
It may be argued that the last paragraph of the decision may be categorized
as the dispositive portion thereof:
xxx xxx xxx
The undersigned Labor Arbiter is not oblivious [to] the fact that respondents
have violated a cardinal rule in every establishment that a payroll and other
papers evidencing hour[s] of work, payment, etc. shall always be maintained
and subjected to inspection and visitation by personnel of the Department
of Labor and Employment. As such penalty, respondents should not escape
liability for this technicality, hence, it is proper that all the individual
complainants except those who resigned and executed quitclaim[s] and
release[s] prior to the filing of this complaint should be reinstated to their
former position with the admonition to respondents that any harassment,
intimidation, coercion or any form of threat as a result of this immediately
executory reinstatement shall be dealt with accordingly.
SO ORDERED.
It is Our considered view that even assuming arguendo that the respondents
failed to maintain their payroll and other papers evidencing hours of work,
payment etc., such circumstance, standing alone, does not warrant the
directive to reinstate complainants to their former positions. It is [a] well
settled rule that there must be a finding of illegal dismissal before
reinstatement be mandated.
In this regard, the LABOR ARBITER is hereby directed to include in his
clarificatory decision, after receiving evidence, considering and resolving the
same, the requisite dispositive portion. 9
Apparently, the Labor Arbiter perceived that if not for petitioners, he would
not have fallen victim to this stinging rebuke at the hands of the NLRC. Thus
does it appear to us that the Labor Arbiter, in concluding in his 27 July 1994
Decision that petitioners abandoned their work, was moved by, at worst,
spite, or at best, lackadaisically glossed over petitioner's evidence. On this
score, we find the following observations of the OSG most persuasive:
In finding that petitioner employees abandoned their work, the Labor
Arbiter and the NLRC relied on the testimony of Security Guard Rolando
Cairo that on January 21, 1991, petitioners refused to work. As a result of
their failure to work, the cheese curls ready for repacking on said date were
spoiled.
The failure to work for one day, which resulted in the spoilage of cheese
curls does not amount to abandonment of work. In fact two (2) days after
the reported abandonment of work or on January 23, 1991, petitioners filed
a complaint for, among others, unfair labor practice, illegal lockout and/or
illegal dismissal. In several cases, this Honorable Court held that "one could
not possibly abandon his work and shortly thereafter vigorously pursue his
complaint for illegal dismissal (De Ysasi III v. NLRC, 231 SCRA 173; Ranara v.
NLRC, 212 SCRA 631; Dagupan Bus Co. v. NLRC, 191 SCRA 328; Atlas
Consolidated Mining and Development Corp. v. NLRC, 190 SCRA 505; Hua
Bee Shirt Factory v. NLRC, 186 SCRA 586; Mabaylan v. NLRC, 203 SCRA 570
and Flexo Manufacturing v. NLRC, 135 SCRA 145). In Atlas Consolidated,
supra, this Honorable Court explicitly stated:
It would be illogical for Caballo, to abandon his work and then immediately
file an action seeking for his reinstatement. We can not believe that Caballo,
who had worked for Atlas for two years and ten months, would simply walk
away from his job unmindful of the consequence of his act. i.e. the forfeiture
of his accrued employment benefits. In opting to finally to [sic] contest the
legality of his dismissal instead of just claiming his separation pay and other
benefits, which he actually did but which proved to be futile after all, ably
supports his sincere intention to return to work, thus negating Atlas' stand
that he had abandoned his job.
In De Ysasi III v. NLRC (supra), this Honorable Court stressed that it is the
clear, deliberate and unjustified refusal to resume employment and not
mere absence that constitutes abandonment. The absence of petitioner
employees for one day on January 21, 1991 as testified [to] by Security
Guard Orlando Cairo did not constitute abandonment.
In his first decision, Labor Arbiter Santos expressly directed the
reinstatement of the petitioner employees and admonished the private
respondents that "any harassment, intimidation, coercion or any form of
threat as a result of this immediately executory reinstatement shall be dealt
with accordingly.
In his second decision, Labor Arbiter Santos did not state why he was
abandoning his previous decision directing the reinstatement of petitioner
employees.
By directing in his first decision the reinstatement of petitioner employees,
the Labor Arbiter impliedly held that they did not abandon their work but
were not allowed to work without just cause.
That petitioner employees are "pakyao" or piece workers does not imply
that they are not regular employees entitled to reinstatement. Private
respondent Empire Food Products, Inc. is a food and fruit processing
company. In Tabas v. California Manufacturing Co., Inc. (169 SCRA 497), this
Honorable Court held that the work of merchandisers of processed food,
who coordinate with grocery stores and other outlets for the sale of the
processed food is necessary in the day-to-day operation[s] of the company.
With more reason, the work of processed food repackers is necessary in the
day-to-day operation[s] of respondent Empire Food Products. 10
It may likewise be stressed that the burden of proving the existence of just
cause for dismissing an employee, such as abandonment, rests on the
employer, 11 a burden private respondents failed to discharge.
Private respondents, moreover, in considering petitioners' employment to
have been terminated by abandonment, violated their rights to security of
tenure and constitutional right to due process in not even serving them with
a written notice of such termination. 12 Section 2, Rule XIV, Book V of the
Omnibus Rules Implementing the Labor Code provides:
Sec. 2. Notice of Dismissal — Any employer who seeks to dismiss a worker
shall furnish him a written notice stating the particular acts or omission
constituting the grounds for his dismissal. In cases of abandonment of work,
the notice shall be served at the worker's last known address.
Petitioners are therefore entitled to reinstatement with full back wages
pursuant to Article 279 of the Labor Code, as amended by R.A. No. 6715.
Nevertheless, the records disclose that taking into account the number of
employees involved, the length of time that has lapsed since their dismissal,
and the perceptible resentment and enmity between petitioners and private
respondents which necessarily strained their relationship, reinstatement
would be impractical and hardly promotive of the best interests of the
parties. In lieu of reinstatement then, separation pay at the rate of one
month for every year of service, with
a fraction of at least six (6) months of service considered as one (1) year, is in
order. 13
That being said, the amount of back wages to which each petitioner is
entitled, however, cannot be fully settled at this time. Petitioners, as piece-
rate workers having been paid by the piece, 14 there is need to determine
the varying degrees of production and days worked by each worker. Clearly,
this issue is best left to the National Labor Relations Commission.
As to the other benefits, namely, holiday pay, premium pay, 13th month pay
and service incentive leave which the labor arbiter failed to rule on but
which petitioners prayed for in their complaint, 15 we hold that petitioners
are so entitled to these benefits. Three (3) factors lead us to conclude that
petitioners, although piece-rate workers, were regular employees of private
respondents. First, as to the nature of petitioners' tasks, their job of
repacking snack food was necessary or desirable in the usual business of
private respondents, who were engaged in the manufacture and selling of
such food products; second, petitioners worked for private respondents
throughout the year, their employment not having been dependent on a
specific project or season; and third, the length of time 16that petitioners
worked for private respondents. Thus, while petitioners' mode of
compensation was on a "per piece basis," the status and nature of their
employment was that of regular employees.
The Rules Implementing the Labor Code exclude certain employees from
receiving benefits such as nighttime pay, holiday pay, service incentive
leave 17 and 13th month pay, 18 inter alia, "field personnel and other
employees whose time and performance is unsupervised by the employer,
including those who are engaged on task or contract basis, purely
commission basis, or those who are paid a fixed amount for performing
work irrespective of the time consumed in the performance thereof."
Plainly, petitioners as piece-rate workers do not fall within this group. As
mentioned earlier, not only did petitioners labor under the control of private
respondents as their employer, likewise did petitioners toil throughout the
year with the fulfillment of their quota as supposed basis for compensation.
Further, in Section 8 (b), Rule IV, Book III which we quote hereunder, piece
workers are specifically mentioned as being entitled to holiday pay.
Sec. 8. Holiday pay of certain employees. —
(b) Where a covered employee is paid by results or output, such as payment
on piece work, his holiday pay shall not be less than his average daily
earnings for the last seven (7) actual working days preceding the regular
holiday: Provided, however, that in no case shall the holiday pay be less than
the applicable statutory minimum wage rate.
In addition, the Revised Guidelines on the Implementation of the 13th
Month Pay Law, in view of the modifications to P.D. No. 851 19 by
Memorandum Order No. 28, clearly exclude the employer of piece rate
workers from those exempted from paying 13th month pay, to wit:
2. EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No. 851:
d. Employers of those who are paid on purely commission, boundary or task
basis, and those who are paid a fixed amount for performing specific work,
irrespective of the time consumed in the performance thereof, except where
the workers are paid on piece-rate basis in which case the employer shall
grant the required 13th month pay to such workers. (emphasis supplied)
The Revised Guidelines as well as the Rules and Regulations identify those
workers who fall under the piece-rate category as those who are paid a
standard amount for every piece or unit of work produced that is more or
less regularly replicated, without regard to the time spent in producing the
same. 20
As to overtime pay, the rules, however, are different. According to Sec. 2(e),
Rule I, Book III of the Implementing Rules, workers who are paid by results
including those who are paid on piece-work, takay, pakiao, or task basis, if
their output rates are in accordance with the standards prescribed under
Sec. 8, Rule VII, Book III, of these regulations, or where such rates have been
fixed by the Secretary of Labor in accordance with the aforesaid section, are
not entitled to receive overtime pay. Here, private respondents did not
allege adherence to the standards set forth in Sec. 8 nor with the rates
prescribed by the Secretary of Labor. As such, petitioners are beyond the
ambit of exempted persons and are therefore entitled to overtime pay. Once
more, the National Labor Relations Commission would be in a better
position to determine the exact amounts owed petitioners, if any.
As to the claim that private respondents violated petitioners' right to self-
organization, the evidence on record does not support this claim. Petitioners
relied almost entirely on documentary evidence which, per se, did not prove
any wrongdoing on private respondents' part. For example, petitioners
presented their complaint 21 to prove the violation of labor laws committed
by private respondents. The complaint, however, is merely "the pleading
alleging the plaintiff's cause or causes of action." 22 Its contents are merely
allegations, the verity of which shall have to be proved during the trial. They
likewise offered their Consolidated Affidavit of Merit and Position
Paper 23which, like the offer of their Complaint, was a tautological exercise,
and did not help nor prove their cause. In like manner, the petition for
certification election 24 and the subsequent order of certification 25 merely
proved that petitioners sought and acquired the status of bargaining agent
for all rank-and-file employees. Finally, the existence of the memorandum of
agreement 26 offered to substantiate private respondents' non-compliance
therewith, did not prove either compliance or non-compliance, absent
evidence of concrete, overt acts in contravention of the provisions of the
memorandum.
IN VIEW WHEREOF, the instant petition is hereby GRANTED. The Resolution
of the National Labor Relations Commission of 29 March 1995 and the
Decision of the Labor Arbiter of 27 July 1994 in NLRC Case No. RAB-III-01-
1964-91 are hereby SET ASIDE, and another is hereby rendered:
1. DECLARING petitioners to have been illegally dismissed by private
respondents, thus entitled to full back wages and other privileges, and
separation pay in lieu of reinstatement at the rate of one month's salary for
every year of service with a fraction of six months of service considered as
one year;
2. REMANDING the records of this case to the National Labor Relations
Commission for its determination of the back wages and other benefits and
separation pay, taking into account the foregoing observations; and
3. DIRECTING the National Labor Relations Commission to resolve the
referred issues within sixty (60) days from its receipt of a copy of this
decision and of the records of the case and to submit to this Court a report
of its compliance hereof within ten (10) days from the rendition of its
resolution.
Costs against private respondents.
SO ORDERED.
G.R. No. 85393 September 5, 1991
ALBA PATIO DE MAKATI, ANASTACIO ALBA and CLAUDIO
OLABARRIETA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ALBA PATIO DE MAKATI
EMPLOYEES ASSOCIATION, HERMOGENES CAGANO, LUCIO CAGANO,
RUPERTO CRUZ and BONIFACIO ACIADO respondents.
Justo & Magpale Law Offices for petitioners.
Felipe P. Fuentes, Jr. for private respondents.
PADILLA, J.:p
This is a petition for certiorari with prayer for the issuance of a writ of
preliminary injunction, seeking to set aside or modify the Order of the
respondent National Labor Relations Commission (NLRC), dated 6
September 1988, which set aside the order of the Labor Arbiter dated 31
October 1984. 1
On 5 December 1988, a temporary restraining order was issued by this Court
enjoining the respondents from enforcing the questioned NLRC Order until
further orders from the Court. 2
The antecedent facts of the case are as follows:
On 30 April 1973, the Court of Industrial Relations (CIR) rendered a decision
in Case No. 5478-ULP, entitled "Alba Patio de Makati Employees Association,
et al, complainants, vs. Alba Patio de Makati, et al., respondents," the
dispositive part of which reads as follows:
WHEREFORE, respondents are hereby declared guilty of unfair labor
practices as charged and are ordered to cease and desist from further
committing said acts, to reinstate the herein four (4) individual complainants
with full back wages and to pay them their respective shares in the service
charges for May 1 to 15, 1970 and for the rest of that month until their
forced resignation.
A motion for reconsideration of the said decision filed by respondents
(herein petitioners) was denied on 6 November 1973.
Petitioners then sought a review by this Court of the CIR's decision and
resolution. The case was docketed as "Alba Patio de Makati, Anastacio Alba
and Claudio Olabarrieta, petitioners, vs. Alba Patio de Makati Employees
Association, Hermogenes Cagano, Ruperto Cruz, Lucio Cagano, and Bonifacio
Aclado, respondents, G.R. No. L-37922." 3
On 16 March 1984, this Court rendered a decision in the above-mentioned
case, dismissing the petition for review and affirming the decision and
resolution of the CIR.
Thereafter, the National Labor Relations Commission (which had succeeded
the Court of Industrial Relations), through Labor Arbiter Antonio Tria Tirona
directed the Chief of the Research and Information Division of the NLRC to
have the award due the complainants computed. The pertinent part of the
"Report of Examiner" submitted stated that the total money value of the
backwages and service charges due herein private respondents amounts to
P196,270.84, and that the herein petitioners had not as of the date of the
report reinstated the private respondents.
With the submission of the Report of Examiner, private respondents moved
for the issuance of a writ of execution. Petitioners opposed the motion,
contending, among other things, that the computation of back wages should
be limited to three (3) years without qualification or deduction, in
accordance with the rulings of this Court on the matter, and that if
complainants would insist on payment based on the "Report of Examiner",
they should then render an accounting of their income realized elsewhere
from 1 May 1970 up to 15 August 1984.
The Report and the petitioners' opposition to the motions were set for
hearing on 29 October 1984. At the said hearing, Lucio Cagano, for himself
and as the alleged attorney-in-fact of the other complainants, filed a
document entitled "Satisfaction of Judgment, Release and Quit-claim" which
declares inter alia that complainants have received the sum of P54,000.00
from the Alba Patio de Makati, which amount corresponds to three (3) years
back wages, including attorney's fees, in full and complete satisfaction of the
judgment and releasing the petitioners from any further liability in
connection with their claims against petitioners. 4 Filed with the above-said
document were the respective special powers of attorney purportedly
executed by Bonifacio Aclado, Ruperto Cruz, and Esteban Cagano, father of
deceased Hermogenes Cagano, appointing Lucio Cagano as their attorney-
in-fact. 5Said documents were notarized by Atty. Eugenio Tumulak, counsel
for Lucio Cagano.
Acting on the foregoing documents, Labor Arbiter Tirona issued the order of
31 October 1984. the dispositive part of which reads:
Finding said "Satisfaction of Judgment, Release and Quit-claim" to be in
order and it appearing thereon that complainants have already received
P54,000.00 for and in consideration thereof, the instant case is hereby
considered CLOSED and TERMINATED. 6
On 10 December 1985, private co-respondent Bonifacio Aclado wrote his
counsel Atty. Felipe P. Fuentes, Jr., informing the latter that as of said date,
he had not been reinstated and paid his back wages by the petitioners. The
following day, or on 11 December 1985, Atty. Fuentes filed before the NLRC
a motion for the immediate execution of the CIR decision. Petitioners
opposed the motion, alleging that the case was already considered closed
and terminated as per order of 31 October 1.984 and that the said order
was issued pursuant to the "Satisfaction of Judgment, Release and Quit-
claim" which had been executed by Lucio Cagano as the attorney-in-fact of
complainant (private co-respondent) Bonifacio Aclado.
Thereafter, on 3 March 1986, other private co-respondent Ruperto Cruz filed
a similar motion for execution and to annul and set aside the order dated 31
October 1984, alleging that he had not executed any specific power of
attorney naming Lucio Cagano as his attorney-in-fact. 7 Petitioners filed an
Omnibus Motion 8 alleging, among other things, that the Labor Arbiter/
NLRC had already lost jurisdiction over the case by reason of the satisfaction
of the judgment and that any question as to the validity of the "Satisfaction
of Judgment, Release and Quit-claim" which is in the nature of a
compromise agreement must be brought before the regular courts.
On 6 September 1988, the NLRC promulgated the questioned Order,
annulling and setting aside the order of Labor Arbiter Antonio Tria Tirona
dated 31 October 1984 and directing the immediate enforcement of the
decision of the Court of Industrial Relations dated 30 April 1973 as affirmed
by this Court. It held:
Resolving this issue, we rule that the special power of attorney executed by
Esteban Cagano in behalf of his deceased son, Hermogenes Cagano, one of
the complainants in this case, who have (sic) children but still minors and
the mother of said children (alleged common law wife of the deceased), and
in favor of Lucio Cagano as attorney-in-fact is patently null and void since
Esteban Cagano had no legal authority to execute a special power of
attorney in behalf of a deceased person or represent the minor children of
the deceased complainant. If an agency is extinguished by death of the
principal, with more reason that an agency cannot be constituted for and in
behalf of a deceased person or the latter's minor children unless duly
authorized by the Court. A cursory reading of these (sic) special power of
attorney shows that the attorney-in-fact was practically granted blanket
authority to negotiate with respondent any amount of back wages due the
complainants. However, such back wages awarded to them and which the
attorney-in-fact is allowed to negotiate or receive in their behalf under the
special power of attorney is an 'amount (shall) be due in accordance with
law.'A fortiori, We should carefully scrutinize and determine in what manner
and to what extent was this express authority exercised and whether or not
the settlement arrived at by the complainants through their attorney-in-fact
and respondents is in accordance with the terms of the special power of
attorney and that the same is not contrary to law, morals, good customs,
public order, or public policy.
To Us, the settlement of the computed award of P196,270.84 for only a
minuscule sum of P54,000.00 is grossly disproportionate, unconscionable
and inequitable. We cannot therefore give imprimatur to such settlement,
release and quitclaim for being clearly contrary to the authority granted to
the attorney-in-fact and also violative of law and public policy. We cannot
allow this miscarriage of justice. Accordingly, the approval of the settlement
constitutes a reversible error. Labor justice may not be thwarted or
frustrated by strait-jacketed technicalities by denying this Commission its
jurisdiction to pass upon these issues. For Us to refer this matter to another
forum would necessarily make the complainants who are affected thereby
to undergo their calvary twice after so many long years of litigation.
Hence, the present petition for certiorari filed by petitioners with prayer for
the issuance of a writ of preliminary injunction.
The only issue to be resolved in this case is whether or not the NLRC still had
jurisdiction to issue the resolution or order of 6 September 1988, setting
aside the Labor Arbiter's order of 31 October 1984.
Petitioners claim that the jurisdiction of the National Labor Relations
Commission over the case had already been lost by virtue of the order dated
31 October 1984, wherein the Labor Arbiter declared the case closed and
terminated in view of the document filed by the private respondents
entitled "Satisfaction of Judgment, Release and Quit-claim"; that the
aforesaid document, petitioners allege, is in the nature of a compromise
agreement which has, upon the parties, the effect of res judicata; that the
allegations in the private respondents' subsequent motions set forth a cause
of action that does not involve a question arising out of employer employee
relations but the validity and enforceability of a compromise agreement
between petitioners and private respondents, for which reason, the matter
should properly be raised before the regular courts.
On the other hand, the Solicitor General maintains that petitioners, having
submitted themselves to the jurisdiction of the NLRC, should not be snowed,
for reasons of public policy, to repudiate the very same jurisdiction they had
invoked to seek affirmative relief, citing in support of his submission the case
of Tijam vs. Sibonghanoy, 23 SCRA 29.
In addition, private respondents insist that they had not executed any
special power of attorney in favor of their co-complainant Lucio Cagano; that
they have not received their backwages and have not been reinstated to
their former respective positions by petitioners pursuant to the CIR decision
as affirmed by this Court.
The petition is bereft of merit.
Time and again, this Court has set aside technicalities in the interest of
substantial justice. In the present case, the judgment of the Court of
Industrial Relations had long become final and executory. A final and
executory judgment can no longer be altered. As we held in a recent Finally, we agree with the Solicitor General, that having submitted
case, 9 "(t)he judgment may no longer be modified in any respect, even if the themselves to the jurisdiction of the NLRC, petitioners should not be
modification is meant to correct what is perceived to be an erroneous allowed to repudiate that same jurisdiction simply because they have failed
conclusion of fact or law, and regardless of whether the modification is to obtain a favorable decision.
attempted to be made by the court rendering it or by the highest court of
This case has been pending for almost eighteen (18) years since the order of
the land." Moreover, a final and executory judgment cannot be negotiated,
hence, any act to subvert it is contemptuous. 10 the CIR was rendered on 30 April 1973. The private respondents have
already suffered for a long time. To further prolong the proceedings in this
The NLRC was correct in setting aside the order of the Labor Arbiter dated case would be tantamount to a denial of justice to private respondents. It is
31 October 1984, as the same was void. It rendered the very decision of this about time that the decision of the Court of Industrial Relations of 30 April
Court meaningless, and showed disrespect for the administration of 1973, as affirmed by this Court, be fully and finally implemented.
justice. 11 This should not be sanctioned.
WHEREFORE, the petition is DISMISSED, and the temporary restraining order
It was incumbent upon the counsel for the complainant (now respondent) LIFTED. Costs against petitioners.
Lucio Cagano to have seen to it that the interest of an complainants (now
SO ORDERED.
private respondents) was protected. The quitclaim and release in the
preparation of which he assisted clearly worked to the grave disadvantage of
the complainants (private respondents). As we have stated earlier, to render
the decision of this Court meaningless by paying the backwages of the
affected employees in a much lesser amount clearly manifested a disregard
of the authority of this Court as the final arbiter of cases brought to it. 12

As for the Labor Arbiter, he should have consciensciously examined the

veracity and reliability of the quitclaim purportedly executed by the other
complainants (now respondents) through Lucio Cagano, especially so when
the counsel of record of private respondents Cruz and Aclado, Atty. Felipe
Fuentes, Jr., was not present when the document was filed. Moreover, he
should have been aware of this Court's standing rulings that quit-claims and
releases signed by employees are normally frowned upon as contrary to
public policy. His precipitate approval of the release and quitclaim resulted
in the reduction of the backwages to a much lesser amount due the private
respondents and in releasing petitioners from their obligation to reinstate
the complainants under a final judgment of this Court. This is indeed
lamentable.

G.R. No. 115077 April 18, 1997
PROGRESSIVE DEVELOPMENT CORPORATION-PIZZA HUT, petitioner,
vs.
HON. BIENVENIDO LAGUESMA, in his capacity as Undersecretary of Labor,
and NAGKAKAISANG LAKAS NG MANGGAGAWA (NLM)-
KATIPUNAN, respondents.
KAPUNAN, J.:
On July 9, 1993, Nagkakaisang Lakas ng Manggagawa (NLM)-Katipunan
(respondent Union) filed a petition for certification election with the
Department of Labor (National Capital Region) in behalf of the rank and file
employees of the Progressive Development Corporation (Pizza Hut)
docketed as NCR Case No. NCR-OD-M-9307-020. 1
Petitioner filed on August 20, 1993, a verified Motion to Dismiss the petition
alleging fraud, falsification and misrepresentation in the respondent. Union's
registration making it void and invalid. The motion specifically alleged that:
a) respondent Union's registration was tainted with false, forged, double or
multiple signatures of those who allegedly took part in the ratification of the
respondent Union's constitution and by-laws and in the election of its
officers that there were two sets of supposed attendees to the alleged
organizational meeting that was alleged to have taken place on June 26,
1993; that the alleged chapter is claimed to have been supported by 318
members when in fact the persons who actually signed their names were
much less; and b) while the application for registration of the charter was
supposed to have been approved in the organizational meeting held on June
27, 1993, the charter certification issued by the federation KATIPUNAN was
dated June 26, 1993 or one (1) day prior to the formation of the chapter,
thus, there were serious falsities in the dates of the issuance of the charter
certification and the organization meeting of the alleged chapter.
Citing other instances of misrepresentation and fraud, petitioner, on August
29, 1993, filed a Supplement to its Motion to Dismiss, 2 claiming that:
1) Respondent Union alleged that the election of its officers was held on
June 27, 1993; however, it appears from the documents submitted by
respondent union to the BIR-DOLE that the Union's constitution and by-laws
were adopted only on July 7, 1993, hence, there was no bases for the
supposed election of officers on June 27, 1993 because as of this date, there
existed no positions to which the officers could be validly elected;
2) Voting was not conducted by secret ballot in violation of Article 241,
section (c) of the Labor Code;
3) The Constitution and by Laws submitted in support of its petition were
not properly acknowledged and notarized. 3
On August 30, 1993, petitioner filed a Petition 4 seeking the cancellation of
the Union's registration on the grounds of fraud and falsification, docketed
as BIR Case No. 8-21-83. 5 Motion was likewise filed by petitioner with the
Med-Arbiter requesting suspension of proceedings in the certification
election case until after the prejudicial question of the Union's legal
personality is determined in the proceedings for cancellation of registration.
6
However, in an Order dated September 29, 1993, Med-Arbiter Rasidali C.
Abdullah directed the holding of a certification election among petitioner's
rank and file employees. The Order explained:
. . . Sumasaklaw sa Manggagawa ng Pizza Hut is a legitimate labor
organization in contemplation of law and shall remain as such until its very
charter certificate is canceled or otherwise revoked by competent authority.
The alleged misrepresentation, fraud and false statement in connection with
the issuance of the charter certificate are collateral issues which could be
properly ventilated in the cancellation proceedings. 7
On appeal to the office of the Secretary of Labor, Labor Undersecretary
Bienvenido E. Laguesma in a Resolution dated December 29, 1993 8 denied
the same.
A motion for reconsideration of the public respondent's resolution was
denied in his Order 9 dated January 27, 1994, hence, this special civil action
for certiorari under Rule 65 of the Revised Rules of Court where the
principal issue raised is whether or not the public respondent committed
grave abuse of discretion in affirming the Med-Arbiter's order to conduct a
certification election among petitioner's rank and file employees,
considering that: (1) respondent Union's legal personality was squarely put
in issue; (2) allegations of fraud and falsification, supported by documentary
evidence were made; and (3) a petition to cancel respondent Union's
registration is pending with the regional office of the Department of Labor
and Employment. 10
We grant the petition.
In the public respondent's assailed Resolution dated December 29, 1993,
the suggestion is made that once a labor organization has filed the
necessary documents and papers and the same have been certified under
oath and attested to, said organization necessarily becomes clothed with the
character of a legitimate labor organization. The resolution declares:
Records show that at the time of the filing of the subject petition on 9 July
1993 by the petitioner NLM-KATIPUNAN, for and in behalf of its local affiliate
Sumasaklaw sa Manggagawa ng Pizza Hut, the latter has been clothed with
the status and/or character of a legitimate labor organization. This is so,
because on 8 July 1993, petitioner submitted to the Bureau of Labor
Relations (BLR), this Department, the following documents: Charter
Certificate, Minutes of the Organizational Meeting, List of Officers, and their
respective addresses, financial statement, Constitution and By-Laws (CBL,
and the minutes of the ratification of the CBL). Said documents (except the
charter certificate) are certified under oath and attested to by the local
union's Secretary/Treasurer and President, respectively.
As to the contention that the certification election proceedings should be
suspended in view of the pending case for the cancellation of the
petitioner's certificate of registration, let it be stressed that the pendency of
a cancellation case is not a ground for the dismissal or suspension of a
representation proceedings considering that a registered labor organization
continues to be a legitimate one entitled to all the rights appurtenant
thereto until a final valid order is issued canceling such registration. 11
In essence, therefore, the real controversy in this case centers on the
question of whether or not, after the necessary papers and documents have
been filed by a labor organization, recognition by the Bureau of Labor
Relations merely becomes a ministerial function.
We do not agree.
In the first place, the public respondent's views as expressed in his
December 29, 1993 Resolution miss the entire point behind the nature and
purpose of proceedings leading to the recognition of unions as legitimate
labor organizations. Article 234 of the Labor Code provides:
Art. 234. Requirements of registration. — Any applicant labor organization,
association or group of unions or workers shall acquire legal personality and
shall be entitled to the rights and privileges granted by law to legitimate
labor organizations upon issuance of the certificate of registration based on
the following requirements:
(a) Fifty pesos (P50.00) registration fee;
(b) The names of its officers, their addresses, the principal address of the
labor organization, the minutes of the organizational meetings and the list of
the workers who participated in such meetings;
(c) The names of all its members comprising at least twenty percent (20%) of
all the employees in the bargaining unit where it seeks to operate;
(d) If the applicant union has been in existence for one or more years, copies
of its annual financial reports; and
(e) Four (4) copies of the constitution and by-laws of the applicant union,
minutes of its adoption or ratification, and the list of the members who
participated in it.
A more than cursory reading of the aforecited provisions clearly indicates
that the requirements embodied therein are intended as preventive
measures against the commission of fraud. After a labor organization has
filed the necessary papers and documents for registration, it becomes
mandatory for the Bureau of Labor Relations to check if the requirements
under Article 234 have been sedulously complied with. If its application for
registration is vitiated by falsification and serious irregularities, especially
those appearing on the face of the application and the supporting
documents, a labor organization should be denied recognition as a
legitimate labor organization. And if a certificate of recognition has been
issued, the propriety of the labor organization's registration could be
assailed directly through cancellation of registration proceedings in
accordance with Articles 238 and 239 of the Labor Code, or indirectly, by
challenging its petition for the issuance of an order for certification election.
These measures are necessary — and may be undertaken simultaneously —
if the spirit behind the Labor Code's requirements for registration are to be
given flesh and blood. Registration requirements specifically afford a
measure of protection to unsuspecting employees who may be lured into
joining unscrupulous or fly-by-night unions whose sole purpose is to control
union funds or use the labor organization for illegitimate ends. 12 Such
requirements are a valid exercise of the police power, because the activities
in which labor organizations, associations and unions of workers are
engaged directly affect the public interest and should be protected. 13
Thus, in Progressive Development Corporation vs. Secretary of Labor and
Employment, 14 we held:
The controversy in this case centers on the requirements before a local or
chapter of a federation may file a petition for certification election and be
certified as the sole and exclusive bargaining agent of the petitioner's
employees.
xxx xxx xxx
But while Article 257 cited by the Solicitor General directs the automatic
conduct of a certification election in an unorganized establishment, it also
requires that the petition for certification election must be filed by a
legitimate labor organization . . .
xxx xxx xxx
. . . The employer naturally needs assurance that the union it is dealing with
is a bona-fide organization, one which has not submitted false statements or
misrepresentations to the Bureau. The inclusion of the certification and
attestation requirements will in a marked degree allay these apprehensions
of management. Not only is the issuance of any false statement and
misrepresentation or ground for cancellation of registration (see Article 239
(a), (c) and (d)); it is also a ground for a criminal charge of perjury.
The certification and attestation requirements are preventive measures
against the commission of fraud. They likewise afford a measure of
protection to unsuspecting employees who may be lured into joining
unscrupulous or fly-by-night unions whose sole purpose is to control union
funds or to use the union for dubious ends.
xxx xxx xxx
. . . It is not this Court's function to augment the requirements prescribed by
law in order to make them wiser or to allow greater protection to the
workers and even their employer. Our only recourse is, as earlier discussed,
to exact strict compliance with what the law provides as requisites for local
or chapter formation.
xxx xxx xxx
The Court's conclusion should not be misconstrued as impairing the local
union's right to be certified as the employees' bargaining agent in the
petitioner's establishment. We are merely saying that the local union must
first comply with the statutory requirements in order to exercise this right.
Big federations and national unions of workers should take the lead in
requiring their locals and chapters to faithfully comply with the law and the
rules instead of merely snapping union after union into their folds in a
furious bid with rival federations to get the most number of members
Furthermore, the Labor Code itself grants the Bureau of Labor Relations a
period of thirty (30) days within which to review all applications for
registration. Article 235 provides:
Art. 235. Action on application. — The Bureau shall act on all applications for
registration within thirty (30) days from filing.
All requisite documents and papers shall be certified under oath by the
secretary or the treasurer of the organization, as the case may be, and
attested to by its president.
The thirty-day period in the aforecited provision ensures that any action
taken by the Bureau of Labor Relations is made in consonance with the
mandate of the Labor Code, which, it bears emphasis, specifically requires
that the basis for the issuance of a certificate of registration should be
compliance with the requirements for recognition under Article 234. Since,
obviously, recognition of a labor union or labor organization is not merely a
ministerial function, the question now arises as to whether or not the public
respondent committed grave abuse of discretion in affirming the Med-
Arbiter's order in spite of the fact that the question of the Union's legitimacy
was squarely put in issue and that the allegations of fraud and falsification
were adequately supported by documentary evidence.
The Labor Code requires that in organized and
15
unorganized establishments, a petition for certification electionmust be
filed by a legitimate labor organization. The acquisition of rights by any
union or labor organization, particularly the right to file a petition for
certification election, first and foremost, depends on whether or not the
labor organization has attained the status of a legitimate labor organization.
In the case before us, the Med-Arbiter summarily disregarded the
petitioner's prayer that the former look into the legitimacy of the
respondent. Union by a sweeping declaration that the union was in the
possession of a charter certificate so that "for all intents and purposes,
Sumasaklaw sa Manggagawa sa Pizza Hut (was) a legitimate labor
organization." 16 Glossing over the transcendental issue of fraud and
misrepresentation raised by herein petitioner, Med-Arbiter Rasidali Abdullah
held that:
The alleged misrepresentation, fraud and false statement in connection with
the issuance of the charter certificate are collateral issues which could be
ventilated in the cancellation proceedings. 17
It cannot be denied that the grounds invoked by petitioner for the
cancellation of respondent Union's registration fall under paragraph (a) and
(c) of Article 239 of the Labor Code, to wit:
(a) Misrepresentation, false statement or fraud in connection with the
adoption or ratification of the constitution and by-laws or amendments
thereto, the minutes of ratification, the list of members who took part in the
ratification of the constitution and by-laws or amendments thereto, the
minutes of ratification, the list of members who took part in the ratification;
xxx xxx xxx
(c) Misrepresentation, false statements or fraud in connection with the
election of officers, minutes of the election of officers, the list of voters, or
failure to submit these documents together with the list of the newly
elected-appointed officers and their postal addresses within thirty (30) days
from election.
xxx xxx xxx
The grounds ventilated in cancellation proceedings in accordance with
Article 239 of the Labor Code constitute a grave challenge to the right of
respondent Union to ask for certification election. The Med-Arbiter should
have looked into the merits of the petition for cancellation before issuing an
order calling for certification election. Registration based on false and
fraudulent statements and documents confer no legitimacy upon a labor
organization irregularly recognized, which, at best, holds on to a mere scrap
of paper. Under such circumstances, the labor organization, not being a
legitimate labor organization, acquires no rights, particularly the right to ask
for certification election in a bargaining unit.
As we laid emphasis in Progressive Development Corporation Labor, 18 "[t]he
employer needs the assurance that the union it is dealing with is a bona fide
organization, one which has not submitted false statements or
misrepresentations to the Bureau." Clearly, fraud, falsification and
misrepresentation in obtaining recognition as a legitimate labor organization
are contrary to the Med-Arbiter's conclusion not merely collateral issues.
The invalidity of respondent Union's registration would negate its legal
personality to participate in certification election.
Once a labor organization attains the status of a legitimate labor
organization it begins to possess all of the rights and privileges granted by
law to such organizations. As such rights and privileges ultimately affect
areas which are constitutionally protected, the activities in which labor
organizations, associations and unions are engaged directly affect the public
interest and should be zealously protected. A strict enforcement of the
Labor Code's requirements for the acquisition of the status of a legitimate
labor organization is in order.
Inasmuch as the legal personality of respondent Union had been seriously
challenged, it would have been more prudent for the Med-Arbiter and
public respondent to have granted petitioner's request for the suspension of
proceedings in the certification election case, until the issue of the legality of
the Union's registration shall have been resolved. Failure of the Med-Arbiter
and public respondent to heed the request constituted a grave abuse of
discretion.
WHEREFORE, PREMISES CONSIDERED, the instant petition is GRANTED and
the Resolution and Order of the public respondent dated December 29,
1993 and January 24, 1994, respectively, are hereby SET ASIDE.
The case is REMANDED to the Med-Arbiter to resolve with reasonable
dispatch petitioner's petition for cancellation of respondent Union's
registration.
SO ORDERED.

G.R. No. 76427 February 21, 1989
JOHNSON AND JOHNSON LABOR UNION-FFW, DANTE JOHNSON
MORANTE, MYRNA OLOVEJA AND ITS OTHER INDIVIDUAL UNION
MEMBERS, petitioners
vs.
DIRECTOR OF LABOR RELATIONS, AND OSCAR PILI, respondents.
Rogelio R. Udarbe for petitioners.
The Solicitor General for public respondent.
Manuel V. Nepomuceno for private respondent.
GUTIERREZ, JR., J.:
The sole issue in this petition for review on certiorari is whether or not the
public respondent committed grave abuse of discretion in ruling that the
private respondent is entitled to the financial aid from the compulsory
contributions of the petitioner-union afforded to its members who have
been suspended or terminated from work without reasonable cause.
The provision for the grant of financial aid in favor of a union member is
embodied in the petitioner-union's Constitution and By-laws, Article XIII,
Section 5, of which reads:
A member who have (sic) been suspended or terminated without
reasonable cause shall be extended a financial aid from the compulsory
contributions in the amount of SEVENTY FIVE CENTAVOS (P0. 75) from each
member weekly. (p. 18, Rollo)
On May 6, 1985, the private respondent, a member of the petitioner-union
was dismissed from his employment by employer Johnson & Johnson (Phil.)
Inc., for non-disclosure in his job application form of the fact that he had a
relative in the company in violation of company policies.
On July 1985, a complaint was filed by the private respondent against the
officers of the petitioner-union docketed as NRC- LRD-M-7-271-85 alleging,
among others, that the union officers had refused to provide the private
respondent the financial aid as provided in the union constitution despite
demands for payment thereof The petitioner-union and its officers counter-
alleged, in their answer, that the said financial aid was to be given only in
cases of termination or suspension without any reasonable cause; that the
union's executive board had the prerogative to determine whether the
suspension or termination was for a reasonable cause or not; and that the
union, in a general membership meeting, had resolved not to extend
financial aid to the private respondent.
While the grievance procedure as contained in the union's collective
bargaining agreement was being undertaken, the private respondent, on
August 26, 1985, filed a case for unfair labor practice and illegal dismissal
against his employer docketed as NLRC-NCR Case No. 6-1912-85.
On September 27, 1985, Med-Arbiter Anastacio L. Bactin issued an order
dismissing for lack of merit the complaint of the private respondent against
the petitioners for alleged violation of the union constitution and by-laws.
On appeal, the then public respondent Director Cresenciano B. Trajano, on
April 17, 1986, rendered the decision assailed in this petition. The
dispositive portion of the said decision reads:
WHEREFORE, premises considered, the appeal of complainant Oscar Pili is
hereby granted and the Order appealed from is hereby set aside. Appellees,
therefore, are hereby ordered to pay the complainant the sum of
P0.75/week per union member to be computed from the time of the
complainant's termination from employment to the time he acquired
another employment should his complaint for illegal dismissal against the
company be resolved in his favor; provided, that if his complaint against the
company be dismissed, appellees are absolved from paying the complainant
anything. (p. 115, Records)
Both parties moved for reconsideration. The petitioners reiterated that since
the private respondent's termination was for a reasonable cause, it would
be unjust and unfair if financial aid were to be given in the event that the
latter's case for illegal dismissal is decided against him. The private
respondent, on the other hand, prayed for the amendment of the
dispositive portion in order that the grant of financial aid be made without
any qualifications.
On June 16, 1986, a Manifestation and/or Opposition to the Motion for
Reconsideration filed by the petitioners was filed by the private respondent
stating that he was being discriminated against considering that one Jerwin
Taguba, another union member, was terminated for dishonesty and loss of
confidence but was granted financial aid by the petitioners while Taguba's
complaint against the company was still pending with the National Labor
Relation Commission.
The public respondent separately resolved the above motions. On June 26,
1986, an order was issued denying the petitioners' motion for
reconsideration. On August 19, 1986, the public respondent modified its
decision dated April 17, 1986 and its aforestated order as follows:
Considering that complainant Pili is similarly situated as Jerwin Taguba
coupled with the need to obviate any discriminating treatment to the
former, it is only just and appropriate that our Decision dated 17 April 1986
be modified in such a manner that respondents immediately pay the
complainant the sum of P0.75/ week per union member to be computed
from the time of his dismissal from the company, without prejudice to
refund of the amount that shall be paid to Pili in the event the pending case
is finally resolved against him.
WHEREFORE, and as above qualified, this Bureau's Decision dated 17 April
1986 and the Order dated 26 June 1986 are hereby modified to the extent
that the respondents are directed to immediately pay complainant the sum
of P0.75/week per union member to be computed from the time of his
termination from his employment until his case against the employer
company shall have been finally resolved and/or disposed. (p. 53, Rollo)
Meanwhile, on July 25, 1986, a motion for issuance of a writ of execution
was filed by the private respondent in order to collect from the petitioners
the amount of financial aid to which the former was entitled.
On September 1, 1986, the petitioners moved for a reconsideration of the
public respondent's resolution dated August 19, 1986 on the grounds that
Taguba's affidavit cannot support the private respondent's claim that he is
also entitled to the financial aid provided in the union's constitution and
that the union cannot be compelled to grant the said aid in the absence of a
special fund for the purpose.
On October 28, 1986, the public respondent through Director Pura Ferrer-
Calleja denied the petitioners' motion for reconsideration stating that Article
XIII, Section 5 of the union's constitution and by-laws does not require a
special fund so that all union members similarly situated as the private
respondent must be entitled to the same right and privilege regarding the
grant of financial aid as therein provided.
On December 18, 1986, a writ of execution was issued by the public
respondent in the following tenor:
NOW THEREFORE, you are hereby directed to proceed to the premises of
Johnson and Johnson (FFW) located at Edison Road, Bo. Ibayo, Paranaque,
Metro Manila to collect from the said union through its Treasurer, Myrna
Oloveja or to any responsible officer of the union the amount of Twenty
Thousand Five Hundred Twenty Pesos (P20,520.00), more or less
representing financial assistance to complainant under the union's
constitution and by-laws. In case you fail to collect said amount in cash, you
are to cause the satisfaction of the same on the union's movable or
immovable properties not exempt from execution. You are to return this
writ within fifteen (15) days from your compliance hereby together with
your report thereon. You may collect your legal fees from the respondent
union. (p. 55, Rollo)
On December 24, 1986, the instant petition was filed with prayer for a
preliminary injunction. The temporary restraining order issued by the Chief
Justice on December 24, 1986 was confirmed in our resolution dated
January 7, 1987.
The grounds relied upon by the petitioners are as follows:
A. THAT THE DECISION/ORDER IN QUESTION IS CONTRARY TO LAW.
B. THAT RESPONDENT OFFICIAL ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION.
C. THAT WITH RESPECT TO PETITIONING MEMBERS, THEY HAVE BEEN
DEPRIVED OF THEIR CONSTITUTIONAL RIGHT TO DUE PROCESS OF LAW. (P.
13, Rollo)
We find unmeritorious the contention of the petitioners that the questioned
decision and order are contrary to law for being tantamount to compelling
the union to disburse it funds without the authority of the general
membership and to collect from its members without the benefit of
individual payroll authorization.
Section 5, Article XIII of the petitioner-union's constitution and by-laws
earlier aforequoted is self-executory. The financial aid extended to any
suspended or terminated union member is realized from the contributions
declared to be compulsory under the said provision in the amount of
seventy-five centavos due weekly from each union member. The nature of
the said contributions being compulsory and the fact that the purpose as
stated is for financial aid clearly indicate that individual payroll
authorizations of the union members are not necessary. The petitioner-
union's constitution and by-laws govern the relationship between and
among its members. As in the interpretation of contracts, if the terms are
clear and leave no doubt as to the intention of the parties, the literal
meaning of the stipulations shall control. (See Government Service
Insurance System v. Court of Appeals, 145 SCRA 311 [1986]). Section 5,
Article XIII of the said constitution and by-laws is in line with the petitioner-
union's aims and purposes which under Sec. 2, Article II include
To promote, establish and devise schemes of mutual assistance among the
members in labor disputes.
Thus, there is no doubt that the petitioner-union can be ordered to release
its funds intended for the promotion of mutual assistance in favor of the
private respondent.
We likewise find untenable the argument of the petitioners that the public
respondent, in granting financial aid to the private respondent, in effect,
substituted the decision of the petitioner-union to do otherwise and that in
so doing, the public respondent gravely abused its discretion amounting to
lack of jurisdiction. The union constitution is a covenant between the union
and its members and among the members. There is nothing in their
constitution which leaves the legal interpretation of its terms unilaterally to
the union or its officers or even the general membership. It is noteworthy to members form the membership. If there is any violation of the right to due
quote the ruling made by the public respondent in this respect, to wit: process in the case at bar it is as regards the private respondent since the
petitioners-union has dispensed with due process in deciding not to extend
The union constitution and by-laws clearly show that any member who is financial aid to the private respondent in the absence yet of a ruling by the
suspended or terminated from employment without reasonable cause is labor arbiter on whether his dismissal was for a reasonable cause or not.
entitled to financial assistance from the union and its members. The
problem, however, is that the constitution does not indicate which body has The remedy of the petitioners is to strike out or amend the objectionable
the power to determine whether a suspension or dismissal is for reasonable features of their constitution. They cannot expect the public respondent to
cause or not. To our mind, the constitution's silence on this matter is a clear assist them in its non- enforcement or violation.
recognition of the labor arbiter's exclusive jurisdiction over dismissal cases.
WHEREFORE, PREMISES CONSIDERED, the instant petition is hereby
After all, the union's constitution and by-laws is valid only insofar as it is not
inconsistent with existing laws. ... . (BLR decision, p. 2; p. 115, Records) DISMISSED in the absence of a showing of grave abuse of discretion on the
part of the public respondent. The decision of the public respondent dated
An aggrieved member has to resort to a government agency or tribunal. April 17, 1986 as modified in a resolution dated August 17, 1986 is
Considering that quasi-judicial agencies like the public respondent's office AFFIRMED. The temporary restraining order issued by the Court on
have acquired expertise since their jurisdiction is confined to specific matter, December 24,1986 is SET ASIDE.
their findings of fact in connection with their rulings are generally accorded
SO ORDERED.
not only respect but at times even finality if supported by substantial
evidence. (See Manila Mandarin Employees Union v. National Labor
Relations Commission, 154 SCRA 368 [1987]) Riker v. Ople, 155 SCRA 85
[1987]; and Palencia v. National Labor Relations Commission, 153 SCRA 247
[1987]. We note from the records that the petitioners have conflicting
interpretations of the same disputed provision one in favor of Jerwin Taguba
and another against the private respondent.

On the ancillary issue presented by the petitioners whether or not the

petitioning union members have been deprived of their right to due process
of law because they were never made parties to the case under
consideration, we rule that the fact that the union officers impleaded since
the inception of the case acted in a representative capacity on behalf of the
entire union's membership substantially meets the requirements of due
process with respect to the said union members. Moreover, the complaint
filed against the union involves the interpretation of its constitution favoring
an aggrieved member. The members are bound by the terms of their own
constitution. A suit to enforce a union constitution does not have to be
brought against each individual member, especially where several thousand

G.R. No. L-43495-99 January 20, 1990
TROPICAL HUT EMPLOYEES' UNION-CGW, JOSE ENCINAS, JOSE LUIS
TRIBINO, FELIPE DURAN, MANUEL MANGYAO, MAMERTO CAHUCOM,
NEMESIO BARRO, TEODULFO CAPAGNGAN, VICTORINO ABORRO, VIDAL
MANTOS, DALMACIO DALDE, LUCIO PIASAN, CANUTO LABADAN, TERESO
ROMERDE, CONRADO ENGALAN, SALVADOR NERVA, BERNARDO
ENGALAN, BONIFACIO CAGATIN, BENEDICTO VALDEZ, EUSEBIO SUPILANAS,
ALFREDO HAMAYAN, ASUERO BONITO, GAVINO DEL CAMPO, ZACARIAS
DAMING, PRUDENCIO LADION, FULGENCIO BERSALUNA, ALBERTO
PERALES, ROMEO MAGRAMO, GODOFREDO CAMINOS, GILDARDO
DUMAS, JORGE SALDIVAR, GENARO MADRIO, SEGUNDINO KUIZON, LUIS
SANDOVAL, NESTOR JAPAY, ROGELIO CUIZON, RENATO ANTIPADO,
GREGORIO CUEVO, MARTIN BALAZUELA, CONSTANCIO CHU, CRISPIN
TUBLE, FLORENCIO CHIU, FABIAN CAHUCOM, EMILIANO VILLAMOR,
RESTITUTO HANDAYAN, VICTORINO ESPEDILLA, NOEL CHUA, ARMANDO
ALCORANO, ELEUTERIO TAGUIK, SAMSON CRUDA, DANILO CASTRO,
CENON VALLENAS, DANILO CAWALING, SIMPLICIO GALLEROS, PERFECTO
CUIZON, PROCESO LAUROS, ANICETO BAYLON, EDISON ANDRES,
REYNALDO BAGOHIN, IRENEO SUPANGAN, RODRIGO CAGATIN, TEODORO
ORENCIO, ARMANDO LUAYON, JAIME NERVA, NARCISO CUIZON, ALFREDO
DEL ROSARIO, EDUARDO LORENZO, PEDRO ARANGO, VICENTE SUPANGAN,
JACINTO BANAL AND BONIFACIO PUERTO, petitioners,
vs.
TROPICAL HUT FOOD MARKET, INC., ESTELITA J. QUE, ARTURO DILAG,
MARCELINO LONTOK JR., NATIONAL ASSOCIATION OF TRADE UNIONS
(NATU), NATIONAL LABOR RELATIONS COMMISSION (NLRC), HON. DIEGO
P. ATIENZA, GERONIMO Q. QUADRA, FEDERICO C. BORROMEO, AND HON.
BLAS F. OPLE,respondents.
Pacifico C. Rosal for petitioners.
Marcelino Lontok, Jr. for private respondents.
Dizon, Vitug & Fajardo Law Office for Tropical Hut Food Market, Inc. and
Que.
MEDIALDEA, J.:
This is a petition for certiorari under Rule 65 seeking to set aside the
decisions of the public respondents Secretary of Labor and National Labor
Relations Commission which reversed the Arbitrators rulings in favor of
petitioners herein.
The following factual background of this case appears from the record:
On January 2, 1968, the rank and file workers of the Tropical Hut Food
Market Incorporated, referred to herein as respondent company, organized
a local union called the Tropical Hut Employees Union, known for short as
the THEU, elected their officers, adopted their constitution and by-laws and
immediately sought affiliation with the National Association of Trade Unions
(NATU). On January 3, 1968, the NATU accepted the THEU application for
affiliation. Following such affiliation with NATU, Registration Certificate No.
5544-IP was issued by the Department of Labor in the name of the Tropical
Hut Employees Union — NATU. It appears, however, that NATU itself as a
labor federation, was not registered with the Department of Labor.
Coverage and Effectivity
Sec. 1. The COMPANY recognizes the UNION as the sole and exclusive
collective bargaining agent for all its workers and employees in all matters
concerning wages, hours of work, and other terms and conditions of
employment.

After several negotiations were conducted between THEU-NATU, xxx xxx xxx
represented by its local president and the national officers of the NATU, Article III
particularly Ignacio Lacsina, President, Pacifico Rosal, Executive Vice-
President and Marcelino Lontok, Jr., Vice President, and respondent Tropical Union Membership and Union Check-off
Hut Food Market, Incorporated, thru its President and General Manager,
Sec. 1 —. . . Employees who are already members of the UNION at the time
Cesar Azcona, Sr., a Collective Bargaining Agreement was concluded
of the signing of this Agreement or who become so thereafter shall be
between the parties on April 1, 1968, the term of which expired on March
required to maintain their membership therein as a condition of continued
31, 1971. Said agreement' contained these clear and unequivocal terms:
employment.
This Agreement made and entered into this __________ day of
xxx xxx xxx
___________, 1968, by and between:
Sec. 3—Any employee who is expelled from the UNION for joining another
The Tropical Hut Food Market, Inc., a corporation duly organized and existing
federation or forming another union, or who fails or refuses to maintain his
under and by virtue of the laws of the Republic of the Philippines, with
membership therein as required, . . . shall, upon written request of the
principal office at Quezon City, represented in this Act by its President, Cesar
UNION be discharged by the COMPANY. (Rollo, pp. 667-670)
B. Azcona (hereinafter referred to as the Company)
And attached to the Agreement as Appendix "A" is a check-off Authorization
—and—
Form, the terms of which are as follows:
The Tropical Hut Employees Union — NATU, a legitimate labor organization
We, the undersigned, hereby designate the NATIONAL Association of Trade
duly organized and existing in accordance with the laws of the Republic of
Unions, of which the TROPICAL HUT EMPLOYEES UNION is an affiliate as sole
the Philippines, and affiliated with the National Association of Trade Unions,
collective bargaining agent in all matters relating to salary rates, hours of
with offices at San Luis Terraces, Ermita, Manila, and represented in this Act
work and other terms and conditions of employment in the Tropical Hut
by its undersigned officers (hereinafter referred to as the UNION)
Food Market, Inc. and we hereby authorize the said company to deduct the
Witnesseth: amount of Four (P 4.00) Pesos each every month as our monthly dues and to
deliver the amount to the Treasurer of the Union or his duly authorized
xxx xxx xxx representatives. (Rollo, pp. 680-684)
Article I
On May 21, 1971, respondent company and THEU-NATU entered into a new
Collective Bargaining Agreement which ended on March 31, 1974. This new
CBA incorporated the previous union-shop security clause and the attached
check-off authorization form.
Sometime in July, 1973, Arturo Dilag, incumbent President of THEU-NATU,
was appointed by the respondent company as Assistant Unit Manager. On
July 24, 1973, he wrote the general membership of his union that for reason
of his present position, he was resigning as President of the THEU-NATU
effective that date. As a consequence thereof, his Vice-President, Jose
Encinas, assumed and discharged the duties of the presidency of the THEU-
NATU.
On December 19,1973, NATU received a letter dated December 15, 1973,
jointly signed by the incumbent officers of the local union informing the
NATU that THEU was disaffiliating from the NATU federation. On December
20, 1973, the Secretary of the THEU, Nemesio Barro, made an
announcement in an open letter to the general membership of the THEU,
concerning the latter's disaffiliation from the NATU and its affiliation with
the Confederation of General Workers (CGW). The letter was passed around
among the members of the THEU-NATU, to which around one hundred and
thirty-seven (137) signatures appeared as having given their consent to and
acknowledgment of the decision to disaffiliate the THEU from the NATU.
On January 1, 1974, the general membership of the so-called THEU-CGW
held its annual election of officers, with Jose Encinas elected as President.
On January 3, 1974, Encinas, in his capacity as THEU-CGW President,
informed the respondent company of the result of the elections. On January
9, 1974, Pacifico Rosal, President of the Confederation of General Workers
(CGW), wrote a letter in behalf of complainant THEU-CGW to the
respondent company demanding the remittance of the union dues collected
by the Tropical Hut Food Mart, Incorporated to the THEU-CGW, but this was
refused by the respondent company.
On January 11, 1974, the NATU thru its Vice-President Marcelino Lontok, Jr.,
wrote Vidal Mantos, requiring the latter to assume immediately the position
of President of the THEU-NATU in place of Jose Encinas, but the position was
declined by Mantos. On the same day, Lontok, Jr., informed Encinas in a
letter, concerning the request made by the NATU federation to the
respondent company to dismiss him (Encinas) in view of his violation of
Section 3 of Article III of the Collective Bargaining Agreement. Encinas was
also advised in the letter that NATU was returning the letter of disaffiliation
on the ground that:
1. Under the restructuring program NOT of the Bureau of Labor but of the
Philippine National Trade Union Center in conjunction with the NATU and
other established national labor centers, retail clerks and employees such as
our members in the Tropical Hut pertain to Industry II which by consensus,
has been assigned already to the jurisdiction of the NATU;
2. The right to disaffiliate belongs to the union membership who — on the
basis of verified reports received by — have not even been consulted by you
regarding the matter;
3. Assuming that the disaffiliation decision was properly reached; your letter
nevertheless is unacceptable in view of Article V, Section 1, of the NATU
Constitution which provides that "withdrawal from the organization shall he
valid provided three (3) months notice of intention to withdraw is served
upon the National Executive Council." (p. 281, Rollo)
In view of NATU's request, the respondent company, on the same day, which
was January 11, 1974, suspended Encinas pending the application for
clearance with the Department of Labor to dismiss him. On January 12,
1974, members of the THEU-CGW passed a resolution protesting the
suspension of Encinas and reiterated their ratification and approval of their
union's disaffiliation from NATU and their affiliation with the Confederation
of General Workers (CGW). It was Encinas' suspension that caused the filing
of NLRC Case No. LR-2511 on January 11, 1974 against private respondents
herein, charging them of unfair labor practice.
On January 15,1974, upon the request of NATU, respondent company
applied for clearance with the Secretary of Labor to dismiss the other
officers and members of THEU-CGW. The company also suspended them
effective that day. NLRC Case No. LR-2521 was filed by THEU-CGW and
individual complainants against private respondents for unfair labor
practices.
On January 19, 1974, Lontok, acting as temporary chairman, presided over
the election of officers of the remaining THEU-NATU in an emergency
meeting pending the holding of a special election to be called at a later date.
In the alleged election, Arturo Dilag was elected acting THEU-NATU
President together with the other union officers. On February 14, 1974,
these temporary officers were considered as having been elected as regular
officers for the year 1974.
On January 30, 1974, petitioner THEU-CGW wrote a letter to Juan Ponce
Enrile, Secretary of National Defense, complaining of the unfair labor
practices committed by respondent company against its members and
requesting assistance on the matter. The aforementioned letter contained
the signatures of one hundred forty-three (143) members.
On February 24,1974, the secretary of THEU-NATU, notified the entire rank
and file employees of the company that they will be given forty-eight (48)
hours upon receipt of the notice within which to answer and affirm their
membership with THEU-NATU. When the petitioner employees failed to
reply, Arturo Dilag advised them thru letters dated February 26, March 2 and
5, 1974, that the THEU-NATU shall enforce the union security clause set
forth in the CBA, and that he had requested respondent company to dismiss
them.
Respondent company, thereafter, wrote the petitioner employees
demanding the latter's comment on Dilag's charges before action was taken
thereon. However, no comment or reply was received from petitioners. In
view of this, Estelita Que, President/General Manager of respondent
company, upon Dilag's request, suspended twenty four (24) workers on
March 5, 1974, another thirty seven (37) on March 8, 1974 and two (2) more
on March 11, 1974, pending approval by the Secretary of Labor of the
application for their dismissal.
As a consequence thereof, NLRC Case Nos. LR-2971, LR-3015 and an
unnumbered case were filed by petitioners against Tropical Hut Food
Market, Incorporated, Estelita Que, Hernando Sarmiento and Arturo Dilag.
It is significant to note that the joint letter petition signed by sixty-seven (67)
employees was filed with the Secretary of Labor, the NLRC Chairman and
Director of Labor Relations to cancel the words NATU after the name of
Tropical Hut Employee Union under Registration Certificate No. 5544 IP.
Another letter signed by one hundred forty-six (146) members of THEU-CGW
was sent to the President of the Philippines informing him of the unfair
labor practices committed by private respondents against THEU-CGW
members.
After hearing the parties in NLRC Cases Nos. 2511 and 2521 jointly filed with
the Labor Arbiter, Arbitrator Daniel Lucas issued an order dated March 21,
1974, holding that the issues raised by the parties became moot and
academic with the issuance of NLRC Order dated February 25, 1974 in NLRC
Case No. LR-2670, which directed the holding of a certification election
among the rank and file workers of the respondent company between the
THEU-NATU and THEU-CGW. He also ordered: a) the reinstatement of all
complainants; b) for the respondent company to cease and desist from
committing further acts of dismissals without previous order from the NLRC
and for the complainant Tropical Hut Employees UNION-CGW to file
representation cases on a case to case basis during the freedom period
provided for by the existing CBA between the parties (pp. 91-93, Rollo).
With regard to NLRC Case Nos. LR-2971, LR-3015, and the unnumbered case,
Arbitrator Cleto T. Villatuya rendered a decision dated October 14, 1974, the
dispositive portion of which states:
Premises considered, a DECISION is hereby rendered ordering respondent
company to reinstate immediately the sixty three (63) complainants to their
former positions with back wages from the time they were illegally
suspended up to their actual reinstatement without loss of seniority and
other employment rights and privileges, and ordering the respondents to
desist from further committing acts of unfair labor practice. The respondent
company's application for clearance filed with the Secretary of Labor to
terminate the subject complainants' services effective March 20 and 23,
1974, should be denied.
SO ORDERED. (pp. 147-148, Rollo)
From the orders rendered above by Abitrator Daniel Lucas in NLRC Cases No.
LR-2511 and LR-2521 and by Arbitrator Cleto Villatuya in NLRC Cases Nos.
LR-2971, LR-3015, and the unnumbered case, all parties thereto, namely,
petitioners herein, respondent company, NATU and Dilag appealed to the
National Labor Relations Commission.
In a decision rendered on August 1, 1975, the National Labor Relations
Commission found the private respondents' appeals meritorious, and
stated, inter alia:
WHEREFORE, in view of the foregoing premises, the Order of Arbitrator
Lucas in NLRC CASE NOS. LR-2511, 2521 and the decision of Arbitrator
Villatuya in NLRC CASE NOS. LR-2971, 3015 and the unnumbered Case are
hereby REVERSED. Accordingly, the individual complainants are deemed to
have lost their status as employees of the respondent company. However,
considering that the individual complainants are not presumed to be
familiar with nor to have anticipated the legal mesh they would find
themselves in, after their "disaffiliation" from National Association of Trade
Unions and the THEU-NATU, much less the legal consequences of the said
action which we presume they have taken in all good faith; considering,
further, that the thrust of the new orientation in labor relations is not
towards the punishment of acts violative of contractual relations but rather
towards fair adjustments of the resulting complications; and considering,
finally, the consequent economic hardships that would be visited on the
individual complainants, if the law were to be strictly enforced against them,
this Commission is constrained to be magnanimous in this instant,
notwithstanding its obligation to give full force and effect to the majesty of
the law, and hereby orders the respondent company, under pain of being
cited for contempt for failure to do so, to give the individual complainants a
second chance by reemploying them upon their voluntary reaffirmation of
membership and loyalty to the Tropical Hut Employees Union-NATU and the
National Association of Trade Unions in the event it hires additional
personnel.
SO ORDERED. (pp. 312-313, Rollo)
The petitioner employees appealed the decision of the respondent National
Labor Relations Commission to the Secretary of Labor. On February 23,
1976, the Secretary of Labor rendered a decision affirming the findings of
the Commission, which provided inter alia:
We find, after a careful review of the record, no sufficient justification to
alter the decision appealed from except that portion of the dispositive part
which states:
. . . this Commission . . . hereby orders respondent company under pain of
being cited for contempt for failure to do so, to give the individual
complainants a second chance by reemploying them upon their voluntary
reaffirmation of membership and loyalty to the Tropical Hut Employees
UNION-NATU and the National Association of Trade Union in the event it
hires additional personnel.
Compliance by respondent of the above undertaking is not immediately
feasible considering that the same is based on an uncertain event, i.e.,
reemployment of individual complainants "in the event that management
hires additional personnel," after they shall have reaffirmed their loyalty to
THEU-NATU, which is unlikely.
In lieu of the foregoing, and to give complainants positive relief pursuant to
Section 9, Implementing Instruction No. 1. dated November 9, 1972,
respondent is hereby ordered to grant to all the individual complainants
financial assistance equivalent to one (1) month salary for every year of
service.
WHEREFORE, with the modification as above indicated, the Decision of the
National Labor Relations Commission is hereby affirmed.
SO ORDERED.(pp. 317-318, Rollo)
From the various pleadings filed and arguments adduced by petitioners and
respondents, the following issues appear to be those presented for
resolution in this petition to wit: 1) whether or not the petitioners failed to
exhaust administrative remedies when they immediately elevated the case
to this Court without an appeal having been made to the Office of the
President; 2) whether or not the disaffiliation of the local union from the
national federation was valid; and 3) whether or not the dismissal of
petitioner employees resulting from their unions disaffiliation for the
mother federation was illegal and constituted unfair labor practice on the
part of respondent company and federation.
We find the petition highly meritorious.
The applicable law then is the Labor Code, PD 442, as amended by PD 643
on January 21, 1975, which states:
Art. 222. Appeal — . . .
xxx xxx xxx
Decisions of the Secretary of Labor may be appealed to the President of the
Philippines subject to such conditions or limitations as the President may
direct. (Emphasis ours)
The remedy of appeal from the Secretary of Labor to the Office of the
President is not a mandatory requirement before resort to courts can be
had, but an optional relief provided by law to parties seeking expeditious
disposition of their labor disputes. Failure to avail of such relief shall not in
any way served as an impediment to judicial intervention. And where the
issue is lack of power or arbitrary or improvident exercise thereof, decisions
of the Secretary of Labor may be questioned in a certiorari proceeding
without prior appeal to the President (Arrastre Security Association —TUPAS
v. Ople, No. L-45344, February 20, 1984, 127 SCRA 580). Since the instant
petition raises the same issue of grave abuse of discretion of the Secretary
of Labor amounting to lack of or in excess of jurisdiction in deciding the
controversy, this Court can properly take cognizance of and resolve the
issues raised herein.
This brings Us to the question of the legality of the dismissal meted to
petitioner employees. In the celebrated case of Liberty Cotton Mills Workers
Union v. Liberty Cotton Mills, L-33187, September 4, 1975, 66 SCRA 512, We
held that the validity of the dismissals pursuant to the union security clause
in the collective bargaining agreement hinges on the validity of the
disaffiliation of the local union from the federation.
The right of a local union to disaffiliate from its mother federation is well-
settled. A local union, being a separate and voluntary association, is free to
serve the interest of all its members including the freedom to disaffiliate
when circumstances warrant. This right is consistent with the constitutional
guarantee of freedom of association (Volkschel Labor Union v. Bureau of
Labor Relations, No. L-45824, June 19, 1985, 137 SCRA 42).
All employees enjoy the right to self organization and to form and join labor
organizations of their own choosing for the purpose of collective bargaining
and to engage in concerted activities for their mutual aid or protection. This
is a fundamental right of labor that derives its existence from the
Constitution. In interpreting the protection to labor and social justice
provisions of the Constitution and the labor laws or rules or regulations, We
have always adopted the liberal approach which favors the exercise of labor
rights.
Relevant on this point is the basic principle We have repeatedly in affirmed
in many rulings:
. . . The locals are separate and distinct units primarily designed to secure
and maintain an equality of bargaining power between the employer and
their employee-members in the economic struggle for the fruits of the joint
productive effort of labor and capital; and the association of the locals into
the national union (PAFLU) was in furtherance of the same end. These
associations are consensual entities capable of entering into such legal
relations with their member. The essential purpose was the affiliation of the
local unions into a common enterprise to increase by collective action the
common bargaining power in respect of the terms and conditions of labor.
Yet the locals remained the basic units of association, free to serve their own
and the common interest of all, subject to the restraints imposed by the
Constitution and By-Laws of the Association, and free also to renounce the
affiliation for mutual welfare upon the terms laid down in the agreement
which brought it into existence. (Adamson & Adamson, Inc. v. CIR, No. L-
35120, January 31, 1984, 127 SCRA 268; Elisco-Elirol Labor Union (NAFLU) v.
Noriel, No. L-41955, December 29, 1977, 80 SCRA 681; Liberty Cotton Mills
Workers Union v. Liberty Cotton Mills, Inc., supra).
The inclusion of the word NATU after the name of the local union THEU in
the registration with the Department of Labor is merely to stress that the
THEU is NATU's affiliate at the time of the registration. It does not mean that
the said local union cannot stand on its own. Neither can it be interpreted to
mean that it cannot pursue its own interests independently of the
federation. A local union owes its creation and continued existence to the
will of its members and not to the federation to which it belongs.
When the local union withdrew from the old federation to join a new
federation, it was merely exercising its primary right to labor organization for
the effective enhancement and protection of common interests. In the
absence of enforceable provisions in the federation's constitution preventing
disaffiliation of a local union a local may sever its relationship with its parent
(People's Industrial and Commercial Employees and Workers Organization
(FFW) v. People's Industrial and Commercial Corporation, No. 37687, March
15, 1982, 112 SCRA 440).
There is nothing in the constitution of the NATU or in the constitution of the
THEU-NATU that the THEU was expressly forbidden to disaffiliate from the
federation (pp. 62, 281, Rollo), The alleged non-compliance of the local
union with the provision in the NATU Constitution requiring the service of
three months notice of intention to withdraw did not produce the effect of
nullifying the disaffiliation for the following grounds: firstly, NATU was not
even a legitimate labor organization, it appearing that it was not registered
at that time with the Department of Labor, and therefore did not possess
and acquire, in the first place, the legal personality to enforce its
constitution and laws, much less the right and privilege under the Labor
Code to organize and affiliate chapters or locals within its group, and
secondly, the act of non-compliance with the procedure on withdrawal is
premised on purely technical grounds which cannot rise above the
fundamental right of self-organization.
Respondent Secretary of Labor, in affirming the decision of the respondent
Commission, concluded that the supposed decision to disaffiliate was not
the subject of a free and open discussion and decision on the part of the
THEU-NATU general membership (p. 305, Rollo). This, however, is
contradicted by the evidence on record. Moreover, We are inclined to
believe Arbitrator Villatuya's findings to the contrary, as follows:
. . . . However, the complainants refute this allegation by submitting the
following: a) Letter dated December 20, 1.973 signed by 142 members
(Exhs. "B to B-5") resolution dated January 12, 1974, signed by 140 members
(Exhs. "H to H-6") letter dated February 26, 1974 to the Department of Labor
signed by 165 members (Exhs. "I to I-10"); d) letter dated January 30, 1974
to the Secretary of the National Defense signed by 144 members (Exhs. "0 to
0-5") and; e) letter dated March 6, 1974 signed by 146 members addressed
to the President of the Philippines (Exhs. "HH to HH-5"), to show that in
several instances, the members of the THEU-NATU have acknowledged their
disaffiliation from NATU. The letters of the complainants also indicate that
an overwhelming majority have freely and voluntarily signed their union's
disaffiliation from NATU, otherwise, if there was really deception employed
in securing their signatures as claimed by NATU/ Dilag, it could not be
possible to get their signatures in five different documents. (p. 144, Rollo)
We are aware of the time-honored doctrine that the findings of the NLRC
and the Secretary of Labor are binding on this Court if supported by
substantial evidence. However, in the same way that the findings of facts
unsupported by substantial and credible evidence do not bind this Court,
neither will We uphold erroneous conclusions of the NLRC and the Secretary
of Labor when We find that the latter committed grave abuse of discretion in
reversing the decision of the labor arbiter (San Miguel Corporation v. NLRC,
L-50321, March 13, 1984, 128 SCRA 180). In the instant case, the factual
findings of the arbitrator were correct against that of public respondents.
Further, there is no merit in the contention of the respondents that the act
of disaffiliation violated the union security clause of the CBA and that their
dismissal as a consequence thereof is valid. A perusal of the collective
bargaining agreements shows that the THEU-NATU, and not the NATU
federation, was recognized as the sole and exclusive collective bargaining
agent for all its workers and employees in all matters concerning wages,
hours of work and other terms and conditions of employment (pp. 667-
706, Rollo). Although NATU was designated as the sole bargaining agent in
the check-off authorization form attached to the CBA, this simply means it
was acting only for and in behalf of its affiliate. The NATU possessed the
status of an agent while the local union remained the basic principal union
which entered into contract with the respondent company. When the THEU
disaffiliated from its mother federation, the former did not lose its legal
personality as the bargaining union under the CBA. Moreover, the union
security clause embodied in the agreements cannot be used to justify the
dismissals meted to petitioners since it is not applicable to the
circumstances obtaining in this case. The CBA imposes dismissal only in case
an employee is expelled from the union for joining another federation or for
forming another union or who fails or refuses to maintain membership
therein. The case at bar does not involve the withdrawal of merely some
employees from the union but of the whole THEU itself from its federation.
Clearly, since there is no violation of the union security provision in the CBA,
there was no sufficient ground to terminate the employment of petitioners.
Public respondents considered the existence of Arturo Dilag's group as the
remaining true and valid union. We, however, are inclined to agree instead
with the Arbitrator's findings when he declared:
. . . . Much more, the so-called THEU-NATU under Dilag's group which
assumes to be the original THEU-NATU has a very doubtful and questionable
existence not to mention that the alleged president is performing
supervisory functions and not qualified to be a bona fide member of the
rank and file union. (p. 146, Rollo)
Records show that Arturo Dilag had resigned in the past as President of
THEU-NATU because of his promotion to a managerial or supervisory
position as Assistant Unit Manager of respondent Company. Petitioner Jose
Encinas replaced Dilag as President and continued to hold such position at
the time of the disaffiliation of the union from the federation. It is therefore
improper and contrary to law for Dilag to reassume the leadership of the
remaining group which was alleged to be the true union since he belonged
to the managerial personnel who could not be expected to work for the
betterment of the rank and file employees. Besides, managers and
supervisors are prohibited from joining a rank and file union (Binalbagan
Isabela Sugar Co., Inc. (BISCOM) v. Philippine Association of Free Labor
Unions (PAFLU), et al., L-18782, August 29, 1963, 8 SCRA 700).
Correspondingly, if a manager or supervisor organizes or joins a rank and file
union, he will be required to resign therefrom (Magalit, et al. v. Court of
Industrial Relations, et al., L-20448, May 25, 1965,14 SCRA 72).
Public respondents further submit that several employees who disaffiliate
their union from the NATU subsequently retracted and reaffirmed their
membership with the THEU-NATU. In the decision which was affirmed by
respondent Secretary of Labor, the respondent Commission stated that:
. . . out of the alleged one hundred and seventy-one (171) members of the
THEU-CGW whose signatures appeared in the "Analysis of Various
Documents Signed by Majority Members of the THEU-CGW, (Annex "T",
Complainants), which incidentally was relied upon by Arbitrator Villatuya in
holding that complainant THEU-CGW commanded the majority of
employees in respondent company, ninety-three (93) of the alleged
signatories reaffirmed their membership with the THEU-NATU and
renounced whatever connection they may have had with other labor unions,
(meaning the complainant THEU-CGW) either through resolution or
membership application forms they have unwittingly signed." (p. 306, Rollo)
Granting arguendo, that the fact of retraction is true, the evidence on record
shows that the letters of retraction were executed on various dates
beginning January 11, 1974 to March 8, 1974 (pp. 278-280, Rollo). This
shows that the retractions were made more or less after the suspension
pending dismissal on January 11, 1974 of Jose Encinas, formerly THEU-NATU
President, who became THEU-CGW President, and the suspension pending
their dismissal of the other elected officers and members of the THEU-CGW
on January 15, 1974. It is also clear that some of the retractions occurred
after the suspension of the first set of workers numbering about twenty-four
(24) on March 5, 1974. There is no use in saying that the retractions
obliterated the act of disaffiliation as there are doubts that they were freely
and voluntarily done especially during such time when their own union
officers and co-workers were already suspended pending their dismissal.
Finally, with regard to the process by which the workers were suspended or
dismissed, this Court finds that it was hastily and summarily done without
the necessary due process. The respondent company sent a letter to
petitioners herein, advising them of NATU/Dilag's recommendation of their
dismissal and at the same time giving them forty-eight (48) hours within
which to comment (p. 637, Rollo). When petitioners failed to do so,
respondent company immediately suspended them and thereafter effected
their dismissal. This is certainly not in fulfillment of the mandate of due
process, which is to afford the employee to be dismissed an opportunity to
be heard.
be limited to the immediate reinstatement of the workers. And since their
dismissals were effected without previous hearing and at the instance of
NATU, this federation should be held liable to the petitioners for the
payment of their backwages, as what We have ruled in the Liberty Cotton
Mills Case (supra).
ACCORDINGLY, the petition is hereby GRANTED and the assailed decision of
respondent Secretary of Labor is REVERSED and SET ASIDE, and the
respondent company is hereby ordered to immediately reinstate all the
petitioner employees within thirty (30) days from notice of this decision. If
reinstatement is no longer feasible, the respondent company is ordered to
pay petitioners separation pay equivalent to one (1) month pay for every
year of service. The respondent NATU federation is directed to pay
petitioners the amount of three (3) years backwages without deduction or
qualification. This decision shall be immediately executory upon
promulgation and notice to the parties.
SO ORDERED.

The prerogative of the employer to dismiss or lay-off an employee should be

done without abuse of discretion or arbitrainess, for what is at stake is not
only the employee's name or position but also his means of livelihood. Thus,
the discharge of an employee from his employment is null and void where
the employee was not formally investigated and given the opportunity to
refute the alleged findings made by the company (De Leon v. NLRC, L-52056,
October 30, 1980, 100 SCRA 691). Likewise, an employer can be adjudged
guilty of unfair labor practice for having dismissed its employees in line with
a closed shop provision if they were not given a proper hearing (Binalbagan-
Isabela Sugar Co., Inc.,(BISCOM) v. Philippine Association of Free Labor
Unions (PAFLU) et al., L-18782, August 29, 1963, 8 SCRA 700).

In view of the fact that the dispute revolved around the mother federation
and its local, with the company suspending and dismissing the workers at
the instance of the mother federation then, the company's liability should

G.R. No. 82914 June 20, 1988
KAPATIRAN SA MEAT AND CANNING DIVISION (TUPAS Local Chapter No.
1027), petitioner,
vs.
THE HONORABLE BLR DIRECTOR PURA FERRER CALLEJA, MEAT AND
CANNING DIVISION UNIVERSAL ROBINA CORPORATION and MEAT AND
CANNING DIVISION NEW EMPLOYEES AND WORKERS UNITED LABOR
ORGANIZATION, respondents.
Alar, Comia, Manalo and Associates for petitioner.
Danilo Bolos for respondent Robina Corporation.
RESOLUTION
GRIÑO-AQUINO, J.:
The petitioner, Kapatiran sa Meat and Canning Division TUPAS Local Chapter
No. 1027) hereinafter referred to as "TUPAS," seeks a review of the
resolution dated January 27, 1988 (Annex D) of public respondent Pura
Ferrer-Calleja, Director of the Bureau of Labor Relations, dismissing its
appeal from the Order dated November 17, 1987 (Annex C) of the Med-
Arbiter Rasidali C. Abdullah ordering a certification election to be conducted
among the regular daily paid rank and file employees/workers of Universal
Robina Corporation-Meat and Canning Division to determine which of the
contending unions:
a) Kapatiran sa Meat and Canning Division TUPAS Local Chapter No. 1027 (or
"TUPAS" for brevity);
b) Meat and Canning Division New Employees and Workers United Labor
Organization (or "NEW ULO" for brevity);
c) No union.
shall be the bargaining unit of the daily wage rank and file employees in the
Meat and Canning Division of the company.
From 1984 to 1987 TUPAS was the sole and exclusive collective bargaining
representative of the workers in the Meat and Canning Division of the
Universal Robina Corporation, with a 3-year collective bargaining agreement
(CBA) which was to expire on November 15, 1987.
Within the freedom period of 60 days prior to the expiration of its CBA,
TUPAS filed an amended notice of strike on September 28, 1987 as a means
of pressuring the company to extend, renew, or negotiate a new CBA with it.
On October 8, 1987, the NEW ULO, composed mostly of workers belonging
to the IGLESIA NI KRISTO sect, registered as a labor union.
On October 12, 1987, the TUPAS staged a strike. ROBINA obtained an
injunction against the strike, resulting in an agreement to return to work and
for the parties to negotiate a new CBA.
The next day, October 13, 1987, NEW ULO, claiming that it has "the majority
of the daily wage rank and file employees numbering 191," filed a petition
for a certification election at the Bureau of Labor Relations (Annex A).
TUPAS moved to dismiss the petition for being defective in form and that the
members of the NEW ULO were mostly members of the Iglesia ni Kristo sect
which three (3) years previous refused to affiliate with any labor union. It
also accused the company of using the NEW ULO to defeat TUPAS'
bargaining rights (Annex B).
On November 17, 1987, the Med-Arbiter ordered the holding of a
certification election within 20 days (Annex C).
TUPAS appealed to the Bureau of Labor Relations BLR. In the meantime, it
was able to negotiate a new 3-year CBA with ROBINA, which was signed on
December 3, 1987 and to expire on November 15, 1990.
The fact that TUPAS was able to negotiate a new CBA with ROBINA within
the 60-day freedom period of the existing CBA, does not foreclose the right
of the rival union, NEW ULO, to challenge TUPAS' claim to majority status, by
filing a timely petition for certification election on October 13, 1987 before
TUPAS' old CBA expired on November 15, 1987 and before it signed a new
CBA with the company on December 3, 1987. As pointed out by Med-Arbiter
Abdullah, a "certification election is the best forum in ascertaining the
majority status of the contending unions wherein the workers themselves
can freely choose their bargaining representative thru secret ballot." Since it
has not been shown that this order is tainted with unfairness, this Court will
not thwart the holding of a certification election (Associated Trade Unions
[ATU] vs. Noriel, 88 SCRA 96).
WHEREFORE, the petition for certiorari is denied, with costs against the
petitioner.

On January 27, 1988, respondent BLR Director Calleja dismissed the appeal SO ORDERED.
(Annex D).

TUPAS' motion for reconsideration (Annex E) was denied on March 17, 1988
(Annex F). On April 30, 1988, it filed this petition alleging that the public
respondent acted in excess of her jurisdiction and with grave abuse of
discretion in affirming the Med-Arbiter's order for a certification election.

After deliberating on the petition and the documents annexed thereto, We

find no merit in the Petition. The public respondent did not err in dismissing
the petitioner's appeal in BLR Case No. A-12-389-87. This Court's decision
inVictoriano vs. Elizalde Rope Workers' Union, 59 SCRA 54, upholding the
right of members of the IGLESIA NI KRISTO sect not to join a labor union for
being contrary to their religious beliefs, does not bar the members of that
sect from forming their own union. The public respondent correctly
observed that the "recognition of the tenets of the sect ... should not
infringe on the basic right of self-organization granted by the constitution to
workers, regardless of religious affiliation."

G.R. No. L-25246 September 12, 1974
BENJAMIN VICTORIANO, plaintiff-appellee,
vs.
ELIZALDE ROPE WORKERS' UNION and ELIZALDE ROPE FACTORY, INC.,
defendants, ELIZALDE ROPE WORKERS' UNION, defendant-appellant.
Salonga, Ordonez, Yap, Sicat & Associates for plaintiff-appellee.
Cipriano Cid & Associates for defendant-appellant.
ZALDIVAR, J.:p
Appeal to this Court on purely questions of law from the decision of the
Court of First Instance of Manila in its Civil Case No. 58894.
The undisputed facts that spawned the instant case follow:
Benjamin Victoriano (hereinafter referred to as Appellee), a member of the
religious sect known as the "Iglesia ni Cristo", had been in the employ of the
Elizalde Rope Factory, Inc. (hereinafter referred to as Company) since 1958.
As such employee, he was a member of the Elizalde Rope Workers' Union
(hereinafter referred to as Union) which had with the Company a collective
bargaining agreement containing a closed shop provision which reads as
follows:
Membership in the Union shall be required as a condition of employment
for all permanent employees workers covered by this Agreement.
The collective bargaining agreement expired on March 3, 1964 but was
renewed the following day, March 4, 1964.
Under Section 4(a), paragraph 4, of Republic Act No. 875, prior to its
amendment by Republic Act No. 3350, the employer was not precluded
"from making an agreement with a labor organization to require as a
condition of employment membership therein, if such labor organization is
the representative of the employees." On June 18, 1961, however, Republic
Act No. 3350 was enacted, introducing an amendment to — paragraph (4)
subsection (a) of section 4 of Republic Act No. 875, as follows: ... "but such
agreement shall not cover members of any religious sects which prohibit
affiliation of their members in any such labor organization".
Being a member of a religious sect that prohibits the affiliation of its
members with any labor organization, Appellee presented his resignation to
appellant Union in 1962, and when no action was taken thereon, he
reiterated his resignation on September 3, 1974. Thereupon, the Union
wrote a formal letter to the Company asking the latter to separate Appellee
from the service in view of the fact that he was resigning from the Union as
a member. The management of the Company in turn notified Appellee and
his counsel that unless the Appellee could achieve a satisfactory
arrangement with the Union, the Company would be constrained to dismiss
him from the service. This prompted Appellee to file an action for injunction,
docketed as Civil Case No. 58894 in the Court of First Instance of Manila to
enjoin the Company and the Union from dismissing Appellee. 1 In its answer,
the Union invoked the "union security clause" of the collective bargaining
agreement; assailed the constitutionality of Republic Act No. 3350; and
contended that the Court had no jurisdiction over the case, pursuant to
Republic Act No. 875, Sections 24 and 9 (d) and (e). 2 Upon the facts agreed
upon by the parties during the pre-trial conference, the Court a
quorendered its decision on August 26, 1965, the dispositive portion of
which reads:
IN VIEW OF THE FOREGOING, judgment is rendered enjoining the defendant
Elizalde Rope Factory, Inc. from dismissing the plaintiff from his present
employment and sentencing the defendant Elizalde Rope Workers' Union to
pay the plaintiff P500 for attorney's fees and the costs of this action. 3
From this decision, the Union appealed directly to this Court on purely
questions of law, assigning the following errors:
I. That the lower court erred when it did not rule that Republic Act No. 3350
is unconstitutional.
II. That the lower court erred when it sentenced appellant herein to pay
plaintiff the sum of P500 as attorney's fees and the cost thereof.
In support of the alleged unconstitutionality of Republic Act No. 3350, the
Union contented, firstly, that the Act infringes on the fundamental right to
form lawful associations; that "the very phraseology of said Republic Act
3350, that membership in a labor organization is banned to all those
belonging to such religious sect prohibiting affiliation with any labor
organization" 4 , "prohibits all the members of a given religious sect from
joining any labor union if such sect prohibits affiliations of their members
thereto" 5 ; and, consequently, deprives said members of their constitutional
right to form or join lawful associations or organizations guaranteed by the
Bill of Rights, and thus becomes obnoxious to Article III, Section 1 (6) of the
1935 Constitution. 6
Secondly, the Union contended that Republic Act No. 3350 is
unconstitutional for impairing the obligation of contracts in that, while the
Union is obliged to comply with its collective bargaining agreement
containing a "closed shop provision," the Act relieves the employer from its
reciprocal obligation of cooperating in the maintenance of union
membership as a condition of employment; and that said Act, furthermore,
impairs the Union's rights as it deprives the union of dues from members
who, under the Act, are relieved from the obligation to continue as such
members. 7
Thirdly, the Union contended that Republic Act No. 3350 discriminatorily
favors those religious sects which ban their members from joining labor
unions, in violation of Article Ill, Section 1 (7) of the 1935 Constitution; and
while said Act unduly protects certain religious sects, it leaves no rights or
protection to labor organizations. 8
Fourthly, Republic Act No. 3350, asserted the Union, violates the
constitutional provision that "no religious test shall be required for the
exercise of a civil right," in that the laborer's exercise of his civil right to join
associations for purposes not contrary to law has to be determined under
the Act by his affiliation with a religious sect; that conversely, if a worker has
to sever his religious connection with a sect that prohibits membership in a
labor organization in order to be able to join a labor organization, said Act
would violate religious freedom. 9
Fifthly, the Union contended that Republic Act No. 3350, violates the "equal
protection of laws" clause of the Constitution, it being a discriminately
legislation, inasmuch as by exempting from the operation of closed shop
agreement the members of the "Iglesia ni Cristo", it has granted said
members undue advantages over their fellow workers, for while the Act
exempts them from union obligation and liability, it nevertheless entitles
them at the same time to the enjoyment of all concessions, benefits and
other emoluments that the union might secure from the employer. 10
Sixthly, the Union contended that Republic Act No. 3350 violates the
constitutional provision regarding the promotion of social justice. 11
Appellant Union, furthermore, asserted that a "closed shop provision" in a
collective bargaining agreement cannot be considered violative of religious
freedom, as to call for the amendment introduced by Republic Act No.
3350; 12and that unless Republic Act No. 3350 is declared unconstitutional,
trade unionism in this country would be wiped out as employers would
prefer to hire or employ members of the Iglesia ni Cristo in order to do away
with labor organizations. 13
Appellee, assailing appellant's arguments, contended that Republic Act No.
3350 does not violate the right to form lawful associations, for the right to
join associations includes the right not to join or to resign from a labor
organization, if one's conscience does not allow his membership therein,
and the Act has given substance to such right by prohibiting the compulsion
of workers to join labor organizations; 14 that said Act does not impair the
obligation of contracts for said law formed part of, and was incorporated
into, the terms of the closed shop agreement; 15 that the Act does not
violate the establishment of religion clause or separation of Church and
State, for Congress, in enacting said law, merely accommodated the religious
needs of those workers whose religion prohibits its members from joining
labor unions, and balanced the collective rights of organized labor with the
constitutional right of an individual to freely exercise his chosen religion;
that the constitutional right to the free exercise of one's religion has primacy
and preference over union security measures which are merely
contractual16 ; that said Act does not violate the constitutional provision of
equal protection, for the classification of workers under the Act depending
on their religious tenets is based on substantial distinction, is germane to
the purpose of the law, and applies to all the members of a given
class; 17 that said Act, finally, does not violate the social justice policy of the
Constitution, for said Act was enacted precisely to equalize employment
opportunities for all citizens in the midst of the diversities of their religious
beliefs." 18
I. Before We proceed to the discussion of the first assigned error, it is
necessary to premise that there are some thoroughly established principles
which must be followed in all cases where questions of constitutionality as
obtains in the instant case are involved. All presumptions are indulged in
favor of constitutionality; one who attacks a statute, alleging
unconstitutionality must prove its invalidity beyond a reasonable doubt, that
a law may work hardship does not render it unconstitutional; that if any
reasonable basis may be conceived which supports the statute, it will be
upheld, and the challenger must negate all possible bases; that the courts
are not concerned with the wisdom, justice, policy, or expediency of a
statute; and that a liberal interpretation of the constitution in favor of the
constitutionality of legislation should be adopted. 19
1. Appellant Union's contention that Republic Act No. 3350 prohibits and
bans the members of such religious sects that forbid affiliation of their
members with labor unions from joining labor unions appears nowhere in
the wording of Republic Act No. 3350; neither can the same be deduced by
necessary implication therefrom. It is not surprising, therefore, that
appellant, having thus misread the Act, committed the error of contending
that said Act is obnoxious to the constitutional provision on freedom of
association.
Both the Constitution and Republic Act No. 875 recognize freedom of
association. Section 1 (6) of Article III of the Constitution of 1935, as well as
Section 7 of Article IV of the Constitution of 1973, provide that the right to
form associations or societies for purposes not contrary to law shall not be
abridged. Section 3 of Republic Act No. 875 provides that employees shall
have the right to self-organization and to form, join of assist labor
organizations of their own choosing for the purpose of collective bargaining
and to engage in concerted activities for the purpose of collective bargaining
and other mutual aid or protection. What the Constitution and the Industrial
Peace Act recognize and guarantee is the "right" to form or join associations.
Notwithstanding the different theories propounded by the different schools
of jurisprudence regarding the nature and contents of a "right", it can be
safely said that whatever theory one subscribes to, a right comprehends at
least two broad notions, namely: first, liberty or freedom, i.e., the absence
of legal restraint, whereby an employee may act for himself without being
prevented by law; and second, power, whereby an employee may, as he
pleases, join or refrain from Joining an association. It is, therefore, the
employee who should decide for himself whether he should join or not an
association; and should he choose to join, he himself makes up his mind as
to which association he would join; and even after he has joined, he still
retains the liberty and the power to leave and cancel his membership with
said organization at any time. 20 It is clear, therefore, that the right to join a
union includes the right to abstain from joining any union. 21 Inasmuch as
what both the Constitution and the Industrial Peace Act have recognized,
and guaranteed to the employee, is the "right" to join associations of his
choice, it would be absurd to say that the law also imposes, in the same
breath, upon the employee the duty to join associations. The law does not
enjoin an employee to sign up with any association.
The right to refrain from joining labor organizations recognized by Section 3
of the Industrial Peace Act is, however, limited. The legal protection granted
to such right to refrain from joining is withdrawn by operation of law, where
a labor union and an employer have agreed on a closed shop, by virtue of
which the employer may employ only member of the collective bargaining
union, and the employees must continue to be members of the union for
the duration of the contract in order to keep their jobs. Thus Section 4 (a) (4)
of the Industrial Peace Act, before its amendment by Republic Act No. 3350,
provides that although it would be an unfair labor practice for an employer
"to discriminate in regard to hire or tenure of employment or any term or
condition of employment to encourage or discourage membership in any
labor organization" the employer is, however, not precluded "from making
an agreement with a labor organization to require as a condition of
employment membership therein, if such labor organization is the
representative of the employees". By virtue, therefore, of a closed shop
agreement, before the enactment of Republic Act No. 3350, if any person,
regardless of his religious beliefs, wishes to be employed or to keep his
employment, he must become a member of the collective bargaining union.
Hence, the right of said employee not to join the labor union is curtailed and
withdrawn.
To that all-embracing coverage of the closed shop arrangement, Republic
Act No. 3350 introduced an exception, when it added to Section 4 (a) (4) of
the Industrial Peace Act the following proviso: "but such agreement shall not
cover members of any religious sects which prohibit affiliation of their
members in any such labor organization". Republic Act No. 3350 merely
excludes ipso jure from the application and coverage of the closed shop
agreement the employees belonging to any religious sects which prohibit
affiliation of their members with any labor organization. What the exception
provides, therefore, is that members of said religious sects cannot be
compelled or coerced to join labor unions even when said unions have
closed shop agreements with the employers; that in spite of any closed shop
agreement, members of said religious sects cannot be refused employment
or dismissed from their jobs on the sole ground that they are not members
of the collective bargaining union. It is clear, therefore, that the assailed Act,
far from infringing the constitutional provision on freedom of association,
upholds and reinforces it. It does not prohibit the members of said religious
sects from affiliating with labor unions. It still leaves to said members the
liberty and the power to affiliate, or not to affiliate, with labor unions. If,
notwithstanding their religious beliefs, the members of said religious sects
prefer to sign up with the labor union, they can do so. If in deference and
fealty to their religious faith, they refuse to sign up, they can do so; the law
does not coerce them to join; neither does the law prohibit them from
joining; and neither may the employer or labor union compel them to join.
Republic Act No. 3350, therefore, does not violate the constitutional
provision on freedom of association.
2. Appellant Union also contends that the Act is unconstitutional for
impairing the obligation of its contract, specifically, the "union security
clause" embodied in its Collective Bargaining Agreement with the Company,
by virtue of which "membership in the union was required as a condition for
employment for all permanent employees workers". This agreement was
already in existence at the time Republic Act No. 3350 was enacted on June
18, 1961, and it cannot, therefore, be deemed to have been incorporated
into the agreement. But by reason of this amendment, Appellee, as well as
others similarly situated, could no longer be dismissed from his job even if
he should cease to be a member, or disaffiliate from the Union, and the
Company could continue employing him notwithstanding his disaffiliation
from the Union. The Act, therefore, introduced a change into the express
terms of the union security clause; the Company was partly absolved by law
from the contractual obligation it had with the Union of employing only
Union members in permanent positions, It cannot be denied, therefore, that
there was indeed an impairment of said union security clause.
According to Black, any statute which introduces a change into the express
terms of the contract, or its legal construction, or its validity, or its discharge,
or the remedy for its enforcement, impairs the contract. The extent of the
change is not material. It is not a question of degree or manner or cause, but
of encroaching in any respect on its obligation or dispensing with any part of
its force. There is an impairment of the contract if either party is absolved by
law from its performance. 22 Impairment has also been predicated on laws
which, without destroying contracts, derogate from substantial contractual
rights. 23
It should not be overlooked, however, that the prohibition to impair the
obligation of contracts is not absolute and unqualified. The prohibition is
general, affording a broad outline and requiring construction to fill in the
details. The prohibition is not to be read with literal exactness like a
mathematical formula, for it prohibits unreasonable impairment only. 24 In
spite of the constitutional prohibition, the State continues to possess
authority to safeguard the vital interests of its people. Legislation
appropriate to safeguarding said interests may modify or abrogate contracts
already in effect. 25 For not only are existing laws read into contracts in order
to fix the obligations as between the parties, but the reservation of essential
attributes of sovereign power is also read into contracts as a postulate of the
legal order. All contracts made with reference to any matter that is subject to
regulation under the police power must be understood as made in reference
to the possible exercise of that power. 26 Otherwise, important and valuable
reforms may be precluded by the simple device of entering into contracts for
the purpose of doing that which otherwise may be prohibited. The policy of
protecting contracts against impairment presupposes the maintenance of a
government by virtue of which contractual relations are worthwhile a
government which retains adequate authority to secure the peace and good
order of society. The contract clause of the Constitution must, therefore, be
not only in harmony with, but also in subordination to, in appropriate
instances, the reserved power of the state to safeguard the vital interests of
the people. It follows that not all legislations, which have the effect of
impairing a contract, are obnoxious to the constitutional prohibition as to
impairment, and a statute passed in the legitimate exercise of police power,
although it incidentally destroys existing contract rights, must be upheld by
the courts. This has special application to contracts regulating relations
between capital and labor which are not merely contractual, and said labor
contracts, for being impressed with public interest, must yield to the
common good. 27
In several occasions this Court declared that the prohibition against
impairing the obligations of contracts has no application to statutes relating
to public subjects within the domain of the general legislative powers of the
state involving public welfare. 28 Thus, this Court also held that the Blue
Sunday Law was not an infringement of the obligation of a contract that
required the employer to furnish work on Sundays to his employees, the law
having been enacted to secure the well-being and happiness of the laboring
class, and being, furthermore, a legitimate exercise of the police power. 29
In order to determine whether legislation unconstitutionally impairs
contract obligations, no unchanging yardstick, applicable at all times and
under all circumstances, by which the validity of each statute may be
measured or determined, has been fashioned, but every case must be
determined upon its own circumstances. Legislation impairing the obligation
of contracts can be sustained when it is enacted for the promotion of the
general good of the people, and when the means adopted to secure that
end are reasonable. Both the end sought and the means adopted must be
legitimate, i.e., within the scope of the reserved power of the state
construed in harmony with the constitutional limitation of that power. 30
What then was the purpose sought to be achieved by Republic Act No.
3350? Its purpose was to insure freedom of belief and religion, and to
promote the general welfare by preventing discrimination against those
members of religious sects which prohibit their members from joining labor
unions, confirming thereby their natural, statutory and constitutional right
to work, the fruits of which work are usually the only means whereby they
can maintain their own life and the life of their dependents. It cannot be
gainsaid that said purpose is legitimate.
The questioned Act also provides protection to members of said religious
sects against two aggregates of group strength from which the individual
needs protection. The individual employee, at various times in his working
life, is confronted by two aggregates of power — collective labor, directed by
a union, and collective capital, directed by management. The union, an
institution developed to organize labor into a collective force and thus
protect the individual employee from the power of collective capital, is,
paradoxically, both the champion of employee rights, and a new source of
their frustration. Moreover, when the Union interacts with management, it
produces yet a third aggregate of group strength from which the individual
also needs protection — the collective bargaining relationship. 31
The aforementioned purpose of the amendatory law is clearly seen in the
Explanatory Note to House Bill No. 5859, which later became Republic Act
No. 3350, as follows:
It would be unthinkable indeed to refuse employing a person who, on
account of his religious beliefs and convictions, cannot accept membership
in a labor organization although he possesses all the qualifications for the
job. This is tantamount to punishing such person for believing in a doctrine
he has a right under the law to believe in. The law would not allow
discrimination to flourish to the detriment of those whose religion discards
membership in any labor organization. Likewise, the law would not
commend the deprivation of their right to work and pursue a modest means
of livelihood, without in any manner violating their religious faith and/or
belief.32
It cannot be denied, furthermore, that the means adopted by the Act to
achieve that purpose — exempting the members of said religious sects from
coverage of union security agreements — is reasonable.
It may not be amiss to point out here that the free exercise of religious
profession or belief is superior to contract rights. In case of conflict, the
latter must, therefore, yield to the former. The Supreme Court of the United
States has also declared on several occasions that the rights in the First
Amendment, which include freedom of religion, enjoy a preferred position
in the constitutional system. 33 Religious freedom, although not unlimited, is
a fundamental personal right and liberty, 34 and has a preferred position in
the hierarchy of values. Contractual rights, therefore, must yield to freedom
of religion. It is only where unavoidably necessary to prevent an immediate
and grave danger to the security and welfare of the community that
infringement of religious freedom may be justified, and only to the smallest
extent necessary to avoid the danger.
3. In further support of its contention that Republic Act No. 3350 is
unconstitutional, appellant Union averred that said Act discriminates in
favor of members of said religious sects in violation of Section 1 (7) of Article
Ill of the 1935 Constitution, and which is now Section 8 of Article IV of the
1973 Constitution, which provides:
No law shall be made respecting an establishment of religion, or prohibiting
the free exercise thereof, and the free exercise and enjoyment of religious
profession and worship, without discrimination and preference, shall forever
be allowed. No religious test shall be required for the exercise of civil or
political rights.
The constitutional provision into only prohibits legislation for the support of
any religious tenets or the modes of worship of any sect, thus forestalling
compulsion by law of the acceptance of any creed or the practice of any
form of worship, 35 but also assures the free exercise of one's chosen form of
religion within limits of utmost amplitude. It has been said that the religion
clauses of the Constitution are all designed to protect the broadest possible
liberty of conscience, to allow each man to believe as his conscience directs,
to profess his beliefs, and to live as he believes he ought to live, consistent
with the liberty of others and with the common good. 36 Any legislation
whose effect or purpose is to impede the observance of one or all religions,
or to discriminate invidiously between the religions, is invalid, even though
the burden may be characterized as being only indirect. 37 But if the stage
regulates conduct by enacting, within its power, a general law which has for
its purpose and effect to advance the state's secular goals, the statute is
valid despite its indirect burden on religious observance, unless the state can
accomplish its purpose without imposing such burden. 38
In Aglipay v. Ruiz 39 , this Court had occasion to state that the government
should not be precluded from pursuing valid objectives secular in character
even if the incidental result would be favorable to a religion or sect. It has
likewise been held that the statute, in order to withstand the strictures of
constitutional prohibition, must have a secular legislative purpose and a
primary effect that neither advances nor inhibits religion. 40 Assessed by
these criteria, Republic Act No. 3350 cannot be said to violate the
constitutional inhibition of the "no-establishment" (of religion) clause of the
Constitution.
The purpose of Republic Act No. 3350 is secular, worldly, and temporal, not
spiritual or religious or holy and eternal. It was intended to serve the secular
purpose of advancing the constitutional right to the free exercise of religion,
by averting that certain persons be refused work, or be dismissed from
work, or be dispossessed of their right to work and of being impeded to
pursue a modest means of livelihood, by reason of union security
agreements. To help its citizens to find gainful employment whereby they
can make a living to support themselves and their families is a valid
objective of the state. In fact, the state is enjoined, in the 1935 Constitution,
to afford protection to labor, and regulate the relations between labor and
capital and industry. 41 More so now in the 1973 Constitution where it is
mandated that "the State shall afford protection to labor, promote full
employment and equality in employment, ensure equal work opportunities
regardless of sex, race or creed and regulate the relation between workers
and employers. 42
The primary effects of the exemption from closed shop agreements in favor
of members of religious sects that prohibit their members from affiliating
with a labor organization, is the protection of said employees against the
aggregate force of the collective bargaining agreement, and relieving certain
citizens of a burden on their religious beliefs; and by eliminating to a certain
extent economic insecurity due to unemployment, which is a serious
menace to the health, morals, and welfare of the people of the State, the
Act also promotes the well-being of society. It is our view that the
exemption from the effects of closed shop agreement does not directly
advance, or diminish, the interests of any particular religion. Although the
exemption may benefit those who are members of religious sects that
prohibit their members from joining labor unions, the benefit upon the
religious sects is merely incidental and indirect. The "establishment clause"
(of religion) does not ban regulation on conduct whose reason or effect
merely happens to coincide or harmonize with the tenets of some or all
religions. 43 The free exercise clause of the Constitution has been interpreted
to require that religious exercise be preferentially aided. 44
We believe that in enacting Republic Act No. 3350, Congress acted
consistently with the spirit of the constitutional provision. It acted merely to
relieve the exercise of religion, by certain persons, of a burden that is
imposed by union security agreements. It was Congress itself that imposed
that burden when it enacted the Industrial Peace Act (Republic Act 875),
and, certainly, Congress, if it so deems advisable, could take away the same
burden. It is certain that not every conscience can be accommodated by all
the laws of the land; but when general laws conflict with scrupples of
conscience, exemptions ought to be granted unless some "compelling state
interest" intervenes.45 In the instant case, We see no such compelling state
interest to withhold exemption.
Appellant bewails that while Republic Act No. 3350 protects members of
certain religious sects, it leaves no right to, and is silent as to the protection
of, labor organizations. The purpose of Republic Act No. 3350 was not to
grant rights to labor unions. The rights of labor unions are amply provided
for in Republic Act No. 875 and the new Labor Code. As to the lamented
silence of the Act regarding the rights and protection of labor unions, suffice
it to say, first, that the validity of a statute is determined by its provisions,
not by its silence 46 ; and, second, the fact that the law may work hardship
does not render it unconstitutional. 47
It would not be amiss to state, regarding this matter, that to compel persons
to join and remain members of a union to keep their jobs in violation of
their religious scrupples, would hurt, rather than help, labor unions,
Congress has seen it fit to exempt religious objectors lest their resistance
spread to other workers, for religious objections have contagious
potentialities more than political and philosophic objections.
Furthermore, let it be noted that coerced unity and loyalty even to the
country, and a fortiori to a labor — union assuming that such unity and
loyalty can be attained through coercion — is not a goal that is
constitutionally obtainable at the expense of religious liberty. 48 A desirable
end cannot be promoted by prohibited means.
4. Appellants' fourth contention, that Republic Act No. 3350 violates the
constitutional prohibition against requiring a religious test for the exercise of
a civil right or a political right, is not well taken. The Act does not require as
a qualification, or condition, for joining any lawful association membership
in any particular religion or in any religious sect; neither does the Act require
affiliation with a religious sect that prohibits its members from joining a
labor union as a condition or qualification for withdrawing from a labor
union. Joining or withdrawing from a labor union requires a positive act.
Republic Act No. 3350 only exempts members with such religious affiliation
from the coverage of closed shop agreements. So, under this Act, a religious
objector is not required to do a positive act — to exercise the right to join or
to resign from the union. He is exempted ipso jure without need of any
positive act on his part. A conscientious religious objector need not perform
a positive act or exercise the right of resigning from the labor union — he is
exempted from the coverage of any closed shop agreement that a labor
union may have entered into. How then can there be a religious test
required for the exercise of a right when no right need be exercised?
We have said that it was within the police power of the State to enact
Republic Act No. 3350, and that its purpose was legal and in consonance
with the Constitution. It is never an illegal evasion of a constitutional
provision or prohibition to accomplish a desired result, which is lawful in
itself, by discovering or following a legal way to do it. 49
5. Appellant avers as its fifth ground that Republic Act No. 3350 is a
discriminatory legislation, inasmuch as it grants to the members of certain
religious sects undue advantages over other workers, thus violating Section
1 of Article III of the 1935 Constitution which forbids the denial to any
person of the equal protection of the laws. 50
The guaranty of equal protection of the laws is not a guaranty of equality in
the application of the laws upon all citizens of the state. It is not, therefore, a
requirement, in order to avoid the constitutional prohibition against
inequality, that every man, woman and child should be affected alike by a
statute. Equality of operation of statutes does not mean indiscriminate
operation on persons merely as such, but on persons according to the
circumstances surrounding them. It guarantees equality, not identity of
rights. The Constitution does not require that things which are different in
fact be treated in law as though they were the same. The equal protection
clause does not forbid discrimination as to things that are different. 51 It does
not prohibit legislation which is limited either in the object to which it is
directed or by the territory within which it is to operate.
The equal protection of the laws clause of the Constitution allows
classification. Classification in law, as in the other departments of knowledge
or practice, is the grouping of things in speculation or practice because they
agree with one another in certain particulars. A law is not invalid because of
simple inequality. 52 The very idea of classification is that of inequality, so
that it goes without saying that the mere fact of inequality in no manner
determines the matter of constitutionality. 53 All that is required of a valid
classification is that it be reasonable, which means that the classification
should be based on substantial distinctions which make for real differences;
that it must be germane to the purpose of the law; that it must not be
limited to existing conditions only; and that it must apply equally to each
member of the class. 54 This Court has held that the standard is satisfied if
the classification or distinction is based on a reasonable foundation or
rational basis and is not palpably arbitrary. 55
In the exercise of its power to make classifications for the purpose of
enacting laws over matters within its jurisdiction, the state is recognized as
enjoying a wide range of discretion. 56 It is not necessary that the
classification be based on scientific or marked differences of things or in
their relation. 57 Neither is it necessary that the classification be made with
mathematical nicety. 58 Hence legislative classification may in many cases
properly rest on narrow distinctions, 59 for the equal protection guaranty
does not preclude the legislature from recognizing degrees of evil or harm,
and legislation is addressed to evils as they may appear.
We believe that Republic Act No. 3350 satisfies the aforementioned
requirements. The Act classifies employees and workers, as to the effect and
coverage of union shop security agreements, into those who by reason of
their religious beliefs and convictions cannot sign up with a labor union, and
those whose religion does not prohibit membership in labor unions. Tile
classification rests on real or substantial, not merely imaginary or whimsical,
distinctions. There is such real distinction in the beliefs, feelings and
sentiments of employees. Employees do not believe in the same religious
faith and different religions differ in their dogmas and cannons. Religious
beliefs, manifestations and practices, though they are found in all places,
and in all times, take so many varied forms as to be almost beyond
imagination. There are many views that comprise the broad spectrum of
religious beliefs among the people. There are diverse manners in which
beliefs, equally paramount in the lives of their possessors, may be
articulated. Today the country is far more heterogenous in religion than
before, differences in religion do exist, and these differences are important
and should not be ignored.
Even from the phychological point of view, the classification is based on real
and important differences. Religious beliefs are not mere beliefs, mere ideas
existing only in the mind, for they carry with them practical consequences
and are the motives of certain rules. of human conduct and the justification
of certain acts. 60 Religious sentiment makes a man view things and events in
their relation to his God. It gives to human life its distinctive character, its
tone, its happiness or unhappiness its enjoyment or irksomeness. Usually, a
strong and passionate desire is involved in a religious belief. To certain
persons, no single factor of their experience is more important to them than
their religion, or their not having any religion. Because of differences in
religious belief and sentiments, a very poor person may consider himself
better than the rich, and the man who even lacks the necessities of life may
be more cheerful than the one who has all possible luxuries. Due to their
religious beliefs people, like the martyrs, became resigned to the inevitable
and accepted cheerfully even the most painful and excruciating pains.
Because of differences in religious beliefs, the world has witnessed turmoil,
civil strife, persecution, hatred, bloodshed and war, generated to a large
extent by members of sects who were intolerant of other religious beliefs.
The classification, introduced by Republic Act No. 3350, therefore, rests on
substantial distinctions.
The classification introduced by said Act is also germane to its purpose. The
purpose of the law is precisely to avoid those who cannot, because of their
religious belief, join labor unions, from being deprived of their right to work
and from being dismissed from their work because of union shop security
agreements.
Republic Act No. 3350, furthermore, is not limited in its application to
conditions existing at the time of its enactment. The law does not provide
that it is to be effective for a certain period of time only. It is intended to
apply for all times as long as the conditions to which the law is applicable
exist. As long as there are closed shop agreements between an employer
and a labor union, and there are employees who are prohibited by their
religion from affiliating with labor unions, their exemption from the
coverage of said agreements continues.
Finally, the Act applies equally to all members of said religious sects; this is
evident from its provision. The fact that the law grants a privilege to
members of said religious sects cannot by itself render the Act
unconstitutional, for as We have adverted to, the Act only restores to them
their freedom of association which closed shop agreements have taken
away, and puts them in the same plane as the other workers who are not
prohibited by their religion from joining labor unions. The circumstance, that
the other employees, because they are differently situated, are not granted
the same privilege, does not render the law unconstitutional, for every
classification allowed by the Constitution by its nature involves inequality.
The mere fact that the legislative classification may result in actual
inequality is not violative of the right to equal protection, for every
classification of persons or things for regulation by law produces inequality
in some degree, but the law is not thereby rendered invalid. A classification
otherwise reasonable does not offend the constitution simply because in
practice it results in some inequality. 61 Anent this matter, it has been said
that whenever it is apparent from the scope of the law that its object is for
the benefit of the public and the means by which the benefit is to be
obtained are of public character, the law will be upheld even though
incidental advantage may occur to individuals beyond those enjoyed by the
general public. 62
6. Appellant's further contention that Republic Act No. 3350 violates the
constitutional provision on social justice is also baseless. Social justice is
intended to promote the welfare of all the people. 63 Republic Act No. 3350
promotes that welfare insofar as it looks after the welfare of those who,
because of their religious belief, cannot join labor unions; the Act prevents
their being deprived of work and of the means of livelihood. In determining
whether any particular measure is for public advantage, it is not necessary
that the entire state be directly benefited — it is sufficient that a portion of
the state be benefited thereby.
Social justice also means the adoption by the Government of measures
calculated to insure economic stability of all component elements of society,
through the maintenance of a proper economic and social equilibrium in the
inter-relations of the members of the community. 64 Republic Act No. 3350
insures economic stability to the members of a religious sect, like the Iglesia
ni Cristo, who are also component elements of society, for it insures security
in their employment, notwithstanding their failure to join a labor union
having a closed shop agreement with the employer. The Act also advances
the proper economic and social equilibrium between labor unions and
employees who cannot join labor unions, for it exempts the latter from the
compelling necessity of joining labor unions that have closed shop
agreements and equalizes, in so far as opportunity to work is concerned,
those whose religion prohibits membership in labor unions with those
whose religion does not prohibit said membership. Social justice does not
imply social equality, because social inequality will always exist as long as
social relations depend on personal or subjective proclivities. Social justice
does not require legal equality because legal equality, being a relative term,
is necessarily premised on differentiations based on personal or natural
conditions. 65 Social justice guarantees equality of opportunity 66 , and this is
precisely what Republic Act No. 3350 proposes to accomplish — it gives
laborers, irrespective of their religious scrupples, equal opportunity for
work.
7. As its last ground, appellant contends that the amendment introduced by
Republic Act No. 3350 is not called for — in other words, the Act is not
proper, necessary or desirable. Anent this matter, it has been held that a
statute which is not necessary is not, for that reason, unconstitutional; that
in determining the constitutional validity of legislation, the courts are
unconcerned with issues as to the necessity for the enactment of the
legislation in question. 67 Courts do inquire into the wisdom of
laws. 68 Moreover, legislatures, being chosen by the people, are presumed to
understand and correctly appreciate the needs of the people, and it may
change the laws accordingly. 69 The fear is entertained by appellant that
unless the Act is declared unconstitutional, employers will prefer employing
members of religious sects that prohibit their members from joining labor
unions, and thus be a fatal blow to unionism. We do not agree. The threat to
unionism will depend on the number of employees who are members of the
religious sects that control the demands of the labor market. But there is
really no occasion now to go further and anticipate problems We cannot
judge with the material now before Us. At any rate, the validity of a statute
is to be determined from its general purpose and its efficacy to accomplish
the end desired, not from its effects on a particular case. 70 The essential
basis for the exercise of power, and not a mere incidental result arising from
its exertion, is the criterion by which the validity of a statute is to be
measured. 71
II. We now pass on the second assignment of error, in support of which the
Union argued that the decision of the trial court ordering the Union to pay
P500 for attorney's fees directly contravenes Section 24 of Republic Act No.
875, for the instant action involves an industrial dispute wherein the Union
was a party, and said Union merely acted in the exercise of its rights under
the union shop provision of its existing collective bargaining contract with
the Company; that said order also contravenes Article 2208 of the Civil
Code; that, furthermore, Appellee was never actually dismissed by the
defendant Company and did not therefore suffer any damage at all . 72
In refuting appellant Union's arguments, Appellee claimed that in the instant
case there was really no industrial dispute involved in the attempt to compel
Appellee to maintain its membership in the union under pain of dismissal,
and that the Union, by its act, inflicted intentional harm on Appellee; that
since Appellee was compelled to institute an action to protect his right to
work, appellant could legally be ordered to pay attorney's fees under
Articles 1704 and 2208 of the Civil Code. 73
The second paragraph of Section 24 of Republic Act No. 875 which is relied
upon by appellant provides that:
No suit, action or other proceedings shall be maintainable in any court
against a labor organization or any officer or member thereof for any act
done by or on behalf of such organization in furtherance of an industrial
dispute to which it is a party, on the ground only that such act induces some
other person to break a contract of employment or that it is in restraint of
trade or interferes with the trade, business or employment of some other
person or with the right of some other person to dispose of his capital or
labor. (Emphasis supplied)
That there was a labor dispute in the instant case cannot be disputed for
appellant sought the discharge of respondent by virtue of the closed shop
agreement and under Section 2 (j) of Republic Act No. 875 a question
involving tenure of employment is included in the term "labor
dispute". 74 The discharge or the act of seeking it is the labor dispute itself. It
being the labor dispute itself, that very same act of the Union in asking the
employer to dismiss Appellee cannot be "an act done ... in furtherance of an
industrial dispute". The mere fact that appellant is a labor union does not
necessarily mean that all its acts are in furtherance of an industrial
dispute. 75 Appellant Union, therefore, cannot invoke in its favor Section 24
of Republic Act No. 875. This case is not intertwined with any unfair labor
practice case existing at the time when Appellee filed his complaint before
the lower court.
Neither does Article 2208 of the Civil Code, invoked by the Union, serve as
its shield. The article provides that attorney's fees and expenses of litigation
may be awarded "when the defendant's act or omission has compelled the
plaintiff ... to incur expenses to protect his interest"; and "in any other case
where the court deems it just and equitable that attorney's fees and
expenses of litigation should be recovered". In the instant case, it cannot be
gainsaid that appellant Union's act in demanding Appellee's dismissal
caused Appellee to incur expenses to prevent his being dismissed from his
job. Costs according to Section 1, Rule 142, of the Rules of Court, shall be
allowed as a matter of course to the prevailing party.
WHEREFORE, the instant appeal is dismissed, and the decision, dated August
26, 1965, of the Court of First Instance of Manila, in its Civil Case No. 58894,
appealed from is affirmed, with costs against appellant Union. It is so
ordered.
Makalintal, C.J, Castro, Teehankee, Barredo, Makasiar, Antonio, Esguerra,
Muñoz Palma and Aquino, JJ., concur.
Separate Opinions
FERNANDO, J, concurring:
The decision arrived at unanimously by this Court that Republic Act No.
3350 is free from the constitutional infirmities imputed to it was
demonstrated in a manner wellnigh conclusive in the learned, scholarly, and
comprehensive opinion so typical of the efforts of the ponente, Justice
Zaldivar. Like the rest of my brethren, I concur fully. Considering moreover,
the detailed attention paid to each and every objection raised as to its
validity and the clarity and persuasiveness with which it was shown to be
devoid of support in authoritative doctrines, it would appear that the last
word has been written on this particular subject. Nonetheless, I deem it
proper to submit this brief expression of my views on the transcendent
character of religious freedom 1 and its primacy even as against the claims of
protection to labor, 2 also one of the fundamental principles of the
Constitution.
1. Religious freedom is identified with the liberty every individual possesses
to worship or not a Supreme Being, and if a devotee of any sect, to act in
accordance with its creed. Thus is constitutionally safeguarded, according to
Justice Laurel, that "profession of faith to an active power that binds and
elevates man to his Creator ...." 3 The choice of what a man wishes to believe
in is his and his alone. That is a domain left untouched, where intrusion is
not allowed, a citadel to which the law is denied entry, whatever be his
thoughts or hopes. In that sphere, what he wills reigns supreme. The
doctrine to which he pays fealty may for some be unsupported by evidence,
devoid of rational foundation. No matter. There is no requirement as to its
conformity to what has found acceptance. It suffices that for him such a
concept holds undisputed sway. That is a recognition of man's freedom. That
for him is one of the ways of self- realization. It would be to disregard the
dignity that attaches to every human being to deprive him of such an
attribute. The "fixed star on our constitutional constellation," to borrow the
felicitous phrase of Justice Jackson, is that no official, not excluding the
highest, has it in his power to prescribe what shall be orthodox in matters of
conscience — or to mundane affairs, for that matter.
Gerona v. Secretary of Education 4 speaks similarly. In the language of
its ponente, Justice Montemayor: "The realm of belief and creed is infinite
and limitless bounded only by one's imagination and thought. So is the
freedom of belief, including religious belief, limitless and without bounds.
One may believe in most anything, however strange, bizarre and
unreasonable the same may appear to others, even heretical when weighed
in the scales of orthodoxy or doctrinal standards." 5 There was this
qualification though: "But between the freedom of belief and the exercise of
said belief, there is quite a stretch of road to travel. If the exercise of said
religious belief clashes with the established institutions of society and with
the law, then the former must yield and give way to the latter. The
Government steps in and either restrains said exercise or even prosecutes
the one exercising it." 6 It was on that basis that the daily compulsory flag
ceremony in accordance with a statute 7 was found free from the
constitutional objection on the part of a religious sect, the Jehovah's
Witnesses, whose members alleged that their participation would be
offensive to their religious beliefs. In a case not dissimilar, West Virginia
State Board of Education v. Barnette, 8 the American Supreme Court reached
a contrary conclusion. Justice Jackson's eloquent opinion is, for this writer,
highly persuasive. Thus: "The case is made difficult not because the
principles of its decision are obscure but because the flag involved is our
own. Nevertheless, we apply the limitations of the Constitution with no fear
that freedom to be intellectually and spiritually diverse or even contrary will
disintegrate the social organization. To believe that patriotism will not
flourish if patriotic ceremonies are voluntary and spontaneous instead of a
compulsory routine is to make an unflattering estimate of the appeal of our
institutions to free minds. We can have intellectual individualism and the
rich cultural diversities that we owe to exceptional minds only at the price of
occasional eccentricity and abnormal attitudes. When they are so harmless
to others or to the State as those we deal with here, the price is not too
great. But freedom to differ is not limited to things that do not matter much.
That would be a mere shadow of freedom. The test of its substance is the
right to differ as to things that touch the heart of the existing order." 9
There is moreover this ringing affirmation by Chief Justice Hughes of the
primacy of religious freedom in the forum of conscience even as against the
command of the State itself: "Much has been said of the paramount duty to
the state, a duty to be recognized, it is urged, even though it conflicts with
convictions of duty to God. Undoubtedly that duty to the state exists within
the domain of power, for government may enforce obedience to laws
regardless of scruples. When one's belief collides with the power of the
state, the latter is supreme within its sphere and submission or punishment
follows. But, in the forum of conscience, duty to a moral power higher than
the state has always been maintained. The reservation of that supreme
obligation, as a matter of principle, would unquestionably be made by many
of our conscientious and law-abiding citizens. The essence of religion is
belief in a relation to God involving duties superior to those arising from any
human relation." 10 The American Chief Justice spoke in dissent, it is true,
but with him in agreement were three of the foremost jurists who ever sat
in that Tribunal, Justices Holmes, Brandeis, and Stone.
2. As I view Justice Zaldivar's opinion in that light, my concurrence, as set
forth earlier, is wholehearted and entire. With such a cardinal postulate as
the basis of our polity, it has a message that cannot be misread. Thus is
intoned with a reverberating clang, to paraphrase Cardozo, a fundamental
principle that drowns all weaker sounds. The labored effort to cast doubt on
the validity of the statutory provision in question is far from persuasive. It is
attended by futility. It is not for this Court, as I conceive of the judicial
function, to restrict the scope of a preferred freedom.
3. There is, however, the question of whether such an exception possesses
an implication that lessens the effectiveness of state efforts to protect labor,
likewise, as noted, constitutionally ordained. Such a view, on the surface,
may not be lacking in plausibility, but upon closer analysis, it cannot stand
scrutiny. Thought must be given to the freedom of association, likewise an
aspect of intellectual liberty. For the late Professor Howe a constitutionalist
and in his lifetime the biographer of the great Holmes, it even partakes of
the political theory of pluralistic sovereignty. So great is the respect for the
autonomy accorded voluntary societies. 11 Such a right implies at the very
least that one can determine for himself whether or not he should join or
refrain from joining a labor organization, an institutional device for
promoting the welfare of the working man. A closed shop, on the other
hand, is inherently coercive. That is why, as is unmistakably reflected in our
decisions, the latest of which isGuijarno v. Court of Industrial Relations, 12 it
is far from being a favorite of the law. For a statutory provision then to
further curtail its operation, is precisely to follow the dictates of sound
public policy.
The exhaustive and well-researched opinion of Justice Zaldivar thus is in the
mainstream of constitutional tradition. That, for me, is the channel to follow.
Separate Opinions
FERNANDO, J, concurring:
The decision arrived at unanimously by this Court that Republic Act No.
3350 is free from the constitutional infirmities imputed to it was
demonstrated in a manner wellnigh conclusive in the learned, scholarly, and
comprehensive opinion so typical of the efforts of the ponente, Justice
Zaldivar. Like the rest of my brethren, I concur fully. Considering moreover,
the detailed attention paid to each and every objection raised as to its
validity and the clarity and persuasiveness with which it was shown to be
devoid of support in authoritative doctrines, it would appear that the last
word has been written on this particular subject. Nonetheless, I deem it
proper to submit this brief expression of my views on the transcendent
character of religious freedom 1 and its primacy even as against the claims of
protection to labor, 2 also one of the fundamental principles of the
Constitution.
1. Religious freedom is identified with the liberty every individual possesses
to worship or not a Supreme Being, and if a devotee of any sect, to act in
accordance with its creed. Thus is constitutionally safeguarded, according to
Justice Laurel, that "profession of faith to an active power that binds and
elevates man to his Creator ...." 3 The choice of what a man wishes to believe
in is his and his alone. That is a domain left untouched, where intrusion is
not allowed, a citadel to which the law is denied entry, whatever be his
thoughts or hopes. In that sphere, what he wills reigns supreme. The
doctrine to which he pays fealty may for some be unsupported by evidence,
devoid of rational foundation. No matter. There is no requirement as to its
conformity to what has found acceptance. It suffices that for him such a
concept holds undisputed sway. That is a recognition of man's freedom. That
for him is one of the ways of self- realization. It would be to disregard the
dignity that attaches to every human being to deprive him of such an
attribute. The "fixed star on our constitutional constellation," to borrow the
felicitous phrase of Justice Jackson, is that no official, not excluding the
highest, has it in his power to prescribe what shall be orthodox in matters of
conscience — or to mundane affairs, for that matter.
Gerona v. Secretary of Education 4 speaks similarly. In the language of
its ponente, Justice Montemayor: "The realm of belief and creed is infinite
and limitless bounded only by one's imagination and thought. So is the
freedom of belief, including religious belief, limitless and without bounds.
One may believe in most anything, however strange, bizarre and
unreasonable the same may appear to others, even heretical when weighed
in the scales of orthodoxy or doctrinal standards." 5 There was this
qualification though: "But between the freedom of belief and the exercise of
said belief, there is quite a stretch of road to travel. If the exercise of said
religious belief clashes with the established institutions of society and with
the law, then the former must yield and give way to the latter. The
Government steps in and either restrains said exercise or even prosecutes
the one exercising it." 6 It was on that basis that the daily compulsory flag
ceremony in accordance with a statute 7 was found free from the
constitutional objection on the part of a religious sect, the Jehovah's
Witnesses, whose members alleged that their participation would be
offensive to their religious beliefs. In a case not dissimilar, West Virginia
State Board of Education v. Barnette, 8 the American Supreme Court reached
a contrary conclusion. Justice Jackson's eloquent opinion is, for this writer,
highly persuasive. Thus: "The case is made difficult not because the
principles of its decision are obscure but because the flag involved is our
own. Nevertheless, we apply the limitations of the Constitution with no fear
that freedom to be intellectually and spiritually diverse or even contrary will
disintegrate the social organization. To believe that patriotism will not
flourish if patriotic ceremonies are voluntary and spontaneous instead of a
compulsory routine is to make an unflattering estimate of the appeal of our
institutions to free minds. We can have intellectual individualism and the
rich cultural diversities that we owe to exceptional minds only at the price of
occasional eccentricity and abnormal attitudes. When they are so harmless
to others or to the State as those we deal with here, the price is not too
great. But freedom to differ is not limited to things that do not matter much.
That would be a mere shadow of freedom. The test of its substance is the
right to differ as to things that touch the heart of the existing order." 9
There is moreover this ringing affirmation by Chief Justice Hughes of the
primacy of religious freedom in the forum of conscience even as against the
command of the State itself: "Much has been said of the paramount duty to
the state, a duty to be recognized, it is urged, even though it conflicts with
convictions of duty to God. Undoubtedly that duty to the state exists within
the domain of power, for government may enforce obedience to laws
regardless of scruples. When one's belief collides with the power of the
state, the latter is supreme within its sphere and submission or punishment
follows. But, in the forum of conscience, duty to a moral power higher than
the state has always been maintained. The reservation of that supreme
obligation, as a matter of principle, would unquestionably be made by many
of our conscientious and law-abiding citizens. The essence of religion is
belief in a relation to God involving duties superior to those arising from any
human relation." 10 The American Chief Justice spoke in dissent, it is true,
but with him in agreement were three of the foremost jurists who ever sat
in that Tribunal, Justices Holmes, Brandeis, and Stone.
2. As I view Justice Zaldivar's opinion in that light, my concurrence, as set
forth earlier, is wholehearted and entire. With such a cardinal postulate as
the basis of our polity, it has a message that cannot be misread. Thus is
intoned with a reverberating clang, to paraphrase Cardozo, a fundamental
principle that drowns all weaker sounds. The labored effort to cast doubt on
the validity of the statutory provision in question is far from persuasive. It is
attended by futility. It is not for this Court, as I conceive of the judicial
function, to restrict the scope of a preferred freedom.
3. There is, however, the question of whether such an exception possesses
an implication that lessens the effectiveness of state efforts to protect labor,
likewise, as noted, constitutionally ordained. Such a view, on the surface,
may not be lacking in plausibility, but upon closer analysis, it cannot stand
scrutiny. Thought must be given to the freedom of association, likewise an
aspect of intellectual liberty. For the late Professor Howe a constitutionalist
and in his lifetime the biographer of the great Holmes, it even partakes of
the political theory of pluralistic sovereignty. So great is the respect for the
autonomy accorded voluntary societies. 11 Such a right implies at the very
least that one can determine for himself whether or not he should join or
refrain from joining a labor organization, an institutional device for
promoting the welfare of the working man. A closed shop, on the other
hand, is inherently coercive. That is why, as is unmistakably reflected in our
decisions, the latest of which isGuijarno v. Court of Industrial Relations, 12 it
is far from being a favorite of the law. For a statutory provision then to
further curtail its operation, is precisely to follow the dictates of sound
public policy.

The exhaustive and well-researched opinion of Justice Zaldivar thus is in the

mainstream of constitutional tradition. That, for me, is the channel to follow.

G.R. Nos. 43633-34 September 14, 1990
PABLO ARIZALA, SERGIO MARIBAO, LEONARDO JOVEN, and FELINO
BULANDUS, petitioners,
vs.
THE COURT OF APPEALS and THE PEOPLE OF THE
PHILIPPINES, respondents.
Januario T. Seno for petitioners.
NARVASA, J.:
Under the Industrial Peace Act, 1 government-owned or controlled
corporations had the duty to bargain collectively and were otherwise subject
to the obligations and duties of employers in the private sector. 2 The Act
also prohibited supervisors to become, or continue to be, members of labor
organizations composed of rank-and-file employees, 3 and prescribed
criminal sanctions for breach of the prohibition. 4
It was under the regime of said Industrial Peace Act that the Government
Service Insurance System (GSIS, for short) became bound by a collective
bargaining agreement executed between it and the labor organization
representing the majority of its employees, the GSIS Employees Association.
The agreement contained a "maintenance-of-membership" clause, 5 i.e.,
that all employees who, at the time of the execution of said agreement,
were members of the union or became members thereafter, were obliged to
maintain their union membership in good standing for the duration of the
agreement as a condition for their continued employment in the GSIS.
There appears to be no dispute that at that time, the petitioners occupied
supervisory positions in the GSIS. Pablo Arizala and Sergio Maribao were,
respectively, the Chief of the Accounting Division, and the Chief of the Billing
Section of said Division, in the Central Visayas Regional Office of the GSIS.
Leonardo Joven and Felino Bulandus were, respectively, the Assistant Chief
of the Accounting Division (sometimes Acting Chief in the absence of the
Chief) and the Assistant Chief of the Field Service and Non-Life Insurance
Division (and Acting Division Chief in the absence of the Chief), of the same
Central Visayas Regional Office of the GSIS. Demands were made on all four
of them to resign from the GSIS Employees Association, in view of their
supervisory positions. They refused to do so. Consequently, two (2) criminal
cases for violation of the Industrial Peace Act were lodged against them in
the City Court of Cebu: one involving Arizala and Maribao 6 and the other,
Joven and Bulandus. 7
Both criminal actions resulted in the conviction of the accused in separate
decisions. 8 They were each sentenced "to pay a fine of P 500.00 or to suffer
subsidiary imprisonment in case of insolvency." They appealed to the Court
of Appeals. 9 Arizala's and Maribao's appeal was docketed as CA-G.R. No.
14724-CR; that of Joven and Bulandus, as CA-G.R. No. 14856-CR.
The appeals were consolidated on motion of the appellants, and eventuated
in a judgment promulgated on January 29, 1976 affirming the convictions of
all four appellants. The appellants moved for reconsideration. They argued
that when the so called "1973 Constitution" took effect on January 17, 1973
pursuant to Proclamation No. 1104, the case of Arizala and Maribao was still
pending in the Court of Appeals and that of Joven and Bulandus, pending
decision in the City Court of Cebu; that since the provisions of that
constitution and of the Labor Code subsequently promulgated (eff.,
November 1, 1974), repealing the Industrial Peace Act-placed employees of
all categories in government-owned or controlled corporations without
distinction within the Civil Service, and provided that the terms and
conditions of their employment were to be "governed by the Civil Service
Law, rules and regulations" and hence, no longer subject of collective
bargaining, the appellants ceased to fall within the coverage of the Industrial
Peace Act and should thus no longer continue to be prosecuted and exposed
to punishment for a violation thereof. They pointed out further that the
criminal sanction in the Industrial Peace Act no longer appeared in the Labor
Code. The Appellate Court denied their plea for reconsideration.
Hence, the present petition for review on certiorari.
The crucial issue obviously is whether or not the petitioners' criminal liability
for a violation of the Industrial Peace Act may be deemed to have been
obliterated in virtue of subsequent legislation and the provisions of the 1973
and 1987 Constitutions.
The petitioners' contention that their liability had been erased is made to
rest upon the following premises:
1. Section 1, Article XII-B of the 1973 Constitution does indeed provide that
the "Civil Service embraces every branch, agency, subdivision and
instrumentality of the government, including government-owned or
controlled corporations, .. administered by an independent Civil Service
Commission.
2. Article 292 of the Labor Code repealed such parts and provisions of the
Industrial Peace Act as were "not adopted as part" of said Code "either
directly or by reference." The Code did not adopt the provision of the
Industrial Peace Act conferring on employees of government-owned or
controlled corporations the right of self-organization and collective
bargaining; in fact it made known that the "terms and conditions of
employment of all government employees, including employees of
government-owned and controlled corporations," would thenceforth no
longer be fixed by collective bargaining but "be governed by the Civil Service
Law, rules and regulations." 10
3. The specific penalty for violation of the prohibition on supervisors being
members in a labor organization of employees under their supervision has
disappeared.
4. The Code also modified the concept of unfair labor practice, decreeing
that thenceforth, "it shall be considered merely as an administrative offense
rather than a criminal offense (and that) (u)nfair labor practice complaints
shall x x be processed like any ordinary labor disputes." 11
On the other hand, in justification of the Appellate Tribunal's affirmance of
the petitioners' convictions of violations of the Industrial Peace Act, the
People-
1) advert to the fact that said Labor Code also states that "all actions or
claims accruing prior to ... (its) effectivity ... shall be determined in
accordance with the laws in force at the time of their accrual;" and
2) argue that the legislature cannot generally intervene and vacate the
judgment of the courts, either directly or indirectly, by the repeal of the
statute under which said judgment has been rendered.
The legal principles governing the rights of self-organization and collective
bargaining of rank-and-file employees in the government- particularly as
regards supervisory, and high level or managerial employees have
undergone alterations through the years.
Republic Act No. 875
As already intimated, under RA 875 (the Industry Peace Act), 12 persons
"employed in proprietary functions of the Government, including but not
limited to governmental corporations," had the right of self-organization and
collective bargaining, including the right to engage in concerted activities to
attain their objectives, e.g. strikes.
But those "employed in governmental functions" were forbidden to "strike
for the purpose of securing changes or modification in their terms and
conditions of employment" or join labor organizations which imposed on
their members the duty to strike. The reason obviously was that the terms
and conditions of their employment were "governed by law" and hence
could not be fixed, altered or otherwise modified by collective bargaining.
Supervisory employees were forbidden to join labor organizations composed
of employees under them, but could form their own unions. Considered
"supervisors' were those 'having authority in the interest of an employer to
hire, transfer, suspend, lay-off, recall, discharge, assign, recommend, or
discipline other employees, or responsibly to direct them, and to adjust their
grievance or effectively to recommend such acts if, in connection with the
foregoing, the exercise of such authority is not merely routinary or clerical in
nature but requires the use of independent judgment." 13
Republic Act No. 2260
Similar provisions were found in R.A. No. 2260, the Civil Service Act of 1959.
This Act declared that the "Philippine Civil Service ... (embraced) all
branches, subdivisions and instrumentalities of the government including
government-owned and controlled corporations." 14
It prohibited such civil service employees who were "employed in
governmental functions" to belong to any labor organization which imposed
on their members "the obligation to strike or to join strikes." And one of the
first issuances of the President after the proclamation of martial law in
September, 1972, was General Order No. 5 which inter alia banned strikes in
vital industries," as well as 'all rallies, demonstrations and other forms of
group actions." 15
Not so prohibited, however, were those "employed in proprietary
functions of the Government including, but not limited to, governmental
corporations." 16 The Act also penalized any person who "violates, refuses or
neglects to comply with any ... provisions (of the Act) or rules (thereunder
promulgated) ... by a fine not exceeding one thousand pesos or by
imprisonment not exceeding six months or both such fine and imprisonment
in the discretion of the court." 17
The 1973 Constitution
The 1973 Constitution laid down the broad principle that "(t)he State shall
assure the rights of workers to self-organization, collective bargaining,
security of tenure, and just and humane conditions of work," 18 and directed
that the "National Assembly shall provide for the standardization of
compensation of government officials and employees, including those in
government-owned or controlled corporations, taking into account the
nature of the responsibilities pertaining to, and the qualifications required
for, the positions concerned." 19
PD 442, The Labor Code
The Labor Code of the Philippines, Presidential Decree No. 442, enacted
within a year from effectivity of the 1973 Constitution, 20 incorporated the
proposition that the "terms and conditions of employment of all
government employees, including employees of government-owned and
controlled corporations ... (are) governed by the Civil Service Law, rules and
regulations." 21 It incorporated, too, the constitutional mandate that the
salaries of said employees "shall be standardized by the National Assembly."
The Labor Code, 22 however "exempted" government employees from the
right to self-organization for purposes of collective bargaining. While the
Code contained provisions acknowledging the right of "all persons employed
in commercial, industrial and agricultural enterprises, including religious,
medical or educational institutions operating for profit" to "self-organization
and to form, join or assist labor organizations for purposes of collective
bargaining," they "exempted from the foregoing provisions:
a) security guards;
b) government employees, including employees of government government-
owned and/ or controlled corporations;
c) managerial employees; and
d) employees of religious, charitable, medical and educational institutions
not operating for profit, provided the latter do not have existing collective
agreements or recognized unions at the time of the effectivity of the code or
have voluntarily waived their exemption." 23
The reason for denying to government employees the right to "self-
organization and to form, join or assist labor organizations for purposes of
collective bargaining" is presumably the same as that under the Industrial
Peace Act, i.e., that the terms and conditions of government employment
are fixed by law and not by collective bargaining.
Some inconsistency appears to have arisen between the Labor Code and the
Civil Service Act of 1959. Under the Civil Service Act, persons "employed in
proprietary functions of the government including, but not limited to,
governmental corporations'-not being within "the policy of the Government
that the employees therein shall not strike for the purpose of securing
changes in their terms and conditions of employment"-could legitimately
bargain with their respective employers through their labor organizations,
and corollarily engage in strikes and other concerted activities in an attempt
to bring about changes in the conditions of their work. They could not
however do so under the Labor Code and its Implementing Rules and
Regulations; these provided that "government employees, including
employees of government-owned and/or controlled corporations," without
distinction as to function, were "exempted" (excluded is the better term)
from "the right to self-organization and to form, join or assist labor
organizations for purposes of collective bargaining," and by implication,
excluded as well from the right to engage in concerted activities, such as
strikes, as coercive measures against their employers.
Members of supervisory unions who were not managerial employees, were
declared by the Labor Code to be "eligible to join or assist the rank and file
labor organization, and if none exists, to form or assist in the forming of such
rank and file organization " 24 Managerial employees, on the other hand,
were pronounced as 'not eligible to join, assist or form any labor
organization." 25 A "managerial employee" was defined as one vested with
power or prerogatives to lay down and execute management policies and/or
to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees, or to effectively recommend such managerial actions." 26
Presidential Decree No. 807
Clarification of the matter seems to have been very shortly attempted by the
Civil Service Decree of the Philippines, Presidential Decree No. 807 (eff., Oct.
6,1975) which superseded the Civil Service Law of 1959 (RA 2260) 27 and
repealed or modified "all laws, rules and regulations or parts thereof
inconsistent with the provisions" thereof. The Decree categorically described
the scope and coverage of the "Civil Service" as embracing 44 every branch,
agency, subdivision, and instrumentality of the government, including every
government owned or controlled corporation whether performing
governmental or propriety function. 28 The effect was seemingly to prohibit
government employees (including those "employed in proprietary functions
of the Government") to "strike for the purpose of securing changes of their
terms and conditions of employment," 29 something which, as aforestated,
they were allowed to do under the Civil Service Act of 1959. 30
Be this as it may it seems clear that PD 807 (the Civil Service Decree) did not
modify the declared ineligibility of "managerial employees" from joining,
assisting or forming any labor organization.
Executive Order No. 111
Executive Order No. 111, issued by President Corazon C. Aquino on
December 24, 1986 in the exercise of legislative powers under the Freedom
Constitution, modified the general disqualification above mentioned of
'government employees, including employees of government-owned and/or
controlled corporations" from "the right to self-organization and to form,
join or assist labor organizations for purposes of collective bargaining.' It
granted to employees "of government corporations established under the
Corporation Code x x the right to organize and to bargain collectively with
their respective employers." 31 To all 'other employees in the civil service, ...
(it granted merely) the right to form associations for purposes not contrary
to law," 32 not for "purposes of collective bargaining."
The 1987 Constitution
The provisions of the present Constitution on the matter appear to be
somewhat more extensive. They declare that the "right to self organization
shall not be denied to government employees;" 33 that the State "shall
guarantee the rights of all workers to self-organization, collective bargaining
and negotiations, and peaceful concerted activities, including the right to
strike in accordance with law;" and that said workers "shall be entitled to
security of tenure, humane conditions of work, and a living wage, ... (and)
also participate in policy and decision-making processes affecting their rights
and benefits as may be provided by law. 34
CSC Memorandum Circular No. 6
Memorandum Circular No. 6 of the Civil Service Commission, issued on April
21, 1987 enjoined strikes by government officials and employees, to wit: 35
... Prior to the enactment by Congress of applicable laws concerning strike
by government employees, and considering that there are existing laws
which prohibit government officials and employees from resorting to strike,
the Commission enjoins, under pain of administrative sanctions, all
government officers and employees from staging strikes, demonstrations,
mass leaves, walk-outs and other forms of mass action which will result in
temporary stoppage or disruption of public services. To allow otherwise is to
undermine or prejudice the government system.
Executive Order No. 180
The scope of the constitutional right to self-organization of "government
employees" above mentioned, was defined and delineated in Executive
Order No. 180 (eff. June 1, 1987). According to this Executive Order, the right
of self-organization does indeed pertain to all "employees of all branches,
subdivisions, instrumentalities and agencies of the Government, including
government-owned or controlled corporations with original charters;" 36such
employees "shall not be discriminated against in respect of their
employment by reason of their membership in employees' organizations or
participation in the normal activities of their organization x x (and their)
employment shall not be subject to the condition that they shall not join or
shall relinquish their membership in the employees' organizations. 37
However, the concept of the government employees' right of self-
organization differs significantly from that of employees in the private sector.
The latter's right of self-organization, i.e., "to form, join or assist labor
organizations for purposes of collective bargaining," admittedly includes the
right to deal and negotiate with their respective employers in order to fix
the terms and conditions of employment and also, to engage in concerted
activities for the attainment of their objectives, such as strikes, picketing,
boycotts. But the right of government employees to "form, join or assist
employees organizations of their own choosing" under Executive Order No.
180 is not regarded as existing or available for "purposes of collective
bargaining," but simply "for the furtherance and protection of their
interests." 38
In other words, the right of Government employees to deal and negotiate
with their respective employers is not quite as extensive as that of private
employees. Excluded from negotiation by government employees are the
"terms and conditions of employment ... that are fixed by law," it being only
those terms and conditions not otherwise fixed by law that "may be subject
of negotiation between the duly recognized employees' organizations and
appropriate government authorities," 39 And while EO No. 180 concedes to
government employees, like their counterparts in the private sector, the
right to engage in concerted activities, including the right to strike, the
executive order is quick to add that those activities must be exercised in
accordance with law, i.e. are subject both to "Civil Service Law and rules"
and "any legislation that may be enacted by Congress," 40 that "the
resolution of complaints, grievances and cases involving government
employees" is not ordinarily left to collective bargaining or other related
concerted activities, but to "Civil Service Law and labor laws and procedures
whenever applicable;" and that in case "any dispute remains unresolved
after exhausting all available remedies under existing laws and procedures,
the parties may jointly refer the dispute to the (Public Sector Labor-
Management) Council for appropriate action." 41 What is more, the Rules
and Regulations implementing Executive Order No. 180 explicitly provide
that since the "terms and conditions of employment in the government,
including any political subdivision or instrumentality thereof and
government-owned and controlled corporations with original charters are
governed by law, the employees therein shall not strike for the purpose of
securing changes thereof. 42
On the matter of limitations on membership in labor unions of government
employees, Executive Order No. 180 declares that "high level employees
whose functions are normally considered as policy making or managerial, or
whose duties are of a highly confidential nature shall not be eligible to join
the organization of rank-and-file government employees. 43 A "high level
employee" is one "whose functions are normally considered policy
determining, managerial or one whose duties are highly confidential in
nature. A managerial function refers to the exercise of powers such as: 1. To
effectively recommend such managerial actions; 2. To formulate or execute
management policies and decisions; or 3. To hire, transfer, suspend, lay off,
recall, dismiss, assign or discipline employees. 44
Republic Act No. 6715
The rule regarding membership in labor organizations of managerial and
supervisory employees just adverted to, was clarified and refined by
Republic Act No. 6715, effective on March 21, 1989, further amending the
Labor Code.
Under RA 6715 labor unions are regarded as organized either (a) "for
purposes of negotiation," or (b) "for furtherance and protection"of the
members' rights. Membership in unions organized "for purposes of
negotiation" is open only to rank-and-file employees. "Supervisory
employees" are ineligible "for membership in a labor organization of the
rank-and-file employees but may join, assist or form separate labor
organizations of their own," i.e., one organized "for furtherance and
protection" of their rights and interests. However, according to the Rules
implementing RA 6715, "supervisory employees who are included in an
existing rank-and- file bargaining unit, upon the effectivity of Republic Act
No. 6715 shall remain in that unit ..." Supervisory employees are "those
who, in the interest of the employer, effectively recommend such
managerial actions 45 if the exercise of such authority is not merely routinary
or clerical in nature but requires the use of independent judgment. 46
Membership in employees' organizations formed for purposes of
negotiation are open to rank-and-file employees only, as above mentioned,
and not to high level employees. 47 Indeed, "managerial employees" or "high
level employees" are, to repeat, "not eligible to join, assist or form any labor
organization" at all. 48 A managerialemployee is defined as "one who is
vested with powers or prerogatives to lay down and execute, management
policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or
discipline employees." 49
This is how the law now stands, particularly with respect to supervisory
employees vis a vis labor organizations of employees under them.
Now, the GSIS performs proprietary functions. It is a non-stock corporation,
managed by a Board of Trustees exercising the "usual corporate
powers." 50 In other words, it exercises all the powers of a corporation under
the Corporation Law in so far as they are not otherwise inconsistent with
other applicable law. 51 It is engaged essentially in insurance, a business that
"is not inherently or exclusively a governmental function, ... (but) is on the
contrary, in essence and practice, of a private nature and interest." 52
1. The petitioners contend that the right of self-organization and
collectivebargaining had been withdrawn by the Labor Code from
government employees including those in government-owned and
controlled corporations- chiefly for the reason that the terms and conditions
of government employment, all embraced in civil service, may not be
modified by collective bargaining because set by law. It is therefore
immaterial, they say, whether supervisors are members of rank-and-file
unions or not; after all, the possibility of the employer's control of the
members of the union thru supervisors thus rendering collective bargaining
illusory, which is the main reason for the prohibition, is no longer of any
consequence.
This was true, for a time. As already discussed, both under the Labor Code
and PD 807, government employees, including those in government-owned
or controlled corporations, were indeed precluded from bargaining as
regards terms and conditions of employment because these were set by law
and hence could not possibly be altered by negotiation.
But EO 111 restored the right to organize and to negotiate and bargain of
employees of "government corporations established under the Corporation
Code." And EO 180, and apparently RA 6715, too, granted to all government
employees the right of collective bargaining or negotiation except as regards
those terms of their employment which were fixed by law; and as to said
terms fixed by law, they were prohibited to strike to obtain changes thereof.
2. The petitioners appear to be correct in their view of the disappearance
from the law of the prohibition on supervisors being members of labor
organizations composed of employees under their supervision. The Labor
Code (PD 442) allowed supervisors (if not managerial) to join rank-and-file
unions. And under the Implementing Rules of RA 6715, supervisors who
were members of existing labor organizations on the effectivity of said RA
6715 were explicitly authorized to "remain therein."
3. The correctness of the petitioners' theory that unfair labor practices
ceased to be crimes and were deemed merely administrative offenses in
virtue of the Labor Code, cannot be gainsaid. Article 250 of the Labor Code
did provide as follows:
ART. 250. Concept of unfair labor practice.-The concept of unfair labor
practice is hereby modified. Henceforth, it shall be considered merely as an
administrative offense rather than a criminal offense. Unfair labor practice
complaints shall, therefore, be processed like any ordinary labor disputes.
But unfair labor practices were declared to be crimes again by later
amendments of the Labor Code effected by Batas Pambansa Blg. 70,
approved on May 1, 1980. As thus amended, the Code now pertinently
reads as follows:
ART. 248. Concept of unfair labor practice and procedure for
prosecution thereof. — Unfair labor practices violate the right of workers
and employees to self organization, are inimical to the legitimate interests of
both labor and management including their right to bargain collectively and
otherwise deal with each other in an atmosphere of freedom and mutual
respect, and hinder the promotion of healthy and stable labor management
relations. Consequently, unfair labor practices are not only violations of the
civil rights of both labor and management but are also offenses against the
State which shall be subject to prosecution and punishment as herein
provided.
xxx xxx xxx
Recovery of civil liability in the administrative proceedings shall bar recovery
under the Civil Code.
No criminal prosecution under this title may be instituted without a final
judgment, finding that an unfair labor practice was committed having been
first obtained in the preceding paragraph. ...
The decisive consideration is that at present, supervisors who were already
members of a rank-and-file labor organization at the time of the effectivity
of R.A. No. 6715, are authorized to "remain therein." It seems plain, in other
words, that the maintenance by supervisors of membership in a rank-and-
file labor organization even after the enactment of a statute imposing a
prohibition on such membership, is not only not a crime, but is explicitly
allowed, under present law.
Now, in a case decided as early as 1935, People v. Tamayo, 53 where the
appellants had appealed from a judgment convicting them of a violation of a
municipal -ordinance, and while their appeal was pending, the ordinance
was repealed such that the act complained of ceased to be a criminal act but
became legal, this Court dismissed the criminal proceedings, pronouncing
the effects of the repeal to be as follows:
In the leading case of the United States vs. Cuna (12 Phil. 241), and Wing
vs. United States (218 U.S. 272), the doctrine was clearly established that in
the Philippines repeal of a criminal act by its reenactment, even without a
saving clause would not destroy criminal liability. But not a single sentence
in either derision indicates that there was any desire to hold that a person
could be prosecuted convicted, and punished for acts no longer criminal.
There is no question that at common law and in America a much more
favorable attitude towards the accused exists relative to statutes that have
been repealed than has been adopted here. Our rule is more in conformity
with the Spanish doctrine, but even in Spain, where the offense ceased to be
criminal, petition cannot be had (1 Pacheco, Commentaries, 296).
The repeal here was absolute and not a reenactment and repeal by
implication. Nor was there any saving clause. The legislative intent as shown
by the action of the municipal is that such conduct, formerly denounced, is
no longer deemed criminal, and it would be illogical for this court to attempt
to sentence appellant for the offense that no longer exists.
We are therefore of the opinion that the proceedings against appellant must
be dismissed.
To the same effect and in even more unmistakable language is People v.
Almuete 54 where the defendants-appellees were charged under section 39
of Republic Act No. 1199, as amended (the Agricultural Land Tenancy Law of
1954) which penalized pre-threshing by either agricultural tenant or his
landlord. They sought and secured a dismissal on the ground, among others,
that there was no law punishing the act charged-a reference to the fact that
Republic Act No. 1199 had already been superseded by the Agricultural Land
Reform Code of 1963 which instituted the leasehold system and abolished
share tenancy subject to certain conditions. On appeal by the Government,
this Court upheld the dismissal, saying:
The legislative intent not to punish anymore the tenant's act of pre-reaping
and pre-threshing without notice to the landlord is inferable from the fact
that, as already noted, the Code of Agrarian Reforms did not reenact section
39 of the Agricultural Tenancy Law and that it abolished share tenancy which
is the basis for penalizing clandestine pre-reaping and pre-threshing.
xxx xxx xxx
As held in the Adillo case, 55 the act of pre-reaping and pre-threshing
without notice to the landlord, which is an offense under the Agricultural
Tenancy Law, had ceased to be an offense under the subsequent law, the
Code of Agrarian Reforms. To prosecute it as an offense when the Code of
Agrarian Reforms is already in force would be repugnant or abhorrent to the
policy and spirit of that Code and would subvert the manifest legislative
intent not to punish anymore pre-reaping and pre-threshing without notice
to the landholder.
xxx xxx xxx
The repeal of a penal law deprives the courts of jurisdiction to punish
persons charged with a violation of the old penal law prior to its repeal
(People vs. Tamayo, 61 Phil. 225; People vs. Sindiong and Pastor, 77 Phil.
1000; People vs. Binuya, 61 Phil. 208; U.S. vs. Reyes, 10 Phil. 423; U.S. vs.
Academia, 10 Phil. 431. See dissent in Lagrimas vs. Director of Prisons, 57
Phil. 247, 252, 254).
The foregoing precedents dictate absolution of the appellants of the
offenses imputed to them.
WHEREFORE, the judgments of conviction in CA-G.R. No. 14724-CR and CA-
G.R. No. 14856-CR, subject of the appeal, as well as those in Crim. Case No.
5275-R and Crim. Case No. 4130-R rendered by the Trial Court, are
REVERSED and the accused-appellants ACQUITTED of the charges against
them, with costs de officio.
SO ORDERED.

G.R. No. 96189 July 14, 1992
UNIVERSITY OF THE PHILIPPINES, petitioner,
vs.
HON. PURA FERRER-CALLEJA, Director of the Bureau of Labor Relations,
Department of Labor and Employment, and THE ALL U.P. WORKERS'
UNION, represented by its President, Rosario del Rosario,respondent.
NARVASA, C.J.:
In this special civil action of certiorari the University of the Philippines seeks
the nullification of the Order dated October 30, 1990 of Director Pura Ferrer-
Calleja of the Bureau of Labor Relations holding that "professors, associate
professors and assistant professors (of the University of the Philippines) are .
. rank-and-file employees . . ;" consequently, they should, together with the
so-called non-academic, non-teaching, and all other employees of the
University, be represented by only one labor organization. 1 The University is
joined in this undertaking by the Solicitor General who "has taken a position
not contrary to that of petitioner and, in fact, has manifested . . that he is
not opposing the petition . . ." 2
The case 3 was initiated in the Bureau of Labor Relations by a petition filed
on March 2, 1990 by a registered labor union, the "Organization of Non-
Academic Personnel of UP" (ONAPUP). 4 Claiming to have a membership of
3,236 members — comprising more than 33% of the 9,617 persons
constituting the non-academic personnel of UP-Diliman, Los Baños, Manila,
and Visayas, it sought the holding of a certification election among all said
non-academic employees of the University of the Philippines. At a
conference thereafter held on March 22, 1990 in the Bureau, the University
stated that it had no objection to the election.
On April 18, 1990, another registered labor union, the "All UP Workers'
Union," 5 filed a comment, as intervenor in the certification election
proceeding. Alleging that its membership covers both academic and non-
academic personnel, and that it aims to unite all UP rank-and-file employees
in one union, it declared its assent to the holding of the election provided
the appropriate organizational unit was first clearly defined. It observed in
this connection that the Research, Extension and Professional Staff (REPS),
who are academic non-teaching personnel, should not be deemed part of
the organizational unit.
For its part, the University, through its General Counsel, 6 made of record its
view that there should be two (2) unions: one for academic, the other for
non-academic or administrative, personnel considering the dichotomy of
interests, conditions and rules governing these employee groups.
Director Calleja ruled on the matter on August 7, 1990. 7 She declared that
"the appropriate organizational unit . . should embrace all the regular rank-
and-file employees, teaching and non-teaching, of the University of the
Philippines, including all its branches" and that there was no sufficient
evidence "to justify the grouping of the non-academic or administrative
personnel into an organization unit apart and distinct from that of the
academic or teaching personnel." Director Calleja adverted to Section 9 of
Executive Order No. 180, viz.:
Sec. 9. The appropriate organizational unit shall be the employer unit
consisting of rank-and-file employees, unless circumstances otherwise
require.
and Section 1, Rule IV of the Rules Implementing said EO 180 (as amended
by SEC. 2, Resolution of Public Sector Labor Management Council dated May
14, 1989, viz.:
xxx xxx xxx
For purposes of registration, an appropriate organizational unit may refer to:
xxx xxx xxx
d. State universities or colleges, government-owned or controlled
corporations with original charters.
She went on to say that the general intent of EO 180 was "not to
fragmentize the employer unit, as "can be gleaned from the definition of the
term "accredited employees' organization," which refers to:
. . a registered organization of the rank-and-file employees as defined in
these rules recognized to negotiate for the employees in an organizational
unit headed by an officer with sufficient authority to bind the agency, such
as . . . . . . state colleges and universities.
The Director thus commanded that a certification election be "conducted
among rank-and-file employees, teaching and non-teaching" in all four
autonomous campuses of the UP, and that management appear and bring
copies of the corresponding payrolls for January, June, and July, 1990 at the
"usual pre-election conference . . ."
At the pre-election conference held on March 22, 1990 at the Labor
Organizational Division of the DOLE, 8 the University sought further
clarification of the coverage of the term, "rank-and-file" personnel, asserting
that not every employee could properly be embraced within both teaching
and non-teaching categories since there are those whose positions are in
truth managerial and policy-determining, and hence, excluded by law.
At a subsequent hearing (on October 4, 1990), the University filed a
Manifestation seeking the exclusion from the organizational unit of those
employees holding supervisory positions among non-academic personnel,
and those in teaching staff with the rank of Assistant Professor or higher,
submitting the following as grounds therefor:
1) Certain "high-level employees" with policy-making, managerial, or
confidential functions, are ineligible to join rank-and-file employee
organizations under Section 3, EO 180:
Sec. 3. High-level employees whose functions are normally considered as
policy-making or managerial or whose duties are of a highly confidential
nature shall not be eligible to join the organization of rank-and file
government employees;
2) In the University hierarchy, not all teaching and non-teaching personnel
belong the rank-and file: just as there are those occupying managerial
positions within the non-teaching roster, there is also a dichotomy between
various levels of the teaching or academic staff;
3) Among the non-teaching employees composed of Administrative Staff
and Research personnel, only those holding positions below Grade 18
should be regarded as rank-and-file, considering that those holding higher
grade positions, like Chiefs of Sections, perform supervisory functions
including that of effectively recommending termination of appointments or
initiating appointments and promotions; and
4) Not all teaching personnel may be deemed included in the term, "rank-
and-file;" only those holding appointments at the instructor level may be so
considered, because those holding appointments from Assistant Professor to
Associate Professor to full Professor take part, as members of the University
Council, a policy-making body, in the initiation of policies and rules with
respect to faculty tenure and promotion. 9
The ONAPUP quite categorically made of record its position; that it was not
opposing the University's proferred classification of rank-and file employees.
On the other hand, the "All UP Workers' Union" opposed the University's
view, in a Position Paper presented by it under date of October 18, 1990.
Director Calleja subsequently promulgated an Order dated October 30,
1990, resolving the "sole issue" of "whether or not professors, associate
professors and assistant professors are included in the definition of high-
level employee(s)" in light of Rule I, Section (1) of the Implementing
Guidelines of Executive Order No. 180, defining "high level employee" as
follows:
1. High Level Employee — is one whose functions are normally considered
policy determining, managerial or one whose duties are highly confidential
in nature. A managerial function refers to the exercise of powers such as:
1. To effectively recommend such managerial actions;
2. To formulate or execute management policies and decisions; or
3. To hire, transfer, suspend, lay-off, recall, dismiss, assign or discipline
employees.
The Director adjudged that said teachers are rank-and-file employees
"qualified to join unions and vote in certification elections." According to her
— while a full Professor who has published several treatises and who has
A careful perusal of the University Code . . shows that the policy-making
powers of the Council are limited to academic matters, namely, prescribing
courses of study and rules of discipline, fixing student admission and
graduation requirements, recommending to the Board of Regents the
conferment of degrees, and disciplinary power over students. The policy-
determining functions contemplated in the definition of a high-level
employee pertain to managerial, executive, or organization policies, such as
hiring, firing, and disciplining of employees, salaries, teaching/working
hours, other monetary and non-monetary benefits, and other terms and
conditions of employment. They are the usual issues in collective bargaining
negotiations so that whoever wields these powers would be placed in a
situation of conflicting interests if he were allowed to join the union of rank-
and-file employees.
The University seasonably moved for reconsideration, seeking to make the
following points, to wit:
1) UP professors do "wield the most potent managerial powers: the power
to rule on tenure, on the creation of new programs and new jobs, and
conversely, the abolition of old programs and the attendant re-assignment
of employees.
2) To say that the Council is "limited to (acting on) academic matters" is
error, since academic decisions "are the most important decisions made in a
University . . (being, as it were) the heart, the core of the University as a
workplace.
3) Considering that the law regards as a "high level" employee, one who
performs either policy-determining, managerial, or confidential functions,
the Director erred in applying only the "managerial functions" test, ignoring
the "policy-determining functions" test.
4) The Director's interpretation of the law would lead to absurd results, e.g.:
"an administrative officer of the College of Law is a high level employee,
distinguished himself in argument before the Supreme Court is a mere rank-
and-file employee. A dormitory manager is classified as a high level
employee, while a full Professor or Political Science with a Ph. D. and several
Honorary doctorates is classified as rank-and-file." 10
The motion for reconsideration was denied by Director Calleja, by Order
dated November 20, 1990.
The University would now have this Court declare void the Director's Order
of October 30, 1990 as well as that of November 20, 1990. 11 A temporary
restraining order was issued by the Court, by Resolution dated December 5,
1990 conformably to the University's application therefor.
Two issues arise from these undisputed facts. One is whether or not
professors, associate professors and assistant professors are "high-level
employees" "whose functions are normally considered policy determining,
managerial or . . highly confidential in nature." The other is whether or not,
they, and other employees performing academic functions, 12 should
comprise a collective bargaining unit distinct and different from that
consisting of the non-academic employees of the University, 13 considering
the dichotomy of interests, conditions and rules existing between them.
As regards the first issue, the Court is satisfied that it has been correctly
resolved by the respondent Director of Bureau Relations. In light of
Executive Order No. 180 and its implementing rules, as well as the
University's charter and relevant regulations, the professors, associate
professors and assistant professors (hereafter simply referred to as
professors) cannot be considered as exercising such managerial or highly
confidential functions as would justify their being categorized as "high-level
employees" of the institution.
The Academic Personnel Committees, through which the professors
supposedly exercise managerial functions, were constituted "in order to
foster greater involvement of the faculty and other academic personnel in
appointments, promotions, and other personnel matters that directly affect
them." 14 Academic Personnel Committees at the departmental and college
levels were organized "consistent with, and demonstrative of the very idea
of consulting the faculty and other academic personnel on matters directly
affecting them" and to allow "flexibility in the determination of guidelines
peculiar to a particular department or college." 15
Personnel actions affecting the faculty and other academic personnel
should, however, "be considered under uniform guidelines and consistent
with the Resolution of the Board (of Regents) adopted during its 789th
Meeting (11-26-69) creating the University Academic Personnel
Board." 16 Thus, the Departmental Academic Personnel Committee is given
the function of "assist(ing) in the review of the recommendations initiated
by the Department Chairman with regard to recruitment, selection,
performance evaluation, tenure and staff development, in accordance with
the general guidelines formulated by the University Academic Personnel
Board and the implementing details laid down by the College Academic
Personnel Committee;" 17 while the College Academic Personnel Committee
is entrusted with the following functions: 18
1. Assist the Dean in setting up the details for the implementation of
policies, rules, standards or general guidelines as formulated by the
University Academic Personnel Board;
2. Review the recommendation submitted by the DAPCs with regard to
recruitment, selection, performance evaluation, tenure, staff development,
and promotion of the faculty and other academic personnel of the College;
3. Establish departmental priorities in the allocation of available funds for
promotion;
4. Act on cases of disagreement between the Chairman and the members of
the DAPC particularly on personnel matters covered by this Order;
5. Act on complaints and/or protests against personnel actions made by the
Department Chairman and/or the DAPC.
The University Academic Personnel Board, on the other hand, performs the
following functions: 19
1. Assist the Chancellor in the review of the recommendations of the
CAPC'S.
2. Act on cases of disagreement between the Dean and the CAPC.
3. Formulate policies, rules, and standards with respect to the selection,
compensation, and promotion of members of the academic staff.
4. Assist the Chancellor in the review of recommendations on academic
promotions and on other matters affecting faculty status and welfare.
From the foregoing, it is evident that it is the University Academic Personnel
Committee, composed of deans, the assistant for academic affairs and the
chief of personnel, which formulates the policies, rules and standards
respecting selection, compensation and promotion of members of the
academic staff. The departmental and college academic personnel
committees' functions are purely recommendatory in nature, subject to
review and evaluation by the University Academic Personnel Board.
In Franklin Baker Company of the Philippines vs. Trajano,20 this Court
reiterated the principle laid down in National Merchandising Corp. vs. Court
of Industrial Relations, 21that the power to recommend, in order to qualify
an employee as a supervisor or managerial employee "must not only
be effective but the exercise of such authority should not be merely of a
routinary or clerical nature but should require the use of independent
judgment." Where such recommendatory powers, as in the case at bar, are
subject to evaluation, review and final action by the department heads and
other higher executives of the company, the same, although present, are not
effective and not an exercise of independent judgment as required by law.
Significantly, the personnel actions that may be recommended by the
departmental and college academic personnel committees must conform
with the general guidelines drawn up by the university personnel academic
committee. This being the case, the members of the departmental and
college academic personnel committees are not unlike the chiefs of divisions
and sections of the National Waterworks and Sewerage Authority whom this
Court considered as rank-and-file employees in National Waterworks &
Sewerage Authority vs. NWSA Consolidated Unions, 22 because "given ready
policies to execute and standard practices to observe for their execution, . . .
they have little freedom of action, as their main function is merely to carry
out the company's orders, plans and policies."
The power or prerogative pertaining to a high-level employee "to effectively
recommend such managerial actions, to formulate or execute management
policies or decisions and/or to hire, transfer, suspend, lay-off, recall, dismiss,
assign or discipline employees" 23 is exercised to a certain degree by the
university academic personnel board/committees and ultimately by the
Board of Regents in accordance with Section 6 of the University
Charter, 24 thus:
(e) To appoint, on the recommendation of the President of the University,
professors, instructors, lecturers and other employees of the University; to
fix their compensation, hours of service, and such other duties and
conditions as it may deem proper; to grant them in its discretion leave of
absence under such regulations as it may promulgate, any other provision of
law to the contrary notwithstanding, and to remove them for cause after
investigation and hearing shall have been had.
Another factor that militates against petitioner's espousal of managerial
employment status for all its professors through membership in the
departmental and college academic personnel committees is that not all
professors are members thereof. Membership and the number of members
in the committees are provided as follows: 25
Sec. 2. Membership in Committees. — Membership in committees may be
made either through appointment, election, or by some other means as may
be determined by the faculty and other academic personnel of a particular
department or college.
Sec. 3. Number of Members. — In addition to the Chairman, in the case of a
department, and the Dean in the case of a college, there shall be such
number of members representing the faculty and academic personnel as will
afford a fairly representative, deliberative and manageable group that can
handle evaluation of personnel actions.
Neither can membership in the University Council elevate the professors to
the status of high-level employees. Section 6 (f) and 9 of the UP Charter
respectively provide: 26
Sec. 6. The Board of Regents shall have the following powers and duties . . . ;
xxx xxx xxx
(f) To approve the courses of study and rules of discipline drawn up by the
University Council as hereinafter provided; . . .
Sec. 9. There shall be a University Council consisting of the President of the
University and of all instructors in the university holding the rank of
professor, associate professor, or assistant professor. The Council shall have
the power to prescribe the courses of study and rules of discipline, subject
to the approval of the Board of Regents. It shall fix the requirements for
admission to any college of the university, as well as for graduation and the
receiving of a degree. The Council alone shall have the power to recommend
students or others to be recipients of degrees. Through its president or
committees, it shall have disciplinary power over the students within the
limits prescribed by the rules of discipline approved by the Board of Regents.
The powers and duties of the President of the University, in addition to
those specifically provided in this Act shall be those usually pertaining to the
office of president of a university.
It is readily apparent that the policy-determining functions of the University
Council are subject to review, evaluation and final approval by the Board of
Regents. The Council's power of discipline is likewise circumscribed by the
limits imposed by the Board of Regents. What has been said about the
recommendatory powers of the departmental and college academic
personnel committees applies with equal force to the alleged policy-
determining functions of the University Council.
Even assuming arguendo that UP professors discharge policy-determining
functions through the University Council, still such exercise would not
qualify them as high-level employees within the context of E.O. 180. As
correctly observed by private respondent, "Executive Order No. 180 is a law
concerning public sector unionism. It must therefore be construed within
that context. Within that context, the University of the Philippines
represents the government as an employer. 'Policy-determining' refers to
policy-determination in university mattes that affect those same matters
that may be the subject of negotiation between public sector management
and labor. The reason why 'policy-determining' has been laid down as a test
in segregating rank-and-file from management is to ensure that those who
lay down policies in areas that are still negotiable in public sector collective
bargaining do not themselves become part of those employees who seek to
change these policies for their collective welfare." 27
The policy-determining functions of the University Council refer to academic
matters, i.e. those governing the relationship between the University and its
students, and not the University as an employer and the professors as
employees. It is thus evident that no conflict of interest results in the
professors being members of the University Council and being classified as
rank-and-file employees.
Be that as it may, does it follow, as public respondent would propose, that all
rank-and-file employees of the university are to be organized into a single
collective bargaining unit?
A "bargaining unit" has been defined as a group of employees of a given
employer, comprised of all or less than all of the entire body of employees,
which the collective interest of all the employees, consistent with equity to
the employer, indicate to be the best suited to serve the reciprocal rights
and duties of the parties under the collective bargaining provisions of the
law. 28
Our labor laws do not however provide the criteria for determining the
proper collective bargaining unit. Section 12 of the old law, Republic Act No.
875 otherwise known as the Industrial Peace Act, simply reads as follows: 29
Sec. 12. Exclusive Collective Bargaining Representation for Labor
Organizations. — The labor organization designated or selected for the
purpose of collective bargaining by the majority of the employees in an
appropriate collective bargaining unit shall be the exclusive representative of
all the employees in such unit for the purpose of collective bargaining in
respect to rates of pay, wages, hours of employment, or other conditions of
employment; Provided, That any individual employee or group of employees
shall have the right at any time to present grievances to their employer.
Although said Section 12 of the Industrial Peace Act was subsequently
incorporated into the Labor Code with minor changes, no guidelines were
included in said Code for determination of an appropriate bargaining unit in
a given case. 30 Thus, apart from the single descriptive word "appropriate,"
no specific guide for determining the proper collective bargaining unit can
be found in the statutes.
Even Executive Order No. 180 already adverted to is not much help. All it
says, in its Section 9, is that "(t)he appropriate organizational unit shall be
the employer unit consisting of rank-and-file employees, unless
circumstances otherwise require." Case law fortunately furnishes some
guidelines.
When first confronted with the task of determining the proper collective
bargaining unit in a particular controversy, the Court had perforce to rely on
American jurisprudence. In Democratic Labor Association vs. Cebu
Stevedoring Company, Inc., decided on February 28, 1958, 31 the Court
observed that "the issue of how to determine the proper collective
bargaining unit and what unit would be appropriate to be the collective
bargaining
agency" . . . "is novel in this jurisdiction; however, American precedents on
the matter abound . . (to which resort may be had) considering that our
present Magna Carta has been patterned after the American law on the
subject." Said the Court:
. . . Under these precedents, there are various factors which must be
satisfied and considered in determining the proper constituency of a
bargaining unit. No one particular factor is itself decisive of the
determination. The weight accorded to any particular factor varies in
accordance with the particular question or questions that may arise in a
given case. What are these factors? Rothenberg mentions a good number,
but the most pertinent to our case are: (1) will of the employees (Globe
Doctrine); (2) affinity and unit of employees' interest, such as substantial
similarity of work and duties, or similarity of compensation and working
conditions; (3) prior collective bargaining history; and (4) employment
status, such as temporary, seasonal probationary employees. . . .
xxx xxx xxx
An enlightening appraisal of the problem of defining an appropriate
bargaining unit is given in the 10th Annual Report of the National Labor
Relations Board wherein it is emphasized that the factors which said board
may consider and weigh in fixing appropriate units are: the history, extent
and type of organization of employees; the history of their collective
bargaining; the history, extent and type of organization of employees in
other plants of the same employer, or other employers in the same industry;
the skill, wages, work, and working conditions of the employees; the desires
of the employees; the eligibility of the employees for membership in the
union or unions involved; and the relationship between the unit or units
proposed and the employer's organization, management, and operation. . . .
. . In said report, it is likewise emphasized that the basic test in determining
the appropriate bargaining unit is that a unit, to be appropriate, must affect
a grouping of employees who have substantial, mutual interests in wages,
hours, working conditions and other subjects of collective bargaining (citing
Smith on Labor Laws, 316-317; Francisco, Labor Laws, 162). . . .
The Court further explained that "(t)he test of the grouping is community or
mutuality of interests. And this is so because 'the basic test of an asserted
bargaining unit's acceptability is whether or not it is fundamentally the
combination which will best assure to all employees the exercise of their
collective bargaining rights' (Rothenberg on Labor Relations, 490)." Hence, in
that case, the Court upheld the trial court's conclusion that two separate
bargaining units should be formed, one consisting of regular and permanent
employees and another consisting of casual laborers or stevedores.
Since then, the "community or mutuality of interests" test has provided the
standard in determining the proper constituency of a collective bargaining
unit. In Alhambra Cigar & Cigarette Manufacturing Company, et al. vs.
Alhambra Employees' Association (PAFLU), 107 Phil. 23, the Court, noting
that the employees in the administrative, sales and dispensary departments
of a cigar and cigarette manufacturing firm perform work which have
nothing to do with production and maintenance, unlike those in the raw
lead (malalasi), cigar, cigarette, packing (precintera) and engineering and
garage departments, authorized the formation of the former set of
employees into a separate collective bargaining unit. The ruling in
the Democratic Labor Association case, supra, was reiterated in Philippine
Land-Air-Sea Labor Unit vs. Court of Industrial Relations, 110 Phil. 176,
where casual employees were barred from joining the union of the
permanent and regular employees.
Applying the same "community or mutuality of interests" test, but resulting
in the formation of only one collective bargaining units is the case
of National Association of Free Trade Unions vs. Mainit Lumber
Development Company Workers Union-United Lumber and General Workers
of the Phils., G.R. No. 79526, December 21, 1990, 192 SCRA 598. In said
case, the Court ordered the formation of a single bargaining unit consisting
of the Sawmill Division in Butuan City and the Logging Division in Zapanta
Valley, Kitcharao, Agusan Norte of the Mainit Lumber Development
Company. The Court reasoned:
Certainly, there is a mutuality of interest among the employees of the
Sawmill Division and the Logging Division. Their functions mesh with one
another. One group needs the other in the same way that the company
needs them both. There may be difference as to the nature of their
individual assignments but the distinctions are not enough to warrant the
formation of a separate bargaining unit.
In the case at bar, the University employees may, as already suggested, quite
easily be categorized into two general classes: one, the group composed of
employees whose functions are non-academic, i.e., janitors, messengers,
typists, clerks, receptionists, carpenters, electricians, grounds-keepers,
chauffeurs, mechanics, plumbers; 32 and two, the group made up of those
performing academic functions, i.e., full professors, associate professors,
assistant professors, instructors — who may be judges or government
executives — and research, extension and professorial staff. 33 Not much
reflection is needed to perceive that the community or mutuality of
interests which justifies the formation of a single collective bargaining unit is
wanting between the academic and non-academic personnel of the
university. It would seem obvious that teachers would find very little in
common with the University clerks and other non-academic employees as
regards responsibilities and functions, working conditions, compensation
rates, social life and interests, skills and intellectual pursuits, cultural
activities, etc. On the contrary, the dichotomy of interests, the dissimilarity
in the nature of the work and duties as well as in the compensation and
working conditions of the academic and non-academic personnel dictate the
separation of these two categories of employees for purposes of collective
bargaining. The formation of two separate bargaining units, the first
consisting of the rank-and-file non-academic personnel, and the second, of
the rank-and-file academic employees, is the set-up that will best assure to
all the employees the exercise of their collective bargaining rights. These
special circumstances, i.e., the dichotomy of interests and concerns as well
as the dissimilarity in the nature and conditions of work, wages and
compensation between the academic and non-academic personnel, bring
the case at bar within the exception contemplated in Section 9 of Executive
Order No. 180. It was grave abuse of discretion on the part of the Labor
Relations Director to have ruled otherwise, ignoring plain and patent
realities.
WHEREFORE, the assailed Order of October 30, 1990 is hereby AFFIRMED in
so far as it declares the professors, associate professors and assistant
professors of the University of the Philippines as rank-and-file employees.
The Order of August 7, 1990 is MODIFIED in the sense that the non-
academic rank-and-file employees of the University of the Philippines shall
constitute a bargaining unit to the exclusion of the academic employees of
the institution — i.e., full professors, associate professors, assistant
professors, instructors, and the research, extension and professorial staff,
who may, if so minded, organize themselves into a separate collective
bargaining unit; and that, therefore, only said non-academic rank-and-file
personnel of the University of the Philippines in Diliman, Manila, Los Baños
and the Visayas are to participate in the certification election.
SO ORDERED.

G.R. No. 96566 January 6, 1992
ATLAS LITHOGRAPHIC SERVICES, INC., petitioner,
vs.
UNDERSECRETARY BIENVENIDO E. LAGUESMA (Department of Labor and
Employment) and ATLAS LITHOGRAPHIC SERVICES, INC. SUPERVISORY,
ADMINISTRATIVE, PERSONNEL, PRODUCTION, ACCOUNTING AND
CONFIDENTIAL EMPLOYEES ASSOCIATION-KAISAHAN NG MANGGAWANG
PILIPINO (KAMPIL-KATIPUNAN), respondents.
Romero, Lagman, Valdecantos & Arreza Law Offices for petitioner.
Esteban M. Mendoza for private respondent.
GUTIERREZ, JR., J.:p
This is a petition for certiorari under Rule 65 of the Rules of Court seeking
the modification of the Order dated 14 December 1990 and the Resolution
dated 21 November 1990 issued by the public respondents.
The antecedent facts of the case as gathered from the records are as
follows:
On July 16, 1990, the supervisory, administrative personnel, production,
accounting and confidential employees of the petitioner Atlas Lithographic
Services, Inc. (ALSI) affiliated with private respondent Kaisahan ng
Manggagawang Pilipino, a national labor organization. The local union
adopted the name Atlas Lithographic Services, Inc. Supervisory,
Administrative, Personnel, Production, Accounting and Confidential
Employees Association or ALSI-SAPPACEA-KAMPIL in short and which we
shall hereafter refer to as the "supervisors" union.
Shortly thereafter, private respondent Kampil-Katipunan filed on behalf of
the "supervisors" union a petition for certification election so that it could
be the sole and exclusive bargaining agent of the supervisory employees.
The petitioners opposed the private respondent's petition claiming that
under Article 245 of the Labor bode the private respondent cannot
represent the supervisory employees for collective bargaining purposeless
because the private respondent also represents the rank-and-file employees'
union.
On September 18, 1990, the Med-Arbiter issued an order in favor of the
private respondent, the dispositive portion of which provides:
WHEREFORE, premises considered, a certification election among the
supervisory employees belonging to the Administrative, Personnel,
Production, Accounting Departments as well as confidential employees
performing supervisory functions of Atlas Lithographic Services,
Incorporated is hereby ordered conducted within 20 days from receipt
hereof, subject to usual pre-election conference, with the following choices:
1. KAMPIL (KATIPUNAN);
2. No union.
SO ORDERED. (Rollo, pp. 39-40)
The petitioners, as expected, appealed for the reversal of the above order.
The public respondent, however, issued a resolution affirming the Med-
Arbiter's order.
The petitioners, in turn, filed a motion for reconsideration but the same was
denied. Hence, this petition forcertiorari.
The sole issue to be resolved in this case is whether or not, under Article 245
of the Labor Code, a local union of supervisory employees may be allowed
to affiliate with a national federation of labor organizations of rank-and-file
employees and which national federation actively represents its affiliates in
collective bargaining negotiations with the same employer of the
supervisors and in the implementation of resulting collective bargaining
agreements.
The petitioner argues that KAMPIL-KATIPUNAN already represents its rank-
and-file employees and, therefore, to allow the supervisors of those
employees to affiliate with the private respondent is tantamount to allowing
the circumvention of the principle of the separation of unions under Article
245 of the Labor Code.
It further argues that the intent of the law is to prevent a single labor
organization from representing different classes of employees with
conflicting interests.
The public respondent, on the other hand, contends that despite affiliation
with a national federation, the local union does not lose its personality
which is separate, and distinct from the national federation. It cites as its
legal basis the case of Adamson & Adamson, Inc. v. CIR (127 SCRA 268
[1984]).
It maintains that Rep. Act No. 6715 contemplates the principle laid down by
this Court in the Adamson case interpreting Section 3 of Rep. Act No. 875
(the Industrial Peace Act) on the right of a supervisor's union to affiliate. The
private respondent asserts that the legislature must have noted
the Adamson ruling then prevailing when it conceived the reinstatement in
the present Labor Code of a similar provision on the right of supervisors to
organize.
Under the Industrial Peace Act of 1953, employees were classified into three
groups, namely: (1) managerial employees; (2) supervisors; and (3) rank-and
file employees. Supervisors, who were considered employees in relation to
their employer could join a union but not a union of rank-and-file
employees.
With the enactment in 1974 of the Labor Code (Pres Decree No. 442),
employees were classified into managerial and rank-and-file employees.
Neither the category of supervisors nor their right to organize under the old
statute were recognized. So that, in Bulletin Publishing Corporation
v. Sanchez (144 SCRA 628 [1986]), the Court interpreted the superseding
labor law to have removed from supervisors the right to unionize among
themselves. The Court ruled:
In the light of the factual background of this case, We are constrained to
hold that the supervisory employees of petitioner firm may not, under the
law, form a supervisors union, separate and distinct from the existing
bargaining unit (BEU), composed of the rank-and-file employees of the
Bulletin Publishing Corporation. It is evident that most of the private
respondents are considered managerial employees. Also, it is distinctly
stated in Section 11, Rule II, of the Omnibus Rules Implementing the Labor
Code, that supervisory unions are presently no longer recognized nor
allowed to exist and operate as such. (pp. 633, 634)
In Section 11, Rule II, Book V of the Omnibus Rules implementing Pres.
Decree No. 442, the supervisory unions existing since the effectivity of the
New Code in January 1, 1975 ceased to operate as such and the members
who did not qualify as managerial employees under this definition in Article
212 (k) therein became eligible to form, to join or assist a rank-and-file
union.
A revision of the Labor Code undertaken by the bicameral Congress brought
about the enactment of Rep. Act No. 6715 in March 1989 in which
employees were reclassified into three groups, namely: (1) the managerial
employees; (2) supervisors; and (3) the rank and file employees. Under the
present law, the category of supervisory employees is once again
recognized. Hence, Art. 212 (m) states:
(m) . . . Supervisory employees are those who, in the interest of the
employer, effectively recommend such managerial actions if the exercise of
such authority is not merely routinary or clerical in nature but requires the
use of independent judgment. . . .
The rationale for the amendment is the government's recognition of the
right of supervisors to organize with the qualification that they shall not join
or assist in the organization of rank-and-file employees. The reason behind
the Industrial Peace Act provision on the same subject matter has been
adopted in the present statute. The interests of supervisors on the one
hand, and the rank-and-file employees on the other, are separate and
distinct. The functions of supervisors, being recommendatory in nature, are
more identified with the interests of the employer. The performance of
those functions may, thus, run counter to the interests of the rank-and-file.
This intent of the law is made clear in the deliberations of the legislators on
then Senate Bill 530 now enacted as Rep. Act No. 6715.
The definition of managerial employees was limited to those having
authority to hire and fire while those who only recommend effectively the
hiring or firing or transfers of personnel would be considered as closer to
rank-and-file employees. The exclusion, therefore, of middle level executives
from the category of managers brought about a third classification, the
supervisory employees. These supervisory employees are allowed to form
their own union but they are not allowed to join the rank-and-file union
because of conflict of interest (Journal of the Senate, First Regular Session,
1987, 1988, Volume 3,
p. 2245).
In terms of classification, however, while they are more closely identified
with the rank-and-file they are still not allowed to join the union of rank-
and-file employees. To quote the Senate Journal:
In reply to Sen. Guingona's query whether "supervisors" are included in the
term "employee", Sen. Herrera stated that while they are considered as
rank-and-file employees, they cannot join the union and they would have to
form their own supervisors' union pursuant to Rep. Act 875. (supra, p. 2288)
The peculiar role of supervisors is such that while they are not managers,
when they recommend action implementing management policy or ask for
the discipline or dismissal of subordinates, they identify with the interests of
the employer and may act contrary to the interests of the rank-and-file.
We agree with the petitioner's contention that a conflict of interest may
arise in the areas of discipline, collective bargaining and strikes.
Members of the supervisory union might refuse to carry out disciplinary
measures against their co-member rank-and-file employees.
In the area of bargaining, their interests cannot be considered identical. The
needs of one are different from those of the other. Moreover, in the event of
a strike, the national federation might influence the supervisors' union to
conduct a sympathy strike on the sole basis of affiliation.
More important, the factual issues in the Adamson case are different from
the present case. First, the rank-and-file employees in the Adamson case are
not directly under the supervisors who comprise the supervisors' union. In
the case at bar, the rank-and file employees are directly under the
supervisors organized by one and the same federation.
The contemplation of the law in Sec. 3 of the Industrial Peace Act is to
prohibit supervisors from joining a labor organization of employees under
their supervision. Sec. 3 of the Industrial Peace Act provides:
Sec. 3 — Employees' Right to Self Organization. Employees shall have the
right to self-organization and to form, join or assist labor organizations of
their own choosing for the purpose of collective bargaining through
representatives of their own choosing and to engage in concerted activities
for the purpose of collective bargaining and other mutual aid or protection.
Individuals employed as supervisors shall not be eligible for membership in a
labor organization of employees under their supervision but may form
separate organizations of their own (Emphasis supplied).
This was not the consideration in the Adamson case because as mentioned
earlier, the rank-and-file employees in the Adamson case were not under the
supervision of the supervisors involved.
Meanwhile, Article 245 of the Labor Code as amended by Rep. Act No. 6715
provides:
Art. 245. Ineligibility of managerial employees to join any labor organization:
right of supervisory employees. — Managerial employees are not eligible to
join, assist or form any labor organization. Supervisory employees shall not
be eligible for membership in a labor organization of the rank-and-file
employees but may join, assist or form separate labor organizations of their
own.
The Court construes Article 245 to mean that, as in Section 3 of the
Industrial Peace Act, supervisors shall not be given an occasion to bargain
together with the rank-and-file against the interests of the employer
regarding terms and conditions of work
Second, the national union in the Adamson case did not actively represent
its local chapters. In the present case, the local union is actively represented
by the national federation. In fact, it was the national federation,
theKAMPIL-KATIPUNAN, which initially filed a petition for certification in
behalf of the respondent union.
Thus, if the intent of the law is to avoid a situation where supervisors would
merge with the rank and-file or where the supervisors' labor organization
would represent conflicting interests, then a local supervisors' union should
not be allowed to affiliate with the national federation of union of rank-and-
file employees where that federation actively participates in union activity in
the company.
The petitioner further contends that the term labor organization includes a
federation considering that Art. 212 (g) mentions "any union or association
of employees."
The respondent, however, argues that the phrase refers to a local union only
in which case, the prohibition in Art. 245 is inapplicable to the case at bar.
The prohibition against a supervisors' union joining a local union of rank-
and-file is replete with jurisprudence. The Court emphasizes that the
limitation is not confined to a case of supervisors wanting to join a rank-and-
file local union. The prohibition extends to a supervisors' local union
applying for membership in a national federation the members of which
include local unions of rank-and-file employees. The intent of the law is clear
especially where, as in the case at bar, the supervisors will be co-mingling
with those employees whom they directly supervise in their own bargaining
unit.
Technicalities should not be allowed to stand in the way of equitably and
completely resolving the rights and obligations of the parties. (Rapid
Manpower Consultants, Inc. v. NLRC, 190 SCRA 747 [1990]) What should be
paramount is the intent behind the law, not its literal construction. Where
one interpretation would result in mischievous consequences while another
would bring about equity, justice, and the promotion of labor peace, there
can be no doubt as to what interpretation shall prevail.
Finally, the respondent contends that the law prohibits the employer from
interfering with the employees' right to self-organization.
There is no question about this intendment of the law. There is, however, in
the present case, no violation of such a guarantee to the employee.
Supervisors are not prohibited from forming their own union. What the law
prohibits is their membership in a labor organization of rank-and-file
employees (Art. 245, Labor Code) or their joining a national federation of
rank-and-file employees that includes the very local union which they are
not allowed to directly join.
In a motion dated November 15, 1991 it appears that the petitioner has
knuckled under to the respondents' pressures and agreed to let the national
federation KAMPIL-KATIPUNAN represent its supervisors in negotiating a
collective bargaining agreement. Against the advise of its own counsel and
on the basis of alleged "industrial peace", the petitioner expressed a loss of
interest in pursuing this action. The petitioner is, of course, free to grant
whatever concessions it wishes to give to its employees unilaterally or
through negotiations but we cannot allow the resulting validation of an
erroneous ruling and policy of the Department of Labor and Employment
(DOLE) to remain on the basis of the petitioner's loss of interest. The
December 14, 1990 order and the November 21, 1990 resolution of DOLE
are contrary to law and must be declared as such.
WHEREFORE, the petition is hereby GRANTED. The private respondent is
disqualified from affiliating with a national federation of labor organizations
which includes the petitioner's rank-and-file employees.

SO ORDERED.
G.R. No. 82819 February 8, 1989
LUZ LUMANTA, ET AL., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FOOD TERMINAL,
INC., respondents.
J. S. Torregoza and Associates for petitioners.
The Solicitor General for public respondent.
The Government Corporate Counsel for Food Terminal, Inc.
RESOLUTION
FELICIANO, J.:
The present Petition for certiorari seeks to annul and set aside the Decision
of the National Labor Relations Commission rendered on 18 March 1988 in
NLRC-NCR Case No. 00- 0301035-87, entitled "Luz Lumanta, et al., versus
Food Terminal Incorporated." The Decision affirmed an order of the Labor
Arbiter dated 31 August 1987 dismissing petitioners' complaint for lack of
Jurisdiction.
On 20 March 1987, petitioner Luz Lumanta, joined by fifty-four (54) other
retrenched employees, filed a complaint for unpaid 'd retrenchment or
separation pay against private respondent Food Terminal, Inc. ("FTI") with
the Department of Labor and Employment. The complaint was later
amended to include charges of underpayment of wages and non-payment of
emergency cost of living allowances (ECOLA).
Private respondent FTI moved to dismiss the complaint on the ground of
lack of jurisdiction. It argued that being a government-owned and controlled
corporation, its employees are governed by the Civil Service Law not by the
Labor Code, and that claims arising from employment fall within the
jurisdiction of the Civil Service Commission and not the Department of
Labor and Employment.
The petitioners opposed the Motion to Dismiss contending that although FTI
is a corporation owned and controlled by the government, it has still the
marks of a private corporation: it directly hires its employees without
seeking approval from the Civil Service Commission and its personnel are
covered by the Social Security System and not the Government Service
Insurance System. Petitioners also argued that being a government-owned
and controlled corporation without original charter, private respondent FTl
clearly falls outside the scope of the civil service as marked out in Section 2
(1), Article IX of the 1987 Constitution.
On 31 August 1987, Labor Arbiter Isabel P. Oritiguerra issued an Order, 1 the
dispositive part of which read:
On account of the above findings the instant case is governed by the Civil
Service Law. The case at bar lies outside the jurisdictional competence of
this Office.
WHEREFORE, premises considered this case is hereby directed to be
DISMISSED for lack of jurisdiction of this Office to hear and decide the case.
SO ORDERED.
On 18 March 1988, the public respondent National Labor Relations
Commission affirmed on appeal the order of the Labor Arbiter and
dismissed the petitioners' appeal for lack of merit.
Hence this Petition for Certiorari.
The only question raised in the present Petition is whether or not a labor law
claim against a government-owned and controlled corporation, such as
private respondent FTI, falls within the jurisdiction of the Department of
Labor and Employment.
In refusing to take cognizance of petitioners' complaint against private
respondent, the Labor Arbiter and the National Labor Relations Commission
relied chiefly on this Court's ruling in National Housing Authority v.
Juco, 2which held that "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.
Juco was decided under the 1973 Constitution, Article II-B, Section 1 (1) of
which provided:
The civil service embraces every branch, agency, subdivision, and
instrumentality of the Government, including every government-owned or
controlled corporation.
The 1987 Constitution which took effect on 2 February 1987, has on this
point a notably different provision which reads:
The civil service embraces all branches, subdivisions, instrumentalities, and
agencies of the Government, including government-owned or controlled
corporations with original charter. (Article IX-B, Section 2 [1]).
The Court, in National Service Corporation (NASECO) v. National Labor
Relations Commission, G.R. No. 69870, promulgated on 29 November
1988, 3 quoting extensively from the deliberations 4 of the 1986
Constitutional Commission in respect of the intent and meaning of the new
phrase "with original charter," in effect held that government-owned and
controlled corporations with original charter refer to corporations
chartered by special lawas distinguished from corporations organized under
our general incorporation statute-the Corporation Code. InNASECO, the
company involved had been organized under the general incorporation
statute and was a subsidiary of the National Investment Development
Corporation (NIDC) which in turn was a subsidiary of the Philippine National
Bank, a bank chartered by a special statute. Thus, government-owned or
controlled corporations like NASECO are effectively excluded from the scope
of the Civil Service.
It is the 1987 Constitution, and not the case law embodied in Juco, 5 which
applies in the case at bar, under the principle that jurisdiction is determined
as of the time of the filing of the complaint. 6 At the time the complaint
against private respondent FTI was filed (i.e., 20 March 1987), and at the
time the decisions of the respondent Labor Arbiter and National Labor
Relations Commission were rendered (i.e., 31 August 1987 and 18 March
1988, respectively), the 1987 Constitution had already come into effect.
latter of Instruction No. 1013, dated 19 April 1980, included Food Terminal,
Inc. in the category of "government-owned or controlled
corporations." 7 Since then, FTI served as the marketing arm of the National
Grains Authority (now known as the National Food Authority). The pleadings
show that FTI was previously a privately owned enterprise, created and
organized under the general incorporation law, with the corporate name
"Greater Manila Food Terminal Market, Inc." 8 The record does not indicate
the precise amount of the capital stock of FM that is owned by the
government; the petitioners' claim, and this has not been disputed, that FTl
is not hundred percent (100%) government-owned and that it has some
private shareholders.
We conclude that because respondent FTI is government-owned and
controlled corporation without original charter, it is the Department of
Labor and Employment, and not the Civil Service Commission, which has
jurisdiction over the dispute arising from employment of the petitioners
with private respondent FTI, and that consequently, the terms and
conditions of such employment are governed by the Labor Code and not by
the Civil Service Rules and Regulations.
Public respondent National Labor Relations Commission acted without or in
excess of its jurisdiction in dismissing petitioners complaint.
ACCORDINGLY, the Petition for certiorari is hereby GRANTED and the
Decision of public respondent Labor Arbiter dated 31 August 1987 and the
Decision of public respondent Commission dated 18 March 1988, both in
NLRC-NCR Case No. 00-03-01035-87 are hereby SET ASIDE. The case is
hereby REMANDED to the Labor Arbiter for further appropriate proceedings.
G.R. No. 85279 July 28, 1989
SOCIAL SECURITY SYSTEM EMPLOYEES ASSOCIATION (SSSEA), DIONISION T.
BAYLON, RAMON MODESTO, JUANITO MADURA, REUBEN ZAMORA,
VIRGILIO DE ALDAY, SERGIO ARANETA, PLACIDO AGUSTIN, VIRGILIO
MAGPAYO, petitioner,
vs.
THE COURT OF APPEALS, SOCIAL SECURITY SYSTEM (SSS), HON. CEZAR C.
PERALEJO, RTC, BRANCH 98, QUEZON CITY, respondents.
Vicente T. Ocampo & Associates for petitioners.
CORTES, J:
Primarily, the issue raised in this petition is whether or not the Regional Trial
Court can enjoin the Social Security System Employees Association (SSSEA)
from striking and order the striking employees to return to work.
Collaterally, it is whether or not employees of the Social Security System
(SSS) have the right to strike.
The antecedents are as follows:
On June 11, 1987, the SSS filed with the Regional Trial Court of Quezon City
a complaint for damages with a prayer for a writ of preliminary injunction
against petitioners, alleging that on June 9, 1987, the officers and members
of SSSEA staged an illegal strike and baricaded the entrances to the SSS
Building, preventing non-striking employees from reporting for work and SSS
members from transacting business with the SSS; that the strike was
reported to the Public Sector Labor - Management Council, which ordered
the strikers to return to work; that the strikers refused to return to work;
and that the SSS suffered damages as a result of the strike. The complaint
prayed that a writ of preliminary injunction be issued to enjoin the strike
and that the strikers be ordered to return to work; that the defendants
(petitioners herein) be ordered to pay damages; and that the strike be
declared illegal.
It appears that the SSSEA went on strike after the SSS failed to act on the
union's demands, which included: implementation of the provisions of the
old SSS-SSSEA collective bargaining agreement (CBA) on check-off of union
dues; payment of accrued overtime pay, night differential pay and holiday
pay; conversion of temporary or contractual employees with six (6) months
or more of service into regular and permanent employees and their
entitlement to the same salaries, allowances and benefits given to other
regular employees of the SSS; and payment of the children's allowance of
P30.00, and after the SSS deducted certain amounts from the salaries of the
employees and allegedly committed acts of discrimination and unfair labor
practices [Rollo, pp. 21-241].
The court a quo, on June 11, 1987, issued a temporary restraining order
pending resolution of the application for a writ of preliminary injunction
[Rollo, p. 71.] In the meantime, petitioners filed a motion to dismiss alleging
the trial court's lack of jurisdiction over the subject matter [Rollo, pp. 72-82.]
To this motion, the SSS filed an opposition, reiterating its prayer for the
issuance of a writ of injunction [Rollo, pp. 209-222]. On July 22,1987, in a
four-page order, the court a quo denied the motion to dismiss and
converted the restraining order into an injunction upon posting of a bond,
after finding that the strike was illegal [Rollo, pp. 83- 86]. As petitioners'
motion for the reconsideration of the aforesaid order was also denied on
August 14, 1988 [Rollo, p. 94], petitioners filed a petition for certiorari and
prohibition with preliminary injunction before this Court. Their petition was
docketed as G.R. No. 79577. In a resolution dated October 21, 1987, the
Court, through the Third Division, resolved to refer the case to the Court of
Appeals. Petitioners filed a motion for reconsideration thereof, but during its
pendency the Court of Appeals on March 9,1988 promulgated its decision
on the referred case [Rollo, pp. 130-137]. Petitioners moved to recall the
Court of Appeals' decision. In the meantime, the Court on June 29,1988
denied the motion for reconsideration in G.R. No. 97577 for being moot and
academic. Petitioners' motion to recall the decision of the Court of Appeals
was also denied in view of this Court's denial of the motion for
reconsideration [Rollo, pp. 141- 143]. Hence, the instant petition to review
the decision of the Court of Appeals [Rollo, pp. 12-37].
Upon motion of the SSS on February 6,1989, the Court issued a temporary
restraining order enjoining the petitioners from staging another strike or
from pursuing the notice of strike they filed with the Department of Labor
and Employment on January 25, 1989 and to maintain the status quo [Rollo,
pp. 151-152].
The Court, taking the comment as answer, and noting the reply and
supplemental reply filed by petitioners, considered the issues joined and the
case submitted for decision.
The position of the petitioners is that the Regional Trial Court had no
jurisdiction to hear the case initiated by the SSS and to issue the restraining
order and the writ of preliminary injunction, as jurisdiction lay with the
Department of Labor and Employment or the National Labor Relations
Commission, since the case involves a labor dispute.
On the other hand, the SSS advances the contrary view, on the ground that
the employees of the SSS are covered by civil service laws and rules and
regulations, not the Labor Code, therefore they do not have the right to
strike. Since neither the DOLE nor the NLRC has jurisdiction over the dispute,
the Regional Trial Court may enjoin the employees from striking.
In dismissing the petition for certiorari and prohibition with preliminary
injunction filed by petitioners, the Court of Appeals held that since the
employees of the SSS, are government employees, they are not allowed to
strike, and may be enjoined by the Regional Trial Court, which had
jurisdiction over the SSS' complaint for damages, from continuing with their
strike.
Thus, the sequential questions to be resolved by the Court in deciding
whether or not the Court of Appeals erred in finding that the Regional Trial
Court did not act without or in excess of jurisdiction when it took cognizance
of the case and enjoined the strike are as follows:
1. Do the employees of the SSS have the right to strike?
2. Does the Regional Trial Court have jurisdiction to hear the case initiated
by the SSS and to enjoin the strikers from continuing with the strike and to
order them to return to work?
These shall be discussed and resolved seriatim
I
The 1987 Constitution, in the Article on Social Justice and Human Rights,
provides that the State "shall guarantee the rights of all workers to self-
organization, collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law" [Art. XIII, Sec.
31].
By itself, this provision would seem to recognize the right of all workers and
employees, including those in the public sector, to strike. But the
Constitution itself fails to expressly confirm this impression, for in the Sub-
Article on the Civil Service Commission, it provides, after defining the scope
of the civil service as "all branches, subdivisions, instrumentalities, and
agencies of the Government, including government-owned or controlled
corporations with original charters," that "[t]he right to self-organization
shall not be denied to government employees" [Art. IX(B), Sec. 2(l) and (50)].
Parenthetically, the Bill of Rights also provides that "[tlhe right of the people,
including those employed in the public and private sectors, to form unions,
associations, or societies for purposes not contrary to law shall not
abridged" [Art. III, Sec. 8]. Thus, while there is no question that the
Constitution recognizes the right of government employees to organize, it is
silent as to whether such recognition also includes the right to strike.
Resort to the intent of the framers of the organic law becomes helpful in
understanding the meaning of these provisions. A reading of the
proceedings of the Constitutional Commission that drafted the 1987
Constitution would show that in recognizing the right of government
employees to organize, the commissioners intended to limit the right to the
formation of unions or associations only, without including the right to
strike.
Thus, Commissioner Eulogio R. Lerum, one of the sponsors of the provision
that "[tlhe right to self-organization shall not be denied to government
employees" [Art. IX(B), Sec. 2(5)], in answer to the apprehensions expressed
by Commissioner Ambrosio B. Padilla, Vice-President of the Commission,
explained:
MR. LERUM. I think what I will try to say will not take that long. When we
proposed this amendment providing for self-organization of government
employees, it does not mean that because they have the right to organize,
they also have the right to strike. That is a different matter. We are only
talking about organizing, uniting as a union. With regard to the right to
strike, everyone will remember that in the Bill of Rights, there is a provision
that the right to form associations or societies whose purpose is not
contrary to law shall not be abridged. Now then, if the purpose of the state
is to prohibit the strikes coming from employees exercising government
functions, that could be done because the moment that is prohibited, then
the union which will go on strike will be an illegal union. And that provision
is carried in Republic Act 875. In Republic Act 875, workers, including those
from the government-owned and controlled, are allowed to organize but
they are prohibited from striking. So, the fear of our honorable Vice-
President is unfounded. It does not mean that because we approve this
resolution, it carries with it the right to strike. That is a different matter. As a
matter of fact, that subject is now being discussed in the Committee on
Social Justice because we are trying to find a solution to this problem. We
know that this problem exist; that the moment we allow anybody in the
government to strike, then what will happen if the members of the Armed
Forces will go on strike? What will happen to those people trying to protect
us? So that is a matter of discussion in the Committee on Social Justice. But,
I repeat, the right to form an organization does not carry with it the right to
strike. [Record of the Constitutional Commission, vol. 1, p. 569].
It will be recalled that the Industrial Peace Act (R.A. No. 875), which was
repealed by the Labor Code (P.D. 442) in 1974, expressly banned strikes by
employees in the Government, including instrumentalities exercising
governmental functions, but excluding entities entrusted with proprietary
functions:
.Sec. 11. Prohibition Against Strikes in the Government. — The terms and
conditions of employment in the Government, including any political
subdivision or instrumentality thereof, are governed by law and it is declared
to be the policy of this Act that employees therein shall not strike for the
purpose of securing changes or modification in their terms and conditions of
employment. Such employees may belong to any labor organization which
does not impose the obligation to strike or to join in strike:Provided,
however, That this section shall apply only to employees employed in
governmental functions and not those employed in proprietary functions of
the Government including but not limited to governmental corporations.
No similar provision is found in the Labor Code, although at one time it
recognized the right of employees of government corporations established
under the Corporation Code to organize and bargain collectively and those
in the civil service to "form organizations for purposes not contrary to law"
[Art. 244, before its amendment by B.P. Blg. 70 in 1980], in the same breath
it provided that "[t]he terms and conditions of employment of all
government employees, including employees of government owned and
controlled corporations, shall be governed by the Civil Service Law, rules and
regulations" [now Art. 276]. Understandably, the Labor Code is silent as to
whether or not government employees may strike, for such are excluded
from its coverage [Ibid]. But then the Civil Service Decree [P.D. No. 807], is
equally silent on the matter.
On June 1, 1987, to implement the constitutional guarantee of the right of
government employees to organize, the President issued E.O. No. 180 which
provides guidelines for the exercise of the right to organize of government
employees. In Section 14 thereof, it is provided that "[t]he Civil Service law
and rules governing concerted activities and strikes in the government
service shall be observed, subject to any legislation that may be enacted by
Congress." The President was apparently referring to Memorandum Circular
No. 6, s. 1987 of the Civil Service Commission under date April 21, 1987
which, "prior to the enactment by Congress of applicable laws concerning
strike by government employees ... enjoins under pain of administrative
sanctions, all government officers and employees from staging strikes,
demonstrations, mass leaves, walk-outs and other forms of mass action
which will result in temporary stoppage or disruption of public service." The
air was thus cleared of the confusion. At present, in the absence of any
legislation allowing government employees to strike, recognizing their right
to do so, or regulating the exercise of the right, they are prohibited from
striking, by express provision of Memorandum Circular No. 6 and as implied
in E.O. No. 180. [At this juncture, it must be stated that the validity of
Memorandum Circular No. 6 is not at issue].
But are employees of the SSS covered by the prohibition against strikes?
The Court is of the considered view that they are. Considering that under
the 1987 Constitution "[t]he civil service embraces all branches,
subdivisions, instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original charters" [Art.
IX(B), Sec. .2(l) see also Sec. 1 of E.O. No. 180 where the employees in the
civil service are denominated as "government employees"] and that the SSS
is one such government-controlled corporation with an original charter,
having been created under R.A. No. 1161, its employees are part of the civil
service [NASECO v. NLRC, G.R. Nos. 69870 & 70295, November 24,1988] and
are covered by the Civil Service Commission's memorandum prohibiting
strikes. This being the case, the strike staged by the employees of the SSS
was illegal.
The statement of the Court in Alliance of Government Workers v. Minister of
Labor and Employment [G.R. No. 60403, August 3, 1:983, 124 SCRA 11 is
relevant as it furnishes the rationale for distinguishing between workers in
the private sector and government employees with regard to the right to
strike:
The general rule in the past and up to the present is that 'the terms and
conditions of employment in the Government, including any political
subdivision or instrumentality thereof are governed by law" (Section 11, the
Industrial Peace Act, R.A. No. 875, as amended and Article 277, the Labor
Code, P.D. No. 442, as amended). Since the terms and conditions of
government employment are fixed by law, government workers cannot use
the same weapons employed by workers in the private sector to secure
concessions from their employers. The principle behind labor unionism in
private industry is that industrial peace cannot be secured through
compulsion by law. Relations between private employers and their
employees rest on an essentially voluntary basis. Subject to the minimum
requirements of wage laws and other labor and welfare legislation, the
terms and conditions of employment in the unionized private sector are
settled through the process of collective bargaining. In government
employment, however, it is the legislature and, where properly given
delegated power, the administrative heads of government which fix the
terms and conditions of employment. And this is effected through statutes
or administrative circulars, rules, and regulations, not through collective
bargaining agreements. [At p. 13; Emphasis supplied].
Apropos is the observation of the Acting Commissioner of Civil Service, in his
position paper submitted to the 1971 Constitutional Convention, and quoted
with approval by the Court in Alliance, to wit:
It is the stand, therefore, of this Commission that by reason of the nature of
the public employer and the peculiar character of the public service, it must
necessarily regard the right to strike given to unions in private industry as
not applying to public employees and civil service employees. It has been
stated that the Government, in contrast to the private employer, protects
the interest of all people in the public service, and that accordingly, such
conflicting interests as are present in private labor relations could not exist
in the relations between government and those whom they employ. [At pp.
16-17; also quoted in National Housing Corporation v. Juco, G.R. No. 64313,
January 17,1985,134 SCRA 172,178-179].
E.O. No. 180, which provides guidelines for the exercise of the right to
organize of government employees, while clinging to the same philosophy,
has, however, relaxed the rule to allow negotiation where the terms and
conditions of employment involved are not among those fixed by law. Thus:
.SECTION 13. Terms and conditions of employment or improvements
thereof, except those that are fixed by law, may be the subject of
negotiations between duly recognized employees' organizations and
appropriate government authorities.
The same executive order has also provided for the general mechanism for
the settlement of labor disputes in the public sector to wit:
.SECTION 16. The Civil Service and labor laws and procedures, whenever
applicable, shall be followed in the resolution of complaints, grievances and
cases involving government employees. In case any dispute remains
unresolved after exhausting all the available remedies under existing laws
and procedures, the parties may jointly refer the dispute to the [Public
Sector Labor- Management] Council for appropriate action.
Government employees may, therefore, through their unions or
associations, either petition the Congress for the betterment of the terms
and conditions of employment which are within the ambit of legislation or
negotiate with the appropriate government agencies for the improvement
of those which are not fixed by law. If there be any unresolved grievances,
the dispute may be referred to the Public Sector Labor - Management
Council for appropriate action. But employees in the civil service may not
resort to strikes, walk-outs and other temporary work stoppages, like
workers in the private sector, to pressure the Govemment to accede to their
demands. As now provided under Sec. 4, Rule III of the Rules and
Regulations to Govern the Exercise of the Right of Government- Employees
to Self- Organization, which took effect after the instant dispute arose, "[t]he
terms and conditions of employment in the government, including any
political subdivision or instrumentality thereof and government- owned and
controlled corporations with original charters are governed by law and
employees therein shall not strike for the purpose of securing changes
thereof."
II
The strike staged by the employees of the SSS belonging to petitioner union
being prohibited by law, an injunction may be issued to restrain it.
It is futile for the petitioners to assert that the subject labor dispute falls
within the exclusive jurisdiction of the NLRC and, hence, the Regional Trial
Court had no jurisdiction to issue a writ of injunction enjoining the
continuance of the strike. The Labor Code itself provides that terms and
conditions of employment of government employees shall be governed by
the Civil Service Law, rules and regulations [Art. 276]. More importantly, E.O.
No. 180 vests the Public Sector Labor - Management Council with
jurisdiction over unresolved labor disputes involving government employees
[Sec. 16]. Clearly, the NLRC has no jurisdiction over the dispute.
This being the case, the Regional Trial Court was not precluded, in the
exercise of its general jurisdiction under B.P. Blg. 129, as amended, from
assuming jurisdiction over the SSS's complaint for damages and issuing the
injunctive writ prayed for therein. Unlike the NLRC, the Public Sector Labor -
Management Council has not been granted by law authority to issue writs of
injunction in labor disputes within its jurisdiction. Thus, since it is the
Council, and not the NLRC, that has jurisdiction over the instant labor
dispute, resort to the general courts of law for the issuance of a writ of
injunction to enjoin the strike is appropriate.
Neither could the court a quo be accused of imprudence or
overzealousness, for in fact it had proceeded with caution. Thus, after
issuing a writ of injunction enjoining the continuance of the strike to prevent
any further disruption of public service, the respondent judge, in the same
order, admonished the parties to refer the unresolved controversies
emanating from their employer- employee relationship to the Public Sector
Labor - Management Council for appropriate action [Rollo, p. 86].
III
In their "Petition/Application for Preliminary and Mandatory Injunction,"
and reiterated in their reply and supplemental reply, petitioners allege that
the SSS unlawfully withheld bonuses and benefits due the individual
petitioners and they pray that the Court issue a writ of preliminary
prohibitive and mandatory injunction to restrain the SSS and its agents from
withholding payment thereof and to compel the SSS to pay them. In their
supplemental reply, petitioners annexed an order of the Civil Service
Commission, dated May 5, 1989, which ruled that the officers of the SSSEA
who are not preventively suspended and who are reporting for work
pending the resolution of the administrative cases against them are entitled
to their salaries, year-end bonuses and other fringe benefits and affirmed
the previous order of the Merit Systems Promotion Board.

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

WHEREFORE, no reversible error having been committed by the Court of

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

SO ORDERED.

G.R. No. 87676 December 20, 1989

REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL PARKS
DEVELOPMENT COMMITTEE,petitioner,
vs.
THE HON. COURT OF APPEALS and THE NATIONAL PARKS DEVELOPMENT
SUPERVISORY ASSOCIATION & THEIR MEMBERS, respondents.
Bienvenido D. Comia for respondents.
GRIÑO-AQUINO, J.:
The Regional Trial Court of Manila, Branch III, dismissed for lack of
jurisdiction, the petitioner's complaint in Civil Case No. 88- 44048 praying for
a declaration of illegality of the strike of the private respondents and to
restrain the same. The Court of Appeals denied the petitioner's petition for
certiorari, hence, this petition for review.
The key issue in this case is whether the petitioner, National Parks
Development Committee (NPDC), is a government agency, or a private
corporation, for on this issue depends the right of its employees to strike.
This issue came about because although the NPDC was originally created in
1963 under Executive Order No. 30, as the Executive Committee for the
development of the Quezon Memorial, Luneta and other national parks, and
later renamed as the National Parks Development Committee under
Executive Order No. 68, on September 21, 1967, it was registered in the
Securities and Exchange Commission (SEC) as a non-stock and non-profit
corporation, known as "The National Parks Development Committee, Inc."
However, in August, 1987, the NPDC was ordered by the SEC to show cause
why its Certificate of Registration should not be suspended for: (a) failure to
submit the General Information Sheet from 1981 to 1987; (b) failure to
submit its Financial Statements from 1981 to 1986; (c) failure to register its
Corporate Books; and (d) failure to operate for a continuous period of at
least five (5) years since September 27, 1967.
On August 18, 1987, the NPDC Chairman, Amado Lansang, Jr., informed SEC
that his Office had no objection to the suspension, cancellation, or
revocation of the Certificate of Registration of NPDC.
By virtue of Executive Order No. 120 dated January 30, 1989, the NPDC was
attached to the Ministry (later Department) of Tourism and provided with a
separate budget subject to audit by the Commission on Audit.
On September 10, 1987, the Civil Service Commission notified NPDC that
pursuant to Executive Order No. 120, all appointments and other personnel
actions shall be submitted through the Commission.
Meanwhile, the Rizal Park Supervisory Employees Association, consisting of
employees holding supervisory positions in the different areas of the parks,
was organized and it affiliated with the Trade Union of the Philippines and
Allied Services (TUPAS) under Certificate No. 1206.
On June 15, 1987, two collective bargaining agreements were entered into
between NPDC and NPDCEA (TUPAS local Chapter No. 967) and NPDC and
NPDCSA (TUPAS Chapter No. 1206), for a period of two years or until June
30, 1989.
On March 20, 1988, these unions staged a stake at the Rizal Park, Fort
Santiago, Paco Park, and Pook ni Mariang Makiling at Los Banos, Laguna,
alleging unfair labor practices by NPDC.
On March 21, 1988, NPDC filed in the Regional Trial Court in Manila, Branch
III, a complaint against the union to declare the strike illegal and to restrain it
on the ground that the strikers, being government employees, have no right
to strike although they may form a union.
On March 24, 1988, the lower court dismissed the complaint and lifted the
restraining order for lack of jurisdiction. It held that the case "properly falls
under the jurisdiction of the Department of Labor," because "there exists an
employer-employee relationship" between NPDC and the strikers, and "that
the acts complained of in the complaint, and which plaintiff seeks to enjoin
in this action, fall under paragraph 5 of Article 217 of the Labor Code, ..., in
relation to Art. 265 of the same Code, hence, jurisdiction over said acts does
not belong to this Court but to the Labor Arbiters of the Department of
Labor." (p. 142, Rollo.).
Petitioner went to the Court of Appeals on certiorari (CA-G.R. SP No. 14204).
On March 31, 1989, the Court of appeals affirmed the order of the trial
court, hence, this petition for review. The petitioner alleges that the Court of
Appeals erred:
1) in not holding that the NPDC employees are covered by the Civil Service
Law; and
2) in ruling that petitioner's labor dispute with its employees is cognizable by
the Department of Labor.
We have considered the petition filed by the Solicitor General on behalf of
NPDC and the comments thereto and are persuaded that it is meritorious.
In Jesus P. Perlas, Jr. vs. People of the Philippines, G.R. Nos. 84637-39,
August 2, 1989, we ruled that the NPDC is an agency of the government, not
a government-owned or controlled corporation, hence, the Sandiganbayan
had jurisdiction over its acting director who committed estafa. We held thus:
The National Parks Development Committee was created originally as an
Executive Committee on January 14,1963, for the development of the
Quezon Memorial, Luneta and other national parks (Executive Order No.
30). It was later designated as the National Parks Development Committee
(NPDC) on February 7, 1974 (E.O. No. 69). On January 9, 1966, Mrs. Imelda
R. Marcos and Teodoro F. Valencia were designated Chairman and Vice-
Chairman respectively (E.O. No. 3). Despite an attempt to transfer it to the
Bureau of Forest Development, Department of Natural Resources, on
December 1, 1975 (Letter of Implementation No. 39, issued pursuant to PD
No. 830, dated November 27, 1975), the NPDC has remained under the
Office of the President (E.O. No. 709, dated July 27, 1981).
Since 1977 to 1981, the annual appropriations decrees listed NPDC as a
regular government agency under the Office of the President and allotments
for its maintenance and operating expenses were issued direct to NPDC
(Exh. 10-A Perlas, Item No. 2, 3). (Italics ours.)
Since NPDC is a government agency, its employees are covered by civil
service rules and regulations (Sec. 2, Article IX, 1987 Constitution). Its
employees are civil service employees (Sec. 14, Executive Order No. 180).
While NPDC employees are allowed under the 1987 Constitution to organize
and join unions of their choice, there is as yet no law permitting them to
strike. In case of a labor dispute between the employees and the
government, Section 15 of Executive Order No. 180 dated June 1, 1987
provides that the Public Sector Labor- Management Council, not the
Department of Labor and Employment, shall hear the dispute. Clearly, the
Court of Appeals and the lower court erred in holding that the labor dispute
between the NPDC and the members of the NPDSA is cognizable by the
Department of Labor and Employment.
WHEREFORE, the petition for review is granted. The decision of the Court of
Appeals in CA-G.R. SP No. 14204 is hereby set aside. The private
respondents' complaint should be filed in the Public Sector Labor-
Management Council as provided in Section 15 of Executive Order No. 180.
Costs against the private respondents.
SO ORDERED.
G.R. No. 91902 May 20, 1991
MANILA ELECTRIC COMPANY, petitioner,
vs.
THE HON. SECRETARY OF LABOR AND EMPLOYMENT, STAFF AND
TECHNICAL EMPLOYEES ASSOCIATION OF MERALCO, and FIRST LINE
ASSOCIATION OF MERALCO SUPERVISORY EMPLOYEES,respondents.
Rolando R. Arbues, Atilano S. Guevarra, Jr. and Gil S. San Diego for
petitioner.
The Solicitor General for public respondent.
Felipe Gojar for STEAM-PCWF.
Wakay & Wakay Legal Services for First Line Association of Meralco
Supervisory Employees.
MEDIALDEA, J.:p
This petition seeks to review the Resolution of respondent Secretary of
Labor and Employment Franklin M. Drilon dated November 3, 1989 which
affirmed an Order of Med-Arbiter Renato P. Parungo (Case No. NCR-O-D-M-
1-70), directing the holding of a certification election among certain
employees of petitioner Manila Electric Company (hereafter "MERALCO") as
well as the Order dated January 16, 1990 which denied the Motion for
Reconsideration of MERALCO.
The facts are as follows:
On November 22, 1988, the Staff and Technical Employees Association of
MERALCO (hereafter "STEAM-PCWF") a labor organization of staff and
technical employees of MERALCO, filed a petition for certification election,
seeking to represent regular employees of MERALCO who are: (a) non-
managerial employees with Pay Grades VII and above; (b) non-managerial
employees in the Patrol Division, Treasury Security Services Section,
Secretaries who are automatically removed from the bargaining unit; and (c)
employees within the rank and file unit who are automatically disqualified
from becoming union members of any organization within the same
bargaining unit.
Among others, the petition alleged that "while there exists a duly-organized
union for rank and file employees in Pay Grade I-VI, which is the MERALCO
Employees and Worker's Association (MEWA) which holds a valid CBA for
the rank and file employees, 1 there is no other labor organization except
STEAM-PCWF claiming to represent the MERALCO employees.
The petition was premised on the exclusion/disqualification of certain
MERALCO employees pursuant to Art. I, Secs. 2 and 3 of the existing MEWA
CBA as follows:
ARTICLE I
SCOPE
xxx xxx xxx
Sec. 2. Excluded from the appropriate bargaining unit and therefore outside
the scope of this Agreement are:
(a) Employees in Patrol Division;
(b) Employees in Treasury Security Services Section;
(c) Managerial Employees; and
(d) Secretaries.
Any member of the Union who may now or hereafter be assigned or
transferred to Patrol Division or Treasury Security Services Section, or
becomes Managerial Employee or a Secretary, shall be considered
automatically removed from the bargaining unit and excluded from the
coverage of this agreement. He shall thereby likewise be deemed
automatically to have ceased to be member of the union, and shall desist
from further engaging in union activity of any kind.
Sec. 3. Regular rank-and-file employees in the organization elements herein
below listed shall be covered within the bargaining unit, but shall be
automatically disqualified from becoming union members:
1. Office of the Corporate Secretary II

2. Corporate Staff Services Department The petition for certification election will disturb the administration of the
existing Collective Bargaining Agreement in violation of Art. 232 of the Labor
3. Managerial Payroll Office Code.
4. Legal Service Department III
5. Labor Relations Division The petition itself shows that it is not supported by the written consent of at
6. Personnel Administration Division least twenty percent (20%) of the alleged 2,500 employees sought to be
represented. (Resolution, Sec. of Labor, pp. 223-224, Rollo)
7. Manpower Planning & Research Division
Before Med-Arbiter R. Parungo, MERALCO contended that employees from
8. Computer Services Department Pay Grades VII and above are classified as managerial employees who, under
the law, are prohibited from forming, joining or assisting a labor organization
9. Financial Planning & Control Department
of the rank and file. As regards those in the Patrol Division and Treasury
10. Treasury Department, except Cash Section Security Service Section, MERALCO maintains that since these employees
are tasked with providing security to the company, they are not eligible to
11. General Accounting Section join the rank and file bargaining unit, pursuant to Sec. 2(c), Rule V, Book V of
the then Implementing Rules and Regulations of the Labor Code (1988)
xxx xxx xxx
which reads as follows:
(p. 19, Rollo)
Sec. 2. Who may file petition. — The employer or any legitimate labor
MERALCO moved for the dismissal of the petition on the following grounds: organization may file the petition.

I The petition, when filed by a legitimate labor organization, shall contain,

among others:
The employees sought to be represented by petitioner are either 1)
managerial who are prohibited by law from forming or joining supervisory xxx xxx xxx
union; 2) security services personnel who are prohibited from joining or
(c) description of the bargaining unit which shall be the employer unit unless
assisting the rank-and-file union; 3) secretaries who do not consent to the
circumstances otherwise require, and provided, further: that the appropriate
petitioner's representation and whom petitioner can not represent; and 4)
bargaining unit of the rank and file employees shall not include security
rank-and-file employees represented by the certified or duly recognized
guards (As amended by Sec. 6, Implementing Rules of EO 111)
bargaining representative of the only rank-and-file bargaining unit in the
company, the Meralco Employees Workers Association (MEWA), in xxx xxx xxx
accordance with the existing Collective Bargaining Agreement with the
latter. (p. 111, Labor Code, 1988 Ed.)
As regards those rank and file employees enumerated in Sec. 3, Art. I,
MERALCO contends that since they are already beneficiaries of the MEWA-
CBA, they may not be treated as a separate and distinct appropriate
bargaining unit.
MERALCO raised the same argument with respect to employees sought to
be represented by STEAM-PCWF, claiming that these were already covered
by the MEWA-CBA.
On March 15, 1989, the Med-Arbiter ruled that having been excluded from
the existing Collective Bargaining Agreement for rank and file employees,
these employees have the right to form a union of their own, except those
employees performing managerial functions. With respect to those
employees who had resented their alleged involuntary membership in the
existing CBA, the Med-Arbiter stated that the holding of a certification
election would allow them to fully translate their sentiment on the matter,
and thus directed the holding of a certification election. The dispositive
portion of the Resolution provides as follows:
WHEREFORE, premises considered, a certification election is hereby ordered
conducted among the regular rank-and-file employees of MERALCO to wit:
1. Non-managerial employees with Pay Grades VII and above;
2. Non-managerial employees of Patrol Division, Treasury Security Services
Section and Secretaries; and
3. Employees prohibited from actively participating as members of the
union.
within 20 days from receipt hereof, subject to the usual pre-election
conference with the following choices:
1. Staff and Technical, Employees Association of MERALCO (STEAM-PCWF);
2. No Union.
SO ORDERED. (p. 222, Rollo)
On April 4, 1989, MERALCO appealed, contending that "until such time that
a judicial finding is made to the effect that they are not managerial
employee, STEAM-PCWF cannot represent employees from Pay Grades VII
and above, additionally reiterating the same reasons they had advanced for
disqualifying respondent STEAM-PCWF.
On April 7, 1989, MEWA filed an appeal-in-intervention, submitting as
follows:
A. The Order of the Med-Arbiter is null and void for being in violation of
Article 245 of the Labor Code;
B. The Order of the Med-Arbiter violates Article 232 of the Labor Code; and
C. The Order is invalid because the bargaining unit it delineated is not an
appropriated (sic) bargaining unit.
On May 4, 1989, STEAM-PCWF opposed the appeal-in-intervention.
With the enactment of RA 6715 and the rules and regulations implementing
the same, STEAM-PCWF renounced its representation of the employees in
Patrol Division, Treasury Security Services Section and rank-and-file
employees in Pay Grades I-VI.
On September 13, 1989, the First Line Association of Meralco
Supervisory Employees. (hereafter FLAMES) filed a similar petition (NCR-OD-
M-9-731-89) seeking to represent those employees with Pay Grades VII to
XIV, since "there is no other supervisory union at MERALCO." (p. 266,Rollo).
The petition was consolidated with that of STEAM-PCWF.
On November 3, 1989, the Secretary of Labor affirmed with modification,
the assailed order of the Med-Arbiter, disposing as follows:
WHEREFORE, premises considered, the Order appealed from is hereby
affirmed but modified as far as the employees covered by Section 3, Article I
of the exist CBA in the Company are concerned. Said employees shall remain
in the unit of the rank-and-file already existing and may exercise their right
to self organization as above enunciated.
Further, the First Line Association of Meralco Supervisory Employees
(FLAMES) is included as among the choices in the certification election.
Let, therefore, the pertinent records of the case be immediately forwarded
to the Office of origin for the conduct of the certification election.
SO ORDERED. (p. 7, Rollo)
MERALCO's motion for reconsideration was denied on January 16, 1990.
On February 9, 1990, MERALCO filed this petition, premised on the following
ground:
RESPONDENT SECRETARY ACTED WITH GRAVE ABUSE OF DISCRETION
AND/OR IN EXCESS OF JURISDICTION AMOUNTING TO LACK OF
JURISDICTION IN RULING THAT:
I. ANOTHER RANK-AND-FILE BARGAINING UNIT CAN BE ESTABLISHED
INDEPENDENT, DISTINCT AND SEPARATE FROM THE EXISTING RANK-AND-
FILE BARGAINING UNIT.
II. THE EMPLOYEES FROM PAY GRADES VII AND ABOVE ARE RANK-AND-FILE
EMPLOYEES.
III. THE SECURITY GUARDS OR PERSONNEL MAY BE LUMPED TOGETHER
WITH THE RANK-AND-FILE UNION AND/OR THE SUPERVISORY UNION. (p.
8, Rollo)
On February 26, 1990, We issued a temporary restraining order (TRO)
against the implementation of the disputed resolution.
In its petition, MERALCO has relented and recognized respondents STEAM-
PCWF and FLAMES' desired representation of supervisory employees from
Grades VII up. However, it believes that all that the Secretary of Labor has to
do is to establish a demarcation line between supervisory and managerial
rank, and not to classify outright the group of employees represented by
STEAM-PCWF and FLAMES as rank and file employees.
In questioning the Secretary of Labor's directive allowing security guards
(Treasury/Patrol Services Section) to be represented by respondents,
MERALCO contends that this contravenes the provisions of the recently
passed RA 6715 and its implementing rules (specifically par. 2, Sec. 1, Rule II,
Book V) which disqualifies supervisory employees and security guards from
membership in a labor organization of the rank and file (p. 11, Rollo).
The Secretary of Labor's Resolution was obviously premised on the
provisions of Art. 212, then par. (k), of the 1988 Labor Code defining
"managerial" and "rank and file" employees, the law then in force when the
complaint was filed. At the time, only two groups of employees were
recognized, the managerial and rank and file. This explains the absence of
evidence on job descriptions on who would be classified managerial
employees. It is perhaps also for this reason why the Secretary of Labor
limited his classification of the Meralco employees belonging to Pay Grades
VII and up, to only two groups, the managerial and rank and file.
However, pursuant to the Department of Labor's goal of strenghthening the
constitutional right of workers to self-organization, RA 6715 was
subsequently passed which reorganized the employee-ranks by including a
third group, or the supervisory employees, and laying down the distinction
between supervisory employees and those of managerial ranks in Art. 212,
renumbered par. [m], depending on whether the employee concerned has
the power to lay down and execute management policies, in the case of
managerial employees, or merely to recommend them, in case of
supervisory employees.
In this petition, MERALCO has admitted that the employees belonging to Pay
Grades VII and up are supervisory (p. 10, Rollo). The records also show that
STEAM-PCWF had "renounced its representation of the employees in Patrol
Division, Treasury Security Service Section and rank and file employees in
Pay Grades I-VI" (p. 6, Rollo); while FLAMES, on the other hand, had limited
its representation to employees belonging to Pay Grades VII-XIV,generally
accepted as supervisory employees, as follows:
It must be emphasized that private respondent First Line Association of
Meralco Supervisory Employees seeks to represent only the Supervisory
Employees with Pay Grades VII to XIV.
Supervisory Employees with Pay Grades VII to XIV are not managerial
employees. In fact the petition itself of petitioner Manila Electric Company
on page 9, paragraph 3 of the petition stated as follows, to wit:
There was no need for petitioner to prove that these employees are not
rank-and-file. As adverted to above, the private respondents admit that
these are not the rank-and-file but the supervisory employees, whom they
seek to represent. What needs to be established is the rank where
supervisory ends and managerial begins.
and First Line Association of Meralco Supervisory Employees herein states
that Pay Grades VII to XIV are not managerial employees. In fact, although
employees with Pay Grade XV carry the Rank of Department Managers,
these employees only enjoys (sic) the Rank Manager but their
recommendatory powers are subject to evaluation, review and final action
by the department heads and other higher executives of the company.
(FLAMES' Memorandum, p. 305, Rollo)
Based on the foregoing, it is clear that the employees from Pay Grades VII
and up have been recognized and accepted as supervisory. On the other
hand, those employees who have been automatically disqualified have been
directed by the Secretary of Labor to remain in the existing labor
organization for the rank and file, (the condition in the CBA deemed
as not having been written into the contract, as unduly restrictive of an
employee's exercise of the right to self-organization). We shall discuss the
rights of the excluded employees (or those covered by Sec. 2, Art. I, MEWA-
CBA later.
Anent the instant petition therefore, STEAM-PCWF, and FLAMES would
therefore represent supervisory employees only. In this regard, the authority
given by the Secretary of Labor for the establishment of two labor
organizations for the rank and file will have to be disregarded since We
hereby uphold certification elections only for supervisory employees from
Pay Grade VII and up, with STEAM-PCWF and FLAMES as choices.
As to the alleged failure of the Secretary of Labor to establish a demarcation
line for purposes of segregating the supervisory from the managerial
employees, the required parameter is really not necessary since the law
itself, Art. 212-m, (as amended by Sec. 4 of RA 6715) has already laid down
the corresponding guidelines:
Art. 212. Definitions. . . .
(m) "Managerial employee" is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of to Book.
In his resolution, the Secretary of Labor further elaborated:
. . . Thus, the determinative factor in classifying an employee as managerial,
supervisory or rank-and-file is the nature of the work of the employee
concerned.
In National Waterworks and Sewerage Authority vs. National Waterworks
and Sewerage Authority Consolidated Unions (11 SCRA 766) the Supreme
Court had the occasion to come out with an enlightening dissertation of the
nature of the work of a managerial employees as follows:
. . . that the employee's primary duty consists of the management of the
establishment or of a customarily recognized department or subdivision
thereof, that he customarily and regularly directs the work of other
employees therein, that he has the authority to hire or discharge other
employees or that his suggestions and recommendations as to the hiring
and discharging and or to the advancement and promotion or any other
change of status of other employees are given particular weight, that he
customarily and regularly exercises discretionary powers . . . (56 CJS, pp.
666-668. (p. 226, Rollo)
We shall now discuss the rights of the security guards to self-organize.
MERALCO has questioned the legality of allowing them to join either the
rank and file or the supervisory union, claiming that this is a violation of par.
2, Sec. 1, Rule II, Book V of the Implementing Rules of RA 6715, which states
as follows:
Sec 1. Who may join unions. . . .
xxx xxx xxx
Supervisory employees and security guards shall not be eligible for
membership in a labor organization of the rank-and-file employees but may
join, assist or form separate labor organizations of their own; . . .
xxx xxx xxx
(emphasis ours)
Paragraph 2, Sec. 1, Rule II, Book V, is similar to Sec. 2 (c), Rule V, also of
Book V of the implementing rules of RA 6715:
Rule V.
REPRESENTATION CASES AND
INTERNAL-UNION CONFLICTS
Sec. 1. . . .
Sec. 2. Who may file.—Any legitimate labor organization or the employer,
when requested to bargain collectively, may file the petition.
The petition, when filed by a legitimate labor-organization shall contain,
among others:
(a) . . .
(b) . . .
(c) description of the bargaining unit which shall be the employer unit unless
circumstances otherwise require; and provided further, that the appropriate
bargaining unit of the rank-and-file employees shall not include supervisory
employees and/or security guards;
xxx xxx xxx
(emphasis ours)
Both rules, barring security guards from joining a rank and file organization,
appear to have been carried over from the old rules which
implemented then Art. 245 of the Labor Code, and which provided thus:
Art. 245. Ineligibility of security personnel to join any labor organization.—
Security guards and other personnel employed for the protection and
security of the person, properties and premises of the employer shall not be
eligible for membership in any labor organization.
On December 24, 1986, Pres. Corazon C. Aquino issued E.O. No. 111
which eliminated the above-cited provision on the disqualification of
security guards. What was retained was the disqualification of managerial
employees, renumbered as Art. 245 (previously Art. 246), as follows:
Art. 245. Ineligibility of managerial employees to joint any labor
organization.—Managerial employees are not eligible to join, assist or form
any labor organization.
With the elimination, security guards were thus free to join a rank and file
organization.
On March 2, 1989, the present Congress passed RA 6715. 2 Section 18
thereof amended Art. 245, to read as follows:
Art. 245. Ineligibility of managerial employees to join any labor organization;
right of supervisory employees.—Managerial employees are not eligible to
join, assist or form any labor organization.Supervisory employees shall not
be eligible for membership in a labor organization of the rank-and-file
employees but may join, assist, or form separate labor organizations of their
own. (emphasis ours)
As will be noted, the second sentence of Art. 245 embodies an amendment
disqualifying supervisory employeesfrom membership in a labor organization
of the rank-and-file employees. It does not include security guards in the
disqualification.
The implementing rules of RA 6715, therefore, insofar as they disqualify
security guards from joining a rank and file organization are null and void,
for being not germane to the object and purposes of EO 111 and RA 6715
upon which such rules purportedly derive statutory moorings. In Shell
Philippines, Inc. vs. Central Bank, G.R. No. 51353, June 27, 1988, 162 SCRA
628, We stated:
The rule-making power must be confined to details for regulating the mode
or proceeding to carry into effect the law as it has been enacted. The power
cannot be extended to amending or expanding the statutory requirements
or to embrace matters not covered by the statute. Rules that subvert the
statute cannot be sanctioned. (citing University of Sto. Tomas vs. Board of
Tax Appeals, 93 Phil. 376).
While therefore under the old rules, security guards were barred from
joining a labor organization of the rank and file, under RA 6715, they may
now freely join a labor organization of the rank and file or that of the
supervisory union, depending on their rank. By accommodating supervisory
employees, the Secretary of Labor must likewise apply the provisions of RA
6715 to security guards by favorably allowing them free access to a labor
organization, whether rank and file or supervisory, in recognition of their
constitutional right to self-organization.
We are aware however of possible consequences in the implementation of
the law in allowing security personnel to join labor unions within the
company they serve. The law is apt to produce divided loyalties in the
faithful performance of their duties. Economic reasons would present the
employees concerned with the temptation to subordinate their duties to the
allegiance they owe the union of which they are members, aware as they
are that it is usually union action that obtains for them increased pecuniary
benefits.
Thus, in the event of a strike declared by their union, security personnel may
neglect or outrightly abandon their duties, such as protection of property of
their employer and the persons of its officials and employees, the control of
access to the employer's premises, and the maintenance of order in the
event of emergencies and untoward incidents.
It is hoped that the corresponding amendatory and/or suppletory laws be
passed by Congress to avoid possible conflict of interest in security
personnel.
ACCORDINGLY, the petition is hereby DISMISSED. We AFFIRM with
modification the Resolution of the Secretary of Labor dated November 3,
1989 upholding an employee's right to self-organization. A certification
election is hereby ordered conducted among supervisory employees of
MERALCO, belonging to Pay Grades VII and above, using as guideliness an
employee's power to either recommend or execute management policies,
pursuant to Art. 212 (m), of the Labor Code, as amended by Sec. 4 of RA
6715, with respondents STEAM-PCWF and FLAMES as choices.
Employees of the Patrol Division, Treasury Security Services Section and
Secretaries may freely join either the labor organization of the rank and file
or that of the supervisory union depending on their employee rank.
Disqualified employees covered by Sec. 3, Art. I of the MEWA-CBA, shall
remain with the existing labor organization of the rank and file, pursuant to
the Secretary of Labor's directive:
By the parties' own agreement, they find the bargaining unit, which includes
the positions enumerated in Section 3, Article I of their CBA, appropriate for
purposes of collective bargaining. The composition of the bargaining unit
should be left to the agreement of the parties, and unless there are legal
infirmities in such agreement, this Office will not substitute its judgment for
that of the parties. Consistent with the story of collective bargaining in the
company, the membership of said group of employees in the existing rank-
and-file unit should continue, for it will enhance stability in that unit already
well establish. However, we cannot approve of the condition set in Section 3,
Article I of the CBA that the employees covered are automatically
disqualified from becoming union members. The condition unduly restricts
the exercise of the right to self organization by the employees in question. It
is contrary to law and public policy and, therefore, should be considered to
have not been written into the contract. Accordingly, the option to join or
not to join the union should be left entirely to the employees themselves.
(p. 229, Rollo)

The Temporary Restraining Order (TRO) issued on February 26, 1990 is

hereby LIFTED. Costs against petitioner.

SO ORDERED.

G.R. No. 88957 June 25, 1992

PHILIPS INDUSTRIAL DEVELOPMENT, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPS EMPLOYEES
ORGANIZATION (FFW),respondents.
DAVIDE, JR., J.:
In this petition for certiorari and prohibition under Rule 65 of the Rules of
Court with a prayer for a temporary restraining order and/or a writ of
preliminary injunction, petitioner Philips Industrial Development, Inc. (PIDI)
seeks to set aside the Decision and Resolution, dated 16 January 1989 and
17 March 1989, respectively, of the National Labor Relations Commission
(NLRC) in Case No. NLRC-NCR-00-11-03936-87 on the ground that it
committed grave abuse of discretion amounting to lack of jurisdiction in
holding that service engineers, sales representatives and confidential
employees of PIDI are qualified to be included in the existing bargaining
unit.
PIDI is a domestic corporation engaged in the manufacturing and marketing
of electronic products Since 1971, it had a total of six (6) collective
bargaining agreements (CBAs) with private respondent Philips Employees
Organization-FFW (PEO-FFW), a registered labor union and the certified
bargaining agent of all the rank and file employees of PIDI. In the first CBA
(1971-1974), the supervisors referred to in R.A. No. 875, confidential
employees, security guards, temporary employees and sales representatives
were excluded from the bargaining unit. In the second to the fifth CBAs
(1975-1977; 1978-1980; 1981-1983; and 1984-1986), the sales force,
confidential employees and heads of small units, together with the
managerial employees, temporary employees and security personnel, were
specifically excluded from the bargaining unit. 1 The confidential employees
are the division secretaries of light/telecom/data and consumer electronics,
marketing managers, secretaries of the corporate planning and business
manager, fiscal and financial system manager and audit and EDP manager,
and the staff of both the General Management and the Personnel
Department. 2
In the sixth CBA covering the years 1987 to 1989, it was agreed upon, among
others, that the subject of inclusion or exclusion of service engineers, sales
personnel and confidential employees in the coverage of the bargaining unit
would be submitted for arbitration. Pursuant thereto, on June 1987, PEO-
FFW filed a petition before the Bureau of Labor Relations (BLR) praying for
an order "directing the parties to select a voluntary arbitrator in accordance
with its rules and regulations."
As the parties failed to agree on a voluntary arbitrator, the BLR endorsed the
petition to the Executive Labor Arbiter of the National Capital Region for
compulsory arbitration pursuant to Article 228 of the Labor Code. Docketed
as Case No. NLRC-NCR-00-11-03936-87, the case was assigned to Executive
Labor Arbiter Arthur Amansec.
On 17 March 1988, Labor Arbiter Amansec rendered a decision, the
dispositive portion of which states:
In view of the foregoing, a decision is hereby rendered, ordering the
respondent to conduct a referendum to determine the will of the service
engineers, sales representatives as to their inclusion or exclusion in the
bargaining unit.
It is hereby declared that the Division Secretaries and all Staff of general
management, personnel and industrial relations department, secretaries of
audit, EDP, financial system are confidential employees and as such are
hereby deemed excluded in the bargaining unit.
SO ORDERED.
PEO-FFW appealed from the decision to the NLRC.
On 16 January 1989, the NLRC rendered the questioned decision, the
dispositive portion of which reads:
WHEREFORE, the foregoing premises considered, the appealed decision of
the Executive Labor Arbiter is hereby SET ASIDE and a new one entered
declaring respondent company's Service Engineers, Sales Force, division
secretaries, all Staff of General Management, Personnel and Industrial
Relations Department, Secretaries of Audit, EDP and Financial Systems are
included within the rank and file bargaining unit.
SO ORDERED.
The reversal is anchored on the respondent NLRC's conclusion that based on
Section 1, 3 Rule II, Book V of the Omnibus Rules Implementing the Labor
Code, as amended by Section 3, Implementing Rules of E.O. No. 111;
paragraph (c) Section 2, Rule V of the same Code, as amended by Section
6 4 of the Implementing Rules of E.O. No. 111; and Article 245 5 of the Labor
Code, as amended:
. . . all workers, except managerial employees and security personnel, are
qualified to join or be a part of the bargaining unit. . . .
It further ruled that:
The Executive Labor Arbiters directive that the service engineers and sales
representatives to (sic) conduct a referendum among themselves is
erroneous inasmuch as it arrogates unto said employees the right to define
what the law means. It would not be amiss to state at this point that there
would be no one more interested in excluding the subject employees from
the bargaining unit than management and that it would not be improbable
for the latter to lobby and/or exert pressure on the employees concerned,
thus agitating unrest among the rank-and-file. Likewise, the Executive Labor
Arbiter's declaration that the Division Secretaries and all Staff of general
management, personnel and industrial relations department, secretaries of
audit, EDP and financial system "are confidential employees and as such are
hereby deemed excluded in (sic) the bargaining unit" is contrary to law for
the simple reason that the law, as earlier quoted, does not mention them as
among those to be excluded from the bargaining unit only (sic) managerial
employees and security guards. As a matter of fact, supervisory unions have
already been dissolved and their members who do not fall within the
definition of managerial employees have become eligible to join or assist the
rank-and-file organization. 6
Its motion for the reconsideration of this decision having been denied by the
NLRC in its Resolution of 16 March 1989, a copy of which it received on 8
June 1989, petitioner PIDI filed the instant petition on 20 July 1989, alleging
that:
I
THE NLRC COMMITTED ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN HOLDING THAT SERVICE ENGINEERS, SALES
REPRESENTATIVES AND CONFIDENTIAL EMPLOYEES OF PETITIONER ARE
QUALIFIED TO BE PART OF THE EXISTING BARGAINING UNIT.
II
THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF JURISDICTION IN NOT APPLYING THE TIME HONORED "GLOBE
DOCTRINE." 7
On 31 July 1989, this Court; required the respondents to comment on the
petition, which PEO-FFW complied with on 28 August 1989. Public
respondent NLRC, thru its counsel, the Solicitor General, moved for, and was
granted a 30-day extension to file its Comment.
On 18 September 1989, this Court required the parties to show cause why
the petition should not be dismissed in view of the finality of the NLRC
decision as provided for by the penultimate sentence of Article 223 of the
Labor Code, as amended by R.A. No. 6715 R..A. No. 6715, which amended
Article 223 of the Labor Code, was enacted on 2 March 1989 and took effect
on 21 March 1989. The parties subsequently complied with the Resolution.
On 16 May 1990, this Court required the parties to submit Memoranda
explaining the effect in this case of Article 223 of the Labor Code, as
amended by Section 12 of R.A. No-6715 with respect to the finality of (Non-Bargaining (Bargaining
decisions of the NLRC. The parties complied separately with the same. AREAS OF INTEREST Unit Employees) Unit Employees)

On 10 September 1990, this Court gave due course to the petition and Qualifications Professional Employees High School/
required the parties to submit their respective Memoranda. The petitioner Vocational
and the Office of the Solicitor General filed their separate Memoranda. On Grads.
the other hand, PEO-FFW moved that its Motion and manifestation dated 23 Work Schedule With Night Shift None
August 1989 be considered as its Memorandum; this Court granted the Schedule
same. Night Shift 10% of Basic Rate None
Differential Pay
As stated earlier, the principal issue in this case is whether the NLRC Stand-By Call & On Stand-By Call with: None
committed grave abuse of discretion in holding that service engineers, sales Allowance First Line:15% of
representatives and confidential employees (division secretaries, staff of basic rate
general management, personnel and industrial relations department, Second Line: 10% of
secretaries of audit, EDP and financial system) are qualified to be included in basic rate
the existing bargaining unit. Petitioner maintains that it did, and in support Uniforms None 2 sets of polo
of its stand that said employees should not be absorbed by the existing & pants every
bargaining unit, it urges this Court to consider these points: 6 months
1) The inclusion of the group in the existing bargaining unit would run Retirement Benefits 15 yrs. ser.70% 15 yrs. serv. 50%
counter to the history of this parties CBA. The parties' five (5) previous CBAs 16 75% 16 85%
consistently excluded this group of employees from the scope of the 17 80% 17 90%
bargaining unit. The rationale for such exclusion is that these employees 18 85% 18 100%
hold positions which are highly sensitive, confidential and of a highly 19 90% 19 115%
fiduciary nature; to include them in the bargaining unit may subject the 20 100% 20 135%
company to breaches in security and the possible revelation of highly Year End Performance Merit Increase system None
sensitive and confidential matters. It would cripple the company's bargaining Evaluation
position and would give undue advantage to the union. Sales Commission Yes None
Car Loan Yes None
2) The absence of mutuality of interests between this group of employees Precalculated Yes None
and the regular rank and file militates against such inclusion. A table Kilometer allowance
prepared by the petitioner shows the disparity of interests between the said
groups:

SERVICE ENGINEERS SERVICE The Office of the Solicitor General supports the decision of the Executive
SALES REPRESENTATIVES TECHNICIANS Labor Arbiter and refuses to uphold the position of the NLRC. It holds the
view that the division Secretaries; the staff members of General
Management, Personnel and the Industrial Relations Department; and the
secretaries of Audit, EDP and Financial Systems, are disqualified from joining
the PEO-FFW as they are confidential employees. They cannot even form a
union of their own for, as held in Golden Farms, Inc. vs. Ferrer-Calleja, 8 the
rationale for the disqualification of managerial employees from joining
unions holds true also for confidential employees. As regards the sales
representatives and service engineers, however, there is no doubt that they
are entitled to join or form a union, as they are not disqualified by law from
doing so. Considering that they have interests dissimilar to those of the rank
and file employees comprising the existing bargaining unit, and following
the Globe Doctrine enunciated in In Re: Globe Machine and Stamping
Company 9 to the effect that in determining the proper bargaining unit the
express will or desire of the employees shall be considered, they should be
allowed to determine for themselves what union to join or form. The best
way to determine their preference is through a referendum. As shown by
the records, such a. referendum was decreed by the Executive Labor Arbiter.
The petition is impressed with merit.
At the outset, We express Our agreement with the petitioner's view that
respondent NLRC did not quite accurately comprehend the issue raised
before it. Indeed, the issue is not whether the subject employees may join
or form a union, but rather, whether or not they may be part of the existing
bargaining unit for the rank and file employees of PIDI.
Even if the issue was, indeed, as perceived by the NLRC, still, a palpable
error was committed by it in ruling that under the law, all workers, except
managerial employees and security personnel, are qualified to join a union,
or form part of a bargaining unit. At the time Case No. NLRC-NCR-00-11-
03936-87 was filed in 1987, security personnel were no longer disqualified
from joining or forming a union.
Section 6 of E.O. No. 111, enacted on 24 December 1986, repealed the
original provisions of Article 245 of the Labor Code, reading as follows:
Art. 245. Ineligibility of security personnel to join any labor organization. —
Security guards and other personnel employed for the protection and
security of the person, properties and premises of the employer shall not be
eligible for membership, in any labor organization.
and substituted it with the following provision:
Art. 245. Right of employees in the public service. — 10
xxx xxx xxx
By virtue of such repeal and substitution, security guards became eligible for
membership in any labor organization. 11
On the main issue raised before Us, it is quite obvious that respondent NLRC
committed grave abuse of discretion in reversing the decision of the
Executive Labor Arbiter and in decreeing that PIDI's "Service Engineers, Sales
Force, division secretaries, all Staff of General Management, Personnel and
Industrial Relations Department, Secretaries of Audit, EDP and Financial
Systems are included within the rank and file bargaining unit."
In the first place, all these employees, with the exception of the service
engineers and the sales force personnel, are confidential employees. Their
classification as such is not seriously disputed by PEO-FFW; the five (5)
previous CBAs between PIDI and PEO-FFW explicitly considered them as
confidential employees. By the very nature of their functions, they assist and
act in a confidential capacity to, or have access to confidential matters of,
persons who exercise managerial functions in the field of labor
relations. 12 As such, the rationale behind the ineligibility of managerial
employees to form, assist or join a labor union equally applies to them.
In Bulletin Publishing Co., Inc. vs. Hon Augusto Sanchez, 13 this Court
elaborated on this rationale, thus:
. . . The rationale for this inhibition has been stated to be, because if these
managerial employees would belong to or be affiliated with a Union, the
latter might not be assured of their loyalty, to the Union in view of evident
conflict of interests. The Union can also become company-dominated with
the presence of managerial employees in Union membership.
In Golden Farms, Inc. vs. Ferrer-Calleja, 14 this Court explicitly made this
rationale applicable to confidential employees:
This rationale holds true also for confidential employees such as accounting
personnel, radio and telegraph operators, who having access to confidential
information, may become the source of undue advantage. Said employee(s)
may act as a spy or, spies of either party to a collective
bargainingagreement. This is specially true in the present case where the
petitioning Union is already the bargaining agent of the rank-and-file
employees in the establishment. To allow the confidential employees to join
the existing Union of the rank-and-file would be in violation of the terms of
the Collective Bargaining Agreement wherein this kind of employees by the
nature of their functions/ positions are expressly excluded.
As regards the service engineers and the sales representatives, two (2)
points which respondent NLRC likewise arbitrarily and erroneously ruled
upon agreed to be discussed. Firstly, in holding that they are included in the
bargaining unit for the rank and file employees of PIDI, the NLRC practically
forced them to become members of PEO-FFW or to be subject to its sphere
of influence, it being the certified bargaining agent for the subject
bargaining unit. This violates, obstructs, impairs and impedes the service
engineers' and the sales representatives' constitutional right to form unions
or associations 15 and to self-organization. 16 In Victoriano vs. Elizalde Rope
Workers Union, 17 this Court already ruled:
. . . Notwithstanding the different theories propounded by the different
schools of jurisprudence regarding the nature and contents of a "right", it
can be safely said that whatever theory one subscribes to, a right
comprehends at least two broad notions, namely: first, liberty or
freedom, i.e., the absence of legal restraint, whereby an employee may act
for himself without being prevented by law; and second, power, whereby an
employee may, as he pleases, join or refrain from joining an association. It is,
therefore, the employee who should decide for himself whether he should
join or not an association; and should he choose to join, he himself makes
up his mind as to which association he would join; and even after he has
joined, he still retains the liberty and the power to leave and cancel his
membership with said organization at any time. 18 It is clear, therefore, that
the right to join a union includes the right to abstain from joining any
union. 19 Inasmuch as what both the Constitution and the Industrial Peace
Act have recognized, and guaranteed to the employee, is the "right" to join
associations of his choice, it would be absurd to say that the law also
imposes, in the same breath, upon the employee the duty to join
associations. The law does not enjoin an employee to sign up with any
association.
The decision then of the Executive Labor Arbiter in merely directing the
holding of a referendum "to determine the will of the service engineers,
sales representatives as to their inclusion or exclusion in (sic) the bargaining
unit" is the most appropriate procedure that conforms with their right to
form, assist or join in labor union or organization. However, since this
decision was rendered before the effectivity of R.A. No. 6715, it must now
be stressed that its future application to the private parties in this case
should, insofar as service engineers and sales representatives holding
supervisory positions or functions are concerned, take into account the
present Article 245 20 of the Labor Code which, as amended by R.A. No.
6715, now reads:
ARTICLE 245. Ineligibility of managerial employees to join any labor
organization; right of supervisory employees. — Managerial employees are
not eligible to join, assist or form any labor organization.Supervisory
employees shall not be eligible for membership in a labor organization of the
rank-and-file employees but may join, assist or form separate labor
organizations of their own. (emphasis supplied)
The foregoing disquisitions render unnecessary a discussion on the second
ground on the alleged grave abuse of discretion on the part of the NLRC in
not applying the "Globe Doctrine". Suffice it to state here that since the only
issue is the subject employees' inclusion in or exclusion from the bargaining
unit in question, and PIDI never questioned the decision of the Executive
Labor Arbiter, the Globe Doctrine finds no application. Besides, this doctrine
applies only in instances of evenly balanced claims by competitive groups for
the right to be established as the bargaining unit, 21 which do not obtain in
this case.

WHEREFORE, the petition is hereby GRANTED. The Decision of public

respondent National Labor Relations Commission in Case No. NLRC-NCR-00-
11-03936-87, promulgated on 16 January 1989, is hereby SET ASIDE while
the Decision of the Executive Labor Arbiter in said case dated 17 March 1988
is hereby REINSTATED, subject to the modifications above indicated. Costs
against private respondent.

SO ORDERED.
G.R. No. 122226 March 25, 1998 The right of the people, including those employed in the public and private
sectors, to form unions, associations, or societies for purposes not contrary
UNITED PEPSI-COLA SUPERVISORY UNION (UPSU), petitioner, to law shall not be abridged.
vs.
HON. BIENVENIDO E. LAGUESMA and PEPSI-COLA PRODUCTS, For this reason, the petition was referred to the Court en banc.
PHILIPPINES, INC. respondents.
The Issues in this Case

Two questions are presented by the petition: (1) whether the route
MENDOZA, J.: managers at Pepsi-Cola Products Philippines, Inc. are managerial employees
and (2) whether Art. 245, insofar as it prohibits managerial employees from
Petitioner is a union of supervisory employees. It appears that on March 20, forming, joining or assisting labor unions, violates Art. III, §8 of the
1995 the union filed a petition for certification election on behalf of the Constitution.
route managers at Pepsi-Cola Products Philippines, Inc. However, its petition
was denied by the med-arbiter and, on appeal, by the Secretary of Labor In resolving these issues it would be useful to begin by defining who are
and Employment, on the ground that the route managers are managerial "managerial employees" and considering the types of "managerial
employees and, therefore, ineligible for union membership under the first employees."
sentence of Art. 245 of the Labor Code, which provides:
Types of Managerial Employees
Ineligibility of managerial employees to join any labor organization; right of
The term "manager" generally refers to "anyone who is responsible for
supervisory employees. — Managerial employees are not eligible to join,
assist or form any labor organization. Supervisory employees shall not be subordinates and other organizational resources." 1 As a class, managers
constitute three levels of a pyramid:
eligible for membership in a labor organization of the rank-and-file
employees but may join, assist or form separate labor organizations of their Top management
own.
————————
Petitioner brought this suit challenging the validity of the order dated
August 31, 1995, as reiterated in the order dated September 22, 1995, of the Middle
Secretary of Labor and Employment. Its petition was dismissed by the Third
Management
Division for lack of showing that respondent committed grave abuse of
discretion. But petitioner filed a motion for reconsideration, pressing for ——————————
resolution its contention that the first sentence of Art. 245 of the Labor
Code, so far as it declares managerial employees to be ineligible to form, First-Line
assist or join unions, contravenes Art. III, §8 of the Constitution which
Management
provides:
(also called
Supervisor)
====================
Operatives
or
Operating
Employees
FIRST-LINE MANAGERS — The lowest level in an organization at which
individuals are responsible for the work of others is called first-line or first-
level management. First-line managers direct operating employees only;
they do not supervise other managers. Examples of first-line managers are
the "foreman" or production supervisor in a manufacturing plant, the
technical supervisor in a research department, and the clerical supervisor in
a large office. First-level managers are often called supervisors.
MIDDLE MANAGERS — The term middle management can refer to more
than one level in an organization. Middle managers direct the activities of
other managers and sometimes also those of operating employees. Middle
managers' principal responsibilities are to direct the activities that
implement their organizations' policies and to balance the demands of their
superiors with the capacities of their subordinates. A plant manager in an
electronics firm is an example of a middle manager.
TOP MANAGERS — Composed of a comparatively small group of
executives, top management is responsible for the overall management of
the organization. It establishes operating policies and guides the
organization's interactions with its environment. Typical titles of top
managers are "chief executive officer," "president," and "senior vice-
president." Actual titles vary from one organization to another and are not
always a reliable guide to membership in the highest management
classification. 2
As can be seen from this description, a distinction exists between those who
have the authority to devise, implement and control strategic and
operational policies (top and middle managers) and those whose task is
simply to ensure that such policies are carried out by the rank-and-file
employees of an organization (first-level managers/supervisors). What
distinguishes them from the rank-and-file employees is that they act in the
interest of the employer in supervising such rank-and-file employees.
"Managerial employees" may therefore be said to fall into two distinct
categories: the "managers" per se, who compose the former group
described above, and the "supervisors" who form the latter group. Whether
they belong to the first or the second category, managers, vis-a-
vis employers, are, likewise, employees. 3
The first question is whether route managers are managerial employees or
supervisors.
Previous Administrative Determinations of
the Question Whether Route Managers
are Managerial Employees
It appears that this question was the subject of two previous determinations
by the Secretary of Labor and Employment, in accordance with which this
case was decided by the med-arbiter.
In Case No. OS-MA-10-318-91, entitled Worker's Alliance Trade Union
(WATU) v. Pepsi-Cola Products Philippines, Inc., decided on November 13,
1991, the Secretary of Labor found:
We examined carefully the pertinent job descriptions of the subject
employees and other documentary evidence on record vis-a-vis paragraph
(m), Article 212 of the Labor Code, as amended, and we find that only those
employees occupying the position of route manager and accounting
manager are managerial employees. The rest i.e. quality control manager,
yard/transport manager and warehouse operations manager are supervisory
employees.
To qualify as managerial employee, there must be a clear showing of the
exercise of managerial attributes under paragraph (m), Article 212 of the
Labor Code as amended. Designations or titles of positions are not
controlling. In the instant case, nothing on record will support the claim that
the quality control manager, yard/transport manager and warehouse
operations manager are vested with said attributes. The warehouse
operations manager, for example, merely assists the plant finance manager
in planning, organizing, directing and controlling all activities relative to
development and implementation of an effective management control
information system at the sale offices. The exercise of authority of the
quality control manager, on the other hand, needs the concurrence of the
manufacturing manager.
As to the route managers and accounting manager, we are convinced that
they are managerial employees. Their job descriptions clearly reveal so.
On July 6, 1992, this finding was reiterated in Case No. OS-A-3-71-92.
entitled In Re: Petition for Direct Certification and/or Certification Election-
Route Managers/Supervisory Employees of Pepsi-Cola Products Phils.Inc., as
follows:
The issue brought before us is not of first impression. At one time, we had
the occasion to rule upon the status of route manager in the same
company vis a vis the issue as to whether or not it is supervisory employee
or a managerial employee. In the case of Workers Alliance Trade Unions
(WATU) vs. Pepsi Cola Products, Phils., Inc. (OS-MA-A-10-318-91 ), 15
November 1991, we ruled that a route manager is a managerial employee
within the context of the definition of the law, and hence, ineligible to join,
form or assist a union. We have once more passed upon the logic of our
Decision aforecited in the light of the issues raised in the instant appeal, as
well as the available documentary evidence on hand, and have come to the
view that there is no cogent reason to depart from our earlier holding.
Route Managers are, by the very nature of their functions and the authority
they wield over their subordinates, managerial employees. The prescription
found in Art. 245 of the Labor Code, as amended therefore, clearly applies
to them. 4
Citing our ruling in Nasipit Lumber Co. v. National Labor Relations
Commission, 5 however, petitioner argues that these previous administrative
determinations do not have the effect of res judicata in this case, because
"labor relations proceedings" are "non-litigious and summary in nature
without regard to legal technicalities." 6 Nasipit Lumber Co. involved a
clearance to dismiss an employee issued by the Department of Labor. The
question was whether in a subsequent proceeding for illegal dismissal, the
clearance was res judicata. In holding it was not, this Court made it clear
that it was referring to labor relations proceedings of a non-adversary
character, thus:
The requirement of a clearance to terminate employment was a creation of
the Department of labor to carry out the Labor Code provisions on security
of tenure and termination of employment. The proceeding subsequent to
the filing of an application for clearance to terminate employment was
outlined in Book V, Rule XIV of the Rules and Regulations Implementing the
Labor Code. The fact that said rule allowed a procedure for the approval of
the clearance with or without the opposition of the employee concerned
(Secs. 7 & 8), demonstrates the non-litigious and summary nature of the
proceeding. The clearance requirement was therefore necessary only as an
expeditious shield against arbitrary dismissal without the knowledge and
supervision of the Department of Labor. Hence, a duly approved clearance
implied that the dismissal was legal or for cause (Sec. 2). 7
But the doctrine of res judicata certainly applies to adversary administrative
proceedings. As early as 1956, inBrillantes v. Castro, 8 we sustained the
dismissal of an action by a trial court on the basis of a prior administrative
determination of the same case by the Wage Administration Service,
applying the principle of res judicata. Recently, in Abad v. NLRC 9 we applied
the related doctrine of stare decisis in holding that the prior determination
that certain jobs at the Atlantic Gulf and Pacific Co., were project
employments was binding in another case involving another group of
employees of the same company. Indeed, in Nasipit Lumber Co., this Court
clarified toward the end of its opinion that "the doctrine of res
judicata applies . . . to judicial or quasi judicial proceedings and not to the
exercise of administrative powers." 10 Now proceedings for certification
election, such as those involved in Case No. OS-M-A-10-318-91 and Case No.
OS-A-3-71-92, are quasi judicial in nature and, therefore, decisions rendered
in such proceedings can attain finality. 11
Thus, we have in this case an expert's view that the employees concerned
are managerial employees within the purview of Art. 212 which provides:
(m) "managerial employee" is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay off, recall, discharge, assign or discipline employees.
Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of this
Book.
At the very least, the principle of finality of administrative determination
compels respect for the finding of the Secretary of Labor that route
managers are managerial employees as defined by law in the absence of
anything to show that such determination is without substantial evidence to
support it. Nonetheless, the Court, concerned that employees who are
otherwise supervisors may wittingly or unwittingly be classified as
managerial personnel and thus denied the right of self-organization, has
decided to review the record of this case.
DOLE's Finding that Route Managers are
Managerial Employees Supported by
Substantial Evidence in the Record
The Court now finds that the job evaluation made by the Secretary of Labor
is indeed supported by substantial evidence. The nature of the job of route
managers is given in a four-page pamphlet, prepared by the company, called
"Route Manager Position Description," the pertinent parts of which read:
A. BASIC PURPOSE
A Manager achieves objectives through others.
As a Route Manager, your purpose is to meet the sales plan; and you achieve
this objective through the skillful MANAGEMENT OF YOUR JOB AND THE
MANAGEMENT OF YOUR PEOPLE.
These then are your functions as Pepsi-Cola Route Manager. Within these
functions — managing your job and managing your people — you are
accountable to your District Manager for the execution and completion of
various tasks and activities which will make it possible for you to achieve
your sales objectives.
B. PRINCIPAL ACCOUNTABILITIES
1.0 MANAGING YOUR JOB
The Route Manager is accountable for the following:
1.1 SALES DEVELOPMENT
1.1.1 Achieve the sales plan.
1.1.2 Achieve all distribution and new account objectives.
1.1.3 Develop new business opportunities thru personal contacts with
dealers.
1.1.4 Inspect and ensure that all merchandizing [sic] objectives are achieved
in all outlets.
1.1.5 maintain and improve productivity of all cooling equipment and kiosks.
1.1.6 Execute and control all authorized promotions.
1.1.7 Develop and maintain dealer goodwill.
1.1.8 Ensure all accounts comply with company suggested retail pricing.
1.1.9 Study from time to time individual route coverage and productivity for
possible adjustments to maximize utilization of resources.
1.2 Administration
1.2.1 Ensure the proper loading of route trucks before check-out and the
proper sorting of bottles before check-in.
1.2.2 Ensure the upkeep of all route sales reports and all other related
reports and forms required on an accurate and timely basis.
1.2.3 Ensure proper implementation of the various company policies and
procedures incl. but not limited to shakedown; route shortage; progressive
discipline; sorting; spoilages; credit/collection; accident; attendance.
1.2.4 Ensure collection of receivables and delinquent accounts.
2.0 MANAGING YOUR PEOPLE
The Route Manager is accountable for the following:
2.1 Route Sales Team Development
2.1.2 Conduct route rides to train, evaluate and develop all assigned route
salesmen and helpers at least 3 days a week, to be supported by required
route ride documents/reports & back check/spot check at least 2 days a
week to be supported by required documents/reports.
2.1.2 Conduct sales meetings and morning huddles. Training should focus on
the enhancement of effective sales and merchandizing [sic] techniques of
the salesmen and helpers. Conduct group training at least 1 hour each week
on a designated day and of specific topic.
2.2 Code of Conduct
2.2.1 Maintain the company's reputation through strict adherence to PCPPI's
code of conduct and the universal standards of unquestioned business
ethics. 12
Earlier in this opinion, reference was made to the distinction between
managers per se (top managers and middle managers) and supervisors (first-
line managers). That distinction is evident in the work of the route managers
which sets them apart from supervisors in general. Unlike supervisors who
basically merely direct operating employees in line with set tasks assigned to
them, route managers are responsible for the success of the company's
main line of business through management of their respective sales teams.
Such management necessarily involves the planning, direction, operation
and evaluation of their individual teams and areas which the work of
supervisors does not entail.
The route managers cannot thus possibly be classified as mere supervisors
because their work does not only involve, but goes far beyond, the simple
direction or supervision of operating employees to accomplish objectives set
by those above them. They are not mere functionaries with simple oversight
functions but business administrators in their own right. An idea of the role
of route managers as managers per se can be gotten from a memo sent by
the director of metro sales operations of respondent company to one of the
route managers. It reads: 13
03 April 1995
To : CESAR T . REOLADA
From : REGGIE M. SANTOS
Subj : SALARY INCREASE
Effective 01 April 1995, your basic monthly salary of P11,710 will be
increased to P12,881 or an increase of 10%. This represents the added
managerial responsibilities you will assume due to the recent restructuring
and streamlining of Metro Sales Operations brought about by the
continuous losses for the last nine (9) months.
Let me remind you that for our operations to be profitable, we have to
sustain the intensity and momentum that your group and yourself have
shown last March. You just have to deliver the desired volume targets, better
negotiated concessions, rationalized sustaining deals, eliminate or reduced
overdues, improved collections, more cash accounts, controlled operating
expenses, etc. Also, based on the agreed set targets, your monthly
performance will be closely monitored.
You have proven in the past that your capable of achieving your targets thru
better planning, managing your group as a fighting team, and thru
aggressive selling. I am looking forward to your success and I expect that
you just have to exert your doubly best in turning around our operations
from a losing to a profitable one!
Happy Selling!!
(Sgd.) R.M. SANTOS
The plasticized card given to route managers, quoted in the separate opinion
of Justice Vitug, although entitled "RM's Job Description," is only a summary
of performance standards. It does not show whether route managers are
managers per se or supervisors. Obviously, these performance standards
have to be related to the specific tasks given to route managers in the four-
page "Route Manager Position Description," and, when this is done, the
managerial nature of their jobs is fully revealed. Indeed, if any, the card
indicates the great latitude and discretion given to route managers — from
servicing and enhancing company goodwill to supervising and auditing
accounts, from trade (new business) development to the discipline, training
and monitoring of performance of their respective sales teams, and so forth,
— if they are to fulfill the company's expectations in the "key result areas."
Article 212(m) says that "supervisory employees are those who, in the
interest of the employer, effectivelyrecommend such managerial actions if
the exercise of such authority is not merely routinary or clerical in nature but
requires the use of independent judgment." Thus, their only power is to
recommend. Certainly, the route managers in this case more than merely
recommend effective management action. They perform operational,
human resource, financial and marketing functions for the company, all of
which involve the laying down of operating policies for themselves and their
teams. For example, with respect to marketing, route managers, in
accordance with B.1.1.1 to B.1.1.9 of the Route Managers Job Description,
are charged, among other things, with expanding the dealership base of
their respective sales areas, maintaining the goodwill of current dealers, and
distributing the company's various promotional items as they see fit. It is
difficult to see how supervisors can be given such responsibility when this
involves not just the routine supervision of operating employees but the
protection and expansion of the company's business vis-a-vis its competitors.
While route managers do not appear to have the power to hire and fire
people (the evidence shows that they only "recommended" or "endorsed"
the taking of disciplinary action against certain employees), this is because
this
is a function of the Human Resources or Personnel Department of the
company. 14 And neither should it be presumed that just because they are
given set benchmarks to observe, they are ipso facto supervisors. Adequate
control methods (as embodied in such concepts as "Management by
Objectives [MBO]" and "performance appraisals") which require a
delineation of the functions and responsibilities of managers by means of
ready reference cards as here, have long been recognized in management as
effective tools for keeping businesses competitive.
This brings us to the second question, whether the first sentence of Art. 245
of the Labor Code, prohibiting managerial employees from forming,
assisting or joining any labor organization, is constitutional in light of Art. III,
§8 of the Constitution which provides:
The right of the people, including those employed in the public and private
sectors, to form unions, associations, or societies for purposes not contrary
to law shall not be abridged.
As already stated, whether they belong to the first category (managers per
se) or the second category (supervisors), managers are employees.
Nonetheless, in the United States, as Justice Puno's separate opinion notes,
supervisors have no right to form unions. They are excluded from the
definition of the term "employee" in §2(3) of the Labor-Management
Relations Act of 1947. 15 In the Philippines, the question whether managerial
employees have a right of self-organization has arisen with respect to first-
level managers or supervisors, as shown by a review of the course of labor
legislation in this country.
Right of Self-Organization of Managerial
Employees under Pre-Labor Code Laws
Before the promulgation of the Labor Code in 1974, the field of labor
relations was governed by the Industrial Peace Act (R.A. No. 875).
In accordance with the general definition above, this law defined
"supervisor" as follows:
Sec. 2. . . .
(k) "Supervisor" means any person having authority in the interest of an
employer, to hire, transfer, suspend, lay-off, recall, discharge, assign,
recommend, or discipline other employees, or responsibly to direct them,
and to adjust their grievances, or effectively to recommend such acts, if, in
connection with the foregoing, the exercise of such authority is not of a
merely routinary or clerical nature but requires the use of independent
judgment. 16
The right of supervisors to form their own organizations was affirmed:
Sec. 3. Employees' Right to Self-Organization. — Employees shall have the
right to self-organization and to form, join or assist labor organizations of
their own choosing for the purpose of collective bargaining through
representatives of their own choosing and to engage in concerted activities
for the purpose of collective bargaining and other mutual aid and
protection. Individuals employed as supervisors shall not be eligible for
membership in a labor organization of employees under their supervision
but may form separate organizations of their own. 17
For its part, the Supreme Court upheld in several of its decisions the right of
supervisors to organize for purposes of labor relations. 18
Although it had a definition of the term "supervisor," the Industrial Peace Act
did not define the term "manager." But, using the commonly-understood
concept of "manager," as above stated, it is apparent that the law used the
term "supervisors" to refer to the sub-group of "managerial employees"
known as front-line managers. The other sub-group of "managerial
employees," known as managers per se, was not covered.
However, in Caltex Filipino Managers and Supervisors Association v. Court of
Industrial Relations, 19 the right of all managerial employees to self-
organization was upheld as a general proposition, thus:
It would be going too far to dismiss summarily the point raised by
respondent Company — that of the alleged identity of interest between the
managerial staff and the employing firm. That should ordinarily be the case,
especially so where the dispute is between management and the rank and
file. It does not necessarily follow though that what binds the managerial
staff to the corporation forecloses the possibility of conflict between them.
There could be a real difference between what the welfare of such group
requires and the concessions the firm is willing to grant. Their needs might
not be attended to then in the absence of any organization of their own. Nor
is this to indulge in empty theorizing. The record of respondent Company,
even the very case cited by it, is proof enough of their uneasy and troubled
relationship. Certainly the impression is difficult to erase that an alien firm
failed to manifest sympathy for the claims of its Filipino executives. To
predicate under such circumstances that agreement inevitably marks their
relationship, ignoring that discord would not be unusual, is to fly in the face
of reality.
. . . The basic question is whether the managerial personnel can organize.
What respondent Company failed to take into account is that the right to
self-organization is not merely a statutory creation. It is fortified by our
Constitution. All are free to exercise such right unless their purpose is
contrary to law. Certainly it would be to attach unorthodoxy to, not to say an
emasculation of, the concept of law if managers as such were precluded
from organizing. Having done so and having been duly registered, as did
occur in this case, their union is entitled to all the rights under Republic Act
No. 875. Considering what is denominated as unfair labor practice under
Section 4 of such Act and the facts set forth in our decision, there can be only
one answer to the objection raised that no unfair labor practice could be Sr. Sales Supervisor
committed by respondent Company insofar as managerial personnel is
concerned. It is, as is quite obvious, in the negative. 20 Deport Supervisor A

Terminal Accountant B
Actually, the case involved front-line managers or supervisors only, as the
plantilla of employees, quoted in the main opinion, 21 clearly indicates: Merchandiser
CAFIMSA members holding the following Supervisory Payroll Position Title Dist. Sales Prom. Supvr.
are Recognized by the Company
Instr. — Merchandising
Payroll Position Title
Asst. Dist. Accountant B
Assistant to Mgr. — National Acct. Sales
Sr. Opers. Supervisor
Jr. Sales Engineer
Jr. Sales Engineer A
Retail Development Asst.
Asst. Bulk Ter. Supt.
Staff Asst. — 0 Marketing
Sr. Opers. Supvr.
Sales Supervisor
Credit Supervisor A
Supervisory Assistant
Asst. Stores Supvr. A
Jr. Supervisory Assistant
Ref. Supervisory Draftsman
Credit Assistant
Refinery Shift Supvr. B
Lab. Supvr. — Pandacan
Asst. Supvr. A — Operations (Refinery)
Jr. Sales Engineer B
Refinery Shift Supvr. B
Operations Assistant B
Asst. Lab. Supvr. A (Refinery)
Field Engineer
St. Process Engineer B (Refinery)
Sr. Opers. Supvr. — MIA A/S
Asst. Supvr. A — Maintenance (Refinery)
Purchasing Assistant
Asst. Supvr. B — Maintenance (Refinery)
Jr. Construction Engineer
Supervisory Accountant (Refinery)
Communications Supervisor (Refinery)
Finally, also deemed included are all other employees excluded from the
rank and file unions but not classified as managerial or otherwise excludable
by law or applicable judicial precedents.
Right of Self-Organization of Managerial
Employees under the Labor Code
Thus, the dictum in the Caltex case which allowed at least for the theoretical
unionization of top and middle managers by assimilating them with the
supervisory group under the broad phrase "managerial personnel," provided
the lynchpin for later laws denying the right of self-organization not only to
top and middle management employees but to front line managers or
supervisors as well. Following the Caltex case, the Labor Code, promulgated
in 1974 under martial law, dropped the distinction between the first and
second sub-groups of managerial employees. Instead of treating the terms
"supervisor" and "manager" separately, the law lumped them together and
called them "managerial employees," as follows:
Art. 212. Definitions . . . .
(k) "Managerial Employee" is one who is vested with powers or prerogatives
to lay down and execute management policies and/or to hire, transfer,
suspend, lay off, recall, discharge, assign or discipline employees, or to
effectively recommend such managerial actions. All employees not falling
within this definition are considered rank and file employees for purposes of
this Book. 22
The definition shows that it is actually a combination of the commonly
understood definitions of both groups of managerial employees,
grammatically joined by the phrase "and/or."
This general definition was perhaps legally necessary at that time for two
reasons. First, the 1974 Code denied supervisors their right to self-organize
as theretofore guaranteed to them by the Industrial Peace Act. Second, it
stood the dictum in the Caltex case on its head by prohibiting all types of
managers from forming unions. The explicit general prohibition was
contained in the then Art. 246 of the Labor Code.
The practical effect of this synthesis of legal concepts was made apparent in
the Omnibus Rules Implementing the Labor Code which the Department of
Labor promulgated on January 19, 1975. Book V, Rule II, §11 of the Rules
provided:
Supervisory unions and unions of security guards to cease operation. — All
existing supervisory unions and unions of security guards shall, upon the
effectivity of the Code, cease to operate as such and their registration
certificates shall be deemed automatically canceled. However, existing
collective agreements with such unions, the life of which extends beyond the
date of effectivity of the Code, shall be respected until their expiry date
insofar as the economic benefits granted therein are concerned.
Members of supervisory unions who do not fall within the definition of
managerial employees shall become eligible to join or assist the rank and file
labor organization, and if none exists, to form or assist in the forming of such
rank and file organization. The determination of who are managerial
employees and who are not shall be the subject of negotiation between
representatives of the supervisory union and the employer. If no agreement
is reached between the parties, either or both of them may bring the issue to
the nearest Regional Office for determination.
The Department of Labor continued to use the term "supervisory unions"
despite the demise of the legal definition of "supervisor" apparently because
these were the unions of front line managers which were then allowed as a
result of the statutory grant of the right of self-organization under the
Industrial Peace Act. Had the Department of Labor seen fit to similarly ban
unions of top and middle managers which may have been formed following
the dictum in Caltex, it obviously would have done so. Yet it did not,
apparently because no such unions of top and middle managers really then
existed.
Real Intent of the 1986 Constitutional Commission
This was the law as it stood at the time the Constitutional Commission
considered the draft of Art. III, §8. Commissioner Lerum sought to amend the
draft of what was later to become Art. III, §8 of the present Constitution:
MR. LERUM. My amendment is on Section 7, page 2, line 19, which is to
insert between the words "people" and "to" the following: WHETHER
EMPLOYED BY THE STATE OR PRIVATE ESTABLISHMENTS. In other words, the
section will now read as follows: "The right of the people WHETHER
EMPLOYED BY THE STATE OR PRIVATE ESTABLISHMENTS to form
associations, unions, or societies for purposes not contrary to law shall not
be abridged." 23
Explaining his proposed amendment, he stated:
MR. LERUM. Under the 1935 Bill of Rights, the right to form associations is
granted to all persons whether or not they are employed in the government.
Under that provision, we allow unions in the government, in government-
owned and controlled corporations and in other industries in the private
sector, such as the Philippine Government Employees' Association, unions in
the GSIS, the SSS, the DBP and other government-owned and controlled
corporations. Also, we have unions of supervisory employees and of security
guards. But what is tragic about this is that after the 1973 Constitution was
approved and in spite of an express recognition of the right to organize in
P.D. No. 442, known as the Labor Code, the right of government workers,
supervisory employees and security guards to form unions was abolished.
And we have been fighting against this abolition. In every tripartite
conference attended by the government, management and workers, we
have always been insisting on the return of these rights. However, both the
government and employers opposed our proposal, so nothing came out of
this until this week when we approved a provision which states:
Notwithstanding any provision of this article, the right to self-organization
shall not be denied to government employees.
We are afraid that without any corresponding provision covering the private
sector, the security guards, the supervisory employees or majority
employees [sic] will still be excluded, and that is the purpose of this
amendment.
I will be very glad to accept any kind of wording as long as it will amount to
absolute recognition of private sector employees, without exception, to
organize.
THE PRESIDENT. What does the Committee say?
FR. BERNAS. Certainly, the sense is very acceptable, but the point raised by
Commissioner Rodrigo is well-taken. Perhaps, we can lengthen this a little bit
more to read: "The right of the people WHETHER UNEMPLOYED OR
EMPLOYED BY STATE OR PRIVATE ESTABLISHMENTS.
I want to avoid also the possibility of having this interpreted as applicable
only to the employed.
MR. DE LOS REYES. Will the proponent accept an amendment to the
amendment, Madam President?
MR. LERUM. Yes, as long as it will carry the idea that the right of the
employees in the private sector is recognized. 24
Lerum thus anchored his proposal on the fact that (1) government
employees, supervisory employees, and security guards, who had the right
to organize under the Industrial Peace Act, had been denied this right by the
Labor Code, and (2) there was a need to reinstate the right of these
employees. In consonance with his objective to reinstate the right of
government, security, and supervisory employees to organize, Lerum then
made his proposal:
MR. LERUM. Mr. Presiding Officer, after a consultation with several
Members of this Commission, my amendment will now read as follows: "The
right of the people INCLUDING THOSE EMPLOYED IN THE PUBLIC AND
PRIVATE SECTORS to form associations, unions, or societies for purposes not
contrary to law shall not be abridged. In proposing that amendment I ask to
make of record that I want the following provisions of the Labor Code to be
automatically abolished, which read:
Art. 245. Security guards and other personnel employed for the protection
and security of the person, properties and premises of the employers shall
not be eligible for membership in a labor organization.
Art. 246. Managerial employees are not eligible to join, assist, and form any
labor organization.
THE PRESIDING OFFICER (Mr. Bengzon). What does the Committee say?
FR. BERNAS. The Committee accepts.
THE PRESIDING OFFICER. (Mr. Bengzon) The Committee has accepted the
amendment, as amended.
Is there any objection? (Silence) The Chair hears none; the amendment, as
amended, is approved. 25
The question is what Commissioner Lerum meant in seeking to
"automatically abolish" the then Art. 246 of the Labor Code. Did he simply
want "any kind of wording as long as it will amount to absolute recognition
of private sector employees, without exception, to organize"? 26 Or, did he
instead intend to have his words taken in the context of the cause which
moved him to propose the amendment in the first place, namely, the denial
of the right of supervisory employees to organize, because he said, "We are
afraid that without any corresponding provision covering the private sector,
security guards, supervisory employees or majority [of] employees will still
be excluded, and that is the purpose of this amendment"? 27
It would seem that Commissioner Lerum simply meant to restore the right of
supervisory employees to organize. For even though he spoke of the need to
"abolish" Art. 246 of the Labor Code which, as already stated, prohibited
"managerial employees" in general from forming unions, the fact was that
in explaining his proposal, he repeatedly referred to "supervisory employees"
whose right under the Industrial Peace Act to organize had been taken away
by Art. 246. It is noteworthy that Commissioner Lerum never referred to the
then definition of "managerial employees" in Art. 212(m) of the Labor Code
which put together, under the broad phrase "managerial employees," top
and middle managers and supervisors. Instead, his repeated use of the term
"supervisory employees," when such term then was no longer in the statute
books, suggests a frame of mind that remained grounded in the language of
the Industrial Peace Act.
Nor did Lerum ever refer to the dictum in Caltex recognizing the right of all
managerial employees to organize, despite the fact that the Industrial Peace
Act did not expressly provide for the right of top and middle managers to
organize. If Lerum was aware of the Caltex dictum, then his insistence on the
use of the term "supervisory employees" could only mean that he was
excluding other managerial employees from his proposal. If, on the other
hand, he was not aware of the Caltex statement sustaining the right to
organize to top and middle managers, then the more should his repeated
use of the term "supervisory employees" be taken at face value, as it had
been defined in the then Industrial Peace Act.
At all events, that the rest of the Commissioners understood his proposal to
refer solely to supervisors and not to other managerial employees is clear
from the following account of Commissioner Joaquin G. Bernas, who writes:
In presenting the modification on the 1935 and 1973 texts, Commissioner
Eulogio R. Lerum explained that the modification included three categories
of workers: (1) government employees, (2) supervisory employees, and (3)
security guards. Lerum made of record the explicit intent to repeal provisions
of P.D. 442, the Labor Code. The provisions referred to were:
Art. 245. Security guards and other personnel employed for the protection
and security of the person, properties and premises of the employers shall
not be eligible for membership in a labor organization.
Art. 246. Managerial employees are not eligible to join, assist, and form any
labor organization. 28
Implications of the Lerum Proposal
In sum, Lerum's proposal to amend Art. III, §8 of the draft Constitution by
including labor unions in the guarantee of organizational right should be
taken in the context of statements that his aim was the removal of the
statutory ban against security guards and supervisory employees joining
labor organizations. The approval by the Constitutional Commission of his
proposal can only mean, therefore, that the Commission intended the
absolute right to organize of government workers, supervisory employees,
and security guards to be constitutionally guaranteed. By implication, no
similar absolute constitutional right to organize for labor purposes should be
deemed to have been granted to top-level and middle managers. As to them
the right of self-organization may be regulated and even abridged
conformably to Art. III, §8.
Constitutionality of Art. 245
Finally, the question is whether the present ban against managerial
employees, as embodied in Art. 245 (which superseded Art. 246) of the
Labor Code, is valid. This provision reads:
Art. 245. Ineligibility of managerial employees to join any labor
organization; right of supervisory employees. — Managerial employees are
not eligible to join, assist or form any labor organization. Supervisory
employees shall not be eligible for membership in a labor organization of the
rank-and-file employees but may join, assist or form separate labor
organizations of their own. 29
This provision is the result of the amendment of the Labor Code in 1989 by
R.A. No. 6715, otherwise known as the Herrera-Veloso Law. Unlike the
Industrial Peace Act or the provisions of the Labor Code which it superseded,
R.A. No. 6715 provides separate definitions of the terms "managerial" and
"supervisory employees," as follows:
Art. 212. Definitions. . . .
(m) "managerial employee" is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to hire
transfer, suspend, lay off, recall, discharge, assign or discipline employees.
Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of this Book.
Although the definition of "supervisory employees" seems to have been
unduly restricted to the last phrase of the definition in the Industrial Peace
Act, the legal significance given to the phrase "effectively recommends"
remains the same. In fact, the distinction between top and middle
managers, who set management policy, and front-line supervisors, who are
merely responsible for ensuring that such policies are carried out by the rank
and file, is articulated in the present definition. 30 When read in relation to
this definition in Art. 212(m), it will be seen that Art. 245 faithfully carries
out the intent of the Constitutional Commission in framing Art. III, §8 of the
fundamental law.
Nor is the guarantee of organizational right in Art. III, §8 infringed by a ban
against managerial employees forming a union. The right guaranteed in Art.
III, §8 is subject to the condition that its exercise should be for purposes "not
contrary to law." In the case of Art. 245, there is a rational basis for
prohibiting managerial employees from forming or joining labor
organizations. As Justice Davide, Jr., himself a constitutional commissioner,
said in his ponencia inPhilips Industrial Development, Inc. v. NLRC: 31
In the first place, all these employees, with the exception of the service
engineers and the sales force personnel, are confidential employees. Their
classification as such is not seriously disputed by PEO-FFW; the five (5)
previous CBAs between PIDI and PEO-FFW explicitly considered them as
confidential employees. By the very nature of their functions, they assist and
act in a confidential capacity to, or have access to confidential matters of,
persons who exercise managerial functions in the field of labor relations. As
such, the rationale behind the ineligibility of managerial employees to form,
assist or joint a labor union equally applies to them.
In Bulletin Publishing Co., Inc. v. Hon. Augusto Sanchez, this Court elaborated
on this rationale, thus:
. . . The rationale for this inhibition has been stated to be, because if these
managerial employees would belong to or be affiliated with a Union, the
latter might not be assured of their loyalty to the Union in view of evident
conflict of interests. The Union can also become company-dominated with
the presence of managerial employees in Union membership. 32
To be sure, the Court in Philips Industrial was dealing with the right of
confidential employees to organize. But the same reason for denying them
the right to organize justifies even more the ban on managerial employees
from forming unions. After all, those who qualify as top or middle managers
are executives who receive from their employers information that not only is
confidential but also is not generally available to the public, or to their
competitors, or to other employees. It is hardly necessary to point out that
to say that the first sentence of Art. 245 is unconstitutional would be to
contradict the decision in that case.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
Narvasa, C.J., Regalado, Romero, Bellosillo, Martinez and Purisima, JJ.,
concur.
Separate Opinions
DAVIDE, JR., J., concurring and dissenting;
I concur with the majority that the "route managers" of private respondent
Pepsi-Cola Products Philippines, Inc. are managerial employees. However, I
respectfully submit that contrary to the majority's holding, Article 245 of the
Labor Code is unconstitutional, as it abridges Section 8, Article III of the
Constitution.
Section 8, Article III of the 1987 Constitution was taken from Section 7,
Article IV of the 1973 Constitution which, in turn, was lifted from Section 6,
Article III of the 1935 Constitution. Section 7 of the 1973 Constitution
provided as follows:
Sec. 7. The right to form associations or societies for purpose not contrary to
law shall not be abridged.
This Section was adopted in Section 7 of Proposed Resolution No. 486 of the
1986 Constitutional Commission, entitled Resolution to Incorporate in the
New Constitution an Article on the Bill of Rights, 1 submitted by the
Committee on Citizenship, Bill of Rights, Political Rights and Obligations, and
Human Rights, with a modification, however, consisting of the insertion of
the word union between the words "associations" and "societies." Thus the
proposed Section 7 provided as follows:
Sec. 7. The right of the people to form associations, unions, or societies for
purposes not contrary to law shall not be abridged (emphasis supplied).
Commissioner Joaquin G. Bernas, in his sponsorship speech on the proposed
Article on the Bill of Rights, expounded on the nature of the proposed
provision, in this wise:
Section 7 preserves the old provision not because it is strictly needed but
because its removal might be subject to misinterpretation. It reads:
xxx xxx xxx
It strictly does not prepare the old provision because it adds the word
UNION, and in the explanation we received from Commissioner Lerum, the
term envisions not just unions in private corporations but also in the
government. This preserves our link with the Malolos Constitution as far as
the right to form associations or societies for purposes not contrary to law is
concerned. 2
During the period of individual amendments, Commissioner Lerum
introduced an amendment to the proposed section consisting of the
insertion of the clause "WHETHER EMPLOYED BY THE STATE OR PRIVATE
ESTABLISHMENTS, which, after consulting other Commissioners, he modified
his proposed amendment to read: "INCLUDING THOSE EMPLOYED IN THE
PUBLIC AND PRIVATE SECTORS." At that time, the section read:
Sec. 7. The right of the people including those employed in the public and
private sectors to form associations, unions or societies for purposes not
contrary to law shall not be abridged.
Pertinently to this dispute Commissioner Lerum's intention that the
amendment "automatically abolish" Articles 245 and 246 of the Labor Code.
The Committee accepted the amendment, and there having been no
objection from the floor, the Lerum amendment was approved, thus:
MR. LERUM: . . . In proposing that amendment I ask to make of record that I
want the following provisions of the Labor Code to be automatically
abolished, which read:
Art. 245. Security guards and other personnel employed for the protection
and security of the person, properties and premises of the employers shall
not be eligible for membership in a labor organization.
Art. 246. Managerial employees are not eligible to join, assist, and form any
labor organization.
THE PRESIDING OFFICER (Mr. Bengzon):
What does the Committee say?
FR. BERNAS: The Committee accepts.
THE PRESIDING OFFICER (Mr. Bengzon):
The Committee has accepted the amendment, as amended.
Is there any objection? (Silence) The Chair hears none; the amendment, as
amended, is approved. 3
The Committee on Style then recommended that commas be placed after
the words people and sectors, while Commissioner Lerum likewise moved to
place the word unions before the word associations. 4 Section 7, which was
subsequently renumbered as Section 8 as presently appearing in the text
ratified in the plebiscite of 2 February 1987, then read as follows:
The right of the people, including those employed in the public and private
sectors, to form unions, associations, or societies for purposes not contrary
to law shall not be abridged.
It is then indubitably clear from the foregoing that the intent of the
Constitutional Commission was to abrogate the law prohibiting managerial
employees from joining, assisting, or forming unions or labor organizations.
In this regard, there is absolutely no need to decipher the intent of the
framers of the 1987 Constitution vis-a-vis Article 245 (originally 246) of the
Labor Code, there being no ambiguity or vagueness in the wording of the
present Section 8, Article III of the 1987 Constitution. The provision is clear
and written in simple language; neither were there any confusing debates
thereon. More importantly, the purpose of Commissioner Lerum's
amendments was unequivocal: he did not merely intend an implied repeal,
but an express repeal of the offending article of the Labor Code. The
approval of the amendments left no doubt whatsoever, as faithfully
disclosed in the Records of the Constitutional Commission,
that all employees meaning rank-and-file, supervisory and managerial —
whether from the public or the private sectors, have the right to form unions
for purposes not contrary to law.
The Labor Code referred to by Commissioner Lerum was P.D. No. 442,
promulgated on 1 May 1974. With the repeal of Article 239 by Executive
Order No. 111 issued on 24 December 1986, 5 Article 246 (as mentioned by
Commissioner Lerum) became Article 245. Thereafter, R.A. No.
6715 6 amended the new Article 245 (originally Article 246) to read, as
follows:
Sec. 245. Ineligibility of managerial employees to join any labor
organization; right of supervisory employees. — Managerial employees are
not eligible to join, assist or form any labor organization. Supervisory
employees shall not be eligible for membership in a labor organization of the
rank-and-file employees but may join, assist or form separate labor
organizations of their own. 7
With the abrogation of the former Article 246 of the Labor Code, 8 and the
constitutional prohibition against any law prohibiting managerial employees
from joining, assisting or forming unions or labor organizations, the first
sentence then of the present Article 245 of the Labor Code must be struck
down as unconstitutional. 9 However, due to an obvious conflict of interest —
being closely identified with the interests of management in view of the
inherent nature of their functions, duties and responsibilities — managerial
employees may only be eligible to join, assist or form unions or labor
organizations of their own rank, and not those of the supervisory employees
nor the rank-and-file employees.
In the instant case, the petitioner's name — United Pepsi-Cola Supervisory
Union (UPSU) — indubitably attests that it is a union of supervisory
employees. In light of the earlier discussion, the route managers who
aremanagerial employees, cannot join or assist UPSU. Accordingly, the Med-
Arbiter and public respondent Laguesma committed no error in denying the
petition for direct certification or for certification election.
I thus vote to GRANT, IN PART, the instant petition. That portion of the
challenged resolution of public respondent holding that since the route
managers of private respondent Pepsi-Cola Products Philippines, Inc., are
managerial employees, they are "not eligible to assist, join or form a union
or any other organization" should be SET ASIDE for being violative of Section
8 of Article III of the Constitution, while that portion thereof denying
petitioner's appeal from the Med-Arbiter's decision dismissing the petition
for direct certification or for a certification election should be AFFIRMED.
PUNO, J., separate concurring;
With due respect, it is my submission that Article 245 of the Labor Code was
not repealed by section 8, Article III of the 1987 Constitution for reasons
discussed below.
A. Types of Employees.
For purposes of applying the law on labor relations, the Labor Code in Article
212 (m) defines three (3) categories of employees. They are managerial,
supervisory and rank-and-file, thus:
Art. 212 (m). "Managerial Employee" is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
"Supervisory employees" are those who, in the interest of the employer,
effectively recommended such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of this Book.
The test of "managerial" or "supervisory" status depends on whether a
person possesses authority to act in the interest of his employer and
whether such authority is not routinary or clerical in nature but requires the
use of independent judgment. 1 The rank-and-file employee performs work
that is routinary and clerical in nature. The distinction between these
employees is significant because supervisory and rank-and-file employees
may form, join or assist labor organizations. Managerial employees cannot.
B. The Exclusion of Managerial Employees: Its Historical Roots in the United
States.
The National Labor Relations Act (NLRA), also known as the Wagner Act,
enacted by the U.S. Congress in 1935, was the first law that regulated labor
relations in the United States and embodied its national labor policy. 2 The
purpose of the NLRA was to eliminate obstructions to the free flow of
commerce through the practice of collective bargaining. The NLRA also
sought to protect the workers' full freedoms of association, self-
organization, and designation of representatives of their own choosing, for
the purpose of negotiating the terms and conditions of their employment or
other mutual aid and protection. 3 The NLRA established the right of
employees to organize, required employers to bargain with employees
collectively through employee-elected representatives, gave employees the
right to engage in concerted activities for collective bargaining purposes or
other mutual aid or protection, and created the National Labor Relations
Board (NLRB) as the regulatory agency in labor-management matters. 4
The NLRA was amended in 1947 by the Labor Management Relations Act
(LMRA), also known as the Taft-Hartley Act. This Act sought to lessen
industrial disputes and placed employers in a more nearly equal position
with unions in bargaining and labor relations procedures. 5
The NLRA did not make any special provision for "managerial
employees." 6 The privileges and benefits of the Act were conferred on
"employees." Labor organizations thus clamored for the inclusion of
supervisory personnel in the coverage of the Act on the ground that
supervisors were also employees. Although traditionally, supervisors were
regarded as part of management, the NLRB was constrained to recognize
supervisors as employees under the coverage of the law. Supervisors were
then granted collective bargaining rights. 7 Nonetheless, the NLRB refused to
consider managers as covered by the law. 8
The LMRA took away the collective bargaining rights of supervisors. The
sponsors of the amendment feared that their unionization would break
down industrial discipline as it would blur the traditional distinction between
management and labor. They felt it necessary to deny supervisory personnel
the right of collective bargaining to preserve their loyalty to the interests of
their employers. 9
Several amendments were later made on the NLRA but the exclusion of
managers and supervisors from its coverage was preserved. Until now
managers and supervisors are excluded from the law. 10 Their exclusion
hinges on the theory that the employer is entitled to the full loyalty of those
whom it chooses for positions of responsibility, entailing action on the
employers' behalf. A supervisor's and manager's ability to control the work
of others would be compromised by his sharing of employee status with
them. 11
C. Historical Development in the Philippines.
Labor-management relations in the Philippines were first regulated under
the Industrial Peace Act 12 which took effect in 1953. Hailed as the Magna
Carta of Labor, it was modelled after the NLRA and LMRA of the United
States. 13 Most of the basic principles of the NLRA have been carried over to
the Industrial Peace Act and the Labor Code. 14 This is significant because we
have ruled that where our labor statutes are based on statutes in foreign
jurisdiction, the decisions of the high courts in those jurisdictions construing
and interpreting the Act are given persuasive effects in the application of
Philippine law. 15
The Industrial Peace Act did not carry any provision prohibiting managerial
employees from joining labor organizations. Section 3 of said law merely
provided:
Sec. 3. Employees' Right to Self-Organization. — Employees shall have the
right to self-organization and to form, join or assist labor organizations of
their own choosing for the purpose of collective bargaining through
representatives of their own choosing and to engage in concerted activities
for the purpose of collective bargaining and other mutual aid and
protection. Individuals employed as supervisors shall not be eligible for
membership in a labor organization of employees under their supervision
but may form separate organizations of their own.
Significantly, the Industrial Peace Act did not define a manager or
managerial employee. It defined a "supervisor" but not a "manager." Thus:
Sec. 2. . . .
(k) "Supervisor" means any person having authority in the interest of an
employer, to hire, transfer, suspend, lay-off, recall, discharge, assign,
recommend, or discipline other employees, or responsibly to direct them,
and to adjust their grievances, or effectively to recommend such acts, if, in
connection with the foregoing, the exercise of such authority is not of a
merely routinary or clerical nature but requires the use of independent
judgment.
In 1972, we interpreted Section 3 of the Industrial Peace Act to give
supervisors the right to join and form labor organizations of their
own. 16 Soon we grappled with the right of managers to organize. In a case
involving Caltex managers, we recognized their right to organize, viz:
It would be going too far to dismiss summarily the point raised by
respondent company, that of the alleged identity of interest between the
managerial staff and the employing firm. That should ordinarily be the case,
especially so where the dispute is between management and the rank-and-
file. It does not necessarily follow though that what binds the managerial
staff to the corporation forecloses the possibility of conflict between them.
There could be a real difference between what the welfare of such group
requires and the concessions the firm is willing to grant. Their needs might
not be attended to then in the absence of any organization of their own. Nor
is this to indulge in empty theorizing. The records of respondent company,
even the very case cited by it, is proof enough of their uneasy and troubled
relationship. Certainly the impression is difficult to erase that an alien firm
failed to manifest sympathy for the claims of its Filipino executives. 17
The Industrial Peace Act was repealed in 1975 by P.D. 442, the Labor Code of
the Philippines. The Labor Code changed existing jurisprudence when it
prohibited supervisory and managerial employees from joining labor
organizations. Supervisory unions were no longer recognized nor allowed to
exist and operate as such. 18 We affirmed this statutory change in Bulletin
Publishing Corp. v. Sanchez. 19 Similarly, Article 246 of the Labor Code
expressly prohibited managerial employees from forming, assisting and
joining labor organizations, to wit:
Art. 246. Ineligibility of managerial employees to join any labor
organization. — Managerial employees are not eligible to join, assist or form
any labor organization.
In the same Bulletin case, the Court applied Article 246 and held that
managerial employees are the very type of employees who, by the nature of
their positions and functions, have been decreed disqualified from
bargaining with management. This prohibition is based on the rationale that
if managerial employees were to belong or be affiliated with a union, the
union might not be assured of their loyalty in view of evident conflict of
interest or that the union can be company-dominated with the presence of
managerial employees in the union membership. 20 In the collective
bargaining process, managerial employees are supposed to be on the side of
the employer, to act as its representative, and to see to it that its interests
are well protected. The employer is not assured of such protection if these
employees themselves become union members. 21
The prohibition on managerial employees to join, assist or form labor
organizations was retained in the Labor Code despite substantial
amendments made in 1989 by R.A. 6715, the Herrera-Veloso Law. R.A. 6715
was passed after the effectivity of the 1987 Constitution and this law did not
abrogate, much less amend the prohibition on managerial employees to join
labor organizations. The express prohibition in Article 246
remained. However, as an addendum to this same Article, R.A. 6715
restored to supervisory employees the right to join labor organizations of
their own. 22 Article 246 now reads:
Art. 246. Ineligibility of managerial employees to join any labor
organization; right of supervisory employees. — Managerial employees are
not eligible to join, assist or form any labor organization. Supervisory
employees shall not be eligible for membership in a labor organization of the
rank-and-file employees but may join, assist or form separate labor
organizations of their own.
Article 246 became Article 245 after then Article 244 was repealed by E.O.
111. Article 246 is presently Article 245 of the Labor Code.
Indeed, Article 245 of the Labor Code prohibiting managerial employees
from joining labor organizations has a social and historical significance in
our labor relations law. This significance should be considered in deciphering
the intent of the framers of the 1987 Constitution vis-a-vis the said Article.
With due respect, I do not subscribe to the view that section 8, Article III of
the Constitution abrogated Article 245 of the Labor Code. A textual analysis
of section 8, Article III of the Constitution will not justify this conclusion. With
due respect, the resort by Mr. Justice Davide to the deliberations of the
Constitutional Commission does not suffice. It is generally recognized that
debates and other proceedings in a constitutional convention are of limited
value and are an unsafe guide to the intent of the people. 23 Judge Cooley
has stated that:
When the inquiry is directed to ascertaining the mischief designed to be
remedied, or the purpose sought to be accomplished by a particular
provision, it may be proper to examine the proceedings of the convention
which framed the instrument. Where the proceedings clearly point out the
purpose of the provision, the aid will be valuable and satisfactory; but where
the question is one of abstract meaning, it will be difficult to derive from this
source much reliable assistance in interpretation. Every member of such a
convention acts upon such motives and reasons as influence him personally,
and the motions and debates do not necessarily indicate the purpose of a
majority of a convention in adopting a particular clause. It is quite possible
for a particular clause to appear so clear and unambiguous to the members
of the convention as to require neither discussion nor illustration; and the
few remarks made concerning it in the convention might have a plain
tendency to lead directly away from the meaning in the minds of the
majority. It is equally possible for a part of the members to accept a clause in
one sense and a part in another. And even if we were certain we had
attained to the meaning of the convention, it is by no means to be allowed a
controlling force, especially if that meaning appears not to be the one which
the words would most naturally and obviously convey. For as the
constitution does not derive its force from the convention which framed, but
from the people who ratified it, the intent to be arrived at is that of the
people, and it is not to be supposed that they have looked for any dark and
abstruse meaning in the words employed, but rather that they have
accepted them in the sense most obvious to the common understanding,
and ratified the instrument in the belief that was the sense designed to be
conveyed. 24
It is for this reason that proceedings of constitutional conventions are less
conclusive of the proper construction of the instrument than are legislative
proceedings of the proper construction of the statute. 25 In the statutes, it is
the intent of the legislature that is being sought, while in constitutions, it is
the intent of the people that is being ascertained through the discussions
and deliberations of their representatives. 26 The proper interpretation of
constitutional provisions depends more on how it was understood by the
people adopting it than in the framers' understanding thereof. 27
Thus, debates and proceedings of the constitutional convention are never of
binding force. They may be valuable but are not necessarily decisive. 28 They
may shed a useful light upon the purpose sought to be accomplished or
upon the meaning attached to the words employed. And the courts are free
to avail themselves of any light that may be derived from such sources, but
they are not bound to adopt it as the sole ground of their decision. 29
Clearly then, a statute cannot be declared void on the sole ground that it is
repugnant to a supposed intent or spirit declared in constitutional
convention proceedings.
D. Freedom of Association
The right of association flows from freedom of expression. 30 Like the right of
expression, the exercise of the right of association is not absolute. It is
subject to certain limitations.
Article 243 of the Labor Code reiterates the right of association of people in
the labor sector. Article 243 provides:
Art. 243. Coverage of employees' right to self-organization. — All persons
employed in commercial, industrial and agricultural enterprises and in
religious, charitable, medical, or educational institutions whether operating
for profit or not, shall have the right to self-organization and to form, join, or
assist labor organizations of their own choosing for purposes of collective
bargaining. Ambulant, intermittent and itinerant workers, self-employed
people, rural workers and those without any definite employers may form
labor organizations for their mutual aid and protection.
Article 243 guarantees the right to self-organization and association to "all
persons." This seemingly all-inclusive coverage of "all persons," however,
actually admits of exceptions.
Article 244 31 of the Labor Code mandates that all employees in the civil
service, i.e, those not employed in government corporations established
under the Corporation Code, may only form associations but may not
collectively bargain on terms and conditions fixed by law. An employee of a
cooperative who is a member and co-owner thereof cannot invoke the right
of collective bargaining and negotiation vis-a-vis the cooperative. 32 An
owner cannot bargain with himself or his co-owners. 33 Employees in foreign
embassies or consulates or in foreign international organizations granted
international immunities are also excluded from the right to form labor
organizations. 34 International organizations are organized mainly as a
means for conducting general international business in which the member-
states have an interest and the immunities granted them shield their affairs
from political pressure or control by the host country and assure the
unimpeded performance of their functions. 35
Confidential employees have also been denied the right to form labor-
organizations. Confidential employees do not constitute a distinct category
for purposes of organizational right. Confidentiality may attach to a
managerial or non-managerial position. We have, however, excluded
confidential employees from joining labor organizations following the
rationale behind the disqualification of managerial employees in Article 245.
In the case of National Association of Trade Unions-Republic Planters' Bank
Supervisors Chapter v. Torres, 36 we held:
In the collective bargaining process, managerial employees are supposed to
be on the side of the employer, to act as its representatives, and to see to it
that its interests are well protected. The employer is not assured of such
protection if these employees themselves are union members. Collective
bargaining in such a situation can become one-sided. It is the same reason
that impelled this Court to consider the position of confidential employees as
included in the disqualification found in Article 245 as if the disqualification
of confidential employees were written in the provision. If confidential
employees could unionize in order to bargain for advantages for themselves,
then they could be governed by their own motives rather than the interest of
the employers. Moreover, unionization of confidential employees for the
purpose of collective bargaining would mean the extension of the law to
persons or individuals who are supposed to act "in the interest of" the
employers. It is not farfetched that in the course of collective bargaining,
they might jeopardize that interest which they are duty-bound to protect. 37
E. The disqualification extends only to labor organizations.
It must be noted that Article 245 of the Labor Code deprives managerial
employees of their right to join "labor organizations." A labor organization is
defined under the Labor Code as:
Art. 212 (g). "Labor organization" means any union or association of
employees which exists in whole or in part for the purpose of collective
bargaining or of dealing with the employer concerning terms and conditions
of employment.
A labor organization has two broad rights: (1) to bargain collectively and (2)
to deal with the employer concerning terms and conditions of employment.
To bargain collectively is a right given to a labor organization once it
registers itself with the Department of Labor and Employment (DOLE).
Dealing with the employer, on the other hand, is a generic description of
interaction between employer and employees concerning grievances, wages,
work hours and other terms and conditions of employment, even if the
employees' group is not registered with the DOLE. 38 Any labor organization
which may or may not be a union may deal with the employer. This explains
why a workers' Organization does not always have to be a labor union and
why employer-employee collective interactions are not always collective
bargaining. 39
In the instant case, it may be argued that managerial employees' labor
organization will merely "deal with the employer concerning terms and
conditions of employment" especially when top management is composed of
aliens, following the circumstances in the Caltex case.
Although the labor organization may exist wholly for the purpose of dealing
with the employer concerning terms and conditions of employment, there is
no prohibition in the Labor Code for it to become a legitimate labor
organization and engage in collective bargaining. Once a labor organization
registers with the DOLE and becomes legitimate, it is entitled to the rights
accorded under Articles 242 and 263 (b) of the Labor Code. And these
include the right to strike and picket.
Notably, however, Article 245 does not absolutely disqualify managerial
employees from exercising their right of association. What it prohibits is
merely the right to join labor organizations. Managerial employees may
form associations or organizations so long as they are not labor
organizations. The freedom of association guaranteed under the
Constitution remains and has not been totally abrogated by Article 245.
To declare Article 245 of the Labor Code unconstitutional cuts deep into our
existing industrial life and will open the floodgates to unionization at all
levels of the industrial hierarchy. Such a ruling will wreak havoc on the
existing set-up between management and labor. If all managerial employees
will be allowed to unionize, then all who are in the payroll of the company,
starting from the president, vice-president, general managers and everyone,
with the exception of the directors, may go on strike or picket the
employer. 40 Company officers will join forces with the supervisors and rank-
and-file. Management and labor will become a solid phalanx with
bargaining rights that could be enforced against the owner of the
company. 41 The basic opposing forces in the industry will not be
management and labor but the operating group on the one hand and the
stockholder and bondholder group on the other. The industrial problem
defined in the Labor Code comes down to a contest over a fair division of the
gross receipts of industry between these two groups. 42 And this will certainly
bring ill-effects on our economy.
The framers of the Constitution could not have intended a major upheaval of
our labor and socio-economic systems. Their intent cannot be made to
override substantial policy considerations and create absurd or impossible
situations. 43 A constitution must be viewed as a continuously operative
charter of government. It must not be interpreted as demanding the
impossible or the impracticable; or as effecting the unreasonable or
absurd.44 Courts should always endeavour to give such interpretation that
would make the constitutional provision and the statute consistent with
reason, justice and the public interest. 45
I vote to dismiss the petition.
VITUG, J., separate concurring and dissenting;
The pivotal issues raised in the case at bar, aptly stated by the Office of the
Solicitor General, are:
(1) Whether or not public respondent, Undersecretary of the Department of
Labor and Employment ("DOLE") Bienvenido E. Laguesma, gravely abused
his discretion in categorizing the members of petitioner union to be
managerial employees and thus ineligible to form or join labor
organizations; and
(2) Whether or not the provision of Article 245 of the Labor Code,
disqualifying managerial employees from joining, assisting or forming any
labor organization, violates Section 8, Article III, of the 1987 Constitution,
which expresses that "(t)he right of the people, including those employed in
public and private sectors to form unions, associations or societies for
purposes not contrary to law shall not be abridged."
The case originated from a petition for direct certification or certification
election among route managers/supervisory employees of Pepsi-Cola
Products Phils., Inc. ("Pepsi"), filed by the United Pepsi-Cola Supervisory
Union ("Union"), claiming to be a legitimate labor organization duly
registered with the Department of Labor and Employment under
Registration Certificate No. NCR-UR-3-1421-95. Pepsi opposed the petition
on the thesis that the case was no more than a mere duplication of a
previous petition for direct certification 1 filed by the same route managers
through the Pepsi-Cola Employees Association (PCEA-Supervisory) which
petition had already been denied by Undersecretary Laguesma. The holding
reiterated a prior decision in Workers Alliance Trade Unions ("WATU")
vs. Pepsi-Cola Products Phils., Inc., 2 that route managers were managerial
employees.
In its decision, dated 05 May 1995, Med-Arbiter Brigida C. Fadrigon
dismissed for lack of merit the petition of the Union, stating that the issue on
the proper classification and status of route managers had already been
ruled with finality in the previous decisions, aforementioned, rendered by
DOLE.
The union appealed the decision. In his resolution of 31 August 1995,
Undersecretary Laguesma dismissed the appeal, saying that there was no
compelling reason to abandon the ruling in the two old cases theretofore
decided by DOLE. In his order of 22 September 1995, Undersecretary
Laguesma denied the Union's motion for reconsideration.
The Union went to this Court, via a petition for certiorari, assailing the
cancellation of its certificate of registration. The Court, after considering the
petition and the comments thereon filed by both public and private
respondents, as well as the consolidated reply of petitioner, dismissed the
case in its resolution of 08 July 1996 on the premise that no grave abuse of
discretion had been committed by public respondent.
Undaunted, the Union moved, with leave, for the reconsideration of the
dismissal of its petition by the Court En Banc. In its resolution of 16 June
1997, the case was referred to the Court En Banc en consulta with the
movant's invocation of unconstitutionality of Article 245 of the Labor
Code vis-a-vis Section 8, Article III, of the 1987 Constitution.
There is merit, in my view, in petitioner's motion for reconsideration but not
on constitutional grounds.
There are, in the hierarchy of management, those who fall below the level of
key officers of an enterprise whose terms and conditions of employment can
well be, indeed are not infrequently, provided for in collective bargaining
agreements. To this group belong the supervisory employees. The
"managerial employees," upon the other hand, and relating the matter
particularly to the Labor Code, are those "vested with powers or
prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees"
as distinguished from the supervisory employees whose duties in these areas
are so designed as to verily be implementary to the policies or rules and
regulations already outstanding and priorly taken up and passed upon by
management. The managerial level is the source, as well as prescribes the
compliance, of broad mandates which, in the field of labor relations, are to
be carried out through the next rank of employees charged with actually
seeing to the specific personnel action required. In fine, the real authority,
such as in hiring or firing of employees, comes from management and
exercised by means of instructions, given in general terms, by the
"managerial employees;" the supervisory employees, although ostensibly
holding that power, in truth, however, only act in obedience to the directives
handed down to them. The latter unit, unlike the former, cannot be
considered the alter ego of the owner of enterprise.
The duties and responsibilities of the members of petitioner union, shown by
their "job description" below —
PCPPI
RM's JOB DESCRIPTION
A. GENERAL/OVERALL OBJECTIVE OF THIS POSITION
To contribute to the growth and profitability of PCPPI via well-selected,
trained and motivated Route Sales Team who sell, collect and merchandise,
following the Pepsi Way, and consistent with Company policies and on master list that bought once
procedures as well as the corporate vision of Customer Satisfaction.
5 months payback on concessions
B. SPECIFIC JOB DESCRIPTION:
4 CED's/Rte.
KEY RESULT AREAS STANDARD OR PERFORMANCE
EXPENSE MANAGEMENT a). 5% Absentism rate Excl. VL
SALES VOLUME *100% Vs. NRC Target
b). 280 cases/route/day
_____% NTG
c). 15% cost-to-sales ratio
DISTRIBUTION * Product Availability
ROUTE MANAGEMENT 3 Days on RR/Wk
70% Pepsi
— Days on BC-SC- Financial &
80% Seven-Up
Co. Assets
40% Mirinda
— Days on TD
65% Mt. Dew
75% Load Factor
5% Out of Stock
18 Productive Calls
ACCOUNTS RECEIVABLE 65% Current (Incl. Legal & Col.)
CUSTOMER SATISFACTION Customer Complaint attended to within the next
MANAGEMENT 80:20 Cash to Credit Ratio working day

DSO — assigned Std. to Division HUMAN RESOURCE 5% Absentism Excl. VL

by the District MANAGEMENT (approved) 3 Documented RR/

ASSET MANAGEMENT 30 cases for ice-coolers Week using SLM's Training Log

80 cases for electric coolers ADMINISTRATIVE — Complete, timely and accurate

BLOWAGA on Division Vehicles MANAGEMENT reports.

60 cases on Rolling/Permanent PCPPI

Kiosks RM's BASIC DAILY ACTIVITIES

TRADE DEVELOPMENT 100% Buying Customers Based A. AT THE SALES OFFICE

1. PRACTICES BLOWAGA ON SERVICE VEHICLE (AT HOME) 4. LOAD FACTOR

2. REPORTS FOR WORK ON OR BEFORE 6:15 A.M. 5. SALESMAN's ROUTING SYSTEM EVALUATION

3. REPORTS IN CLEAN AND NEAT UNIFORM (GOOD GROOMING) BC/SC

4. DAILY BRIEFING WITH THE DM 1. FINANCIAL & ASSET VERIFICATION, CONFIRMATION & AUDIT

5. CONDUCTS SKILLS ENHANCEMENT OR HUDDLES WITH RST's 2. BACKCHECKS FIRST 5 CUSTOMERS SERVED FOR THE DAY

a). ATTENDANCE/GROOMING a). MERCHANDISING

b). OPERATIONAL DIRECTIONS & PRIORITIES b). SERVICING

c). ANNOUNCEMENT c). RM's TERRITORY FAMILIARITY

6. RM's PRESENCE DURING CHECK-OUT d). KEY ACCOUNTS GOODWILL

a). SLM PRACTICES BLOWAGA ON ROUTE TRUCK TRADE DEVELOPMENT

b). PRIVATE COUNSELING WITH RST (AM & PM IF NECESSARY) 1. PREPARATION PRIOR TO CALL

c). PROPER HANDLING OF SELLING/MDSG. MATERIALS 2. ACTUAL CALL

d). YESTERDAY's FINAL SETTLEMENT REVIEW 3. POST CALL ANALYSIS

7. UPDATE REPORTS, MONITORS, DOCUMENTS & TELEPHONE CONMATION (HOW DID I FARE? WHY? WHAT ACTIONS TO TAKE)

8. ATTENDS TO PRODUCT COMPLAINTS (GFM) 4. FOLLOW-UP ACTION

9. CONDUCTS ADMINISTRATIVE INVESTIGATION OR ATTENDS DM's MEETING C. AT CLOSE OF DAY

(on Saturdays)
1. MAINTAINS & UPDATES CORRECT & ACCURATE RECORDS & REPORTS
B. FIELD WORK
2. RM-SLM DEBRIEFING
ROUTE RIDE
3. SLR DISCUSSION (BASED ON A.M. SLR)
1. CHECKS SLMS. TRAINING LOG (PROGRESS & DEV'T.)
4. COORDINATES WITH DM ON PLANS & PROGRAMS
2. SALESMAN's CPC
5. PREPARATIONS FOR NEXT DAY's ACTIVITIES 3
3. ROUTE COVERAGE EVALUATION
— convey no more than those that are aptly consigned to the "supervisory"
group by the relatively small unit of "managerial" employees. Certain
portions of a pamphlet, the so-called "Route Manager Position Description"
referred to by Mr. Justice Vicente Mendoza, in his ponencia, hereunder
reproduced for easy reference, thus —
A. BASIC PURPOSE
A Manager achieves objectives through others.
As a Route Manager, your purpose is to meet the sales plan; and you achieve
this objective through the skillful management of your job and the
management of your people.
These then are your functions as Pepsi-Cola Route Manager. Within these
functions — managing your job and managing your people — you are
accountable to your District Manager for the execution and completion of
various tasks and activities which will make it possible for you to achieve
your sales objectives.
B. PRINCIPAL ACCOUNTABILITIES
1.0 MANAGING YOUR JOB
The Route Manager is accountable for the following:
1.1 SALES DEVELOPMENT
1.1.1 Achieve the sales plan.
1.1.2 Achieve all distribution and new account objectives.
1.1.3 Develop new business opportunities thru personal contacts with
dealers.
1.1.4 Inspect and ensure that all merchandising objectives are achieved in all
outlets.
1.1.5 Maintain and improve productivity of all cooling equipment and kiosks.
1.1.6 Execute and control all authorized promotions.
1.1.7 Develop and maintain dealer goodwill.
1.1.8 Ensure all accounts comply with company suggested retail pricing.
1.1.9 Study from time to time individual route coverage and productivity for
possible adjustments to maximize utilization of resources.
1.2 Administration
1.2.1 Ensure the proper loading of route trucks before check-out and the
proper sorting of bottles before check-in.
1.2.2 Ensure the upkeep of all route sales reports and all other related
reports and forms required on an accurate and timely basis.
1.2.3 Ensure proper implementation of the various company policies and
procedures include but not limited to shakedown; route shortage;
progressive discipline; sorting; spoilages; credit/collection; accident;
attendance.
1.2.4 Ensure collection of receivables and delinquent accounts.
2.0 MANAGING YOUR PEOPLE
The Route Manager is accountable for the following:
2.1 Route Sales Team Development
2.1.1 Conduct route rides to train, evaluate and develop all assigned route
salesmen and helpers at least 3 days a week, to be supported by required
route ride documents/reports & back check/spot check at least 2 days a
week to be supported by required documents/reports.
2.1.2 Conduct sales meetings and morning huddles. Training should focus on
the enhancement of effective sales and merchandising techniques of the
salesmen and helpers. Conduct group training at least 1 hour each week on
a designated day and of specific topic.
2.2 Code of Conduct
2.2.1 Maintain the company's reputation through strict adherence to PCPPI's
code of conduct and the universal standards of unquestioned business
ethics. —
offer nothing at all that can approximate the authority and functions of
those who actually and genuinely hold the reins of management.
I submit, with due respect, that the members of petitioning union, not really
being "managerial employees" in the true sense of the term, are not
disqualified from forming or joining labor organizations under Article 245 of
the Labor Code.
I shall now briefly touch base on the constitutional question raised by the
parties on Article 245 of the Labor Code.
The Constitution acknowledges "the right of the people, including those
employed in the public and private sectors, to form unions, associations or
societies for purposes not contrary to law . . . ." 4 Perforce, petitioner claims,
that part of Article 245 5 of the Labor Code which states: "Managerial
employees are not eligible to join, assist or form any labor organization,"
being in direct collision with the Constitutional provision, must now be
declared abrogated in the law.
Frankly, I do not see such a "direct collision." The Constitution did not
obviously grant a limitless right "to form unions, associations or societies"
for it has clearly seen it fit to subject its exercise to possible legislative
judgment such as may be appropriate or, to put it in the language of the
Constitution itself, to "purposes not contrary to law."
Freedom of association, like freedom of expression, truly occupies a choice
position in the hierarchy of constitutional values. Even while the Constitution
itself recognizes the State's prerogative to qualify this right, heretofore
discussed, any limitation, nevertheless, must still be predicated on the
existence of a substantive evil sought to be addressed. 6 Indeed, in the
exercise of police power, the State may, by law, prescribe proscriptions,
provided reasonable and legitimate of course, against even the most basic
rights of individuals.
The restriction embodied in Article 245 of the Labor Code is not without
proper rationale. Concededly, the prohibition to form labor organizations on
the part of managerial employees narrows down their freedom of
association. The very nature of managerial functions, however, should
preclude those who exercise them from taking a position adverse to the
interest they are bound to serve and protect. The mere opportunity to
undermine that interest can validly be restrained. To say that the right of
managerial employees to form a "labor organization" within the context and
ambit of the Labor Code should be deemed totally separable from the right
to bargain collectively is not justified by related provisions of the Code. For
instance —
Art. 212. Definitions. 7 — . . .
(g) "Labor organization" means any union or association of employees which
exists in whole or in part for the purpose of collective bargaining or of
dealing with employers concerning terms and conditions of employment.
xxx xxx xxx
(m) "Managerial employee" is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such
authority is not merely routinely or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of this Book.
Art. 263. . . .
(b) Workers shall have the right to engage in concerted activities for
purposes of collective bargaining or for their mutual benefit and protection.
The right of legitimate labor organizations to strike and picket and of
employers to lockout, consistent with the national interest, shall continue to
be recognized and respected.
The maxim "ut res magis quam pereat" requires not merely that a statute
should be given such a consequence as to be deemed whole but that each of
its express provisions equally should be given the intended effect.
I find it hard to believe that the fundamental law could have envisioned the
use by managerial employees of coercive means against their own
employers over matters entrusted by the latter to the former. Whenever
trust and confidence is a major aspect of any relationship, a conflict of
interest on the part of the person to whom that trust and confidence is
reposed must be avoided and when, unfortunately, it does still arise its
containment can rightly be decreed.
Article 245 of the Labor Code indeed aligns itself to the Corporation Code,
the basic law on by far the most commonly used business vehicle — the
corporation — which prescribes the tenure of office, as well as the duties
and functions, including terms of employment (governed in most part by the
Articles of Incorporation, the By-laws of the Corporation, or resolutions of
the Board of Directors), of corporate officers for both the statutory
officers,i.e., the president, the treasurer and the corporate secretary, and the
non-statutory officers, i.e., those who occupy positions created by the
corporate by-laws who are deemed essential for effective management of
the enterprise. I cannot imagine these officers as being legally and morally
capable of associating themselves into a labor organization and asserting
collective bargaining rights against the very entity in whose behalf they act
and are supposed to act.
I submit, accordingly, that, firstly, the members of petitioner union or the so-
called route managers, being no more than supervisory employees, can
lawfully organize themselves into a labor union within the meaning of the
Labor Code, and that, secondly, the questioned provision of Article 245 of
the Labor Code has not been revoked by the 1987 Constitution.
WHEREFORE, I vote, given all the foregoing, for the reversal of the resolution
of 31 August 1995, and the order of 22 September 1995, of public
respondent.
Kapunan, Panganiban and Quisumbing, JJ., concur and dissent.
Separate Opinions
DAVIDE, JR., J., concurring and dissenting;
I concur with the majority that the "route managers" of private respondent
Pepsi-Cola Products Philippines, Inc. are managerial employees. However, I
respectfully submit that contrary to the majority's holding, Article 245 of the
Labor Code is unconstitutional, as it abridges Section 8, Article III of the
Constitution.
Section 8, Article III of the 1987 Constitution was taken from Section 7,
Article IV of the 1973 Constitution which, in turn, was lifted from Section 6,
Article III of the 1935 Constitution. Section 7 of the 1973 Constitution
provided as follows:
Sec. 7. The right to form associations or societies for purpose not contrary to
law shall not be abridged.
This Section was adopted in Section 7 of Proposed Resolution No. 486 of the
1986 Constitutional Commission, entitled Resolution to Incorporate in the
New Constitution an Article on the Bill of Rights, 1 submitted by the
Committee on Citizenship, Bill of Rights, Political Rights and Obligations, and
Human Rights, with a modification, however, consisting of the insertion of
the word union between the words "associations" and "societies." Thus the
proposed Section 7 provided as follows:
Sec. 7. The right of the people to form associations, unions, or societies for
purposes not contrary to law shall not be abridged (emphasis supplied).
Commissioner Joaquin G. Bernas, in his sponsorship speech on the proposed
Article on the Bill of Rights, expounded on the nature of the proposed
provision, in this wise:
Section 7 preserves the old provision not because it is strictly needed but
because its removal might be subject to misinterpretation. It reads:
xxx xxx xxx
It strictly does not prepare the old provision because it adds the word
UNION, and in the explanation we received from Commissioner Lerum, the
term envisions not just unions in private corporations but also in the
government. This preserves our link with the Malolos Constitution as far as
the right to form associations or societies for purposes not contrary to law is
concerned. 2
During the period of individual amendments, Commissioner Lerum
introduced an amendment to the proposed section consisting of the
insertion of the clause "WHETHER EMPLOYED BY THE STATE OR PRIVATE
ESTABLISHMENTS, which, after consulting other Commissioners, he modified
his proposed amendment to read: "INCLUDING THOSE EMPLOYED IN THE
PUBLIC AND PRIVATE SECTORS." At that time, the section read:
Sec. 7. The right of the people including those employed in the public and
private sectors to form associations, unions or societies for purposes not
contrary to law shall not be abridged.
Pertinently to this dispute Commissioner Lerum's intention that the
amendment "automatically abolish" Articles 245 and 246 of the Labor Code.
The Committee accepted the amendment, and there having been no
objection from the floor, the Lerum amendment was approved, thus:
MR. LERUM: . . . In proposing that amendment I ask to make of record that I
want the following provisions of the Labor Code to be automatically
abolished, which read:
Art. 245. Security guards and other personnel employed for the protection
and security of the person, properties and premises of the employers shall
not be eligible for membership in a labor organization.
Art. 246. Managerial employees are not eligible to join, assist, and form any
labor organization.
THE PRESIDING OFFICER (Mr. Bengzon):
What does the Committee say?
FR. BERNAS: The Committee accepts.
THE PRESIDING OFFICER (Mr. Bengzon):
The Committee has accepted the amendment, as amended.
Is there any objection? (Silence) The Chair hears none; the amendment, as
amended, is approved. 3
The Committee on Style then recommended that commas be placed after
the words people and sectors, while Commissioner Lerum likewise moved to
place the word unions before the word associations. 4 Section 7, which was
subsequently renumbered as Section 8 as presently appearing in the text
ratified in the plebiscite of 2 February 1987, then read as follows:
The right of the people, including those employed in the public and private
sectors, to form unions, associations, or societies for purposes not contrary
to law shall not be abridged.
It is then indubitably clear from the foregoing that the intent of the
Constitutional Commission was to abrogate the law prohibiting managerial
employees from joining, assisting, or forming unions or labor organizations.
In this regard, there is absolutely no need to decipher the intent of the
framers of the 1987 Constitution vis-a-vis Article 245 (originally 246) of the
Labor Code, there being no ambiguity or vagueness in the wording of the
present Section 8, Article III of the 1987 Constitution. The provision is clear
and written in simple language; neither were there any confusing debates
thereon. More importantly, the purpose of Commissioner Lerum's
amendments was unequivocal: he did not merely intend an implied repeal,
but an express repeal of the offending article of the Labor Code. The
approval of the amendments left no doubt whatsoever, as faithfully
disclosed in the Records of the Constitutional Commission,
that all employees meaning rank-and-file, supervisory and managerial —
whether from the public or the private sectors, have the right to form unions
for purposes not contrary to law.
The Labor Code referred to by Commissioner Lerum was P.D. No. 442,
promulgated on 1 May 1974. With the repeal of Article 239 by Executive
Order No. 111 issued on 24 December 1986, 5 Article 246 (as mentioned by
Commissioner Lerum) became Article 245. Thereafter, R.A. No.
6715 6 amended the new Article 245 (originally Article 246) to read, as
follows:
Sec. 245. Ineligibility of managerial employees to join any labor
organization; right of supervisory employees. — Managerial employees are
not eligible to join, assist or form any labor organization. Supervisory
employees shall not be eligible for membership in a labor organization of the
rank-and-file employees but may join, assist or form separate labor
organizations of their own. 7
With the abrogation of the former Article 246 of the Labor Code, 8 and the
constitutional prohibition against any law prohibiting managerial employees
from joining, assisting or forming unions or labor organizations, the first
sentence then of the present Article 245 of the Labor Code must be struck
down as unconstitutional. 9 However, due to an obvious conflict of interest —
being closely identified with the interests of management in view of the
inherent nature of their functions, duties and responsibilities — managerial
employees may only be eligible to join, assist or form unions or labor
organizations of their own rank, and not those of the supervisory employees
nor the rank-and-file employees.
In the instant case, the petitioner's name — United Pepsi-Cola Supervisory
Union (UPSU) — indubitably attests that it is a union of supervisory
employees. In light of the earlier discussion, the route managers who
aremanagerial employees, cannot join or assist UPSU. Accordingly, the Med-
Arbiter and public respondent Laguesma committed no error in denying the
petition for direct certification or for certification election.
I thus vote to GRANT, IN PART, the instant petition. That portion of the
challenged resolution of public respondent holding that since the route
managers of private respondent Pepsi-Cola Products Philippines, Inc., are
managerial employees, they are "not eligible to assist, join or form a union
or any other organization" should be SET ASIDE for being violative of Section
8 of Article III of the Constitution, while that portion thereof denying
petitioner's appeal from the Med-Arbiter's decision dismissing the petition
for direct certification or for a certification election should be AFFIRMED.
PUNO, J., separate concurring;
With due respect, it is my submission that Article 245 of the Labor Code was
not repealed by section 8, Article III of the 1987 Constitution for reasons
discussed below.
A. Types of Employees.
For purposes of applying the law on labor relations, the Labor Code in Article
212 (m) defines three (3) categories of employees. They are managerial,
supervisory and rank-and-file, thus:
Art. 212 (m). "Managerial Employee" is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
"Supervisory employees" are those who, in the interest of the employer,
effectively recommended such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of this Book.
The test of "managerial" or "supervisory" status depends on whether a
person possesses authority to act in the interest of his employer and
whether such authority is not routinary or clerical in nature but requires the
use of independent judgment. 1 The rank-and-file employee performs work
that is routinary and clerical in nature. The distinction between these
employees is significant because supervisory and rank-and-file employees
may form, join or assist labor organizations. Managerial employees cannot.
B. The Exclusion of Managerial Employees: Its Historical Roots in the United
States.
The National Labor Relations Act (NLRA), also known as the Wagner Act,
enacted by the U.S. Congress in 1935, was the first law that regulated labor
relations in the United States and embodied its national labor policy. 2 The
purpose of the NLRA was to eliminate obstructions to the free flow of
commerce through the practice of collective bargaining. The NLRA also
sought to protect the workers' full freedoms of association, self-
organization, and designation of representatives of their own choosing, for
the purpose of negotiating the terms and conditions of their employment or
other mutual aid and protection. 3 The NLRA established the right of
employees to organize, required employers to bargain with employees
collectively through employee-elected representatives, gave employees the
right to engage in concerted activities for collective bargaining purposes or
other mutual aid or protection, and created the National Labor Relations
Board (NLRB) as the regulatory agency in labor-management matters. 4
The NLRA was amended in 1947 by the Labor Management Relations Act
(LMRA), also known as the Taft-Hartley Act. This Act sought to lessen
industrial disputes and placed employers in a more nearly equal position
with unions in bargaining and labor relations procedures. 5
The NLRA did not make any special provision for "managerial
employees." 6 The privileges and benefits of the Act were conferred on
"employees." Labor organizations thus clamored for the inclusion of
supervisory personnel in the coverage of the Act on the ground that
supervisors were also employees. Although traditionally, supervisors were
regarded as part of management, the NLRB was constrained to recognize
supervisors as employees under the coverage of the law. Supervisors were
then granted collective bargaining rights. 7 Nonetheless, the NLRB refused to
consider managers as covered by the law. 8
The LMRA took away the collective bargaining rights of supervisors. The
sponsors of the amendment feared that their unionization would break
down industrial discipline as it would blur the traditional distinction between
management and labor. They felt it necessary to deny supervisory personnel
the right of collective bargaining to preserve their loyalty to the interests of
their employers. 9
Several amendments were later made on the NLRA but the exclusion of
managers and supervisors from its coverage was preserved. Until now
managers and supervisors are excluded from the law. 10 Their exclusion
hinges on the theory that the employer is entitled to the full loyalty of those
whom it chooses for positions of responsibility, entailing action on the
employers' behalf. A supervisor's and manager's ability to control the work
of others would be compromised by his sharing of employee status with
them. 11
C. Historical Development in the Philippines.
Labor-management relations in the Philippines were first regulated under
the Industrial Peace Act 12 which took effect in 1953. Hailed as the Magna
Carta of Labor, it was modelled after the NLRA and LMRA of the United
States. 13 Most of the basic principles of the NLRA have been carried over to
the Industrial Peace Act and the Labor Code. 14 This is significant because we
have ruled that where our labor statutes are based on statutes in foreign
jurisdiction, the decisions of the high courts in those jurisdictions construing
and interpreting the Act are given persuasive effects in the application of
Philippine law. 15
The Industrial Peace Act did not carry any provision prohibiting managerial
employees from joining labor organizations. Section 3 of said law merely
provided:
Sec. 3. Employees' Right to Self-Organization. — Employees shall have the
right to self-organization and to form, join or assist labor organizations of
their own choosing for the purpose of collective bargaining through
representatives of their own choosing and to engage in concerted activities
for the purpose of collective bargaining and other mutual aid and
protection. Individuals employed as supervisors shall not be eligible for
membership in a labor organization of employees under their supervision
but may form separate organizations of their own.
Significantly, the Industrial Peace Act did not define a manager or
managerial employee. It defined a "supervisor" but not a "manager." Thus:
Sec. 2. . . .
(k) "Supervisor" means any person having authority in the interest of an
employer, to hire, transfer, suspend, lay-off, recall, discharge, assign,
recommend, or discipline other employees, or responsibly to direct them,
and to adjust their grievances, or effectively to recommend such acts, if, in
connection with the foregoing, the exercise of such authority is not of a
merely routinary or clerical nature but requires the use of independent
judgment.
In 1972, we interpreted Section 3 of the Industrial Peace Act to give
supervisors the right to join and form labor organizations of their
own. 16 Soon we grappled with the right of managers to organize. In a case
involving Caltex managers, we recognized their right to organize, viz:
It would be going too far to dismiss summarily the point raised by
respondent company, that of the alleged identity of interest between the
managerial staff and the employing firm. That should ordinarily be the case,
especially so where the dispute is between management and the rank-and-
file. It does not necessarily follow though that what binds the managerial
staff to the corporation forecloses the possibility of conflict between them.
There could be a real difference between what the welfare of such group
requires and the concessions the firm is willing to grant. Their needs might
not be attended to then in the absence of any organization of their own. Nor
is this to indulge in empty theorizing. The records of respondent company,
even the very case cited by it, is proof enough of their uneasy and troubled
relationship. Certainly the impression is difficult to erase that an alien firm
failed to manifest sympathy for the claims of its Filipino executives. 17
The Industrial Peace Act was repealed in 1975 by P.D. 442, the Labor Code of
the Philippines. The Labor Code changed existing jurisprudence when it
prohibited supervisory and managerial employees from joining labor
organizations. Supervisory unions were no longer recognized nor allowed to
exist and operate as such. 18 We affirmed this statutory change in Bulletin
Publishing Corp. v. Sanchez. 19 Similarly, Article 246 of the Labor Code
expressly prohibited managerial employees from forming, assisting and
joining labor organizations, to wit:
Art. 246. Ineligibility of managerial employees to join any labor
organization. — Managerial employees are not eligible to join, assist or form
any labor organization.
In the same Bulletin case, the Court applied Article 246 and held that
managerial employees are the very type of employees who, by the nature of
their positions and functions, have been decreed disqualified from
bargaining with management. This prohibition is based on the rationale that
if managerial employees were to belong or be affiliated with a union, the
union might not be assured of their loyalty in view of evident conflict of
interest or that the union can be company-dominated with the presence of
managerial employees in the union membership. 20 In the collective
bargaining process, managerial employees are supposed to be on the side of
the employer, to act as its representative, and to see to it that its interests
are well protected. The employer is not assured of such protection if these
employees themselves become union members. 21
The prohibition on managerial employees to join, assist or form labor
organizations was retained in the Labor Code despite substantial
amendments made in 1989 by R.A. 6715, the Herrera-Veloso Law. R.A. 6715
was passed after the effectivity of the 1987 Constitution and this law did not
abrogate, much less amend the prohibition on managerial employees to join
labor organizations. The express prohibition in Article 246
remained. However, as an addendum to this same Article, R.A. 6715
restored to supervisory employees the right to join labor organizations of
their own. 22 Article 246 now reads:
Art. 246. Ineligibility of managerial employees to join any labor
organization; right of supervisory employees. — Managerial employees are
not eligible to join, assist or form any labor organization. Supervisory
employees shall not be eligible for membership in a labor organization of the
rank-and-file employees but may join, assist or form separate labor
organizations of their own.
Article 246 became Article 245 after then Article 244 was repealed by E.O.
111. Article 246 is presently Article 245 of the Labor Code.
Indeed, Article 245 of the Labor Code prohibiting managerial employees
from joining labor organizations has a social and historical significance in
our labor relations law. This significance should be considered in deciphering
the intent of the framers of the 1987 Constitution vis-a-vis the said Article.
With due respect, I do not subscribe to the view that section 8, Article III of
the Constitution abrogated Article 245 of the Labor Code. A textual analysis
of section 8, Article III of the Constitution will not justify this conclusion. With
due respect, the resort by Mr. Justice Davide to the deliberations of the
Constitutional Commission does not suffice. It is generally recognized that
debates and other proceedings in a constitutional convention are of limited
value and are an unsafe guide to the intent of the people. 23 Judge Cooley
has stated that:
When the inquiry is directed to ascertaining the mischief designed to be
remedied, or the purpose sought to be accomplished by a particular
provision, it may be proper to examine the proceedings of the convention
which framed the instrument. Where the proceedings clearly point out the
purpose of the provision, the aid will be valuable and satisfactory; but where
the question is one of abstract meaning, it will be difficult to derive from this
source much reliable assistance in interpretation. Every member of such a
convention acts upon such motives and reasons as influence him personally,
and the motions and debates do not necessarily indicate the purpose of a
majority of a convention in adopting a particular clause. It is quite possible
for a particular clause to appear so clear and unambiguous to the members
of the convention as to require neither discussion nor illustration; and the
few remarks made concerning it in the convention might have a plain
tendency to lead directly away from the meaning in the minds of the
majority. It is equally possible for a part of the members to accept a clause in
one sense and a part in another. And even if we were certain we had
attained to the meaning of the convention, it is by no means to be allowed a
controlling force, especially if that meaning appears not to be the one which
the words would most naturally and obviously convey. For as the
constitution does not derive its force from the convention which framed, but
from the people who ratified it, the intent to be arrived at is that of the
people, and it is not to be supposed that they have looked for any dark and
abstruse meaning in the words employed, but rather that they have
accepted them in the sense most obvious to the common understanding,
and ratified the instrument in the belief that was the sense designed to be
conveyed. 24
It is for this reason that proceedings of constitutional conventions are less
conclusive of the proper construction of the instrument than are legislative
proceedings of the proper construction of the statute. 25 In the statutes, it is
the intent of the legislature that is being sought, while in constitutions, it is
the intent of the people that is being ascertained through the discussions
and deliberations of their representatives. 26 The proper interpretation of
constitutional provisions depends more on how it was understood by the
people adopting it than in the framers' understanding thereof. 27
Thus, debates and proceedings of the constitutional convention are never of
binding force. They may be valuable but are not necessarily decisive. 28 They
may shed a useful light upon the purpose sought to be accomplished or
upon the meaning attached to the words employed. And the courts are free
to avail themselves of any light that may be derived from such sources, but
they are not bound to adopt it as the sole ground of their decision. 29
Clearly then, a statute cannot be declared void on the sole ground that it is
repugnant to a supposed intent or spirit declared in constitutional
convention proceedings.
D. Freedom of Association
The right of association flows from freedom of expression. 30 Like the right of
expression, the exercise of the right of association is not absolute. It is
subject to certain limitations.
Article 243 of the Labor Code reiterates the right of association of people in
the labor sector. Article 243 provides:
Art. 243. Coverage of employees' right to self-organization. — All persons
employed in commercial, industrial and agricultural enterprises and in
religious, charitable, medical, or educational institutions whether operating
for profit or not, shall have the right to self-organization and to form, join, or
assist labor organizations of their own choosing for purposes of collective
bargaining. Ambulant, intermittent and itinerant workers, self-employed
people, rural workers and those without any definite employers may form
labor organizations for their mutual aid and protection.
Article 243 guarantees the right to self-organization and association to "all
persons." This seemingly all-inclusive coverage of "all persons," however,
actually admits of exceptions.
Article 244 31 of the Labor Code mandates that all employees in the civil
service, i.e, those not employed in government corporations established
under the Corporation Code, may only form associations but may not
collectively bargain on terms and conditions fixed by law. An employee of a
cooperative who is a member and co-owner thereof cannot invoke the right
of collective bargaining and negotiation vis-a-vis the cooperative. 32 An
owner cannot bargain with himself or his co-owners. 33 Employees in foreign
embassies or consulates or in foreign international organizations granted
international immunities are also excluded from the right to form labor
organizations. 34 International organizations are organized mainly as a
means for conducting general international business in which the member-
states have an interest and the immunities granted them shield their affairs
from political pressure or control by the host country and assure the
unimpeded performance of their functions. 35
Confidential employees have also been denied the right to form labor-
organizations. Confidential employees do not constitute a distinct category
for purposes of organizational right. Confidentiality may attach to a
managerial or non-managerial position. We have, however, excluded
confidential employees from joining labor organizations following the
rationale behind the disqualification of managerial employees in Article 245.
In the case of National Association of Trade Unions-Republic Planters' Bank
Supervisors Chapter v. Torres, 36 we held:
In the collective bargaining process, managerial employees are supposed to
be on the side of the employer, to act as its representatives, and to see to it
that its interests are well protected. The employer is not assured of such
protection if these employees themselves are union members. Collective
bargaining in such a situation can become one-sided. It is the same reason
that impelled this Court to consider the position of confidential employees as
included in the disqualification found in Article 245 as if the disqualification
of confidential employees were written in the provision. If confidential
employees could unionize in order to bargain for advantages for themselves,
then they could be governed by their own motives rather than the interest of
the employers. Moreover, unionization of confidential employees for the
purpose of collective bargaining would mean the extension of the law to
persons or individuals who are supposed to act "in the interest of" the
employers. It is not farfetched that in the course of collective bargaining,
they might jeopardize that interest which they are duty-bound to protect. 37
E. The disqualification extends only to labor organizations.
It must be noted that Article 245 of the Labor Code deprives managerial
employees of their right to join "labor organizations." A labor organization is
defined under the Labor Code as:
Art. 212 (g). "Labor organization" means any union or association of
employees which exists in whole or in part for the purpose of collective
bargaining or of dealing with the employer concerning terms and conditions
of employment.
A labor organization has two broad rights: (1) to bargain collectively and (2)
to deal with the employer concerning terms and conditions of employment.
To bargain collectively is a right given to a labor organization once it
registers itself with the Department of Labor and Employment (DOLE).
Dealing with the employer, on the other hand, is a generic description of
interaction between employer and employees concerning grievances, wages,
work hours and other terms and conditions of employment, even if the
employees' group is not registered with the DOLE. 38 Any labor organization
which may or may not be a union may deal with the employer. This explains
why a workers' Organization does not always have to be a labor union and
why employer-employee collective interactions are not always collective
bargaining. 39
In the instant case, it may be argued that managerial employees' labor
organization will merely "deal with the employer concerning terms and
conditions of employment" especially when top management is composed of
aliens, following the circumstances in the Caltex case.
Although the labor organization may exist wholly for the purpose of dealing
with the employer concerning terms and conditions of employment, there is
no prohibition in the Labor Code for it to become a legitimate labor
organization and engage in collective bargaining. Once a labor organization
registers with the DOLE and becomes legitimate, it is entitled to the rights
accorded under Articles 242 and 263 (b) of the Labor Code. And these
include the right to strike and picket.
Notably, however, Article 245 does not absolutely disqualify managerial
employees from exercising their right of association. What it prohibits is
merely the right to join labor organizations. Managerial employees may
form associations or organizations so long as they are not labor
organizations. The freedom of association guaranteed under the
Constitution remains and has not been totally abrogated by Article 245.
To declare Article 245 of the Labor Code unconstitutional cuts deep into our
existing industrial life and will open the floodgates to unionization at all
levels of the industrial hierarchy. Such a ruling will wreak havoc on the
existing set-up between management and labor. If all managerial employees
will be allowed to unionize, then all who are in the payroll of the company,
starting from the president, vice-president, general managers and everyone,
with the exception of the directors, may go on strike or picket the
employer. 40 Company officers will join forces with the supervisors and rank-
and-file. Management and labor will become a solid phalanx with
bargaining rights that could be enforced against the owner of the
company. 41 The basic opposing forces in the industry will not be
management and labor but the operating group on the one hand and the
stockholder and bondholder group on the other. The industrial problem
defined in the Labor Code comes down to a contest over a fair division of the
gross receipts of industry between these two groups. 42 And this will certainly
bring ill-effects on our economy.
The framers of the Constitution could not have intended a major upheaval of
our labor and socio-economic systems. Their intent cannot be made to
override substantial policy considerations and create absurd or impossible
situations. 43 A constitution must be viewed as a continuously operative
charter of government. It must not be interpreted as demanding the
impossible or the impracticable; or as effecting the unreasonable or
absurd.44 Courts should always endeavour to give such interpretation that
would make the constitutional provision and the statute consistent with
reason, justice and the public interest. 45
I vote to dismiss the petition.
VITUG, J., separate concurring and dissenting;
The pivotal issues raised in the case at bar, aptly stated by the Office of the
Solicitor General, are:
(1) Whether or not public respondent, Undersecretary of the Department of
Labor and Employment ("DOLE") Bienvenido E. Laguesma, gravely abused
his discretion in categorizing the members of petitioner union to be
managerial employees and thus ineligible to form or join labor
organizations; and
(2) Whether or not the provision of Article 245 of the Labor Code,
disqualifying managerial employees from joining, assisting or forming any
labor organization, violates Section 8, Article III, of the 1987 Constitution,
which expresses that "(t)he right of the people, including those employed in
public and private sectors to form unions, associations or societies for
purposes not contrary to law shall not be abridged."
The case originated from a petition for direct certification or certification
election among route managers/supervisory employees of Pepsi-Cola
Products Phils., Inc. ("Pepsi"), filed by the United Pepsi-Cola Supervisory
Union ("Union"), claiming to be a legitimate labor organization duly
registered with the Department of Labor and Employment under
Registration Certificate No. NCR-UR-3-1421-95. Pepsi opposed the petition
on the thesis that the case was no more than a mere duplication of a
previous petition for direct certification 1 filed by the same route managers
through the Pepsi-Cola Employees Association (PCEA-Supervisory) which
petition had already been denied by Undersecretary Laguesma. The holding
reiterated a prior decision in Workers Alliance Trade Unions ("WATU")
vs. Pepsi-Cola Products Phils., Inc., 2 that route managers were managerial
employees.
In its decision, dated 05 May 1995, Med-Arbiter Brigida C. Fadrigon
dismissed for lack of merit the petition of the Union, stating that the issue on
the proper classification and status of route managers had already been
ruled with finality in the previous decisions, aforementioned, rendered by
DOLE.
The union appealed the decision. In his resolution of 31 August 1995,
Undersecretary Laguesma dismissed the appeal, saying that there was no
compelling reason to abandon the ruling in the two old cases theretofore
decided by DOLE. In his order of 22 September 1995, Undersecretary
Laguesma denied the Union's motion for reconsideration.
The Union went to this Court, via a petition for certiorari, assailing the
cancellation of its certificate of registration. The Court, after considering the
petition and the comments thereon filed by both public and private
respondents, as well as the consolidated reply of petitioner, dismissed the
case in its resolution of 08 July 1996 on the premise that no grave abuse of
discretion had been committed by public respondent.
Undaunted, the Union moved, with leave, for the reconsideration of the
dismissal of its petition by the Court En Banc. In its resolution of 16 June
1997, the case was referred to the Court En Banc en consulta with the
movant's invocation of unconstitutionality of Article 245 of the Labor
Code vis-a-vis Section 8, Article III, of the 1987 Constitution.
There is merit, in my view, in petitioner's motion for reconsideration but not
on constitutional grounds.
There are, in the hierarchy of management, those who fall below the level of
key officers of an enterprise whose terms and conditions of employment can
well be, indeed are not infrequently, provided for in collective bargaining
agreements. To this group belong the supervisory employees. The
"managerial employees," upon the other hand, and relating the matter
particularly to the Labor Code, are those "vested with powers or
prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees"
as distinguished from the supervisory employees whose duties in these areas
are so designed as to verily be implementary to the policies or rules and
regulations already outstanding and priorly taken up and passed upon by
management. The managerial level is the source, as well as prescribes the
compliance, of broad mandates which, in the field of labor relations, are to
be carried out through the next rank of employees charged with actually
seeing to the specific personnel action required. In fine, the real authority,
such as in hiring or firing of employees, comes from management and
exercised by means of instructions, given in general terms, by the
"managerial employees;" the supervisory employees, although ostensibly MANAGEMENT 80:20 Cash to Credit Ratio
holding that power, in truth, however, only act in obedience to the directives
handed down to them. The latter unit, unlike the former, cannot be DSO — assigned Std. to Division
considered the alter ego of the owner of enterprise. by the District
The duties and responsibilities of the members of petitioner union, shown by ASSET MANAGEMENT 30 cases for ice-coolers
their "job description" below —
80 cases for electric coolers
PCPPI
BLOWAGA on Division Vehicles
RM's JOB DESCRIPTION
60 cases on Rolling/Permanent
A. GENERAL/OVERALL OBJECTIVE OF THIS POSITION
Kiosks
To contribute to the growth and profitability of PCPPI via well-selected,
trained and motivated Route Sales Team who sell, collect and merchandise, TRADE DEVELOPMENT 100% Buying Customers Based
following the Pepsi Way, and consistent with Company policies and
on master list that bought once
procedures as well as the corporate vision of Customer Satisfaction.
5 months payback on concessions
B. SPECIFIC JOB DESCRIPTION:
4 CED's/Rte.
KEY RESULT AREAS STANDARD OR PERFORMANCE
EXPENSE MANAGEMENT a). 5% Absentism rate Excl. VL
SALES VOLUME *100% Vs. NRC Target
b). 280 cases/route/day
_____% NTG
c). 15% cost-to-sales ratio
DISTRIBUTION * Product Availability
ROUTE MANAGEMENT 3 Days on RR/Wk
70% Pepsi
— Days on BC-SC- Financial &
80% Seven-Up
Co. Assets
40% Mirinda
— Days on TD
65% Mt. Dew
75% Load Factor
5% Out of Stock
18 Productive Calls
ACCOUNTS RECEIVABLE 65% Current (Incl. Legal & Col.)
CUSTOMER SATISFACTION Customer Complaint attended to within the next
working day
HUMAN RESOURCE 5% Absentism Excl. VL
MANAGEMENT (approved) 3 Documented RR/
Week using SLM's Training Log
d). YESTERDAY's FINAL SETTLEMENT REVIEW
7. UPDATE REPORTS, MONITORS, DOCUMENTS & TELEPHONE CONMATION
8. ATTENDS TO PRODUCT COMPLAINTS (GFM)
9. CONDUCTS ADMINISTRATIVE INVESTIGATION OR ATTENDS DM's MEETING
(on Saturdays)

ADMINISTRATIVE — Complete, timely and accurate B. FIELD WORK

MANAGEMENT reports. ROUTE RIDE

PCPPI 1. CHECKS SLMS. TRAINING LOG (PROGRESS & DEV'T.)

RM's BASIC DAILY ACTIVITIES 2. SALESMAN's CPC

A. AT THE SALES OFFICE 3. ROUTE COVERAGE EVALUATION

1. PRACTICES BLOWAGA ON SERVICE VEHICLE (AT HOME) 4. LOAD FACTOR

2. REPORTS FOR WORK ON OR BEFORE 6:15 A.M. 5. SALESMAN's ROUTING SYSTEM EVALUATION

3. REPORTS IN CLEAN AND NEAT UNIFORM (GOOD GROOMING) BC/SC

4. DAILY BRIEFING WITH THE DM 1. FINANCIAL & ASSET VERIFICATION, CONFIRMATION & AUDIT

5. CONDUCTS SKILLS ENHANCEMENT OR HUDDLES WITH RST's 2. BACKCHECKS FIRST 5 CUSTOMERS SERVED FOR THE DAY

a). ATTENDANCE/GROOMING a). MERCHANDISING

b). OPERATIONAL DIRECTIONS & PRIORITIES b). SERVICING

c). ANNOUNCEMENT c). RM's TERRITORY FAMILIARITY

6. RM's PRESENCE DURING CHECK-OUT d). KEY ACCOUNTS GOODWILL

a). SLM PRACTICES BLOWAGA ON ROUTE TRUCK TRADE DEVELOPMENT

b). PRIVATE COUNSELING WITH RST (AM & PM IF NECESSARY) 1. PREPARATION PRIOR TO CALL

c). PROPER HANDLING OF SELLING/MDSG. MATERIALS 2. ACTUAL CALL

3. POST CALL ANALYSIS
(HOW DID I FARE? WHY? WHAT ACTIONS TO TAKE)
4. FOLLOW-UP ACTION
C. AT CLOSE OF DAY
1. MAINTAINS & UPDATES CORRECT & ACCURATE RECORDS & REPORTS
2. RM-SLM DEBRIEFING
3. SLR DISCUSSION (BASED ON A.M. SLR)
4. COORDINATES WITH DM ON PLANS & PROGRAMS
5. PREPARATIONS FOR NEXT DAY's ACTIVITIES 3
— convey no more than those that are aptly consigned to the "supervisory"
group by the relatively small unit of "managerial" employees. Certain
portions of a pamphlet, the so-called "Route Manager Position Description"
referred to by Mr. Justice Vicente Mendoza, in his ponencia, hereunder
reproduced for easy reference, thus —
A. BASIC PURPOSE
A Manager achieves objectives through others.
As a Route Manager, your purpose is to meet the sales plan; and you achieve
this objective through the skillful management of your job and the
management of your people.
These then are your functions as Pepsi-Cola Route Manager. Within these
functions — managing your job and managing your people — you are
accountable to your District Manager for the execution and completion of
various tasks and activities which will make it possible for you to achieve
your sales objectives.
B. PRINCIPAL ACCOUNTABILITIES
1.0 MANAGING YOUR JOB
The Route Manager is accountable for the following:
1.1 SALES DEVELOPMENT
1.1.1 Achieve the sales plan.
1.1.2 Achieve all distribution and new account objectives.
1.1.3 Develop new business opportunities thru personal contacts with
dealers.
1.1.4 Inspect and ensure that all merchandising objectives are achieved in all
outlets.
1.1.5 Maintain and improve productivity of all cooling equipment and kiosks.
1.1.6 Execute and control all authorized promotions.
1.1.7 Develop and maintain dealer goodwill.
1.1.8 Ensure all accounts comply with company suggested retail pricing.
1.1.9 Study from time to time individual route coverage and productivity for
possible adjustments to maximize utilization of resources.
1.2 Administration
1.2.1 Ensure the proper loading of route trucks before check-out and the
proper sorting of bottles before check-in.
1.2.2 Ensure the upkeep of all route sales reports and all other related
reports and forms required on an accurate and timely basis.
1.2.3 Ensure proper implementation of the various company policies and
procedures include but not limited to shakedown; route shortage;
progressive discipline; sorting; spoilages; credit/collection; accident;
attendance.
1.2.4 Ensure collection of receivables and delinquent accounts.
2.0 MANAGING YOUR PEOPLE
The Route Manager is accountable for the following:
2.1 Route Sales Team Development
2.1.1 Conduct route rides to train, evaluate and develop all assigned route
salesmen and helpers at least 3 days a week, to be supported by required
route ride documents/reports & back check/spot check at least 2 days a
week to be supported by required documents/reports.
2.1.2 Conduct sales meetings and morning huddles. Training should focus on
the enhancement of effective sales and merchandising techniques of the
salesmen and helpers. Conduct group training at least 1 hour each week on
a designated day and of specific topic.
2.2 Code of Conduct
2.2.1 Maintain the company's reputation through strict adherence to PCPPI's
code of conduct and the universal standards of unquestioned business
ethics. —
offer nothing at all that can approximate the authority and functions of
those who actually and genuinely hold the reins of management.
I submit, with due respect, that the members of petitioning union, not really
being "managerial employees" in the true sense of the term, are not
disqualified from forming or joining labor organizations under Article 245 of
the Labor Code.
I shall now briefly touch base on the constitutional question raised by the
parties on Article 245 of the Labor Code.
The Constitution acknowledges "the right of the people, including those
employed in the public and private sectors, to form unions, associations or
societies for purposes not contrary to law . . . ." 4 Perforce, petitioner claims,
that part of Article 245 5 of the Labor Code which states: "Managerial
employees are not eligible to join, assist or form any labor organization,"
being in direct collision with the Constitutional provision, must now be
declared abrogated in the law.
Frankly, I do not see such a "direct collision." The Constitution did not
obviously grant a limitless right "to form unions, associations or societies"
for it has clearly seen it fit to subject its exercise to possible legislative
judgment such as may be appropriate or, to put it in the language of the
Constitution itself, to "purposes not contrary to law."
Freedom of association, like freedom of expression, truly occupies a choice
position in the hierarchy of constitutional values. Even while the Constitution
itself recognizes the State's prerogative to qualify this right, heretofore
discussed, any limitation, nevertheless, must still be predicated on the
existence of a substantive evil sought to be addressed. 6 Indeed, in the
exercise of police power, the State may, by law, prescribe proscriptions,
provided reasonable and legitimate of course, against even the most basic
rights of individuals.
The restriction embodied in Article 245 of the Labor Code is not without
proper rationale. Concededly, the prohibition to form labor organizations on
the part of managerial employees narrows down their freedom of
association. The very nature of managerial functions, however, should
preclude those who exercise them from taking a position adverse to the
interest they are bound to serve and protect. The mere opportunity to
undermine that interest can validly be restrained. To say that the right of
managerial employees to form a "labor organization" within the context and
ambit of the Labor Code should be deemed totally separable from the right
to bargain collectively is not justified by related provisions of the Code. For
instance —
Art. 212. Definitions. 7 — . . .
(g) "Labor organization" means any union or association of employees which
exists in whole or in part for the purpose of collective bargaining or of
dealing with employers concerning terms and conditions of employment.
xxx xxx xxx
(m) "Managerial employee" is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, lay-off, recall, discharge, assign or discipline employees.
Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such
authority is not merely routinely or clerical in nature but requires the use of
independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of this Book.
Art. 263. . . .
(b) Workers shall have the right to engage in concerted activities for
purposes of collective bargaining or for their mutual benefit and protection.
The right of legitimate labor organizations to strike and picket and of
employers to lockout, consistent with the national interest, shall continue to
be recognized and respected.
corporation — which prescribes the tenure of office, as well as the duties
and functions, including terms of employment (governed in most part by the
Articles of Incorporation, the By-laws of the Corporation, or resolutions of
the Board of Directors), of corporate officers for both the statutory
officers,i.e., the president, the treasurer and the corporate secretary, and the
non-statutory officers, i.e., those who occupy positions created by the
corporate by-laws who are deemed essential for effective management of
the enterprise. I cannot imagine these officers as being legally and morally
capable of associating themselves into a labor organization and asserting
collective bargaining rights against the very entity in whose behalf they act
and are supposed to act.
I submit, accordingly, that, firstly, the members of petitioner union or the so-
called route managers, being no more than supervisory employees, can
lawfully organize themselves into a labor union within the meaning of the
Labor Code, and that, secondly, the questioned provision of Article 245 of
the Labor Code has not been revoked by the 1987 Constitution.
WHEREFORE, I vote, given all the foregoing, for the reversal of the resolution
of 31 August 1995, and the order of 22 September 1995, of public
respondent.

The maxim "ut res magis quam pereat" requires not merely that a statute
should be given such a consequence as to be deemed whole but that each of
its express provisions equally should be given the intended effect.

I find it hard to believe that the fundamental law could have envisioned the
use by managerial employees of coercive means against their own
employers over matters entrusted by the latter to the former. Whenever
trust and confidence is a major aspect of any relationship, a conflict of
interest on the part of the person to whom that trust and confidence is
reposed must be avoided and when, unfortunately, it does still arise its
containment can rightly be decreed.

Article 245 of the Labor Code indeed aligns itself to the Corporation Code,
the basic law on by far the most commonly used business vehicle — the
G.R. No. 121084 February 19, 1997
TOYOTA MOTOR PHILIPPINES CORPORATION , petitioner,
vs.
TOYOTA MOTOR PHILIPPINES CORPORATION LABOR UNION AND THE
SECRETARY OF LABOR AND EMPLOYMENT, respondents.
KAPUNAN, J.:
On November 26, 1992, the Toyota Motor Philippines Corporation Labor
Union (TMPCLU) filed a petition for certification election with the
Department of Labor, National Capital Region, for all rank-and-file
employees of the Toyota Motor Corporation. 1
In response, petitioner filed a Position Paper on February 23, 1993 seeking
the denial of the issuance of an Order directing the holding of a certification
election on two grounds: first, that the respondent union, being "in the
process of registration" had no legal personality to file the same as it was
not a legitimate labor organization as of the date of the filing of the petition;
and second, that the union was composed of both rank-and-file and
supervisory employees in violation of law. 2 Attached to the position paper
was a list of union members and their respective job classifications,
indicating that many of the signatories to the petition for certification
election occupied supervisory positions and were not in fact rank-and-file
employees. 3
The Med-Arbiter, Paterno D. Adap, dismissed respondent union's petition for
certification election for lack of merit. In his March 8, 1993 Order, the Med-
Arbiter found that the labor organization's membership was composed of
supervisory and rank-and-file employees in violation of Article 245 of the
Labor Code, 4 and that at the time of the filing of its petition, respondent
union had not even acquired legal personality yet. 5
On appeal, the Office of the Secretary of Labor, in a Resolution 6 dated
November 9, 1993 signed by Undersecretary Bienvenido E. Laguesma, set
aside the Med-Arbiter's Order of March 3, 1993, and directed the holding of
a certification election among the regular rank.-and-file employees of Toyota
Motor Corporation. In setting aside the questioned Order, the Office of the
Secretary contended that:
Contrary to the allegation of herein respondent-appellee, petitioner-
appellant was already a legitimate labor organization at the time of the filing
of the petition on 26 November 1992. Records show that on 24 November
1992 or two (2) days before the filing of the said petition, it was issued a
certificate of registration.
We also agree with petitioner-appellant that the Med-Arbiter should have
not dismissed the petition for certification election based on the ground that
the proposed bargaining unit is a mixture of supervisory and rank-and-file
employees, hence, violative of Article 245 of the Labor Code as amended.
A perusal of the petition and the other documents submitted by petitioner-
appellant will readily show that what the former really seeks to represent
are the regular rank-and-file employees in the company numbering about
1,800 more or less, a unit which is obviously appropriate for bargaining
purposes. This being the case, the mere allegation of respondent-appellee
that there are about 42 supervisoy employees in the proposed bargaining
unit should have not caused the dismissal of the instant petition. Said issue
could very well be taken cared of during the pre-election conference where
inclusion/exclusion proceedings will be conducted to determine the list of
eligible voters. 7
Not satisfied with the decision of the Office of the Secretary of Labor,
petitioner filed a Motion for Reconsideration of the Resolution of March 3,
1993, reiterating its claim that as of the date of filing of petition for
certification election, respondent TMPCLU had not yet acquired the status of
a legitimate labor organization as required by the Labor Code, and that the
proposed bargaining unit was inappropriate.
Acting on petitioner's motion for reconsideration, the public respondent, on
July 13, 1994 set aside its earlier resolution and remanded the case to the
Med-Arbiter concluding that the issues raised by petitioner both on appeal
and in its motion for reconsideration were factual issues requiring further
hearing and production of evidence. 8 The Order stated
We carefully re-examined the records vis-a-vis the arguments raised by the
movant, and we note that movant correctly pointed out that petitioner
submitted a copy of its certificate of registration for the first time on
appeal and that in its petition, petitioner alleges that it is an independent
organization which is in the process of registration." Movant strongly argues
that the foregoing only confirms what it has been pointing out all along, that
at the time the petition was filed petitioner is (sic) not yet the holder of a
registration certificate; that what was actually issued on 24 November 1992
or two (2) days before the filing of the petition was an official receipt of
payment for the application fee; and, that the date appearing in the
Registration certificate which is November 24, 1992 is not the date when
petitioner was actually registered, but the date when the registration
certificate was prepared by the processor. Movant also ratiocinates that if
indeed petitioner has been in possession of the registration certificate at the
time this petition was filed on November 26, 1992, it would have attached
the same to the petition.
The foregoing issues are factual ones, the resolution of which is crucial to
the petition. For if indeed it is true that at the time of filing of the petition,
the said registration certificate has not been approved yet, then, petitioner
lacks the legal personality to file the petition and the dismissal order is
proper. Sadly, we can not resolve the said questions by merely perusing the
records. Further hearing and introduction of evidence are required. Thus,
there is a need to remand the case to the Med-Arbiter solely for the
purpose.
WHEREFORE, the motion is hereby granted and our Resolution is hereby set
aside. Let the case be remanded to the Med-Arbiter for the purpose
aforestated.
SO ORDERED. 9
Pursuant to the Order, quoted above, Med-Arbiter Brigida C. Fodrigon
submitted her findings on September 28, 1994, stating the following: 10
[T]he controvertible fact is that petitioner could not have been issued its
Certificate of Registration on November 24, 1992 when it applied for
registration only on November 23, 1992 as shown by the official receipt of
payment of filing fee. As Enrique Nalus, Chief LEG, this office, would attest in
his letter dated September 8, 1994 addressed to Mr. Porfirio T. Reyes,
Industrial Relations Officer of respondent company, in response to a query
posed by the latter, "It is unlikely that an application for registration is
approved on the date that it is filed or the day thereafter as the processing
course has to pass thought routing, screening, and assignment, evaluation,
review and initialing, and approval/disapproval procedure, among others, so
that a 30-day period is provided for under the Labor Code for this purpose,
let alone opposition thereto by interested parties which must be also given
due course.
Another evidence which petitioner presented. . . is the "Union Registration
1992 Logbook of IRD". . . and the entry date November 25, 1992 as allegedly
the date of the release of the registration certificate. . . On the other hand,
respondent company presented . . . a certified true copy of an entry on page
265 of the Union Registration Logbook showing the pertinent facts about
petitioner but which do not show the petitioner's registration was issued on
or before November 26, 1992. 11
Further citing other pieces of evidence presented before her, the Med-
Arbiter concluded that respondent TMPCLU could not have "acquire[d] legal
personality at the time of the filing of (its) petition." 12
On April 20, 1996, the public respondent issued a new Resolution, "directing
the conduct of a certification election among the regular rank-and-file
employees of the Toyota Motor Philippines Corporation. 13 Petitioner's
motion for reconsideration was denied by public respondent in his Order
dated July 14, 1995. 14
Hence, this special civil action for certiorari under Rule 65 of the Revised
Rules of Court, where petitioner contends that "the Secretary of Labor and
Employment committed grave abuse of discretion amounting to lack or
excess of jurisdiction in reversing, contrary to law and facts the findings of
the Med-Arbiters to the effect that: 1) the inclusion of the prohibited mix of
rank-and file and supervisory employees in the roster of members and
officers of the union cannot be cured by a simple inclusion-exclusion
proceeding; and that 2) the respondent union had no legal standing at the
time of the filing of its petition for certification election. 15
We grant the petition.
The purpose of every certification election is to determine the exclusive
representative of employees in an appropriate bargaining unit for the
purpose of collective bargaining. A certification election for the collective
bargaining process is one of the fairest and most effective ways of
determining which labor organization can truly represent the working
force. 16 In determining the labor organization which represents the interests
of the workforce, those interests must be, as far as reasonably possible,
homogeneous, so as to genuinely reach the concerns of the individual
members of a labor organization.
According to Rothenberg, 17 an appropriate bargaining unit is a group of
employees of a given employer, composed of all or less than the entire body
of employees, which the collective interests of all the employees, consistent
with equity to the employer indicate to be best suited to serve reciprocal
rights and duties of the parties under the collective bargaining provisions of
law. In Belyca Corporation v. Ferrer Calleja, 18 we defined the bargaining unit
as "the legal collectivity for collective bargaining purposes whose members
have substantially mutual bargaining interests in terms and conditions of
employment as will assure to all employees their collective bargaining
rights." This in mind, the Labor Code has made it a clear statutory policy to
prevent supervisory employees from joining labor organizations consisting
of rank-and-file employees as the concerns which involve members of either
group are normally disparate and contradictory. Article 245 provides:
Art. 245 Ineligibility of managerial employees to join any labor organization;
right of supervisory employees. — Managerial Employees are not eligible to
join, assist or form any labor organization. Supervisory employees shall not
be eligible for membership in a labor organization of the rank-and-file
employees but may join, assist or form separate labor organizations of their
own.
Clearly, based on this provision, a labor organization composed of both rank-
and-file and supervisory employees is no labor organization at all. It cannot,
for any guise or purpose, be a legitimate labor organization. Not being one,
an organization which carries a mixture of rank-and-file and supervisory
employees cannot possess any of the rights of a legitimate labor
organization, including the right to file a petition for certification election for
the purpose of collective bargaining. It becomes necessary,
therefore, anterior to the granting of an order allowing a certification
election, to inquire into the composition of any labor organization whenever
the status of the labor organization is challenged on the basis of Article 245
of the Labor Code.
It is the petitioner's contention that forty-two (42) of the respondent union's
members, including three of its officers, occupy supervisory positions 19 In its
position paper dated February 22, 1993, petitioner identified fourteen (14)
union members occupying the position of Junior Group Chief 11 20 and
twenty-seven (27) members in level five positions. Their respective job-
descriptions are quoted below:
LEVEL 4 (JUNIOR GROUP CHIEF II) — He is responsible for all operators and
assigned stations, prepares production reports related to daily production
output. He oversees smooth flow of production, quality of production,
availability of manpower, parts and equipments. He also coordinates with
other sections in the Production Department.
LEVEL 5 — He is responsible for overseeing initial production of new models,
prepares and monitors construction schedules for new models, identifies
manpower requirements for production, facilities and equipment, and lay-
out processes. He also oversees other sections in the production process
(e.g. assembly, welding, painting)." (Annex "V" of Respondent TMP's
Position Paper; which is the Job Description for an Engineer holding Level 5
position in the Production Engineering Section of the Production Planning
and Control Department).
While there may be a genuine divergence of opinion as to whether or not
union members occupying Level 4 positions are supervisory employees, it is
fairly obvious, from a reading of the Labor Code's definition of the term that
those occupying Level 5 positions are unquestionably supervisory
employees. Supervisory employees, as defined above, are those who, in the
interest of the employer, effectively recommend managerial actions if the
exercise of such authority is not merely routinary or clerical in nature but
require the use of independent judgment. 21 Under the job description for
level five employees, such personnel — all engineers — having a number of
personnel under them, not only oversee production of new models but also
determine manpower requirements, thereby influencing important hiring
decisions at the highest levels. This determination is neither routine nor
clerical but involves the independent assessment of factors affecting
production, which in turn affect decisions to hire or transfer workers. The
use of independent judgment in making the decision to hire, fire or transfer
in the identification of manpower requirements would be greatly impaired if
the employee's loyalties are torn between the interests of the union and the
interests of management. A supervisory employee occupying a level five
position would therefore find it difficult to objectively identify the exact
manpower requirements dictated by production demands.
This is precisely what the Labor Code, in requiring separate unions among
rank-and-file employees on one hand, and supervisory employees on the
other, seeks to avoid. The rationale behind the Code's exclusion of
supervisors from unions of rank-and-file employees is that such employees,
while in the performance of supervisory functions, become the alter ego of
management in the making and the implementing of key decisions at the
sub-managerial level. Certainly, it would be difficult to find unity or
mutuality of interests in a bargaining unit consisting of a mixture of rank-
and-file and supervisory employees. And this is so because the fundamental
test of a bargaining unit's acceptability is whether or not such a unit will best
advance to all employees within the unit the proper exercise of their
collective bargaining rights. 22 The Code itself has recognized this, in
preventing supervisory employees from joining unions of rank-and-file
employees.
In the case at bar, as respondent union's membership list contains the
names of at least twenty-seven (27) supervisory employees in Level Five
positions. the union could not, prior to purging itself of its supervisory
employee members, attain the status of a legitimate labor organization. Not
being one, it cannot possess the requisite personality to file a petition for
certification election.
The foregoing discussion, therefore, renders entirely irrelevant, the technical
issue raised as to whether or not respondent union was in possession of the
status of a legitimate labor organization at the time of filing, when, as
petitioner vigorously claims, the former was still at the stage of processing of
its application for recognition as a legitimate labor organization. The union's
composition being in violation of the Labor Code's Prohibition of unions
composed of supervisory and rank-and-file employees, it could not possess
the requisite personality to file for recognition as a legitimate labor
organization. In any case, the factual issue, albeit ignored by the public
respondent's assailed Resolution, was adequately threshed out in the Med-
Arbiter's September 28, 1994 Order
The holding of a certification election is based on clear statutory policy
which cannot be circumvented. 23 Its rules, strictly construed by this Court,
are designed to eliminate fraud and manipulation. As we emphasized
inProgressive Development Corporation v. Secretary, Department of Labor
and Employment, 24 the Court's conclusion should not be interpreted as
impairing any union's right to be certified as the employees' bargaining
agent in the petitioner's establishment. Workers of an appropriate
bargaining unit must be allowed to freely express their choice in an election
where everything is open to sound judgment and the possibility for fraud
and misrepresentation is absent. 25
WHEREFORE, the petition is GRANTED. The assailed Resolution dated April
20, 1995 and Order dated July 14, 1995 of respondent Secretary of Labor are
hereby SET ASIDE. The Order dated September 28, 1994 of the Med-Arbiter
is REINSTATED.

SO ORDERED.
G.R. No. 110399 August 15, 1997
SAN MIGUEL CORPORATION SUPERVISORS AND EXEMPT UNION AND
ERNESTO L. PONCE, President,petitioners,
vs.
HONORABLE BIENVENIDO E. LAGUESMA IN HIS CAPACITY AS
UNDERSECRETARY OF LABOR AND EMPLOYMENT, HONORABLE DANILO L.
REYNANTE IN HIS CAPACITY AS MED-ARBITER AND SAN MIGUEL
CORPORATION, respondents.
ROMERO, J.:
This is a Petition for Certiorari with Prayer for the Issuance of Preliminary
Injunction seeking to reverse and set aside the Order of public respondent,
Undersecretary of the Department of Labor and Employment, Bienvenido E.
Laguesma, dated March 11, 1993, in Case No. OS MA A-2-70-91 1 entitled "In
Re: Petition for Certification Election Among the Supervisory and Exempt
Employees of the San Miguel Corporation Magnolia Poultry Plants of
Cabuyao, San Fernando and Otis, San Miguel Corporation Supervisors and
Exempt Union, Petitioner." The Order excluded the employees under
supervisory levels 3 and 4 and the so-called exempt employees from the
proposed bargaining unit and ruled out their participation in the certification
election.
The antecedent facts are undisputed:
On October 5, 1990, petitioner union filed before the Department of Labor
and Employment (DOLE) a Petition for Direct Certification or Certification
Election among the supervisors and exempt employees of the SMC Magnolia
Poultry Products Plants of Cabuyao, San Fernando and Otis.
On December 19, 1990, Med-Arbiter Danilo L. Reynante issued an Order
ordering the conduct of certification election among the supervisors and
exempt employees of the SMC Magnolia Poultry Products Plants of Cabuyao,
San Fernando and Otis as one bargaining unit.
On January 18, 1991, respondent San Miguel Corporation filed a Notice of
Appeal with Memorandum on Appeal, pointing out, among others, the Med-
Arbiter's error in grouping together all three (3) separate plants, Otis,
Cabuyao and San Fernando, into one bargaining unit, and in including
supervisory levels 3 and above whose positions are confidential in nature.
On July 23, 1991, the public respondent, Undersecretary Laguesma, granted
respondent company's Appeal and ordered the remand of the case to the
Med-Arbiter of origin for determination of the true classification of each of
the employees sought to be included in the appropriate bargaining unit.
Upon petitioner-union's motion dated August 7, 1991, Undersecretary
Laguesma granted the reconsideration prayed for on September 3, 1991 and
directed the conduct of separate certification elections among the
supervisors ranked as supervisory levels 1 to 4 (S1 to S4) and the exempt
employees in each of the three plants at Cabuyao, San Fernando and Otis.
On September 21, 1991, respondent company, San Miguel Corporation filed
a Motion for Reconsideration with Motion to suspend proceedings.
On March 11, 1993, an Order was issued by the public respondent granting
the Motion, citing the doctrine enunciated in Philips Industrial Development,
Inc. v. NLRC 2 case. Said Order reads in part:
. . . Confidential employees, like managerial employees, are not allowed to
form, join or assist a labor union for purposes of collective bargaining.
In this case, S3 and S4 Supervisors and the so-called exempt employees are
admittedly confidential employees and therefore, they are not allowed to
form, join or assist a labor union for purposes of collective bargaining
following the above court's ruling. Consequently, they are not allowed to
participate in the certification election.
WHEREFORE, the Motion is hereby granted and the Decision of this Office
dated 03 September 1991 is hereby modified to the extent that employees
under supervisory levels 3 and 4 (S3 and S4) and the so-called exempt
employees are not allowed to join the proposed bargaining unit and are
therefore excluded from those who could participate in the certification
election. 3
Hence this petition.
For resolution in this case are the following issues:
1. Whether Supervisory employees 3 and 4 and the exempt employees of
the company are considered confidential employees, hence ineligible from
joining a union.
2. If they are not confidential employees, do the employees of the three
plants constitute an appropriate single bargaining unit.
On the first issue, this Court rules that said employees do not fall within the
term "confidential employees" who may be prohibited from joining a union.
There is no question that the said employees, supervisors and the exempt
employees, are not vested with the powers and prerogatives to lay down
and execute management policies and/or to hire, transfer, suspend, layoff,
recall, discharge or dismiss employees. They are, therefore, not qualified to
be classified as managerial employees who, under Article 245 4 of the Labor
Code, are not eligible to join, assist or form any labor organization. In the
very same provision, they are not allowed membership in a labor
organization of the rank-and-file employees but may join, assist or form
separate labor organizations of their own. The only question that need be
addressed is whether these employees are properly classified as confidential
employees or not.
Confidential employees are those who (1) assist or act in a confidential
capacity, (2) to persons who formulate, determine, and effectuate
management policies in the field of labor relations. 5 The two criteria are
cumulative, and both must be met if an employee is to be considered a
confidential employee — that is, the confidential relationship must exist
between the employee and his supervisor, and the supervisor must handle
the prescribed responsibilities relating to labor relations. 6
The exclusion from bargaining units of employees who, in the normal course
of their duties, become aware of management policies relating to labor
relations is a principal objective sought to be accomplished by the
''confidential employee rule." The broad rationale behind this rule is that
employees should not be placed in a position involving a potential conflict of
interests. 7 "Management should not be required to handle labor relations
matters through employees who are represented by the union with which
the company is required to deal and who in the normal performance of their
duties may obtain advance information of the company's position with
regard to contract negotiations, the disposition of grievances, or other labor
relations matters." 8
There have been precedents in this regards, thus in Bulletin Publishing
Company v. Hon. Augusto Sanchez, 9 the Court held that "if these managerial
employees would belong to or be affiliated with a Union, the latter might
not be assured of their loyalty to the Union in view of evident conflict of
interest. The Union can also become company-dominated with the presence
of managerial employees in Union membership." The same rationale was
applied to confidential employees in "Golden Farms, Inc. v. Ferrer-
Calleja" 10 and in the more recent case of "Philips Industrial Development,
Inc. v. NLRC" 11 which held that confidential employees, by the very nature of
their functions, assist and act in a confidential capacity to, or have access to
confidential matters of, persons who exercise managerial functions in the
field of labor relations. Therefore, the rationale behind the ineligibility of
managerial employees to form, assist or join a labor union was held equally
applicable to them. 12
An important element of the "confidential employee rule" is the employee's
need to use labor relations information. Thus, in determining the
confidentiality of certain employees, a key question frequently considered is
the employee's necessary access to confidential labor relations
information. 13
It is the contention of respondent corporation that Supervisor employees 3
and 4 and the exempt employees come within the meaning of the term
"confidential employees" primarily because they answered in the affirmative
when asked "Do you handle confidential data or documents?" in the
Position Questionnaires submitted by the Union. 14In the same
questionnaire, however, it was also stated that the confidential information
handled by questioned employees relate to product formulation, product
standards and product specification which by no means relate to "labor
relations." 15
Granting arguendo that an employee has access to confidential labor
relations information but such is merely incidental to his duties and
knowledge thereof is not necessary in the performance of such duties, said
access does not render the employee a confidential employee. 16 "If access
to confidential labor relations information is to be a factor in the
determination of an employee's confidential status, such information must
relate to the employer's labor relations policies. Thus, an employee of a
labor union, or of a management association, must have access to
confidential labor relations information with respect to his employer, the
union, or the association, to be regarded a confidential employee, and
knowledge of labor relations information pertaining to the companies with
which the union deals, or which the association represents, will not cause an
employee to be excluded from the bargaining unit representing employees
of the union or association." 17 "Access to information which is regarded by
the employer to be confidential from the business standpoint, such as
financial information 18 or technical trade secrets, will not render an
employee a confidential employee." 19
Herein listed are the functions of supervisors 3 and higher:
1. To undertake decisions to discontinue/temporarily stop shift operations
when situations require.
2. To effectively oversee the quality control function at the processing lines
in the storage of chicken and other products.
3. To administer efficient system of evaluation of products in the outlets.
4. To be directly responsible for the recall, holding and rejection of direct
manufacturing materials.
5. To recommend and initiate actions in the maintenance of sanitation and
hygiene throughout the plant. 20
It is evident that whatever confidential data the questioned employees may
handle will have to relate to their functions. From the foregoing functions, it
can be gleaned that the confidential information said employees have access
to concern the employer's internal business operations. As held
in Westinghouse Electric Corporation v.National Labor Relations
Board, 21 "an employee may not be excluded from appropriate bargaining
unit merely because he has access to confidential information concerning
employer's internal business operations and which is not related to the field
of labor relations."
It must be borne in mind that Section 3 of Article XIII of the 1987
Constitution mandates the State to guarantee to "all" workers the right to
self-organization. Hence, confidential employees who may be excluded from
bargaining unit must be strictly defined so as not to needlessly deprive many
employees of their right to bargain collectively through representatives of
their choosing. 22
In the case at bar, supervisors 3 and above may not be considered
confidential employees merely because they handle "confidential data" as
such must first be strictly classified as pertaining to labor relations for them
to fall under said restrictions. The information they handle are properly
classifiable as technical and internal business operations data which, to our
mind, has no relevance to negotiations and settlement of grievances
wherein the interests of a union and the management are invariably
adversarial. Since the employees are not classifiable under the confidential
type, this Court rules that they may appropriately form a bargaining unit for
purposes of collective bargaining. Furthermore, even assuming that they are
confidential employees, jurisprudence has established that there is no legal
prohibition against confidential employees who are not performing
managerial functions to form and join a union. 23
In this connection, the issue of whether the employees of San Miguel
Corporation Magnolia Poultry Products Plants of Cabuyao, San Fernando,
and Otis constitute a single bargaining unit needs to be threshed out.
It is the contention of the petitioner union that the creation of three (3)
separate bargaining units, one each for Cabuyao, Otis and San Fernando as
ruled by the respondent Undersecretary, is contrary to the one-company,
one-union policy. It adds that Supervisors level 1 to 4 and exempt employees
of the three plants have a similarity or a community of interests.
This Court finds the contention of the petitioner meritorious.
An appropriate bargaining unit may be defined as "a group of employees of
a given employer, comprised of all or less than all of the entire body of
employees, which the collective interest of all the employees, consistent
with equity to the employer, indicate to be best suited to serve the
reciprocal rights and duties of the parties under the collective bargaining
provisions of the
law." 24
A unit to be appropriate must effect a grouping of employees who have
substantial, mutual interests in wages, hours, working conditions and other
subjects of collective bargaining. 25
It is readily seen that the employees in the instant case have "community or
mutuality of interests," which is the standard in determining the proper
constituency of a collective bargaining unit. 26 It is undisputed that they all
belong to the Magnolia Poultry Division of San Miguel Corporation. This
means that, although they belong to three different plants, they perform
work of the same nature, receive the same wages and compensation, and
most importantly, share a common stake in concerted activities.
In light of these considerations, the Solicitor General has opined that
separate bargaining units in the three different plants of the division will
fragmentize the employees of the said division, thus greatly diminishing
their bargaining leverage. Any concerted activity held against the private
respondent for a labor grievance in one bargaining unit will, in all
probability, not create much impact on the operations of the private
respondent. The two other plants still in operation can well step up their
production and make up for the slack caused by the bargaining unit engaged
in the concerted activity. This situation will clearly frustrate the provisions of
the Labor Code and the mandate of the Constitution. 27
The fact that the three plants are located in three different places, namely,
in Cabuyao, Laguna, in Otis, Pandacan, Metro Manila, and in San Fernando,
Pampanga is immaterial. Geographical location can be completely
disregarded if the communal or mutual interests of the employees are not
sacrificed as demonstrated in UP v.Calleja-Ferrer where all non-academic
rank and file employee of the University of the Philippines in Diliman,
Quezon City, Padre Faura, Manila, Los Baños, Laguna and the Visayas were
allowed to participate in a certification election. We rule that the distance
among the three plants is not productive of insurmountable difficulties in
the administration of union affairs. Neither are there regional differences
that are likely to impede the operations of a single bargaining
representative.
WHEREFORE, the assailed Order of March 11, 1993 is hereby SET ASIDE and
the Order of the Med-Arbiter on December 19, 1990 is REINSTATED under
which a certification election among the supervisors (level 1 to 4) and
exempt employees of the San Miguel Corporation Magnolia Poultry
Products Plants of Cabuyao, San Fernando, and Otis as one bargaining unit is
ordered conducted.
SO ORDERED.
G.R. No. L-54334 January 22, 1986
KIOK LOY, doing business under the name and style SWEDEN ICE CREAM
PLANT, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and PAMBANSANG
KILUSAN NG PAGGAWA (KILUSAN), respondents.
CUEVAS, J.:
Petition for certiorari to annul the decision 1 of the National Labor Relations
Commission (NLRC) dated July 20, 1979 which found petitioner Sweden Ice
Cream guilty of unfair labor practice for unjustified refusal to bargain, in
violation of par. (g) of Article 249 2 of the New Labor Code, 3 and declared
the draft proposal of the Union for a collective bargaining agreement as the
governing collective bargaining agreement between the employees and the
management.
The pertinent background facts are as follows:
In a certification election held on October 3, 1978, the Pambansang Kilusang
Paggawa (Union for short), a legitimate late labor federation, won and was
subsequently certified in a resolution dated November 29, 1978 by the
Bureau of Labor Relations as the sole and exclusive bargaining agent of the
rank-and-file employees of Sweden Ice Cream Plant (Company for short).
The Company's motion for reconsideration of the said resolution was denied
on January 25, 1978.
Thereafter, and more specifically on December 7, 1978, the Union
furnished 4 the Company with two copies of its proposed collective
bargaining agreement. At the same time, it requested the Company for its
counter proposals. Eliciting no response to the aforesaid request, the Union
again wrote the Company reiterating its request for collective bargaining
negotiations and for the Company to furnish them with its counter
proposals. Both requests were ignored and remained unacted upon by the
Company.
Left with no other alternative in its attempt to bring the Company to the
bargaining table, the Union, on February 14, 1979, filed a "Notice of Strike",
with the Bureau of Labor Relations (BLR) on ground of unresolved economic
issues in collective bargaining. 5
Conciliation proceedings then followed during the thirty-day statutory
cooling-off period. But all attempts towards an amicable settlement failed,
prompting the Bureau of Labor Relations to certify the case to the National
Labor Relations Commission (NLRC) for compulsory arbitration pursuant to
Presidential Decree No. 823, as amended. The labor arbiter, Andres Fidelino,
to whom the case was assigned, set the initial hearing for April 29, 1979. For
failure however, of the parties to submit their respective position papers as
required, the said hearing was cancelled and reset to another date.
Meanwhile, the Union submitted its position paper. The Company did not,
and instead requested for a resetting which was granted. The Company was
directed anew to submit its financial statements for the years 1976, 1977,
and 1978.
The case was further reset to May 11, 1979 due to the withdrawal of the
Company's counsel of record, Atty. Rodolfo dela Cruz. On May 24, 1978, Atty.
Fortunato Panganiban formally entered his appearance as counsel for the
Company only to request for another postponement allegedly for the
purpose of acquainting himself with the case. Meanwhile, the Company
submitted its position paper on May 28, 1979.
When the case was called for hearing on June 4, 1979 as scheduled, the
Company's representative, Mr. Ching, who was supposed to be examined,
failed to appear. Atty. Panganiban then requested for another postponement
which the labor arbiter denied. He also ruled that the Company has waived
its right to present further evidence and, therefore, considered the case
submitted for resolution.
On July 18, 1979, labor arbiter Andres Fidelino submitted its report to the
National Labor Relations Commission. On July 20, 1979, the National Labor
Relations Commission rendered its decision, the dispositive portion of which
reads as follows:
WHEREFORE, the respondent Sweden Ice Cream is hereby declared guilty of
unjustified refusal to bargain, in violation of Section (g) Article 248 (now
Article 249), of P.D. 442, as amended. Further, the draft proposal for a
collective bargaining agreement (Exh. "E ") hereto attached and made an
integral part of this decision, sent by the Union (Private respondent) to the
respondent (petitioner herein) and which is hereby found to be reasonable
under the premises, is hereby declared to be the collective agreement which
should govern the relationship between the parties herein.
SO ORDERED. (Emphasis supplied)
Petitioner now comes before Us assailing the aforesaid decision contending
that the National Labor Relations Commission acted without or in excess of
its jurisdiction or with grave abuse of discretion amounting to lack of
jurisdiction in rendering the challenged decision. On August 4, 1980, this
Court dismissed the petition for lack of merit. Upon motion of the petitioner,
however, the Resolution of dismissal was reconsidered and the petition was
given due course in a Resolution dated April 1, 1981.
Petitioner Company now maintains that its right to procedural due process
has been violated when it was precluded from presenting further evidence
in support of its stand and when its request for further postponement was
denied. Petitioner further contends that the National Labor Relations
Commission's finding of unfair labor practice for refusal to bargain is not
supported by law and the evidence considering that it was only on May 24,
1979 when the Union furnished them with a copy of the proposed Collective
Bargaining Agreement and it was only then that they came to know of the
Union's demands; and finally, that the Collective Bargaining Agreement
approved and adopted by the National Labor Relations Commission is
unreasonable and lacks legal basis.
The petition lacks merit. Consequently, its dismissal is in order.
Collective bargaining which is defined as negotiations towards a collective
agreement, 6 is one of the democratic frameworks under the New Labor
Code, designed to stabilize the relation between labor and management and
to create a climate of sound and stable industrial peace. It is a mutual
responsibility of the employer and the Union and is characterized as a legal
obligation. So much so that Article 249, par. (g) of the Labor Code makes it
an unfair labor practice for an employer to refuse "to meet and convene
promptly and expeditiously in good faith for the purpose of negotiating an
agreement with respect to wages, hours of work, and all other terms and
conditions of employment including proposals for adjusting any grievance or
question arising under such an agreement and executing a contract
incorporating such agreement, if requested by either party.
While it is a mutual obligation of the parties to bargain, the employer,
however, is not under any legal duty to initiate contract negotiation. 7 The
mechanics of collective bargaining is set in motion only when the following
jurisdictional preconditions are present, namely, (1) possession of the status
of majority representation of the employees' representative in accordance
with any of the means of selection or designation provided for by the Labor
Code; (2) proof of majority representation; and (3) a demand to bargain
under Article 251, par. (a) of the New Labor Code . ... all of which
preconditions are undisputedly present in the instant case.
From the over-all conduct of petitioner company in relation to the task of
negotiation, there can be no doubt that the Union has a valid cause to
complain against its (Company's) attitude, the totality of which is indicative
of the latter's disregard of, and failure to live up to, what is enjoined by the
Labor Code — to bargain in good faith.
We are in total conformity with respondent NLRC's pronouncement that
petitioner Company is GUILTY of unfair labor practice. It has been
indubitably established that (1) respondent Union was a duly certified
bargaining agent; (2) it made a definite request to bargain, accompanied
with a copy of the proposed Collective Bargaining Agreement, to the
Company not only once but twice which were left unanswered and unacted
upon; and (3) the Company made no counter proposal whatsoever all of
which conclusively indicate lack of a sincere desire to negotiate. 8 A
Company's refusal to make counter proposal if considered in relation to the
entire bargaining process, may indicate bad faith and this is specially true
where the Union's request for a counter proposal is left unanswered. 9 Even
during the period of compulsory arbitration before the NLRC, petitioner
Company's approach and attitude-stalling the negotiation by a series of
postponements, non-appearance at the hearing conducted, and undue
delay in submitting its financial statements, lead to no other conclusion
except that it is unwilling to negotiate and reach an agreement with the
Union. Petitioner has not at any instance, evinced good faith or willingness
to discuss freely and fully the claims and demands set forth by the Union
much less justify its opposition thereto. 10
The case at bar is not a case of first impression, for in the Herald Delivery
Carriers Union (PAFLU) vs. Herald Publications 11the rule had been laid down
that "unfair labor practice is committed when it is shown that the
respondent employer, after having been served with a written bargaining
proposal by the petitioning Union, did not even bother to submit an answer
or reply to the said proposal This doctrine was reiterated anew in Bradman
vs. Court of Industrial Relations 12 wherein it was further ruled that "while
the law does not compel the parties to reach an agreement, it does
contemplate that both parties will approach the negotiation with an open
mind and make a reasonable effort to reach a common ground of
agreement
As a last-ditch attempt to effect a reversal of the decision sought to be
reviewed, petitioner capitalizes on the issue of due process claiming, that it
was denied the right to be heard and present its side when the Labor Arbiter
denied the Company's motion for further postponement.
Petitioner's aforesaid submittal failed to impress Us. Considering the various
postponements granted in its behalf, the claimed denial of due process
appeared totally bereft of any legal and factual support. As herein earlier
stated, petitioner had not even honored respondent Union with any reply to
the latter's successive letters, all geared towards bringing the Company to
the bargaining table. It did not even bother to furnish or serve the Union
with its counter proposal despite persistent requests made therefor.
Certainly, the moves and overall behavior of petitioner-company were in
total derogation of the policy enshrined in the New Labor Code which is
aimed towards expediting settlement of economic disputes. Hence, this
Court is not prepared to affix its imprimatur to such an illegal scheme and
dubious maneuvers.
Neither are WE persuaded by petitioner-company's stand that the Collective
Bargaining Agreement which was approved and adopted by the NLRC is a
total nullity for it lacks the company's consent, much less its argument that
once the Collective Bargaining Agreement is implemented, the Company will
face the prospect of closing down because it has to pay a staggering amount
of economic benefits to the Union that will equal if not exceed its capital.
Such a stand and the evidence in support thereof should have been
presented before the Labor Arbiter which is the proper forum for the
purpose.
We agree with the pronouncement that it is not obligatory upon either side
of a labor controversy to precipitately accept or agree to the proposals of
the other. But an erring party should not be tolerated and allowed with
impunity to resort to schemes feigning negotiations by going through empty
gestures. 13 More so, as in the instant case, where the intervention of the
National Labor Relations Commission was properly sought for after
conciliation efforts undertaken by the BLR failed. The instant case being a
certified one, it must be resolved by the NLRC pursuant to the mandate of
P.D. 873, as amended, which authorizes the said body to determine the
reasonableness of the terms and conditions of employment embodied in
any Collective Bargaining Agreement. To that extent, utmost deference to its
findings of reasonableness of any Collective Bargaining Agreement as the
governing agreement by the employees and management must be accorded
due respect by this Court.
WHEREFORE, the instant petition is DISMISSED. The temporary restraining
order issued on August 27, 1980, is LIFTED and SET ASIDE.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 163942 November 11, 2008 Evolution of the Present Petitions

NATIONAL UNION OF WORKERS IN THE HOTEL RESTAURANT AND ALLIED The Union is the certified bargaining agent of the regular rank-and-file
INDUSTRIES (NUWHRAIN-APL-IUF) DUSIT HOTEL NIKKO employees of Dusit Hotel Nikko (Hotel), a five star service establishment
CHAPTER, petitioner, owned and operated by Philippine Hoteliers, Inc. located in Makati City.
vs. Chiyuki Fuijimoto and Esperanza V. Alvez are impleaded in their official
THE HONORABLE COURT OF APPEALS (Former Eighth Division), THE capacities as the Hotel's General Manager and Director of Human
NATIONAL LABOR RELATIONS COMMISSION (NLRC), PHILIPPINE HOTELIERS Resources, respectively.
INC., owner and operator of DUSIT HOTEL NIKKO and/or CHIYUKI
FUJIMOTO, and ESPERANZA V. ALVEZ, respondents. On October 24, 2000, the Union submitted its Collective Bargaining
Agreement (CBA) negotiation proposals to the Hotel. As negotiations
x----------------------------------------x ensued, the parties failed to arrive at mutually acceptable terms and
conditions. Due to the bargaining deadlock, the Union, on December 20,
G.R. No. 166295 November 11, 2008 2001, filed a Notice of Strike on the ground of the bargaining deadlock with
NUWHRAIN-DUSIT HOTEL NIKKO CHAPTER, petitioner, the National Conciliation and Mediation Board (NCMB), which was docketed
vs. as NCMB-NCR-NS-12-369-01. Thereafter, conciliation hearings were
SECRETARY OF LABOR AND EMPLOYMENT and PHILIPPINE HOTELIERS, conducted which proved unsuccessful. Consequently, a Strike Vote 8 was
INC., respondents. conducted by the Union on January 14, 2002 on which it was decided that
the Union would wage a strike.
DECISION
Soon thereafter, in the afternoon of January 17, 2002, the Union held a
VELASCO, JR., J.: general assembly at its office located in the Hotel's basement, where some
members sported closely cropped hair or cleanly shaven heads. The next
In G.R. No. 163942, the Petition for Review on Certiorari under Rule 45 of
day, or on January 18, 2002, more male Union members came to work
the National Union of Workers in the Hotel Restaurant and Allied Industries
sporting the same hair style. The Hotel prevented these workers from
Dusit Hotel Nikko Chapter (Union) seeks to set aside the January 19, 2004
entering the premises claiming that they violated the Hotel's Grooming
Decision1 and June 1, 2004 Resolution2 of the Court of Appeals (CA) in CA-
Standards.
G.R. SP No. 76568 which affirmed the October 9, 2002 Decision 3 of the
National Labor Relations Commission (NLRC) in NLRC NCR CC No. 000215- In view of the Hotel's action, the Union staged a picket outside the Hotel
02. premises. Later, other workers were also prevented from entering the Hotel
causing them to join the picket. For this reason the Hotel experienced a
In G.R. No. 166295, the Petition for Certiorari under Rule 65 of the Union
severe lack of manpower which forced them to temporarily cease
seeks to nullify the May 6, 2004 Decision 4 and November 25, 2004
operations in three restaurants.
Resolution5 of the CA in CA-G.R. SP No. 70778 which affirmed the January
31, 20026 and March 15, 20027 Orders of the Secretary of Labor and Subsequently, on January 20, 2002, the Hotel issued notices to Union
Employment, Patricia A. Sto. Tomas (Secretary). members, preventively suspending them and charging them with the
following offenses: (1) violation of the duty to bargain in good faith; (2)
illegal picket; (3) unfair labor practice; (4) violation of the Hotel's Grooming
Standards; (5) illegal strike; and (6) commission of illegal acts during the
illegal strike. The next day, the Union filed with the NCMB a second Notice of
Strike on the ground of unfair labor practice and violation of Article 248(a) of
the Labor Code on illegal lockout, which was docketed as NCMB-NCR-NS-01-
019-02. In the meantime, the Union officers and members submitted their
explanations to the charges alleged by the Hotel, while they continued to
stage a picket just inside the Hotel's compound.
On January 26, 2002, the Hotel terminated the services of twenty-nine (29)
Union officers and sixty-one (61) members; and suspended eighty-one (81)
employees for 30 days, forty-eight (48) employees for 15 days, four (4)
employees for 10 days, and three (3) employees for five days. On the same
day, the Union declared a strike. Starting that day, the Union engaged in
picketing the premises of the Hotel. During the picket, the Union officials
and members unlawfully blocked the ingress and egress of the Hotel
premises.
Consequently, on January 31, 2002, the Union filed its third Notice of Strike
with the NCMB which was docketed as NCMB-NCR-NS-01-050-02, this time
on the ground of unfair labor practice and union-busting.
On the same day, the Secretary, through her January 31, 2002 Order,
assumed jurisdiction over the labor dispute and certified the case to the
NLRC for compulsory arbitration, which was docketed as NLRC NCR CC No.
000215-02. The Secretary's Order partly reads:
WHEREFORE, in order to have a complete determination of the bargaining
deadlock and the other incidents of the dispute, this Office hereby
consolidates the two Notices of Strike - NCMB-NCR-NS-12-369-01 and
NCMB-NCR-NS-01-019-02 - and CERTIFIES the entire labor dispute covered
by these Notices and the intervening events, to the NATIONAL LABOR
RELATIONS COMMISSION for compulsory arbitration pursuant to Article 263
(g) of the Labor Code, as amended, under the following terms:
xxxx
d. the Hotel is given the option, in lieu of actual reinstatement, to
merely reinstate the dismissed or suspended workers in the payroll in light
of the special circumstances attendant to their reinstatement;
xxxx
SO ORDERED. (Emphasis added.)
Pursuant to the Secretary's Order, the Hotel, on February 1, 2002, issued an
Inter-Office Memorandum,9directing some of the employees to return to
work, while advising others not to do so, as they were placed under payroll
reinstatement.
Unhappy with the Secretary's January 31, 2002 Order, the Union moved for
reconsideration, but the same was denied per the Secretary's subsequent
March 15, 2002 Order. Affronted by the Secretary's January 31, 2002 and
March 15, 2002 Orders, the Union filed a Petition for Certiorari with the CA
which was docketed as CA-G.R. SP No. 70778.
Meanwhile, after due proceedings, the NLRC issued its October 9, 2002
Decision in NLRC NCR CC No. 000215-02, in which it ordered the Hotel and
the Union to execute a CBA within 30 days from the receipt of the decision.
The NLRC also held that the January 18, 2002 concerted action was an illegal
strike in which illegal acts were committed by the Union; and that the strike
violated the "No Strike, No Lockout" provision of the CBA, which thereby
caused the dismissal of 29 Union officers and 61 Union members. The NLRC
ordered the Hotel to grant the 61 dismissed Union members financial
assistance in the amount of ½ month's pay for every year of service or their
retirement benefits under their retirement plan whichever was higher. The
NLRC explained that the strike which occurred on January 18, 2002 was
illegal because it failed to comply with the mandatory 30-day cooling-off
period10 and the seven-day strike ban,11 as the strike occurred only 29 days
after the submission of the notice of strike on December 20, 2001 and only
four days after the submission of the strike vote on January 14, 2002. The
NLRC also ruled that even if the Union had complied with the temporal
requirements mandated by law, the strike would nonetheless be declared
illegal because it was attended by illegal acts committed by the Union
officers and members.
The Union then filed a Motion for Reconsideration of the NLRC's Decision
which was denied in the February 7, 2003 NLRC Resolution. Unfazed, the
Union filed a Petition for Certiorari under Rule 65 with the CA, docketed as
CA-G.R. SP No. 76568, and assailed both the October 9, 2002 Decision and
the February 7, 2003 Resolution of the NLRC.
Soon thereafter, the CA promulgated its January 19, 2004 Decision in CA-
G.R. SP No. 76568 which dismissed the Union's petition and affirmed the
rulings of the NLRC. The CA ratiocinated that the Union failed to
demonstrate that the NLRC committed grave abuse of discretion and
capriciously exercised its judgment or exercised its power in an arbitrary and
despotic manner.
For this reason, the Union filed a Motion for Reconsideration which the CA,
in its June 1, 2004 Resolution, denied for lack of merit.
In the meantime, the CA promulgated its May 6, 2004 Decision in CA-G.R. SP
No. 70778 which denied due course to and consequently dismissed the
Union's petition. The Union moved to reconsider the Decision, but the CA
was unconvinced and denied the motion for reconsideration in its
November 25, 2004 Resolution.
Thus, the Union filed the present petitions.
The Union raises several interwoven issues in G.R. No. 163942, most
eminent of which is whether the Union conducted an illegal strike. The
issues presented for resolution are:
-A-
WHETHER OR NOT THE UNION, THE 29 UNION OFFICERS AND 61 MEMBERS
MAY BE ADJUDGED GUILTY OF STAGING AN ILLEGAL STRIKE ON JANUARY 18,
2002 DESPITE RESPONDENTS' ADMISSION THAT THEY PREVENTED SAID
OFFICERS AND MEMBERS FROM REPORTING FOR WORK FOR ALLEGED
VIOLATION OF THE HOTEL'S GROOMING STANDARDS
-B-
WHETHER OR NOT THE 29 UNION OFFICERS AND 61 MEMBERS MAY VALIDLY
BE DISMISSED AND MORE THAN 200 MEMBERS BE VALIDLY SUSPENDED ON
THE BASIS OF FOUR (4) SELF-SERVING AFFIDAVITS OF RESPONDENTS
-C-
WHETHER OR NOT RESPONDENTS IN PREVENTING UNION OFFICERS AND
MEMBERS FROM REPORTING FOR WORK COMMITTED AN ILLEGAL LOCK-
OUT12
In G.R. No. 166295, the Union solicits a riposte from this Court on whether
the Secretary has discretion to impose "payroll" reinstatement when he
assumes jurisdiction over labor disputes.
The Court's Ruling
The Court shall first dispose of G.R. No. 166295.
According to the Union, there is no legal basis for allowing payroll
reinstatement in lieu of actual or physical reinstatement. As argued, Art.
263(g) of the Labor Code is clear on this point.
The Hotel, on the other hand, claims that the issue is now moot and any
decision would be impossible to execute in view of the Decision of the NLRC
which upheld the dismissal of the Union officers and members.
The Union's position is untenable.
The Hotel correctly raises the argument that the issue was rendered moot
when the NLRC upheld the dismissal of the Union officers and members. In
order, however, to settle this relevant and novel issue involving the breadth
of the power and jurisdiction of the Secretary in assumption of jurisdiction
cases, we now decide the issue on the merits instead of relying on mere
technicalities.
We held in University of Immaculate Concepcion, Inc. v. Secretary of Labor:
With respect to the Secretary's Order allowing payroll reinstatement instead
of actual reinstatement for the individual respondents herein, an
amendment to the previous Orders issued by her office, the same is usually
not allowed. Article 263(g) of the Labor Code aforementioned states that all
workers must immediately return to work and all employers must readmit
all of them under the same terms and conditions prevailing before the strike
or lockout. The phrase "under the same terms and conditions" makes it clear
that the norm is actual reinstatement. This is consistent with the idea that
any work stoppage or slowdown in that particular industry can be
detrimental to the national interest. 13
Thus, it was settled that in assumption of jurisdiction cases, the Secretary
should impose actual reinstatement in accordance with the intent and spirit
of Art. 263(g) of the Labor Code. As with most rules, however, this one is
subject to exceptions. We held in Manila Diamond Hotel Employees' Union
v. Court of Appeals that payroll reinstatement is a departure from the rule,
and special circumstances which make actual reinstatement impracticable
must be shown.14 In one case, payroll reinstatement was allowed where the
employees previously occupied confidential positions, because their actual
reinstatement, the Court said, would be impracticable and would only serve
to exacerbate the situation.15In another case, this Court held that the NLRC
did not commit grave abuse of discretion when it allowed payroll
reinstatement as an option in lieu of actual reinstatement for teachers who
were to be reinstated in the middle of the first term. 16 We held that the
NLRC was merely trying its best to work out a satisfactory ad hoc solution to
a festering and serious problem.17
The peculiar circumstances in the present case validate the Secretary's
decision to order payroll reinstatement instead of actual reinstatement. It is
obviously impracticable for the Hotel to actually reinstate the employees
who shaved their heads or cropped their hair because this was exactly the
reason they were prevented from working in the first place. Further, as with
most labor disputes which have resulted in strikes, there is mutual
antagonism, enmity, and animosity between the union and the
management. Payroll reinstatement, most especially in this case, would have
been the only avenue where further incidents and damages could be
avoided. Public officials entrusted with specific jurisdictions enjoy great
confidence from this Court. The Secretary surely meant only to ensure
industrial peace as she assumed jurisdiction over the labor dispute. In this
case, we are not ready to substitute our own findings in the absence of a
clear showing of grave abuse of discretion on her part.
The issues raised in G.R. No. 163942, being interrelated, shall be discussed
concurrently.
To be determined whether legal or not are the following acts of the Union:
(1) Reporting for work with their bald or cropped hair style on January 18,
2002; and
(2) The picketing of the Hotel premises on January 26, 2002.
The Union maintains that the mass picket conducted by its officers and
members did not constitute a strike and was merely an expression of their
grievance resulting from the lockout effected by the Hotel management. On
the other hand, the Hotel argues that the Union's deliberate defiance of the
company rules and regulations was a concerted effort to paralyze the
operations of the Hotel, as the Union officers and members knew pretty well
that they would not be allowed to work in their bald or cropped hair style.
For this reason, the Hotel argues that the Union committed an illegal strike
on January 18, 2002 and on January 26, 2002.
We rule for the Hotel.
Art. 212(o) of the Labor Code defines a strike as "any temporary stoppage of
work by the concerted action of employees as a result of an industrial or
labor dispute."
In Toyota Motor Phils. Corp. Workers Association (TMPCWA) v. National
Labor Relations Commission, we cited the various categories of an illegal
strike, to wit:
Noted authority on labor law, Ludwig Teller, lists six (6) categories of an
illegal strike, viz.:
(1) [when it] is contrary to a specific prohibition of law, such as strike by
employees performing governmental functions; or
(2) [when it] violates a specific requirement of law[, such as Article 263 of
the Labor Code on the requisites of a valid strike]; or
(3) [when it] is declared for an unlawful purpose, such as inducing the
employer to commit an unfair labor practice against non-union employees;
or
(4) [when it] employs unlawful means in the pursuit of its objective, such as
a widespread terrorism of non-strikers [for example, prohibited acts under
Art. 264(e) of the Labor Code]; or
(5) [when it] is declared in violation of an existing injunction[, such as
injunction, prohibition, or order issued by the DOLE Secretary and the NLRC
under Art. 263 of the Labor Code]; or
(6) [when it] is contrary to an existing agreement, such as a no-strike clause
or conclusive arbitration clause.18
With the foregoing parameters as guide and the following grounds as basis,
we hold that the Union is liable for conducting an illegal strike for the
following reasons:
First, the Union's violation of the Hotel's Grooming Standards was clearly a
deliberate and concerted action to undermine the authority of and to
embarrass the Hotel and was, therefore, not a protected action. The
appearances of the Hotel employees directly reflect the character and well-
being of the Hotel, being a five-star hotel that provides service to top-notch
clients. Being bald or having cropped hair per se does not evoke negative or
unpleasant feelings. The reality that a substantial number of employees
assigned to the food and beverage outlets of the Hotel with full heads of
hair suddenly decided to come to work bald-headed or with cropped hair,
however, suggests that something is amiss and insinuates a sense that
something out of the ordinary is afoot. Obviously, the Hotel does not need
to advertise its labor problems with its clients. It can be gleaned from the
records before us that the Union officers and members deliberately and in
apparent concert shaved their heads or cropped their hair. This was shown
by the fact that after coming to work on January 18, 2002, some Union
members even had their heads shaved or their hair cropped at the Union
office in the Hotel's basement. Clearly, the decision to violate the company
rule on grooming was designed and calculated to place the Hotel
management on its heels and to force it to agree to the Union's proposals.
In view of the Union's collaborative effort to violate the Hotel's Grooming
Standards, it succeeded in forcing the Hotel to choose between allowing its
inappropriately hair styled employees to continue working, to the detriment
of its reputation, or to refuse them work, even if it had to cease operations
in affected departments or service units, which in either way would disrupt
the operations of the Hotel. This Court is of the opinion, therefore, that the
act of the Union was not merely an expression of their grievance or
displeasure but, indeed, a calibrated and calculated act designed to inflict
serious damage to the Hotel's finances or its reputation. Thus, we hold that
the Union's concerted violation of the Hotel's Grooming Standards which
resulted in the temporary cessation and disruption of the Hotel's operations
is an unprotected act and should be considered as an illegal strike.
Second, the Union's concerted action which disrupted the Hotel's operations
clearly violated the CBA's "No Strike, No Lockout" provision, which reads:
ARTICLE XXII - NO STRIKE/WORK STOPPAGE AND LOCKOUT
SECTION 1. No Strikes
The Union agrees that there shall be no strikes, walkouts, stoppage or slow-
down of work, boycott, refusal to handle accounts, picketing, sit-down
strikes, sympathy strikes or any other form of interference and/or
interruptions with any of the normal operations of the HOTEL during the life
of this Agreement.
The facts are clear that the strike arose out of a bargaining deadlock in the
CBA negotiations with the Hotel. The concerted action is an economic strike
upon which the afore-quoted "no strike/work stoppage and lockout"
prohibition is squarely applicable and legally binding. 19
Third, the Union officers and members' concerted action to shave their
heads and crop their hair not only violated the Hotel's Grooming Standards
but also violated the Union's duty and responsibility to bargain in good faith.
By shaving their heads and cropping their hair, the Union officers and
members violated then Section 6, Rule XIII of the Implementing Rules of
Book V of the Labor Code. 20 This rule prohibits the commission of any act
which will disrupt or impede the early settlement of the labor disputes that
are under conciliation. Since the bargaining deadlock is being conciliated by
the NCMB, the Union's action to have their officers and members' heads
shaved was manifestly calculated to antagonize and embarrass the Hotel
management and in doing so effectively disrupted the operations of the
Hotel and violated their duty to bargain collectively in good faith.
Fourth, the Union failed to observe the mandatory 30-day cooling-of
period and the seven-day strike ban before it conducted the strike on
January 18, 2002. The NLRC correctly held that the Union failed to observe
the mandatory periods before conducting or holding a strike. Records reveal
that the Union filed its Notice of Strike on the ground of bargaining deadlock
on December 20, 2001. The 30-day cooling-off period should have been until
January 19, 2002. On top of that, the strike vote was held on January 14,
2002 and was submitted to the NCMB only on January 18, 2002; therefore,
the 7-day strike ban should have prevented them from holding a strike until
January 25, 2002. The concerted action committed by the Union on January
18, 2002 which resulted in the disruption of the Hotel's operations clearly
violated the above-stated mandatory periods.
Last, the Union committed illegal acts in the conduct of its strike. The NLRC
ruled that the strike was illegal since, as shown by the pictures 21 presented
by the Hotel, the Union officers and members formed human barricades and
obstructed the driveway of the Hotel. There is no merit in the Union's
argument that it was not its members but the Hotel's security guards and
the police officers who blocked the driveway, as it can be seen that the
guards and/or police officers were just trying to secure the entrance to the
Hotel. The pictures clearly demonstrate the tense and highly explosive
situation brought about by the strikers' presence in the Hotel's driveway.
Furthermore, this Court, not being a trier of facts, finds no reason to alter or
disturb the NLRC findings on this matter, these findings being based on
substantial evidence and affirmed by the CA. 22 Factual findings of labor
officials, who are deemed to have acquired expertise in matters within their
respective jurisdictions, are generally accorded not only respect but even
finality, and bind us when supported by substantial evidence. 23 Likewise, we
are not duty-bound to delve into the accuracy of the factual findings of the
NLRC in the absence of clear showing that these were arrived at arbitrarily
and/or bereft of any rational basis.24
What then are the consequent liabilities of the Union officers and members
for their participation in the illegal strike?
Regarding the Union officers and members' liabilities for their participation
in the illegal picket and strike, Art. 264(a), paragraph 3 of the Labor Code
provides that "[a]ny union officer who knowingly participates in an illegal
strike and any worker or union officer who knowingly participates in the
commission of illegal acts during a strike may be declared to have lost his
employment status x x x." The law makes a distinction between union
officers and mere union members. Union officers may be validly terminated
from employment for their participation in an illegal strike, while union
members have to participate in and commit illegal acts for them to lose their
employment status.25 Thus, it is necessary for the company to adduce proof
of the participation of the striking employees in the commission of illegal
acts during the strikes.26
Clearly, the 29 Union officers may be dismissed pursuant to Art. 264(a), par. The CA's January 19, 2004 Decision in CA-G.R. SP No. 76568 is hereby SET
3 of the Labor Code which imposes the penalty of dismissal on "any union ASIDE. The October 9, 2002 Decision of the NLRC in NLRC NCR CC No.
officer who knowingly participates in an illegal strike." We, however, are of 000215-02 is hereby AFFIRMED withMODIFICATIONS, as follows:
the opinion that there is room for leniency with respect to the Union
members. It is pertinent to note that the Hotel was able to prove before the The 29 Union officials are hereby declared to have lost their employment
status, to wit:
NLRC that the strikers blocked the ingress to and egress from the Hotel. But
it is quite apparent that the Hotel failed to specifically point out the 1. LEO ANTONIO ATUTUBO
participation of each of the Union members in the commission of illegal acts 2. EDWIN E. BALLESTEROS
during the picket and the strike. For this lapse in judgment or diligence, we 3. LORETTA DIVINA DE LUNA
are constrained to reinstate the 61 Union members. 4. INISUSAN DE VELEZ
Further, we held in one case that union members who participated in an 5. DENNIS HABER
6. MARITES HERNANDEZ
illegal strike but were not identified to have committed illegal acts are
entitled to be reinstated to their former positions but without 7. BERNARD HUGO
8. NORZAMIA INTAL
backwages.27 We then held in G & S Transport Corporation v. Infante:
9. LAURO JAVIER
With respect to backwages, the principle of a "fair day's wage for a fair day's 10. SHANE LAUZ
labor" remains as the basic factor in determining the award thereof. If there 11. MAY BELEN LEANO
is no work performed by the employee there can be no wage or pay unless, 12. EDGAR LINGHON
of course, the laborer was able, willing and ready to work but was illegally 13. MILAGROS LOPEZ
locked out, suspended or dismissed or otherwise illegally prevented from 14. JOSE MUZONES
working. While it was found that respondents expressed their intention to 15. RAY NERVA
report back to work, the latter exception cannot apply in this case. 16. JESUS NONAN
In Philippine Marine Officer's Guild v. Compañia Maritima, as affirmed 17. MARLYN OLLERO
in Philippine Diamond Hotel and Resort v. Manila Diamond Hotel Employees 18. CATHY ORDUNA
Union, the Court stressed that for this exception to apply, it is required that 19. REYNALDO RASING
the strike be legal, a situation that does not obtain in the case at bar. 28 20. JUSTO TABUNDA
21. BARTOLOME TALISAYON
In this light, we stand by our recent rulings and reinstate the 61 Union 22. JUN TESORO
members without backwages. 23. LYNDON TESORO
WHEREFORE, premises considered, the CA's May 6, 2004 Decision in CA-G.R. 24. SALVADOR TIPONES
SP No. 70778 is hereby AFFIRMED. 25. SONNY UY
26. WILFREDO VALLES, JR.
27. MEL VILLAHUCO
28. EMMA Q. DANAO 30. HONORIO PACIONE
29. JORDAN ALEJANDRO 31. ANDREA VILLAFUERTE
32. MARIO PACULAN
The 61 Union members are hereby REINSTATED to their former positions 33. JULIO PAJINAG
without backwages: 34. JOSELITO PASION
1. DANILO AGUINALDO 35. VICENTE PASIOLAN
2. CLARO ABRANTE 36. HAZEL PENA
3. FELIX ARRIESGADO 37. PEDRO POLLANTE
4. DAN BAUTISTA 38. EDUARDO RAMOS
5. MA. THERESA BONIFACIO 39. IMELDA RASIN
6. JUAN BUSCANO 40. DELFIN RAZALAN
7. ELY CHUA 41. EVANGELINE REYES
8. ALLAN DELAGON 42. RODOLFO REYES
9. FRUMENCIO DE LEON 43. BRIGILDO RUBIO
10. ELLIE DEL MUNDO 44. RIO SALCEDO
11. EDWIN DELOS CIENTOS 45. JUANITO SANCHEZ
12. SOLOMON DIZON 46. MA. THERESA SANCHEZ
13. YLOTSKI DRAPER 47. DONATO SAN AGUSTIN
14. ERLAND COLLANTES 48. RICARDO SOCORRO
15. JONAS COMPENIDO 49. VALERIO SOLIS
16. RODELIO ESPINUEVA 50. DOMINADOR SUAREZ
17. ARMANDO ESTACIO 51. ORLANDO TABUGOCA
18. SHERWIN FALCES 52. HELEN TALEON
19. JELA FRANZUELA 53. ROBERT TANEGRA
20. REY GEALOGO 54. LOURDES TAYAG
21. ALONA GERNOMINO 55. ROLANDO TOLENTINO
22. VINCENT HEMBRADOR 56. REYNALDO TRESNADO
23. ROSLYN IBARBIA 57. RICHARD SABLADA
24. JAIME IDIOMA, JR. 58. MAE YAP-DIANGCO
25. OFELIA LLABAN 59. GILBERTO VEDASTO
26. RENATON LUZONG 60. DOMINGO VIDAROZAGA
27. TEODULO MACALINO 61. DAN VILLANUEVA
28. JAKE MACASAET In view of the possibility that the Hotel might have already hired regular
29. HERNANIE PABILONIA replacements for the afore-listed 61 employees, the Hotel may opt to
pay SEPARATION PAY computed at one (1) month's pay for every year of
service in lieu of REINSTATEMENT, a fraction of six (6) months being
considered one year of service.

SO ORDERED.
G.R. No. L-19778 September 30, 1964
CROMWELL COMMERCIAL EMPLOYEES AND LABORERS UNION
(PTUC), petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS and CROMWELL COMMERCIAL CO.,
INC., respondents.
Vicente T. Ocampo for petitioner.
Jalandoni & Jamir for respondent Cromwell Commercial Company, Inc.
Vidal C. Magbanua for respondent Court of Industrial Relations.
REGALA, J.:
On July 10, 1956, Cromwell Commercial Co. and the Cromwell
Commercial Employees and Laborers Union (PTUC) signed a collective
bargaining agreement which provided among other things, for the following:
3. The Company agrees to consider as permanent employees and
workers all those who have rendered three (3) months continuous,
satisfactory service, and as such shall be entitled to all privileges enjoyed by
all permanent and regular employees; provided, however, that the
COMPANY reserves the right to dismiss any employee for cause;
4. A "Grievance Committee" composed of three (3) representatives
appointed by the COMPANY and three (3) UNION members elected by the
UNION shall be immediately constituted. This Committee shall meet not
more than once a week as may be called by proper notice of any three (3)
members of said committee to hear and decide any differences on labor
management relations. The committee shall hear the grievance and the
witnesses of the parties concerned, if any, and shall submit its
recommendation to the President of the COMPANY who shall decide the
same, within thirty (30) days from transmittal of said recommendation by
the president's representative in the Philippines.
7. Considering that the COMPANY has put into effect, effective April
16, 1956, a minimum wage of P140.00 a month to permanent employees in
its office and has given merit increase to a few others, the COMPANY agrees
in principle to the demand of the UNION for a general increase of salaries
and wages, if the financial position of the COMPANY shows that it can afford
to give an increase after the second quarter of 1956 but reserves its decision
as to the amount. The COMPANY further reserves its right as to whether to
give or not to give increases to those who already received merit increases
effective April 16, 1956, provided, however, that those whose salaries were
slashed in 1956 and were restored on April 16, 1956, shall not be considered
as having received a merit increase;
8. That the COMPANY shall restore all salesmen to the status of salary
basis effective May 1, 1956 and shall also restore the helper's allowance of
provincial salesmen effective the same date;
9. The COMPANY agrees in principle to consider the giving of share of
its profits to its employees and workers, the amount and the time to depend
on the sole discretion of the management of the COMPANY.
However, it appears that, contrary to paragraph 7, the company gave
no salary increases to its employees, except to three who were not union
members, despite the fact that it had made a P90,000 profit at the close of
the second quarter of 1956.
With respect to paragraph 10 of the agreement, it appears that
salesmen of the company used to be paid on a straight salary basis. Some
were receiving P300, others P320 while still others were getting P350 a
month. In addition, those assigned to the provinces were given a so-called
helper's allowance of P120 a month, a per diemof P8 and an allowance for
postage and other expenses incurred in remitting their collections. For some
reason, however, the company reduced the salary of salesmen to P200 a
month and their helper's allowance from P120 to P60 a month, although it
paid them a commission of 1 per cent of their collections.
This is the reason why paragraph 10, which provided for the
restoration of cuts in the salaries and allowances of salesmen, was inserted
in the agreement. But instead of restoring the salaries in full, the company
merely paid P300 even to those who, before salaries were reduced, were
already receiving P320 or P350 a month. The so-called helper's allowance,
which as already stated had been reduced from P120 to P60 a month, was
not restored at all.
What is worse, effective March 1, 1957, the company reverted all
salesmen to salary and commission basis, stopped their helper's allowance
altogether and discontinued the payment of per diem and other allowances
to provincial salesmen, so much so that the latter found themselves again in
the same situation they were in before the signing of the collective
bargaining agreement. Worst of all, the company increased the quotas of
some salesmen and threatened them with dismissal if they could not fill
their quotas.
These changes in the working conditions in the company and the
latter's failure to carry out its part of the agreement became a source of
complaint among the employees. But beyond promising that the matter
would be looked into as soon as its President arrived from the United States,
the company did nothing. The grievance machinery set up in the agreement
could not function on account of the company's refusal to name its
representatives in the committee.
Meanwhile, daily wage employees in the shipping department began
agitating for the application of paragraph 10 to them. In a letter sent to the
company on March 2, 1957, Jose J. Hernandez of the Philippine Trade Union
Council asked that these employees be put on a monthly salary basis. He
also called attention to the failure of the company to send representatives to
the grievance committee.
Three days after, the company dismissed Francisco Gaddi and
Cresenciano Andrada, leaders of the shipping department-employees. And
so on March 7, the union dispatched another letter to the company, calling
attention to the contents of its March 2 letter and protesting the dismissal of
Gaddi and Andrada. It gave the company 48 hours within which to act on its
grievance and reinstate the dismissed employees.
On March 6, the company President replied, stating in part that —
... Effective March 1st, I reduced all salesmen's salaries, I discontinued
the helper's allowance and, in the case of provincial salesmen, I
discontinued the payment of any per diems.
In another letter sent the following day, the company explained that
the relief of Gaddi and Andrada was in line with its policy of laying off extra
employees.
From then on the relation between the company and the union
steadily deteriorated.
On March 8, the company took back the keys from the warehouseman
and ordered the salesmen to put their trucks in the garage.
On March 9, the parties met to resolve their differences only to part
ways later — still poles apart.
Finally, on March 11, the union struck and picketed the premises of the
company.
The company in turn gave the strikers until 8 a.m. of March 14, 1957
within which to return to work otherwise they would be considered
dismissed for cause. It warned them that the strike was illegal for being
against the no strike clause of the collective bargaining agreement.
In a conference called by the Department of Labor, the strikers offered
to return to work provided the company observed the provisions of the
bargaining contract. But the company insisted that the strikers could be
taken back only under the terms of its March 1 order. As already stated, this
order reverted salesmen to salary and commission basis, abolished their
helper's allowance and stopped the payment of per diem and other
allowances to provincial salesmen.
In addition, the company set as price for continued conciliation
conference the remittance by the salesmen of their collections and the
return of delivery trucks and stocks on hand. The union replied that the
strikers had not lost their employee status and that at any rate they were
bonded. It suffered though to deposit with the Conciliation Service of the
Department of Labor the things demanded by the company, but the
company was unyielding in its demand. Anyway, nothing came out of the
conference. The employees gradually gave up the strike and the salesmen
later settled their accounts and returned the property of the company.
On September 19, 1957 this case was filed in the Court of Industrial
Relations, charging the company, together with its President and Vice
President, with unfair labor practice. After trial, the court rendered
judgment as follows:
IN VIEW OF ALL THE FOREGOING, the Respondent and all its officers
and agents are hereby ordered:
(1) To cease and desist from:
a) refusing to bargain collectively in good faith with the Union.
b) refusing to bargain collectively in good faith with respect to the grievance
of the Union by appointing its representatives to the grievance committee as
provided for in the said agreement.
c) making changes in the working condition, of the salesmen who are
members of the Union with respect to their salaries and the helper's
allowance of provincial salesmen without complying with the requirements
of Sec. 13 of Republic Act 875.
(2) To take the following affirmative acts which the Court finds will
effectuate the policy of the Act:
a) to reinstate Francisco Gaddi with half backpay from March 5, 1957 to
actual date of his reinstatement, minus whatever salaries he might have
earned during the pendency of this case, unless he has found a substantial
employment elsewhere. And with respect to Cresenciano Andrada, his
onehalf back wages shall be from March 5, 1957 until the date he
committed illegal acts in the picket line. Angel Dario is not entitled to
reinstatement.
b) to reinstate salesmen Antonio Jacinto, Celestino Gualberto, Constantino
Atienza, Elias Berrova and Pedro del Rosario with half backwages from the
date they have cleared their accountabilities or responsibilities with the
Company, minus what they have earned during the pendency of the dispute
unless they have found substantial employment elsewhere. The case of
Teofilo Nuñez is dismissed as heretofore indicated. With respect to Roberto
Dijamco as also mentioned, there is a pending separate unfair labor practice
in the Court (Case No. 1271-ULP).
c) To reinstate all the strikers listed in Annex "A" of the complaint, without
backwages, in view of the circumstances, as explained on the subject of the
strike, unless they have found substantial employment elsewhere during the
pendency of this case.
In addition, respondent is hereby ordered to post a copy of this order
in the company's bulletin board, if any or in default thereof, in any
conspicuous place at company's premises, and report to the Court as soon
as possible its compliance.
The union moved for a reconsideration of the decision, contending
that the trial judge erred (1) in awarding only half back wages to Francisco
Gaddi and the five salesmen, (2) in awarding no back wages to the rest of
the strikers and (3) in denying reinstatement to Cresenciano Andrada and
Angel Dario and to those who might have found substantially equivalent
employment elsewhere. The court in banc affirmed the decision. Hence this
appeal.
The issues in this appeal relate to the power of the Court of Industrial
Relations to order reinstatement and the payment of back wages in unfair
labor practice cases as a means of effectuating the policy of the law.
Section 5 (c) of the Industrial Peace Act states:
 ... If, after investigation, the Court shall be of the opinion that any
person named in the complaint has engaged in or is engaging in any unfair
labor practice, then the Court shall state its findings of fact and shall issue
and cause to be served on such person an order requiring such person to
cease and desist from such unfair labor practice and take such affirmative
action as will effectuate the policies of this Act, including (but not limited to)
reinstatement of employees with or without backpay and including rights of
the employees prior to dismissal including seniority. ...
At the outset, two types of employees involved in this case must be
distinguished, namely, those who were discriminatorily dismissed for union
activities and those who voluntarily went on strike. To the first class belong
Francisco Gaddi and Cresenciano Andrada, both of whom, as earlier shown,
had been dismissed for union activities, and the five salesmen who were
virtually locked out by the company when they were ordered to put their
trucks in the garage. To the second class belong those who declared a strike
on March 11, 1957, following the failure of the company-union conference
to settle their dispute.
Both types of employees are entitled to reinstatement. Indeed, it is
said that striking employees are entitled to reinstatement whether or not
the strike was the consequence of the employer's unfair labor practice,
unless, where the strike was not due to any unfair labor practice, the
employer has hired others to take the place of the strikers and has promised
them continued employment. (Teller, 2 Labor Disputes and Collective
Bargaining, Sec. 371, pp. 396-397)
From this rule, however, must be excepted those who, although
discriminatorily discharged, must nevertheless be denied reinstatement
because of (1) unlawful conduct or (2) because of violence. For while the
Court of Industrial Relations has indeed discretion in determining the
remedy in case of unfair labor practice, its discretion is not unbounded. (Big
Five Products Workers Union (CLP) v. Court of Industrial Relations, et al., G.R.
No. L-17600, July 31, 1963). It cannot exercise its right beyond the point
which the object of "effectuation" of the act requires. It can not order the
reinstatement of those convicted of violence upon the employer's property.
(Rothenberg on Labor Relations, 573-574; Philippine Education Co., Inc. v.
Court of Industrial Relations, et al., G.R. No. L-7156, May 31, 1955;
Consolidated Labor Ass'n of the Phil. v. Marsman & Co., Inc., et al., G.R. No.
L-17038, July 31, 1964).
Such is the case of Cresenciano Andrada and Angel Dario who were
found guilty of acts of violence consisting of hurling stones which smashed
glass windows of the building of the company and the headlights of a car
and the utterance of obscenities such as "Putang ina".
But the union contends that the acts committed by Andrada and Dario
were not so serious as to call for the forfeiture of their right to
reinstatement. It is not for Us to judge the effect of misconduct by
employees. That is primarily for the Court of Industrial Regulations to
determine. (See NLRB v. Weissman Co., 170 F [24] 952). In the absence of
proof of abuse of discretion on the part of the Court of Industrial Relations,
this Court will not interfere with the exercise of that discretion.
The same thing may be said of the denial of reinstatement to those
who might have found substantial employment elsewhere. We agree with
the union that under the ruling of Phelps Dodge Corp. v. NLRB 313 U.S. 177,
85 L. ed. 1271 (See also Cox and Bok Cases on Labor Law. 259, 5th ed.), the
mere fact that strikers or dismissed employees have found such
employment elsewhere is not necessarily a bar to their reinstatement. 1 But
it is just as true to say that the Phelps Dodge case did not rule that in any
event discriminatorily dismissed employees must be ordered reinstated even
though they have in the meanwhile found substantially equivalent
employment somewhere else. While denying that employees who have
obtained equivalent employment are ineligible as a matter of law to
reinstatement, the Supreme Court of the United States at the same time
denied also that the definition of the term "employee" can be disregarded
by the National Labor Relations Board in exercising its power under Section
10(c) of the Wagner Act, which corresponds to Section 5(c) of our Industrial
Peace Act, to direct the taking of affirmative action by an employer to
remedy unfair labor practices. According to the Court, it is for the Board in
each case to weigh the particular facts and to determine, in the exercise of
wise administrative discretion, whether the Act would best be effectuated
by directing reinstatement despite the fact that the given employees had
found equivalent employment.
Obviously it was after considering the facts in this case that the Court
of Industrial Relations predicated the reinstatement of the employees
concerned on the fact that they had not found substantially equivalent
employment elsewhere. Thus, it made clear in the dispositive portion of its
decision that it was ordering the taking of affirmative acts "which the Court
finds will effectuate the policy of the Act". The union has not shown that in
so doing the Court of Industrial Relations abused its discretion.
Coming now to the question of backpay, the decision under review
directs the company "to reinstate all the strikers listed in Annex 'A' of the
complaint, without backwages, in view of the circumstances, as explained on
the subject of the strike, unless they have found substantial employment
elsewhere during the pendency of this case." The union assails this order as
erroneous. According to the union, it is unfair to deny backwages to the
strikers after finding that the strike declared by them was legal because it
was provoked by unfair labor practices of the company. Indeed a reading of
the 46-page decision of the Court of Industrial Relations fails to yield the
reason that impelled the court to deny backwages to the strikers.
Nevertheless, We believe that the denial of backpay may be justified,
although on a different ground. For this purpose, We shall advert again to
the distinction earlier made between discriminatorily dismissed employees
and those who struck, albeit in protest against the company's unfair labor
practice. Discriminatorily dismissed employees received backpay from the
date of the act of discrimination, that is from the day of their discharge. On
this score, the award of backpay to Gaddi, Andrada and the salesmen may
be justified. The salesmen, as already stated, were practically locked out
when they were ordered to put their trucks in the garage; they did not
voluntarily strike. (See Macleod & Co. of the Phil. v. Progressive Federation
of Labor, G.R. No. L-7887, May 31, 1955) Hence, the award of backwages.
In contrast, the rest of the employees struck as a voluntary act of
protest against what they considered unfair labor practices of the company.
The stoppage of their work was not the direct consequence of the
company's unfair labor practice. Hence their economic loss should not be
shifted to the employer. (See Dinglasan v. National Labor Union, G.R. No. L-
14183, Nov. 28, 1959) As explained by the National Labor Relations Board in
the case of American Manufacturing Co., NLRB 443, "When employees
voluntarily go on strike, even if in protest against unfair labor practices, it
has been our policy not to award them backpay during the strike. However,
when the strikers abandon the strike and apply for reinstatement despite
the unfair labor practices and the employer either refuses to reinstate them
or imposes upon their reinstatement new conditions that constitute unfair
labor practices, We are of the opinion that the considerations impelling our
refusal to award backpay are no longer controlling. Accordingly, We hold
that where, as in this case, an employer refuses to reinstate strikers except
upon their acceptance of the new conditions that discriminate against them
because of their union membership or activities, the strikers who refuse to
accept the conditions and are consequently refused reinstatement are
entitled to be made whole for any losses of pay they may have suffered by
reason of the respondent's discriminatory acts." (Quoted in Teller, 2 Labor
Disputes and Collective Bargaining, Sec. 371, pp. 997-998)1awphîl.nèt
While it is true that the strikers in this case offered to return to work
on March 14, 1957, We find that their offer was conditional. Their offer was
predicated on the company's observance of the provisions of the collective
bargaining agreement — the very bone of contention between the parties
by reason of which the union walked out. To be effective so as to entitle the
strikers to backpay, the offer must have been unconditional. The strikers
must have offered to return to work under the same conditions under which
they just before their strike so that the company's refusal would have placed
on the blame for their economic loss. But that is not the case here. Indeed
the offer of the company to accept the striker under the conditions
obtaining before the strike (without prejudice of course to taking up the
grievances of the strike can be considered in its favor in denying back wages
to the strikers. (Dinglasan v. National Labor Union, G. R. No. L-14183, Nov.
28, 1959)
Nor may it be said that the strikers could not have offered to return to
work because the company dismissed them upon their failure to return to
work on March 14, 1957. For the notice given by the company was merely a
"tactical" threat designed to break the strike and not really to discharge the
striking employees. (Majestic Mfg. Co., et al., 64 NLRB 961; Rockwood Stove
Works, 63 NLRB 1297; American Mfg. Co., 7 NLRB 753)
labor policies, and the denial of backpay to the victims of unfair labor
practices is a direct encouragement for the employer to continue its
reprobable misconduct.
While the laborers technically violated the no-strike clause, the facts as
found reveal that the employer goaded the laborers into striking, by
repeatedly violating the collective bargaining agreement and by preventing
the organization of the grievance committee through the Company's refusal
to name its representatives therein.

WHEREFORE, the decision and resolution of the Court of Industrial

Relations appealed from are hereby affirmed, without pronouncement as to
costs.

Bengzon, C.J., Bautista Angelo, Paredes, Dizon, Makalintal Bengzon, J.P., and
Zaldivar, JJ., concur.
Concepcion, J., concurs with the dissenting opinion of Justice J.B.L. Reyes.
Barrera, J., took no part.

Separate Opinions

REYES, J.B.L., J., dissenting:

I can not agree to the ruling laid down in the opinion in so far as it
denies backpay to the reinstated laborers. There is no dispute that the
employer was the first to infringe the collective bargaining agreement by
refusing to implement its provisions, particularly by its March 1 order, and
by insisting on it as a condition for taking back the strikers. I can not see how
the objectives and policies of the Industrial Peace Act can be said to be
promoted by placing the economic loss on the strikers, denying them
backpay; the discouraging of unfair labor practices is certainly one of unfair
G.R. No. 124678 July 31, 1997
DELIA BANGALISAN, LUCILIN CABALFIN, EMILIA DE GUZMAN, CORAZON
GOMEZ, CORAZON GREGORIO, LOURDES LAREDO, RODOLFO MARIANO,
WILFREDO MERCADO, LIGAYA MONTANCES and CORAZON
PAGPAGUITAN, petitioners,
vs.
HON. COURT OF APPEALS, THE CIVIL SERVICE COMMISSION and THE
SECRETARY OF THE DEPARTMENT OF EDUCATION, CULTURE AND
SPORTS, respondents.
REGALADO, J.:
This is an appeal by certiorari from the judgment of the Court of Appeals in
CA-G.R. SP No. 38316, which affirmed several resolutions of the Civil Service
Commission finding petitioners guilty of conduct prejudicial to the best
interest of the service, as well as its resolution of April 12, 1996 denying
petitioners' motion for reconsideration. 1
Petitioners, except Rodolfo Mariano, were among the 800 public school
teachers who staged "mass actions" on September 17 to 19, 1990 to
dramatize their grievances concerning, in the main, the alleged failure of the
public authorities to implement in a just and correct manner certain laws
and measures intended for their material benefit.
On September 17, 1990, the Secretary of the Department of Education,
Culture and Sports (DECS) issued a Return-to-Work Order. Petitioners failed
to comply with said order, hence they were charged by the Secretary with
"grave misconduct; gross neglect of duty; gross violation of Civil Service law,
rules and regulations and reasonable office regulations; refusal to perform
official duty; gross insubordination; conduct prejudicial to the best interest
of the service; and absence without official leave in violation of PD 807,
otherwise known as the Civil Service Decree of the Philippines." They were
simultaneously placed under preventive suspension.
Despite due notice, petitioners failed to submit their answer to the
complaint. On October 30, 1990, the DECS Secretary rendered a decision
finding petitioners guilty as charged and dismissing them from the service
effective immediately.
Acting on the motions for reconsideration filed by petitioners Bangalisan,
Gregorio, Cabalfin, Mercado, Montances and Pagpaguitan, the Secretary
subsequently modified the penalty of dismissal to suspension for nine
months without pay.
Petitioner Gomez likewise moved for reconsideration with the DECS and
then appealed to the Merit Systems Protection Board (MSPB). The other
petitioners also filed individual appeals to the MSPB, but all of their appeals
were dismissed for lack of merit.
Not satisfied with the aforestated adjudication of their respective cases,
petitioners appealed to the Civil Service Commission (CSC). The appeals of
petitioners Cabalfin, Montances and Pagpaguitan were dismissed for having
been filed out of time. On motion for reconsideration, however, the CSC
decided to rule on the merits of their appeal in the interest of justice.
Thereafter, the CSC issued Resolution No. 94-1765 finding Cabalfin guilty of
conduct prejudicial to the best interest of the service and imposing on him a
penalty of six months suspension without pay. The CSC also issued
Resolutions Nos. 94-2806 and 94-2384 affirming the penalty of nine months
suspension without pay theretofore imposed on petitioners Montances and
Pagpaguitan.
With respect to the appeals of the other petitioners, the CSC also found
them guilty of conduct prejudicial to the best interest of the service. It,
however, modified the penalty of nine months suspension previously meted
to them to six months suspension with automatic reinstatement in the
service but without payment of back wages.
All the petitioners moved for reconsideration of the CSC resolutions but
these were all denied, 2 except that of petitioner Rodolfo Mariano who was
found guilty only of a violation of reasonable office rules and regulations
because of his failure to inform the school of his intended absence and to
file an application for leave therefor. This petitioner was accordingly given
only a reprimand. 3
Petitioners then filed a petition for certiorari with this Court but, on August
29, 1995, their petition was referred to the Court of Appeals pursuant to
Revised Administrative Circular No. 1-95. 4
On October 20, 1995, the Court of Appeals dismissed the petition for lack of
merit. 5 Petitioners' motion for reconsideration was also denied by
respondent court, 6 hence the instant petition alleging that the Court of
Appeals committed grave abuse of discretion when it upheld the resolutions
of the CSC (1) that penalized petitioners whose only offense was to exercise
their constitutional right to peaceably assemble and petition the
government for redress of grievances; (2) that penalized petitioner Mariano
even after respondent commission found out that the specific basis of the
charges that former Secretary Cariño filed against him was a falsehood; and
(3) that denied petitioners their right to back wages covering the period
when they were illegally not allowed to teach. 7
It is the settled rule in this jurisdiction that employees in the public service
may not engage in strikes. While the Constitution recognizes the right of
government employees to organize, they are prohibited from staging strikes,
demonstrations, mass leaves, walk-outs and other forms of mass action
which will result in temporary stoppage or disruption of public services. The
right of government employees to organize is limited only to the formation
of unions or associations, without including the right to strike. 8
Petitioners contend, however, that they were not on strike but were merely
exercising their constitutional right peaceably to assemble and petition the
government for redress of grievances. We find such pretension devoid of
merit.
The issue of whether or not the mass action launched by the public school
teachers during the period from September up to the first half of October,
1990 was a strike has been decided by this Court in a resolution, dated
December 18, 1990, in the herein cited case of Manila Public School
Teachers Association, et al. vs. Laguio, Jr.,supra. It was there held "that from
the pleaded and admitted facts, these 'mass actions' were to all intents and
purposes a strike; they constituted a concerted and unauthorized stoppage
of, or absence from, work which it was the teachers' duty to perform,
undertaken for essentially economic reasons."
It is an undisputed fact that there was a work stoppage and that petitioners'
purpose was to realize their demands by withholding their services. The fact
that the conventional term "strike" was not used by the striking employees
to describe their common course of action is inconsequential, since the
substance of the situation, and not its appearance, will be deemed to be
controlling. 9
The ability to strike is not essential to the right of association. In the absence
of statute, public employees do not have the right to engage in concerted
work stoppages for any purpose. 10
Further, herein petitioners, except Mariano, are being penalized not because
they exercised their right of peaceable assembly and petition for redress of
grievances but because of their successive unauthorized and unilateral
absences which produced adverse effects upon their students for whose
education they are responsible. The actuations of petitioners definitely
constituted conduct prejudicial to the best interest of the service,
punishable under the Civil Service law, rules and regulations.
As aptly stated by the Solicitor General, "It is not the exercise by the
petitioners of their constitutional right to peaceably assemble that was
punished, but the manner in which they exercised such right which resulted
in the temporary stoppage or disruption of public service and classes in
various public schools in Metro Manila. For, indeed, there are efficient but
non-disruptive avenues, other than the mass actions in question, whereby
petitioners could petition the government for redress of grievances." 11
It bears stressing that suspension of public services, however temporary, will
inevitably derail services to the public, which is one of the reasons why the
right to strike is denied government employees. 12 It may be conceded that
the petitioners had valid grievances and noble intentions in staging the
"mass actions," but that will not justify their absences to the prejudice of
innocent school children. Their righteous indignation does not legalize an
illegal work stoppage.
As expounded by this Court in its aforementioned resolution of December
18, 1990, in the Manila Public School Teachers Association case, ante:
It is, of course, entirely possible that petitioners and their member-teachers
had and have some legitimate grievances. This much may be conceded.
After all, and for one thing, even the employees of the Court have found
reason to complain about the manner in which the provisions of the salary
standardization law on pay adjustments and position classification have
been, or are being, implemented. Nonetheless, what needs to be borne in
mind, trite though it may be, is that one wrong cannot be righted by
another, and that redress, for even the most justifiable complaints, should
not be sought through proscribed or illegal means. The belief in the
righteousness of their cause, no matter how deeply and fervently held, gives
the teachers concerned no license to abandon their duties, engage in
unlawful activity, defy constituted authority and set a bad example to their
students.
Petitioners also assail the constitutionality of Memorandum Circular No. 6
issued by the Civil Service Commission. The resolution of the said issue is
not really necessary in the case at bar. The argument of petitioners that the
said circular was the basis of` their liability is off tangent.
As a general rule, even in the absence of express statutory prohibition like
Memorandum Circular No. 6, public employees are denied the right to strike
or engage in a work stoppage against a public employer. 13 The right of the
sovereign to prohibit strikes or work stoppages by public employees was
clearly recognized at common law. Indeed, it is frequently declared that
modern rules which prohibit such strikes, either by statute or by judicial
decision, simply incorporate or reassert the common law rule. 14
To grant employees of the public sector the right to strike, there must be a
clear and direct legislative authority therefor. 15 In the absence of any
express legislation allowing government employees to strike, recognizing
their right to do so, or regulating the exercise of the right, employees in the
public service may not engage in strikes, walkouts and temporary work
stoppages like workers in the private sector. 16
On the issue of back wages, petitioners' claim is premised on the allegation
that their preventive suspension, as well as the immediate execution of the
decision dismissing or suspending them, are illegal. These submissions are
incorrect.
Section 51 of Executive Order No. 292 provides that "(t)he proper
disciplining authority may preventively suspend any subordinate officer or
employee under his authority pending an investigation, if the charge against
such officer or employee involves dishonesty, oppression or grave
misconduct, or neglect in the performance of duty, or if there are reasons to
believe that the respondent is guilty of charges which would warrant his
removal from the service."
Under the aforesaid provision, it is the nature of the charge against an
officer or employee which determines whether he may be placed under
preventive suspension. In the instant case, herein petitioners were charged
by the Secretary of the DECS with grave misconduct, gross neglect of duty,
gross violation of Civil Service law, rules and regulations, and reasonable
office regulations, refusal to perform official duty, gross insubordination,
conduct prejudicial to the best interest of the service and absence without
official leave (AWOL), for joining the teachers' mass actions held at Liwasang
Bonifacio on September 17 to 21, 1990. Hence, on the basis of the charges
against them, it was within the competence of the Secretary to place herein
petitioners under preventive suspension.
As to the immediate execution of the decision of the Secretary against
petitioners, the same is authorized by Section 47, paragraph (2), of Executive
Older No. 292, thus: "The Secretaries and heads of agencies and
instrumentalities, provinces, cities and municipalities shall have jurisdiction
to investigate and decide matters involving disciplinary action against
officers and employees under their jurisdiction. Their decisions shall be final
in case the penalty imposed is suspension for not more than thirty days or
fine in an amount not exceeding thirty days' salary. In case the decision
rendered by a bureau or office head is appealable to the Commission, the
same shall be executory except when the penalty is removal, in which case
the same shall be executory only after confirmation by the Secretary
concerned."
Petitioners' claim of denial of due process must also fail. The records of this
case clearly show that they were given opportunity to refute the charges
against them but they failed to avail themselves of the same. The essence of
due process is simply an opportunity to be heard or, as applied to
administrative proceedings, an opportunity to seek reconsideration of the
action or ruling complained of. 17 For as long as the parties were given the
opportunity to be heard before judgment was rendered, the demands of
due process were sufficiently met. 18
Having ruled that the preventive suspension of petitioners and the
immediate execution of the DECS decision are in accordance with law, the
next query is whether or not petitioners may be entitled to back wages.
The issue regarding payment of back salaries during the period of
suspension of a member of the civil service who is subsequently ordered
reinstated, is already settled in our jurisdiction. Such payment of salaries
corresponding to the period when an employee is not allowed to work may
be decreed if he is found innocent of the charges which caused the
suspension and when the suspension is unjustified. 19
With respect to petitioner Rodolfo Mariano, payment of his back wages is in
order. A reading of the resolution of the Civil Service Commission will show
that he was exonerated of the charges which formed the basis for his
suspension. The Secretary of the DECS charged him with and he was later
found guilty of grave misconduct, gross neglect of duty, gross violation of the
Civil Service Law, rules and regulations and reasonable office regulations,
refusal to perform official duty, gross insubordination conduct prejudicial to
the best interest of the service, and absence without official leave, for his
participation in the mass actions on September 18, 20 and 21, 1990. It was
his alleged participation in the mass actions that was the basis of his
preventive suspension and, later, his dismissal from the service.
However, the Civil Service Commission, in the questioned resolution, made a
finding that Mariano was not involved in the "mass actions" but was absent
because he was in Ilocos Sur to attend the wake and interment of his
grandmother. Although the CSC imposed upon him the penalty of
reprimand, the same was for his violation of reasonable office rules and
regulations because he failed to inform the school or his intended absence
and neither did he file an application for leave covering such absences. 20
Under Section 23 of the Rules Implementing Book V of Executive Order No.
292 and other pertinent civil service laws, in violations of reasonable office
rules and regulations, the first offense is punishable by reprimand. To deny
petitioner Mariano his back wages during his suspension would be
tantamount to punishing him after his exoneration from the charges which
caused his dismissal from the service. 21
However, with regard to the other petitioners, the payment of their back
wages must be denied. Although the penalty imposed on them was only
suspension, they were not completely exonerated of the charges against
them. The CSC made specific findings that, unlike petitioner Mariano, they
indeed participated in the mass actions. It will be noted that it was their
participation in the mass actions that was the very basis of the charges
against them and their subsequent suspension.
The denial of salary to an employee during the period of his suspension, if
he should later be found guilty, is proper because he had given ground for
his suspension. It does not impair his constitutional rights because the
Constitution itself allows suspension for cause as provided by law and the
law provides that an employee may be suspended pending an investigation
or by way of penalty. 22
Moreover, the general proposition is that a public official is not entitled to
any compensation if he has not rendered any service. As he works, he shall
earn. Since petitioners did not work during the period for which they are
now claiming salaries, there can be no legal or equitable basis to order the
payment of such salaries. 23

It is also noteworthy that in its resolutions, the Civil Service Commission

expressly denied petitioners' right to back wages. In the case of Yacia vs. City
of Baguio, 24 the decision of the Commissioner of Civil Service ordering the
dismissal of a government employee on the ground of dishonesty was
immediately executed pending appeal, but, on appeal, the Civil Service
Board of Appeals modified that penalty to a fine equivalent to six months
pay. We ruled that the claim of an employee for back wages, for the period
during which he was not allowed to work because of the execution of the
decision of the Commissioner, should be denied.

The appeal board's modified decision did not exonerate the employee nor
did it affect the validity of his dismissal or separation from work pending
appeal, as ordered by the Civil Service Commissioner. Such separation from
work pending his appeal remained valid and effective until it was set aside
and modified with the imposition of the lesser penalty by the appeals board.
If the Civil Service Appeals Board had intended to grant him back salaries
and to reduce his penalty to six months fine deductible from such unearned
back salaries, the board could and should have so expressly stated in its
decision.

WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED, but

with the MODIFICATION that petitioner Rodolfo Mariano shall be given back
wages without deduction or qualification from the time he was suspended
until his actual reinstatement which, under prevailing jurisprudence, should
not exceed five years.

SO ORDERED.
G.R. No. L-59743 May 31 1982

NATIONAL FEDERATION OF SUGAR WORKERS (NFSW), petitioner,

vs.
ETHELWOLDO R. OVEJERA, CENTRAL AZUCARERA DE LA CARLOTA (CAC),
COL. ROGELIO DEINLA, as Provincial Commander, 3311st P.C. Command,
Negros Occidental, respondents.
PLANA, J:
This is a petition for prohibition seeking to annul the decision dated
February 20, 1982 of Labor Arbiter Ethelwoldo R. Ovejera of the National
Labor Relations Commission (NLRC) with station at the Regional Arbitration
Branch No. VI-A, Bacolod City, which, among others, declared illegal the
ongoing strike of the National Federation of Sugar Workers (NFSW) at the
Central Azucarera de la Carlota (CAC), and to restrain the implementation
thereof.
I. FACTS —
1. NFSW has been the bargaining agent of CAC rank and file employees
(about 1200 of more than 2000 personnel) and has concluded with CAC a
collective bargaining agreement effective February 16, 1981 — February 15,
1984. Under Art. VII, Sec. 5 of the said CBA —
Bonuses — The parties also agree to maintain the present practice on the
grant of Christmas bonus, milling bonus, and amelioration bonus to the
extent as the latter is required by law.
The Christmas and milling bonuses amount to 1-½ months' salary.
2. On November 28, 1981, NFSW struck allegedly to compel the payment of
the 13th month pay under PD 851, in addition to the Christmas, milling and
amelioration bonuses being enjoyed by CAC workers.
3. To settle the strike, a compromise agreement was concluded between
CAC and NFSW on November 30,1981. Under paragraph 4 thereof —
The parties agree to abide by the final decision of the Supreme Court in any
case involving the 13th Month Pay Law if it is clearly held that the employer
is liable to pay a 13th month pay separate and distinct from the bonuses
already given.
4. As of November 30, 1981, G.R. No. 51254 (Marcopper Mining Corp. vs.
Blas Ople and Amado Inciong, Minister and Deputy Minister of Labor,
respectively, and Marcopper Employees Labor Union, Petition for certiorari
and Prohibition) was still pending in the Supreme Court. The Petition had
been dismissed on June 11, 1981 on the vote of seven Justices. 1 A motion
for reconsideration thereafter filed was denied in a resolution dated
December 15, 1981, with only five Justices voting for denial. (3 dissented; 2
reserved their votes: 4 did not take part.)
On December 18, 1981 — the decision of June 11, 1981 having become final
and executory — entry of judgment was made.
5. After the Marcopper decision had become final, NFSW renewed its
demand that CAC give the 13th month pay. CAC refused.
6. On January 22, 1982, NFSW filed with the Ministry of Labor and
Employment (MOLE) Regional Office in Bacolod City a notice to strike based
on non-payment of the 13th month pay. Six days after, NFSW struck.
7. One day after the commencement of the strike, or on January 29, 1982, a
report of the strike-vote was filed by NFSW with MOLE.
8. On February 8, 1982, CAC filed a petition (R.A.B. Case No. 0110-82) with
the Regional Arbitration Branch VI-A, MOLE, at Bacolod City to declare the
strike illegal, principally for being violative of Batas Pambansa Blg. 130, that
is, the strike was declared before the expiration of the 15-day cooling-off
period for unfair labor practice (ULP) strikes, and the strike was staged
before the lapse of seven days from the submission to MOLE of the result of
the strike-vote.
9. After the submission of position papers and hearing, Labor Arbiter
Ovejera declared the NFSW strike illegal. The dispositive part of his decision
dated February 20, 1982 reads:
Wherefore, premises considered, judgment is hereby rendered:
1. Declaring the strike commenced by NFSW on January 28, 1982, illegal,
2. Directing the Central to resume operations immediately upon receipt
hereof;
3. Directing the Central to accept back to work all employees appearing in its
payroll as of January 28, 1982 except those covered by the February 1, 1982
memorandum on preventive suspension but without prejudice to the said
employees' instituting appropriate actions before this Ministry relative to
whatever causes of action they may have obtained proceeding from said
memorandum;
4. Directing the Central to pay effective from the date of resumption of
operations the salaries of those to be placed on preventive suspension as
per February 1, 1982 memorandum during their period of preventive
suspension; and
5. Directing, in view of the finding that the subject strike is illegal, NFSW, its
officers, members, as well as sympathizers to immediately desist from
committing acts that may impair or impede the milling operations of the
Central
The law enforcement authorities are hereby requested to assist in the
peaceful enforcement and implementation of this Decision.
SO ORDERED.
10. On February 26, 1982, the NFSW — by passing the NLRC — filed the
instant Petition for prohibition alleging that Labor Arbiter Ovejera, CAC and
the PC Provincial Commander of Negros Occidental were threatening to
immediately enforce the February 20, 1982 decision which would violate
fundamental rights of the petitioner, and praying that —
WHEREFORE, on the foregoing considerations, it is prayed of the Honorable
Court that on the Petition for Preliminary Injunction, an order, after hearing,
issue:
1. Restraining implementation or enforcement of the Decision of February
20, 1982;
2. Enjoining respondents to refrain from the threatened acts violative of the
rights of strikers and peaceful picketers;
3. Requiring maintenance of the status quo as of February 20, 1982, until
further orders of the Court;
and on the Main Petition, judgment be rendered after hearing.
1. Declaring the Decision of February 2O, l982 null and void;
2. Making the preliminary injunction permanent;
3. Awarding such other relief as may be just in the premises.
11. Hearing was held, after which the parties submitted their memoranda.
No restraining order was issued.
II ISSUES —
The parties have raised a number of issues, including some procedural
points. However, considering their relative importance and the impact of
their resolution on ongoing labor disputes in a number of industry sectors,
we have decided — in the interest of expediency and dispatch — to brush
aside non-substantial items and reduce the remaining issues to but two
fundamental ones:
1. Whether the strike declared by NFSW is illegal, the resolution of which
mainly depends on the mandatory or directory character of the cooling-off
period and the 7-day strike ban after report to MOLE of the result of a strike-
vote, as prescribed in the Labor Code.
2. Whether under Presidential Decree 851 (13th Month Pay Law), CAC is
obliged to give its workers a 13th month salary in addition to Christmas,
milling and amelioration bonuses, the aggregate of which admittedly
exceeds by far the disputed 13th month pay. (See petitioner's memorandum
of April 12, 1982, p. 2; CAC memorandum of April 2, 1982, pp. 3-4.)
Resolution of this issue requires an examination of the thrusts and
application of PD 851.
III. DISCUSSION —
1. Articles 264 and 265 of the Labor Code, insofar as pertinent, read:
Art. 264, Strikes, picketing and lockouts. — ...
(c) In cases of bargaining deadlocks, the certified or duly recognized
bargaining representative may file a notice of strike with the Ministry (of
Labor and Employment) at least thirty (30) days before the intended date
thereof. In cases of unfair labor practices, the period of notice shall be
shortened tofifteen (15) days; ...
(d) During the cooling-off period, it shall be the duty of the voluntary
sttlement. Should the dispute remain unsettled until the lapse of the
requisite number of days from the mandatory filing of the notice, the labor
union may strike or the employer may declare a lockout.
(f) A decision to declae a strike must be approved by at least two-thirds (2/3)
of the total union membership in the bargaining unit concerened by secret
ballots in meetings or referenda. A decision to declae a lockout must be
approved by at least two-thirds (2/3) of the board of direcotrs of the
employer corporation or association or of the partners in a partnership
obtained by secret ballot in a meeting called for the purpose. the decision
shall be valid for the duration of the dispute based on substantially the same
grounds considered when the strike or lockout vote was taken . The Ministry,
may at its own intitiative or upon the request of any affected party,
supervise the conduct of the secret balloting. In every case, the union of the
employer shall furnish the Ministry the results of the voting at least seven
(7) days before the intended strike or lockout, subject to the cooling-off
periodherein provided. (Emphasis supplied).
ART. 265. Prohibited activities. — It shall be unlawful for any labor
organization or employer to declare a strike or lockout without first having
bargained collectively in accordance with Title VII of this Book or without
first having filed the notice required in the preceding Article or without the
necessary strike or lockout vote first having been obtained and reported to
the Ministry.
It shall likewise be unlawful to declare a strike or lockout after assumption of
jurisdiction by the President or the Minister or after certification or
submission of the dispute to compulsory or voluntary arbitration or during
the pendency of cases involving the same grounds for the strike or lockout.
(Emphasis supplied.)
(a) Language of the law. — The foregoing provisions hardly leave any room
for doubt that the cooling-off period in Art. 264(c) and the 7-day strike ban
after the strike-vote report prescribed in Art. 264(f) were meant to be, and
should be deemed, mandatory.
When the law says "the labor union may strike" should the dispute "remain
unsettled until the lapse of the requisite number of days (cooling-off period)
from the filing of the notice," the unmistakable implication is that the union
may not strike before the lapse of the cooling-off period. Similarly, the
mandatory character of the 7-day strike ban after the report on the strike-
vote is manifest in the provision that "in every case," the union shall furnish
the MOLE with the results of the voting "at least seven (7) days before the
intended strike, subject to the (prescribed) cooling-off period." It must be
stressed that the requirements of cooling-off period and 7-day strike ban
must both be complied with, although the labor union may take a strike vote
and report the same within the statutory cooling-off period.
If only the filing of the strike notice and the strike-vote report would be
deemed mandatory, but not the waiting periods so specifically and
emphatically prescribed by law, the purposes (hereafter discussed) for which
the filing of the strike notice and strike-vote report is required would not be
achieved, as when a strike is declaredimmediately after a strike notice is
served, or when — as in the instant case — the strike-vote report is filed
with MOLE after the strike had actually commenced Such interpretation of
the law ought not and cannot be countenanced. It would indeed be self-
defeating for the law to imperatively require the filing on a strike notice and
strike-vote report without at the same time making the prescribed waiting
periods mandatory.
(b) Purposes of strike notice and strike-vote report.— In requiring a strike
notice and a cooling-off period, the avowed intent of the law is to provide an
opportunity for mediation and conciliation. It thus directs the MOLE "to
exert all efforts at mediation and conciliation to effect a voluntary
settlement" during the cooling-off period . As applied to the CAC-NFSW
dispute regarding the 13th month pay, MOLE intervention could have
possibly induced CAC to provisionally give the 13th month pay in order to
avert great business loss arising from the project strike,without prejudice to
the subsequent resolution of the legal dispute by competent authorities; or
mediation/conciliation could have convinced NFSW to at least postpone the
intended strike so as to avoid great waste and loss to the sugar central, the
sugar planters and the sugar workers themselves, if the strike would
coincide with the mining season.
So, too, the 7-day strike-vote report is not without a purpose. As pointed out
by the Solicitor General —
Many disastrous strikes have been staged in the past based merely on the
insistence of minority groups within the union. The submission of the report
gives assurance that a strike vote has been taken and that, if the report
concerning it is false, the majority of the members can take appropriate
remedy before it is too late. (Answer of public respondents, pp. 17-18.)
If the purpose of the required strike notice and strike-vote report are to be
achieved, the periods prescribed for their attainment must, as aforesaid, be
deemed mandatory., —
... when a fair interpretation of the statute, which directs acts or
proceedings to be done in a certain way, shows the legislature intended a
compliance with such provision to be essential to the validity of the act or
proceeding, or when some antecedent and prerequisite conditions must
exist prior to the exercise of power or must be performed before certain
other powers can be exercised, the statute must be regarded as mandatory.
So it has been held that, when a statute is founded on public policy [such as
the policy to encourage voluntary settlement of disputes without resorting
to strikes], those to whom it applies should not be permitted to waive its
provisions. (82 C.J.S. 873-874. Emphasis supplied.)
(c) Waiting period after strike notice and strike-vote report, valid regulation
of right to strike. — To quote Justice Jackson in International Union vs.
Wisconsin Employment Relations Board, 336 U.S. 245, at 259 —
The right to strike, because of its more serious impact upon the public
interest, is more vulnerable to regulation than the right to organize and
select representatives for lawful purposes of collective bargaining ...
The cooling-off period and the 7-day strike ban after the filing of a strike-
vote report, as prescribed in Art. 264 of the Labor Code, are reasonable
restrictions and their imposition is essential to attain the legitimate policy
objectives embodied in the law. We hold that they constitute a valid exercise
of the police power of the state.
(d) State policy on amicable settlement of criminal liability. — Petitioner
contends that since the non-compliance (with PD 851) imputed to CAC is an
unfair labor practice which is an offense against the state, the cooling-off
period provided in the Labor Code would not apply, as it does not apply to
ULP strikes. It is argued that mediation or conciliation in order to settle a
criminal offense is not allowed.
In the first place, it is at best unclear whether the refusal of CAC to give a
13th month pay to NFSW constitutes a criminal act. Under Sec. 9 of the
Rules and regulations Implementing Presidential Decree No. 851 —
Non-payment of the thirteenth-month pay provided by the Decree and
these rules shall be treated as money claims cases and shall be processed in
accordance with the Rules Implementing the Labor Code of the Philippines
and the Rules of the National Labor Relations Commission.
Secondly, the possible dispute settlement, either permanent or temporary,
could very well be along legally permissible lines, as indicated in (b) above or
assume the form of measures designed to abort the intended strike, rather
than compromise criminal liability, if any. Finally, amicable settlement of
criminal liability is not inexorably forbidden by law. Such settlement is valid
when the law itself clearly authorizes it. In the case of a dispute on the
payment of the 13th month pay, we are not prepared to say that its
voluntary settlement is not authorized by the terms of Art. 264(e) of the
Labor Code, which makes it the duty of the MOLE to exert all efforts at
mediation and conciliation to effect a voluntary settlement of labor disputes.
(e) NFSW strike is illegal. — The NFSW declared the strike six (6) days after
filing a strike notice, i.e., before the lapse of the mandatory cooling-off
period. It also failed to file with the MOLE beforelaunching the strike a
report on the strike-vote, when it should have filed such report "at least
seven (7) days before the intended strike." Under the circumstances, we are
perforce constrained to conclude that the strike staged by petitioner is not
in conformity with law. This conclusion makes it unnecessary for us to
determine whether the pendency of an arbitration case against CAC on the
same issue of payment of 13th month pay [R.A.B No. 512-81, Regional
Arbitration Branch No. VI-A, NLRC, Bacolod City, in which the National
Congress of Unions in the Sugar Industry of the Philippines (NACUSIP) and a
number of CAC workers are the complainants, with NFSW as Intervenor
seeking the dismissal of the arbitration case as regards unnamed CAC rank
and file employees] has rendered illegal the above strike under Art. 265 of
the Labor Code which provides:
It shall likewise be unlawful to declare a strike or lockout after assumption of
jurisdiction by the President or the Minister, or after certification or
submission of the dispute to compulsory or voluntary arbitration or during
the pendency of cases involving the same grounds for the strike or lockout.
(Emphasis supplied.)
(2) The Second Issue. — At bottom, the NFSW strike arose from a dispute on
the meaning and application of PD 851, with NFSW claiming entitlement to a
13th month pay on top of bonuses given by CAC to its workers, as against
the diametrically opposite stance of CAC. Since the strike was just an
offshoot of the said dispute, a simple decision on the legality or illegality of
the strike would not spell the end of the NFSW-CAC labor dispute. And
considering further that there are other disputes and strikes — actual and
impending — involving the interpretation and application of PD 851, it is
important for this Court to definitively resolve the problem: whether under
PD 851, CAC is obliged to give its workers a 13th month salary in addition to
Christmas, milling and amelioration bonuses stipulated in a collective
bargaining agreement amounting to more than a month's pay.
Keenly sensitive to the needs of the workingmen, yet mindful of the
mounting production cost that are the woe of capital which provides
employment to labor, President Ferdinand E. Marcos issued Presidential
Decree No. 851 on 16 December 1975. Thereunder, "all employers are
hereby required to pay salary of not more than all their employees receiving
a basic P1,000 a month, regardless of the nature of their employment, a
13th month pay not later than December 24 of every year." Exempted from
the obligation however are:
Employers already paying their employees a 13th month pay or its
equivalent ...
(Section 2.)
The evident intention of the law, as revealed by the law itself, was to grant
an additional income in the form of a 13th month pay to employees not
already receiving the same. Otherwise put, the intention was to grant some
relief — not to all workers — but only to the unfortunate ones not actually
paid a 13th month salary or what amounts to it, by whatever name called;
but it was not envisioned that a double burden would be imposed on the
employer already paying his employees a 13th month pay or its equivalent
— whether out of pure generosity or on the basis of a binding agreement
and, in the latter ease, regardless of the conditional character of the grant
(such as making the payment dependent on profit), so long as there is actual
payment. Otherwise, what was conceived to be a 13th month salary would
in effect become a 14th or possibly 15th month pay.
This view is justified by the law itself which makes no distinction in the grant
of exemption: "Employers already paying their employees a 13th month pay
or its equivalent are not covered by this Decree." (P.D. 851.)
The Rules Implementing P.D. 851 issued by MOLE immediately after the
adoption of said law reinforce this stand. Under Section 3(e) thereof —
The term "its equivalent" ... shall include Christmas bonus, mid-year
bonus, profit-sharing payments and other cash bonuses amounting to not
less than 1/12th of the basic salary but shall not include cash and stock
dividends, cost of living allowances and all other allowances regularly
enjoyed by the employee, as well as non-monetary benefits. Where an
employer pays less than 1/12th of the employee's basic salary, the employer
shall pay the difference." (Italics supplied.)
Having been issued by the agency charged with the implementation of PD
851 as its contemporaneous interpretation of the law, the quoted rule
should be accorded great weight.
Pragmatic considerations also weigh heavily in favor of crediting both
voluntary and contractual bonuses for the purpose of determining liability
for the 13th month pay. To require employers (already giving their
employees a 13th month salary or its equivalent) to give a second 13th
month pay would be unfair and productive of undesirable results. To the
employer who had acceded and is already bound to give bonuses to his
employees, the additional burden of a 13th month pay would amount to a
penalty for his munificence or liberality. The probable reaction of one so
circumstance would be to withdraw the bonuses or resist further voluntary
grants for fear that if and when a law is passed giving the same benefits, his
prior concessions might not be given due credit; and this negative attitude
would have an adverse impact on the employees.
In the case at bar, the NFSW-CAC collective bargaining agreement provides
for the grant to CAC workers of Christmas bonus, milling bonus and
amelioration bonus, the aggregate of which is very much more than a
worker's monthly pay. When a dispute arose last year as to whether CAC
workers receiving the stipulated bonuses wouldadditionally be entitled to a
13th month pay, NFSW and CAC concluded a compromise agreement by
which they —
agree(d) to abide by the final decision of the Supreme Court in any case
involving the 13th Month Pay Law if it is clearly held that the employer is
liable to pay a 13th month pay separate and distinct from the bonuses
already given.
When this agreement was forged on November 30,1981, the original
decision dismissing the petition in the aforecited Marcopper case had
already been promulgated by this Court. On the votes of only 7 Justices,
including the distinguished Chief Justice, the petition of Marcopper Mining
Corp. seeking to annul the decision of Labor Deputy Minister Amado Inciong
granting a 13th month pay to Marcopper employees (in addition to mid-
year and Christmas bonuses under a CBA) had been dismissed. But a motion
for reconsideration filed by Marcopper was pending as of November 30,
1981. In December 1981, the original decision was affirmed when this Court
finally denied the motion for reconsideration. But the resolution of denial
was supported by the votes of only 5 Justices. The Marcopper decision is
therefore a Court decision but without the necessary eight votes to be
doctrinal. This being so, it cannot be said that the Marcopper decision
"clearly held" that "the employer is liable to pay a 13th month pay separate
and distinct from the bonuses already given," within the meaning of the
NFSW-CAC compromise agreement. At any rate, in view of the rulings made
herein, NFSW cannot insist on its claim that its members are entitled to a
13th month pay in addition to the bonuses already paid by CAC.
WHEREFORE, the petition is dismissed for lack of merit. No costs.
SO ORDERED.
Aquino, Guerrero, Escolin, Vasquez, Relova and Gutierrez, JJ., concur.
Concepcion, J., is on leave.
Teehankee, J., concurs in the result.

Separate Opinions
MAKASIAR, J., concurring:
Concurs in the separate opinion of qualified concurrence as to the illegality
of the strike and of dissent as to the interpretation of Presidential Decree
No. 851 submitted by the Chief Justice.
FERNANDO, CJ., concurring:
With qualifications on the questions of the legality of the strike and
dissenting on the interpretation to be accorded Presidential Decree No. 851
on the thirteenth-month additional pay.,
There is at the outset due acknowledgmen t on my part of the high quality
of craftsmanship in the opinion of the Court penned by Justice Efren Plana.
It is distinguished by its lucidity. There is the imprint of inevitability in the
conclusion approached based on the basic premise that underlies it. So it
should be if the decisive consideration is the language used both of the
applicable provisions of the Labor Code, Article 264 (c), (e), and (f) and
Article 265, as well as of Presidential Decree No. 851. In that sense, the
decision of the Court can stand the test of scrutiny based on sheer logic.
That for me would not suffice. Such an approach, to my mind, is quite
limited. The standard that should govern is the one supplied by the
Constitution. That is the clear implication of constitutionalism. Anything less
would deprive it of its quality as the fundamental law. It is my submission,
therefore, that statutes, codes, decrees, administrative rules, municipal
ordinances and any other jural norms must be construed in the light of and
in accordance with the Constitution. There is this explicit affirmation in the
recently decided case of De la Llana v. Alba sustaining the validity of Batas
Pambansa Blg. 129 reorganizing the judiciary: "The principle that the
Constitution enters into and forms part of every act to avoid any
unconstitutional taint must be applied. Nunez v. Sandiganbayan,
promulgated last January, has this relevant excerpt: 'It is true that the other
Sections of the Decree could have been so worded as to avoid any
constitutional objection. As of now, however, no ruling is called for. The view
is given expression in the concurring and dissenting opinion of Justice
Makasiar that in such a case to save the Decree from the dire fate of
invalidity, they must be construed in such a way as to preclude any possible
erosion on the powers vested in this Court by the Constitution. That is a
proposition too plain to be contested. It commends itself for approval.'" 1
1. It may not be amiss to start with the dissenting portion of this separate
opinion. It is worthwhile to recall the decision in Marcopper Mining
Corporation v. Hon. Blas Ople. 2 It came from a unanimous Court. It is true
that only seven Justices signed the opinion, two of the members of this
Tribunal, who participated in the deliberation, Justices Teehankee and
Melencio-Herrera having reserved their votes. Justice Concepcion Jr. was on
leave. It is accurate, therefore, to state that Marcopper as stated in Justice
Plana's opinion, is not doctrinal in character, the necessary eight votes not
having been obtained. It is a plurality as distinguished from a majority
opinion. It is quite apparent, however, that there was not a single dissenting
vote. There was subsequently a motion for reconsideration. This Court duly
weighed the arguments for and against the merit of the unanimous opinion
rendered. The resolution denying the motion for reconsideration was not
issued until December 15, 1981 on which occasion three Justices
dissented. 3 In the brief resolution denying the option for reconsideration,
with five Justices adhering to their original stand 4 it was set forth that such
denial was based: "primarily [on] the reason that the arguments advanced
had been duly considered and found insufficient to call for a decision other
than that promulgated on June 11, 1981, which stands unreversed and
unmodified. This is a case involving the social justice concept, which, as
pointed out in Carillo v. Allied Workers Association of the Philippines involves
'the effectiveness of the community's effort to assist the economically
under- privileged. For under existing conditions, without such succor and
support, they might not, unaided, be able to secure justice for themselves.'
In an earlier decision, Del Rosario v. De los Santos, it was categorically stated
that the social justice principle 'is the translation into reality of its
significance as popularized by the late President Magsaysay: He who has less
in life should have more in law.'" 5 In his dissent, Justice Fernandez took
issue on the interpretation of social justice by relying on the well- known
opinion of Justice Laurel in Calalang v. William 6 and concluded: "It is as
much to the benefit of labor that the petitioner be accorded social justice.
For if the mining companies, like the petitioner, can no longer operate, all
the laborers employed by aid company shall be laid-off." 7 To reinforce such
a conclusion, it was further stated: "The decision in this case is far reaching.
It affects all employers similarly situated as the petitioner. The natural
reaction of employers similarly situated as the petitioner will be to withdraw
gratuities that they have been giving employees voluntarily. In the long run,
the laborers will suffer. In the higher interest of all concerned the contention
of the petitioner that the mid-year bonus and Christmas bonus that it is
giving to the laborers shall be applied to the 13th month pay should be
sustained." 8 Such pragmatic consideration is likewise evident in the opinion
of the Court in this case. It is quite obvious from the above resolution of
denial that the approach based on the Constitution, compelling in its
character set forth in the opinion of the Court of June 11, 1981, is the one
followed by the members of this Court either adhering to or departing from
the previous unanimous conclusion reached. The main reliance to repeat, is
on the social justice provision 9 as reinforced by the protection to labor
provision. 10 As noted, such concepts were enshrined in the 1935
Constitution. 11 The opinion pursued the matter further: "Even then, there
was a realization of their importance in vitalizing a regime of liberty not just
as immunity from government restraint but as the assumption by the State
of an obligation to assure a life of dignity for all, especially the poor and the
needy. The expanded social justice and protection to labor provisions of the
present Constitution lend added emphasis to the concern for social and
economic rights. ... That was so under the 1935 Constitution. Such an
approach is even more valid now. As a matter of fact, in the first case after
the applicability of the 1973 constitution where social and economic rights
were involved, this Court in Alfanta v. Noe, through Justice Antonio, stated:
'In the environment of a new social order We can do no less. Thus, under
the new Constitution, property ownership has been impressed with a social
function. This implies that the owner has the obligation to use his property
not only to benefit himself but society as well. Hence, it provides under
Section 6 of Article II thereof, that in the promotion of social justice, the
State "shall regulate the acquisition, ownership, use, enjoyment, and
disposition of private property, and equitably diffuse property ownership
and profits." The Constitution also ensures that the worker shall have a just
and living wage which should assure for himself and his family an existence
worthy of human dignity and give him opportunity for a better life.' Such a
sentiment finds expression in subsequent opinions. 12
2. It thus becomes apparent, therefore, why predicated on what for me is
the significance of the social justice and the protection to labor mandates of
the Constitution, I cannot, with due respect, concur with my brethren. The
stand taken by this Court, I submit, cannot be justified by the hitherto
hospitable scope accorded such provisions. It is to the credit of this
Administration that even during the period of crisis government, the social
and economic rights were fully implemented. As a matter of fact, some
critics, not fully informed of the actual state of affairs, would predicate their
assessment of its accomplishments in this sphere on their inaccurate and
unsympathetic appraisal of how much success had been achieved. It is a
matter of pride for the Philippines that as far back as her 1935 Constitution,
provisions assuring liberty in its positive sense, enabling her citizens to live a
life of humanity and dignity, were already incorporated. The social and
economic rights found therein antedated by thirteen years the Universal
Declaration of Human Rights. When it is considered that, as pointed out in
the opinion of Justice Antonio in Alfanta, rendered in the first year of the
present Constitution, the social justice principle now lends itself to the
equitable diffusion of property ownership and profits, it becomes difficult
for me to justify why any lurking ambiguity in Presidential Decree No. 851
could be construed against the rights of labor. This Court is not acting
unjustly if it promotes social justice. This Court is not acting unjustly if it
protects labor. This Court is just being true to its mission of fealty to the
Constitution. Under the concept of separation of powers, while the political
branches enact the laws and thereafter enforce them, any question as to
their interpretation, justiciable in character, is for the courts, ultimately this
Tribunal, to decide. That is its sworn duty. It cannot be recreant to such a
trust. Its role, therefore, is far from passive. It may be said further that if the
object Of statutory construction is in the well-known language of Learned
Hand "proliferation of purpose," there is warrant for the view that I espouse.
That is to attain its basic objective, namely, to cope with the ravages of
inflation. Moreover, the Decree only benefits the low-salaried employees.
There is thus ample warrant for a more liberal approach. It only remains to
be added that there was in Marcopper not only a recognition of the
administrative determination by the Minister of Labor as well as the then
Deputy Minister of Labor but also an acceptance of the ably-written
memorandum of Solicitor General Mendoza. Hence, to repeat, my inability
to concur on this point with my brethren whose views, as I stated earlier, are
deserving of the fullest respect.
3. There is, however — and it must be so recognized an obstacle to the
approach above followed. There is an agreement both on the part of
management and labor in this case quoted in the main opinion to this effect,
"to abide by the final decision of the Supreme Court in any case involving
the 13th Month Pay Law if it is clearly heldthat the employer is liable to pay
a 13th month pay separate and distinct from the bonuses already given."
Such an obstacle, on further reflection, is not, for me, insurmountable. The
only case then within the contemplation of the parties is Marcopper. With
the unanimous opinion rendered and a subsequent denial of a motion for
reconsideration, it would appear that while it lacked doctrinal force, this
Court "clearly held" that there is liability on the part of the employer to pay
a 13-month pay separate and distinct from the bonuses already given.
Perhaps the parties, especially labor, could have been more accurate and
more precise. It take comfort from the view expressed by Justice Cardozo in
Wood v. Duff-Gordon: 13 "The law has outgrown its primitive stage of
formalism when the precise word was the sovereign talisman, and every slip
was fatal. It takes a broader view today. A promise may be lacking, and yet
the whole writing may be 'instinct with an obligation,' imperfectly
expressed." 14
4. Now as to the qualified concurrence. Based on the codal provisions the
finding of the illegality of strike is warranted. That for me does not fully
resolve the questions raised by such a declaration. From my reading of the
opinion of the Court, it does not go as far as defining the consequences of
such illegal strike. Again the approach I propose to follow is premised on the
two basic mandates of social justice and protection to labor, for while they
are obligations imposed on the government by the fundamental law,
compulsory arbitration as a result of which there could be a finding of
illegality is worded in permissive not in mandatory language. It would be, for
me, a departure from principles to which this Court has long remained
committed, if thereby loss of employment, even loss of seniority rights or
other privileges is ultimately incurred. That is still an open question. The
decision has not touched on that basic aspect of this litigation. The issue is
not foreclosed. It seems fitting that this brief concurrence and dissent
should end with a relevant excerpt from Free Telephone Workers Union v.
The Minister of Labor: 15 "It must be stressed anew, however, that the power
of compulsory arbitration, while allowable under the Constitution and quite
understandable in labor disputes affected with a national interest, to be free
from the taint of unconstitutionality, must be exercised in accordance with
the constitutional mandate of protection to labor. The arbiter then is called
upon to take due care that in the decision to be reached, there is no
violation of 'the rights of workers to self-organization, collective bargaining,
security of tenure, and just and humane conditions of work.' It is of course
manifest that there is such unconstitutional application if a law 'fair on its
face and impartial in appearance [is] applied and administered by public
authority with an evil eye and an unequal hand.' It does not even have to go
that far. An instance of unconstitutional application would be discernible if
what is ordained by the fundamental law, the protection of labor, is ignored
or disregarded. 16
I am authorized to state that Justice Makasiar joins me in this separate
opinion.
BARREDO, J., concurring:
At this stage of my tenure in the Supreme Court which is to end in about
four months from now, I feel it is but fitting and proper that I make my
position clear and unmistakable in regard to certain principles that have to
be applied to this labor case now before Us. Few perhaps may have noticed
it, but the fact is that in most cases of this nature I have endeavored my very
best to fully abide by the part that pertains to the judiciary in the social
justice and protection to labor clauses of the Constitution, not alone
because. I consider it as an obligation imposed by the fundamental law of
the land but by natural inclination, perhaps because I began to work as a
common worker at the age of thirteen, and I cannot in any sense be
considered as a capitalist or management-inclined just because I happen to
have joined, within the legal bounds of the position I occupy, some business
ventures with the more affluent members of my family and with some good
and faithful old time friends. I need not say that I am pro-labor; I only wish
to deny most vehemently that I am anti-labor
Having been one of the seven members of the Court who co-signed with our
learned Chief Justice the Marcopper "decision" and later on reserved my
vote when a motion for reconsideration thereof was filed for me to concur
now by merely cosigning the brilliant opinion of our distinguished colleague,
Mr. Justice Plana, is to my mind short of what all concerned might expect
from me. For me to merely vote in support of the judgment herein without
any explanation of my peculiar situation does not satisfy my conscience, not
to mention that I owe such explanation to those who would all probably be
raising their eyebrows since they must come to feel they could depend on
me to always vote in favor of labor.
The Supreme Court is a court of law and of equity at the same time but,
understandably, equity comes in only when law is inadequate to afford the
parties concerned the essence of justice, fairness and square dealing. It is to
this basic tenet that I am bound by my oath of office before God and our
people Having this Ideal in mind, the paramount thought that should
dominate my actuations is complete and absolute impartiality in the best
light God has given me. Hence, when the aid of the Court is sought on legal
grounds, We can resort to equity only when there is no law that can be
properly applied. My view of the instant case is that it is one of law, not of
equity. It is on this fundamental basis that I have ventured to write this
concurrence.
Looking back at my concurrence in Marcopper, and guided by the
observations in the main opinion herein, as to the doctrinal value of Our
decision therein, I have come to the realization, after mature deliberation,
that the conclusion reached in the opinion of the Chief Justice may not
always be consistent with the evident intent and purpose of Section 2 of P.D.
No. 851 which, indeed, unequivocally provides that "(E)mployers already
paying their employees a 13th month pay or its equivalent are not covered
by this decree", albeit it does not clarify what it means by the "equivalent"
of the 13th month pay. Such being the case, nothing can be more proper
than for everyone to abide by or at least give due respect to the meaning
thereof as has been officially expressed by the usual executive authority
called upon to implement the same, none other than the Ministry of Labor
(MOLE, for short), unless, of course, the understanding of MOLE appears to
be manifestly and palpably erroneous and completely alien to the evident
intent of the decree. And Section 3(e) of the Rules Implementing P.D. 851
issued by MOLE reads thus:
The term "its equivalent" as used in paragraph (c) hereof shall include
Christmas bonus, midyear bonus, profit-sharing payments and other cash
bonuses amounting to not less than 1/12th of the basic but shall not include
cash and stock dividends, cost of living allowances and all other allowances
regularly enjoyed by the employee, as well as non-monetary benefits.
Where an employer pays less than 1/12th of the employee's basic salary the
employer shall pay the difference.
Petitioner National Federation of Sugar Workers (NFSW, for short) is now
before Us with the plea that because in its agreement with respondent
Central Azucarera de la Carlota (CAC, for short) of November 30, 1981 to the
effect that:
The parties agree to abide by the final decision of the Supreme Court in any
case involving the 13th Month Pay Law if it is clearly held that the employer
is liable to pay a 13th month pay separate and distinct from the bonuses
already given. (Par. 4)
and because this Court dismissed, in legal effect, for lack of necessary votes,
the petition in the Marcopper case seeking the setting aside of Deputy
Minister Inciong's decision which considered the midyear and Christmas
bonuses being given to the Marcopper workers as not the equivalent of the
13th month pay enjoined by P.D. 851, We should now order CAC to pay
NFSW members in the same way as stated in the opinion of the Chief Justice
in the Marcopper case.
At first glance, such a pause does appear tenable and plausible. But looking
deeper at the precise wording of the November 30, 1981 agreement
between NFSW and CAC abovequoted, the proposition in the main opinion
herein that what must be deemed contemplated in said agreement is that
the final decision of the Supreme Court therein referred to must be one
wherein it would be "clearly held that the employer is liable to pay 13th
month pay separate and distinct from the bonuses already given", compels
concurrence on my part. I find said agreement to be definitely worded.
There is no room at all for doubt as to the meaning thereof. And tested in
the light of such unambiguous terminology of the said agreement, the
Marcopper opinion signed by only seven members of this Court, cannot,
under the Constitution and prevailing binding legal norms, unfortunately,
have doctrinal worth and cannot be considered as stare decisis. Hence, it
cannot be said to be the "definite" decision of the Supreme Court the
parties (CAC and NFSW) had in mind. Accordingly, it is my considered
opinion that NFSW's plea in this case is premature and rather off tangent.
I am not unmindful of the possibility or even probability that labor may
argue that in signing the November 30, 1981 agreement, NFSW little cared,
for it was not fully informed about what doctrinal and what is not doctrinal
signify in law. Labor may argue that it is enough that Marcopper workers got
their 13th month pay in addition to their bonuses by virtue of the denial by
this Supreme Court of Marcopper Company's appeal to US, and NFSW
members should not be left getting less. And it would only be rational to
expect labor to invoke in support of their plea no less than the social justice
and protection to labor provisions of the Constitution.
As I have said at the outset, I am about to leave this Court. Nothing could
warm my heart and lift my spirit more than to part with the noble thought
that during my tenure of fourteen years in this Supreme Court, I have given
labor the most that it has been within my power to give. But again I must
emphasize that what is constitutionally ordained, and by that I mean also by
God and by our country and people, is for me to jealously guard that the
scales of justice are in perfect balance. No fondness for any sector of society,
no love for any man or woman, no adherence to any political party, no
feeling for any relative or friend nor religious consideration or belief should
ever induce me to allow it to tilt in the slightest degree in favor of anyone.
The concept of social justice has been variously explained in previous
decisions of this Court. In Talisay Silay, 1penned by this writer, We went as far
as to hold that when it comes to labor-management relationship, the social
justice principle is more pervasive and imperious than police power. It is
indeed consecrated as one of the most valued principles of national policy in
the Constitution. (Sec. 6, Art. II) So also is protection to labor. (See. 9, Id.) I
am of the firm conviction, however, that these constitutional injunctions are
primarily directed to and are responsibilities of the policy-determining
departments of the government. In the enforcement of said principles, the
role of the judiciary is to a certain degree less active. The courts are
supposed to be called upon only to strike down any act or actuation of
anyone violative thereof, and, of course 6 in case of doubt in any given
situation, to resolve the same in favor of labor. Verily, neither the Supreme
Court nor any other court is enjoined to favor labor merely for labor's sake,
even as the judiciary is duty bound never to place labor at a disadvantage,
for that would not be only unconstitutional but inhuman, contrary to the
Universal Declaration of Human Rights and unpardonably degrading to the
dignity of man who has been precisely created in the image of God. At
bottom the Ideal in social justice is precisely to maintain the forces of all the
economic segments of society in undisturbed and undisturbable
equilibrium, as otherwise there would be no justice for anyone of them at
all.
In the case at bar, I do not feel at liberty to disregard what the parties have
freely agreed upon, assuming, as I must, that in entering into such
agreement both parties were fully aware of their legal rights and
responsibilities. In this connection, I take particular note of the fact that if
CAC is a big financially well conditioned concern, NFSW is not just one
ignorant laborer or group of laborers, but a federation with leaders and
lawyers of adequate if not expert knowledge-ability in regard to their rights
and other relevant matters affecting labor. I am satisfied that there is here
no occasion to apply the Civil Code rule regarding vigilance whenever there
is inequality in the situations of the parties to an agreement or transaction.
In conclusion, I concur fully in the main opinion of Justice Plana as regards
both issues of illegality of the strike here in question and the non-
applicability hereto of whatever has been said in Marcopper. I have added
the above remarks only to make myself clear on labor-management issues
before I leave this Court, lest there be no other appropriate occasion for me
to do so.
ABAD SANTOS, J., concurring:
I concur but lest I be accused of inconsistency because in Marcopper Mining
Corporation vs. Ople, et al., No. 51254, June 11, 1981, 105 SCRA 75, I voted
to dismiss the petition for lack of merit and as a result Marcopper had to
give the 13th-month pay provided in P.D. No. 851 even as its employees
under the CBA had mid-year and end-of-year bonuses, I have to state that
Marcopper and La Carlota have different factual situations as follows: 1. In
Marcopper, the CBA clearly stated that the company was obligated to "grant
midyear and end-of-year bonuses to employees following years in which it
had profitable operations." Thus the payment of the bonuses was
contingent upon the realization of profits. If there were no profits, there
were to be no bonuses. Accordingly, it was fair and proper to conclude that
Marcopper had not shown that it was already paying its employees the
13th-month pay or its equivalent as provided in Sec. 2 of P.D. No. 851.
However, in the instant case of La Carlota the obligation of the employer to
pay bonuses is not contingent on the realization of profits. The CBA
stipulates that the "parties also agree to maintain the present practice on
the grant of Christmas bonus, milling bonus, and amelioration bonus to the
extent as the latter is required by law." It can thus be said that La Carlota is
already paying the equivalent of the 13th-month pay. 2. In Marcopper, the
company's liability for the 13th month pay was determined by no less than
the Deputy Minister of Labor, Amado G. Inciong. I have always given much
weight to the determination of officers who are tasked with implementing
legislation because their expertise qualifies them in making authoritative
decisions. In the present case of La Carlota, there has been no
determination that the employees are entitled to the 13th-month pay. In
fact, a negative conclusion can be implied from the declaration of Labor
Arbiter Ovejera that the labor union's strike against La Carlota was illegal.
MELENCIO-HERRERA, J., concurring.
A. The question of law involved in this Petition for Prohibition with
Preliminary Injunction is based on the following relevant facts which are
indicated in the record:
1. Prior to December 16, 1975, Central Azucarera de la Carlota (LA CARLOTA,
for short), which operates a sugar mill in La Carlota, Negros Occidental, may
be deemed as paying to its employees milling bonus, amelioration bonus,
and Christmas bonus equal at least to a months' salary.
2. PD 851, effective on the aforementioned date of December 16, 1975,
required employers to pay their employees a 13the month pay, provided the
employer was not already paying the said 13th month pay or itsequivalent.
3. On December 22, 1975, the then Department of Labor promulgated a
regulation stating that "Christmas bonus" is an equivalent of the 13th month
pay,
4. From 1975 to 1981, LA CARLOTA was not paying 13th month pay on the
assumption that the "Christmas bonus" it was paying was an "equivalent" of
the 13th month pay. The employees of LA CARLOTA and their labor unions
had not protested the non-payment of the 13th month pay in addition to
the Christmas bonus.
5. On June 11, 1981, this Court promulgated its Decision in the "Marcopper"
case, which involved a relationship between the " 13th month pay" and the
"Christmas bonus" being paid by an employer. A Motion for reconsideration
of the Decision was subsequently filed in said case, which was denied only
on December 15,1981.
6. In the meantime, on November 29, 1981, the National Federation of
Sugar Workers (NFSW), as the labor union representing the majority of
employees at LA CARLOTA, staged a strike because LA CARLOTA had refused
to pay the 13th month pay in addition to Christmas bonus. The strike lasted
one day on November 30, 1981, LA CARLOTA and NFSW entered into a
settlement agreement, paragraph 4 whereof provided as follows:
4. The parties agree to abide by the final decision of the Supreme Court in
any case involving the 13th Month Pay Law if it is clearly held that the
employer is liable to pay a 13th Month Pay separate and distinct from the
bonuses already given;
7. On January 28, 1982, NFSW declared a strike on the ground that, despite
the finality of the Marcopper Decision, LA CARLOTA had refused to grant
13th month pay to its employees, in addition to Christmas bonus, as agreed
upon in the settlement agreement of November 30, 1981.
B. The legal controversy in the matter may be explained as follows:
1. NFSW filed a notice of strike on January 22, 1982, claiming that the
contemplated strike was based on an unfair labor practice, and that it could
declare the strike even before the expiration of fifteen (15) days thereafter.
The unfair labor practice relied upon was management's alleged renegation
of the November 30, 1981 agreement, considering that the finality of the
Marcopper Decision had "clearly held that the employer is liable to pay a
13th month pay separate and distinct from "the Christmas bonus".
2. On the other hand, LA CARLOTA took the position that the strike was not a
ULP strike but an economic strike subject to a cooling period of thirty (30)
days with its attendant requirements.
3. It is clear that the controversy between NFSW and LA CARLOTA
substantially hinges on the question of whether or not the Marcopper
Decision has clearly held that a Christmas bonus, in whatsoever form,
should not deter the employer's obligation to the payment of the 13th
month pay.
C. The proceedings in the case below were as follows:
1. On February 4, 1982, LA CARLOTA filed a petition to declare the strike of
January 28, 1982 as illegal in R. A. B. Case No. 110- 82 of the Regional
Arbitration Branch No. VI-A of the National Labor Commission in Bacolod
City (the CASE BELOW).
2. After relatively protracted hearings, respondent Labor Arbiter rendered a
Decision declaring illegal the strike of January 28, 1982. That is the Decision
assailed by NFSW in this instance claiming it to be null and void.
D. Reference to a collateral proceeding may be made at this juncture:
1. It appears that, in LA CARLOTA, there is another labor union under the
name of National Congress of Unions in the Sugar Industry in the Philippines
(NACUSIP).
2. On July 30, 1981, NACUSIP filed a complaint in FSD Case No. 1192-81
before R. A. B. No. VI-A in Bacolod City praying that an Order be issued
directing LA CARLOTA to pay 13th month pay to its employees from the
effective date of PD 851 (the COLLATERAL PROCEEDING).
3. On December 4, 1981, NFSW filed a notice to intervene in the
COLLATERAL PROCEEDING.
4. On January 26, 1982, a Decision was rendered in the COLLATERAL
PROCEEDING which, in part, said:
On the contrary, what this Labor Arbiter is aware of, with which he can take
notice, is the policy declaration of the Honorable Minister of Labor and
Employment contained in a telegram addressed to Asst. Director Dante G.
Ardivilla Bacolod District Office, this Ministry, and disseminated for the
information of this Branch which states, among other things, that where
bonuses in CBAs are not contingent on realization of profit as in the
Marcopper case, the decision (of the Supreme Court, re: Marcopper case),
does not apply, and cases thereon should be resolved under the provisions
of PD 851 and its implementing rules.
5. On February 15, 1982, NFSW filed a Motion for Reconsideration of the
Decision.
Upon the foregoing exposition, there is justification for an outright dismissal
of the Petition for Prohibition for the simple reason that the strike of January
28, 1982 may not be considered a ULP strike. When the strike was declared,
it could not be validly claimed that there was already a final decision made
by this Court which "clearly held that the employer is liable to pay a 13th
month pay separate and distinct from" the Christmas bonus being paid by LA
CARLOTA. However, since the Marcopper Decision has engendered
controversies in labor-management relations in several
industrial/commercial firms, the Court has resolved to rule on the merits of
the substantial question between LA CARLOTA and NFSW for the public
benefit with a clarification of the Marcopper judgment.
I agree with the proposition taken by the Ministry of Labor and Employment
that Christmas bonus, not contingent on realization of profit as in the
Marcoper case, is the equivalent of the 13th month pay. In regards to the
juxtaposition of the terms "13th month pay" and "Christmas bonus" in an
amount not less than a month's salary, the following may be explained:
Within recent time, it has been usual for an industrial or commercial firm,
which has had a successful year, to grant a bonus to its employees generally
denominated before as year-end bonus. A firm usually knows whether or
not it has had a successful year by the middle of December. In case of
profitability, payment of the year-end bonus does not have to await the end
of the year, but it is often times given some days before New Year, generally
about Christmas day. Before long, the year-end bonus became also known
as Christmas bonus, following the change of the Christmas gift-giving day
from January 6th to December 25th. Thus, it has been stated: "a less formal
use of the bonus concept, which is designed to reward workers for a
successful business year, is the annual or Christmas bonus" (3 Ency. Brit.,
918).
Although the original concept of a year-end bonus or Christmas bonus, was
that it depended on a successful year, the bonus, in many instances, has
been developed into an obligatory payment as part of wages and not related
to profitability of operations. As part of wages, they are subject to CBA
negotiation. That has been the general trend in the United States and in our
country.
... But where so-called gifts are so tied to the remuneration which
employees receive for their work that they are in fact a part of it, they are in
reality wages within the meaning of the Act.
xxx xxx xxx
In a number of cases an employer has been held required to bargain
concerning bonuses, including regularly given Christmas bonuses. (48 Am
Jur 2d., p. 455).
Moreover, once a Christmas bonus becomes institutionalized, it has to be
non-discriminatory. "An employer violates 29 USC (Sec.) 158(a) (3) where, to
discourage union membership, he ceases giving a Christmas bonus to all
employees and gives the bonus only to office and supervisory employees
after unionization of his production and maintenance employees." (48 Am
Jur 2d., p. 420).
The Christmas bonus, as it clearly denotes, has a literal religious connection,
"Christmas" being a term within the Christian religion. Considering that the
Christmas bonus has become obligatory and non- discriminatory in many
jurisdictions, a tendency arose to disassociate that bonus from its religious
connotation. Some countries, with non-christian or "liberal" christian
segments, have opted to make the year-end or Christmas bonus obligatory,
and they called it the 13th month pay. It is, perhaps, having our Moslem
brothers in mind that the Government had decided to set up in our country
the obligatory payment of the 13th month pay Thereby, the orthodox non-
christian employee is not subjected to "discrimination" due to his inability to
accept the Christmas bonus because of strict allegiance to this own faith. It
should, therefore, be apparent that "christmas bonus" and "13th month
pay" should be equated one with the other.
PD 851 does not contain a provision for rules and regulations to be
promulgated by the Department of Labor for implementation of the Decree.
Notwithstanding, on December 22, 1975, the Department of Labor issued
"Rules and Regulations Implementing Presidential Decree 851 ", with the
following relevant provision:
The term "its equivalent" as used in paragraph (c) hereof shall include
Christmas bonus, mid-year bonus, profit-sharing payments and other cash
bonuses amounting to not less than 1/12th of the basic salary but shall not
include cash and stock dividends cost of living allowances and all other
allowances regularly enjoyed by the employee, as well as non-monetary
benefits. Where an employer pays less than 1/12th of the employees basic
salary, the employer shall pay the difference.
When administrative rules and regulations are not properly "delegated",
they cannot have the force and effect of law. It has been stated that:
Administrative rules and regulations. As discussed in Public Administrative
Bodies and Procedure (Sec.) 108, rules and regulations duly promulgated
and adopted in pursuance of properly delegated authority have the force
and effect of law where they are legislative in character, but rules and
regulations which are merely executive or administrative views as to the
meaning and construction of the statute are not controlling on the courts,
and cannot alter or extend the plain meaning of a statute, although they are
entitled to great weight where the statute is ambiguous. (82 C.J.S., pp. 770,
771).
Although the rule defining the term "equivalent" as used in PD 851 does not
have the force and effect of law, it can and should be considered as an
administrative view entitled to great weight as it is an interpretation of
"equivalent" made by the administrative agency which has the duty to
enforce the Decree.
In the light of the foregoing views, I concur with the dismissal of the Petition
for Prohibition with the express statements that LA CARLOTA's Christmas
bonus and other bonuses exempts it from giving 13th month pay to its
employees, and that the strike of January 28, 1982 was not a ULP strike and
should be considered illegal even if NFSW had complied with all statutory
requirements for the strike.
Separate Opinions
MAKASIAR, J., concurring:
Concurs in the separate opinion of qualified concurrence as to the illegality
of the strike and of dissent as to the interpretation of Presidential Decree
No. 851 submitted by the Chief Justice.
FERNANDO, CJ., concurring:
With qualifications on the questions of the legality of the strike and
dissenting on the interpretation to be accorded Presidential Decree No. 851
on the thirteenth-month additional pay.,
There is at the outset due acknowledgmen t on my part of the high quality
of craftsmanship in the opinion of the Court penned by Justice Efren Plana.
It is distinguished by its lucidity. There is the imprint of inevitability in the
conclusion approached based on the basic premise that underlies it. So it
should be if the decisive consideration is the language used both of the
applicable provisions of the Labor Code, Article 264 (c), (e), and (f) and
Article 265, as well as of Presidential Decree No. 851. In that sense, the
decision of the Court can stand the test of scrutiny based on sheer logic.
That for me would not suffice. Such an approach, to my mind, is quite
limited. The standard that should govern is the one supplied by the
Constitution. That is the clear implication of constitutionalism. Anything less
would deprive it of its quality as the fundamental law. It is my submission,
therefore, that statutes, codes, decrees, administrative rules, municipal
ordinances and any other jural norms must be construed in the light of and
in accordance with the Constitution. There is this explicit affirmation in the
recently decided case of De la Llana v. Alba sustaining the validity of Batas
Pambansa Blg. 129 reorganizing the judiciary: "The principle that the
Constitution enters into and forms part of every act to avoid any
unconstitutional taint must be applied. Nunez v. Sandiganbayan,
promulgated last January, has this relevant excerpt: 'It is true that the other
Sections of the Decree could have been so worded as to avoid any
constitutional objection. As of now, however, no ruling is called for. The view
is given expression in the concurring and dissenting opinion of Justice
Makasiar that in such a case to save the Decree from the dire fate of
invalidity, they must be construed in such a way as to preclude any possible
erosion on the powers vested in this Court by the Constitution. That is a
proposition too plain to be contested. It commends itself for approval.'" 1
1. It may not be amiss to start with the dissenting portion of this separate
opinion. It is worthwhile to recall the decision in Marcopper Mining
Corporation v. Hon. Blas Ople. 2 It came from a unanimous Court. It is true
that only seven Justices signed the opinion, two of the members of this
Tribunal, who participated in the deliberation, Justices Teehankee and
Melencio-Herrera having reserved their votes. Justice Concepcion Jr. was on
leave. It is accurate, therefore, to state that Marcopper as stated in Justice
Plana's opinion, is not doctrinal in character, the necessary eight votes not
having been obtained. It is a plurality as distinguished from a majority
opinion. It is quite apparent, however, that there was not a single dissenting
vote. There was subsequently a motion for reconsideration. This Court duly
weighed the arguments for and against the merit of the unanimous opinion
rendered. The resolution denying the motion for reconsideration was not
issued until December 15, 1981 on which occasion three Justices
dissented. 3 In the brief resolution denying the option for reconsideration,
with five Justices adhering to their original stand 4 it was set forth that such
denial was based: "primarily [on] the reason that the arguments advanced
had been duly considered and found insufficient to call for a decision other
than that promulgated on June 11, 1981, which stands unreversed and
unmodified. This is a case involving the social justice concept, which, as
pointed out in Carillo v. Allied Workers Association of the Philippines involves
'the effectiveness of the community's effort to assist the economically
under- privileged. For under existing conditions, without such succor and
support, they might not, unaided, be able to secure justice for themselves.'
In an earlier decision, Del Rosario v. De los Santos, it was categorically stated
that the social justice principle 'is the translation into reality of its
significance as popularized by the late President Magsaysay: He who has less
in life should have more in law.'" 5 In his dissent, Justice Fernandez took
issue on the interpretation of social justice by relying on the well- known
opinion of Justice Laurel in Calalang v. William 6 and concluded: "It is as
much to the benefit of labor that the petitioner be accorded social justice.
For if the mining companies, like the petitioner, can no longer operate, all
the laborers employed by aid company shall be laid-off." 7 To reinforce such a
conclusion, it was further stated: "The decision in this case is far reaching. It
affects all employers similarly situated as the petitioner. The natural reaction
of employers similarly situated as the petitioner will be to withdraw
gratuities that they have been giving employees voluntarily. In the long run,
the laborers will suffer. In the higher interest of all concerned the contention
of the petitioner that the mid-year bonus and Christmas bonus that it is
giving to the laborers shall be applied to the 13th month pay should be
sustained." 8 Such pragmatic consideration is likewise evident in the opinion
of the Court in this case. It is quite obvious from the above resolution of
denial that the approach based on the Constitution, compelling in its
character set forth in the opinion of the Court of June 11, 1981, is the one
followed by the members of this Court either adhering to or departing from
the previous unanimous conclusion reached. The main reliance to repeat, is
on the social justice provision 9 as reinforced by the protection to labor
provision. 10 As noted, such concepts were enshrined in the 1935
Constitution. 11 The opinion pursued the matter further: "Even then, there
was a realization of their importance in vitalizing a regime of liberty not just
as immunity from government restraint but as the assumption by the State
of an obligation to assure a life of dignity for all, especially the poor and the
needy. The expanded social justice and protection to labor provisions of the
present Constitution lend added emphasis to the concern for social and
economic rights.** That was so under the 1935 Constitution. Such an
approach is even more valid now. As a matter of fact, in the first case after
the applicability of the 1973 constitution where social and economic rights
were involved, this Court in Alfanta v. Noe, through Justice Antonio, stated:
'In the environment of a new social order We can do no less. Thus, under
the new Constitution, property ownership has been impressed with a social
function. This implies that the owner has the obligation to use his property
not only to benefit himself but society as well. Hence, it provides under
Section 6 of Article II thereof, that in the promotion of social justice, the
State "shall regulate the acquisition, ownership, use, enjoyment, and
disposition of private property, and equitably diffuse property ownership
and profits." The Constitution also ensures that the worker shall have a just
and living wage which should assure for himself and his family an existence
worthy of human dignity and give him opportunity for a better life.' Such a
sentiment finds expression in subsequent opinions. 12
2. It thus becomes apparent, therefore, why predicated on what for me is
the significance of the social justice and the protection to labor mandates of
the Constitution, I cannot, with due respect, concur with my brethren. The
stand taken by this Court, I submit, cannot be justified by the hitherto
hospitable scope accorded such provisions. It is to the credit of this
Administration that even during the period of crisis government, the social
and economic rights were fully implemented. As a matter of fact, some
critics, not fully informed of the actual state of affairs, would predicate their
assessment of its accomplishments in this sphere on their inaccurate and
unsympathetic appraisal of how much success had been achieved. It is a
matter of pride for the Philippines that as far back as her 1935 Constitution,
provisions assuring liberty in its positive sense, enabling her citizens to live a
life of humanity and dignity, were already incorporated. The social and
economic rights found therein antedated by thirteen years the Universal
Declaration of Human Rights. When it is considered that, as pointed out in
the opinion of Justice Antonio in Alfanta, rendered in the first year of the
present Constitution, the social justice principle now lends itself to the
equitable diffusion of property ownership and profits, it becomes difficult
for me to justify why any lurking ambiguity in Presidential Decree No. 851
could be construed against the rights of labor. This Court is not acting
unjustly if it promotes social justice. This Court is not acting unjustly if it
protects labor. This Court is just being true to its mission of fealty to the
Constitution. Under the concept of separation of powers, while the political
branches enact the laws and thereafter enforce them, any question as to
their interpretation, justiciable in character, is for the courts, ultimately this
Tribunal, to decide. That is its sworn duty. It cannot be recreant to such a
trust. Its role, therefore, is far from passive. It may be said further that if the
object Of statutory construction is in the well-known language of Learned
Hand "proliferation of purpose," there is warrant for the view that I espouse.
That is to attain its basic objective, namely, to cope with the ravages of
inflation. Moreover, the Decree only benefits the low-salaried employees.
There is thus ample warrant for a more liberal approach. It only remains to
be added that there was in Marcopper not only a recognition of the
administrative determination by the Minister of Labor as well as the then
Deputy Minister of Labor but also an acceptance of the ably-written
memorandum of Solicitor General Mendoza. Hence, to repeat, my inability
to concur on this point with my brethren whose views, as I stated earlier, are
deserving of the fullest respect.
3. There is, however — and it must be so recognized an obstacle to the
approach above followed. There is an agreement both on the part of
management and labor in this case quoted in the main opinion to this effect,
"to abide by the final decision of the Supreme Court in any case involving
the 13th Month Pay Law if it is clearly heldthat the employer is liable to pay
a 13th month pay separate and distinct from the bonuses already given."
Such an obstacle, on further reflection, is not, for me, insurmountable. The
only case then within the contemplation of the parties is Marcopper. With
the unanimous opinion rendered and a subsequent denial of a motion for
reconsideration, it would appear that while it lacked doctrinal force, this
Court "clearly held" that there is liability on the part of the employer to pay
a 13-month pay separate and distinct from the bonuses already given.
Perhaps the parties, especially labor, could have been more accurate and
more precise. It take comfort from the view expressed by Justice Cardozo in
Wood v. Duff-Gordon: 13 "The law has outgrown its primitive stage of
formalism when the precise word was the sovereign talisman, and every slip
was fatal. It takes a broader view today. A promise may be lacking, and yet
the whole writing may be 'instinct with an obligation,' imperfectly
expressed." 14
4. Now as to the qualified concurrence. Based on the codal provisions the
finding of the illegality of strike is warranted. That for me does not fully
resolve the questions raised by such a declaration. From my reading of the
opinion of the Court, it does not go as far as defining the consequences of
such illegal strike. Again the approach I propose to follow is premised on the
two basic mandates of social justice and protection to labor, for while they
are obligations imposed on the government by the fundamental law,
compulsory arbitration as a result of which there could be a finding of
illegality is worded in permissive not in mandatory language. It would be, for
me, a departure from principles to which this Court has long remained
committed, if thereby loss of employment, even loss of seniority rights or
other privileges is ultimately incurred. That is still an open question. The
decision has not touched on that basic aspect of this litigation. The issue is
not foreclosed. It seems fitting that this brief concurrence and dissent
should end with a relevant excerpt from Free Telephone Workers Union v.
The Minister of Labor: 15 "It must be stressed anew, however, that the power
of compulsory arbitration, while allowable under the Constitution and quite
understandable in labor disputes affected with a national interest, to be free
from the taint of unconstitutionality, must be exercised in accordance with
the constitutional mandate of protection to labor. The arbiter then is called
upon to take due care that in the decision to be reached, there is no
violation of 'the rights of workers to self-organization, collective bargaining,
security of tenure, and just and humane conditions of work.' It is of course
manifest that there is such unconstitutional application if a law 'fair on its
face and impartial in appearance [is] applied and administered by public
authority with an evil eye and an unequal hand.' It does not even have to go
that far. An instance of unconstitutional application would be discernible if
what is ordained by the fundamental law, the protection of labor, is ignored
or disregarded . 16
I am authorized to state that Justice Makasiar joins me in this separate
opinion.
BARREDO, J., concurring:
At this stage of my tenure in the Supreme Court which is to end in about
four months from now, I feel it is but fitting and proper that I make my
position clear and unmistakable in regard to certain principles that have to
be applied to this labor case now before Us. Few perhaps may have noticed
it, but the fact is that in most cases of this nature I have endeavored my very
best to fully abide by the part that pertains to the judiciary in the social
justice and protection to labor clauses of the Constitution, not alone
because. I consider it as an obligation imposed by the fundamental law of
the land but by natural inclination, perhaps because I began to work as a
common worker at the age of thirteen, and I cannot in any sense be
considered as a capitalist or management-inclined just because I happen to
have joined, within the legal bounds of the position I occupy, some business
ventures with the more affluent members of my family and with some good
and faithful old time friends. I need not say that I am pro-labor; I only wish
to deny most vehemently that I am anti-labor
Having been one of the seven members of the Court who co-signed with our
learned Chief Justice the Marcopper "decision" and later on reserved my
vote when a motion for reconsideration thereof was filed for me to concur
now by merely cosigning the brilliant opinion of our distinguished colleague,
Mr. Justice Plana, is to my mind short of what all concerned might expect
from me. For me to merely vote in support of the judgment herein without
any explanation of my peculiar situation does not satisfy my conscience, not
to mention that I owe such explanation to those who would all probably be
raising their eyebrows since they must come to feel they could depend on
me to always vote in favor of labor.
The Supreme Court is a court of law and of equity at the same time but,
understandably, equity comes in only when law is inadequate to afford the
parties concerned the essence of justice, fairness and square dealing. It is to
this basic tenet that I am bound by my oath of office before God and our
people Having this Ideal in mind, the paramount thought that should
dominate my actuations is complete and absolute impartiality in the best
light God has given me. Hence, when the aid of the Court is sought on legal
grounds, We can resort to equity only when there is no law that can be
properly applied. My view of the instant case is that it is one of law, not of
equity. It is on this fundamental basis that I have ventured to write this
concurrence.
Looking back at my concurrence in Marcopper, and guided by the
observations in the main opinion herein, as to the doctrinal value of Our
decision therein, I have come to the realization, after mature deliberation,
that the conclusion reached in the opinion of the Chief Justice may not
always be consistent with the evident intent and purpose of Section 2 of P.D.
No. 851 which, indeed, unequivocally provides that "(E)mployers already
paying their employees a 13th month pay or its equivalent are not covered
by this decree", albeit it does not clarify what it means by the "equivalent"
of the 13th month pay. Such being the case, nothing can be more proper
than for everyone to abide by or at least give due respect to the meaning
thereof as has been officially expressed by the usual executive authority
called upon to implement the same, none other than the Ministry of Labor
(MOLE, for short), unless, of course, the understanding of MOLE appears to
be manifestly and palpably erroneous and completely alien to the evident
intent of the decree. And Section 3(e) of the Rules Implementing P.D. 851
issued by MOLE reads thus:
The term "its equivalent" as used in paragraph (c) hereof shall include
Christmas bonus, midyear bonus, profit-sharing payments and other cash
bonuses amounting to not less than 1/12th of the basic but shall not include
cash and stock dividends, cost of living allowances and all other allowances
regularly enjoyed by the employee, as well as non-monetary benefits.
Where an employer pays less than 1/12th of the employee's basic salary the
employer shall pay the difference.
Petitioner National Federation of Sugar Workers (NFSW, for short) is now
before Us with the plea that because in its agreement with respondent
Central Azucarera de la Carlota (CAC, for short) of November 30, 1981 to the
effect that:
The parties agree to abide by the final decision of the Supreme Court in any
case involving the 13th Month Pay Law if it is clearly held that the employer
is liable to pay a 13th month pay separate and distinct from the bonuses
already given. (Par. 4)
and because this Court dismissed, in legal effect, for lack of necessary votes,
the petition in the Marcopper case seeking the setting aside of Deputy
Minister Inciong's decision which considered the midyear and Christmas
bonuses being given to the Marcopper workers as not the equivalent of the
13th month pay enjoined by P.D. 851, We should now order CAC to pay
NFSW members in the same way as stated in the opinion of the Chief Justice
in the Marcopper case.
At first glance, such a pause does appear tenable and plausible. But looking
deeper at the precise wording of the November 30, 1981 agreement
between NFSW and CAC abovequoted, the proposition in the main opinion
herein that what must be deemed contemplated in said agreement is that
the final decision of the Supreme Court therein referred to must be one
wherein it would be "clearly held that the employer is liable to pay 13th
month pay separate and distinct from the bonuses already given", compels
concurrence on my part. I find said agreement to be definitely worded.
There is no room at all for doubt as to the meaning thereof. And tested in
the light of such unambiguous terminology of the said agreement, the
Marcopper opinion signed by only seven members of this Court, cannot,
under the Constitution and prevailing binding legal norms, unfortunately,
have doctrinal worth and cannot be considered as stare decisis. Hence, it
cannot be said to be the "definite" decision of the Supreme Court the
parties (CAC and NFSW) had in mind. Accordingly, it is my considered
opinion that NFSW's plea in this case is premature and rather off tangent.
I am not unmindful of the possibility or even probability that labor may
argue that in signing the November 30, 1981 agreement, NFSW little cared,
for it was not fully informed about what doctrinal and what is not doctrinal
signify in law. Labor may argue that it is enough that Marcopper workers got
their 13th month pay in addition to their bonuses by virtue of the denial by
this Supreme Court of Marcopper Company's appeal to US, and NFSW
members should not be left getting less. And it would only be rational to
expect labor to invoke in support of their plea no less than the social justice
and protection to labor provisions of the Constitution.
As I have said at the outset, I am about to leave this Court. Nothing could
warm my heart and lift my spirit more than to part with the noble thought
that during my tenure of fourteen years in this Supreme Court, I have given
labor the most that it has been within my power to give. But again I must
emphasize that what is constitutionally ordained, and by that I mean also by
God and by our country and people, is for me to jealously guard that the
scales of justice are in perfect balance. No fondness for any sector of society,
no love for any man or woman, no adherence to any political party, no
feeling for any relative or friend nor religious consideration or belief should
ever induce me to allow it to tilt in the slightest degree in favor of anyone.
The concept of social justice has been variously explained in previous
decisions of this Court. In Talisay Silay, 1penned by this writer, We went as far
as to hold that when it comes to labor-management relationship, the social
justice principle is more pervasive and imperious than police power. It is
indeed consecrated as one of the most valued principles of national policy in
the Constitution. (Sec. 6, Art. II) So also is protection to labor. (See. 9, Id.) I
am of the firm conviction, however, that these constitutional injunctions are
primarily directed to and are responsibilities of the policy-determining
departments of the government. In the enforcement of said principles, the
role of the judiciary is to a certain degree less active. The courts are
supposed to be called upon only to strike down any act or actuation of
anyone violative thereof, and, of course 6 in case of doubt in any given
situation, to resolve the same in favor of labor. Verily, neither the Supreme
Court nor any other court is enjoined to favor labor merely for labor's sake,
even as the judiciary is duty bound never to place labor at a disadvantage,
for that would not be only unconstitutional but inhuman, contrary to the
Universal Declaration of Human Rights and unpardonably degrading to the
dignity of man who has been precisely created in the image of God. At
bottom the Ideal in social justice is precisely to maintain the forces of all the
economic segments of society in undisturbed and undisturbable
equilibrium, as otherwise there would be no justice for anyone of them at
all.
In the case at bar, I do not feel at liberty to disregard what the parties have
freely agreed upon, assuming, as I must, that in entering into such
agreement both parties were fully aware of their legal rights and
responsibilities. In this connection, I take particular note of the fact that if
CAC is a big financially well conditioned concern, NFSW is not just one
ignorant laborer or group of laborers, but a federation with leaders and
lawyers of adequate if not expert knowledge-ability in regard to their rights
and other relevant matters affecting labor. I am satisfied that there is here
no occasion to apply the Civil Code rule regarding vigilance whenever there
is inequality in the situations of the parties to an agreement or transaction.
In conclusion, I concur fully in the main opinion of Justice Plana as regards
both issues of illegality of the strike here in question and the non-
applicability hereto of whatever has been said in Marcopper. I have added
the above remarks only to make myself clear on labor-management issues
before I leave this Court, lest there be no other appropriate occasion for me
to do so.
ABAD SANTOS, J., concurring:
I concur but lest I be accused of inconsistency because in Marcopper Mining
Corporation vs. Ople, et al., No. 51254, June 11, 1981, 105 SCRA 75, I voted
to dismiss the petition for lack of merit and as a result Marcopper had to
give the 13th-month pay provided in P.D. No. 851 even as its employees
under the CBA had mid-year and end-of-year bonuses, I have to state that
Marcopper and La Carlota have different factual situations as follows: 1. In
Marcopper, the CBA clearly stated that the company was obligated to "grant
midyear and end-of-year bonuses to employees following years in which it
had profitable operations." Thus the payment of the bonuses was
contingent upon the realization of profits. If there were no profits, there
were to be no bonuses. Accordingly, it was fair and proper to conclude that
Marcopper had not shown that it was already paying its employees the
13th-month pay or its equivalent as provided in Sec. 2 of P.D. No. 851.
However, in the instant case of La Carlota the obligation of the employer to
pay bonuses is not contingent on the realization of profits. The CBA
stipulates that the "parties also agree to maintain the present practice on
the grant of Christmas bonus, milling bonus, and amelioration bonus to the
extent as the latter is required by law." It can thus be said that La Carlota is
already paying the equivalent of the 13th-month pay. 2. In Marcopper, the
company's liability for the 13th month pay was determined by no less than
the Deputy Minister of Labor, Amado G. Inciong. I have always given much
weight to the determination of officers who are tasked with implementing
legislation because their expertise qualifies them in making authoritative
decisions. In the present case of La Carlota, there has been no
determination that the employees are entitled to the 13th-month pay. In
fact, a negative conclusion can be implied from the declaration of Labor
Arbiter Ovejera that the labor union's strike against La Carlota was illegal.
MELENCIO-HERRERA, J., concurring.
A. The question of law involved in this Petition for Prohibition with
Preliminary Injunction is based on the following relevant facts which are
indicated in the record:
1. Prior to December 16, 1975, Central Azucarera de la Carlota (LA CARLOTA,
for short), which operates a sugar mill in La Carlota, Negros Occidental, may
be deemed as paying to its employees milling bonus, amelioration bonus,
and Christmas bonus equal at least to a months' salary.
2. PD 851, effective on the aforementioned date of December 16, 1975,
required employers to pay their employees a 13the month pay, provided the
employer was not already paying the said 13th month pay or itsequivalent.
3. On December 22, 1975, the then Department of Labor promulgated a
regulation stating that "Christmas bonus" is an equivalent of the 13th month
pay,
4. From 1975 to 1981, LA CARLOTA was not paying 13th month pay on the
assumption that the "Christmas bonus" it was paying was an "equivalent" of
the 13th month pay. The employees of LA CARLOTA and their labor unions
had not protested the non-payment of the 13th month pay in addition to
the Christmas bonus.
5. On June 11, 1981, this Court promulgated its Decision in the "Marcopper"
case, which involved a relationship between the " 13th month pay" and the
"Christmas bonus" being paid by an employer. A Motion for reconsideration
of the Decision was subsequently filed in said case, which was denied only
on December 15,1981.
6. In the meantime, on November 29, 1981, the National Federation of
Sugar Workers (NFSW), as the labor union representing the majority of
employees at LA CARLOTA, staged a strike because LA CARLOTA had refused
to pay the 13th month pay in addition to Christmas bonus. The strike lasted
one day on November 30, 1981, LA CARLOTA and NFSW entered into a
settlement agreement, paragraph 4 whereof provided as follows:
4. The parties agree to abide by the final decision of the Supreme Court in
any case involving the 13th Month Pay Law if it is clearly held that the
employer is liable to pay a 13th Month Pay separate and distinct from the
bonuses already given;
7. On January 28, 1982, NFSW declared a strike on the ground that, despite
the finality of the Marcopper Decision, LA CARLOTA had refused to grant
13th month pay to its employees, in addition to Christmas bonus, as agreed
upon in the settlement agreement of November 30, 1981.
B. The legal controversy in the matter may be explained as follows:
1. NFSW filed a notice of strike on January 22, 1982, claiming that the
contemplated strike was based on an unfair labor practice, and that it could
declare the strike even before the expiration of fifteen (15) days thereafter.
The unfair labor practice relied upon was management's alleged renegation
of the November 30, 1981 agreement, considering that the finality of the
Marcopper Decision had "clearly held that the employer is liable to pay a
13th month pay separate and distinct from "the Christmas bonus".
2. On the other hand, LA CARLOTA took the position that the strike was not a
ULP strike but an economic strike subject to a cooling period of thirty (30)
days with its attendant requirements.
3. It is clear that the controversy between NFSW and LA CARLOTA
substantially hinges on the question of whether or not the Marcopper
Decision has clearly held that a Christmas bonus, in whatsoever form,
should not deter the employer's obligation to the payment of the 13th
month pay.
C. The proceedings in the case below were as follows:
1. On February 4, 1982, LA CARLOTA filed a petition to declare the strike of
January 28, 1982 as illegal in R. A. B. Case No. 110- 82 of the Regional
Arbitration Branch No. VI-A of the National Labor Commission in Bacolod
City (the CASE BELOW).
2. After relatively protracted hearings, respondent Labor Arbiter rendered a
Decision declaring illegal the strike of January 28, 1982. That is the Decision
assailed by NFSW in this instance claiming it to be null and void.
D. Reference to a collateral proceeding may be made at this juncture:
1. It appears that, in LA CARLOTA, there is another labor union under the
name of National Congress of Unions in the Sugar Industry in the Philippines
(NACUSIP).
2. On July 30, 1981, NACUSIP filed a complaint in FSD Case No. 1192-81
before R. A. B. No. VI-A in Bacolod City praying that an Order be issued
directing LA CARLOTA to pay 13th month pay to its employees from the
effective date of PD 851 (the COLLATERAL PROCEEDING).
3. On December 4, 1981, NFSW filed a notice to intervene in the
COLLATERAL PROCEEDING.
4. On January 26, 1982, a Decision was rendered in the COLLATERAL
PROCEEDING which, in part, said:
On the contrary, what this Labor Arbiter is aware of, with which he can take
notice, is the policy declaration of the Honorable Minister of Labor and
Employment contained in a telegram addressed to Asst. Director Dante G.
Ardivilla Bacolod District Office, this Ministry, and disseminated for the
information of this Branch which states, among other things, that where
bonuses in CBAs are not contingent on realization of profit as in the
Marcopper case, the decision (of the Supreme Court, re: Marcopper case),
does not apply, and cases thereon should be resolved under the provisions
of PD 851 and its implementing rules.
5. On February 15, 1982, NFSW filed a Motion for Reconsideration of the
Decision.
Upon the foregoing exposition, there is justification for an outright dismissal
of the Petition for Prohibition for the simple reason that the strike of January
28, 1982 may not be considered a ULP strike. When the strike was declared,
it could not be validly claimed that there was already a final decision made
by this Court which "clearly held that the employer is liable to pay a 13th
month pay separate and distinct from" the Christmas bonus being paid by LA
CARLOTA. However, since the Marcopper Decision has engendered
controversies in labor-management relations in several
industrial/commercial firms, the Court has resolved to rule on the merits of
the substantial question between LA CARLOTA and NFSW for the public
benefit with a clarification of the Marcopper judgment.
I agree with the proposition taken by the Ministry of Labor and Employment
that Christmas bonus, not contingent on realization of profit as in the
Marcoper case, is the equivalent of the 13th month pay. In regards to the
juxtaposition of the terms "13th month pay" and "Christmas bonus" in an
amount not less than a month's salary, the following may be explained:
Within recent time, it has been usual for an industrial or commercial firm,
which has had a successful year, to grant a bonus to its employees generally
denominated before as year-end bonus. A firm usually knows whether or
not it has had a successful year by the middle of December. In case of
profitability, payment of the year-end bonus does not have to await the end
of the year, but it is often times given some days before New Year, generally
about Christmas day. Before long, the year-end bonus became also known
as Christmas bonus, following the change of the Christmas gift-giving day
from January 6th to December 25th. Thus, it has been stated: "a less formal
use of the bonus concept, which is designed to reward workers for a
successful business year, is the annual or Christmas bonus" (3 Ency. Brit.,
918).
Although the original concept of a year-end bonus or Christmas bonus, was
that it depended on a successful year, the bonus, in many instances, has
been developed into an obligatory payment as part of wages and not related
to profitability of operations. As part of wages, they are subject to CBA
negotiation. That has been the general trend in the United States and in our
country.
... But where so-called gifts are so tied to the remuneration which
employees receive for their work that they are in fact a part of it, they are in
reality wages within the meaning of the Act.
xxx xxx xxx
In a number of cases an employer has been held required to bargain
concerning bonuses, including regularly given Christmas bonuses. (48 Am
Jur 2d., p. 455).
Moreover, once a Christmas bonus becomes institutionalized, it has to be
non-discriminatory. "An employer violates 29 USC (Sec.) 158(a) (3) where, to
discourage union membership, he ceases giving a Christmas bonus to all
employees and gives the bonus only to office and supervisory employees
after unionization of his production and maintenance employees." (48 Am
Jur 2d., p. 420).
The Christmas bonus, as it clearly denotes, has a literal religious connection,
"Christmas" being a term within the Christian religion. Considering that the
Christmas bonus has become obligatory and non- discriminatory in many
jurisdictions, a tendency arose to disassociate that bonus from its religious
connotation. Some countries, with non-christian or "liberal" christian
segments, have opted to make the year-end or Christmas bonus obligatory,
and they called it the 13th month pay. It is, perhaps, having our Moslem
brothers in mind that the Government had decided to set up in our country
the obligatory payment of the 13th month pay Thereby, the orthodox non-
christian employee is not subjected to "discrimination" due to his inability to
accept the Christmas bonus because of strict allegiance to this own faith. It
should, therefore, be apparent that "christmas bonus" and "13th month
pay" should be equated one with the other.
PD 851 does not contain a provision for rules and regulations to be
promulgated by the Department of Labor for implementation of the Decree.
Notwithstanding, on December 22, 1975, the Department of Labor issued
"Rules and Regulations Implementing Presidential Decree 851 ", with the
following relevant provision:
The term "its equivalent" as used in paragraph (c) hereof shall include
Christmas bonus, mid-year bonus, profit-sharing payments and other cash
bonuses amounting to not less than 1/12th of the basic salary but shall not
include cash and stock dividends cost of living allowances and all other
allowances regularly enjoyed by the employee, as well as non-monetary
benefits. Where an employer pays less than 1/12th of the employees basic
salary, the employer shall pay the difference.
When administrative rules and regulations are not properly "delegated",
they cannot have the force and effect of law. It has been stated that:

Administrative rules and regulations. As discussed in Public Administrative

Bodies and Procedure (Sec.) 108, rules and regulations duly promulgated
and adopted in pursuance of properly delegated authority have the force
and effect of law where they are legislative in character, but rules and
regulations which are merely executive or administrative views as to the
meaning and construction of the statute are not controlling on the courts,
and cannot alter or extend the plain meaning of a statute, although they are
entitled to great weight where the statute is ambiguous. (82 C.J.S., pp. 770,
771).

Although the rule defining the term "equivalent" as used in PD 851 does not
have the force and effect of law, it can and should be considered as an
administrative view entitled to great weight as it is an interpretation of
"equivalent" made by the administrative agency which has the duty to
enforce the Decree.

In the light of the foregoing views, I concur with the dismissal of the Petition
for Prohibition with the express statements that LA CARLOTA's Christmas
bonus and other bonuses exempts it from giving 13th month pay to its
employees, and that the strike of January 28, 1982 was not a ULP strike and
G.R. No. 86000 September 21, 1990
should be considered illegal even if NFSW had complied with all statutory
requirements for the strike. GOLD CITY INTEGRATED PORT SERVICES, INC. (INPORT), petitioner,
vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION (NLRC) and
JOSE L. BACALSO,respondents.

Jerry M. Pacuribot for petitioner.

Francisco D. Alas for private respondent.

FELICIANO, J.:
Private respondent Jose Bacalso was employed as an admeasurer by the
petitioner Gold City Integrated Port Services, Inc. ("Gold City"). He was
suspected by management of under measuring cargo. Hence, on 23 January
1987, the cargo control officer ordered two (2) other admeasurers to re-
measure three (3) pallets of bananas which had already been measured by
private respondent. 1 The re-measurement revealed that respondent had
under-measured the bananas by 1.427 cubic meters. 2
Private respondent felt insulted by the re-measurement and so the next day
he went to the office of the Chief Admeasurer, Rolando Guanaco, and there
confronted Nigel Mabalacad, one of the two (2) admeasurers who had re-
checked his work, regarding the matter. Private respondent quarreled with
Mabalacad in the presence of Guanaco, their immediate superior, inside the
latter's office. Guanaco directed private respondent to stop provoking
Mabalacad and told both that being in his office, they should behave
properly. Private respondent ignored this oral directive and a fistfight
erupted then and there between him and Mabalacad. Both were eventually
pacified by their co-workers. 3
Private respondent Bacalso was then charged with assaulting a co-employee
and falsifying reports and records of the company relative to the
performance of his duties, and was preventively suspended pending
investigation of his case by the union-management grievance
committee. 4 In a letter dated 20 March 1987, the grievance committee
referred the disposition of the matter to management in view of the
objections of the aggrieved parties to the proposal that private respondent
be meted out a penalty of forty-five (45) days suspension. 5 Apparently,
Guangco and Mabalacad did not consider suspension an adequate sanction
considering private respondent's alleged inability to get along with the other
admeasurers and with the company's customers. On 11 April 1987, private
respondent received a notice of termination of services upon the grounds of
assaulting a co-employee and of insubordination. 6
Private respondent Bacalso filed a complaint for illegal dismissal with the
Regional Arbitration Branch No. 10 of the Department of Labor and
Employment on 25 May 1987. He controverted the finding of
insubordination, contending that there was no evidence he had wilfully
disobeyed any order given by his superior during the incident. He admitted
assaulting his co-employee but claimed that that did not constitute just
cause for his dismissal under Article 282 (d) of the Labor Code because that
act was not an offense committed against his employer's duly authorized
representative. He prayed for reinstatement with backwages and damages. 7
Petitioner Gold City in its answer argued that Bacalso's failure to heed
Guangco's order to stop provoking Mabalacad constituted insubordination
or disrespect towards a superior officer punishable by dismissal under the
Schedule of disciplinary sanctions and norms of conduct, incorporated in the
existing Collective Bargaining Agreement ("CBA") with the union. 8
The Labor Arbiter rendered an award in favor of private respondent Bacalso
holding that the dismissal was illegal because there was no evidence to
support the charge of insubordination, and that assault on a co-employee
was punishable only with fifteen (15) days suspension under the CBA's
Schedule of penalties. In view of the strained relations between the parties,
however, the Labor Arbiter did not order reinstatement and awarded
Bacalso separation pay and attorney's fees instead. 9
Both parties appealed to the National Labor Relations Commission ("NLRC").
The NLRC, in a decision dated 30 August 1988, held that only Bacalso's
appeal was meritorious. It declined to characterize the assailed conduct of
Bacalso as insubordination under Article 282 (a) of the Labor Code because
Guangco's order was "not connected with" Bacalso's work, and did not
amount to wilful or gross disrespect. The NLRC modified the Labor Arbiter's
decision by ordering private respondent Bacalso's reinstatement with
backwages. 10
Petitioner, having moved for reconsideration without success, is before this
Court on certiorari. On 20 February 1989, the Court issued a temporary
restraining order enjoining execution of the NLRC's decision pending
resolution of this Petition, effective upon petitioner's posting of a cash or
surety bond in the amount of P60,000.00. 11 Petitioner Gold City posted a
cash deposit in the required amount. 12
In its Petition, Gold City emphasizes management's prerogative to
promulgate rules of discipline and to enforce the Schedule of disciplinary
sanctions providing for dismissal of an employee who commits gross
disrespect of a superior officer. 13
In his Comment on the Petition, private respondent Bacalso alleged that he
was apprised of the charge of insubordination only in his notice of
termination, and that he was thereby denied an opportunity to be heard on
this charge before being dismissed, in violation of Sections 2 and 5 of Rule
14 of the Omnibus Rules Implementing the Labor Code. 14
Two (2) issues are posed for resolution in this case; (a) whether private
respondent was denied due process in the course of his dismissal; and (b)
whether private respondent was dismissed for a just cause.
In respect of the first issue, it must be noted that petitioner did not properly
inform private respondent of all the infractions of company regulations
which subsequently became the justification for his dismissal. After being
preventively suspended, he was charged with assaulting a co-employee and
falsifying reports and records of the company relating to the performance of
his duties. Consequently, throughout the investigation conducted at the
company level, private respondent's explanations in defense were shaped to
meet only those charges. Petitioner discovered it could not sustain the
charge of falsification of company records against private respondent. Since
assault upon a co-employee, the charge admitted by private respondent, is
punishable only with fifteen (15) days suspension under the CBA's Schedule
of penalties, it in effect became necessary for petitioner to characterize said
assault as an act of "insubordination or disrespect towards a superior
officer", an offense punishable with dismissal under the Schedule. 15 So it
came to pass that when private respondent received his notice of
termination, the causes therefor were stated as assault on a co-employee
and insubordination.
The Court considers that there was here at least a partial deprivation of
private respondent's right to procedural due process. He could not be
expected adequately to defend himself as he was not fully or correctly
informed of the charges against him which management intended to prove.
It is less than fair for management to charge an employee with one offense
and then to dismiss him for having committed another offense with which
he had not been charged and against which he was therefore unable
adequately to defend himself. Correct specification of private respondent's
alleged wrongdoing was obviously important here, since the penalty that
could appropriately be meted out depended upon what offense was charged
and proven. It has been stressed by the Court that the right of an employee
to procedural due process consists of the twin rights of notice and
hearing. 16 The purpose of the requirement of notice is obviously to enable
the employee to defend himself against the charge preferred against him by
presenting and substantiating his version of the facts. Since Gold City here in
effect charged private respondent with a second offense other than
falsification of company records, it was incumbent upon petitioner employer
to have given private respondent additional time and opportunity to meet
the new charge against him of insubordination. Gold City failed to do that
here. In so failing, Gold City failed to accord to private respondent the full
measure of his right to procedural due process. The fact that in the
proceedings before the Labor Arbiter the conduct of private respondent that
petitioner regarded as insubordination was substantiated, does not militate
against this conclusion.
Coming to the second issue, Article 282 of the Labor Code provides in part:
Art. 282. Termination by Employer.-An employer may terminate an
employment for any of the following causes: a) Serious misconduct or wilful
disobedience by the employee of the lawful orders of his employer or
representative in connection with his work.
xxx xxx xxx
(Emphasis supplied)
Wilful disobedience of the employer's lawful orders, as a just cause for the
dismissal of an employee, envisages the concurrence of at least two (2)
requisites: the employee's assailed conduct must have been wilful or
intentional, the wilfulness being characterized by a "wrongful and perverse
attitude"; and the order violated must have been reasonable, lawful, made
known to the employee and must pertain to the duties which he had been
engaged to discharge. 17 Both requisites are present in the instant case.
By private respondent Bacalso's own admission, he felt insulted by the re-
measurement of the cargo he had already measured. He was apparently
much offended by the implication he perceived that management was
uncertain either about his honesty or his competence or possibly both. He
determined to lose his temper, became very angry and picked a fight with
one of the co-workers who had been instructed by their common superior
to carry out the re-measurement of private respondent's pallets of bananas.
In the process, private respondent Bacalso completely disregarded the
courtesy and respect due from a subordinate to his superior. Indeed, he may
have been, consciously or otherwise, precisely sending a signal to his
superior officer in whose presence he provoked and then engaged in
physical violence with his co-worker. Prior to the fistfight, Guangco had
warned Bacalso to desist from further provoking his co-worker with insulting
language. This warning constituted an order from private respondent's
immediate superior not to breach the peace and order of the
Surveyors'(Admeasurers') Division; Guangco was obviously attempting to
maintain basic employee discipline in the workplace.
It is thus not easy to understand how public respondent NLRC could have
reasonably concluded that Guangco's order and warning were "not
connected" with private respondent's work. We believe and so hold that
private respondent's act constituted wilful disobedience to a lawful order of
petitioner's representative obviously connected with private respondent's
work.
It does not follow, however, that private respondent Bacalso's services were
lawfully terminated either under Article 282 (a) of the Labor Code or under
the CBA Schedule of penalties. We believe that not every case of
insubordination or wilful disobedience by an employee of a lawful work-
connected order of the employer or its representative is reasonably
penalized with dismissal. For one thing, Article 282 (a) refers to
"serious misconduct or wilful disobedience". There must be reasonable
proportionality between, on the one hand, the wilful disobedience by the
employee and, on the other hand, the penalty imposed therefor.
Examination of the circumstances surrounding private respondent's assault
upon his co-employee shows that no serious or substantial danger had been
posed by that fistfight to the well-being of his other co-employees or of the
general public doing business with petitioner employer; and neither did such
behavior threaten substantial prejudice for the business of his employer. The
fistfight occurred inside the offices of the Surveyors' Division, more
particularly, Mr. Guangco's office, away from the view of petitioner's
customers or of the general public. In Lausa v. National Labor Relations
Commission, 18 petitioner Lausa exhibited disorderly and pugnacious
behavior in the course of an argument with his immediate superior, in the
presence of passengers and other crewmen on board the inter-island vessel
of which Lausa was a crew-member. In that case, the Court sustained the
dismissal of petitioner Reynaldo Lausa considering that his "behavior could
easily have provoked or triggered off a brawl and mindless panic on board
the vessel, and endangered the safety of people and crew-members, and
under certain conditions, the safety of the vessel itself." In Wenphil
Corporation v. National Labor Relations Commission, 19 the Court also
sustained the dismissal of private respondent Roberto Mallare who, while
tending the salad bar of a fast food restaurant, engaged in an altercation a
co-worker slapping the latter on the head, stepping on his foot, brandishing
an ice scooper against him and refusing to be pacified, right in front and in
plain sight of customers dining in the restaurant, thus posing a substantial
threat of disorder in the restaurant. In the instant case, private respondent
Bacalso's disorderly behavior did not present a comparable threat to the
safety or peace of mind of his co-workers or that of the customers of Gold
City.
Considering that private respondent Bacalso's unruly temper did not
become an effective threat to his co-workers or the safety of the customers
dealing with his employer, or to the goodwill of his employer, and
considering further that he had been quite candid in admitting that he had
been at fault as soon as the investigation began in the company level, we
agree with the NLRC that termination of his services was a
disproportionately heavy penalty. We believe that suspension without pay
for three (3) months would be an adequate penalty for the assault on a co-
worker and act of insubordination that private respondent Bacalso actually
committed.

It follows that private respondent Bacalso is entitled to

reinstatement. 20 Should reinstatement to his previous position not be
feasible because of his relationship or lack of relationship with his fellow
admeasurers, he should be reinstated to a substantially equivalent position
in another division of the company. If that is not possible or feasible either,
then in lieu of such reinstatement, petitioner shall pay private respondent
separation pay equivalent to one-month's pay for every year of
service. 21 Private respondent is also entitled to his backwages; however, an
amount equivalent to his three (3) months pay shall be deducted from such
backwages. The award of attorney's fees stays.

WHEREFORE, the Petition for certiorari is hereby DISMISSED for lack of

merit, and the Decision dated 30 August 1988 of public respondent NLRC is
hereby AFFIRMED with the modifications that: (1) from private respondent's
backwages, there shall be deducted an amount equivalent to his three-
month's pay corresponding to the penalty properly imposable upon him; G.R. No. 150437 July 17, 2006
and (2) should reinstatement to private respondent Bacalso's former
SUKHOTHAI CUISINE and RESTAURANT, petitioner,
position, or to a substantially equivalent position in another division of
vs.
petitioner Gold City, not be feasible, petitioner shall pay private respondent
COURT OF APPEALS, NATIONAL LABOR PHILIPPINE LABOR ALLIANCE
Bacalso, in lieu of such reinstatement, separation pay equivalent to one-
COUNCIL (PLAC) Local 460 Sukhothai Restaurant Chapter, EMMANUEL
month's pay for every year of service. The temporary restraining order dated
CAYNO, ALEX MARTINEZ, BILLY BACUS, HERMIE RAZ, JOSE LANORIAS, LITO
20 February 1989 is hereby LIFTED. No pronouncement as to costs.
ARCE, LINO SALUBRE, CESAR SANGREO, ROLANDO FABREGAS, JIMMY
SO ORDERED. BALAN, JOVEN LUALHATI, ANTONIO ENEBRAD, JOSE NEIL ARCILLA, REY
ARSENAL, ROEL ESANCHA, EDGAR EUGENIO, ALBERT AGBUYA, ROLANDO
PUGONG, ARNEL SALVADOR, RICKY DEL PRADO, CLAUDIO PANALIGAN,
BERNIE DEL MUNDO, JOHN BATHAN, ROBERTO ECO, JOVEN TALIDONG,
LENY LUCENTE, ANALIZA CABLAY, RIGOBERTO TUBAON and MERLY
NAZ, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before this Court is a petition for certiorari under Rule 45 questioning the
Decision1 dated August 8, 2001 promulgated by the Court of Appeals (CA) in
CA-G.R. SP No. 63864 which affirmed in toto the Decision dated November
29, 2000 of the National Labor Relations Commission (NLRC); and the CA
Resolution2 dated October 18, 2001 which denied the petitioner's Motion
for Reconsideration.
This case originated from a complaint for illegal strike filed with the NLRC by
the petitioner3 against private respondents due to an alleged "wildcat strike"
and other concerted action staged in the company premises on June 24, 25
and 26, 1999.
The undisputed facts are as follows:
Sometime in March 1998, the majority of the employees of the petitioner
organized themselves into a union which affiliated with the Philippine Labor
Alliance Council (PLAC), and was
designated as PLAC Local 460 Sukhothai Restaurant Chapter (Union). 4
On December 3, 1998, private respondent Union filed a Notice of Strike with
the National Conciliation and Mediation Board (NCMB) on the ground of
unfair labor practice, and particularly, acts of harassment, fault-finding, and
union busting through coercion and interference with union affairs. On
December 10, 1998, in a conciliation conference, the representatives of the
petitioner agreed and guaranteed that there will be no termination of the
services of private respondents during the pendency of the case, with the
reservation of the management prerogative to issue memos to erring
employees for the infraction, or violation of company policies. On the
following day, or on December 11, 1998, a Strike Vote was conducted and
supervised by NCMB personnel, and the results of the vote were submitted
to the NCMB on December 21, 1998.
On January 21, 1999, the petitioner and the Union entered into a
Submission Agreement, thereby agreeing to submit the issue of unfair labor
practice – the subject matter of the foregoing Notice of Strike and the Strike
Vote – for voluntary arbitration with a view to prevent the strike.
On March 24, 1999, during the pendency of the voluntary arbitration
proceedings, the petitioner, through its president, Ernesto Garcia, dismissed
Eugene Lucente, a union member, due to an alleged petty quarrel with a co-
employee in February 1999. In view of this termination, private respondent
Union filed with the NLRC a complaint for illegal dismissal.
In the morning of June 24, 1999, private respondent Jose Lanorias, a union
member, was relieved from his post, and his employment as cook,
terminated. Subsequently, respondent Billy Bacus, the union vice-president,
conferred with Ernesto Garcia and protested Lanorias's dismissal. Shortly
thereafter, respondents staged a "wildcat strike."
On June 25, 1999, a Notice of Strike was re-filed by the private respondents
and the protest, according to the respondents, was converted into a "sit-
down strike." On the next day, or on June 26, 1999, the same was
transformed into an "actual strike."
On June 29, 1999, the petitioner filed a complaint for illegal strike with the
NLRC against private respondents, seeking to declare the strike illegal, and
to declare respondents, who participated in the commission of illegal acts,
to have lost their employment status. Having arrived at no amicable
settlement, the parties submitted their position papers, together with
supporting documents, affidavits of witnesses, and photographs, in
compliance with the orders of the Labor Arbiter. On October 12, 1999, the
Labor Arbiter rendered a Decision the dispositive portion of which reads:
WHEREFORE, premises considered, respondents are hereby declared to
have staged an illegal strike, and the employment of union officers and all
individual respondents are deemed validly terminated in accordance with
law.
Finally, all individual respondents are hereby directed to immediately
remove their picket lines and all physical obstructions that impede ingress
and egress to petitioner's premises.
SO ORDERED.5
The principal question before the Labor Arbiter was whether the private
respondents staged an illegal strike. Ruling in the affirmative, the Labor
Arbiter held that the Notice of Strike dated December 3, 1998 as well as the
Strike Vote of December 11, 1998 referred to a prior dispute submitted for
voluntary arbitration and, hence, they cannot apply to the strike staged
about six months later, which commenced on June 24, 1999 and ended on
June 26, 1999; that, for these reasons, the Union failed to comply with the
mandatory requisites for a lawful strike; that the issuance of memos by the
petitioner to instill discipline on erring employees is a lawful exercise of
management prerogative and do not amount to acts of unfair labor practice;
that, instead of resorting to a strike, private respondents should have availed
of the proper legal remedies such as the filing of complaints for illegal
suspension or illegal dismissal with the NLRC; that, the root causes of the
controversy are the petition for certification election and petition for
cancellation of union registration which were then pending before the
Department of Labor as well as the issue on unfair labor practice then
pending before the voluntary arbitrator, and, hence, the parties should have
awaited the resolution of the cases in the proper fora; and that even if
private respondents complied with all the requisites of a valid strike, the
strike is still illegal due to the commission of prohibited acts, including the
obstruction of free ingress and egress of the premises, intimidation, and
threat inflicted upon non-striking employees.
Private respondents appealed to the NLRC which, on November 29, 2000,
promulgated its Decision the dispositive portion of which states:
WHEREFORE, the appeal is hereby granted. Accordingly, the Decision dated
October 12, 1999 in the above entitled case is hereby vacated and set-aside.
Consequently, the complaint of illegal strike is hereby dismissed for lack of
merit.
All striking workers are hereby ordered to return to work immediately and
Sukhothai Restaurant to accept them back to their former or equivalent
positions. If the same is no longer possible, Sukhothai Restaurant is ordered
to pay them separation pay equivalent to one month salary for every year of
service reckoned from their initial date of employment up to the present.
SO ORDERED.6
In overruling the Labor Arbiter, the NLRC held that the petitioner is guilty of
union busting; that the petitioner violated the Submission Agreement dated
December 10, 1998 in that no termination shall be effected during the
voluntary arbitration proceedings and, hence, the strike was justified; that
the Notice of Strike and Strike Vote dated December 3, 1998 and December
11, 1998, respectively, are applicable to the strike of June 24, 25, and 26,
1999 since the same issues of unfair labor practice were involved and that
unfair labor practices are continuing offenses; that even if the foregoing
Notice of Strike and Strike Vote were not applicable, the Union may take
action immediately since the petitioner is guilty of union busting; and that
the re-filing of a Notice of Strike on June 25, 1999 cured the defect of non-
compliance with the mandatory requirements.
After the NLRC denied the Motion for Reconsideration, the petitioner
appealed to the CA and raised the following issues:
I. WHETHER OR NOT THE STRIKE STAGED BY THE PRIVATE RESPONDENTS IS
LEGAL; and
II. WHETHER OR NOT THE PRIVATE RESPONDENTS WHO PARTICIPATED IN
THE STRIKE AND COMMITTED ILLEGAL ACTS WERE PROPERLY AND VALIDLY
DECLARED TO HAVE LOST THEIR EMPLOYMENT STATUS. 7
As stated above, the CA denied the petition and affirmed the NLRC.
Petitioner is now before this Court, raising the following grounds:
I. THE COURT OF APPEALS GRAVELY ERRED AND DECIDED THE ISSUES IN THE
INSTANT CASE IN A MANNER CONTRARY TO ESTABLISHED LAW AND
JURISPRUDENCE BY RULING THAT THE WILDCAT STRIKE OF JUNE 24, 1999 IS
VALID AND LEGAL DESPITE CLEAR AND INCONTROVERTIBLE EVIDENCE THAT:
A. PRIVATE RESPONDENTS FAILED TO COMPLY WITH THE REQUISITES FOR A
VALID STRIKE AS PRESCRIBED BY THE PERTINENT PROVISIONS OF THE LABOR
CODE;
B. THERE WERE NO STRIKEABLE ISSUES; AND
C. PRIVATE RESPONDENTS COMMITTED ILLEGAL AND PROHIBITED ACTS
DURING THE STRIKE.
II. THE COURT OF APPEALS GRAVELY ERRED BY FAILING TO ADDRESS THE
OTHER ISSUES RAISED BY THE PETITIONER IN ITS PETITION FOR CERTIORARI
WHICH FAILURE AMOUNTED TO A DENIAL OF ITS RIGHT TO DUE PROCESS
OF LAW.8
The petition is meritorious.
The questions before this Court are whether the strike staged by the private
respondents is illegal; and whether private respondents are deemed to have
lost their employment status by participating in the commission of illegal
acts during the strike.
Respondents insist that the filing of the Notice of Strike on December 3,
1998, the Strike Vote of December 11, 1998, the submission of the results of
the vote to the NCMB on December 21, 1998, and their observation of the
15-day cooling-off period in case of unfair labor practice as well as the
seven-day reporting period of the results of the strike vote, all satisfy the
mandatory requirements under Article 263 9 of the Labor Code and are
applicable to the June 1999 strike. In support of this theory, respondents
invoke Article 263(f) in that the decision to strike is valid for the duration of
the dispute based on substantially the same grounds considered when the
strike vote was taken, thus, there is no need to repeat the process.
Furthermore, according to the respondents, even assuming for the sake of
argument that the Notice of Strike and Strike Vote in December 1998 cannot
be made to apply to the concerted actions in June 1999, these requirements
may nonetheless be dispensed with since the petitioner is guilty of union
busting and, hence, the Union can take action immediately.
The undisputed fact, however, is that at the time the strike was staged in
June 1999, voluntary arbitration between the parties was ongoing by virtue
of the January 21, 1999 Submission Agreement. The issue to be resolved
under those proceedings pertained to the very same issues stated in the
Notice of Strike of December 3, 1998: the commission of unfair labor
practices, such as acts of harassment, fault-finding, and union busting
through coercion and interference with union affairs.
Article 264 of the Labor Code provides:
Art. 264. Prohibited activities. –
xxxx
No strike or lockout shall be declared after assumption of jurisdiction by the
President or the Secretary or after certification or submission of the dispute
to compulsory or voluntary arbitration or during the pendency of cases
involving the same grounds for the strike or lockout.
x x x x (emphasis supplied)
This Court has held that strikes staged in violation of agreements providing
for arbitration are illegal, since these agreements must be strictly adhered to
and respected if their ends are to be achieved. 10 The rationale of the
prohibition under Article 264 is that once jurisdiction over the labor dispute
has been properly acquired by competent authority, that jurisdiction should
not be interfered with by the application of the coercive processes of a
strike.11 Indeed it is among the chief policies of the State to promote and
emphasize the primacy of free collective bargaining and negotiations,
including voluntary arbitration, mediation, and conciliation, as modes of
settling labor, or industrial disputes. 12 In Alliance of Government Workers v.
Minister of Labor,13 Chief Justice Fernando declared that the principle behind
labor unionism in private industry is that industrial peace cannot be secured
through compulsion by law. Relations between private employers and their
employees rest on an essentially voluntary basis, subject to the minimum
requirements of wage laws and other labor and welfare legislation. 14
The alleged dismissals of Lucente and respondent Lanorias, both union
members, which allegedly triggered the wildcat strike, are not sufficient
grounds to justify the radical recourse on the part of the private
respondents. The questions that surround their dismissal, as private
respondents so affirm, are connected to the alleged breach of the
"guarantee" by the petitioner not to dismiss its employees during the
pendency of the arbitration case, the very questions which they also link to
the other incidents of unfair labor practices allegedly committed by the
petitioner—these matters should have been raised and resolved in the
voluntary arbitration proceedings that were commenced precisely to
address them. On the other hand, if private respondents believed that the
disciplinary measures had nothing to do with the issues under arbitration,
then they should have availed of the appropriate remedies under the Labor
Code, such as the institution of cases of illegal dismissal 15 or, by agreement
of the parties, the submission of the cases to the grievance machinery of the
CBA, if one is available, so that they may be subjected to separate voluntary
arbitration proceedings,16 or simply seek to terminate the pending voluntary
arbitration case and complete the mandatory procedure for a lawful strike.
Private respondents should have availed themselves of any of these
alternative remedies instead of resorting to a drastic and unlawful measure,
specifically, the holding a wildcat strike. 17 And because of the fact that the
Union was fully aware that the arbitration proceedings were pending, good
faith cannot be invoked as a defense.18
For failing to exhaust all steps in the arbitration proceedings by virtue of the
Submission Agreement, in view of the proscription under Article 264 of the
Labor Code, and the prevailing state policy as well as its underlying
rationale, this Court declares that the strike staged by the private
respondents is illegal.19
With respect to respondents' averment that assuming arguendo that the
Notice of Strike and Strike Vote in December 1998 cannot be made to apply
to the strike in June 1999, the requirements for a valid strike may
nonetheless be dispensed
with in case of union busting,20 the Court finds it unnecessary to discuss the
question at length, especially in view of the foregoing declaration that the
strike is illegal, as well as the considerations of established doctrine: the
language of the law leaves no room for doubt that the cooling-off period
and the seven-day strike ban after the strike-vote report were intended to
be mandatory,21 and in case of union busting where the existence of the
union is threatened, it is only the 15-day cooling-off period that may be
dispensed with.
Article 263(f) in part states: "In every case, the union or the employer shall
furnish the Department the results of the voting at least seven days before
the intended strike or lockout, subject to the cooling-off period herein
provided." This provision should be read with Section 3, Rule XXII, Book V of
the Rules Implementing the Labor Code, then applicable at the time of the
dispute, the relevant provisions of which state:
However, in case of unfair labor practice involving the dismissal from
employment of any union officer duly elected in accordance with the union
constitution and by-laws which may constitute union-busting where the
existence of the union is threatened, the fifteen-day cooling-off period shall
not apply and the union may take action immediately after the strike vote is
conducted and the results thereof submitted to the appropriate regional
branch of the Board. (emphasis supplied)
The NCMB Primer on Strike, Picketing, and Lockout (January 31, 1992)
provide the same wording. The foregoing provision of the implementing
rules should also be compared to the provisions of the Labor Code under
Article 263(c):
(c) x x x However, in case of dismissal from employment of union officers
duly elected in accordance with the union constitution and by-laws, which
may constitute union busting where the existence of the union is
threatened, the 15-day cooling-off period shall not apply and the union may
take action immediately.
The implementing rules clarify Article 263(c) in that the union may strike
"immediately" provided that the strike vote is conducted, the results thereof
submitted "in every case" at least seven days before the intended strike or
lockout. In sum, in case of alleged union busting, the three remaining
requirements – notice, strike vote, and seven-day report period – cannot be
dispensed with.22
What is more, the strike had been attended by the widespread commission
of prohibited acts. Well-settled is the rule that even if the strike were to be
declared valid because its objective or purpose is lawful, the strike may still
be declared invalid where the means employed are illegal. 23 Among such
limits are the prohibited activities under Article 264 of the Labor Code,
particularly paragraph (e), which states that no person engaged in picketing
shall:
a) commit any act of violence, coercion, or intimidation or
b) obstruct the free ingress to or egress from the employer's premises for
lawful purposes, or
c) obstruct public thoroughfares.
The following acts have been held to be prohibited activities: where the
strikers shouted slanderous and scurrilous words against the owners of the
vessels;24 where the strikers used unnecessary and obscene language 25 or
epithets to prevent other laborers to go to work, 26 and circulated libelous
statements against the employer which show actual malice; 27 where the
protestors used abusive and threatening language towards the patrons of a
place of business or against co-employees, going beyond the mere attempt
to persuade customers to withdraw their patronage; 28 where the strikers
formed a human cordon and blocked all the ways and approaches to the
launches and vessels of the vicinity of the workplace 29 and perpetrated acts
of violence and coercion to prevent work from being performed; 30 and
where the strikers shook their fists and threatened non-striking employees
with bodily harm if they persisted to proceed to the workplace. 31 Permissible
activities of the picketing workers do
not include obstruction of access of customers. 32
The evidence in the record clearly and extensively shows that the individual
respondents engaged in illegal acts during the strike, such as the
intimidation and harassment of a considerable number of customers to turn
them away and discourage them from patronizing the business of the
petitioner;33 waving their arms and shouting at the passersby, "Huwag
kayong pumasok sa Sukhothai!"[34] and "Nilagyan na namin ng lason ang
pagkain d'yan!"[35]as well as numerous other statements made to discredit
the reputation of the establishment; 36 preventing the entry of
customers;37 angry and unruly behavior calculated to cause
commotion38 which affected neighboring establishments within the
mall;39 openly cursing and shouting at the president in front of
customers40 and using loud and abusive language, such as "Putang ina
niyong lahat!", toward the rest of the management 41 as well as their co-
workers who refused to go on strike; 42 physically preventing non-strikers
from entering the premises,43 as well as deliberately blocking their
movements inside the restaurant, 44 at times by sharply bumping into
them45 or through indecent physical contact;46 openly threatening non-
strikers with bodily harm, such as "Pag hindi sila pumayag, upakan
mo!";47 and shouting at the security guard "Granada!" which caused panic
among the customers and prompted security to report a possible death
threat to management and the security agency. 48
In the determination of the liabilities of the individual respondents, the
applicable provision is Article 264(a) of the Labor Code:
Art. 264. Prohibited Activities – (a) x x x
xxxx
x x x x Any union officer who knowingly participates in an illegal strike and non-strikers with bodily harm;55
any worker or union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his employment Knowingly participating in an illegal
status: Provided, That mere participation of a worker in a lawful strike shall strike; Intimidating, harassing,
not constitute sufficient ground for termination of his employment, even if a preventing, and discouraging customers
replacement had been hired by the employer during such lawful strike. from entering the restaurant;56 use of
abusive language towards management
xxxx or non-strikers;57 deliberately blocking
the movements of management or
In Samahang Manggagawa sa Sulpicio Lines, Inc.-NAFLU v. Sulpicio Lines,
Billy Bacus Vice President non-strikers inside the restaurant; 58
Inc.49 this Court explained that the effects of such illegal strikes, outlined in
Article 264, make a distinction between workers and union officers who Knowingly participating in an illegal
participate therein: an ordinary striking worker cannot be terminated for strike; Intimidating, harassing,
mere participation in an illegal strike. There must be proof that he or she preventing, and discouraging customers
committed illegal acts during a strike. A union officer, on the other hand, Analiza Cablay Secretary from entering the restaurant;59
may be terminated from work when he knowingly participates in an illegal
Knowingly participating in an illegal
strike, and like other workers, when he commits an illegal act during a
strike; Intimidating, harassing,
strike.50 In all cases, the striker must be identified. But proof beyond
preventing, and discouraging customers
reasonable doubt is not required. Substantial evidence available under the
from entering the restaurant;60 publicly
attendant circumstances, which may justify the imposition of the penalty of
denouncing the reputation of the
dismissal, may suffice.51 Liability for prohibited acts is to be determined on
establishment;61 coercing non-strikers
an individual basis:
to strike;62 Cursing and use of abusive
Rank in language towards management, non-
Private Respondent Jose Neil Arcilla Treasurer strikers, or customers;63
Respondent Union Illegal Acts
Knowingly participating in an illegal
Emmanuel Cayno President Knowingly participating in an illegal strike; intimidating, harassing,
strike; shouting at the security guard preventing, and discouraging customers
"Granada!" which caused panic among Roel Esancha Auditor from entering the restaurant;64
the customers;52Intimidating, harassing,
Claudio Panaligan Board Member Knowingly participating in an illegal
preventing, and discouraging customers
strike; use of abusive language towards
from entering the restaurant;53 publicly
management, non-strikers, or
denouncing the reputation of the
customers;65 intimidating, harassing,
establishment;54 openly threatening
preventing, and discouraging customers
 from entering the customers;80
restaurant;66deliberately blocking the
Intimidating, harassing, preventing, and
movements of management or non-
discouraging customers from entering
strikers inside the restaurant; 67
Joven Lualhati Member the restaurant;81
Intimidating, harassing, preventing, and
Antonio Enebrad Member Id.82
discouraging customers from entering
Rey Arsenal Member the restaurant;68 Id.;83 cursing and use of abusive
language towards management, non-
Intimidating, harassing, preventing, and
Edgar Eugenio Member strikers, or customers;84
discouraging customers from entering
Alex Martinez Member the restaurant;69 Intimidating, harassing, preventing, and
discouraging customers from entering
Cursing and use of abusive language
Albert Agbuya Member the restaurant;85
towards management, non-strikers, or
customers;70deliberately blocking the Arnel Salvador Member Id.86
movements of management or non-
strikers inside the Ricky Del Prado Member Id.87
restaurant;71 intimidating, harassing,
Bernie Del
preventing, and discouraging customers
Mundo Member Id.88
Hermie Raz Member from entering the restaurant;72
Roberto Eco Member Id.89
Intimidating, harassing, preventing, and
discouraging customers from entering Joven Talidong Member Id.90
Jose Lanorias Member the restaurant;73
Id.;91 threatening non-strikers with
74
Lito Arce Member Id. Leny Lucente Member bodily harm;92

Cesar Sangreo Member Id.75 Intimidating, harassing, preventing, and

Rolando Fabregas Member Id.76
Jimmy Balan Member Id.;77 deliberately blocking movements
of non-strikers inside the restaurant by
sharply bumping into them78 or through
indecent physical contact; 79 cursing and
use of abusive language towards
management, non-strikers, or
discouraging customers from entering
the restaurant;93 cursing and use of
abusive language towards
management, non-strikers, or
Rigoberto Tubaon Member customers;94
Merly Naz Member Intimidating, harassing, preventing, and
discouraging customers from entering
 the restaurant;95 cursing and use of
abusive language towards
management, non-strikers, or
customers;96

Preventing and discouraging customers

Lino Salubre Member from entering the restaurant;97

Preventing and discouraging customers

Rolando Pugong Member from entering the restaurant;98

Intimidating, harassing, preventing, and

discouraging customers from entering
G.R. No. 100158 June 2, 1992
John Bathan Member the restaurant;99

Thus, the Labor Arbiter is correct in ruling that the employment of all
individual private respondents are deemed validly terminated.
WHEREFORE, the petition is granted. The Decision and Resolution of the
Court of Appeals together with the Decision dated November 29, 2000 of
the National Labor Relations Commission are REVERSED and SET ASIDE. The
Decision of the Labor Arbiter dated October 12, 1999 is REINSTATED. The
Court finds the strike illegal and, as a consequence thereto, the union
officers who participated in the illegal strike and in the commission of illegal
acts, namely, Emmanuel Cayno, Billy Bacus, Analiza Cablay, Jose Neil Arcilla,
Roel Esancha, and Claudio Panaligan, as well as the union members who
participated in the commission of illegal acts during the strike, namely, Rey
Arsenal, Alex Martinez, Hermie Raz, Jose Lanorias, Lito Arce, Cesar Sangreo,
Rolando Fabregas, Jimmy Balan, Joven Lualhati, Antonio Enebrad, Edgar
Eugenio, Albert Agbuya, Arnel Salvador, Ricky Del Prado, Bernie Del Mundo,
Roberto Eco, Joven Talidong, Leny Lucente, Rigoberto Tubaon, Merly Naz,
Lino Salubre, Rolando Pugong, and John Bathan, all private respondents, are
hereby declared to have lost their employment status.
No pronouncement as to costs.
ST. SCHOLASTICA'S COLLEGE, petitioner,
vs.
HON. RUBEN TORRES, in his capacity as SECRETARY OF LABOR AND
EMPLOYMENT, and SAMAHANG NG MANGGAGAWANG PANG-EDUKASYON
SA STA. ESKOLASTIKA-NAFTEU, respondents.
BELLOSILLO, J.:
The principal issue to be resolved in this recourse is whether striking union
members terminated for abandonment of work after failing to comply with
return-to-work orders of the Secretary of Labor and Employment
(SECRETARY, for brevity) should by law be reinstated.
On 20 July 1990, petitioner St. Scholastica's College (COLLEGE, for brevity)
and private respondent Samahan ng Manggagawang Pang-Edukasyon sa Sta.
Eskolastika-NAFTEU (UNION, for brevity) initiated negotiations for a first-
ever collective bargaining agreement. A deadlock in the negotiations
prompted the UNION to file on 4 October 1990 a Notice of Strike with the
Department of Labor and Employment (DEPARTMENT, for brevity), docketed
as NCMB-NCR-NS-10-826.

SO ORDERED.
On 5 November 1990, the UNION declared a strike which paralyzed the
operations of the COLLEGE. Affecting as it did the interest of the students,
public respondent SECRETARY immediately assumed jurisdiction over the
labor dispute and issued on the same day, 5 November 1990, a return-to-
work order. The following day, 6 November 1990, instead of returning to
work, the UNION filed a motion for reconsideration of the return-to-work
order questioning inter alia the assumption of jurisdiction by the SECRETARY
over the labor dispute.
On 9 November 1990, the COLLEGE sent individual letters to the striking
employees enjoining them to return to work not later than 8:00 o'clock A.M.
of 12 November 1990 and, at the same time, giving notice to some twenty-
three (23) workers that their return would be without prejudice to the filing
of appropriate charges against them. In response, the UNION presented a
list of (6) demands to the COLLEGE in a dialogue conducted on 11 November
1990. The most important of these demands was the unconditional
acceptance back to work of the striking employees. But these were flatly
rejected.
Likewise, on 9 November 1990, respondent SECRETARY denied
reconsideration of his return-to-work order and sternly warned the striking
employees to comply with its terms. On 12 November 1990, the UNION
received the Order.
Thereafter, particularly on 14 and 15 November 1990, the parties held
conciliation meetings before the National Conciliation and Mediation Board
where the UNION pruned down its demands to three (3), viz.: that striking
employees be reinstated under the same terms and conditions before the
strike; that no retaliatory or disciplinary action be taken against them; and,
that CBA negotiations be continued. However, these efforts proved futile as
the COLLEGE remained steadfast in its position that any return-to-work offer
should be unconditional.
On 16 November 1990, the COLLEGE manifested to respondent SECRETARY
that the UNION continued to defy his return-to-work order of 5 November
1990 so that "appropriate steps under the said circumstances" may be
undertaken by him. 1
On 23 November 1990, the COLLEGE mailed individual notices of
termination to the striking employees, which were received on 26
November 1990, or later. The UNION officers and members then tried to
return to work but were no longer accepted by the COLLEGE.
On 5 December 1990, a Complaint for Illegal Strike was filed against the
UNION, its officers and several of its members before the National Labor
Relations Commission (NLRC), docketed as NLRC Case No. 00-12-06256-90.
The UNION moved for the enforcement of the return-to-work order before
respondent SECRETARY, citing "selective acceptance of returning strikers" by
the COLLEGE. It also sought dismissal of the complaint. Since then, no
further hearings were conducted.
Respondent SECRETARY required the parties to submit their respective
position papers. The COLLEGE prayed that respondent SECRETARY uphold
the dismissal of the employees who defied his return-to-work order.
On 12 April 1991, respondent SECRETARY issued the assailed Order
which, inter alia, directed the reinstatement of striking UNION members,
premised on his finding that no violent or otherwise illegal act accompanied
the conduct of the strike and that a fledgling UNION like private respondent
was "naturally expected to exhibit unbridled if inexperienced enthusiasm, in
asserting its existence". 2 Nevertheless, the aforesaid Order held UNION
officers responsible for the violation of the return-to-work orders of 5 and 9
November 1990 and, correspondingly, sustained their termination.
Both parties moved for partial reconsideration of the Order, with petitioner
COLLEGE questioning the wisdom of the reinstatement of striking UNION
members, and private respondent UNION, the dismissal of its officers.
On 31 May 1991, in a Resolution, respondent SECRETARY denied both
motions. Hence, this Petition for Certiorari, with Prayer for the Issuance of a
Temporary Restraining Order.
On 26 June 1991, We restrained the SECRETARY from enforcing his assailed
Orders insofar as they directed the reinstatement of the striking workers
previously terminated.
Petitioner questions the assumption by respondent SECRETARY of
jurisdiction to decide on termination disputes, maintaining that such
jurisdiction is vested instead in the Labor Arbiter pursuant to Art. 217 of the
Labor Code, thus —
Art. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) Except as
otherwise provided under this Code, the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide, within thirty (30) calendar days
after the submission of the case by the parties for decision without
extension, the following cases involving all workers, whether agricultural or
non-agricultural: . . . 2. Termination disputes . . . 5. Cases arising from any
violation of Article 264 of this Code, including questions on the legality of
strikes and lock-outs . . .
In support of its position, petitioner invokes Our ruling in PAL v. Secretary of
Labor and Employment 3 where We held:
The labor Secretary exceeded his jurisdiction when he restrained PAL from
taking disciplinary measures against its guilty employees, for, under Art. 263
of the Labor Code, all that the Secretary may enjoin is the holding of the
strike but not the company's right to take action against union officers who
participated in the illegal strike and committed illegal acts.
Petitioner further contends that following the doctrine laid down
in Sarmiento v. Tuico 4 and Union of Filipro Employees v. Nestle Philippines,
Inc., 5 workers who refuse to obey a return-to-work order are not entitled to
be paid for work not done, or to reinstatement to the positions they have
abandoned of their refusal to return thereto as ordered.
Taking a contrary stand, private respondent UNION pleads for reinstatement
of its dismissed officers considering that the act of the UNION in continuing
with its picket was never characterized as a "brazen disregard of successive
legal orders", which was readily apparent in Union Filipro Employees v.
Nestle Philippines, Inc., supra, nor was it a willful refusal to return to work,
which was the basis of the ruling in Sarmiento v. Tuico, supra. The failure of
UNION officers and members to immediately comply with the return-to-
work orders was not because they wanted to defy said orders; rather, they
held the view that academic institutions were not industries indispensable
to the national interest. When respondent SECRETARY denied their motion
for reconsideration, however, the UNION intimated that efforts were
immediately initiated to fashion out a reasonable return-to-work agreement
with the COLLEGE, albeit, if failed.
The issue on whether respondent SECRETARY has the power to assume
jurisdiction over a labor dispute and its incidental controversies, causing or
likely to cause a strike or lockout in an industry indispensable to the national
interest, was already settled in International Pharmaceuticals, Inc. v.
Secretary of Labor and Employment. 6 Therein, We ruled that:
. . . [T]he Secretary was explicitly granted by Article 263 (g) of the Labor
Code the authority to assume jurisdiction over a labor dispute causing or
likely to cause a strike or lockout in an industry indispensable to the national
interest, and decide the same accordingly. Necessarily, this authority to
assume jurisdiction over the said labor dispute must include and extend to
all questions and include and extend to all questions and controversies
arising therefrom, including cases over which the Labor Arbiter has exclusive
jurisdiction.
And rightly so, for, as found in the aforesaid case, Article 217 of the Labor
Code did contemplate of exceptions thereto where the SECRETARY is
authorized to assume jurisdiction over a labor dispute otherwise belonging
exclusively to the Labor Arbiter. This is readily evident from its opening
proviso reading "(e)xcept as otherwise provided under this Code . . .
Previously, We held that Article 263 (g) of the Labor Code was broad enough
to give the Secretary of Labor and Employment the power to take
jurisdiction over an issue involving unfair labor practice. 7
At first glance, the rulings above stated seem to run counter to that of PAL v.
Secretary of Labor and Employment, supra, which was cited by petitioner.
But the conflict is only apparent, not real.
To recall, We ruled in the latter case that the jurisdiction of the Secretary of
Labor and Employment in assumption and/or certification cases is limited to
the issues that are involved in the disputes or to those that are submitted to
him for resolution. The seeming difference is, however, reconcilable. Since
the matter on the legality or illegality of the strike was never submitted to
him for resolution, he was thus found to have exceeded his jurisdiction
when he restrained the employer from taking disciplinary action against
employees who staged an illegal strike.
Before the Secretary of Labor and Employment may take cognizance of an
issue which is merely incidental to the labor dispute, therefore, the same
must be involved in the labor disputed itself, or otherwise submitted to him
for resolution. If it was not, as was the case in PAL v. Secretary or Labor and
Employment, supra, and he nevertheless acted on it, that assumption of
jurisdiction is tantamount to a grave abuse of discretion. Otherwise, the
ruling in International Pharmaceuticals, Inc. v. Secretary of Labor and
Employment, supra, will apply.
The submission of an incidental issue of a labor dispute, in assumption
and/or certification cases, to the Secretary of Labor and Employment for his
resolution is thus one of the instances referred to whereby the latter may
exercise concurrent jurisdiction together with the Labor Arbiters.
In the instant petition, the COLLEGE in its Manifestation, dated 16 November
1990, asked the "Secretary of Labor to take the appropriate steps under the
said circumstances." It likewise prayed in its position paper that respondent
SECRETARY uphold its termination of the striking employees. Upon the other
hand, the UNION questioned the termination of its officers and members
before respondent SECRETARY by moving for the enforcement of the return-
to-work orders. There is no dispute then that the issue on the legality of the
termination of striking employees was properly submitted to respondent
SECRETARY for resolution.
Such an interpretation will be in consonance with the intention of our labor
authorities to provide workers immediate access to their rights and benefits
without being inconvenienced by the arbitration and litigation process that
prove to be not only nerve-wracking, but financially burdensome in the long
run. Social justice legislation, to be truly meaningful and rewarding to our
workers, must not be hampered in its application by long-winded arbitration
and litigation. Rights must be asserted and benefits received with the least
inconvenience. For, labor laws are meant to promote, not defeat, social
justice (Maternity Children's Hospital v. Hon. Secretary of Labor ). 8 After all,
Art. 4 of the Labor Code does state that all doubts in the implementation
and interpretation of its provisions, including its implementing rules and
regulations, shall be resolved in favor of labor.
We now come to the more pivotal question of whether striking union
members, terminated for abandonment of work after failing to comply
strictly with a return-to-work order, should be reinstated.
We quote hereunder the pertinent provisions of law which govern the
effects of defying a return-to-work order:
1. Article 263 (g) of the Labor Code —
Art. 263. Strikes, picketing, and lockouts. — . . . (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 . . . (as amended by
Sec. 27, R.A. 6715; emphasis supplied).
2. Article 264, same Labor Code —
Art. 264. Prohibited activities. — (a) No labor organization or employer shall
declare a strike or lockout without first having bargained collectively in
accordance with Title VII of this Book or without first having filed the notice
required in the preceding Article or without the necessary strike or lockout
vote first having been obtained and reported to the Ministry.
No strike or lockout shall be declared after assumption of jurisdiction by the
President or the Minister or after certification or submission of the dispute
to compulsory or voluntary arbitration or during the pendency of cases
involving the same grounds for the strike or lockout
. . . (emphasis supplied).
Any worker whose employment has been terminated as consequence of an
unlawful lockout shall be entitled to reinstatement with full back wages. Any
union officer who knowingly participates in an illegal strike and any worker
or union officer who knowingly participates in the commission of illegal acts
during a strike may be declared to have lost his employment status:
Provided, That mere participation of a worker in a lawful strike shall not
constitute sufficient ground for termination of his employment, even if a
replacement had been hired by the employer during such lawful
strike . . . (emphasis supplied).
3. Section 6, Rule IX, of the New Rules of Procedure of the NLRC (which took
effect on 31 August 1990) —
Sec. 6. Effects of Defiance. — Non-compliance with the certification order of
the Secretary of Labor and Employment or a return to work order of the
Commission shall be considered an illegal act committed in the course of the
strike or lockout and shall authorize the Secretary of Labor and Employment
or the Commission, as the case may be, to enforce the same under pain or
loss of employment status or entitlement to full employment benefits from
the locking-out employer or backwages, damages and/or other positive
and/or affirmative reliefs, even to criminal prosecution against the liable
parties . . . (emphasis supplied).
Private respondent UNION maintains that the reason they failed to
immediately comply with the return-to-work order of 5 November 1990 was
because they questioned the assumption of jurisdiction of respondent
SECRETARY. They were of the impression that being an academic institution,
the school could not be considered an industry indispensable to national
interest, and that pending resolution of the issue, they were under no
obligation to immediately return to work.
This position of the UNION is simply flawed. Article 263 (g) of the Labor
Code provides that if a strike has already taken place at the time of
assumption, "all striking . . . employees shall immediately return to work."
This means that by its very terms, a return-to-work order is immediately
effective and executory notwithstanding the filing of a motion for
reconsideration (University of Sto. Tomas v. NLRC). 9 It must be strictly
complied with even during the pendency of any petition questioning its
validity (Union of Filipro Employees v. Nestle Philippines, Inc., supra). After
all, the assumption and/or certification order is issued in the exercise of
respondent SECRETARY's compulsive power of arbitration and, until set
aside, must therefore be immediately complied with.
The rationale for this rule is explained in University of Sto. Tomas v. NLRC,
supra, citing Philippine Air Lines Employees Association v. Philippine Air
Lines, Inc., 10 thus —
To say that its (return-to-work order) 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 to work would, in the
ordinary course, have already passed and hence can no longer be affirmed
insofar as the time element is concerned.
Moreover, the assumption of jurisdiction by the Secretary of Labor and
Employment over labor disputes involving academic institutions was already
upheld in Philippine School of Business Administration v. Noriel 11 where We
ruled thus:
There is no doubt that the on-going labor dispute at the school adversely
affects the national interest. The school is a duly registered educational
institution of higher learning with more or less 9,000 students. The on-going
work stoppage at the school unduly prejudices the students and will entail
great loss in terms of time, effort and money to all concerned. More
important, it is not amiss to mention that the school is engaged in the
promotion of the physical, intellectual and emotional well-being of the
country's youth.
Respondent UNION's failure to immediately comply with the return-to-work
order of 5 November 1990, therefore, cannot be condoned.
The respective liabilities of striking union officers and members who failed
to immediately comply with the return-to-work order is outlined in Art. 264
of the Labor Code which provides that any declaration of a strike or lockout
after the Secretary of Labor and Employment has assumed jurisdiction over
the labor dispute is considered an illegal. act. Any worker or union officer
who knowingly participates in a strike defying a return-to-work order may,
consequently, "be declared to have lost his employment status."
Section 6 Rule IX, of the New Rules of Procedure of the NLRC, which
provides the penalties for defying a certification order of the Secretary of
Labor or a return-to-work order of the Commission, also reiterates the same
penalty. It specifically states that non-compliance with the aforesaid orders,
which is considered an illegal act, "shall authorize the Secretary of Labor and
Employment or the Commission . . . to enforce the same under pain of loss
of employment status." Under the Labor Code, assumption and/or
certification orders are similarly treated.
Thus, we held in Sarmiento v. Tuico, supra, that by insisting on staging the
restrained strike and defiantly picketing the company premises to prevent
the resumption of operations, the strikers have forfeited their right to be
readmitted, having abandoned their positions, and so could be validly
replaced.
We recently reiterated this stance in Federation of Free Workers v.
Inciong, 12 wherein we cited Union of Filipro Employees v. Nestle Philippines,
Inc., supra, thus —
A strike undertaken despite the issuance by the Secretary of Labor of an
assumption or certification order becomes a prohibited activity and thus
illegal, pursuant to the second paragraph of Art. 264 of the Labor Code as
amended . . . The union officers and members, as a result, are deemed to
have lost their employment status for having knowingly participated in an
illegal act.
Despite knowledge of the ruling in Sarmiento v. Tuico, supra, records of the
case reveal that private respondent UNION opted to defy not only the
return-to-work order of 5 November 1990 but also that of 9 November
1990.
While they claim that after receiving copy of the Order of 9 November 1990
initiatives were immediately undertaken to fashion out a return-to-work
agreement with management, still, the unrebutted evidence remains that
the striking union officers and members tried to return to work only eleven
(11) days after the conciliation meetings ended in failure, or twenty (20)
days after they received copy of the first return-to-work order on 5
November 1990.
The sympathy of the Court which, as a rule, is on the side of the laboring
classes (Reliance Surety & Insurance Co., Inc. v. NLRC), 13 cannot be extended
to the striking union officers and members in the instant petition. There was
willful disobedience not only to one but two return-to-work orders.
Considering that the UNION consisted mainly of teachers, who are supposed
to be well-lettered and well-informed, the Court cannot overlook the plain
arrogance and pride displayed by the UNION in this labor dispute. Despite
containing threats of disciplinary action against some union officers and
members who actively participated in the strike, the letter dated 9
November 1990 sent by the COLLEGE enjoining the union officers and
members to return to work on 12 November 1990 presented the workers an
opportunity to return to work under the same terms and conditions or prior
to the strike. Yet, the UNION decided to ignore the same. The COLLEGE,
correspondingly, had every right to terminate the services of those who
chose to disregard the return-to-work orders issued by respondent
SECRETARY in order to protect the interests of its students who form part of
the youth of the land.
Lastly, the UNION officers and members also argue that the doctrine laid
down in Sarmiento v. Tuico, supra, and Union of Filipro Employees v. Nestle,
Philippines, Inc., supra, cannot be made applicable to them because in the
latter two cases, workers defied the return-to-work orders for more than
five (5) months. Their defiance of the return-to-work order, it is said, did not
last more than a month.
Again, this line of argument must be rejected. It is clear from the provisions
above quoted that from the moment a worker defies a return-to-work order,
he is deemed to have abandoned his job. It is already in itself knowingly
participating in an illegal act. Otherwise, the worker will just simply refuse to
return to his work and cause a standstill in the company operations while
retaining the positions they refuse to discharge or allow the management to
fill (Sarmiento v. Tuico, supra).Suffice it to say, in Federation of Free Workers
v. Inciong, supra, the workers were terminated from work after defying the
return-to-work order for only nine (9) days. It is indeed inconceivable that an
employee, despite a return-to-work order, will be allowed in the interim to
stand akimbo and wait until five (5) orders shall have been issued for their
return before they report back to work. This is absurd.
In fine, respondent SECRETARY gravely abused his discretion when he
ordered the reinstatement of striking union members who refused to report
back to work after he issued two (2) return-to-work orders, which in itself is
knowingly participating in an illegal act. The Order in question is, certainly,
contrary to existing law and jurisprudence.
WHEREFORE, the Petition for Certiorari is hereby GRANTED. The Order of 12
April 1991 and the Resolution 31 May 1991 both issued by respondent
Secretary of Labor and Employment are SET ASIDE insofar as they order the
reinstatement of striking union members terminated by petitioner, and the
temporary restraining order We issued on June 26, 1991, is made
permanent.
No costs.
SO ORDERED.
G.R. No. 122743 & 127215. December 12, 1997]
TELEFUNKEN SEMICONDUCTORS EMPLOYEES UNION - FFW, petitioner, vs.
SECRETARY OF LABOR AND EMPLOYMENT AND TEMIC TELEFUNKEN
MICRO-ELECTRONICS (PHILS.), INC., respondent.
TEMIC TELEFUNKEN MICRO-ELECTRONICS (PHILS.) INC., petitioner, vs.
HON. LEONARDO A. QUISUMBING in his capacity as Secretary of Labor and
Employment, and TELEFUNKEN SEMICONDUCTORS EMPLOYEES UNION -
FFW, respondents.
DECISION
BELLOSILLO, J.:
Two (2) petitions for certiorari are before us: first, the petition instituted by
Telefunken Semiconductors Employees Union-FFW (UNION for brevity),
questioning the exclusion of union officers, shop stewards and those with
pending criminal charges in the order of the Acting Secretary of the
Department of Labor and Employment (DOLE) directing the company to
accept back all striking workers, docketed as G.R. No. 122743, and second,
the petition filed a year later by Temic Telefunken Microelectronics (Phils.),
Inc. (COMPANY for brevity), seeking to set aside altogether the writ of
execution issued to implement the order, docketed as G.R. No. 127215.
On 25 August 1995 the dispute between the parties started when the
COMPANY and the UNION reached a deadlock in their negotiations for a
new collective bargaining agreement. Hence on 28 august 1995 the UNION
filed a Notice of Strike with the National Conciliation and Mediation Board.
On 8 September 1995, upon petition of the COMPANY considering the
nature of its business and the corresponding effects to the country's
economy, then Acting Secretary of Labor and Employment Jose S. Brillantes,
after ascertaining that the labor dispute involved a matter of national
interest, intervened and assumed jurisdiction over the dispute pursuant to
Art. 263, par. (g), of the Labor Code.
Nevertheless, on 14 September 1995 the UNION struck. Two (2) days later,
or on 16 September 1995, Acting Secretary Brillantes ordered the striking
workers to return to work within twenty-four (24) hours. But the striking
UNION members failed to return to work; instead, they continued with their
pickets. As a result, on 23 September 1995 violence erupted in the picket
lines. The service bus ferrying non-striking workers was stoned causing
injuries to its passengers. Thereafter complaints for threats, defamation,
illegal detention and physical injuries were filed against the strikers.
Meanwhile, on 26 September 1995 the COMPANY
sent show cause memoranda to the UNION members who joined the strike
and defied the return-to work orders, directing them to submit their written
explanation why they should not be disciplined or dismissed from
employment. Not one reportedly submitted an explanation. Still, a number
of UNION members continued refusing to return to work. Thus on 1 October
1995 the UNION members were placed under preventive suspension and
asked to appear in the administrative hearing that was conducted. Only two
(2) workers appeared. Consequently, on 2 October 1995 letters of
termination for cause were personally delivered to UNION members who
failed to report for work notwithstanding the assumption and return-to-
work orders.
On 29 October 1995 Acting Secretary Brillantes issued an Order dated 27
October 1995 a portion of which reads -
Atty. Tito F. Genilo, Technical Assistant, Office of the Secretary, this
Department, is hereby designated to immediately call the parties and hear
and receive evidence on the matter of illegal strike, including the reciprocal
demands of the parties for damages arising therefrom, and to submit the
appropriate report and recommendations on the case within ten (10) days
from termination of the proceedings thereon.
Pending resolution of the issue involving the legality of the strike, the
Company is hereby directed to accept back all striking workers, except the
Union Officers, shop stewards, and all those with pending criminal charges,
whose termination shall be among the issues to be heard by Atty. Genilo.
Relative thereto, the parties are hereby directed to submit their position
papers and evidence within ten (10) days from receipt of this Order
(emphasis supplied).[1]
On 9 November 1995 both the COMPANY and the UNION filed their
respective motions for reconsideration. On 24 November 1995 Acting
Secretary Brillantes issued an order modifying in part his 27 October 1995
Order, but affirmed that portion which excluded the union officers, shop
stewards and those with pending criminal charges, from the order to accept
back all striking workers pending the resolution of the issue involving the
legality of the strike.
On 5 December 1995, the UNION, aggrieved by the Order of 27 October
1995 instituted a petition for certiorari before this Court questioning the
order excluding all union officers, shop stewards and all those with pending
criminal charges. The UNION argued that since, as stated in the Order of 27
October 1995, the “termination (of all union officers, shop stewards and all
those with pending criminal charges) shall be among the issues to be heard
by Atty. Genilo,” they should not have been excluded at all in the first place,
as their immediate exclusion is in effect termination without due process.
Meanwhile, as a result of the dispute, some 1,500 striking workers many of
whom had been charged before the Office of the Prosecutor after 27
October 1995 have yet to be reinstated. On 7 December 1995 Acting
Secretary Brillantes issued a clarificatory order the dispositive portion of
which states -
WHEREFORE, as clarified above, we hereby rule that the phrase “those with
pending criminal charges” shall only cover those workers with pending
criminal charges at the time of the issuance of the Order dated 27 October
1995. [2]
Pending resolution of the petition filed by the UNION before this Court,
Secretary of Labor and Employment Leonardo A. Quisumbing issued a Writ
of Execution the dispositive portion of which states -
ACCORDINGLY, A Writ of Execution is here issued commanding Sheriff Edgar
Paredes of the National Capital Regional Office, this Department, to proceed
to the premises of Temic Telefunken Microelectronics (Phils.) Inc., at the
Temic Building, Bagsakan Road, FTI Estate, Taguig, Metro Manila, and
execute fully and faithfully the Decision of the Secretary dated October 27,
1995 and November 24, 1995 by seeing the actual and physical
reinstatement of the remaining striking workers listed in the 32 page Annex
A who are yet to be readmitted as ordered in the Decisions under the same
terms and conditions prevailing before the strike on September 14, 1995
and, if necessary, to seek the aid of the Taguig Police Station, Taguig, Metro
Manila, which is here deputized for the purpose of aiding this Office in the
enforcement of its Orders and to make a return within thirty (30) days from
issuance of the Writ to the Office of the Secretary, copy furnished the Legal
Service. [3]
The COMPANY filed a Motion to Quash, Recall or Suspend the Writ of
Execution. On 17 October 1996 the motion was denied for lack of merit and
an alias writ of execution was issued directing the reinstatement of the
strikers in the payroll if actual and physical reinstatement was not possible.
On 23 October 1996 the COMPANY filed a motion for reconsideration which
on 21 November 1996 was denied. On 9 December 1996 the COMPANY, not
satisfied with the rulings of the Secretary of Labor and Employment,
petitioned this Court for a writ of certiorari.
In these twin petitions, the UNION argues that the exclusion of union
officers, shop stewards and those with pending criminal charges from the
directive to the COMPANY to accept back the striking workers is tantamount
to illegal dismissal since the workers are in effect being terminated without
due process of law. The COMPANY on the other hand maintains that the
dismissal of those who failed to comply with the assumption and return-to-
work orders is valid and in accordance with jurisprudence.
Furthermore, the COMPANY asserts that the Secretary of Labor and
Employment should have refrained from issuing a writ of execution
mandating the immediate reinstatement of some 1,500 dismissed striking
workers since the exclusion of union officers, shop stewards and those with
pending criminal charges from the directive to the COMPANY to accept back
the striking workers is still pending before this Court. Also, the COMPANY
claims that the Secretary of Labor gravely abused his discretion when he
ruled that complaints lodged with the police authorities before 27 October
1995 and subsequently filed with the provincial prosecutor after 27 October
1995 are not within the ambit of the phrase “with pending criminal
charges.”
In the main, the consolidated case raise three (3) issues: whether the
Secretary of Labor and Employment gravely abused his discretion, first, in
excluding union officers, shop stewards and those with pending criminal
charges in his order to the COMPANY to accept back the striking
workers; second, in issuing a writ of execution pending resolution of a
related petition for certioraribefore this Court; and third, in holding that
complaints lodged before the police authorities before 27 October 1995 and
subsequently filed with the provincial prosecutor after 27 October 1995 are
not within the ambit of the phrase “with pending criminal charges.”
We first resolve the exclusion of certain employees. In Union of Filipro
Employees v. Nestle Philippines, Inc. [4] we said -
x x x an assumption and/or certification order of the Secretary of Labor
automatically results in return-to-work of all striking workers, whether or
not a corresponding order has been issued by the Secretary of Labor x x x x
Article 264 (g) is clear. Once an assumption/certification order is issued,
strikes are enjoined, or if one has already taken place, all strikers shall
immediately return to work.
A strike that is undertaken despite the issuance of the Secretary of Labor of
an assumption or certification order becomes a prohibited activity and thus
illegal, pursuant to the second paragraph of Art. 264 of the Labor Code as
amended (Zamboanga Wood Products, Inc. v. NLRC, G.R. No. 82088, October
13, 1989; 178 SCRA 482).
In Gold City Integrated Port Service, Inc. v. National Labor Relations
Commission [5] we explained -
The effects of such illegal strikes, outlined in Article 265 (now Article 264) of
the Labor Code, make a distinction between workers and union officers who
participate therein.
A union officer who knowingly participates in an illegal strike and any worker
or union officer who knowingly participates in the commission of illegal acts
during a strike may be declared to have lost their employment status. An
ordinary striking worker cannot be terminated for mere participation in an
illegal strike. There must be proof that he committed illegal acts during a
strike. A union officer, on the other hand, may be terminated from work
when he knowingly participates in an illegal strike, and like other workers,
when he commits an illegal act during a strike.
[6]
But as we said in Batangas Laguna Tayabas Bus Company v. NLRC-
That is only half the picture. As the NLRC further explained, it was “not
inclined to declare a wholesale forfeiture of employment status of all those
who participated in the strike” because, first of all, there was an inadequate
service of the certification order on the union as of the date the strike was
declared and there was no showing that the striking members had been
apprised of such order by the NAFLU x x x x We agree with the Solicitor
General that the mere filing of charges against an employee for alleged
illegal acts during a strike does not by itself justify his dismissal. The charges
must be proved at an investigation duly called where the employee shall be
given an opportunity to defend himself. This is true even if the alleged
ground constitute a criminal offense x x x x
In the case before us, we cannot see how respondent Secretary of Labor and
Employment arrived at his decision of excluding union officers, shop
stewards and those with pending criminal charges in his directive to the
COMPANY to accept back the striking workers. For in the same assailed
Order he said on the illegal strike issue -
Taking into account that the determination of this issue requires the
appreciation of evidentiary matters and testimonies of the parties involved,
this Office likewise finds it appropriate to conduct further hearing hereon.
Hence, resolution on this issue is hereby deferred until the termination of
the appropriate proceedings hereon.
Thus in the dispositive portion of his Order the Secretary of Labor stated
that the termination of subject employees shall be among the issues yet to
be heard by Atty. Genilo who was designated to “immediately call the
parties and hear and receive evidence on the matter of illegal strike,
including the reciprocal demands of the parties for damages arising
therefrom x x x x” [7]
It may be true that the workers struck after the Secretary of Labor and
Employment had assumed jurisdiction over the case and that they may have
failed to immediately return to work even after the issuance of a return-to-
work order, making their continued strike illegal. For, a return-to-work order
is immediately effective and executory notwithstanding the filing of a
motion for reconsideration. [8] But, the liability of each of the union officers
and the workers, if any, has yet to be determined. More so in the instant
case where the UNION alleges inadequate service upon the UNION
leadership of the Assumption Order of 8 September 1995 and the return-to-
work order of 16 September 1995. [9] Thus, did all or some of the UNION
leaders knowingly participate in the illegal strike? Did any or all of the
members of the UNION who then had pending criminal
charges knowingly participate in the commission, if any, of illegal acts during
the strike? The records do not bear the answers to these questions, but not
expectedly so, for Atty. Genilo of the DOLE has yet to hear and receive
evidence on the matter, and to submit a report and recommendation
thereon.
Thus to exclude union officers, shop stewards and those with pending
criminal charges in the directive to the COMPANY to accept back the striking
workers without first determining whether they knowingly committed illegal
acts would be tantamount to dismissal without due process of law. We
therefore hold that the Honorable Secretary of Labor gravely abused his
discretion in excluding union officers, shop stewards and those with pending
criminal charges in the order to the COMPANY to accept back the striking
workers pending resolution of the issue involving the legality of the strike.
We however sustain the authority of the Secretary of Labor and
Employment to issue the assailed writ of execution- [10]
We likewise do not find any merit in the Company's contention that when
the Union filed a Petition for Certiorari with the Supreme Court (docketed as
G.R. No. 122743), with a prayer that the Company be directed to accept
back all striking workers without any exception, it has effectively raised the
matter to the Supreme Court.
We must emphasize that the issue involved in the certiorari case now
pending before the Supreme Court is the legality of the exclusion of the
Union officers, shop stewards and those against whom criminal charges
were filed on October 27, 1995, vis-a-vis, this Office's return-to-work order.
On the other hand, the pending issue before this Office is the propriety of
the issuance of a Writ of Execution to enforce the twin orders dated October
27, 1995 and November 24, 1995 which have long become final and
executory.
We need not remind the Company that the decision of this Office is final and
executory ten (10) calendar days after receipt thereof by the parties. Thus, in
clear and categorical language, Art. 263 (1) of the Labor code, as amended,
provides:
Art. 263 (1) The Secretary of Labor and Employment, the Commission or the
Voluntary Arbitrator shall decide or resolve the dispute, as the case may be.
The decision of the President, the Secretary of Labor and Employment, the
Commission or the Voluntary Arbitrator shall be final and executory ten (10)
calendar days after receipt thereof by the parties.
In the case at bar, the Supreme Court did not issue any Temporary
Restraining Order. There is therefore no legal impediment to the
enforcement of the Writ of Execution and Alias Writ of Execution previously
issued by this Office.
This, to say the least, is elementary. Thus, as correctly cited by the
UNION, [11] this Court in Santiago v. Vasquez [12] said -
Petitioner further posits, however, that the filing of the instant special civil
action for certiorari divested the Sandiganbayan of its jurisdiction over the
case therein. Whether generated by misconception or design, we shall
address this proposition which, in the first place, had no reason for being
and should not hereafter be advanced under like similar procedural
scenarios.
The original and special civil action filed with this Court is, for all intents and
purposes, an invocation for the exercise of its supervisory powers over the
lower courts. It does not have the effect of divesting the inferior courts of
jurisdiction validly acquired over the case pending before them. It is
elementary that the mere pendency of a special civil action for certiorari,
commenced in relation to a case pending before a lower court, does not
even interrupt the course of the latter when there is no writ of injunction
restraining it. The inevitable conclusion is that for as long as no writ of
injunction or restraining order is issued in the special civil action
for certiorari, no impediments exists and there is nothing to prevent the
lower court from exercising its jurisdiction and proceeding with the case
pending before it. And, even if such injunctive writ or order is issued, the
lower court nevertheless continues to retain its jurisdiction over the
principal action.
The COMPANY likewise argues that the Secretary of Labor gravely abuse his
discretion when he ruled that complaints filed with the police authorities
before 27 October 1995 and subsequently with the provincial prosecutor
after 27 October 1995 are not within the ambit of the phrase “with pending
criminal charges.” Suffice it to say that this issue has been rendered moot.
For, we have earlier said that no striker should have been excluded it
appearing from the record that the strike has yet to be ruled upon and the
liability of each striker still to be determined.
But if only for the sake of argument, the contention of the COMPANY is still
specious. The Secretary of Labor could not have explained this point any
better -[13]
In clarifying the workers excluded by the order dated 27 October 1995, we
are guided by the principle that the return-to-work Order issued herein was
designed to restore the Company's normal operations and at the same time
provide employment to the greater majority of its employees pending
resolution of the labor dispute. It would does be absurd, nay, illogical for us
to interpret and conclude that the phrase “those with pending criminal
charges” covers criminal cases filed against the striking workers after the
issuance of the Order dated 27 October 1995. To our mind, such an
interpretation would open the floodgates to the massive exclusion from
work of the striking workers thru the simple expedient of filing criminal
charges against them long after the issuance of the return-to-work Order.
At best the raising of this issue by COMPANY appears to be an afterthought
as the COMPANY has failed to seek the reversal of the Order of 7 December
1995 holding that “the phrase ’those with pending criminal charges' shall
only cover those workers with pending criminal charges at the time of the
issuance of the Order dated 27 October 1995.” The COMPANY merely
questioned this ruling after a writ of execution was already issued on 27
June 1996, or long after the clarificatory order dated 7 December 1995 had
become final and executory.
In fine, we repeat what the Solicitor General astutely observed in Batangas
Laguna Tayabas Bus Company v. NLRC- [14]
The assailed Resolution does not prevent petitioner from continuing with its
investigations and come up with evidence against these workers. But they
have to be admitted back to their work first. This is clearly a situation where
the social justice provisions of our laws and jurisprudence come in aid of
labor. Since such investigations might be extended, intentionally or
otherwise, the workers are in danger of losing their livelihood. As compared
to the management that is in a position to wage an extended legal struggle
against labor, the latter cannot do so. This is where the State intervenes to
equalize matters between labor and management.
While this Court prefers to rule likewise on the legality or illegality of the
strike and determine the individual liability of the strikers, if any, to put an
end to this protracted labor dispute, this Court is unable to do so as the
record is wanting of any evidence to support a conclusion. We thus order
the Secretary of Labor to resolve the instant case with utmost dispatch and
determine whether the strike was illegal and the liability of the individual
strikers, if any.
A word of admonition to petitioner-employees who camped in front of the
Supreme Court Building, commenced a “hunger strike,” and who now
appear to have vowed to continue with their protest march until the end -
The right of petition is conceded to be an inherent right of the citizen under
all free governments. However, such right, natural and inherent though it
may be, has never been invoke to shatter the standards of propriety
entertained for the conduct of courts. For,’it is a traditional conviction
of civilized society everywhere that courts and juries, in the decision of
issues of fact and law, should be immune from every extraneous
influence; the facts should be decided upon evidence produced in
court; and that the determination of such facts should be uninfluenced by
bias, prejudice or sympathies x x x x Moreover, ’parties have a constitutional
right to have their causes tried fairly in court by an impartial tribunal,
uninfluenced by publication or public clamor. Every citizen has a profound
personal interest in the enforcement of the fundamental right to have
justice administered by the courts, under the protection and forms of law
free from outside coersion or interference.' The aforecited acts of the
respondents are therefore not only an affront to the dignity of this Court,
but equally a violation of the above-stated right of the adverse parties and
the citizenry at large x x x x The Court will not hesitate in future similar
situations to apply the full force of the law and punish for contempt those
who attempt to pressure the Court into acting one way or the other in any
case pending before it. Grievances, if any, must be ventilated through the
proper channels, i.e., through appropriate petitions, motions or other
pleadings in keeping with the respect due to the Courts as impartial
administrators of justice entitled to ’proceed to the disposition of its
business in an orderly manner, free from outside interference obstructive of
its functions and tending to embarrass the administration of justice.' [15]
Here, the Court will do no less. It will not yield its judicial prerogatives to
petitioning strikers if only to appease them, much less give in to their
demand for a favorable decision and violate the basic tenets of due process.
For when petitioners marched with their placards in front of the premises of
the Court, pitched their tents on the sidewalk across the street and went on
“hunger strike” while demanding an early disposition in their favor, until
they moved over to the Department of Justice next door, the petition in G.R.
No. 127215 was not even submitted yet for decision. The pleadings had yet
to be completed.
actions, etc. This schematic artifice will take them nowhere. On the contrary,
such wantonness and unrestrained misconduct gravely offend and affront
the dignity of the Court.
WHEREFORE, the petition in G.R. No. 122743 is GRANTED. Respondent
TEMIC TELEFUNKEN MICROELECTRONICS (PHILS.), INC., is ORDERED to
accept back immediately all striking workers of TELEFUNKEN
SEMICONDUCTORS EMPLOYEES UNION - FFW WITHOUT EXCEPTION.
In G.R. No. 127215, the petition is DISMISSED for lack of merit. Accordingly,
respondent Secretary of Labor and Employment is DIRECTED to ensure the
effective enforcement of the writ of execution he issued and determine
WITH DISPATCH the legality of the strike as well as the liability of the
individual strikers, if any. The members of the TELEFUNKEN
SEMICONDUCTORS EMPLOYEES UNION - FFW are WARNED that a repetition
of the same or similar mass demonstration within or about the premises of
this Court will be dealt with severely.
SO ORDERED.

Indeed, it would be unfeeling, if not unchristian, to ignore the “hunger

strike” of the workers and allow them to be exposed to the elements - the
cold of the night and the scorching heat of the noonday sun. But the strikers
must realize that judicial decisions are not issued on pity and sympathy.
They are weighed according to the established facts and the merits of the
arguments of the parties. This Court at times may show compassion and
mercy but it cannot hem and haw to lay aside its emotional nuance and
sacrifice the broader interest of fair play and justice. Let this then be a stern
warning to all those who hanker for justice yet desire to obtain it through
improper pressure and influence, e.g., demonstrations, pretensions, mass
G.R. Nos. 92981-83 January 9, 1992

INTERNATIONAL PHARMACEUTICALS, INC., petitioner,

vs.
HON. SECRETARY OF LABOR and ASSOCIATED LABOR UNION
(ALU), respondents.

E.B. Ramos & Associates for petitioner.

Celso C. Reales for private respondent.

REGALADO, J.:

The issue before us is whether or not the Secretary of the Department of

Labor and Employment has the power to assume jurisdiction over a labor
dispute and its incidental controversies, including unfair labor practice cases,
causing or likely to cause a strike or lockout in an industry indispensable to
the national interest.

The operative facts which culminated in the present recourse are

undisputed.

Prior to the expiration on January 1, 1989 of the collective bargaining

agreement between petitioner International Pharmaceuticals, Inc.
(hereafter, Company) and the Associated Labor Union (Union, for brevity),
the latter submitted to the Company its economic and political demands.
These were not met by the Company, hence a deadlock ensued.
On June 27, 1989, the Union filed a notice of strike with Regional Office No.
VII of the National Conciliation and Mediation Board, Department of Labor
and Employment, which was docketed as NCMB-RBVII-NS-06-050-89. After
all conciliation efforts had failed, the Union went on strike on August 8, 1989
and the Company's operations were completely paralyzed.
Subsequently, three other labor cases involving the same parties were filed
with the National Labor Relations Commission (NLRC) to wit:
1. International Pharmaceuticals, Inc. vs. Associated Labor Union, NLRC Case
No. VII-09-0810-89, 1 a petition for injunction and damages with temporary
restraining order filed by the Company against the Union and some of its
members for picketing the Company's establishment in Cebu, Davao, and
Metro Manila allegedly without the required majority of the employees
approving and agreeing to the strike and with simulated strike votes, in
direct violation of the provisions of their collective bargaining agreement
and in total and complete defiance of the provisions of the Labor Code;
2. Associated Labor Union vs. International Pharmaceuticals, Inc., et al.,
NLRC Case No-VII-08-0715-89, 2 a complaint for unfair labor practice with
prayer for damages and attorney's fees filed by the Union against the
Company, its personnel manager, and the Workers Alliance of Trade Unions
(WATU) as a result of the Company's refusal to include the sales workers in
the bargaining unit resulting in a deadlock in the bargaining negotiations; for
coddling the respondent WATU as a separate bargaining agent of the sales
workers despite a contrary ruling of the Med-Arbiter; and undue
interference by the Company in the right of the workers to self-organization
through harassment and dispersal of a peaceful picket during the strike; and
3. International Pharmaceuticals, Inc., et al. vs. Associated Labor Union,
NLRC Case No. VII-08-0742-89, 3 a petition to declare the strike illegal with
prayer for damages filed by the Company alleging, among others, that the
notice of strike filed by the Union with the National Conciliation and
Mediation Board did not conform with the requirements of the Labor Code,
and that the Union, in violation of the Labor Code provisions on the conduct
of the strike, totally blockaded and continued to blockade the ingress and
egress of the Company's premises by human barricades, placards, benches
and other obstructions, completely paralyzing its business operations.
Meanwhile, considering that the Company belongs to an industry
indispensable to national interest, it being engaged in the manufacture of
drugs and pharmaceuticals and employing around 600 workers, then Acting
Secretary of Labor, Ricardo C. Castro, invoking Article 263 (g) of the Labor
Code, issued an order dated September 26, 1989 assuming jurisdiction over
the aforesaid case docketed as NCMB-RBVII-NS-06-050-89 and directing the
parties to return to the status quo before the work stoppage. The decretal
portion of the order reads:
WHEREFORE, PREMISES CONSIDERED, this Office hereby assumes
jurisdiction over the labor dispute at the International Pharmaceuticals,
Incorporated pursuant to Article 263 (g) of the Labor Code, as amended.
Accordingly, all striking workers are hereby directed to return to work and
management to accept them under the same terms and conditions
prevailing before the work stoppage, within twenty four (24) hours from
receipt of this Order. Management is directed to post copies of this Order in
three (3) conspicuous places in the company premises.
The parties are likewise ordered to cease and desist from committing any
and all acts that will prejudice either party and aggravate the situation as
well as the normalization of operations.
SO ORDERED. 4
On January 15, 1990, the Union filed a motion in NCMB-RBVII-NS-06-050-85,
the case over which jurisdiction had been assumed by the Secretary of Labor
and Employment (hereafter referred to as the Secretary), seeking the
consolidation of the three NLRC cases (NLRC Cases Nos. VII-09-0810-89, VII-
08-0715-89, and VII-08-0742-89) with the first stated case.
In an order dated January 31, 1990, Secretary of Labor Ruben D. Torres
granted the motion and ordered the consolidation of the three NLRC cases
with NCMB-RBVII-NS-06-050-89, as follows:
WHEREFORE, finding the Associated Labor Union's Motion to be
meritorious, the same is granted and NLRC Cases Nos. VII-09-0810-89, VII-
08-0715-89 and VII-08-0742-89 are hereby ordered consolidated with the
instant proceedings. The Labor Arbiter handling the same is directed to
immediately transmit the records of the said cases to the Asst. Regional
Director, DOLE Regional Office No. 7 who has been designated to hear and
receive the evidence of the parties.
SO ORDERED. 5
The Company's subsequent motion for reconsideration of the order
consolidating the cases was denied by the Secretary on March 5,
1990. 6 Thereafter, the Assistant Regional Director of Regional Office No. VII,
as directed, assumed jurisdiction over the consolidated cases and set the
same for reception of evidence.
Petitioner Company now comes to this Court assailing the aforesaid orders
and alleging grave abuse of discretion on the part of the public respondent
in the issuance thereof. The Union, as the bargaining agent of the rank and
file workers of the Company, was impleaded as the private respondent.
Petitioner Company submits that the exclusive jurisdiction to hear and
decide the three NLRC cases above-specified is vested in the labor arbiter as
provided in paragraph (a) (1) and (5) of Article 217 of the Labor Code.
Moreover, petitioner insists that there is nothing in Article 263 (g) of the
Labor Code which directs the labor arbiter to hold in abeyance all
proceedings in the NLRC cases and await instruction from the Secretary.
Otherwise, so it postulates, Section 6, Rule V of the Revised Rules of the
NLRC which is invoked by the Secretary is null and void since it orders the
cessation of all proceedings before the labor arbiter and orders him to await
instructions from the Secretary in labor disputes where the Secretary bas
assumed jurisdiction, thereby amending Article 263 (g) of the Labor Code by
enlarging the jurisdiction of the Secretary.
Petitioner further contends that, granting arguendo that Section 6, Rule V of
the Revised Rules of the NLRC is in accordance with Article 263 (g) of the
Labor Code, still the Secretary should not have ordered the consolidation of
the three unfair labor practice cases with NCMB-RBVII-NS-06-050-89, since
the Secretary assumed jurisdiction only over the deadlock in the negotiation
of the collective bargaining agreement and the petition for contempt as a
result of the said deadlock.
Respondents, on the other band, assert that the authority to assume
jurisdiction over labor disputes, vested in the Secretary by Article 263 (g) of
the Labor Code, extends to all questions and incidents arising therein
causing or likely to cause strikes or lockouts in industries indispensable to
national interest.
Moreover, respondents counter that Section 6, Rule V of the Revised Rules
of the NLRC is in accordance with Article 263 (g) of the Labor Code,
notwithstanding the provisions of Article 217 of the Labor Code. To rule
otherwise, they point out, would encourage splitting of jurisdiction,
multiplicity of suits, and possible conflicting findings and decisions which
could only result in delay and complications in the disposition of the labor
disputes.
It was also stressed that the three NLRC cases which respondent Secretary
ordered consolidated with the labor dispute over which he had assumed
jurisdiction arose from or are directly related to and are incidents of the said
labor dispute.
Finally, respondents invoke the rule that all doubts in the implementation
and interpretation of the Labor Code provisions should be resolved in favor
of labor. By virtue of the assailed orders, the Union and its members were
relieved of the burden of having to litigate their interrelated cases in
different fora.
There are three governing labor law provisions which are determinative of
the present issue of jurisdiction, viz.:
1. Article 217 (a) (1) and (5) of the Labor Code which provides:
Art. 217. Jurisdiction of Labor Arbiters and the Commission — (a) Except as
otherwise provided under this Code the Labor Arbiters shall have original
and exclusive jurisdiction to hear and decide . . . the following cases
involving all workers. . . .
1. Unfair labor practice cases;
xxx xxx xxx
5. Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; . . .
2. Article 263 (g) of the Labor Code which declares:
(g) When, in his opinion, there exists a labor dispute causing or likely to
cause a strike of 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. . . .
3. Section 6, Rule V of the Revised Rules of the NLRC which states:
Sec. 6. Disposition of cases. — . . .
Provided, that when the Minister (Secretary) of Labor and Employment has
assumed jurisdiction over a strike or lockout dispute or certified the same to
the Commission, the parties to such dispute shall immediately inform the
Minister (Secretary) or the Commission as the case may be, of all cases
between them pending before any Regional Arbitration Branch, and the
Labor Arbiter handling the same of such assumption or certification,
whereupon all proceedings before the Labor Arbiter concerning such cases
shall cease and the Labor Arbiter shall await instructions from the Minister
(Secretary) or the Commission.
The foregoing provisions persuade us that the Secretary did not gravely
abuse his discretion when he issued the questioned orders.
As early as 1913, this Court laid down in Herrera vs. Baretto, et al., 7 the
fundamental normative rule that jurisdiction is the authority to bear and
determine a cause — the right to act in a case. However, this should be
distinguished from the exercise of jurisdiction. The authority to decide a
case at all and not the decision rendered therein is what makes up
jurisdiction. Where there is jurisdiction over the person and the subject
matter, the decision of all other questions arising in the case is but an
exercise of that jurisdiction. 8
In the present case, the Secretary was explicitly granted by Article 263 (g) of
the Labor Code the authority to assume jurisdiction over a labor dispute
causing or likely to cause a strike or lockout in an industry indispensable to
the national interest, and decide the same accordingly. Necessarily, this
authority to assume jurisdiction over the said labor dispute must include
and extend to all questions and controversies arising therefrom, including
cases over which the labor arbiter has exclusive jurisdiction.
Moreover, Article 217 of the Labor Code is not without, but contemplates,
exceptions thereto. This is evident from the opening proviso therein reading
"(e)xcept as otherwise provided under this Code . . ." Plainly, Article 263 (g)
of the Labor Code was meant to make both the Secretary (or the various
regional directors) and the labor arbiters share jurisdiction, subject to
certain conditions. 9 Otherwise, the Secretary would not be able to
effectively and efficiently dispose of the primary dispute. To hold the
contrary may even lead to the absurd and undesirable result wherein the
Secretary and the labor arbiter concerned may have diametrically opposed
rulings. As we have said, "(i)t is fundamental that a statute is to be read in a
manner that would breathe life into it, rather than defeat it." 10
In fine, the issuance of the assailed orders is within the province of the
Secretary as authorized by Article 263 (g) of the Labor Code and Article 217
(a) (1) and (5) of the same Code, taken conjointly and rationally construed to
subserve the objective of the jurisdiction vested in the Secretary.
Our pronouncement on this point should be distinguished from the situation
which obtained and our consequent ruling in Servando's, Inc. vs. The
Secretary of Labor and Employment, et al. 11 wherein we referred to the
appropriate labor arbiter a case previously decided by the Secretary. The
said case was declared to be within the exclusive jurisdiction of the labor
arbiter since the aggregate claims of each of the employees involved
exceeded P5,000.00. In Servando, the Secretary invoked his visitorial and
enforcement powers to assume jurisdiction over the case, the exclusive and
original jurisdiction of which belongs to the labor arbiter. We said that to
uphold the Secretary would empower him, under his visitorial powers, to
hear and decide an employee's claim of more than P5,000.00. We held that
he could not do that and we, therefore, overruled him.
In the present case, however, by virtue of Article 263 (g) of the Labor Code,
the Secretary has been conferred jurisdiction over cases which would
otherwise be under the original and exclusive jurisdiction of labor arbiters.
There was an existing labor dispute as a result of a deadlock in the
negotiation for a collective bargaining agreement and the consequent strike,
over which the Secretary assumed jurisdiction pursuant to Article 263 (g) of
the Labor Code. The three NLRC cases were just offshoots of the stalemate
in the negotiations and the strike. We, therefore, uphold the Secretary's
order to consolidate the NLRC cases with the labor dispute pending before
him and his subsequent assumption of jurisdiction over the said NLRC cases
for him to be able to competently and efficiently dispose of the dispute in its
totality.
Petitioner's thesis that Section 6, Rule V of the Revised Rules of the NLRC is
null and void has no merit. The aforesaid rule has been promulgated to
implement and enforce Article 263 (g) of the Labor Code. The rule is in
harmony with the objectives sought to be achieved by Article 263 (g) of the
Labor Code, particularly the Secretary's assumption of jurisdiction over a
labor dispute and his subsequent disposition of the same in the most
expeditious and conscientious manner. To be able to completely dispose of a
labor dispute, all its incidents would have to be taken into consideration.
Clearly, the purpose of the questioned regulation is to carry into effect the
broad provisions of Article 263 (g) of the Labor Code.
By and large, Section 6, Rule V of the Revised Rules of the NLRC is germane
to the objects and purposes of Article 263 (g) of the Labor Code, and it is not
in contradiction with but conforms to the standards the latter requires.
Thus, we hold that the terms of the questioned regulation are within the
statutory power of the Secretary to promulgate as a necessary implementing
rule or regulation for the enforcement and administration of the Labor
Code, in accordance with Article 5 of the same Code.
Besides, to uphold petitioner Company's arguments that the NLRC cases are
alien and totally separate and distinct from the deadlock in the negotiation
of the collective bargaining agreement is to sanction split jurisdiction which
is obnoxious to the orderly administration of justice. 12
Moreover, the rule is that all doubts in the interpretation and
implementation of labor laws should be resolved in favor of labor. In
upholding the assailed orders of the Secretary, the Court is only giving
meaning to this rule. The Court should help labor authorities provide
workers immediate access to their rights and benefits, without being
hampered by arbitration or litigation processes that prove to be not only
nerve-wracking, but financially burdensome in the long
13
run. Administrative rules of procedure should be construed liberally in
order to promote their object and assist the parties, especially the
workingman, in obtaining just, speedy, and inexpensive determination of
their respective claims and defenses. By virtue of the assailed orders. The
Union and its members are relieved of the burden of litigating their
interrelated cases in different tribunals.
WHEREFORE. there being no grave abuse of discretion committed by the
Secretary of Labor and Employment, the petition at bar is hereby
DISMISSED.
SO ORDERED.
G.R. No. L-25471 March 27, 1968

BENGUET CONSOLIDATED, INC., STANLEY WILLIMONT, EUGENE KNEEBONE,

C.W. HEROLD, A.P. DAVIDSON, G.N. WRIGHT and O.M.
WESTERFIELD, petitioners,
vs.
BCI EMPLOYEES & WORKERS UNION-PAFLU and DONACIANO S. ANDRADA
and the COURT OF INDUSTRIAL RELATIONS, respondents.

Ross, Selph, Salcedo, Del Rosario, Bito & Misa for petitioners.
Leonardo C. Fernandez and Cipriano Cid & Associates for respondents.

BENGZON, J.P., J.:

On May 3, 1963, respondent labor union and Donaciano Andrada filed

an unfair labor practice charge in the Court of Industrial Relations against
petitioner company alleging that the latter unduly discriminated against
respondent Andrade, one of its employees, with regard to his status and
conditions of employment in violation of Sec. 4(a) (4) of Republic Act 875.

After investigating the charge, the acting prosecutor of the Court filed
on September 4, 1963, the formal complaint against petitioners company
and some of its officials. The principal averment in the complaint was 1 —

That in the year 1954, complainant Danaciano Andrada was promoted

to the position of Invoice Processing Clerk, but respondents refused to
implement his wage scale as embodied in the several collective bargaining
agreements between the Benguet Balatoc Workers Union, the complainant
labor organization and the company, starting 1954, on account of:
(a) His militant union activities;
(b) his persistent refusal to disaffiliate from complainant union;
(c) his petitions for the betterment of his co-employees for which he was
discriminated by the company;1äwphï1.ñët
Petitioners filed their answer on September 28, 1963 denying the
alleged discrimination against respondent Andrada and the alleged unjust
refusal on their part to implement the wage scale under the Collective
Bargaining Agreements.
Issues having been joined, trial was conducted. On March 23, 1965,
Associate Judge Amando Bugayong before whom the hearings were made,
rendered decision finding petitioners guilty of unfair labor practice based on
the following of facts:2
Respondent Benguet Consolidated, Inc., is a domestic corporation
engaged in the mining industry with respondents Stanley Willimont, Eugene
Kneebone, C.W. Herold, G.N. Wright, O.M. Westerfield, A.P. Davidson and
William Johnson as its officers. Complainant BCI Employees and Workers
Union (PAFLU) is a legitimate labor union while complainant Donaciano
Andrada is a member thereof.
Prior to December 19, 1954, complainant Andrada was a payroll clerk
in the respondent Company with a salary of P3.24 per day. On August 28,
1954, he and several others petitioned the respondent company that they
be given the rates of pay as prescribed in the collective bargaining contract.
It appears that at that time there was an existing collective bargaining
contract between the respondent company then operating under the trade
name Benguet Consolidated Mining Company and Balatoc Mining Company
and the Benguet-Balatoc Workers Union of which complainant Andrada was
then a member. Said contract (Exh. "A") provides for the wage scales of the
workers and pursuant thereto, the wage scale of a payroll clerk, first class
category, was P3.56 per day (Exh. "A-1"). Thus, complainant Andrada,
together with several others, requested for adjustment of their wages (Exh.
"B") and the respondent company, in compliance thereto made the
necessary salary adjustment with the exception of complainant Andrada
who, although he was reclassified from clerk second class to clerk first class,
did not receive any corresponding increase in his pay (Exh. "1").
Then, on or about January 1, 1955, he was transferred from the
Accounting Department, clerk first class, to the Purchasing Department also
as clerk first class with the same salary of P97.20 per month or P3.24 per day
(Exh. "E"). His assignment in the Purchasing Department was recommended
by S.J. Willimont, his former department head, and C.W. Herold, head of the
Purchasing Department, and approved by A.P. Davidson, General
Superintendent. He was assigned to replace Ramon M. Alvia, a bodeguero
performing invoice clearing duties who resigned December 19, 1954 and
who was receiving a salary of P4.60 per day (Exh. "E-1").
To support his claim that he was discriminated against because of his
militant union activities, complainant Andrada testified that sometime after
he, together with several others, petitioned the respondent company for a
reclassification and readjustment of their wages, as first class clerk (Exh. "B")
he brought the matter to the attention of his union, then the Benguet-
Balatoc Workers Union and accordingly the latter, through Braulio Oximana,
union steward, wrote a letter dated October 6, 1954 (Exh. "F") to the
respondent company requesting information as to the action taken by said
respondent on the aforesaid petition for reclassification. He also testified
that an or about October 8, 1954, he had occasion to talk with Stanley
Willimont, then his department head, and the latter told him that had he not
brought his petition to the union, his future would have been better; and
that as a matter of fact he was the only employee who did not receive any
adjustment in his salary although he was placed in the first class clerk
category. Complaint Andrada further testified that sometime in 1955 after
he was transferred to the Purchasing Department, as replacement of Ramon
M. Alvia, a "bodeguero" performing invoice clearing duties and who was
receiving a salary of P4.60 per day, he received the same salary as payroll
clerk which was P97.20 per month or P3.24 per day. So, he approached C. W.
Herold, head of the Purchasing Department, and complained to the latter
about his situation hoping that he will be extended the proper wage
appertaining to the position of "bodeguero" as provided in the collective
bargaining contract, but nothing came out of his request.
He also declared that on or about August 26, 1967, on the occasion of
a grievance meeting concerning the adjustment of his wages, Eugene
Kneebone, one of the respondent herein, said to him, "am spending much
of my time for your complaint. My time is precious. I tell you that as long as I
am still connected with Benguet Consolidated, Inc., this office cannot give
you any change of classification whatsoever"; That Mr. Kneebone further
said, "By representing your grievance to the union, you are cutting your neck
entirely, and I tell you to think it over or retract your complaint"; that
complaint again met Mr. Kneebone who said to him, "The question with you
is, you are too vocal of your union activities. Had you shut your mouth, your
case should not have happened like that." He also testified that sometime in
1958, he was elected district governor for Balatoc and on July 28, 1958 the
union's counsel sent a letter to the respondent company informing the latter
of the appointment of complainant Andrada as union steward for Balatoc
(Exh. "D"); that as district governor and steward of the union, he was most
often alone in representing the workers in his district; that sometime in
1959, the respondent company offered to transfer him as "bodeguero" to
the Kias Dynamite Storage area, but the same was intended to take him far
from the company where he performs his duties as union district steward.
Complaint further testified that sometime in July, 1962, there was an
increase of P.24 to all kinds of categories and that he was not benefitted by
the increase; that he asked O.M. Westerfield, his department head, to give
him also an increase, but the latter said to him, "If you will not stop asking or
complaining about your rate, Mr. Crosby will step over your head."
xxx xxx x x x1äwphï1.ñët
Accordingly, petitioners were ordered "to implement the salary scale
with respect to the daily wage of complainant Donaciano S. Andrada from
1954 until his wage reaches the level as embodied in the collective
bargaining agreements between the Benguet-Balatoc Workers Union, the
complainant labor organization, and the respondent company."
Petitioners subsequently moved for reconsideration, which the lower
court, en banc, denied altho one of the five judges dissented. They then
elevated the case to this Court for review by way of certiorari. Pending the
appeal and at petitioners' instance, this Court issued preliminary injunction
to prevent immediate execution of the judgment.
Petitioners' principal submission, in the first three errors assigned, is
that they were held liable for discriminating against respondent Andrada in
1954 on account of militant union activities which, however, were
conducted in 1958. This is erroneous on two counts. First, what was charged
was not discrimination committed in 1954 alone but rather continuing acts
of discrimination committed "starting 1954" as alleged in par. 3 of the
complaint for unfair labor practice. The charge of discrimination, consisting
in petitioners' refusal to implement the proper salary scale as to respondent
Andrada is adequately supported by the following findings of the court a
quo. In August, 1954, Andrada's category was changed to clerk first class but
he received no salary adjustment unlike the other employees. In 1955, after
he was transferred to the Purchasing Department and was assigned to
perform the work done by one Ramon Alvia who held the category of
bodeguero (with a higher pay rate) respondent Andrada still received no
corresponding pay increase. In July, 1962, there was a general pay hike but
Andrada was not benefitted.
Second, the militant union activity, involved is not Andrada's having
been elected as Union District Governor and Steward and his actuations as
such, but rather Andrada's having sought the help of his union in pursuing
what he believed was his right to salary adjustment. It should be noted that
the damaging statement on this score3imputed to co-petitioners Stanley
Willimont and Eugene Kneebone by respondent Andrada in his testimony to
which the court a quo gave credence, were never denied or controverted by
them. And it is unquestionable that the seeking of the union's help by one of
its members in connection with the latter's correct wages constitutes proper
union activity.
 The claim that respondent Andrada was guilty of laches is without
merit. The discriminations, from 1954 to 1962, were continuing. Moreover,
as counsel for respondents correctly points out, the unfair labor practice
charge was filed only in 1963 because respondent's complaint was first
coursed thru a series of conciliation meetings between the union and
petitioner company.
In this connection, petitioner's final submission that respondent's
complaint had already been satisfactorily settled in the grievance
proceedings as the latter himself admitted is not borne out in the portion of
Andrada's testimony reproduced in Annex D of the petition. What could be
inferred therefrom is that respondent Andrada, who was on a monthly wage
basis, refused to be classified on a daily wage basis. But as the lower court
found, 4respondent was justified in so refusing, since; an employee on a
daily wage basis gets less than one on the monthly basis assuming the pay
rate to be the same. This finding of the court is based on the admission of
Willimont, one co-petitioner company's own officials.
In fine, this Court finds that the findings of fact below furnish
satisfactory answers to the questions presented here by petitioners. And
there is not even a slight suggestion from them that these findings are not
based on substantial evidence. Hence, said findings are controlling.
WHEREFORE, the judgment sought to be reviewed is hereby affirmed
and the preliminary injunction previously issued is hereby revoked and set
aside. Costs against petitioners. So ordered.
G.R. No. 91307 January 24, 1991
SINGER SEWING MACHINE COMPANY, petitioner
vs.
HON. FRANKLIN M. DRILON, MED-ARBITER FELIX B. CHAGUILE, JR., and
SINGER MACHINE COLLECTORS UNION-BAGUIO (SIMACUB), respondents.
Misa, Castro, Villanueva, Oposa, Narvasa & Pesigan for petitioner.
Domogan, Lockey, Orate & Dao-ayan Law Office for private respondent.
GUTIERREZ, JR., J.:p
This is a petition for certiorari assailing the order of Med-Arbiter Designate
Felix B. Chaguile, Jr., the resolution of then Labor Secretary Franklin M.
Drilon affirming said order on appeal and the order denying the motion for
reconsideration in the case entitled "In Re: Petition for Direct Certification as
the Sole and Exclusive Collective Bargaining Agent of Collectors of Singer
Sewing Machine Company-Singer Machine Collectors Union-Baguio
(SIMACUB)" docketed as OS-MA-A-7-119-89 (IRD Case No. 02-89 MED).
On February 15, 1989, the respondent union filed a petition for direct
certification as the sole and exclusive bargaining agent of all collectors of the
Singer Sewing Machine Company, Baguio City branch (hereinafter referred
to as "the Company").
The Company opposed the petition mainly on the ground that the union
members are actually not employees but are independent contractors as
evidenced by the collection agency agreement which they signed.
The respondent Med-Arbiter, finding that there exists an employer-
employee relationship between the union members and the Company,
granted the petition for certification election. On appeal, Secretary of Labor
Franklin M. Drilon affirmed it. The motion for reconsideration of the
Secretary's resolution was denied. Hence, this petition in which the
Company alleges that public respondents acted in excess of jurisdiction
and/or committed grave abuse of discretion in that:
a) the Department of Labor and Employment (DOLE) has no jurisdiction over
the case since the existence of employer-employee relationship is at issue;
b) the right of petitioner to due process was denied when the evidence of
the union members' being commission agents was disregarded by the Labor
Secretary;
c) the public respondents patently erred in finding that there exists an
employer-employee relationship;
d) the public respondents whimsically disregarded the well-settled rule that
commission agents are not employees but are independent contractors.
The respondents, on the other hand, insist that the provisions of the
Collection Agency Agreement belie the Company's position that the union
members are independent contractors. To prove that union members are
employees, it is asserted that they "perform the most desirable and
necessary activities for the continuous and effective operations of the
business of the petitioner Company" (citing Article 280 of the Labor Code).
They add that the termination of the agreement by the petitioner pending
the resolution of the case before the DOLE "only shows the weakness of
petitioner's stand" and was "for the purpose of frustrating the
constitutionally mandated rights of the members of private respondent
union to self-organization and collective organization." They also contend
that under Section 8, Rule 8, Book No. III of the Omnibus Rules
Implementing the Labor Code, which defines job-contracting, they cannot
legally qualify as independent contractors who must be free from control of
the alleged employer, who carry independent businesses and who have
substantial capital or investment in the form of equipment, tools, and the
like necessary in the conduct of the business.
The present case mainly calls for the application of the control test, which if
not satisfied, would lead us to conclude that no employer-employee
relationship exists. Hence, if the union members are not employees, no right
to organize for purposes of bargaining, nor to be certified as such bargaining
agent can ever be recognized. The following elements are generally
considered in the determination of the employer-employee relationship;
"(1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the
employee's conduct — although the latter is the most important element"
(Mafinco Trading Corporation v. Ople, 70 SCRA 139 [1976]; Development
Bank of the Philippines v. National Labor Relations Commission, 175 SCRA
537 [1989]; Rosario Brothers, Inc. v. Ople, 131 SCRA 72 [1984]; Broadway
Motors Inc. v. NLRC, 156 SCRA 522 [1987]; Brotherhood Labor Unity
Movement in the Philippines v. Zamora, 147 SCRA 49 [1986]).
The Collection Agency Agreement defines the relationship between the
Company and each of the union members who signed a contract. The
petitioner relies on the following stipulations in the agreements: (a) a
collector is designated as a collecting agent" who is to be considered at all
times as an independent contractor and not employee of the Company; (b)
collection of all payments on installment accounts are to be made monthly
or oftener; (c) an agent is paid his compensation for service in the form of a
commission of 6% of all collections made and turned over plus a bonus on
said collections; (d) an agent is required to post a cash bond of three
thousand pesos (P3,000.00) to assure the faithful performance and
observance of the terms and conditions under the agreement; (e) he is
subject to all the terms and conditions in the agreement; (f) the agreement
is effective for one year from the date of its execution and renewable on a
yearly basis; and (g) his services shall be terminated in case of failure to
satisfy the minimum monthly collection performance required, failure to
post a cash bond, or cancellation of the agreement at the instance of either
party unless the agent has a pending obligation or indebtedness in favor of
the Company.
Meanwhile, the respondents rely on other features to strengthen their
position that the collectors are employees. They quote paragraph 2 which
states that an agent shall utilize only receipt forms authorized and issued by
the Company. They also note paragraph 3 which states that an agent has to
submit and deliver at least once a week or as often as required a report of
all collections made using report forms furnished by the Company.
Paragraph 4 on the monthly collection quota required by the Company is
deemed by respondents as a control measure over the means by which an
agent is to perform his services.
The nature of the relationship between a company and its collecting agents
depends on the circumstances of each particular relationship. Not all
collecting agents are employees and neither are all collecting agents
independent contractors. The collectors could fall under either category
depending on the facts of each case.
The Agreement confirms the status of the collecting agent in this case as an
independent contractor not only because he is explicitly described as such
but also because the provisions permit him to perform collection services
for the company without being subject to the control of the latter except
only as to the result of his work. After a careful analysis of the contents of
the agreement, we rule in favor of the petitioner.
The requirement that collection agents utilize only receipt forms and report
forms issued by the Company and that reports shall be submitted at least
once a week is not necessarily an indication of control over the means by
which the job of collection is to be performed. The agreement itself
specifically explains that receipt forms shall be used for the purpose of
avoiding a co-mingling of personal funds of the agent with the money
collected on behalf of the Company. Likewise, the use of standard report
forms as well as the regular time within which to submit a report of
collection are intended to facilitate order in office procedures. Even if the
report requirements are to be called control measures, any control is only
with respect to the end result of the collection since the requirements
regulate the things to be done after the performance of the collection job or
the rendition of the service.
The monthly collection quota is a normal requirement found in similar
contractual agreements and is so stipulated to encourage a collecting agent
to report at least the minimum amount of proceeds. In fact, paragraph 5,
section b gives a bonus, aside from the regular commission every time the
quota is reached. As a requirement for the fulfillment of the contract, it is
subject to agreement by both parties. Hence, if the other contracting party
does not accede to it, he can choose not to sign it. From the records, it is
clear that the Company and each collecting agent intended that the former
take control only over the amount of collection, which is a result of the job
performed.
The respondents' contention that the union members are employees of the
Company is based on selected provisions of the Agreement but ignores the
following circumstances which respondents never refuted either in the trial
proceedings before the labor officials nor in its pleadings filed before this
Court.
1. The collection agents are not required to observe office hours or report to
Singer's office everyday except, naturally and necessarily, for the purpose of
remitting their collections.
2. The collection agents do not have to devote their time exclusively for
SINGER. There is no prohibition on the part of the collection agents from
working elsewhere. Nor are these agents required to account for their time
and submit a record of their activity.
3. The manner and method of effecting collections are left solely to the
discretion of the collection agents without any interference on the part of
Singer.
4. The collection agents shoulder their transportation expenses incurred in
the collections of the accounts assigned to them.
5. The collection agents are paid strictly on commission basis. The amounts
paid to them are based solely on the amounts of collection each of them
make. They do not receive any commission if they do not effect any
collection even if they put a lot of effort in collecting. They are paid
commission on the basis of actual collections.
6. The commissions earned by the collection agents are directly deducted by
them from the amount of collections they are able to effect. The net amount
is what is then remitted to Singer." (Rollo, pp. 7-8)
If indeed the union members are controlled as to the manner by which they
are supposed to perform their collections, they should have explicitly said so
in detail by specifically denying each of the facts asserted by the petitioner.
As there seems to be no objections on the part of the respondents, the
Court finds that they miserably failed to defend their position.
A thorough examination of the facts of the case leads us to the conclusion
that the existence of an employer-employee relationship between the
Company and the collection agents cannot be sustained.
The plain language of the agreement reveals that the designation as
collection agent does not create an employment relationship and that the
applicant is to be considered at all times as an independent contractor. This
is consistent with the first rule of interpretation that the literal meaning of
the stipulations in the contract controls (Article 1370, Civil Code; La Suerte
Cigar and Cigarette Factory v. Director of Bureau of Labor, Relations, 123
SCRA 679 [1983]). No such words as "to hire and employ" are present.
Moreover, the agreement did not fix an amount for wages nor the required
working hours. Compensation is earned only on the basis of the tangible
results produced, i.e., total collections made (Sarra v. Agarrado, 166 SCRA
625 [1988]). In Investment Planning Corp. of the Philippines v. Social Security
System, 21 SCRA 924 [1967] which involved commission agents, this Court
had the occasion to rule, thus:
We are convinced from the facts that the work of petitioner's agents or
registered representatives more nearly approximates that of an independent
contractor than that of an employee. The latter is paid for the labor he
performs, that is, for the acts of which such labor consists the former is paid
for the result thereof . . . .
xxx xxx xxx
Even if an agent of petitioner should devote all of his time and effort trying
to sell its investment plans he would not necessarily be entitled to
compensation therefor. His right to compensation depends upon and is
measured by the tangible results he produces."
Moreover, the collection agent does his work "more or less at his own
pleasure" without a regular daily time frame imposed on him (Investment
Planning Corporation of the Philippines v. Social Security System, supra; See
alsoSocial Security System v. Court of Appeals, 30 SCRA 210 [1969]).
The grounds specified in the contract for termination of the relationship do
not support the view that control exists "for the causes of termination thus
specified have no relation to the means and methods of work that are
ordinarily required of or imposed upon employees." (Investment Planning
Corp. of the Phil. v. Social Security System, supra)
The last and most important element of the control test is not satisfied by
the terms and conditions of the contracts. There is nothing in the agreement
which implies control by the Company not only over the end to be achieved
but also over the means and methods in achieving the end (LVN Pictures,
Inc. v. Philippine Musicians Guild, 1 SCRA 132 [1961]).
The Court finds the contention of the respondents that the union members
are employees under Article 280 of the Labor Code to have no basis. The
definition that regular employees are those who perform activities which
are desirable and necessary for the business of the employer is not
determinative in this case. Any agreement may provide that one party shall
render services for and in behalf of another for a consideration (no matter
how necessary for the latter's business) even without being hired as an
employee. This is precisely true in the case of an independent
contractorship as well as in an agency agreement. The Court agrees with the
petitioner's argument that Article 280 is not the yardstick for determining
the existence of an employment relationship because it merely distinguishes
between two kinds of employees, i.e., regular employees and casual
employees, for purposes of determining the right of an employee to certain
benefits, to join or form a union, or to security of tenure. Article 280 does
not apply where the existence of an employment relationship is in dispute.
Even Section 8, Rule 8, Book III of the Omnibus Rules Implementing the
Labor Code does not apply to this case. Respondents assert that the said
provision on job contracting requires that for one to be considered an
independent contractor, he must have "substantial capital or investment in
the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business." There is no
showing that a collection agent needs tools and machineries. Moreover, the
provision must be viewed in relation to Article 106 of the Labor Code which
provides:
Art. 106. Contractor or subcontractor. — Whenever an employer enters into
a contract with another person for the performance of the former's work,
the employees of the contractor and of the latter's subcontractor, if any,
shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of
his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees
to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
xxx xxx xxx
There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such persons are performing activities
which are directly related to the principal business of such employer. In such
cases, the person or intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him." (p. 20)
It can readily be seen that Section 8, Rule 8, Book Ill and Article 106 are
relevant in determining whether the employer is solidarily liable to
the employees of an alleged contractor and/or sub-contractor for unpaid
wages in case it is proven that there is a job-contracting situation.
The assumption of jurisdiction by the DOLE over the case is justified as the
case was brought on appeal by the petitioner itself which prayed for the
reversal of the Order of the Med-Arbiter on the ground that the union
members are not its employees. Hence, the petitioner submitted itself as
well as the issue of existence of an employment relationship to the
jurisdiction of the DOLE which was faced with a dispute on an application for
certification election.
The Court finds that since private respondents are not employees of the
Company, they are not entitled to the constitutional right to join or form a
labor organization for purposes of collective bargaining. Accordingly, there is
no constitutional and legal basis for their "union" to be granted their
petition for direct certification. This Court made this pronouncement in La
Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor Relations,
supra:
. . . The question of whether employer-employee relationship exists is a
primordial consideration before extending labor benefits under the
workmen's compensation, social security, medicare, termination pay and
labor relations law. It is important in the determination of who shall be
included in a proposed bargaining unit because, it is the 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 . . . . (At p. 689)
WHEREFORE, the Order dated June 14,1989 of Med-Arbiter Designate Felix
B. Chaguile, Jr., the Resolution and Order of Secretary Franklin M. Drilon
dated November 2, 1989 and December 14, 1989, respectively are hereby
REVERSED and SET ASIDE. The petition for certification election is ordered
dismissed and the temporary restraining order issued by the Court on
December 21, 1989 is made permanent.
G.R. No. 70705 August 21, 1989
SO ORDERED.
MOISES DE LEON, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and LA TONDEÑ;A
INC., respondents.

Amorito V. Canete for petitioner.

Pablo R. Cruz for private respondent.

FERNAN, C.J.:

This petition for certiorari seeks to annul and set aside: (1) the majority
decision dated January 28, 1985 of the National Labor Relations Commission
First Division in Case No. NCR- 83566-83, which reversed the Order dated
April 6,1984 of Labor Arbiter Bienvenido S. Hernandez directing the
reinstatement of petitioner Moises de Leon by private respondent La
Tondeñ;a Inc. with payment of backwages and other benefits due a regular
employee; and, (2) the Resolution dated March 21, 1985 denying
petitioner's motion for reconsideration.

It appears that petitioner was employed by private respondent La Tondeñ;a

Inc. on December 11, 1981, at the Maintenance Section of its Engineering
Department in Tondo, Manila. 1 His work consisted mainly of painting
company building and equipment, and other odd jobs relating to
maintenance. He was paid on a daily basis through petty cash vouchers.

In the early part of January, 1983, after a service of more than one (1) year,
petitioner requested from respondent company that lie be included in the
payroll of regular workers, instead of being paid through petty cash
vouchers. Private respondent's response to this request was to dismiss
petitioner from his employment on January 16, 1983. Having been refused
reinstatement despite repeated demands, petitioner filed a complaint for
illegal dismissal, reinstatement and payment of backwages before the Office
of the Labor Arbiter of the then Ministry now Department of Labor and
Employment.
Petitioner alleged that he was dismissed following his request to be treated
as a regular employee; that his work consisted of painting company
buildings and maintenance chores like cleaning and operating company
equipment, assisting Emiliano Tanque Jr., a regular maintenance man; and
that weeks after his dismissal, he was re-hired by the respondent company
indirectly through the Vitas-Magsaysay Village Livelihood Council, a labor
agency of respondent company, and was made to perform the tasks which
he used to do. Emiliano Tanque Jr. corroborated these averments of
petitioner in his affidavit. 2
On the other hand, private respondent claimed that petitioner was not a
regular employee but only a casual worker hired allegedly only to paint a
certain building in the company premises, and that his work as a painter
terminated upon the completion of the painting job.
On April 6, 1984, Labor Arbiter Bienvenido S. Hernandez rendered a
decision 3 finding the complaint meritorious and the dismissal illegal; and
ordering the respondent company to reinstate petitioner with full
backwages and other benefits. Labor Arbiter Hernandez ruled that
petitioner was not a mere casual employee as asserted by private
respondent but a regular employee. He concluded that the dismissal of
petitioner from the service was prompted by his request to be included in
the list of regular employees and to be paid through the payroll and is,
therefore, an attempt to circumvent the legal obligations of an employer
towards a regular employee.
Labor Arbiter Hernandez found as follows:
After a thorough examination of the records of the case and evaluation of
the evidence and versions of the parties, this Office finds and so holds that
the dismissal of complainant is illegal. Despite the impressive attempt of
respondents to show that the complainant was hired as casual and for the
work on particular project, that is the repainting of Mama Rosa Building,
which particular work of painting and repainting is not pursuant to the
regular business of the company, according to its theory, we find differently.
Complainant's being hired on casual basis did not dissuade from the cold
fact that such painting of the building and the painting and repainting of the
equipment and tools and other things belonging to the company and the
odd jobs assigned to him to be performed when he had no painting and
repainting works related to maintenance as a maintenance man are
necessary and desirable to the better operation of the business company.
Respondent did not even attempt to deny and refute the corroborating
statements of Emiliano Tanque Jr., who was regularly employed by it as a
maintenance man doing same jobs not only of painting and repainting of
building, equipment and tools and machineries or machines if the company
but also other odd jobs in the Engineering and Maintenance Department
that complainant Moises de Leon did perform the same odd jobs and
assignments as were assigned to him during the period de Leon was
employed for more than one year continuously by Id respondent company.
We find no reason not to give credit and weight to the affidavit and
statement made therein by Emiliano Tanque Jr. This strongly confirms that
complainant did the work pertaining to the regular business in which the
company had been organized. Respondent cannot be permitted to
circumvent the law on security of tenure by considering complainant as a
casual worker on daily rate basis and after working for a period that has
entitled him to be regularized that he would be automatically
terminated. ... .4
On appeal, however, the above decision of the Labor Arbiter was reversed
by the First Division of the National Labor Relations Commission by virtue of
the votes of two members 5 which constituted a majority. Commissioner
Geronimo Q. Quadra dissented, voting "for the affirmation of the well-
reasoned decision of the Labor Arbiter below." 6 The motion for
reconsideration was denied. Hence, this recourse.
Petitioner asserts that the respondent Commission erred and gravely abuse
its discretion in reversing the Order of the Labor Arbiter in view of the
uncontroverted fact that the tasks he performed included not only painting
but also other maintenance work which are usually necessary or desirable in
the usual business of private respondent: hence, the reversal violates the
Constitutional and statutory provisions for the protection of labor.
The private respondent, as expected, maintains the opposite view and
argues that petitioner was hired only as a painter to repaint specifically the
Mama Rosa building at its Tondo compound, which painting work is not part
of their main business; that at the time of his engagement, it was made clear
to him that he would be so engaged on a casual basis, so much so that he
was not required to accomplish an application form or to comply with the
usual requisites for employment; and that, in fact, petitioner was never paid
his salary through the regular payroll but always through petty cash
vouchers. 7
The Solicitor General, in his Comment, recommends that the petition be
given due course in view of the evidence on record supporting petitioner's
contention that his work was regular in nature. In his view, the dismissal of
petitioner after he demanded to be regularized was a subterfuge to
circumvent the law on regular employment. He further recommends that
the questioned decision and resolution of respondent Commission be
annulled and the Order of the Labor Arbiter directing the reinstatement of
petitioner with payment of backwages and other benefits be upheld. 8
After a careful review of the records of this case, the Court finds merit in the
petition as We sustain the position of the Solicitor General that the reversal
of the decision of the Labor Arbiter by the respondent Commission was
erroneous.
The law on the matter is Article 281 of the Labor Code which defines regular
and casual employment as follows:
Art. 281. Regular and casual employment. The provisions of a written
agreement to the contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or 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
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.
This provision reinforces the Constitutional mandate to protect the interest
of labor. Its language evidently manifests the intent to safeguard the tenurial
interest of the worker who may be denied the rights and benefits due a
regular employee by virtue of lopsided agreements with the economically
powerful employer who can maneuver to keep an employee on a casual
status for as long as convenient. Thus, contrary agreements
notwithstanding, an employment is deemed regular when the activities
performed by the employee are usually necessary or desirable in the usual
business or trade of the employer. Not considered regular are the so-called
"project employment" the completion or termination of which is more or
less determinable at the time of employment, such as those employed in
connection with a particular construction project 9 and seasonal
employment which by its nature is only desirable for a limited period of
time. However, any employee who has rendered at least one year of service,
whether continuous or intermittent, is deemed regular with respect to the
activity he performed and while such activity actually exists.
The primary standard, therefore, of determining a regular employment is
the reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. The test
is whether the former is usually necessary or desirable in the usual business
or trade of the employer. The connection can be determined by considering
the nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety. Also, if the employee has been
performing the job for at least one year, even if the performance is not
continuous or merely intermittent, the law deems the repeated and
continuing need for its performance as sufficient evidence of the necessity if
not indispensability of that activity to the business. Hence, the employment
is also considered regular, but only with respect to such activity and while
such activity exists.
In the case at bar, the respondent company, which is engaged in the
business of manufacture and distillery of wines and liquors, claims that
petitioner was contracted on a casual basis specifically to paint a certain
company building and that its completion rendered petitioner's employment
terminated. This may have been true at the beginning, and had it been
shown that petitioner's activity was exclusively limited to painting that
certain building, respondent company's theory of casual employment would
have been worthy of consideration.
However, during petitioner's period of employment, the records reveal that
the tasks assigned to him included not only painting of company buildings,
equipment and tools but also cleaning and oiling machines, even operating a
drilling machine, and other odd jobs assigned to him when he had no
painting job. A regular employee of respondent company, Emiliano Tanque
Jr., attested in his affidavit that petitioner worked with him as a maintenance
man when there was no painting job.
It is noteworthy that, as wisely observed by the Labor Arbiter, the
respondent company did not even attempt to negate the above averments
of petitioner and his co- employee. Indeed, the respondent company did not
only fail to dispute this vital point, it even went further and confirmed its
veracity when it expressly admitted in its comment that, "The main bulk of
work and/or activities assigned to petitioner was painting and other related
activities. Occasionally, he was instructed to do other odd things in
connection with maintenance while he was waiting for materials he would
need in his job or when he had finished early one assigned to him. 10
The respondent Commission, in reversing the findings of the Labor Arbiter
reasoned that petitioner's job cannot be considered as necessary or
desirable in the usual business or trade of the employer because, "Painting
the business or factory building is not a part of the respondent's
manufacturing or distilling process of wines and liquors. 11
The fallacy of the reasoning is readily apparent in view of the admitted fact
that petitioner's activities included not only painting but other maintenance
work as well, a fact which even the respondent Commission, like the private
respondent, also expressly recognized when it stated in its decision that,
'Although complainant's (petitioner) work was mainly painting, he was
occasionally asked to do other odd jobs in connection with maintenance
work. 12 It misleadingly assumed that all the petitioner did during his more
than one year of employment was to paint a certain building of the
respondent company, whereas it is admitted that he was given other
assignments relating to maintenance work besides painting company
building and equipment.
It is self-serving, to say the least, to isolate petitioner's painting job to justify
the proposition of casual employment and conveniently disregard the other
maintenance activities of petitioner which were assigned by the respondent
company when he was not painting. The law demands that the nature and
entirety of the activities performed by the employee be considered. In the
case of petitioner, the painting and maintenance work given him manifest a
treatment consistent with a maintenance man and not just a painter, for if
his job was truly only to paint a building there would have been no basis for
giving him other work assignments In between painting activities.
It is not tenable to argue that the painting and maintenance work of
petitioner are not necessary in respondent's business of manufacturing
liquors and wines, just as it cannot be said that only those who are directly
involved in the process of producing wines and liquors may be considered as
necessary employees. Otherwise, there would have been no need for the
regular Maintenance Section of respondent company's Engineering
Department, manned by regular employees like Emiliano Tanque Jr., whom
petitioner often worked with.
Furthermore, the petitioner performed his work of painting and aggrieved laborer clearly spells a grave abuse of discretion amounting to lack
maintenance activities during his employment in respondent's business of jurisdiction.
which lasted for more than one year, until early January, 1983 when he
WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution
demanded to be regularized and was subsequently dismissed. Certainly, by
this fact alone he is entitled by law to be considered a regular employee. of the National Labor Relations Commission are hereby annulled and set
aside. The Order of Labor arbiter Bienvenido S. Hernandez dated April 6,
And considering further that weeks after his dismissal, petitioner was
rehired by the company through a labor agency and was returned to his post 1984 is reinstated. Private respondent is ordered to reinstate petitioner as a
regular maintenance man and to pay petitioner 1) backwages equivalent to
in the Maintenance Section and made to perform the same activities that he
used to do, it cannot be denied that as activities as a regular painter and three years from January 16,1983, in accordance with the Aluminum Wage
Orders in effect for the period covered, 2) ECOLA 3) 13th Month Pay, 4) and
maintenance man still exist.
other benefits under pertinent Collective Bargaining Agreements, if any.
It is of no moment that petitioner was told when he was hired that his
SO ORDERED.
employment would only be casual, that he was paid through cash vouchers,
and that he did not comply with regular employment procedure. Precisely,
the law overrides such conditions which are prejudicial to the interest of the
worker whose weak bargaining position needs the support of the State. That
determines whether a certain employment is regular or casual is not the will
and word of the employer, to which the desperate worker often accedes,
much less the procedure of hiring the employee or the manner of paying his
salary. It is the nature of the activities performed in relation to the particular
business or trade considering all circumstances, and in some cases the
length of time of its performance and its continued existence.

Finally, considering its task to give life and spirit to the Constitutional
mandate for the protection of labor, to enforce and uphold our labor laws
which must be interpreted liberally in favor of the worker in case of doubt,
the Court cannot understand the failure of the respondent Commission to
perceive the obvious attempt on the part of the respondent company to
evade its obligations to petitioner by dismissing the latter days after he
asked to be treated as a regular worker on the flimsy pretext that his
painting work was suddenly finished only to rehire him indirectly weeks
after his dismissal and assign him to perform the same tasks he used to
perform. The devious dismissal is too obvious to escape notice. The
inexplicable disregard of established and decisive facts which the
Commission itself admitted to be so, in justifying a conclusion adverse to the
G.R. Nos. 92777-78 March 13, 1991

ISAGANI ECAL, CRISOLOGO ECAL, NELSON BUENAOBRA, NARDING

BANDOGELIO, WILMER ECHAGUE, ROGELIO CASTILLO, ALFREDO
FERNANDO, OLIGARIO BIGATA, ROBERTO FERRER AND HONESTO TANAEL,
Represented by ISAGANI ECAL, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION), JIMMY
MATCHUKA AND HI-LINE TIMBER, INC., respondents.

Armando A. San Antonio for petitioners.

Chicote Abad & Macaisip Law Offices for private respondents.

GANCAYCO, J.:p

Is there an employer-employee relationship between petitioners and private

respondent Hi-Line Timber, Inc. or merely an employer-independent
contractor relationship between said private respondent and petitioner
Isagani Ecal with the other petitioners being mere contract workers of Ecal?
In the case of the latter, is Ecal engaged in "job" contracting or "labor-only"
contracting? What then is the extent of the liability of private respondent?
These are the questions raised in this petition.

This case traces its origin from two consolidated complaints for illegal
dismissal and money claims filed by petitioners Isagani Ecal, Crisologo Ecal,
Nelson Buenaobra, Narding Bandogelio, Wilmer Echague, Rogelio Castillo,
Alfredo Fernando, Oligario Bigata, Roberto Ferrer and Honesto Tanael
against private respondents Hi-Line Timber, Inc. (hereinafter referred to as
Hi-Line) and Jimmy Matchuka, the company foreman, with the Department
of Labor and Employment docketed as NLRC case No. RAB-03-09-0107-87
and No. RAB III-09-0116-87.

In their complaints/position papers, petitioners alleged, among others, that

they have been employed by Hi-Line as follows: Isagani Ecal, from February,
1986; Crisologo Ecal, Buenaobra, Bandogelio, Fernando, Bigata, Ferrer and
Tanael, from March 3, 1986; and Castillo and Echague, from May 1, 1986;
that except for Isagani Ecal, they were all receiving a salary of P 35.00 a day;
that they were required to report for work 7 days a week including rest days,
legal holidays, except Christmas and Good Friday from 7:00 A.M. to 7:00
P.M.; that they were not given living allowance, overtime pay, premium pay
for rest days and legal holidays, 13th month pay and service incentive leave
pay; and, that on June 6, 1987, they were not allowed to work and instead
were informed that their services were no longer needed.
Private respondents, on the other hand, denied the existence of an
employer-employee relationship between the company and the petitioners
claiming that the latter are under the employ of an independent contractor,
petitioner Isagani Ecal, an employee of the company until his resignation on
February 4, 1987.
After submission of the supplemental position papers and other evidence by
the parties, the labor arbiter rendered his decision dated June 10, 1988
finding no employer-employee relationship between the parties. Thus, he
dismissed the two cases for lack of merit. 1
On appeal, public respondent National Labor Relations Commission (NLRC)
affirmed the aforesaid decision of the labor arbiter in a resolution dated
October 2, 1989. 2
The motion for reconsideration of petitioners was denied in a resolution
dated March 12, 1990. 3
In this petition for certiorari, petitioners primarily question the finding of the
public respondent NLRC that no employer-employee relationship existed
between them and Hi-Line Timber, Inc. They contend that petitioner Isagani
Ecal is not an independent contractor but a mere employee of Hi-Line Line.
In response, the Solicitor General points out that the issue of whether or not
an employer-employee relationship exists between the parties is a question
of fact and the findings of the labor arbiter and the NLRC on this issue are
conclusive upon this Court if they are supported by substantial evidence 4 as
in this case.
The NLRC ruled —
We have carefully examined and evaluated the basis of the decision of the
Labor Arbiter and to Our mind his factual findings are indeed supported by
substantial evidence. Thus, we cite a few of the clear and convincing
evidence and record which compelled the Labor Arbiter to disregard the
claim of the complainants that there was (an) employer-employee
relationship between the contending parties. Firstly, the affidavit of
respondents' personnel officer, Elizabeth Natividad, dated 22 April 1988,
clearly attesting to the fact that complainants, except Isagani Ecal, who
worked at their plant at Bocaue, Bulacan, from 24 April 1986 up to 4
February 1987 and who tendered his resignation on the latter date, were
not at all employees of respondents; secondly, the payrolls of the
respondents do not indicate that said complainants were employees of the
respondents; thirdly, the Sinumpaang Salaysay of Jose Mendoza, the
Secretary-Treasurer of the Hi-Line Workers Union-Confederation of Free
Laborers (CFL), a registered labor Union under Reg. Cert. No. (FED-425)-
6756-11, issued March, 1987, to the effect that none of the complainants,
except Isagani Ecal, were listed as members of the union and/or employees
of respondents; and lastly, two (2) Sinumpaang Salaysay dated 22 April 1988
executed by respondents' company guard Honorio T. Battung and Foreman
Clemente S. Sales, respectively, attesting that it was only Isagani Ecal who
worked with respondents but resigned on 4 February 1987 to work as (an)
independent contractor. 5
Petitioners claim that the NLRC based its decision solely on the evidence
aforestated and completely ignored the evidence they presented thus
denying them due process. The Court carefully examined the records of the
case and finds that the NLRC limited itself to a superficial evaluation of the
relationship of the parties based mainly on the aforestated documents with
emphasis on the company payrolls without regard to the particular
circumstances of the case.
The finding of the NLRC that Isagani Ecal is no longer an employee of Hi-Line
line is amply supported by the evidence on record. His resignation letter
dated February 4, 1987 stating "ako po ay magreresign na sa aking trabaho
bilang "laborer" sapagka't nakita ko na mas malaki ang kikitain kung
mangongontrata na lamang " 6speaks for itself. This was unsuccessfully
rebutted by petitioners.
To determine whether there exists an employer-employee relationship, the
four-way test should be applied, namely: (1) selection and engagement of
the employee; (2) the payment of wages; (3) the power of dismissal; and (4)
the power to control the employee's conduct—the last being the most
important element. 7 Neither the NLRC nor the labor arbiter utilized these
guides in their disposition of the complaint.
The records show that Hi-Line does not choose the workers but merely
accepts whoever may be selected by petitioner Isagani Ecal. Petitioners are
not included in the payroll. Instead a lump sum of P1,400.00 is given to
Isagani Ecal or his representative Solomon de los Santos, every four days, to
cover their wages for the period which the petitioners divide among
themselves.
Private respondents allege that Isagani Ecal customarily removes some of his
laborers at the Hi-Line sawmill and assigns them to other sawmills; however,
there was no evidence adduced to show that indeed Ecal regularly or even
once transferred some of his workers to other sawmills. Petitioners worked
at the company compound at Wakas, Bocaue, Bulacan, at least eight hours a
day, for seven days a week so that it would be impossible for them to find
time to work in some other sawmill. On June 6, 1987, the company
unilaterally terminated the services of petitioners without notice allegedly
on the ground that its contract with Isagani Ecal has already expired.
As to the matter of control, it would seem that petitioners were mostly left
on their own to devise the most expeditious way of segregating lumber
materials as to sizes and of loading and unloading the same in the chamber
for drying. However, their task is performed within the work premises of Hi-
Line, specifically at its Kiln Drying Section, so it cannot be said that no
amount of control and supervision is exerted upon them by the company
through their foremen, private respondent Matchuka and Clemente S. Sales.
Moreover, the very nature of the task performed by petitioners requires
very limited supervision as there are only so many ways of segregating
lumber according to their sizes and of loading and unloading them in the
dryer so that all that the company has to do is to check on the results of
their work.
The foregoing observation suggests that there is a certain relationship
existing between the parties although a clear-cut characterization of such
relationship — whether it is an employer-employee relationship or an
employer-independent contractor relationship — is unavailing. Hence, a
closer scrutiny of said relationship is in order.
Petitioners urge that even assuming arguendo that Isagani Ecal is an
independent contractor, he should be considered only a labor supplier who
is deemed an agent of the company so that petitioners should enjoy the
status of being its employees; therefore, Hi-Line should be held liable for
illegally dismissing petitioners and for the non-payment of benefits due
them. Private respondents, however, maintain that Isagani Ecal is an
independent contractor or a job contractor.
The Solicitor General adopts the theory that Ecal is an independent
contractor. However, he faults the labor arbiter for his failure to determine
the benefits due petitioners, an issue raised by the latter, on the ground that
Hi-Line, being an indirect employer, is jointly and severally liable with Isagani
Ecal to the extent of the work performed by the employees as if they were
directly employed by it. He, therefore, seeks the remand of the case to the
labor arbiter for determination of the unpaid benefits of petitioners.
The pertinent provisions of the Labor Code, as amended, are:
Art. 106. Contractor or subcontractor. — Whenever an employer enters into
a contract with another person for the performance of the former's work,
the employees of the contractor and of the latter's subcontractor, if any,
shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of
his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees
to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit
the contracting out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among
the parties involved shall be considered the employer for purposes of this
Code, to prevent any violation or circumvention of any provision of this
Code.
There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities which
are directly related to the principal business of such employer. In such cases,
the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed.
Art. 107. Indirect Employer. — The provisions of the immediately preceding
Article shall likewise apply to any person, partnership, association or
corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project.
Under the provisions of Article 106, paragraphs 1 and 2, an employer who
enters into a contract with a contractor for the performance of work for the
employer does not thereby establish an employer-employee relationship
between himself and the employees of the contractor. The law itself,
however, creates such a relationship when a contractor fails to pay the
wages of his employees in accordance with the Labor Code, and only for this
limited purpose, i.e. to ensure that the latter will be paid the wages due
them. 8
On the other hand, the legal effect of a finding that a contractor is merely a
"labor only" contractor was explained in Philippine Bank of Communications
vs. National Labor Relations Commission, et al., 9 —
. . . The "labor-only" contractor — i.e., "the person or intermediary" — is
considered "merely as an agent of the employer." The employer is made by
the statute responsible to the employees of the "labor only" contractor as if
such employee had been directly employed by the employer. Thus, where
"labor-only" contracting exists in a given case, the statute itself implies or
establishes an employer-employee relationship between the employer (the
owner of the project) and the employees of the "labor-only" contractor, this
time for a comprehensive purpose: "employer for purposes of this Code, to
prevent any violation or circumvention of any provision of this Code." The
law in effect holds both the employer and the 'labor-only' contractor
responsible to the latter's employees for the more effective safeguarding of
the employees' rights under the Labor Code.
Sections 8 and 9, Rule VIII, Book III of the Omnibus Rules implementing the
Labor Code set forth the distinctions between "job" contracting and "labor-
only" contracting —
Sec. 8. Job contracting. — There is job contracting permissible under the
Code if the following conditions are met:
(1) The contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to
his own manner and method, free from control and direction of his
employer or principal in all matters connected with the performance of the
work except as to the results thereof, and
(2) The contractor has substantial capital or investment in the form of tools,
equipments, machineries, work premises, and other materials which are
necessary in the conduct of his business.
Sec. 9. Labor-only contracting — (a) Any person who undertakes to supply
workers to an employer shall be deemed to be engaged in labor-only
contracting where such person:
(1) Does not have substantial capital or investment in the form of tools,
equipments, machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing
activities which are directly related to the principal business or operations of
the employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the
person acting as contractor shall be considered merely as an agent or
intermediary of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him.
xxx xxx xxx
Applying the foregoing provisions, the Court finds petitioner Isagani Ecal to
be a "labor-only" contractor, a mere supplier of manpower to Hi-Line.
Isagani Ecal was only poor laborer at the time of his resignation on February
4, 1987 who cannot even afford to have his daughter treated for
malnutrition. He resigned and became a supplier of laborers for Hi-Line,
because he saw an opportunity for him to earn more than what he was
earning while still in the payroll of the company. At the same time, he
continued working for the company as a laborer at the kiln drying section.
He definitely does not have sufficient capital to invest in tools and
machineries. Private respondents, however, claim that the business
contracted by Ecal did not require the use of tools, equipment and
machineries and the contracted task had to be executed in the premises of
Hi-Line. Precisely, the job assigned to petitioners has to be executed within
the work premises of Hi-Line where they use the machineries and
equipment of the company for the drying of lumber materials. Even the
company's personnel officer Elizabeth Natividad admitted that Ecal resigned
in order to supply manpower to the company on a task basis. 10 By the very
allegations of private respondents, it is quite clear that Isagani Ecal only
supplies manpower to Hi-Line within the context of "labor-only" contracting
as defined by law.
There is also no question that the task performed by petitioners is directly
related to the business of Hi-Line. Petitioners were assigned to sort out the
lumber materials whether wet or fresh kiln as to sizes and to carry them
from the stockpile to the dryer where they are loaded for drying after which
they are unloaded. The work of petitioners is an integral part of the
operation of the sawmill of Hi-Line without which production and company
sales will suffer.
A finding that Isagani Ecal is a "labor-only" contractor is equivalent to a
finding that an employer-employee relationship exists between the
company and Ecal including the latter's "contract workers" herein
petitioners, the relationship being such as provided by the law itself. 11
Indeed, the law prohibits "labor-only" contracting and creates an employer-
employee relationship for the protection of the laborers. The Court had in
fact observed that businessmen, with the aid of lawyers, have tried to avoid
the bringing about of an employer-employee relationship in some of their
enterprises because that juridical relation spawns obligations connected
with workmen's compensation, social security, medicare, minimum wage,
termination pay and unionism. 12
This unscrupulous practice is quite evident in the case at bar. It is company
policy that once an employee is assigned to the kiln drying section, he is no
longer included in the payroll and is then paid on a task basis, even if he had
long been employed with the company. Since the employee will no longer
be included in the payroll, it becomes easy for the company to deny the
regular employment of such a worker and is able to avoid whatever
obligations it may have under an employer-employee relationship.
Moreover, Hi-Line limits the period of undertaking to only four days
presumably to make termination of the services of petitioners easier and to
prevent them from attaining regular status. The company had no doubt
taken advantage of these laborers in order to escape liability for benefits
and privileges accruing to one holding a regular employment. Without a law
prohibiting "labor-only" contracting to protect the rights of labor, these poor WHEREFORE, the decision of public respondent NLRC is hereby REVERSED
workers will always be at the mercy of the employer. and SET ASIDE. Private respondent Hi-Line Timber, Inc. is hereby ordered to
reinstate petitioners to their former positions with backwages equivalent to
Since petitioners perform tasks which are usually necessary or desirable in three (3) years without deductions and qualifications. The records of the
the main business of Hi-Line, they should be deemed regular employees of case are remanded to the labor arbiter for determination of the unpaid
the latter 13 and as such are entitled to all the benefits and rights benefits due petitioners. No costs.
appurtenant to regular employment.
SO ORDERED.
Being regular employees, they should have been afforded due process prior
to their dismissal. 14 Instead they were unceremoniously dismissed on June
6, 1987 when they were not allowed to enter the company's premises by
the security guards. The argument of private respondents that the contract
of Ecal with the company expired cannot be sustained. Petitioners may only
be dismissed for an authorized or just cause and after due process.

At this juncture, We note that petitioners and private respondents allege

conflicting dates of employment of the former. Petitioners claim that as
early as March or May, 1986, they have already been working with Hi-Line
Line, while private respondents contend that it was only in April, 1987 that
they had been engaged by the company. This Court is not a trier of facts and
there is not enough basis in the records to enable Us to come up with
definite dates of employment. However, whatever be the date of their
employment, petitioners will still be considered employees of the company.
If petitioners had started their employment in 1986, they would have
rendered more than 1 year of service at the time of their dismissal and,
therefore, should be considered regular employees. Even if they have been
engaged only in April of 1987, they will still be deemed regular employees
for as earlier indicated, Isagani Ecal is a "labor-only" contractor and
petitioners perform activities directly related to the principal business of Hi-
Line Line.

Petitioners, having been illegally dismissed on June 6, 1987, are entitled to

backwages equivalent to three years without qualifications and deductions
in line with prevailing jurisprudence.
 NATIONAL LABOR RELATIONS COMMISSION and CONSTRESS PHILIPPINES,
INC., respondents.

Jose V. Juan, Mercedes M. Respicio and Roberto C. Omandam for petitioner.

Topacio/Tagoc & Associates for private respondent.

FERNAN, C.J.:

The issue in this petition for certiorari is whether public respondent National
Labor Relations Commission committed grave abuse of discretion in
reversing and setting aside the decision of Labor Arbiter Domingo V. del
Rosario dated June 22, 1983 directing private respondent in Case No. NLRC-
NCR-8-5215-82 entitled "Telesforo Magante, complainant, vs. Constress
Philippines, Inc., respondent" to reinstate petitioner to his position with full
backwages with all the rights and benefits granted by law. In lieu of the
aforesaid decision, public respondent commission entered a new judgment
dismissing petitioner's complaint for illegal dismissal on the ground that said
petitioner is a project employee whose employment terminated upon the
completion of the project to which he was assigned. 1

The undisputed facts of the case as culled from the records of the case are:

Private respondent Constress Philippines Inc. is engaged in the concrete

structural business with address at Ortigas Avenue, Pasig, Metro Manila.
Petitioner Telesforo Magante, on the other hand, was employed by the
former as a carpenter from April 17, 1980 until his dismissal on March 6,
1982 earning three hundred pesos (P300.00), more or less, a week excluding
allowance and rendering about fourteen (14) hours of work daily from 7:00
in the morning to 10:00 in the evening. His work involved the making of
molds (forma or siding of cement post) for bridges, buildings, charcoal
builder sea file, and others. Apparently. petitioner was never assigned to
G.R. No. 74969 May 7, 1990 work outside the plant of private respondent.
TELESFORO MAGANTE, petitioner,
vs.
Every three (3) months, petitioner was made to fill up and sign an
employment contract relating to a particular phase of work in a specific
project. Allegedly, the terms of the contract written in English were not
understood by petitioner nor was the same explained to him. The last hiring
agreement entered into between petitioner and private respondent was on
December 7, 1981 which was to take effect on even date with an agreed
compensation of P21.36 a day.
On March 6, 1982, private respondent posted a notice of termination on its
bulletin board to take effect the following day, March 7, 1989, which
included petitioner and other employees as among those whose services
were being terminated by private respondent. Petitioner was told that he
cannot work anymore because he is already old, that his contract had
already expired and was not renewed being a project employee. The
termination of petitioner and his fellow workers was reported to the
Ministry of Labor.
Consequently, petitioner filed a complaint with the then Ministry (now
Department) of Labor and Employment for illegal dismissal. After the filing
of the respective position papers by the parties, Labor Arbiter Domingo del
Rosario rendered a decision 2 on June 22, 1983 with the following
pronouncement:
The terms of the contract that complainant is a project worker is not the
determining factor of the status of complainant or any worker but the work
performed by him and the place where he performed his assignment. The
contract entered into by respondent and complainant is more of a scheme
to evade its liability or obligation under the law.
WHEREFORE, respondent is directed to reinstate complainant to his position
with full backwages with all the rights and benefits granted by law and by
respondent Company. 3
From the foregoing decision of the labor arbiter, private respondent filed an
appeal before the National Labor Relations Commission premised on the
ground that the termination of petitioner's employment was occasioned by
the completion of the phase of work in the project for which he was
specifically hired and that he was duly notified thereof in compliance with
the requirements of law.
Finding merit in the appeal, public respondent held that petitioners
employment falls squarely within the purview of Policy Instructions No. 20, a
regulation intended for stabilizing employer-employee relations in the
construction industry which has aptly taken into consideration the unique
characteristics of respondent's business herein, quoting the pertinent
provisions as follows:
Generally, there are two types of employees in the construction industry
namely:
1) Project employees, and
2) Non-project employees
Project employees are those employed in connection with a particular
construction project. . . .
Project employees are not entitled to termination pay if they are terminated
as a result of the completion of the project or any phase thereof in which
they are employed, regardless of the number of projects in which they have
been employed by a particular construction company. 4
Public respondent further found that upon completion of a particular phase
of work in the project for which petitioner's services have been hired, his
termination was indubitably for cause. With these justifications, public
respondent set aside the appealed decision of the labor arbiter and entered
a new judgment dismissing the complaint for lack of merit. Petitioner filed a
motion for reconsideration of the aforesaid decision but the same was
denied.
Petitioner now comes before Us by way of certiorari to set aside the
aforesaid decision of public respondent promulgated on August 1, 1984 for
having been issued with grave abuse of discretion. It is asserted in the
instant petition that private respondent's argument that petitioner was only
hired for a fixed period of time cannot escape the factual finding of the
Labor Arbiter's decision that the contract entered into by private respondent
with the petitioner is more of a scheme to evade its liability or obligation
under the law by making it appear that said petitioner is a project to project
employee.
The Solicitor-General, when required to file a Comment to the instant
petition, took the same stand as petitioner citing the case Fequirin et
al. vs. National Labor Relations Commission, et al. 5 as the basis for
considering petitioner as a regular and permanent employee, who should
therefore be reinstated to his position with backwages. 6
In view of the Solicitor-General's contrary stand to the decision of public
respondent National Labor Relations Commission, the latter was given an
opportunity to file its own comment to the petition. In the aforesaid
comment, public respondent defends its decision in line with Article 281 of
the Labor Code which provides the exception to regular and casual
employment, that is, when 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 employment. Public
respondent contends that petitioner's case falls within the exception and
the Fegurin case relied upon by petitioner does not stand on all fours with
the present case because the complainants in said case had lengths of
service for nine (9), eight (8) and six (6) years, the shortest being three (3)
years. In the instant case, petitioner worked only for over a year, his last
contract lasting only a span of four (4) months. Furthermore, Article 281 of
this Labor Code is intended for all industries except the construction
industry. Precisely, Policy Instruction No. 20 was promulgated for the reason
that problems of regularity of employment in the construction industry has
continued to plague it. This policy merely implements the exception to
Article 281 of the Labor Code. 7
We find merit in the petition as We sustain the position of the Solicitor-
General that petitioner Telesforo Magante was a regular employee of private
respondent.
Article 281 of the Labor Code provides:
Art. 281. Regular and Casual Employment. — The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer
except where the employment has been fixed for a specific project or
undertaking, the completion or termination of which has been determined
at the time of the engagement of the employee or where the work or
service to be performed is seasonal in nature and the employment is for the
duration of the season.
An employment shall be deemed 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.
As aptly observed by the Solicitor-General, petitioner has established that
since the very inception of his employment in 1980, he was never deployed
from project to project of private respondent but had been regularly
assigned to perform carpentry work under the supervision of a certain
Bernardo Padaon who, since 1964 until his resignation on January 2, 1982
worked for private respondent as the supervisor of its Carpentry
Department. This goes to show two things: that petitioner was assigned to
perform tasks which are usually necessary or desirable in the usual business
or trade of private respondent; and that said assignments did not end on a
project to project basis, although the contrary was made to appear by
private respondent through the signing of separate employment contracts
allegedly for different projects because it is indeed obvious that petitioner
continued to perform the same kind of work throughout his period of
employment allegedly considered to have been done on a project to project
basis.
Although petitioner had only rendered almost two years of service,
nevertheless this should not detract from his status of being a regular
employee because as correctly stated by the labor arbiter, the determining
factor of the status of complainant-petitioner or any worker is the nature of
the work performed by the latter and the place where he performed his
assignment.
We have re-examined the case of Fegurin vs. National Labor Relations
Commission 8 and found that although the facts of the said case are not on
all fours with the instant petition there being a work pool to which the
complaining employees therein belonged, nonetheless, the doctrine therein
may be similarly applied in the case at bar considering that the nature of the
work of petitioner herein and in said case also involved carpentry work and
there was a continuous assignment of similar workload from project to
project.
report to the nearest Public Employment Office for statistical purposes.
(Emphasis Supplied)
Throughout the duration of petitioner's employment, there should have
been filed as many reports of termination as there were construction
projects actually finished if it were true that petitioner Telesforo Magante
was only a project worker.
The foregoing considered, public respondent National Labor Relations
Commission gravely abused its discretion in closing its eyes to the evidence
on record and the factual findings of the labor arbiter in setting aside the
decision of the latter. Construing the employment contract signed by
petitioner with private respondent solely on its face without considering the
surrounding circumstances in this case serves to defeat the purpose for
which the Labor Code and its implementing rules were enacted.

We held therein that the employment of petitioners with the company for
several years [four (4) of whom for nine (9) years, one (1) for eight (8) years,
another for six (6) years, the shortest term being three (3) years] despite the
shorter employment periods specified in their notices of employment,
performing activities usually necessary or desirable in the usual business of
the company, shows that they are regular employees.
WHEREFORE, the petition for certiorari is granted, and the decision of the
National Labor Relations Commission, dated August 1, 1984 is hereby
REVERSED and SET ASIDE and the decision of the Labor Arbiter dated June
22, 1983 is hereby AFFIRMED and REINSTATED.
SO ORDERED.

Moreover, if petitioner were employed as a "project employee" private

respondent should have submitted a report of termination to the nearest
public employment office every time his employment is terminated due to
completion of each construction project, as required by Policy Instruction
No. 20, 9 which provides:

Project employees are not entitled to termination pay if they are terminated
as a result of the completion of the project or any phase thereof in which
they are employed, regardless of the number of projects in which they have
been employed by a particular construction company. Moreover, the
company is not required to obtain a clearance from the Secretary of Labor in
connection with such termination. What is required of the company is a
 BAGUIO COUNTRY CLUB CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ASSOCIATED LABOR UNION
(ALU) and JIMMY CALAMBA,respondents.

Guillermo B. Bandonill and A.N. Bolinao, Jr. for petitioner.

Jose C. Evangelista for Jimmy Calamba.

MEDIALDEA, J.:

This petition for certiorari seeks to annul and set aside the resolution issued
by the respondent National Labor Relations Commission dated June 10,
1985 dismissing the appeal of petitioner for lack of merit and affirming in
toto the decision of the Executive Labor Arbiter dated September 15, 1982
declaring private respondent Calamba as a regular employee entitled to
reinstatement to the position of gardener without loss of seniority and with
full backwages, benefits and privileges from the time of his dismissal up to
reinstatement including 13th month pay.

The antecedent facts are as follows:

Petitioner Baguio Country Club Corporation (corporation) is a recreational

establishment certified by the Ministry of Labor and Employment as an"
entertainment-service" establishment. Respondent National Labor Relations
Commission (Commission) is a government instrumentality created by law,
impleaded in its official capacity, while private respondent Associated Labor
Union (union) is a duly registered labor organization and private respondent
Jimmy Calamba is an employee of the petitioner corporation as laborer,
dishwasher, and gardener.

Private respondent Jimmy Calamba was employed on a day to day basis in

various capacities as laborer and dishwasher for a period of ten (10) months
from October 1, 1979 to July 24, 1980. On September 1, 1980 to October 1,
G.R. No. 71664 February 28, 1992 1980, private respondent Calamba was hired as a gardener and rehired as
such on November 15, 1980 to January 4, 1981 when he was dismissed by
the petitioner corporation. (see Rollo, pp. 28-36)
On August 3, 1981, private respondent Jimmy Calamba assisted by private
respondent union instituted a complaint against petitioner corporation with
the Ministry of Labor (now Department of Labor and Employment), Baguio
District Office, Baguio City for unfair labor practice, illegal dismissal and non-
payment of 13th month pay for 1979 and 1980.
The Executive Labor Arbiter Sotero L. Tumang rendered a decision on
September 15, 1982 declaring private respondent Calamba as a regular
employee and ordering petitioner to reinstate private respondent to the
position of gardener without loss of seniority and with full backwages,
benefits and privileges from the time of his dismissal up to reinstatement
including 13th month pay.
Labor Arbiter Tumang found as follows:
After a careful perusal of the facts presented by the parties, we find the
complaint for illegal dismissal and non-payment of thirteenth (13th) month
pay, meritorious for the following reasons:
1. Complainant Jimmy Calamba has attained regular status as an employee
of the Club on account of the nature of the job he was hired, to perform
continuously and on staggered basis for a span of thirteen months. True that
there were employment contracts executed between the Club and the
complainant indicating the period or the number of days the complainant is
being needed but what is to be considered is not the agreement, written or
otherwise, of the parties in determining the regularity or casualness of job
but it should be the nature of the job. Clearly, the work of a gardener is not
a seasonal or for a specific period undertaking but it is a whole year round
activity. We must not lose sight of the fact that the Baguio Country Club
Corporation is an exclusive Club with sustaining members who avails (sic) of
its facilities the whole year round and it is necessary, is has been observed
and of common knowledge, that the gardens including the green of its golf
course where the complainant was assigned must be properly kept and
maintained.
2. Being a regular employee with more than one (1) year length of service
with the respondent, Jimmy Calamba could not be terminated without a just
or valid cause. This is so explicit in our Constitution that the security of
tenure of a worker must be safeguarded and protected and Jimmy Calamba
should enjoy no less protection.
3. Jimmy Calamba was dismissed without any written clearance from the
Ministry of Labor and Employment prior to his termination. Worse, the
respondent fired the complainant from his job due to the a (sic) alleged
expiration of his employment contract ten (10) times but not even a single
report of his dismissal as mandated by law was submitted to the Ministry of
Labor and Employment.
4. The Company did not refute the claim of Jimmy Calamba for payment of
his thirteenth (13th) month pay under P.D. 851 nor presented any report of
compliance to that effect with the Ministry of Labor and Employment and,
therefore, he must be paid correspondingly. (Rollo, pp. 39-40)
Hence, the petitioner interposed an appeal to the respondent Commission.
On June 10, 1985, after finding that there existed no sufficient justification
to disturb the appealed decision, the respondent Commission rendered a
resolution dismissing the appeal for lack of merit.
Hence, this present petition raising four (4) assignments of errors, which are
as follows:
I
THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN HOLDING THAT
PRIVATE RESPONDENT JIMMY CALAMBA WAS A "CASUAL" EMPLOYEE AND
HAD ATTAINED THE STATUS OF A REGULAR EMPLOYEE, DESPITE THE
INCONTROVERTIBLE FACT THAT SAID PRIVATE RESPONDENT WAS A
CONTRACTUAL AND SEASONAL EMPLOYEE.
II
THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN HOLDING THAT
THE CONCLUSIONS OF THE EXECUTIVE LABOR ARBITER WERE FULLY
SUPPORTED BY THE EVIDENCE AND IN UPHOLDING THE REINSTATEMENT OF
PRIVATE RESPONDENT JIMMY CALAMBA.
III
THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN HOLDING THAT
THE DISMISSAL OF PRIVATE RESPONDENT JIMMY CALAMBA REQUIRED
PRIOR CLEARANCE FROM THE MINISTRY OF LABOR AND EMPLOYMENT
EACH TIME HIS CONTRACT OF EMPLOYMENT EXPIRED.
IV
THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN NOT HOLDING
THAT PRIVATE RESPONDENT ASSOCIATED LABOR UNION HAS NO LEGAL
PERSONALITY TO FILE THIS CASE FOR PRIVATE RESPONDENT JIMMY
CALAMBA BEFORE THE REGIONAL OFFICE OF THE NATIONAL LABOR
RELATIONS COMMISSION, AS SAID PRIVATE RESPONDENT BEING A
CONTRACTUAL EMPLOYEE IS EXPRESSLY EXCLUDED FROM THE BARGAINING
UNIT UNDER THE COLLECTIVE BARGAINING AGREEMENT (Rollo, pp. 98-99)
Petitioner maintains that private respondent Calamba was a contractual
employee whose employment was for a fixed and specific period as set forth
and evidenced by the private respondent's contracts of employment, the
pertinent portions of which are quoted as follows:
xxx xxx xxx
. . . the employment may be terminated any time without liability to the
Baguio Country Club other than for salary actually earned up to and
including the date of last service.
His/her employment shall be on a day to day BASIS for a temporary period . .
. subject to termination at any time at the discretion of the Baguio Country
Club Corporation.
xxx xxx xxx
(Rollo, p. 7)
In addition, petitioner stresses that there was absolutely no oral or
documentary evidence to support the conclusion of the Executive Labor
Arbiter which was subsequently affirmed by the respondent Commission
that private respondent Calamba has rendered thirteen (13) months of
continuous service.
On the contrary, respondent Commission through the Solicitor General
argues that private respondent Calamba, having rendered services as
laborer, gardener and dishwasher for more than one (1) year, was a regular
employee at the time his employment was terminated.
Moreover, the nature of private respondent Calamba's employment as
laborer, gardener, and dishwasher pertains to a regular employee because
they are necessary or desirable in the usual business of petitioner as a
recreational establishment.
The pivotal issue therefore in whether or not the private respondent Jimmy
Calamba has acquired the status of a regular employee at the time his
employment was terminated.
After a careful review of the records of this case the Court finds no merit in
the petition and holds that the respondent Commission did not gravely
abuse its discretion when it affirmed in toto the decision of the labor arbiter.
The law on the matter is Article 280 of the Labor Code which defines regular
and casual employment as follows:
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
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
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.
This provision reinforces the Constitutional mandate to protect the interest
of labor. Its language evidently manifests the intent to safeguard the tenurial
interest of the worker who may be denied the rights and benefits due a
regular employee by virtue of lopsided agreements with the economically
powerful employer who can maneuver to keep an employee on a casual
status for as long as convenient. Thus, contrary agreements
notwithstanding, an employment is deemed regular when the activities
performed by the employee are usually necessary or desirable in the usual
business or trade of the employer. Not considered regular are the so-called
"project employment" the completion or termination of which is more or
less determinable at the time of employment, such as those employed in
connection with a particular construction project, and seasonal employment
which by its nature is only desirable for a limited period of time. However,
any employee who has rendered at least one year of service, whether
continuous or intermittent, is deemed regular with respect to the activity he
performed and while such activity actually exits.
The primary standard, therefore, of determining a regular employment is
the reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. The test
is whether the former is usually necessary or desirable in the usual business
or trade of the employer. The connection can be determined by considering
the nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety. Also, if the employee has been
performing the job for at least one year, even if the performance is not
continuous or merely intermittent, the law deems the repeated and
continuing need for its performance as sufficient evidence of the necessity if
not indispensability of that activity to the business. Hence, the employment
is also considered regular, but only with respect to such activity and while
such activity exists. (De Leon v. National Labor Relations Commission, G.R.
No. 70705, August 21, 1989. 176 SCRA 615, 620-621)
In the case at bar, the petitioner corporation, which is certified by the
Ministry of Labor and Employment as an "entertainment-service"
establishment, claims that private respondent was contracted for a fixed and
specific period. However, the records are that the private respondent was
repeatedly re-hired to perform tasks ranging from dishwashing and
gardening, aside from performing maintenance work.
Such repeated rehiring and the continuing need for his service are sufficient
evidence of the necessity and indispensability of his service to the
petitioner's business or trade.
The law demands that the nature and entirety of the activities performed by
the employee be considered. It is not tenable to argue that the
aforementioned tasks of private respondent are not necessary in petitioner's
business as a recreational establishment, just as it cannot be said that only
those who are directly involved in providing entertainment service may be
considered as necessary employees. Otherwise, there would have been no
need for the regular maintenance section of petitioner corporation.
Furthermore, the private respondent performed the said tasks which lasted
for more than one year, until early January, 1981 when he was terminated.
Certainly, by this fact alone he is entitled by law to be considered a regular
employee.
Owing to private respondent's length of service with the petitioner
corporation, he became a regular employee, by operation of law, one year
after he was employed. It is more in consonance with the intent and spirit of
the law to rule that the status of regular employment attaches to the casual
employee on the day immediately after the end of his first year of service. To
rule otherwise is to impose a burden on the employee which is not
sanctioned by law. (see Kimberly Independent Labor Union for Solidarity,
Activism and Nationalism in Line Industries and Agriculture v. Drilon, G.R.
No. 77629, May 9, 1990, 185 SCRA 190, 203-204)
It is of no moment that private respondent was told when he was hired that
his employment would only be "on a day to day basis for a temporary
period" and may be terminated at any time subject to the petitioner's
discretion. Precisely, the law overrides such conditions which are prejudicial
to the interest of the worker. Evidently, the employment contracts entered
into by private respondent with the petitioner have the purpose of
circumventing the employee's security of tenure. The Court therefore,
rigorously disapproves said contracts which demonstrate a clear attempt to
exploit the employee and deprive him of the protection sanctioned by the
Labor Code.
It is noteworthy that what determines whether a certain employment is
regular or casual is not the will and word of the employer, to which the
desperate worker often accedes. It is the nature of the activities performed
in relation to the particular business or trade considering all circumstances,
and in some cases the length of time of its performance and its continued
existence. (see De Leon v. NLRC, Ibid)
All premises considered, the Court is convinced that the assailed resolution
of the respondent Commission is not tainted with arbitrariness that would
amount to grave abuse of discretion or lack of jurisdiction and therefore, We
find no reason to disturb the same.
ACCORDINGLY, the petition is DISMISSED for lack of merit.
SO ORDERED.
G.R. No. 149793. April 15, 2005
WACK WACK GOLF & COUNTRY CLUB, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MARTINA G. CAGASAN,
CARMENCITA F. DOMINGUEZ, and BUSINESS STAFFING AND
MANAGEMENT, INC., Respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review of the Resolution1 of the Court of Appeals (CA) in
CA-G.R. SP No. 63658, dismissing the petition for certiorari before it for
being insufficient in form and the subsequent resolution denying the motion
for reconsideration thereof.
The undisputed antecedent facts are as follows:
On November 29, 1996, a fire destroyed a large portion of the main
clubhouse of the Wack Wack Golf and Country Club (Wack Wack), including
its kitchen. In view of the reconstruction of the whole clubhouse complex,
Wack Wack filed a notice with the Department of Labor and Employment
(DOLE) on April 14, 1997 that it was going to suspend the operations of the
Food and Beverage (F & B) Department one (1) month thereafter. Notices to
54 employees (out of a complement of 85 employees in the department)
were also sent out, informing them that they need not report for work
anymore after April 14, 1997 but that they would still be paid their salaries
up to May 14, 1997. They were further told that they would be informed
once full operations in Wack Wack resume.
The Wack Wack Golf Employees Union branded the suspension of
operations of the F & B Department as arbitrary, discriminatory and
constitutive of union-busting, so they filed a notice of strike with the DOLE’s
National Conciliation and Mediation Board (NCMB). Several meetings
between the officers of Wack Wack and the Union, headed by its President,
Crisanto Baluyot, Sr., and assisted by its counsel, Atty. Pedro T. De Quiroz,
were held until the parties entered into an amicable settlement. An
Agreement2 was forged whereby a special separation benefit/retirement
package for interested Wack Wack employees, especially those in the F & B
Department was offered. The terms and conditions thereof reads as follows:
1. The UNION and the affected employees of F & B who are members of the
UNION hereby agree to accept the special separation benefit package
agreed upon between the CLUB management on the one hand, and the
UNION officers and the UNION lawyer on the other, in the amount
equivalent to one-and-one-half months salary for every year of service,
regardless of the number of years of service rendered. That, in addition, said
employees shall also receive the other benefits due them, namely, the cash
equivalent of unused vacation and sick leave credits, proportionate 13th
month pay; and other benefits, if any, computed without premium;
2. That the affected F & B employees who have already signified intention to
be separated from the service under the special separation benefit package
shall receive their separation pay as soon as possible;
3. That the same package shall, likewise, be made available to other
employees who are members of the bargaining unit and who may or may
not be affected by future similar suspensions of operations. The UNION re-
affirms and recognizes that it is the sole prerogative of the management of
the Club to suspend part or all of its operations as may be necessitated by
the exigencies of the situation and the general welfare of its membership.
The closure of the West Course, which is scheduled for conversion to an All-
Weather Championship golf course, is cited as an example. It is, however,
agreed that if a sufficient number of employees, other than F & B
employees, would apply for availment of the package within the next two
months, the Club may no longer go through the process of formally notifying
the Department of Labor. The processing and handling of benefits for these
other employees shall be done over a transition period within one year;
4. All qualified employees who may have been separated from the service
under the above package shall be considered under a priority basis for
employment by concessionaires and/or contractors, and even by the Club
upon full resumption of operations, upon the recommendation of the
UNION. The Club may even persuade an employee-applicant for availment
under the package to remain on his/her job, or be assigned to another
position.3
Respondent Carmencita F. Dominguez, who was then working in the
Administrative Department of Wack Wack, was the first to avail of the
special separation package.4 Computed at 1½ months for every year of
service pursuant to the Agreement, her separation pay amounted
to P91,116.84, while economic benefits amounted toP6,327.53. 5 On
September 18, 1997, Dominguez signed a Release and Quitclaim 6 in favor of
Wack Wack.
Respondent Martina B. Cagasan was Wack Wack’s Personnel Officer who,
likewise, volunteered to avail of the separation package. 7 On September 30,
1997, she received from Wack Wack the amount of P469,495.66 as
separation pay and other economic benefits amounting to P17,010.50.8 A
Release and Quitclaim9 was signed on September 30, 1997.
The last one to avail of the separation package was Crisanto Baluyot, Sr.
who, in a Letter10 dated January 16, 1998 addressed to Mr. Bienvenido Juan,
Administrative Manager of Wack Wack, signified his willingness to avail of
the said early retirement package. The total amount of P688,290.3011 was
received and the Release and Quitclaim 12 signed on May 14, 1998.
On October 15, 1997, Wack Wack entered into a Management
Contract13 with Business Staffing and Management, Inc. (BSMI), a
corporation engaged in the business as Management Service Consultant
undertaking and managing for a fee projects which are specialized and
technical in character like marketing, promotions, merchandising, financial
management, operation management and the like. 14 BSMI was to provide
management services for Wack Wack in the following operational areas:
1. Golf operations management;
2. Management and maintenance of building facilities;
3 .Management of food and beverage operation;
4. Management of materials and procurement functions;
5. To provide and undertake administrative and support services for the
[said] projects.15
Pursuant to the Agreement, the retired employees of Wack Wack by reason
of their experience were given priority by BSMI in hiring. On October 21,
1997, respondents Cagasan and Dominguez filed their respective
applications16 for employment with BSMI. They were eventually hired by
BSMI to their former positions in Wack Wack as project employees and were
issued probationary contracts.17
Aside from BSMI, Wack Wack also engaged several contractors which were
assigned in various operating functions of the club, to wit:
1. Skills and Talent Employment Promotion (STEP) whose 90 workers are
designated as locker attendants, golf bag attendants, nurses, messengers,
technical support engineer, golf director, agriculturist, utilities and
gardeners;
2. Marvel Manpower Agency - whose 19 employees are designated as
sweepers, locker attendants, drive range attendant, telephone operator,
workers and secretaries;
3 City Service Corporation – contractor for janitorial services for the whole
club;
4. Microstar Business and Management Services, Inc. whose 15 employees
are designated in the Finance and Accounting departments. 18
Due to these various management service contracts, BSMI undertook an
organizational analysis and manpower evaluation to determine its efficacy,
and to streamline its operations. In the course of its assessment, BSMI saw
that the positions of Cagasan and Dominguez were redundant. In the case of
respondent Cagasan, her tasks as personnel officer were likewise being
taken cared of by the different management service contractors; on the
other hand, Dominguez’s work as telephone operator was taken over by the
personnel of the accounting department. Thus, in separate Letters 19 dated
February 27, 1998, the services of Dominguez and Cagasan were
terminated. With respect to Baluyot, he applied for the position of Chief
Porter on May 12, 1998. The position, however, was among those
recommended to be abolished by the BSMI, so he was offered the position
of Caddie Master Aide with a starting salary of P5,500.00 a month. Baluyot
declined the offer. Pending Wack Wack’s approval of the proposed abolition
of the position of Chief Porter, Baluyot was temporarily accepted to the
position with a monthly salary of P12,000.00. In July 1998, Baluyot decided
not to accept the position of Caddie Master Aide; thus, BSMI continued with
its plan to abolish the said position of Chief Porter and Baluyot was
dismissed from the service.
Thereafter, the three (3) employees filed their respective complaints with
the National Labor Relations Commission (NLRC) for illegal dismissal and
damages against Wack Wack and BSMI.
The complainants averred that they were dismissed without cause. They
accepted the separation package upon the assurance that they would be
given their former work and assignments once the Food and Beverage
Department of Wack Wack resumes its operations. On the other hand, the
respondents therein alleged that the dismissal of the complainants were
made pursuant to a study and evaluation of the different jobs and positions
and found them to be redundant.
In a Decision20 dated January 25, 2000, the Labor Arbiter found that the
dismissal of Dominguez and Cagasan was for a valid and authorized cause,
and dismissed their complaints.
The position of personnel manager occupied by Martina Cagasan was
redundated as it is allegedly not necessary, because her functions will be
taken over [by] the field superintendent and the company’s personnel and
operations manager. The work of Carmencita Dominguez on the other hand
as telephone operator will be taken over by the accounting department
personnel. Such move really are intended to streamline operations. While
admittedly, they are still necessary in the operations of Wack Wack, their
jobs can be assigned to some other personnel, who will be performing dual
functions and does save Wack Wack money. This is feasible on account of
the fact that they are functions pertaining to administrative work. 21
As to Baluyot, however, the Labor Arbiter found that while the position of
chief porter had been abolished, the caddie master aide had been created.
Their functions were one and the same. The porters, upon instructions from
the chief porter, are the ones who bring down the golf bags of the players
from the vehicle. The caddie master receives them and counts the number
of clubs inside the golf set. After the game, the same procedure is repeated
before the golf sets are loaded once more into the vehicle. 22 The Labor
Arbiter found that the dismissal of Baluyot as Chief Porter was unjustified
and can not be considered redundant in the case at bar. It was a means
resorted to in order to unduly sever Baluyot’s relationship with BSMI
without justifiable cause. The Labor Arbiter therefore found Baluyot’s
dismissal to be illegal. The dispositive portion of the decision reads as
follows:
CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered
dismissing the complaints of Carmencita F. Dominguez and Martina Cagasan
for lack of merit. Finding Crisanto Baluyot’s dismissal to be illegal.
Consequently, he should immediately be reinstated to his former position as
Chief Porter or Caddie Master, and paid his backwages which, as of
December 31, 1999, has accumulated in the sum of P180,000.00 by BSMI.
All other claims are dismissed for lack of merit. 23
Since Baluyot no longer appealed the decision, complainants Dominguez
and Cagasan filed a Partial Appeal on the ground of prima facie abuse of
discretion on the part of the Labor Arbiter and serious errors in his findings
of facts and law. Their claims were anchored on the Agreement between the
Union and management, that they were promised to be rehired upon the
full resumption of operations of Wack Wack. They asserted that Wack Wack
and BSMI should not avoid responsibility to their employment, by conniving
with each other to render useless and meaningless the Agreement.
BSMI also appealed to the NLRC, alleging that the Labor Arbiter committed
grave abuse of discretion in finding Baluyot’s dismissal to be illegal, when in
fact his position as Chief Porter was abolished pursuant to a bona
fidereorganization of Wack Wack. It was not motivated by factors other than
the promotion of the interest and welfare of the company.
On September 27, 2000, the NLRC rendered its Decision 24 ordering Wack
Wack to reinstate Carmencita F. Dominguez and Martina Cagasan to their
positions in respondent Wack Wack Golf & Country Club with full backwages
and other benefits from the date of their dismissal until actually reinstated.
It anchored its ruling on the Agreement dated June 16, 1997 reached
between the Union and Wack Wack, particularly Section 4 25 thereof. The
NLRC directed Wack Wack to reinstate the respondents and pay their
backwages since "Business Staffing and Management, Inc. (BSMI) is a
contractor who [merely] supplies workers to respondent Wack Wack. It has
nothing to do with the grievance of the complainants with their employer,
respondent Wack Wack."
Wack Wack and BSMI filed a motion for reconsideration which was denied in
the Resolution26 dated December 15, 2000.
Wack Wack, now the petitioner, consequently filed a petition for certiorari
with the Court of Appeals, docketed as CA-G.R. SP No. 63658 alleging the
following:
A. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND DENIAL OF DUE
PROCESS IN HOLDING THAT RESPONDENTS CAGASAN AND DOMINGUEZ
HAVE REGAINED THEIR JOBS OR EMPLOYMENT PURSUANT TO THE
AGREEMENT BETWEEN PETITIONER AND WACK WACK GOLF EMPLOYEES
UNION.
B. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND DENIAL OF DUE
PROCESS IN RULING THAT RESPONDENT BSMI IS NOT AN INDEPENDENT
CONTRACTOR BUT A MERE SUPPLIER OF WORKERS TO THE PETITIONER.
C. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND DENIAL OF DUE
PROCESS IN HOLDING PETITIONER LIABLE FOR THE REINSTATEMENT OF
RESPONDENTS CAGASAN AND DOMINGUEZ AND FOR THE PAYMENT OF
THEIR SUPPOSED BACKWAGES DESPITE THE ABSENCE OF EMPLOYER-
EMPLOYEE RELATION BETWEEN THEM.27
Likewise, BSMI also assailed the resolutions of the NLRC and filed its own
petition for certiorari with the CA, docketed as CA-G.R. SP No. 63553. 28 A
perusal of the petition which is attached to the records reveal that BSMI
ascribes grave abuse of discretion on the part of the NLRC in ruling that: (a)
the private respondents have regained their employment pursuant to the
Agreement between Wack Wack and the Wack Wack Golf Employees Union;
(b) the dismissal of private respondents was made pursuant to the
petitioner’s exercise of its management prerogatives; and (c) the petitioner
(BSMI) is liable for the reinstatement of private respondents and the
payment of their backwages.29
On April 3, 2001, the CA (Twelfth Division) dismissed the petition on the
ground that the petitioner therein failed to attach an Affidavit of Service as
required in Section 11, Rule 13 of the 1997 Rules of Civil Procedure.
Moreover, the verification and certification against forum shopping was
insufficient for having been executed by the general manager who claimed
to be the duly-authorized representative of the petitioner, but did not show
any proof of authority, i.e., a board resolution, to the effect.
A motion for reconsideration was, consequently, filed appending thereto the
requisite documents of proof of authority. It asserted that in the interest of
substantial justice, the CA should decide the case on its merits.
BSMI filed a Comment 30 to the Motion for Reconsideration of the petitioner,
also urging the CA to set aside technicalities and to consider the legal issues
involved: (a) whether or not there is a guaranty of employment in favor of
the complainants under the Agreement between the petitioner and the
Union; (b) whether or not the termination of the employment of the
complainants, based on redundancy, is legal and valid; and (c) who are the
parties liable for the reinstatement of the complainants and the payment of
backwages. It further added that it shares the view of the petitioner, that
the assailed resolutions of the NLRC are tainted with legal infirmities. For
this reason, it was also constrained to file its own petition for certiorari with
the CA, docketed as CA-G.R. SP No. 63553 pending with the Special Fourth
Division, just to stress that there is no guaranty of perpetual employment in
favor of the complainants.
On August 31, 2001, the CA denied petitioner’s motion for reconsideration.
The petitioner is now before the Court, assailing the twin resolutions of the
CA. It points out that BSMI has filed its petition for certiorari before the CA
one day late and yet, the Special Fourth Division admitted the petition in the
interest of substantial justice, and directed the respondents to file a
comment thereon;31 whereas, in the instant case, the mere lack of proof of
authority of Wack Wack’s General Manager to sign the certificate of non-
forum shopping was considered fatal by the CA’s Twelfth Division. It further
asserts that its petition for certiorari is meritorious, considering that the
NLRC committed grave abuse of discretion in ordering Wack Wack to
reinstate the respondents Cagasan and Dominguez, and to pay their
backwages when indubitable evidence shows that the said respondents
were no longer employees of Wack Wack when they filed their complaints
with the Labor Arbiter.
There is merit in the petition.
In Novelty Philippines, Inc. v. Court of Appeals,32 the Court recognized the
authority of the general manager to sue on behalf of the corporation and to
sign the requisite verification and certification of non-forum shopping. The
general manager is also one person who is in the best position to know the
state of affairs of the corporation. It was also error for the CA not to admit
the requisite proof of authority when in the Novelty case, the Court ruled
that the subsequent submission of the requisite documents constituted
substantial compliance with procedural rules. There is ample jurisprudence
holding that the subsequent and substantial compliance of an appellant may
call for the relaxation of the rules of procedure in the interest of
justice.33 While it is true that rules of procedure are intended to promote
rather than frustrate the ends of justice, and while the swift unclogging of
court dockets is a laudable objective, it nevertheless must not be met at the
expense of substantial justice.34 It was, therefore, reversible error for the CA
to have dismissed the petition for certiorari before it. The ordinary recourse
for us to take is to remand the case to the CA for proper disposition on the
merits; however, considering that the records are now before us, we deem it
necessary to resolve the instant case in order to ensure harmony in the
rulings and expediency.
Indeed, the merits of the case constitute special or compelling reasons for
us to overlook the technical rules in this case. With the dismissal of its
petition for certiorari before the CA, the petitioner by virtue of the NLRC
decision is compelled to reinstate respondents Cagasan and Dominguez and
pay their full backwages from the time of their dismissal until actual
reinstatement when the attendant circumstances, however, show that the
respondents had no cause of action against the petitioner for illegal
dismissal and damages.
It must be recalled that said respondents availed of the special separation
package offered by the petitioner. This special separation package was
thought of and agreed by the two parties (Wack Wack and the Union) after a
series of discussions and negotiations to avert any labor unrest due to the
closure of Wack Wack.35 Priority was given to the employees of the F & B
Department, but was, likewise, offered to the other employees who may
wish to avail of the separation package due to the reconstruction of Wack
Wack. Respondents do not belong to the F & B Department and yet, on their
own volition opted to avail of the special separation package. The
applications which were similarly worded read as follows:
TO : WACK WACK GOLF & COUNTRY CLUB
BOARD OF DIRECTORS AND MANAGEMENT
Based on the information that the Club and the employees’ Union have
reached an agreement on a special separation benefit package equivalent to
one-and-one-half months salary for every year of service, regardless of the
number of years of service, for employees who have been affected and may
be affected by ongoing as well as forthcoming Club renovation, construction
and related activities and reportedly even for those who may not be affected
but wish to avail of an early retirement under the above package
arrangement, I hereby register my desire to be separated from the Club and
receive the benefits under the above stated package. 36
Thereafter, the respondents signed their respective release and quitclaims
after receiving their money benefits.
It cannot be said that the respondents in the case at bar did not fully
comprehend and realize the consequences of their acts. Herein respondents
are not unlettered persons who need special protection. They held
responsible positions in the petitioner-employer, so they presumably
understood the contents of the documents they signed. There is no showing
that the execution thereof was tainted with deceit or coercion. Further, the
respondents were paid hefty amounts of separation pay indicating that their
separation from the company was for a valuable consideration. Where the
person making the waiver has done so voluntarily, with a full understanding
thereof, and the consideration for the quitclaim is credible and reasonable,
the transaction must be recognized as being a valid and binding
undertaking.37 As in contracts, these quitclaims amount to a valid and
binding compromise agreement between the parties which deserve to be
respected.38
We reiterate what was stated in the case of Periquet v. NLRC 39 that:
Not all waivers and quitclaims are invalid as against public policy. If the
agreement was voluntarily entered into and represents a reasonable
settlement, it is binding on the parties and may not later be disowned simply
because of a change of mind. It is only where there is clear proof that the
waiver was wangled from an unsuspecting or gullible person, or the terms of
settlement are unconscionable on its face, that the law will step in to annul
the questionable transaction. But where it is shown that the person making
the waiver did so voluntarily, with full understanding of what he was doing,
and the consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and binding undertaking. … 40
When the respondents voluntarily signed their quitclaims and accepted the
separation package offered by the petitioner, they, thenceforth, already
ceased to be employees of the petitioner. Nowhere does it appear in the
Agreement that the petitioner assured the respondents of continuous
employment in Wack Wack. Qualified employees were given priority in
being hired by its concessionaires and/or contractors such as BSMI when it
entered into a management contract with the petitioner.
This brings us to the threshold issue on whether or not BSMI is an
independent contractor or a labor-only contractor. The NLRC posits that
BSMI is merely a supplier of workers or a labor-only contractor; hence, the
petitioner remains to be the principal employer of the respondents and
liable for their reinstatement and payment of backwages.
The ruling of the NLRC is wrong. An independent contractor is one who
undertakes "job contracting," i.e., a person who: (a) carries on an
independent business and undertakes the contract work on his own account
under his own responsibility according to his own manner and method, free
from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results
thereof; and (b) has substantial capital or investment in the form of tools,
equipments, machineries, work premises and other materials which are
necessary in the conduct of the business. Jurisprudential holdings are to the
effect that in determining the existence of an independent contractor
relationship, several factors may be considered, such as, but not necessarily
confined to, whether or not the contractor is carrying on an independent
business; the nature and extent of the work; the skill required; the term and
duration of the relationship; the right to assign the performance of specified
pieces of work; the control and supervision of the work to another; the
employer’s power with respect to the hiring, firing, and payment of the
contractor’s workers; the control of the premises; the duty to supply
premises, tools, appliances, materials and labor; and the mode, manner and
terms of payment.41
There is indubitable evidence showing that BSMI is an independent
contractor, engaged in the management of projects, business operations,
functions, jobs and other kinds of business ventures, and has sufficient
capital and resources to undertake its principal business. It had provided
management services to various industrial and commercial business
establishments. Its Articles of Incorporation proves its sufficient
capitalization. In December 1993, Labor Secretary Bienvenido Laguesma, in
the case of In re Petition for Certification Election Among the Regular Rank-
and-File Employees Workers of Byron-Jackson (BJ) Services International
Incorporated, Federation of Free Workers (FFW)-Byron Jackson Services
Employees Chapter,42 recognized BSMI as an independent contractor. As a
legitimate job contractor, there can be no doubt as to the existence of an
employer-employee relationship between the contractor and the workers. 43
BSMI admitted that it employed the respondents, giving the said retired
employees some degree of priority merely because of their work experience
with the petitioner, and in order to have a smooth transition of
operations.44 In accordance with its own recruitment policies, the
respondents were made to sign applications for employment, accepting the
condition that they were hired by BSMI as probationary employees only. Not
being contrary to law, morals, good custom, public policy and public order,
these employment contracts, which the parties are bound are considered
valid. Unfortunately, after a study and evaluation of its personnel
organization, BSMI was impelled to terminate the services of the
respondents on the ground of redundancy. This right to hire and fire is
another element of the employer-employee relationship 45 which actually
existed between the respondents and BSMI, and not with Wack Wack.
There being no employer-employee relationship between the petitioner and
respondents Cagasan and Dominguez, the latter have no cause of action for
illegal dismissal and damages against the petitioner. Consequently, the
petitioner cannot be validly ordered to reinstate the respondents and pay
them their claims for backwages.
WHEREFORE, the petition is GRANTED. The Resolutions of the Court of G.R. No. 89990 March 20, 1991
Appeals and the NLRC are SET ASIDE and REVERSED. The complaints of
respondents Cagasan and Dominguez are DISMISSED. No costs. EUGENIO DE JESUS, petitioner,
vs.
SO ORDERED PHILIPPINE NATIONAL CONSTRUCTION CORPORATION (Formerly CDCP),
and NATIONAL LABOR RELATIONS COMMISSION, respondents.

Venida & Associates for petitioner.

The Government Corporate Counsel for private respondent.

SARMIENTO, J.:p

The Court reverses the decision of the respondent National Labor Relations
Commission in this case, dismissing the petitioner's appeal and affirming,
consequently, the dismissal rendered by the labor arbiter.

In the Court's Resolution of September 20, 1989, the Court granted leave for
the petitioner to prosecute the case as a pauper litigant. 1 Meanwhile, in a
Manifestation dated January 10, 1990, the Solicitor General informed the
Court that, based on his own assessment, he is unable to defend the
decision of the National Labor Relations Commission.

The records disclose that the petitioner, prior to his separation, was a
carpenter for the respondent, Philippine National Construction Corporation;
that sometime in September, 1984, while on duty at Apalit, Pampanga,
where the respondent corporation was pursuing the construction of the
Apalit Bridge, he vomitted blood and was treated at the company clinic after
which he was sent home; that he reported back in December, 1984, but was
no longer accepted and was informed by Moises Chiu General Manager of
the respondent corporation, that he had been replaced; that between
January and September 1985, he sought reinstatement but invariably, he
was rebuffed by the company.
Presently, he instituted a complaint, initially, for separation pay but upon an
amendment, prayed for reinstatement on account of an illegal dismissal plus
backwages and payment of legal benefits.
The private respondent, on the other hand, presented the petitioner's "201-
file" which disclosed that he had been hired as Carpenter II on March 31,
1984; that among the terms and conditions of his employment was that he
was being "employed only for the period and specific works stated" 2 in his
appointment, and that as a "project worker" he was subject to the
provisions of Policy Instructions No. 20; that his separation was due to the
completion of the project; and that he had signed a clearance wherein he
admitted having received all remunerations due him.
As we adverted to at the outset, the labor arbiter dismissed the complaint.
The petitioner then appealed, but was dismissed, on a finding by the
National Labor Relations Commission that the appeal had been filed
unseasonably. The latter subsequently reconsidered, but at any rate,
affirmed the appealed decision.
In support of this petition, the petitioner attached thereto, among other
things, certain "personnel action forms" which showed that he was given
appointments for specific projects on June 16, 1974, 3 July 2, 1975 4 July 1,
1976,5 May 1, 1977, 6 April 5, 1978, 7 December 1, 1979, 8 July 30,
1980, 9 November 20, 1981, 10 March 16, 1982, 11August 24,
12 13 14
1983, September 30, 1983, December 30,1983, and May 1,
1984; 15 and that since January 15, 1978, he had been a member of the
CDCP Employees Savings & Loan Association; 16 and that, as a result, he has
become a regular, not a project, employee, who may be terminated only for
a lawful cause.
The Government Corporate Counsel, arguing on behalf of the respondent
corporation in lieu of the Solicitor General, alleges that the findings of fact of
the National Labor Relations Commission are binding on the Court, and that
the finding that the petitioner was a project employee is a finding of fact;
that the petitioner has been compensated fully; and that the personnel
action forms partake of new matters that can not be appreciated at this
stage of the proceedings.
The National Labor Relations Commission, on the other hand, denies any
grave abuse of discretion attributed to it because it was not aware of the
facts the petitioner now deposits.
The petition is impressed with merit.
It is clear from the records that the petitioner is, contrary to the assailed
decision, a non-project employee and is, hence, entitled to regular
employment having rendered service for more than ten years. As such, he
can not be terminated unless for just cause.
Article 280 of the Labor Code provides, as follows:
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 (sic) 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.
Without question, the petitioner, a carpenter, performs work "necessary, or
desirable" in the construction business, the respondent corporation's field of
activity. The fact however that he had been involved in project works will
not alter his status because the law requires a "specific project or
undertaking the completion or termination of which has been determined at
the time of the engagement" in order to make a project employee a true
project employee. Based on his employment contract:
Your herein Appointment Employment will be co-terminus with the need of
Structures [of North Luzon Expressway (Stage) II] as it will necessitate
personnel in such number and duration contingent upon the progress
accomplishment from time to time. The company shall determine the
personnel and the number as the work progresses. 17
we can not say that the petitioner's engagement has been pre-determined
because the duration of the work is "contigent upon the progress
accomplishment" and secondly, the company, under the contract, is free to
"determine the personnel and the number as the work progresses." Clearly,
the employment is subject to no term but rather, a condition, that is,
"progress accomplishment." It can not therefore be said to be definite that
will therefore exempt the respondent company from the effects of Article
280. 18
It is to be noted that under Policy Instructions No. 20 of the Secretary of
Labor, regular employment in specific undertakings are recognized and
defined as follows:
xxx xxx xxx
Members of a work pool from which a construction company draws its
project employees, if considered employees of the construction company
while in the work pool, are non-project employees or employees for an
indefinite period. If they are employed in a particular project, the
completion of the project or of any phase thereof will not mean severance
of employer-employee relationship.
However, if the workers in the work pool are free to leave anytime and offer
their services to other employers then they are project employees employed
by a construction company in a particular project or in a phase thereof.
Generally, there are three (3) types of non-project employees: first,
probationary employees; second, regular employees; and third, casual
employees.
Probationary employees are those who, upon the completion of the
probationary period, are entitled to regularization. Regular employees are
those who have completed the probationary period or those appointed to
fill up regular positions vacated as a result of death, retirement, resignation,
or termination of the regular holders thereof. On the other hand, casual
employees are those employed for a short term duration to perform work
not related to the main line of the business of the employer.
xxx xxx xxx
Based therefore on the personnel action forms submitted to this Court, the
petitioner is either a member of a work pool of workers, which Policy
Instructions No. 20 terms as "non-project employees," or at the very least, a
probationary worker who, after the period of six months, has achieved a
regular status. 19
As a regular employee, the petitioner could not have been validly
terminated by reason alone of the completion of the project.
The respondent corporation, of course, assails the various personnel action
forms as new matters that can not be introduced in the Supreme Court
without infringing its right to due process. What the respondent firm very
obviously overlooks is the fact that: (1) it had known all along, but concealed
it from the labor arbiter, that the petitioner had been working for the firm
since 1974; (2) that notwithstanding, it insisted that he, the petitioner, had
joined the company in 1984 only; and (3) it took an unfair advantage of the
petitioner's unfamiliarity with procedure, and will take that advantage
herein, in order to trap him, so to speak, to its theory of the case.
It is true that this Court is normally bound by the factual findings of the
National Labor Relations Commission, that rule is, however subject to a
fundamental exception, that is, unless it would defeat, rather than enhance,
the State protection to labor guaranteed by the Constitution. 20 No rule, legal
or judicial, can override a constitutional mandate.
The respondent corporation, as we said, was no stranger to the personnel
action forms in question, and hence it can not rightfully say that they
constitute "fresh matters." It has failed furthermore to deny their
genuineness, much less, their existence.
To allow, therefore, the respondent company to object to the above
personnel action forms on nebulous pretenses of violation of due process is
indeed, to reward it for its own breach of faith.
We can not, finally, accept the alleged "quitclaim" 21 executed by the
petitioner in which he denied any liability by the employer, as a genuine act
of remission in this case. There is nothing there that suggests any
acceptance by the petitioner of his termination from work. Apart from that,
the same is couched in the English language and the respondent company
has not shown that the petitioner understands English. We can not presume
that he, a humble carpenter, is aware of that language, much more,
conversant with it, and under the Civil Code, it is incumbent upon the
respondent to "show that the terms thereof have seen fully explained." 22 It
has not made that showing here.
WHEREFORE, the petition is GRANTED. The petitioner is REINSTATED and
awarded backwages based on the latest pay scale corresponding to the
position Carpenter II equivalent to three years without qualification or
deduction.
IT IS SO ORDERED.
G.R. No. 79869 September 5, 1991
FORTUNATO MERCADO, SR., ROSA MERCADO, FORTUNATO MERCADO, JR.,
ANTONIO MERCADO, JOSE CABRAL, LUCIA MERCADO, ASUNCION
GUEVARA, ANITA MERCADO, MARINA MERCADO, JULIANA CABRAL,
GUADALUPE PAGUIO, BRIGIDA ALCANTARA, EMERLITA MERCADO, ROMEO
GUEVARA, ROMEO MERCADO and LEON SANTILLAN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), THIRD DIVISION;
LABOR ARBITER LUCIANO AQUINO, RAB-III; AURORA L. CRUZ; SPOUSES
FRANCISCO DE BORJA and LETICIA DE BORJA; and STO. NIÑO REALTY,
INCORPORATED, respondents.
Servillano S. Santillan for petitioners.
Luis R. Mauricio for private respondents.
PADILLA, J.:p
Assailed in this petition for certiorari is the decision * of the respondent
national Labor Relations Commission (NLRC) dated 8 August 1984 which
affirmed the decision of respondent Labor Arbiter Luciano P. Aquino with
the slight modification of deleting the award of financial assistance to
petitioners, and the resolution of the respondent NLRC dated 17 August
1987, denying petitioners' motion for reconsideration.
This petition originated from a complaint for illegal dismissal, underpayment
of wages, non-payment of overtime pay, holiday pay, service incentive leave
benefits, emergency cost of living allowances and 13th month pay, filed by
above-named petitioners against private respondents Aurora L. Cruz,
Francisco Borja, Leticia C. Borja and Sto. Niño Realty Incorporated, with
Regional Arbitration Branch No. III, National Labor Relations Commission in
San Fernando, Pampanga. 1
Petitioners alleged in their complaint that they were agricultural workers
utilized by private respondents in all the agricultural phases of work on the 7
1/2 hectares of ace land and 10 hectares of sugar land owned by the latter;
that Fortunato Mercado, Sr. and Leon Santillan worked in the farm of private
respondents since 1949, Fortunato Mercado, Jr. and Antonio Mercado since
1972 and the rest of the petitioners since 1960 up to April 1979, when they
were all allegedly dismissed from their employment; and that, during the
period of their employment, petitioners received the following daily wages:
From 1962-1963 — P1.50
1963-1965 — P2.00
1965-1967 — P3.00
1967-1970 — P4.00
1970-1973 — P5.00
1973-1975 — P5.00
1975-1978 — P6.00
1978-1979 — P7.00
Private respondent Aurora Cruz in her answer to petitioners' complaint
denied that said petitioners were her regular employees and instead averred
that she engaged their services, through Spouses Fortunato Mercado, Sr.
and Rosa Mercado, their "mandarols", that is, persons who take charge in
supplying the number of workers needed by owners of various farms, but
only to do a particular phase of agricultural work necessary in rice
production and/or sugar cane production, after which they would be free to
render services to other farm owners who need their services. 2
The other private respondents denied having any relationship whatsoever
with the petitioners and state that they were merely registered owners of
the land in question included as corespondents in this case. 3
The dispute in this case revolves around the issue of whether or not
petitioners are regular and permanent farm workers and therefore entitled
to the benefits which they pray for. And corollary to this, whether or not said
petitioners were illegally dismissed by private respondents.
Respondent Labor Arbiter Luciano P. Aquino ruled in favor of private
respondents and held that petitioners were not regular and permanent
workers of the private respondents, for the nature of the terms and
conditions of their hiring reveal that they were required to perform phases
of agricultural work for a definite period of time after which their services
would be available to any other farm owner. 4 Respondent Labor Arbiter
deemed petitioners' contention of working twelve (12) hours a day the
whole year round in the farm, an exaggeration, for the reason that the
planting of lice and sugar cane does not entail a whole year as reported in
the findings of the Chief of the NLRC Special Task Force. 5 Even the sworn
statement of one of the petitioners, Fortunato Mercado, Jr., the son of
spouses Fortunato Mercado, Sr. and Rosa Mercado, indubitably show that
said petitioners were hired only as casuals, on an "on and off" basis, thus, it
was within the prerogative of private respondent Aurora Cruz either to take
in the petitioners to do further work or not after any single phase of
agricultural work had been completed by them. 6
Respondent Labor Arbiter was also of the opinion that the real cause which
triggered the filing of the complaint by the petitioners who are related to
one another, either by consanguinity or affinity, was the filing of a criminal
complaint for theft against Reynaldo Mercado, son of spouses Fortunate
Mercado, Sr. and Rosa Mercado, for they even asked the help of Jesus David,
Zone Chairman of the locality to talk to private respondent, Aurora Cruz
regarding said criminal case. 7 In his affidavit, Jesus David stated under oath
that petitioners were never regularly employed by private respondent
Aurora Cruz but were, on-and-off hired to work and render services when
needed, thus adding further support to the conclusion that petitioners were
not regular and permanent employees of private respondent Aurora Cruz. 8
Respondent Labor Arbiter further held that only money claims from years
1976-1977, 1977-1978 and 1978-1979 may be properly considered since all
the other money claims have prescribed for having accrued beyond the
three (3) year period prescribed by law. 9 On grounds of equity, however,
respondent Labor Arbiter awarded petitioners financial assistance by private
respondent Aurora Cruz, in the amount of Ten Thousand Pesos (P10,000.00)
to be equitably divided among an the petitioners except petitioner
Fortunato Mercado, Jr. who had manifested his disinterest in the further
prosecution of his complaint against private respondent. 10
Both parties filed their appeal with the National Labor Relations
Commissions (NLRC). Petitioners questioned respondent Labor Arbiter's
finding that they were not regular and permanent employees of private
respondent Aurora Cruz while private respondents questioned the award of
financial assistance granted by respondent Labor Arbiter.
The NLRC ruled in favor of private respondents affirming the decision of the
respondent Labor Arbiter, with the modification of the deletion of the award
for financial assistance to petitioners. The dispositive portion of the decision
of the NLRC reads:
WHEREFORE, the Decision of Labor Arbiter Luciano P. Aquino dated March 3,
1983 is hereby modified in that the award of P10,000.00 financial assistance
should be deleted. The said Decision is affirmed in all other aspects.
SO ORDERED. 11
Petitioners filed a motion for reconsideration of the Decision of the Third
Division of the NLRC dated 8 August 1984; however, the NLRC denied tills
motion in a resolution dated 17 August 1987. 12
In the present Petition for certiorari, petitioners seek the reversal of the
above-mentioned rulings. Petitioners contend that respondent Labor Arbiter
and respondent NLRC erred when both ruled that petitioners are not regular
and permanent employees of private respondents based on the terms and
conditions of their hiring, for said findings are contrary to the provisions of
Article 280 of the Labor Code. 13 They submit that petitioners' employment,
even assuming said employment were seasonal, continued for so many
years such that, by express provision of Article 280 of the Labor Code as
amended, petitioners have become regular and permanent employees. 14
Moreover, they argue that Policy Instruction No. 12 15 of the Department of
Labor and Employment clearly lends support to this contention, when it
states:
PD 830 has defined the concept of regular and casual employment. What
determines regularity or casualness is not the employment contract, written
or otherwise, but the nature of the job. If the job is usually necessary or
desirable to the main business of the employer, then employment is regular.
If not, then the employment is casual. Employment for a definite period
which exceeds one (1) year shall be considered re for the duration of the
definite period.
This concept of re and casual employment is designed to put an end to
casual employment in regular jobs which has been abused by many
employers to prevent so-called casuals from enjoying the benefits of regular
employees or to prevent casuals from joining unions.
This new concept should be strictly enforced to give meaning to the
constitutional guarantee of employment tenure. 16
Tested under the laws invoked, petitioners submit that it would be unjust, if
not unlawful, to consider them as casual workers since they have been doing
all phases of agricultural work for so many years, activities which are
undeniably necessary, desirable and indispensable in the rice and sugar cane
production business of the private respondents. 17
In the Comment filed by private respondents, they submit that the decision
of the Labor Arbiter, as aimed by respondent NLRC, that petitioners were
only hired as casuals, is based on solid evidence presented by the parties
and also by the Chief of the Special Task Force of the NLRC Regional Office
and, therefore, in accordance with the rule on findings of fact of
administrative agencies, the decision should be given great
weight. 18 Furthermore, they contend that the arguments used by
petitioners in questioning the decision of the Labor Arbiter were based on
matters which were not offered as evidence in the case heard before the
regional office of the then Ministry of Labor but rather in the case before the
Social Security Commission, also between the same parties. 19
Public respondent NLRC filed a separate comment prepared by the Solicitor
General. It submits that it has long been settled that findings of fact of
administrative agencies if supported by substantial evidence are entitled to
great weight. 20 Moreover, it argues that petitioners cannot be deemed to be
permanent and regular employees since they fall under the exception stated
in Article 280 of the Labor Code, which reads:
The provisions of written agreements to the contrary notwithstanding and
regardless of the oral agreements of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business or
trade of the employer, exceptwhere 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. 21 (emphasis supplied)
The Court resolved to give due course to the petition and required the
parties to submit their respective memoranda after which the case was
deemed submitted for decision.
The petition is not impressed with merit.
The invariable rule set by the Court in reviewing administrative decisions of
the Executive Branch of the Government is that the findings of fact made
therein are respected, so long as they are supported by substantial
evidence, even if not overwhelming or preponderant; 22 that it is not for the
reviewing court to weigh the conflicting evidence, determine the credibility
of the witnesses or otherwise substitute its own judgment for that of the
administrative agency on the sufficiency of the evidence; 23 that the
administrative decision in matters within the executive's jurisdiction can only
be set aside upon proof of gross abuse of discretion, fraud, or error of law. 24
The questioned decision of the Labor Arbiter reads:
Focusing the spotlight of judicious scrutiny on the evidence on record and
the arguments of both parties, it is our well-discerned opinion that the
petitioners are not regular and permanent workers of the respondents. The
very nature of the terms and conditions of their hiring reveal that the
petitioners were required to perform p of cultural work for a definite period,
after which their services are available to any farm owner. We cannot share
the arguments of the petitioners that they worked continuously the whole
year round for twelve hours a day. This, we feel, is an exaggeration which
does not deserve any serious consideration inasmuch as the plan of rice and
sugar cane does not entail a whole year operation, the area in question
being comparatively small. It is noteworthy that the findings of the Chief of
the Special Task Force of the Regional Office are similar to this.
In fact, the sworn statement of one of the petitioners Fortunato Mercado,
Jr., the son of spouses Fortunato Mercado, Sr. and Rosa Mercado,
indubitably shows that said petitioners were only hired as casuals, on-and-
off basis. With this kind of relationship between the petitioners and the
respondent Aurora Cruz, we feel that there is no basis in law upon which the
claims of the petitioners should be sustained, more specially their complaint
for illegal dismissal. It is within the prerogative of respondent Aurora Cruz
either to take in the petitioners to do further work or not after any single
phase of agricultural work has been completed by them. We are of the
opinion that the real cause which triggered the filing of this complaint by the
petitioners who are related to one another, either by consanguinity or
affinity was due to the filing of a criminal complaint by the respondent
Aurora Cruz against Reynaldo Mercado, son of spouses Fortunato Mercado,
Sr. and Rosa Mercado. In April 1979, according to Jesus David, Zone
Chairman of the locality where the petitioners and respondent reside,
petitioner Fortunato Mercado, Sr. asked for help regarding the case of his
son, Reynaldo, to talk with respondent Aurora Cruz and the said Zone
Chairman also stated under oath that the petitioners were never regularly
employed by respondent Aurora Cruz but were on-and-off hired to work to
render services when needed. 25
A careful examination of the foregoing statements reveals that the findings
of the Labor Arbiter in the case are ably supported by evidence. There is,
therefore, no circumstance that would warrant a reversal of the questioned
decision of the Labor Arbiter as affirmed by the National Labor Relations
Commission.
The contention of petitioners that the second paragraph of Article 280 of the
Labor Code should have been applied in their case presents an opportunity
to clarify the afore-mentioned provision of law.
Article 280 of the Labor Code reads in full:
Article 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
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.
The first paragraph answers the question of who are employees. It states
that, regardless of any written or oral agreement to the contrary, an
employee is deemed regular where he is engaged in necessary or desirable
activities in the usual business or trade of the employer, except for project
employees.
A project employee has been defined to be one whose employment has
been fixed for a specific project or undertaking, the completion or
termination of which has been determined at the time of the engagement of
the employee, or where the work or service to be performed is seasonal in
nature and the employment is for the duration of the season 26 as in the
present case.
The second paragraph of Art. 280 demarcates as "casual" employees, all
other employees who do not fan under the definition of the preceding
paragraph. The proviso, in said second paragraph, deems as regular
employees those "casual" employees who have rendered at least one year
of service regardless of the fact that such service may be continuous or
broken.
Petitioners, in effect, contend that the proviso in the second paragraph of
Art. 280 is applicable to their case and that the Labor Arbiter should have
considered them regular by virtue of said proviso. The contention is without
merit.
The general rule is that the office of a proviso is to qualify or modify only the
phrase immediately preceding it or restrain or limit the generality of the
clause that it immediately follows. 27 Thus, it has been held that a proviso is
to be construed with reference to the immediately preceding part of the
provision to which it is attached, and not to the statute itself or to other
sections thereof. 28 The only exception to this rule is where the clear
legislative intent is to restrain or qualify not only the phrase immediately
preceding it (the proviso) but also earlier provisions of the statute or even
the statute itself as a whole. 29
Policy Instruction No. 12 of the Department of Labor and Employment
discloses that the concept of regular and casual employees was designed to
put an end to casual employment in regular jobs, which has been abused by
many employers to prevent called casuals from enjoying the benefits of
regular employees or to prevent casuals from joining unions. The same
instructions show that the proviso in the second paragraph of Art. 280 was
not designed to stifle small-scale businesses nor to oppress agricultural land
owners to further the interests of laborers, whether agricultural or
industrial. What it seeks to eliminate are abuses of employers against their
employees and not, as petitioners would have us believe, to prevent small-
scale businesses from engaging in legitimate methods to realize profit.
Hence, the proviso is applicable only to the employees who are deemed
"casuals" but not to the "project" employees nor the regular employees
treated in paragraph one of Art. 280.
Clearly, therefore, petitioners being project employees, or, to use the correct
term, seasonal employees, their employment legally ends upon completion
of the project or the season. The termination of their employment cannot
and should not constitute an illegal dismissal. 30
WHEREFORE, the petition is DISMISSED. The decision of the National Labor
Relations Commission affirming that of the Labor Arbiter, under review, is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
RONALDO ZAMORA, the Presidential Assistant for Legal Afairs, Office of
the President, and DOROTEO R. ALEGRE, respondents.
Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioners.
Mauricio G. Domogon for respondent Alegre.
NARVASA, J.:
The question presented by the proceedings at bar 1 is whether or not the
provisions of the Labor Code, 2 as amended, 3 have anathematized "fixed
period employment" or employment for a term.
The root of the controversy at bar is an employment contract in virtue of
which Doroteo R. Alegre was engaged as athletic director by Brent School,
Inc. at a yearly compensation of P20,000.00. 4 The contract fixed a specific
term for its existence, five (5) years, i.e., from July 18, 1971, the date of
execution of the agreement, to July 17, 1976. Subsequent subsidiary
agreements dated March 15, 1973, August 28, 1973, and September 14,
1974 reiterated the same terms and conditions, including the expiry date, as
those contained in the original contract of July 18, 1971. 5

Some three months before the expiration of the stipulated period, or more
precisely on April 20,1976, Alegre was given a copy of the report filed by
Brent School with the Department of Labor advising of the termination of
his services effective on July 16, 1976. The stated ground for the termination
was "completion of contract, expiration of the definite period of
employment." And a month or so later, on May 26, 1976, Alegre accepted
the amount of P3,177.71, and signed a receipt therefor containing the
phrase, "in full payment of services for the period May 16, to July 17, 1976
as full payment of contract."
G.R. No. L-48494 February 5, 1990
However, at the investigation conducted by a Labor Conciliator of said report
BRENT SCHOOL, INC., and REV. GABRIEL DIMACHE, petitioners, of termination of his services, Alegre protested the announced termination
vs. of his employment. He argued that although his contract did stipulate that
the same would terminate on July 17, 1976, since his services were
necessary and desirable in the usual business of his employer, and his
employment had lasted for five years, he had acquired the status of a
regular employee and could not be removed except for valid cause. 6 The
Regional Director considered Brent School's report as anapplication for
clearance to terminate employment (not a report of termination), and
accepting the recommendation of the Labor Conciliator, refused to give such
clearance and instead required the reinstatement of Alegre, as a
"permanent employee," to his former position without loss of seniority
rights and with full back wages. The Director pronounced "the ground relied
upon by the respondent (Brent) in terminating the services of the
complainant (Alegre) . . . (as) not sanctioned by P.D. 442," and, quite oddly,
as prohibited by Circular No. 8, series of 1969, of the Bureau of Private
Schools. 7
Brent School filed a motion for reconsideration. The Regional Director
denied the motion and forwarded the case to the Secretary of Labor for
review. 8 The latter sustained the Regional Director. 9 Brent appealed to the
Office of the President. Again it was rebuffed. That Office dismissed its
appeal for lack of merit and affirmed the Labor Secretary's decision, ruling
that Alegre was a permanent employee who could not be dismissed except
for just cause, and expiration of the employment contract was not one of
the just causes provided in the Labor Code for termination of services. 10
The School is now before this Court in a last attempt at vindication. That it
will get here.
The employment contract between Brent School and Alegre was executed
on July 18, 1971, at a time when the Labor Code of the Philippines (P.D. 442)
had not yet been promulgated. Indeed, the Code did not come into effect
until November 1, 1974, some three years after the perfection of the
employment contract, and rights and obligations thereunder had arisen and
been mutually observed and enforced.
At that time, i.e., before the advent of the Labor Code, there was no doubt
whatever about the validity of term employment. It was impliedly but
nonetheless clearly recognized by the Termination Pay Law, R.A. 1052, 11 as
amended by R.A. 1787. 12 Basically, this statute provided that—
In cases of employment, without a definite period, in a commercial,
industrial, or agricultural establishment or enterprise, the employer or the
employee may terminate at any time the employment with just cause; or
without just cause in the case of an employee by serving written notice on
the employer at least one month in advance, or in the case of an employer,
by serving such notice to the employee at least one month in advance or
one-half month for every year of service of the employee, whichever is
longer, a fraction of at least six months being considered as one whole year.
The employer, upon whom no such notice was served in case of termination
of employment without just cause, may hold the employee liable for
damages.
The employee, upon whom no such notice was served in case of termination
of employment without just cause, shall be entitled to compensation from
the date of termination of his employment in an amount equivalent to his
salaries or wages corresponding to the required period of notice.
There was, to repeat, clear albeit implied recognition of the licitness of term
employment. RA 1787 also enumerated what it considered to be just causes
for terminating an employment without a definite period, either by the
employer or by the employee without incurring any liability therefor.
Prior, thereto, it was the Code of Commerce which governed employment
without a fixed period, and also implicitly acknowledged the propriety of
employment with a fixed period. Its Article 302 provided that —
In cases in which the contract of employment does not have a fixed period,
any of the parties may terminate it, notifying the other thereof one month
in advance.
The factor or shop clerk shall have a right, in this case, to the salary
corresponding to said month.
The salary for the month directed to be given by the said Article 302 of the
Code of Commerce to the factor or shop clerk, was known as
the mesada (from mes, Spanish for "month"). When Article 302 (together
with many other provisions of the Code of Commerce) was repealed by the
Civil Code of the Philippines, Republic Act No. 1052 was enacted avowedly
for the precise purpose of reinstating the mesada.
Now, the Civil Code of the Philippines, which was approved on June 18, 1949
and became effective on August 30,1950, itself deals with obligations with a
period in section 2, Chapter 3, Title I, Book IV; and with contracts of labor
and for a piece of work, in Sections 2 and 3, Chapter 3, Title VIII,
respectively, of Book IV. No prohibition against term-or fixed-period
employment is contained in any of its articles or is otherwise deducible
therefrom.
It is plain then that when the employment contract was signed between
Brent School and Alegre on July 18, 1971, it was perfectly legitimate for
them to include in it a stipulation fixing the duration thereof Stipulations for
a term were explicitly recognized as valid by this Court, for instance,
in Biboso v. Victorias Milling Co., Inc., promulgated on March 31,
1977, 13 and J. Walter Thompson Co. (Phil.) v. NLRC, promulgated on
December 29, 1983. 14 TheThompson case involved an executive who had
been engaged for a fixed period of three (3) years. Bibosoinvolved teachers
in a private school as regards whom, the following pronouncement was
made:
What is decisive is that petitioners (teachers) were well aware an the time
that their tenure was for a limited duration. Upon its termination, both
parties to the employment relationship were free to renew it or to let it
lapse. (p. 254)
Under American law 15 the principle is the same. "Where a contract specifies
the period of its duration, it terminates on the expiration of such
period." 16 "A contract of employment for a definite period terminates by its
own terms at the end of such period." 17
The status of legitimacy continued to be enjoyed by fixed-period
employment contracts under the Labor Code (Presidential Decree No. 442),
which went into effect on November 1, 1974. The Code contained explicit
references to fixed period employment, or employment with a
fixed or definite period. Nevertheless, obscuration of the principle of
licitness of term employment began to take place at about this time
Article 320, entitled "Probationary and fixed period employment," originally
stated that the "termination of employment of probationary employees
and those employed WITH A FIXED PERIOD shall be subject to such
regulations as the Secretary of Labor may prescribe." The asserted
objective to was "prevent the circumvention of the right of the employee to
be secured in their employment as provided . . . (in the Code)."
Article 321 prescribed the just causes for which an employer could
terminate "an employment without a definite period."
And Article 319 undertook to define "employment without a fixed period" in
the following manner: 18
An employment shall be deemed to be without a definite period for
purposes of this Chapter where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of which has
been determined at the time of the engagement of the employee or where
the work or service to be performed is seasonal in nature and the
employment is for the duration of the season.
The question immediately provoked by a reading of Article 319 is whether or
not a voluntary agreement on a fixed term or period would be valid where
the employee "has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer." The
definition seems a non sequitur. From the premise — that the duties of an
employee entail "activities which are usually necessary or desirable in the
usual business or trade of the employer the" — conclusion does not
necessarily follow that the employer and employee should be forbidden to
stipulate any period of time for the performance of those activities. There is
nothing essentially contradictory between a definite period of an
employment contract and the nature of the employee's duties set down in
that contract as being "usually necessary or desirable in the usual business
or trade of the employer." The concept of the employee's duties as being
"usually necessary or desirable in the usual business or trade of the
employer" is not synonymous with or identical to employment with a fixed
term. Logically, the decisive determinant in term employment should not be
the activities that the employee is called upon to perform, but the day
certain agreed upon by the parties for the commencement and termination
of their employment relationship, a day certain being understood to be
"that which must necessarily come, although it may not be known
when." 19 Seasonal employment, and employment for a particular
project are merely instances employment in which a period, where not
expressly set down, necessarily implied.
Of course, the term — period has a definite and settled signification. It
means, "Length of existence; duration. A point of time marking a
termination as of a cause or an activity; an end, a limit, a bound; conclusion;
termination. A series of years, months or days in which something is
completed. A time of definite length. . . . the period from one fixed date to
another fixed date . . ." 20 It connotes a "space of time which has an
influence on an obligation as a result of a juridical act, and either suspends
its demandableness or produces its extinguishment." 21 It should be
apparent that this settled and familiar notion of a period, in the context of a
contract of employment, takes no account at all of the nature of the duties
of the employee; it has absolutely no relevance to the character of his duties
as being "usually necessary or desirable to the usual business of the
employer," or not.
Subsequently, the foregoing articles regarding employment with "a definite
period" and "regular" employment were amended by Presidential Decree
No. 850, effective December 16, 1975.
Article 320, dealing with "Probationary and fixed period employment," was
altered by eliminating the reference to persons "employed with a fixed
period," and was renumbered (becoming Article 271). The article 22 now
reads:
. . . Probationary employment.—Probationary employment shall not exceed
six months from the date the employee started working, unless it is covered
by an apprenticeship agreement stipulating a longer period. The services of
an employee who has been engaged in a probationary basis may be
terminated for a just cause or when he fails to qualify as a regular employee
in accordance with reasonable standards made known by the employer to
the employee at the time of his engagement. An employee who is allowed
to work after a probationary period shall be considered a regular employee.
Also amended by PD 850 was Article 319 (entitled "Employment with a fixed
period," supra) by (a) deleting mention of employment with a fixed or
definite period, (b) adding a general exclusion clause declaring irrelevant
written or oral agreements "to the contrary," and (c) making the provision
treat exclusively of "regular" and "casual" employment. As revised, said
article, renumbered 270, 23 now reads:
. . . 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 employed
is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to he 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.
The first paragraph is identical to Article 319 except that, as just mentioned,
a clause has been added, to wit: "The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreements of the
parties . . ." The clause would appear to be addressed inter alia to
agreements fixing a definite period for employment. There is withal no clear
indication of the intent to deny validity to employment for a definite period.
Indeed, not only is the concept of regular employment not essentially
inconsistent with employment for a fixed term, as above pointed out, Article
272 of the Labor Code, as amended by said PD 850, still impliedly
acknowledged the propriety of term employment: it listed the "just causes"
for which "an employer may terminate employment without a definite
period," thus giving rise to the inference that if the employment be with a
definite period, there need be no just cause for termination thereof if the
ground be precisely the expiration of the term agreed upon by the parties
for the duration of such employment.
Still later, however, said Article 272 (formerly Article 321) was further
amended by Batas Pambansa Bilang 130, 24to eliminate altogether reference
to employment without a definite period. As lastly amended, the opening
lines of the article (renumbered 283), now pertinently read: "An employer
may terminate an employment for any of the following just causes: . . . " BP
130 thus completed the elimination of every reference in the Labor Code,
express or implied, to employment with a fixed or definite period or term.
It is 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 one 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 25 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 employed
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 specie, goods or services, except the general admonition against
stipulations contrary to law, morals, good customs, public order or public
policy. 26Under 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 nature seasonal or for specific projects with pre-
determined 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 contracts 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 will all that it implies does not appear ever
to have been applied, Article 280 of the Labor Code not withstanding; 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 27 implicitly recognize that certain company
officials may be elected for what would amount to fixed periods, at the
expiration of which they would have to stand down, in providing that these
officials," . . . 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 re-elect 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 disregarded 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 exist, 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 . . .
(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
with 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 off 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 objecionable mischievous,
undefensible, wrongful, evil and injurious consequences. 28
Nothing is better settled than that courts are not to give words a meaning
which would lead to absurd or unreasonable consequences. That s a
principle that does back to In re Allen decided oil October 27, 1903, 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 fact that the
construction placed upon the statute by the appellants would lead to an
absurdity is another argument for rejecting it. . . ." 29
. . . 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. 30
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 WHEREFORE, the public respondent's Decision complained of is REVERSED
where it satisfactorily appears that the employer and employee dealt with and SET ASIDE. Respondent Alegre's contract of employment with Brent
each other on more or less equal terms with no moral dominance whatever School having lawfully terminated with and by reason of the expiration of
being exercised by the former over the latter. Unless thus limited in its the agreed term of period thereof, he is declared not entitled to
purview, the law would be made to apply to purposes other than those reinstatement and the other relief awarded and confirmed on appeal in the
explicitly stated by its framers; it thus becomes pointless and arbitrary, proceedings below. No pronouncement as to costs.
unjust in its effects and apt to lead to absurd and unintended consequences.
SO ORDERED.
31
Such interpretation puts the seal on Bibiso upon the effect of the expiry of
an agreed period of employment as still good rule—a rule reaffirmed in the
recent case of Escudero vs. Office of the President (G.R. No. 57822, April 26,
1989) where, in the fairly analogous case of a teacher being served by her
school a notice of termination following the expiration of the last of three
successive fixed-term employment contracts, the Court held:

Reyes (the teacher's) argument is not persuasive. It loses sight of the fact
that her employment was probationary, contractual in nature, and one with
a definitive period. At the expiration of the period stipulated in the contract,
her appointment was deemed terminated and the letter informing her of
the non-renewal of her contract is not a condition sine qua non before Reyes
may be deemed to have ceased in the employ of petitioner UST. The notice
is a mere reminder that Reyes' contract of employment was due to expire
and that the contract would no longer be renewed. It is not a letter of
termination. The interpretation that the notice is only a reminder is
consistent with the court's finding in Labajo supra. ... 32

Paraphrasing Escudero, respondent Alegre's employment was terminated

upon the expiration of his last contract with Brent School on July 16, 1976
without the necessity of any notice. The advance written advice given the
Department of Labor with copy to said petitioner was a mere reminder of
the impending expiration of his contract, not a letter of termination, nor an
application for clearance to terminate which needed the approval of the
Department of Labor to make the termination of his services effective. In
any case, such clearance should properly have been given, not denied.
 Francisco D. Alas for petitioner.

Mateo G. Delegencia for private respondent.

CRUZ, J.:p

The petitioner is a truck driver who claims he was illegally dismissed by the
private respondent, the Henry Lei Trucking Company. The Labor Arbiter
found for him and ordered his reinstatement with back wages. 1 On appeal,
the decision was reversed by the National Labor Relations Commission,
which held that the petitioner's employment had expired under a valid
contract. 2 The petitioner then came to us on certiorari under Rule 65 of the
Rules of Court.

Required to submit a Comment (not to file a motion to dismiss), the private

respondent nevertheless moved to dismiss on the ground that the petition
was filed sixty-eight days after service of the challenged decision on the
petitioner, hence late. The motion was untenable, of course. Petitions
for certiorari under Rule 65 may be instituted within a reasonable period,
which the Court has consistently reckoned at three months.**

In his own Comment, the Solicitor General defended the public respondent
and agreed that the contract between the petitioner and the private
respondent was a binding agreement not contrary to law, morals or public
policy. The petitioner's services could be legally terminated upon the
expiration of the period agreed upon, which was only six months. The
petitioner could therefore not complain that he had been illegally dismissed.

As an examination of the claimed agreement was necessary to the

G.R. No. 78693 January 28, 1991
resolution of this case, the Court required its production by the petitioner.
ZOSIMO CIELO, petitioner, But he could not comply because he said he had not been given a copy by
vs. the private respondent. A similar requirement proved fruitless when
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, HENRY LEI addressed to the private respondent, which explained it could not locate the
and/or HENRY LEI TRUCKINGrespondents. folder of the case despite diligent search. It was only on October 15, 1990,
that the records of the case, including the subject agreement, were finally
received by the Court from the NLRC, which had obtained them from its
Cagayan de Oro regional office. 3
The said agreement reads in full as follows:
AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement made and executed by and between:
HENRY LEI, of legal age, Filipino citizen, married, and a resident of Digos,
Davao del Sur, now and hereinafter called the FIRST PARTY,
—a n d —
ZOSIMO CIELO, of legal age, married, Filipino citizen, and a resident of
Agusan, Canyon, Camp Philipps, now and hereinafter called the SECOND
PARTY,
WITNESSETH
That the FIRST PARTY is an owner of some cargo trucks.
WHEREAS, the SECOND PARTY desires to operate one of the said cargo
trucks which he himself shall drive for income;
NOW, THEREFORE, for the foregoing premises, the FIRST PARTY does hereby
assign one cargo truck of his fleet to the SECOND PARTY under the following
conditions and stipulations:
1. That the term of this Agreement is six (6) months from and after the
execution hereof, unless otherwise earlier terminated at the option of either
party;
2. That the net income of the said vehicle after fuel and oil shall be divided
by and between them on ninety/ten percent (90/10%) basis in favor of the
FIRST PARTY;
3. That there is no employer/employee relationship between the parties, the
nature of this Agreement being contractual;
4. In the event the SECOND PARTY needs a helper the personnel so
employed by him shall be to his personal account, who shall be considered
his own employee;
5. That the loss of or damage to the said vehicle shall be to account of the
SECOND PARTY; he shall return the unit upon the expiration or termination
of this contract in the condition the same was received by him, fair wear and
tear excepted.
IN WITNESS WHEREOF, the parties hereunto affixed their signature on this
30th day of June, 1984, at Digos, Davao del Sur, Philippines.
(Sgd.) HENRY LEI (Sgd.) ZOSIMO CIELO
First Party Second Party
SIGNED IN THE PRESENCE OF:
(Sgd.) VICTOR CHAN (Sgd.) AMALFE M. NG
The agreement was supposed to have commenced on June 30, 1984, and to
end on December 31, 1984. On December 22, 1984, however, the petitioner
was formally notified by the private respondent of the termination of his
services on the ground of expiration of their contract. Soon thereafter, on
January 22, 1985, the petitioner filed his complaint with the Ministry of
Labor and Employment.
In his position paper, the petitioner claimed he started working for the
private respondent on June 16, 1984, and having done so for more than six
months had acquired the status of a regular employee. As such, he could no
longer be dismissed except for lawful cause. He also contended that he had
been removed because of his refusal to sign, as required by the private
respondent, an affidavit reading as follows:
AFFIDAVIT
That I, ZOSIMO CIELO, Filipino, of legal age, married/single and a resident of
Agusan Canyon, Camp Philipps, after having been duly sworn to in
accordance with law, hereby depose and say:
That I am one of the drivers of the trucks of Mr. HENRY LEI whose hauling
trucks are under contract with the Philippine Packing Corporation;
That I have received my salary and allowances from Mr. HENRY LEI the sum
of P1,421.10 for the month of October 1984. That I have no more claim
against the said Mr. Henry Lei.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 15th day of
November 1984.
______________
Driver
The private respondent rests its case on the agreement and maintains that
the labor laws are not applicable because the relations of the parties are
governed by their voluntary stipulations. The contract having expired, it was
the prerogative of the trucking company to renew it or not as it saw fit.
The writ will issue.
While insisting that it is the agreement that regulates its relations with the
petitioner, the private respondent is ensnared by its own words. The
agreement specifically declared that there was no employer-employee
relationship between the parties. Yet the affidavit the private respondent
prepared required the petitioner to acknowledge that "I have received
my salary and allowances from Mr. Henry Lei," suggesting an employment
relationship. According to its position paper, the petitioner's refusal to sign
the affidavit constituted disrespect or insubordination, which had "some
bearing on the renewal of his contract of employment with the respondent."
Of this affidavit, the private respondent had this to say:
. . . Since October 1984, respondent adopted a new policy to require all their
employees to sign an affidavit to the effect that they received their salaries.
Copy of which is hereto attached as Annex "C," covering the months of
October and November 1984. All other employees of the respondent signed
the said affidavit, only herein complainant refused to do so for reasons
known only to him. . . .
It appears from the records that all the drivers of the private respondent
have been hired on a fixed contract basis, as evidenced by the
mimeographed form of the agreement and of the affidavit. The private
respondent merely filled in the blanks with the corresponding data, such as
the driver's name and address, the amount received by him, and the date of
the document. Each driver was paid through individual vouchers 4 rather
than a common payroll, as is usual in companies with numerous employees.
The private respondent's intention is obvious. It is remarkable that neither
the NLRC nor the Solicitor General recognized it. There is no question that
the purpose behind these individual contracts was to evade the application
of the labor laws by making it appear that the drivers of the trucking
company were not its regular employees.
Under these arrangements, the private respondent hoped to be able to
terminate the services of the drivers without the inhibitions of the Labor
Code. All it had to do was refuse to renew the agreements, which,
significantly, were uniformly limited to a six-month period. No cause had to
be established because such renewal was subject to the discretion of the
parties. In fact, the private respondent did not even have to wait for the
expiration of the contract as it was there provided that it could be "earlier
terminated at the option of either party."
By this clever scheme, the private respondent could also prevent the drivers
from becoming regular employees and thus be entitled to security of tenure
and other benefits, such as a minimum wage, cost-of-living allowances,
vacation and sick leaves, holiday pay, and other statutory requirements. The
private respondent argues that there was nothing wrong with the affidavit
because all the affiant acknowledged therein was full payment of the
amount due him under the agreement. Viewed in this light, such
acknowledgment was indeed not necessary at all because this was already
embodied in the vouchers signed by the payee-driver. But the affidavit, for
all its seeming innocuousness, imported more than that. What was insidious
about the document was the waiver the affiant was unwarily making of the
statutory rights due him as an employee of the trucking company.
And employee he was despite the innocent protestations of the private
respondent. We accept the factual finding of the Labor Arbiter that the
petitioner was a regular employee of the private respondent. The private
respondent is engaged in the trucking business as a hauler of cattle, crops
and other cargo for the Philippine Packing Corporation. This business
requires the services of drivers, and continuously because the work is not
seasonal, nor is it limited to a single undertaking or operation. Even if
ostensibly hired for a fixed period, the petitioner should be considered a
regular employee of the private respondent, conformably to Article 280 of
the Labor Code providing as follows:
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 necessarily 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
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.
(Emphasis supplied)
In Brent School, Inc. vs. Zamora, the Court affirmed the general principle
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 disregarded as contrary to public policy, morals,
etc." Such circumstances have been sufficiently established in the case at
bar and justify application of the following conclusions:
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.
The agreement in question had such a purpose and so was null and void ab
initio.
The private respondent's argument that the petitioner could at least be
considered on probation basis only and therefore separable at will is self-
defeating. The Labor Code clearly provides as follows:
Art. 281. Probationary employment. — Probationary employment shall not
exceed six (6) months from the date the employee started working, unless it
is covered by an apprenticeship agreement stipulating a longer period. The
services of an employee who has been engaged on a probationary basis may
be terminated for a just cause or when he fails to qualify as a regular
employee in accordance with reasonable standards made known by the
employer to the employee at the time of his engagement. An employee who
is allowed to work after a probationary period shall be considered a regular
employee.
There is no question that the petitioner was not engaged as an apprentice,
being already an experienced truck driver when he began working for the
private respondent. Neither has it been shown that he was informed at the
time of his employment of the reasonable standards under which he could
qualify as a regular employee. It is plain that the petitioner was hired at the
outset as a regular employee. At any rate, even assuming that the original
employment was probationary, the Labor Arbiter found that the petitioner
had completed more than six month's service with the trucking company
and so had acquired the status of a regular employee at the time of his
dismissal.
Even if it be assumed that the six-month period had not yet been
completed, it is settled that the probationary employee cannot be removed
except also for cause as provided by law. It is not alleged that the petitioner
was separated for poor performance; in fact, it is suggested by the private
respondent that he was dismissed for disrespect and insubordination, more
specifically his refusal to sign the affidavit as required by company policy.
Hence, even as a probationer, or more so as a regular employee, the
petitioner could not be validly removed under Article 282 of the Labor Code,
providing as follows:
should commend rather than prejudice him for standing up to his rights, at
great risk to his material security, against the very source of his livelihood.
The Court looks with stern disapproval at the contract entered into by the
private respondent with the petitioner (and who knows with how many
other drivers). The agreement was a clear attempt to exploit the unwitting
employee and deprive him of the protection of the Labor Code by making it
appear that the stipulations of the parties were governed by the Civil Code
as in ordinary private transactions. They were not, to be sure. The
agreement was in reality a contract of employment into which were read
the provisions of the Labor Code and the social justice policy mandated by
the Constitution. It was a deceitful agreement cloaked in the habiliments of
legality to conceal the selfish desire of the employer to reap undeserved
profits at the expense of its employees. The fact that the drivers are on the
whole practically unlettered only makes the imposition more censurable and
the avarice more execrable.

Art. 282. Termination by employer. — An employer may terminate an
employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or representative in connection with his work
WHEREFORE, the petition is GRANTED. The decision of the National Labor
Relations Commission is SET ASIDE and that of the Labor Arbiter
REINSTATED, with costs against the private respondents.
SO ORDERED.

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

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

(d) Commission of a crime or offense by the employee against the person of

his employer or any immediate member of his family or his duly authorized
representative; and

(e) Other causes analogous to the foregoing.

In refusing to sign the affidavit as required by the private respondent, the

petitioner was merely protecting his interests against an unguarded waiver
of the benefits due him under the Labor Code. Such willful disobedience
 YNARES-SANTIAGO, J.:

This petition for review on certiorari assails the Decision 1 of the Court of
Appeals (CA) dated August 23, 2006 in CA-G.R. SP No. 87956 which affirmed
the National Labor Relations Commission’s (NLRC) decision setting aside the
Labor Arbiter’s findings of illegal retrenchment and ordering the
reinstatement of the retrenched Philippine Airlines, Inc. (PAL) employee-
members of petitioner Flight Attendants and Stewards Association of the
Philippines (FASAP), with payment of backwages, moral and exemplary
damages, and attorney’s fees. Also assailed is the May 29, 2007
Resolution2 denying the motion for reconsideration.

Petitioner FASAP is the duly certified collective bargaining representative of

PAL flight attendants and stewards, or collectively known as PAL cabin crew
personnel. Respondent PAL is a domestic corporation organized and existing
under the laws of the Republic of the Philippines, operating as a common
carrier transporting passengers and cargo through aircraft.

On June 15, 1998, PAL retrenched 5,000 of its employees, including more
than 1,400 of its cabin crew personnel, to take effect on July 15, 1998. PAL
adopted the retrenchment scheme allegedly to cut costs and mitigate huge
financial losses as a result of a downturn in the airline industry brought
about by the Asian financial crisis. During said period, PAL claims to have
incurred P90 billion in liabilities, while its assets stood at P85 billion. 3

In implementing the retrenchment scheme, PAL adopted its so-called "Plan

14" whereby PAL’s fleet of aircraft would be reduced from 54 to 14, thus
requiring the services of only 654 cabin crew personnel. 4 PAL admits that the
G.R. No. 178083 July 22, 2008 retrenchment is wholly premised upon such reduction in fleet, 5 and to "the
strike staged by PAL pilots since this action also translated into a reduction of
FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF THE PHILIPPINES
flights."6 PAL claims that the scheme resulted in "savings x x x amounting to
(FASAP), Petitioner,
approximately P24 million per month – savings that would greatly alleviate
vs.
PAL’s financial crisis."7
PHILIPPINE AIRLINES, INC., PATRIA CHIONG and COURT OF
APPEALS, Respondents. Prior to the full implementation of the assailed retrenchment program,
FASAP and PAL conducted a series of consultations and meetings and
DECISION
explored all possibilities of cushioning the impact of the impending
reduction in cabin crew personnel. However, the parties failed to agree on
how the scheme would be implemented. Thus PAL unilaterally resolved to
utilize the criteria set forth in Section 112 of the PAL-FASAP Collective
Bargaining Agreement8 (CBA) in retrenching cabin crew personnel: that is,
that retrenchment shall be based on the individual employee’s efficiency
rating and seniority.
PAL determined the cabin crew personnel efficiency ratings through an
evaluation of the individual cabin crew member’s overall performance for
the year 1997 alone.9 Their respective performance during previous years,
i.e., the whole duration of service with PAL of each cabin crew personnel,
was not considered. The factors taken into account on whether the cabin
crew member would be retrenched, demoted or retained were: 1) the
existence of excess sick leaves; 2) the crew member’s being physically
overweight; 3) seniority; and 4) previous suspensions or warnings
imposed.10
While consultations between FASAP and PAL were ongoing, the latter began
implementing its retrenchment program by initially terminating the services
of 140 probationary cabin attendants only to rehire them in April 1998.
Moreover, their employment was made permanent and regular. 11
On July 15, 1998, however, PAL carried out the retrenchment of its more
than 1,400 cabin crew personnel.
Meanwhile, in June 1998, PAL was placed under corporate rehabilitation and
a rehabilitation plan was approved per Securities and Exchange Commission
(SEC) Order dated June 23, 1998 in SEC Case No. 06-98-6004. 12
On September 4, 1998, PAL, through its Chairman and Chief Executive
Officer (CEO) Lucio Tan, made an offer to transfer shares of stock to its
employees and three seats in its Board of Directors, on the condition that all
the existing Collective Bargaining Agreements (CBAs) with its employees
would be suspended for 10 years, but it was rejected by the employees. On
September 17, 1998, PAL informed its employees that it was shutting down
its operations effective September 23, 1998, 13 despite the previous approval
on June 23, 1998 of its rehabilitation plan.
On September 23, 1998, PAL ceased its operations and sent notices of
termination to its employees. Two days later, PAL employees, through the
Philippine Airlines Employees Association (PALEA) board, sought the
intervention of then President Joseph E. Estrada. PALEA offered a 10-year
moratorium on strikes and similar actions and a waiver of some of the
economic benefits in the existing CBA. Lucio Tan, however, rejected this
counter-offer.14
On September 27, 1998, the PALEA board again wrote the President
proposing the following terms and conditions, subject to ratification by the
general membership:
1. Each PAL employee shall be granted 60,000 shares of stock with a par
value of P5.00, from Mr. Lucio Tan’s shareholdings, with three (3) seats in
the PAL Board and an additional seat from government shares as indicated
by His Excellency;
2. Likewise, PALEA shall, as far as practicable, be granted adequate
representation in committees or bodies which deal with matters affecting
terms and conditions of employment;
3. To enhance and strengthen labor-management relations, the existing
Labor-Management Coordinating Council shall be reorganized and
revitalized, with adequate representation from both PAL management and
PALEA;
4. To assure investors and creditors of industrial peace, PALEA agrees,
subject to the ratification by the general membership, (to) the suspension of
the PAL-PALEA CBA for a period of ten (10) years, provided the following
safeguards are in place:
a. PAL shall continue recognizing PALEA as the duly certified bargaining agent
of the regular rank-and-file ground employees of the Company;
b. The ‘union shop/maintenance of membership’ provision under the PAL-
PALEA CBA shall be respected.
c. No salary deduction, with full medical benefits.
5. PAL shall grant the benefits under the 26 July 1998 Memorandum of
Agreement forged by and between PAL and PALEA, to those employees who
may opt to retire or be separated from the company.
6. PALEA members who have been retrenched but have not received
separation benefits shall be granted priority in the hiring/rehiring of
employees.
7. In the absence of applicable Company rule or regulation, the provisions of
the Labor Code shall apply.15
In a referendum conducted on October 2, 1998, PAL employees ratified the
above proposal. On October 7, 1998, PAL resumed domestic operations and,
soon after, international flights as well.16
Meanwhile, in November 1998, or five months after the June 15, 1998 mass
dismissal of its cabin crew personnel, PAL began recalling to service those it
had previously retrenched. Thus, in November 1998 17 and up to March
1999,18 several of those retrenched were called back to service. To date, PAL
claims to have recalled 820 of the retrenched cabin crew personnel. 19 FASAP,
however, claims that only 80 were recalled as of January 2001. 20
In December 1998, PAL submitted a "stand-alone" rehabilitation plan to the
SEC by which it undertook a recovery on its own while keeping its options
open for the entry of a strategic partner in the future. Accordingly, it
submitted an amended rehabilitation plan to the SEC with a proposed
revised business and financial restructuring plan, which required the
infusion of US$200 million in new equity into the airline.
On May 17, 1999, the SEC approved the proposed "Amended and Restated
Rehabilitation Plan" of PAL and appointed a permanent rehabilitation
receiver for the latter. 21
On June 7, 1999, the SEC issued an Order confirming its approval of the
"Amended and Restated Rehabilitation Plan" of PAL. In said order, the cash
infusion of US$200 million made by Lucio Tan on June 4, 1999 was
acknowledged.22
On October 4, 2007, PAL officially exited receivership; thus, our ruling in
Philippine Air Lines v. Kurangking 23 no longer applies.
On June 22, 1998, FASAP filed a Complaint 24 against PAL and Patria T.
Chiong25 (Chiong) for unfair labor practice, illegal retrenchment with claims
for reinstatement and payment of salaries, allowances and backwages of
affected FASAP members, actual, moral and exemplary damages with a
prayer to enjoin the retrenchment program then being implemented.
Instead of a position paper, respondents filed a Motion to Dismiss and/or
Consolidation with NCMB Case No. NS 12-514-97 pending with the Office of
the Secretary of the Department of Labor and Employment and/or
Suspension and Referral of Claims to the interim rehabilitation proceedings
(motion to dismiss).26
On July 6, 1998, FASAP filed its Comment to respondents’ motion to dismiss.
On July 23, 1998, the Labor Arbiter issued an Order 27 denying respondents’
motion to dismiss; granting a writ of preliminary injunction against PAL’s
implementation of its retrenchment program with respect to FASAP
members; setting aside the respective notices of retrenchment addressed to
the cabin crew; directing respondents to restore the said retrenched cabin
crew to their positions and PAL’s payroll until final determination of the case;
and directing respondents to file their position paper.
Respondents appealed to the NLRC which reversed the decision of the Labor
Arbiter. The NLRC directed the lifting of the writ of injunction and to vacate
the directive setting aside the notices of retrenchment and reinstating the
dismissed cabin crew to their respective positions and in the PAL payroll. 28
FASAP filed its Position Paper29 on September 28, 1999. On November 8,
1999, respondents filed their Position Paper 30 with counterclaims against
FASAP, to which FASAP filed its Reply. 31 Thereafter, the parties were directed
to file their respective Memoranda.32
Meanwhile, instead of being dismissed in accordance with the Kurangking
case, the FASAP case (NLRC-NCR Case No. 06-05100-98) was consolidated
with the following cases:
1. Ramon and Marian Joy Camahort v. PAL, et al. (NLRC-NCR Case No. 00-07-
05854-98);
2. Erlinda Arevalo and Chonas Santos v. PAL, et al. (NLRC-NCR Case No. 00-
07-09793-98); and
3. Victor Lanza v. PAL, et al. (NLRC-NCR Case No.00-04-04254-99).
On July 21, 2000, Labor Arbiter Jovencio Ll. Mayor rendered a Decision, 33 the
dispositive portion of which reads, as follows:
WHEREFORE, premises considered, this Office renders judgment declaring
that Philippine Airlines, Inc., illegally retrenched One Thousand Four
Hundred (1,400) cabin attendants including flight pursers for effecting the
retrenchment program in a despotic and whimsical manner. Philippine
Airlines, Inc. is likewise hereby ordered to:
1. Reinstate the cabin attendants retrenched and/or demoted to their
previous positions;
2. Pay the concerned cabin attendants their full backwages from the time
they were illegally dismissed/retrenched up to their actual reinstatements;
3. Pay moral and exemplary damages in the amount of Five Hundred
Thousand Pesos (P500,000.00); and
4. Ten (10%) per cent of the total monetary award as and by way of
attorney’s fees.
SO ORDERED.34
Respondents appealed to the NLRC. Meanwhile, FASAP moved for the
implementation of the reinstatement aspect of the Labor Arbiter’s decision.
Despite respondents’ opposition, the Labor Arbiter issued a writ of
execution with respect to the reinstatement directive in his decision.
Respondents moved to quash the writ, but the Labor Arbiter denied the
same. Again, respondents took issue with the NLRC.
Meanwhile, on May 31, 2004, the NLRC issued its Decision 35 in the appeal
with respect to the Labor Arbiter’s July 21, 2000 decision. The dispositive
portion thereof reads:
WHEREFORE, premises considered, the Decision dated July 21, 2000 is
hereby SET ASIDE and a new one entered DISMISSING the consolidated
cases for lack of merit.
With respect to complainant Ms. Begonia Blanco, her demotion is hereby
declared illegal and respondent PAL is ordered to pay her salary differential
covering the period from the time she was downgraded in July 1998 up to
the time she resigned in October 1999.
Respondent PAL is likewise ordered to pay the separation benefits to those
complainants who have not received their separation pay and to pay the
balance to those who have received partial separation pay.
The Order of the Labor Arbiter dated April 6, 2000 is also SET ASIDE and the
Writ of Execution dated November 13, 2000 is hereby quashed.
Annexes "A" and "B" are considered part of this Decision.
SO ORDERED.36
FASAP moved for reconsideration but it was denied; hence it filed an appeal
to the Court of Appeals which was denied in the herein assailed Decision.
FASAP’s motion for reconsideration was likewise denied; hence, the instant
petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS DECIDED THE CASE A QUO IN A
WAY CONTRARY TO LAW AND/OR APPLICABLE JURISPRUDENCE WHEN IT
DENIED FASAP’S PETITION FOR CERTIORARI UNDER RULE 65 AND
EFFECTIVELY VALIDATED THE RETRENCHMENT EXERCISED BY RESPONDENT
PAL WHICH WAS INITIALLY DECLARED AS ILLEGAL BY THE LABOR ARBITER A
QUO SINCE:
FIRST, the record shows that PAL failed or neglected to adopt less drastic
cost-cutting measures before resorting to retrenchment. No less than the
Supreme Court held that resort to less drastic cost-cutting measures is an
indispensable requirement for a valid retrenchment x x x.
SECOND, PAL arbitrarily and capriciously singled out the year 1997 as a
reference in its alleged assessment of employee efficiency. With this, it
totally disregarded the employee’s performance during the years prior to
1997. This resulted in the unreasonable and unfair retrenchment or
demotion of several flight pursers and attendants who showed impeccable
service records during the years prior to 1997.
THIRD, seniority was totally disregarded in the selection of employees to be
retrenched, which is a clear and willful violation of the CBA.
FOURTH, PAL maliciously represented in the proceedings below that it could
only operate on a fleet of fourteen (14) planes in order to justify the
retrenchment scheme. Yet, the evidence on record revealed that PAL
operated a fleet of twenty two (22) planes. In fact, after having illegally
retrenched the unfortunate flight attendants and pursers, PAL rehired those
who were capriciously dismissed and even hired from the outside just to
fulfill their manning requirements.
FIFTH, PAL did not use any fair and reasonable criteria in effecting
retrenchment. If there really was any, the same was applied arbitrarily, if not
discriminatorily.
FINALLY, and perhaps the worst transgression of FASAP’s rights, PAL used
retrenchment to veil its union-busting motives and struck at the heart of
FASAP when it retrenched seven (7) of its twelve (12) officers and demoted
three (3) others.37 (Emphasis supplied)
These issues boil down to the question of whether PAL’s retrenchment
scheme was justified.
It is a settled rule that in the exercise of the Supreme Court’s power of
review, the Court is not a trier of facts and does not normally undertake the
re-examination of the evidence presented by the contending parties during
trial. However, there are several exceptions to this rule 38 such as when the
factual findings of the Labor Arbiter differ from those of the NLRC, as in the
instant case, which opens the door to a review by this Court. 39
Under the Labor Code, retrenchment or reduction of employees is
authorized as follows:
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 this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of labor-
saving devices or redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least his one (1) month pay or to at least
one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered
one (1) whole year.
The law recognizes the right of every business entity to reduce its work force
if the same is made necessary by compelling economic factors which would
endanger its existence or stability. 40 Where appropriate and where
conditions are in accord with law and jurisprudence, the Court has
authorized valid reductions in the work force to forestall business losses, the
hemorrhaging of capital, or even to recognize an obvious reduction in the
volume of business which has rendered certain employees redundant. 41
Nevertheless, while it is true that the exercise of this right is a prerogative of
management, there must be faithful compliance with substantive and
procedural requirements of the law and jurisprudence, for retrenchment
strikes at the very heart of the worker’s employment, the lifeblood upon
which he and his family owe their survival. Retrenchment is only a measure
of last resort, when other less drastic means have been tried and found to
be inadequate.42
The burden clearly falls upon the employer to prove economic or business
losses with sufficient supporting evidence. Its failure to prove these reverses
or losses necessarily means that the employee’s dismissal was not
justified.43 Any claim of actual or potential business losses must satisfy
certain established standards, all of which must concur, before any reduction
of personnel becomes legal.44 These are:
(1) That retrenchment is reasonably necessary and likely to prevent business
losses which, if already incurred, are not merely de minimis, but substantial,
serious, actual and real, or if only expected, are reasonably imminent as
perceived objectively and in good faith by the employer;
(2) That the employer served written notice both to the employees and to
the Department of Labor and Employment at least one month prior to the
intended date of retrenchment;
(3) That the employer pays the retrenched employees separation pay
equivalent to one (1) month pay or at least one-half (½) month pay for every
year of service, whichever is higher;
(4) That the employer exercises its prerogative to retrench employees in
good faith for the advancement of its interest and not to defeat or
circumvent the employees’ right to security of tenure; and,
(5) That the employer used fair and reasonable criteria in ascertaining who
would be dismissed and who would be retained among the employees, such
as status, efficiency, seniority, physical fitness, age, and financial hardship for
certain workers.45
In view of the facts and the issues raised, the resolution of the instant
petition hinges on a determination of the existence of the first, fourth and
the fifth elements set forth above, as well as compliance therewith by PAL,
taking to mind that the burden of proof in retrenchment cases lies with the
employer in showing valid cause for dismissal; 46 that legitimate business
reasons exist to justify retrenchment.47
FIRST ELEMENT: That retrenchment is reasonably necessary and likely to
prevent business losses which, if already incurred, are not merely de
minimis, but substantial, serious, actual and real, or if only expected, are
reasonably imminent as perceived objectively and in good faith by the
employer.
The employer’s prerogative to layoff employees is subject to certain
limitations. In Lopez Sugar Corporation v. Federation of Free Workers, 48 we
held that:
Firstly, the losses expected should be substantial and not merely de minimis
in extent. If the loss purportedly sought to be forestalled by retrenchment is
clearly shown to be insubstantial and inconsequential in character, the bona
fide nature of the retrenchment would appear to be seriously in question.
Secondly, the substantial loss apprehended must be reasonably imminent,
as such imminence can be perceived objectively and in good faith by the
employer. There should, in other words, be a certain degree of urgency for
the retrenchment, which is after all a drastic recourse with serious
consequences for the livelihood of the employees retired or otherwise laid-
off. Because of the consequential nature of retrenchment, it must, thirdly, be
reasonably necessary and likely to effectively prevent the expected losses.
The employer should have taken other measures prior or parallel to
retrenchment to forestall losses, i.e., cut other costs than labor costs. An
employer who, for instance, lays off substantial numbers of workers while
continuing to dispense fat executive bonuses and perquisites or so-called
"golden parachutes," can scarcely claim to be retrenching in good faith to
avoid losses. To impart operational meaning to the constitutional policy of
providing "full protection" to labor, the employer’s prerogative to bring
down labor costs by retrenching must be exercised essentially as a measure
of last resort, after less drastic means - e.g., reduction of both management
and rank-and-file bonuses and salaries, going on reduced time, improving
manufacturing efficiencies, trimming of marketing and advertising costs, etc.
- have been tried and found wanting.
Lastly, but certainly not the least important, alleged losses if already
realized, and the expected imminent losses sought to be forestalled, must
be proved by sufficient and convincing evidence.
The law speaks of serious business losses or financial reverses. Sliding
incomes or decreasing gross revenues are not necessarily losses, much less
serious business losses within the meaning of the law. The fact that an
employer may have sustained a net loss, such loss, per se, absent any other
evidence on its impact on the business, nor on expected losses that would
have been incurred had operations been continued, may not amount to
serious business losses mentioned in the law. The employer must show that
its losses increased through a period of time and that the condition of the
company will not likely improve in the near future, 49 or that it expected no
abatement of its losses in the coming years. 50 Put simply, not every loss
incurred or expected to be incurred by a company will justify
retrenchment.51
The employer must also exhaust all other means to avoid further losses
without retrenching its employees. 52Retrenchment is a means of last resort;
it is justified only when all other less drastic means have been tried and
found insufficient.53 Even assuming that the employer has actually incurred
losses by reason of the Asian economic crisis, the retrenchment is not
completely justified if there is no showing that the retrenchment was the
last recourse resorted to.54 Where the only less drastic measure that the
employer undertook was the rotation work scheme, or the three-day-work-
per-employee-per-week schedule, and it did not endeavor at other
measures, such as cost reduction, lesser investment on raw materials,
adjustment of the work routine to avoid scheduled power failure, reduction
of the bonuses and salaries of both management and rank-and-file,
improvement of manufacturing efficiency, and trimming of marketing and
advertising costs, the claim that retrenchment was done in good faith to
avoid losses is belied.55
Alleged losses if already realized, and the expected imminent losses sought
to be forestalled, must be proved by sufficient and convincing evidence. The
reason for requiring this is readily apparent: any less exacting standard of
proof would render too easy the abuse of this ground for termination of
services of employees; scheming employers might be merely feigning
business losses or reverses in order to ease out employees. 56
In establishing a unilateral claim of actual or potential losses, financial
statements audited by independent external auditors constitute the normal
method of proof of profit and loss performance of a company. 57 The
condition of business losses justifying retrenchment is normally shown by
audited financial documents like yearly balance sheets and profit and loss
statements as well as annual income tax returns. Financial statements must
be prepared and signed by independent auditors; otherwise, they may be
assailed as self-serving.58 A Statement of Profit and Loss submitted to prove
alleged losses, without the accompanying signature of a certified public
accountant or audited by an independent auditor, is nothing but a self-
serving document which ought to be treated as a mere scrap of paper
devoid of any probative value.59
The audited financial statements should be presented before the Labor
Arbiter who is in the position to evaluate evidence. They may not be
submitted belatedly with the Court of Appeals, because the admission of
evidence is outside the sphere of the appellate court’s certiorari jurisdiction.
Neither can this Court admit in evidence audited financial statements, or
make a ruling on the question of whether the employer incurred substantial
losses justifying retrenchment on the basis thereof, as this Court is not a
trier of facts.60 Even so, this Court may not be compelled to accept the
contents of said documents blindly and without thinking. 61
The requirement of evidentiary substantiation dictates that not even the
affidavit of the Assistant to the General Manager is admissible to prove
losses, as the same is self-serving.62 Thus, in Central Azucarera de la Carlota
v. National Labor Relations Commission, 63 the Court ruled that the mere
citation by the employer of the economic setback suffered by the sugar
industry as a whole cannot, in the absence of adequate, credible and
persuasive evidence, justify its retrenchment program, 64 thus:
A litany of woes, from a labor strike way back in 1982 to the various crises
endured by the sugar industry, droughts, the 1983 assassination of former
Senator Benigno Aquino, Jr., high crop loan interests, spiraling prices of
fertilizers and spare parts, the depression of sugar prices in the world
market, cutback in the U.S. sugar quota, abandonment of productive areas
because of the insurgency problem and the absence of fair and consistent
government policies may have contributed to the unprecedented decline in
sugar production in the country, but there is no solid evidence that they
translated into specific and substantial losses that would necessitate
retrenchment. Just exactly what negative effects were borne by petitioner as
a result, petitioner failed to underscore.65
In Anino v. National Labor Relations Commission, 66 the Court also held that
the employer’s claim – that retrenchment was undertaken as a measure of
self-preservation to prevent losses brought about by the continuing decline
of nickel prices and export volume in the mining industry, as well as its
allegation that the reduction of excise taxes on mining from 5% to 1% on a
graduated basis as provided under Republic Act No. 7729 was a clear
recognition by the government of the industry’s worsening economic
difficulties – was a bare claim in the absence of evidence of actual losses in
its business operations. 67
In the instant case, PAL failed to substantiate its claim of actual and
imminent substantial losses which would justify the retrenchment of more
than 1,400 of its cabin crew personnel. Although the Philippine economy
was gravely affected by the Asian financial crisis, however, it cannot be
assumed that it has likewise brought PAL to the brink of bankruptcy.
Likewise, the fact that PAL underwent corporate rehabilitation does not
automatically justify the retrenchment of its cabin crew personnel.
Records show that PAL was not even aware of its actual financial position
when it implemented its retrenchment program. It initially decided to cut its
fleet size to only 14 ("Plan 14") and based on said plan, it retrenched more
than 1,400 of its cabin crew personnel. Later on, however, it abandoned its
"Plan 14" and decided to retain 22 units of aircraft ("Plan 22").
Unfortunately, it has retrenched more than what was necessary. PAL admits
that:
[U]pon reconsideration and with some optimistic prospects for operations,
the Company (PAL) decided not to implement "Plan 14" and instead
implemented "Plan 22," which would involve a fleet of 22 planes. Since
"Plan 14" was abandoned, the Company deemed it appropriate to recall
back into employment employees it had previously retrenched. Thus, some
of the employees who were initially laid off were recalled back to duty, the
basis of which was passing the 1997 efficiency rating to meet the Company’s
operational requirements.68
PAL decided to adopt "Plan 14" on June 12, 1998. Three days after, or on
June 15, 1998, it sent notices of retrenchment to its cabin crew personnel to
take effect on July 15, 1998. However, after allegedly realizing that it was
going to retain 22 of its aircraft instead of 14, and after more than 1,400 of
its cabin crew have been fired – during the period from November 30, 1998
to December 15, 1998, it suddenly recalled to duty 202 of the retrenched
cabin crew personnel.69
This only proves that PAL was not aware of the true state of its finances at
the time it implemented the assailed massive retrenchment scheme. It
embarked on the mass dismissal without first undertaking a well-considered
study on the proposed retrenchment scheme. This view is underscored by
the fact that previously, PAL terminated the services of 140 probationary
cabin attendants, but rehired them almost immediately and even converted
their employment into permanent and regular, even as a massive
retrenchment was already looming in the horizon.
To prove that PAL was financially distressed, it could have submitted its
audited financial statements but it failed to present the same with the Labor
Arbiter. Instead, it narrated a litany of woes without offering any evidence to
show that they translated into specific and substantial losses that would
necessitate retrenchment, thus:
1. It is a matter of public knowledge that PAL had been suffering severe
financial losses that reached its most critical condition in 1998 when its
liabilities amounted to about P90,642,933,919.00, while its assets amounted
to only about P85,109,075,351.00. The precarious situation prompted PAL to
adopt cost-cutting measures to prevent it from becoming totally bankrupt,
including the reduction of its flight fleet from 56 to 14 aircrafts and the
retrenchment of unneeded employees.
xxxx
26. To save its business, PAL had every right to undergo a retrenchment
program immediately. PAL did not need, by law, to justify or explain to
FASAP the reasons for the retrenchment before it could implement it. Proof
of actual financial losses incurred by the company is not a condition sine qua
non for retrenchment.70
This bare and unilateral claim does not suffice. The Labor Arbiter’s finding
that PAL "amply satisfied the rules imposed by law and jurisprudence that
sustain retrenchment," is without basis, absent the presentation of
documentary evidence to that effect. In Saballa v. National Labor Relations
Commission,71 we ruled that where the decision of the Labor Arbiter did not
indicate the specific bases for such crucial finding that the employer was
suffering business reverses, the same was arbitrary. We ratiocinated therein
that since the employer insisted that its critical financial condition was the
central and pivotal reason for its retrenchment, there was no reason why it
should have neglected or refused to submit its audited financial statements.
PAL’s assertion – that its finances were gravely compromised as a result of
the 1997 Asian financial crisis and the pilots’ strike – lacks basis due to the
non-presentation of its audited financial statements to prove actual or
imminent losses. Also, the fact that PAL was placed under receivership did
not excuse it from submitting to the labor authorities copies of its audited
financial statements to prove the urgency, necessity and extent, of its
retrenchment program. PAL should have presented its audited financial
statements for the years immediately preceding and during which the
retrenchment was carried out. Law and jurisprudence require that alleged
losses or expected imminent losses must be proved by sufficient and
convincing evidence.
Likewise, PAL has not shown to the Court’s satisfaction that the pilots’ strike
had gravely affected its operations. It offered no proof to show the
correlation between the pilots’ strike and its alleged financial difficulties. In
Guerrero v. National Labor Relations Commission, 72 the Court held that
where the employer failed to prove its claim with competent evidence that
the employees’ strike paralyzed its operations and resulted in the
withdrawal of its clients’ orders, the retrenchment of its employees must be
declared illegal.73
Moreover, as the Court ruled in the case of EMCO Plywood Corporation, 74 it
must be shown that the employer resorted to other means but these proved
to be insufficient or inadequate, such as cost reduction, lesser investment on
raw materials, adjustment of the work routine to avoid scheduled power
failure, reduction of the bonuses and salaries of both management and
rank-and-file, improvement of manufacturing efficiency, and trimming of
marketing and advertising costs. In the instant case, there is no proof that
PAL engaged in cost-cutting measures other than a mere reduction in its
fleet of aircraft and the retrenchment of 5,000 of its personnel.
The only manifestation of PAL’s attempt at exhausting other possible
measures besides retrenchment was when it conducted negotiations and
consultations with FASAP which, however, ended nowhere. None of the
plans and suggestions taken up during the meetings was implemented. On
the other hand, PAL’s September 4, 1998 offer of shares of stock to its
employees was adopted belatedly, or only after its more than 1,400 cabin
crew personnel were retrenched. Besides, this offer can hardly be
considered to be borne of good faith, considering that it was premised on
the condition that, if accepted, all existing CBAs between PAL and its
employees would have to be suspended for 10 years. When the offer was
rejected by the employees, PAL ceased its operations on September 23,
1998. It only resumed business when the CBA suspension clause was ratified
by the employees in a referendum subsequently conducted. 75 Moreover, this
stock distribution scheme does not do away with PAL’s expenditures or
liabilities, since it has for its sole consideration the commitment to suspend
CBAs with its employees for 10 years. It did not improve the financial
standing of PAL, nor did it result in corporate savings, vis-à-vis the financial
difficulties it was suffering at the time.
Also, the claim that PAL saved P24 million monthly due to the
implementation of the retrenchment program does not prove anything; it
has not been shown to what extent or degree such savings benefited PAL,
vis-à-vis its total expenditures or its overall financial position. Likewise, its
claim that its liabilities reached P90 billion, while its assets amounted to P85
billion only – or a debt to asset ratio of more than 1:1 – may not readily be
believed, considering that it did not submit its audited financial statements.
All these allegations are self-serving evidence.
Interestingly, PAL submitted its audited financial statements only when the
case was the subject of certiorari proceedings in the Court of Appeals by
attaching in its Comment76 a copy of its consolidated audited financial
statements for the years 2002, 2003 and 2004. 77 However, these are not the
financial statements that would have shown PAL’s alleged precarious
position at the time it implemented the massive retrenchment scheme in
1998. PAL should have submitted its financial statements for the years 1997
up to 1999; and not for the years 2002 up to 2004 because these financial
statements cover a period markedly distant to the years in question, which
make them irrelevant and unacceptable.
Neither could PAL claim to suffer from imminent or resultant losses had it
not implemented the retrenchment scheme in 1998. It could not have
proved that retrenchment was necessary to prevent further losses, because
immediately thereafter – or in February 1999 78 – PAL was on the road to
recovery; this is the airline’s bare admission in its Comment to the instant
petition.79 During that period, it was recalling to duty cabin crew it had
previously retrenched. In March 2000, PAL declared a net income of P44.2
million. In March 2001, it reported a profit of P419 million. In March 2003, it
again registered a net income of P295 million. 80 All these facts are anathema
to a finding of financial difficulties.
Finally, what further belied PAL’s allegation that it was suffering from
substantial actual and imminent losses was the fact that in December 1998,
PAL submitted a "stand-alone" rehabilitation plan to the SEC, and on June 4,
1999, or less than a year after the retrenchment, the amount of US$200
million was invested directly into PAL by way of additional capital infusion
for its operations.81 These facts betray PAL’s claim that it was in dire financial
straits. By submitting a "stand-alone" rehabilitation plan, PAL acknowledged
that it could undertake recovery on its own and that it possessed enough
resources to weather the financial storm, if any.
Thus said, it was grave error for the Labor Arbiter, the NLRC and the Court of
Appeals, to have simply assumed that PAL was in grievous financial state,
without requiring the latter to substantiate such claim. It bears stressing that
in retrenchment cases, the presentation of proof of financial difficulties
through the required documents, preferably audited financial statements
prepared by independent auditors, may not summarily be done away with.
That FASAP admitted and took for granted the existence of PAL’s financial
woes cannot excuse the latter from proving to the Court’s satisfaction that
indeed it was bleeding financially. It was the airline’s obligation to prove that
it was in such financial distress; that it was necessary to implement an
appropriate retrenchment scheme; that it had to undergo a retrenchment
program in proportion to or commensurate with the extent of its financial
distress; and that, it was carrying out the scheme in good faith and without
undermining the security of tenure of its employees. The Court is mindful
that the characterization of an employee’s services as no longer necessary or
sustainable, and therefore, properly terminable, is an exercise of business
judgment on the part of the employer, and that the wisdom or soundness of
such characterization or decision is not subject to discretionary review,
provided of course that violation of law or arbitrary or malicious action is
not shown.82
The foregoing principle holds true with respect to PAL’s claim in its Comment
that the only issue is the manner by which its retrenchment scheme was
carried out because the validity of the scheme has been settled in its
favor.83Respondents might have confused the right to retrench with its
actual retrenchment program, treating them as one and the same. The first,
no doubt, is a valid prerogative of management; it is a right that exists for all
employers. As to the second, it is always subject to scrutiny in regard to
faithful compliance with substantive and procedural requirements which the
law and jurisprudence have laid down. The right of an employer to dismiss
an employee differs from and should not be confused with the manner in
which such right is exercised.84
FOURTH ELEMENT: That the employer exercises its prerogative to retrench
employees in good faith for the advancement of its interest and not to
defeat or circumvent the employees’ right to security of tenure.
Concededly, retrenchment to prevent losses is an authorized cause for
terminating employment and the decision whether to resort to such move
or not is a management prerogative. However, the right of an employer to
dismiss an employee differs from and should not be confused with the
manner in which such right is exercised. It must not be oppressive and
abusive since it affects one's person and property. 85
In Indino v. National Labor Relations Commission,86 the Court held that it is
almost an inflexible rule that employers who contemplate terminating the
services of their workers cannot be so arbitrary and ruthless as to find flimsy
excuses for their decisions. This must be so considering that the dismissal of
an employee from work involves not only the loss of his position but more
important, his means of livelihood. Applying this caveat, it is therefore
incumbent for the employer, before putting into effect any retrenchment
process on its work force, to show by convincing evidence that it was being
wrecked by serious financial problems. Simply declaring its state of
insolvency or its impending doom will not be sufficient. To do so would
render the security of tenure of workers and employees illusory. Any
employer desirous of ridding itself of its employees could then easily do so
without need to adduce proof in support of its action. We can not
countenance this. Security of tenure is a right guaranteed to employees and
workers by the Constitution and should not be denied on the basis of mere
speculation.
On the requirement that the prerogative to retrench must be exercised in
good faith, we have ruled that the hiring of new employees and subsequent
rehiring of "retrenched" employees constitute bad faith; 87 that the failure of
the employer to resort to other less drastic measures than retrenchment
seriously belies its claim that retrenchment was done in good faith to avoid
losses;88 and that the demonstrated arbitrariness in the selection of which of
its employees to retrench is further proof of the illegality of the employer’s
retrenchment program, not to mention its bad faith. 89
When PAL implemented Plan 22, instead of Plan 14, which was what it had
originally made known to its employees, it could not be said that it acted in
a manner compatible with good faith. It offered no satisfactory explanation
why it abandoned Plan 14; instead, it justified its actions of subsequently
recalling to duty retrenched employees by making it appear that it was a
show of good faith; that it was due to its good corporate nature that the
decision to consider recalling employees was made. The truth, however, is
that it was unfair for PAL to have made such a move; it was capricious and
arbitrary, considering that several thousand employees who had long been
working for PAL had lost their jobs, only to be recalled but assigned to lower
positions (i.e., demoted), and, worse, some as new hires, without due regard
for their long years of service with the airline.
The irregularity of PAL’s implementation of Plan 14 becomes more apparent
when it rehired 140 probationary cabin attendants whose services it had
previously terminated, and yet proceeded to terminate the services of its
permanent cabin crew personnel.
In sum, we find that PAL had implemented its retrenchment program in an
arbitrary manner and with evident bad faith, which prejudiced the tenurial
rights of the cabin crew personnel.
Moreover, the management’s September 4, 1998 offer to transfer PAL shares
of stock in the name of its employees in exchange for the latter’s
commitment to suspend all existing CBAs for 10 years; the closure of its
operations when the offer was rejected; and the resumption of its business
after the employees relented; all indicate that PAL had not acted in earnest
in regard to relations with its employees at the time.
FIFTH ELEMENT: That the employer used fair and reasonable criteria in
ascertaining who would be dismissed and who would be retained among the
employees, such as status, efficiency, seniority, physical fitness, age, and
financial hardship for certain workers.
In selecting employees to be dismissed, fair and reasonable criteria must be
used, such as but not limited to: (a) less preferred status (e.g., temporary
employee), (b) efficiency and (c) seniority. 90
In Villena v. National Labor Relations Commission, 91 the Court considered
seniority an important aspect for the validity of a retrenchment program. In
Philippine Tuberculosis Society, Inc. v. National Labor Union, 92 the Court held
that the implementation of a retrenchment scheme without taking seniority
into account rendered the retrenchment invalid, even as against factors such
as dependability, adaptability, trainability, job performance, discipline, and
attitude towards work.
In the implementation of its retrenchment scheme, PAL evaluated the cabin
crew personnel’s performance during the year preceding the retrenchment
(1997), based on the following set of criteria or rating variables found in the
Performance Evaluation Form of the cabin crew personnel’s Grooming and
Appearance Handbook:
A. INFLIGHT PROFICIENCY EVALUATION – 30%
B. JOB PERFORMANCE – 35%
· Special Award – +5
· Commendations – +2
· Appreciation – +1
· Disciplinary Actions – Reminder (-3), Warning/Admonition & Reprimands (-
5), Suspension (-20), Passenger Complaints (-30), Appearance (-10)
C. ATTENDANCE – 35%
· Perfect Attendance – +2
· Missed Assignment – -30
· Sick Leaves in excess of allotment and other leaves in excess of allotment –
-20
· Tardiness – -10 93
The appellate court held that there was no need for PAL to consult with
FASAP regarding standards or criteria that the airline would utilize in the
implementation of the retrenchment program; and that the criteria actually
used which was unilaterally formulated by PAL using its Performance
Evaluation Form in its Grooming and Appearance Handbook was reasonable
and fair. Indeed, PAL was not obligated to consult FASAP regarding the
standards it would use in evaluating the performance of the each cabin
crew. However, we do not agree with the findings of the appellate court that
the criteria utilized by PAL in the actual retrenchment were reasonable and
fair.
This Court has repeatedly enjoined employers to adopt and observe fair and
reasonable standards to effect retrenchment. This is of paramount
importance because an employer’s retrenchment program could be easily
justified considering the subjective nature of this requirement. The adoption
and implementation of unfair and unreasonable criteria could not easily be
detected especially in the retrenchment of large numbers of employees, and
in this aspect, abuse is a very distinct and real possibility. This is where labor
tribunals should exercise more diligence; this aspect is where they should
concentrate when placed in a position of having to judge an employer’s
retrenchment program.
Indeed, the NLRC made a detailed listing of the retrenchment scheme based
on the ICCD Masterank and Seniority 1997 Ratings. It found the following:
1. Number of employees retrenched due to inverse seniority rule and other
reasons -- 454
2. Number of employees retrenched due to excess sick leaves -- 299
3. Number of employees who were retrenched due to excess sick leave and
other reasons -- 61
4. Number of employees who were retrenched due to other reasons -- 107
5. Number of employees who were demoted -- 552
Total -- 1,473.94
Prominent from the above data is the retrenchment of cabin crew personnel
due to "other reasons" which, however, are not specifically stated and
shown to be for a valid cause. This is not allowed because it has no basis in
fact and in law.
Moreover, in assessing the overall performance of each cabin crew
personnel, PAL only considered the year 1997. This makes the evaluation of
each cabin attendant’s efficiency rating capricious and prejudicial to PAL
employees covered by it. By discarding the cabin crew personnel’s previous
years of service and taking into consideration only one year’s worth of job
performance for evaluation, PAL virtually did away with the concept of
seniority, loyalty and past efficiency, and treated all cabin attendants as if
they were on equal footing, with no one more senior than the other.
In sum, PAL’s retrenchment program is illegal because it was based on
wrongful premise (Plan 14, which in reality turned out to be Plan 22,
resulting in retrenchment of more cabin attendants than was necessary) and
in a set of criteria or rating variables that is unfair and unreasonable when
implemented. It failed to take into account each cabin attendant’s respective
service record, thereby disregarding seniority and loyalty in the evaluation of
overall employee performance.
Anent the claim of unfair labor practices committed against petitioner, we
find the same to be without basis. Article 261 of the Labor Code provides
that violations of a CBA, except those which are gross in character, shall no
longer be treated as unfair labor practice and shall be resolved as grievances
under the parties’ CBA. Moreover, "gross violations of CBA" under the same
Article referred to flagrant and/or malicious refusal to comply with the
economic provisions of such agreement, which is not the issue in the instant
case.1avvphi1
Also, we fail to see any specific instance of union busting, oppression or
harassment and similar acts of FASAP’s officers. The fact that majority of
FASAP’s officers were either retrenched or demoted does not prove restraint
or coercion in their right to organize. Instead, we see a simple retrenchment
scheme gone wrong for failure to abide by the stringent rules prescribed by
law, and a failure to discharge the employer’s burden of proof in such cases.
Quitclaims executed as a result of PAL’s illegal retrenchment program are
likewise annulled and set aside because they were not voluntarily entered
into by the retrenched employees; their consent was obtained by fraud or
mistake, as volition was clouded by a retrenchment program that was, at its
inception, made without basis. The law looks with disfavor upon quitclaims
and releases by employees pressured into signing by unscrupulous
employers minded to evade legal responsibilities. As a rule, deeds of release
or quitclaim cannot bar employees from demanding benefits to which they
are legally entitled or from contesting the legality of their dismissal. The
acceptance of those benefits would not amount to estoppel. The amounts
already received by the retrenched employees as consideration for signing
the quitclaims should, however, be deducted from their respective
monetary awards.95
In Trendline Employees Association-Southern Philippines Federation of motion for reconsideration, are REVERSED and SET ASIDE and a new one is
Labor v. NLRC,96 we held that where the employer led its employees to rendered:
believe that the employer was suffering losses and as a result thereof accept
1. FINDING respondent Philippine Airlines, Inc. GUILTY of illegal dismissal;
retrenchment by executing quitclaims and waivers, there was evident bad
faith on the part of the employer justifying the setting aside of the 2. ORDERING Philippine Air Lines, Inc. to reinstate the cabin crew personnel
quitclaims and waivers executed. who were covered by the retrenchment and demotion scheme of June 15,
As to PAL’s recall and rehire process (of retrenched cabin crew employees), 1998 made effective on July 15, 1998, without loss of seniority rights and
other privileges, and to pay them full backwages, inclusive of allowances
the same is likewise defective. Considering the illegality of the
retrenchment, it follows that the subsequent recall and rehire process is and other monetary benefits computed from the time of their separation up
to the time of their actual reinstatement, provided that with respect to
likewise invalid and without effect.
those who had received their respective separation pay, the amounts of
A corporate officer is not personally liable for the money claims of payments shall be deducted from their backwages. Where reinstatement is
discharged corporate employees unless he acted with evident malice and no longer feasible because the positions previously held no longer exist,
bad faith in terminating their employment. 97 We do not see how respondent respondent Corporation shall pay backwages plus, in lieu of reinstatement,
Patria Chiong may be held personally liable together with PAL, it appearing separation pay equal to one (1) month pay for every year of service;
that she was merely acting in accordance with what her duties required
3. ORDERING Philippine Airlines, Inc. to pay attorney’s fees equivalent to ten
under the circumstances. Being an Assistant Vice President for Cabin
Services of PAL, she takes direct orders from superiors, or those who are percent (10%) of the total monetary award.
charged with the formulation of the policies to be implemented. Costs against respondent PAL.
With respect to moral damages, we have time and again held that as a SO ORDERED.
general rule, a corporation cannot suffer nor be entitled to moral damages.
A corporation, being an artificial person and having existence only in legal
contemplation, has no feelings, no emotions, no senses; therefore, it cannot
experience physical suffering and mental anguish. Mental suffering can be
experienced only by one having a nervous system and it flows from real ills,
sorrows, and griefs of life – all of which cannot be suffered by an artificial,
juridical person.98 The Labor Arbiter’s award of moral damages was
therefore improper.

WHEREFORE, the instant petition is GRANTED. The assailed Decision of the

Court of Appeals in CA-G.R. SP No. 87956 dated August 23, 2006, which
affirmed the Decision of the NLRC setting aside the Labor Arbiter’s findings
of illegal retrenchment and its Resolution of May 29, 2007 denying the
 Ruben Serrano's complaint for illegal dismissal and denied his motion for
reconsideration. The facts are as follows:

Petitioner was hired by private respondent Isetann Department Store as a

security checker to apprehend shoplifters and prevent pilferage of
merchandise.1 Initially hired on October 4, 1984 on contractual basis,
petitioner eventually became a regular employee on April 4, 1985. In 1988,
he became head of the Security Checkers Section of private respondent. 2

Sometime in 1991, as a cost-cutting measure, private respondent decided to

phase out its entire security section and engage the services of an
independent security agency. For this reason, it wrote petitioner the
following memorandum:3

October 11, 1991

MR. RUBEN SERRANO

PRESENT

Dear Mr. Seranno,

In view of the retrenchment program of the company, we hereby reiterate

our verbal notice to you of your termination as Security Section Head
effective October 11, 1991.

G.R. No. 117040 January 27, 2000 Please secure your clearance from this office.

RUBEN SERRANO, petitioner, Very truly yours,

vs.
NATIONAL LABOR RELATIONS COMMISSION and ISETANN DEPARTMENT [Sgd.] TERESITA A. VILLANUEVA
STORE, respondents. Human Resources Division Manager

MENDOZA, J.:
This is a Petition seeking review of the resolutions, dated March 30, 1994
and August 26, 1994, of the National Labor Relations Commission (NLRC)
which reversed the decision of the Labor Arbiter and dismissed petitioner
The loss of his employment prompted petitioner to file a complaint on
December 3, 1991 for illegal dismissal, illegal layoff, unfair labor practice,
underpayment of wages, and nonpayment of salary and overtime pay. 4
The parties were required to submit their position papers, on the basis of
which the Labor Arbiter defined the issues as follows: 5
Whether or not there is a valid ground for the dismissal of the complainant.
Whether or not complainant is entitled to his monetary claims for
underpayment of wages, nonpayment of salaries, 13th month pay for 1991
and overtime pay.
Whether or not Respondent is guilty of unfair labor practice.
Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter
rendered a decision finding petitioner to have been illegally dismissed. He
ruled that private respondent failed to establish that it had retrenched its
security section to prevent or minimize losses to its business; that private
respondent failed to accord due process to petitioner; that private
respondent failed to use reasonable standards in selecting employees whose
employment would be terminated; that private respondent had not shown
that petitioner and other employees in the security section were so
inefficient so as to justify their replacement by a security agency, or that
"cost-saving devices [such as] secret video cameras (to monitor and prevent
shoplifting) and secret code tags on the merchandise" could not have been
employed; instead, the day after petitioner's dismissal, private respondent
employed a safety and security supervisor with duties and functions similar
to those of petitioner.1âwphi1.nêt
Accordingly, the Labor Arbiter ordered: 6
WHEREFORE, above premises considered, judgment is hereby decreed:
(a) Finding the dismissal of the complainant to be illegal and concomitantly,
Respondent is ordered to pay complainant full backwages without
qualification or deduction in the amount of P74,740.00 from the time of his
dismissal until reinstatement. (computed till promulgation only) based on his
monthly salary of P4,040.00/month at the time of his termination but
limited to (3) three years;
(b) Ordering the Respondent to immediately reinstate the complainant to
his former position as security section head or to a reasonably equivalent
supervisorial position in charges of security without loss of seniority rights,
privileges and benefits. This order is immediately executory even pending
appeal;
(c) Ordering the Respondent to pay complainant unpaid wages in the
amount of P2,020.73 and proportionate 13th month pay in the amount
of P3,198.30;
(d) Ordering the Respondent to pay complainant the amount of P7,995.91,
representing 10% attorney's fees based on the total judgment award
of P79,959.12.
All other claims of the complainant whether monetary or otherwise is
hereby dismissed for lack of merit.
SO ORDERED.
Private respondent appealed to the NLRC which, in its resolution of March
30, 1994; reversed the decision of the Labor Arbiter and ordered petitioner
to be given separation pay equivalent to one month pay for every year of
service, unpaid salary, and proportionate 13th month pay. Petitioner filed a
motion for reconsideration, but his motion was denied.
The NLRC held that the phase-out of private respondent's security section
and the hiring of an independent security agency constituted an exercise by
private respondent of "[a] legitimate business decision whose wisdom we do
not intend to inquire into and for which we cannot substitute our
judgment"; that the distinction made by the Labor Arbiter between
"retrenchment" and the employment of cost-saving devices" under Art. 283
of the Labor Code was insignificant because the company official who wrote
the dismissal letter apparently used the term "retrenchment" in its "plain
and ordinary sense: to layoff or remove from one's job, regardless of the
reason therefor"; that the rule of "reasonable criteria" in the selection of the
employees to be retrenched did not apply because all positions in the
security section had been abolished; and that the appointment of a safety
and security supervisor referred to by petitioner to prove bad faith on
private respondent's part was of no moment because the position had long
been in existence and was separate from petitioner's position as head of the
Security Checkers Section.
Hence this petition. Petitioner raises the following issue:
IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE
RESPONDENT TO REPLACE ITS CURRENT SECURITY SECTION A VALID
GROUND FOR THE DISMISSAL OF THE EMPLOYEES CLASSED UNDER THE
LATTER?7
Petitioner contends that abolition of private respondent's Security Checkers
Section and the employment of an independent security agency do not fall
under any of the authorized causes for dismissal under Art. 283 of the Labor
Code.
Petitioner Laid Off for Cause
Petitioner's contention has no merit. Art. 283 provides:
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 operations of the establishment or undertaking
unless the closing is for the purpose of circumventing the provisions of this
Title, by serving a written notice on the, workers and the Department 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 one (1) month pay or to at least one (1) month pay
for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of 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 at least 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 as one (1)
whole year.
In De Ocampo v. National Labor Relations Commission,8 this Court upheld
the termination of employment of three mechanics in a transportation
company and their replacement by a company rendering maintenance and
repair services. It held:
In contracting the services of Gemac Machineries, as part of the company's
cost-saving program, the services rendered by the mechanics became
redundant and superfluous, and therefore properly terminable. The
company merely exercised its business judgment or management
prerogative. And in the absence of any proof that the management abused
its discretion or acted in a malicious or arbitrary manner, the court will not
interfere with the exercise of such prerogative. 9
In Asian Alcohol Corporation v. National Labor Relations Commission,10 the
Court likewise upheld the termination of employment of water pump
tenders and their replacement by independent contractors. It ruled that an
employer's good faith in implementing a redundancy program is not
necessarily put in doubt by the availment of the services of an independent
contractor to replace the services of the terminated employees to promote
economy and efficiency.
Indeed, as we pointed out in another case, the "[management of a
company] cannot be denied the faculty of promoting efficiency and attaining
economy by a study of what units are essential for its operation. To it
belongs the ultimate determination of whether services should be
performed by its personnel or contracted to outside agencies . . . [While
there] should be mutual consultation, eventually deference is to be paid to
what management decides."11 Consequently, absent proof that management
acted in a malicious or arbitrary manner, the Court will not interfere with
the exercise of judgment by an employer. 12
In the case at bar, we have only the bare assertion of petitioner that, in
abolishing the security section, private respondent's real purpose was to
avoid payment to the security checkers of the wage increases provided in
the collective bargaining agreement approved in 1990. 13 Such an assertion is
not sufficient basis for concluding that the termination of petitioner's
employment was not a bona fide decision of management to obtain
reasonable return from its investment, which is a right guaranteed to
employers under the Constitution. 14 Indeed, that the phase-out of the
security section constituted a "legitimate business decision" is a factual
finding of an administrative agency which must be accorded respect and
even finality by this Court since nothing can be found in the record which
fairly detracts from such finding.15
Accordingly, we hold that the termination of petitioner's services was for an
authorized cause, i.e., redundancy. Hence, pursuant to Art. 283 of the Labor
Code, petitioner should be given separation pay at the rate of one month
pay for every year of service.
Sanctions for Violations of the Notice Requirement
Art. 283 also provides that to terminate the employment of an employee for
any of the authorized causes the employer must serve "a written notice on
the workers and the Department of Labor and Employment at least one (1)
month before the intended date thereof." In the case at bar, petitioner was
given a notice of termination on October 11, 1991. On the same day, his
services were terminated. He was thus denied his right to be given written
notice before the termination of his employment, and the question is the
appropriate sanction for the violation of petitioner's right.
To be sure, this is not the first time this question has arisen. In Subuguero v.
NLRC,16 workers in a garment factory were temporarily laid off due to the
cancellation of orders and a garment embargo. The Labor Arbiter found that
the workers had been illegally dismissed and ordered the company to pay
separation pay and backwages. The NLRC, on the other hand, found that this
was a case of retrenchment due to business losses and ordered the payment
of separation pay without backwages. This Court sustained the NLRC's
finding. However, as the company did not comply with the 30-day written
notice in Art. 283 of the Labor Code, the Court ordered the employer to pay
the workers P2,000.00 each as indemnity.
The decision followed the ruling in several cases involving dismissals which,
although based on any of the just causes under Art. 282, 17 were effected
without notice and hearing to the employee as required by the
implementing rules.18 As this Court said: "It is now settled that where the
dismissal of one employee is in fact for a just and valid cause and is so
proven to be but he is not accorded his right to due process, i.e., he was not
furnished the twin requirements of notice and opportunity to be heard, the
dismissal shall be upheld but the employer must be sanctioned for non-
compliance with the requirements of, or for failure to observe, due
process."19
The rule reversed a long standing policy theretofore followed that even
though the dismissal is based on a just cause or the termination of
employment is for an authorized cause, the dismissal or termination is illegal
if effected without notice to the employee. The shift in doctrine took place
in 1989 in Wenphil Corp. v. NLRC.20 In announcing the change, this Court
said:21
The Court holds that the policy of ordering the reinstatement to the service
of an employee without loss of seniority and the payment of his wages
during the period of his separation until his actual reinstatement but not
exceeding three (3) years without qualification or deduction, when it
appears he was not afforded due process, although his dismissal was found
to be for just and authorized cause in an appropriate proceeding in the
Ministry of Labor and Employment, should be re-examined. It will be highly
prejudicial to the interests of the employer to impose on him the services of
an employee who has been shown to be guilty of the charges that
warranted his dismissal from employment. Indeed, it will demoralize the
rank and file if the undeserving, if not undesirable, remains in the service.
xxx xxx xxx
However, the petitioner must nevertheless be held to account for failure to
extend to private respondent his right to an investigation before causing his
dismissal. The rule is explicit as above discussed. The dismissal of an
employee must be for just or authorized cause and after due process.
Petitioner committed an infraction of the second requirement. Thus, it must
be imposed a sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from
employment. Considering the circumstances of this case petitioner must
indemnify the private respondent the amount of P1,000.00. The measure of
this award depends on the facts of each case and the gravity of the omission
committed by the employer.
The fines imposed for violations of the notice requirement have varied from
P1,000.0022 to P2,000.0023 to P5,000.0024 to P10,000.00.25
Need for Reexamining the Wenphil Doctrine
Today, we once again consider the question of appropriate sanctions for
violations of the notice experience during the last decade or so with the
Wenphil doctrine. The number of cases involving dismissals without the
requisite notice to the employee, although effected for just or authorized
causes, suggest that the imposition of fine for violation of the notice
requirement has not been effective in deterring violations of the notice
requirement. Justice Panganiban finds the monetary sanctions "too
insignificant, too niggardly, and sometimes even too late." On the other
hand, Justice Puno says there has in effect been fostered a policy of "dismiss
now; pay later" which moneyed employers find more convenient to comply
with than the requirement to serve a 30-day written notice (in the case of
termination of employment for an authorized cause under Arts. 283-284) or
to give notice and hearing (in the case of dismissals for just causes under
Art. 282).
For this reason, they regard any dismissal or layoff without the requisite
notice to be null and void even though there are just or authorized cause for
such dismissal or layoff. Consequently, in their view, the employee
concerned should be reinstated and paid backwages.
Validity of Petitioner's Layoff Not Affected by Lack of Notice
We agree with our esteemed colleagues, Justices Puno and Panganiban, that
we should rethink the sanction of fine for an employer's disregard of the
notice requirement. We do not agree, however, that disregard of this
requirement by an employer renders the dismissal or termination of
employment null and void. Such a stance is actually a reversion to the
discredited pre-Wenphil rule of ordering an employee to be reinstated and
paid backwages when it is shown that he has not been given notice and
hearing although his dismissal or layoff is later found to be for a just or
authorized cause. Such rule was abandoned in Wenphil because it is really
unjust to require an employer to keep in his service one who is guilty, for
example, of an attempt on the life of the employer or the latter's family, or
when the employer is precisely retrenching in order to prevent losses.
The need is for a rule which, while recognizing the employee's right to
notice before he is dismissed or laid off, at the same time acknowledges the
right of the employer to dismiss for any of the just causes enumerated in
Art. 282 or to terminate employment for any of the authorized causes
mentioned in Arts. 283-284. If the Wenphil rule imposing a fine on an
employer who is found to have dismissed an employee for cause without
prior notice is deemed ineffective in deterring employer violations of the
notice requirement, the remedy is not to declare the dismissal void if there
are just or valid grounds for such dismissal or if the termination is for an
authorized cause. That would be to uphold the right of the employee but
deny the right of the employer to dismiss for cause. Rather, the remedy is to
order the payment to the employee of full backwages from the time of his
dismissal until the court finds that the dismissal was for a just cause. But,
otherwise, his dismissal must be upheld and he should not be reinstated.
This is because his dismissal is ineffectual.
For the same reason, if an employee is laid off for any of the causes in Arts.
283-284, i.e., installation of a labor-saving device, but the employer did not
give him and the DOLE a 30-day written notice of termination in advance,
then the termination of his employment should be considered ineffectual
and he should be paid backwages. However, the termination of his
employment should not be considered void but he should simply be paid
separation pay as provided in Art. 283 in addition to backwages.
Justice Puno argues that an employer's failure to comply with the notice
requirement constitutes a denial of the employee's right to due process.
Prescinding from this premise, he quotes the statement of Chief Justice
Concepcion Vda. de Cuaycong v. Vda. de Sengbengco 26 that "acts of
Congress, as well as of the Executive, can deny due process only under the
pain of nullity, and judicial proceedings suffering from the same flaw are
subject to the same sanction, any statutory provision to the contrary
notwithstanding." Justice Puno concludes that the dismissal of an employee
without notice and hearing, even if for a just cause, as provided in Art. 282,
or for an authorized cause, as provided in Arts. 283-284, is a nullity. Hence,
even if just or authorized cause exist, the employee should be reinstated
with full back pay. On the other hand, Justice Panganiban quotes from the
statement in People v. Bocar27 that "[w]here the denial of the fundamental
right of due process is apparent, a decision rendered in disregard of that
right is void for lack of jurisdiction."
Violation of Notice Requirement Not a Denial of Due Process
The cases cited by both Justices Puno and Panganiban refer, however, to the
denial of due process by the State, which is not the case here. There are
three reasons why, on the other hand, violation by the employer of the
notice requirement cannot be considered a denial of due process resulting
in the nullity of the employee's dismissal or layoff.
The first is that the Due Process Clause of the Constitution is a limitation on
governmental powers. It does not apply to the exercise of private power,
such as the termination of employment under the Labor Code. This is plain
from the text of Art. III, §1 of the Constitution, viz.: "No person shall be
deprived of life, liberty, or property without due process of law. . . ." The
reason is simple: Only the State has authority to take the life, liberty, or
property of the individual. The purpose of the Due Process Clause is to
ensure that the exercise of this power is consistent with what are considered
civilized methods.
The second reason is that notice and hearing are required under the Due
Process Clause before the power of organized society are brought to bear
upon the individual. This is obviously not the case of termination of
employment under Art. 283. Here the employee is not faced with an aspect
of the adversary system. The purpose for requiring a 30-day written notice
before an employee is laid off is not to afford him an opportunity to be
heard on any charge against him, for there is none. The purpose rather is to
give him time to prepare for the eventual loss of his job and the DOLE an
opportunity to determine whether economic causes do exist justifying the
termination of his employment.
Even in cases of dismissal under Art. 282, the purpose for the requirement
of notice and hearing is not to comply with Due Process Clause of the
Constitution. The time for notice and hearing is at the trial stage. Then that
is the time we speak of notice and hearing as the essence of procedural due
process. Thus, compliance by the employer with the notice requirement
before he dismisses an employee does not foreclose the right of the latter to
question the legality of his dismissal. As Art. 277(b) provides, "Any decision
taken by the employer shall be without prejudice to the right of the worker
to contest the validity or legality of his dismissal by filing a complaint with
the regional branch of the National Labor Relations Commission."
Indeed, to contend that the notice requirement in the Labor Code is an
aspect of due process is to overlook the fact that Art. 283 had its origin in
Art. 302 of the Spanish Code of Commerce of 1882 which gave either party
to the employer-employee relationship the right to terminate their
relationship by giving notice to the other one month in advance. In lieu of
notice, an employee could be laid off by paying him a mesada equivalent to
his salary for one month. 28 This provision was repealed by Art. 2270 of the
Civil Code, which took effect on August 30, 1950. But on June 12, 1954, R.A.
No. 1052, otherwise known as the Termination Pay Law, was enacted
reviving the mesada. On June 21, 1957, the law was amended by R.A. No.
1787 providing for the giving of advance notice or the payment of
compensation at the rate of one-half month for every year of service. 29
The Termination Pay Law was held not to be a substantive law but a
regulatory measure, the purpose of which was to give the employer the
opportunity to find a replacement or substitute, and the employee the equal
opportunity to look for another job or source of employment. Where the
termination of employment was for a just cause, no notice was required to
be given to the, employee. 30 It was only on September 4, 1981 that notice
was required to be given even where the dismissal or termination of an
employee was for cause. This was made in the rules issued by the then
Minister of Labor and Employment to implement B.P. Blg. 130 which
amended the Labor Code. And it was still much later when the notice
requirement was embodied in the law with the amendment of Art. 277(b)
by R.A. No. 6715 on March 2, 1989. It cannot be that the former regime
denied due process to the employee. Otherwise, there should now likewise
be a rule that, in case an employee leaves his job without cause and without
prior notice to his employer, his act should be void instead of simply making
him liable for damages.
The third reason why the notice requirement under Art. 283 can not be
considered a requirement of the Due Process Clause is that the employer
cannot really be expected to be entirely an impartial judge of his own cause.
This is also the case in termination of employment for a just cause under
Art. 282 (i.e., serious misconduct or willful disobedience by the employee of
the lawful orders of the employer, gross and habitual neglect of duties, fraud
or willful breach of trust of the employer, commission of crime against the
employer or the latter's immediate family or duly authorized
representatives, or other analogous cases).
Justice Puno disputes this. He says that "statistics in the DOLE will prove that
many cases have been won by employees before the grievance committees
manned by impartial judges of the company." The grievance machinery is,
however, different because it is established by agreement of the employer
and the employees and composed of representatives from both sides. That
is why, in Batangas Laguna Tayabas Bus Co. ·v. Court of Appeals,31 which
Justice Puno cites, it was held that "Since the right of [an employee] to his
labor is in itself a property and that the labor agreement between him and
[his employer] is the law between the parties, his summary and arbitrary
dismissal amounted to deprivation of his property without due process of
law." But here we are dealing with dismissals and layoffs by employers
alone, without the intervention of any grievance machinery. Accordingly
in Montemayor v. Araneta University Foundation,32 although a professor was
dismissed without a hearing by his university, his dismissal for having made
homosexual advances on a student was sustained, it appearing that in the
NLRC, the employee was fully heard in his defense.
Lack of Notice Only Makes Termination Ineffectual
Not all notice requirements are requirements of due process. Some are
simply part of a procedure to be followed before a right granted to a party
can be exercised. Others are simply an application of the Justinian precept,
embodied in the Civil Code,33 to act with justice, give everyone his due, and
observe honesty and good faith toward one's fellowmen. Such is the notice
requirement in Arts. 282-283. The consequence of the failure either of the
employer or the employee to live up to this precept is to make him liable in
damages, not to render his act (dismissal or resignation, as the case may be)
void. The measure of damages is the amount of wages the employee should
have received were it not for the termination of his employment without
prior notice. If warranted, nominal and moral damages may also be
awarded.
We hold, therefore, that, with respect to Art. 283 of the Labor Code, the
employer's failure to comply with the notice requirement does not
constitute a denial of due process but a mere failure to observe a procedure
for the termination of employment which makes the termination of
employment merely ineffectual. It is similar to the failure to observe the
provisions of Art. 1592, in relation to Art. 1191, of the Civil Code 34 in
rescinding a contract for the sale of immovable property. Under these
provisions, while the power of a party to rescind a contract is implied in
reciprocal obligations, nonetheless, in cases involving the sale of immovable
property, the vendor cannot exercise this power even though the vendee
defaults in the payment of the price, except by bringing an action in court or
giving notice of rescission by means of a notarial demand. 35 Consequently, a
notice of rescission given in the letter of an attorney has no legal effect, and
the vendee can make payment even after the due date since no valid notice
of rescission has been given.36
Indeed, under the Labor Code, only the absence of a just cause for the
termination of employment can make the dismissal of an employee illegal.
This is clear from Art. 279 which provides:
Security of Tenure. — In cases of regular employment, the employer shall
not terminate the services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissedfrom work
shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement.37
Thus, only if the termination of employment is not for any of the causes
provided by law is it illegal and, therefore, the employee should be
reinstated and paid backwages. To contend, as Justices Puno and
Panganiban do, that even if the termination is for a just or authorized cause
the employee concerned should be reinstated and paid backwages would be
to amend Art. 279 by adding another ground for considering a dismissal
illegal. What is more, it would ignore the fact that under Art. 285, if it is the
employee who fails to give a written notice to the employer that he is
leaving the service of the latter, at least one month in advance, his failure to
comply with the legal requirement does not result in making his resignation
void but only in making him liable for damages. 38 This disparity in legal
treatment, which would result from the adoption of the theory of the
minority cannot simply be explained by invoking resident Ramon
Magsaysay's motto that "he who has less in life should have more in law."
That would be a misapplication of this noble phrase originally from Professor
Thomas Reed Powell of the Harvard Law School.
Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,39 in support of his
view that an illegal dismissal results not only from want of legal cause but
also from the failure to observe "due process." The Pepsi-Cola case actually
involved a dismissal for an alleged loss of trust and confidence which, as
found by the Court, was not proven. The dismissal was, therefore, illegal, not
because there was a denial of due process, but because the dismissal was
without cause. The statement that the failure of management to comply
with the notice requirement "taints the dismissal with illegality" was merely
a dictum thrown in as additional grounds for holding the dismissal to be
illegal.
Given the nature of the violation, therefore, the appropriate sanction for the
failure to give notice is the payment of backwages for the period when the
employee is considered not to have been effectively dismissed or his
employment terminated. The sanction is not the payment alone of nominal
damages as Justice Vitug contends.
Unjust Results of Considering Dismissals/Layoffs Without Prior Notice As
Illegal
The refusal to look beyond the validity of the initial action taken by the
employer to terminate employment either for an authorized or just cause
can result in an injustice to the employer. For not giving notice and hearing
before dismissing an employee, who is otherwise guilty of, say, theft, or even
of an attempt against the life of the employer, an employer will be forced to
keep in his employ such guilty employee. This is unjust.
It is true the Constitution regards labor as "a primary social economic
force."40 But so does it declare that it "recognizes the indispensable role of
the private sector, encourages private enterprise, and provides incentives to
needed investment."41 The Constitution bids the State to "afford full
protection to labor."42 But it is equally true that "the law, in protecting the
right's of the laborer, authorizes neither oppression nor self-destruction of
the employer."43 And it is oppression to compel the employer to continue in
employment one who is guilty or to force the employer to remain in
operation when it is not economically in his interest to do so.
In sum, we hold that if in proceedings for reinstatement under Art. 283, it is
shown that the termination of employment was due to an authorized cause,
then the employee concerned should not be ordered reinstated even
though there is failure to comply with the 30-day notice requirement.
Instead, he must be granted separation pay in accordance with Art. 283, to SO ORDERED.
wit:

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 month for
every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of service, whichever is higher.
A fraction of at least six months shall be considered one (1) whole year.

If the employee's separation is without cause, instead of being given

separation pay, he should be reinstated. In either case, whether he is
reinstated or only granted separation pay, he should be paid full backwages
if he has been laid off without written notice at least 30 days in advance.

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

WHEREFORE, the petition is GRANTED and the resolution of the National

Labor Relations Commission is MODIFIED by ordering private respondent
Isetann Department Store, Inc. to pay petitioner separation pay equivalent
to one (1) month pay for every year of service, his unpaid salary, and his
proportionate 13th month pay and, in addition, full backwages from the
time his employment was terminated on October 11, 1991 up to the time
the decision herein becomes final. For this purpose, this case is REMANDED
to the Labor Arbiter for computation of the separation pay, backwages, and
other monetary awards to petitioner.
 YNARES-SANTIAGO, J.:

This petition for review seeks to reverse the decision 1 of the Court of
Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, modifying the
decision of National Labor Relations Commission (NLRC) in NLRC-NCR Case
No. 023442-00.

Private respondent Riviera Home Improvements, Inc. is engaged in the

business of selling and installing ornamental and construction materials. It
employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board
and cornice installers on January 2, 1992 2 until February 23, 1999 when they
were dismissed for abandonment of work.

Petitioners then filed a complaint for illegal dismissal and payment of money
claims3 and on December 28, 1999, the Labor Arbiter rendered a decision
declaring the dismissals illegal and ordered private respondent to pay the
monetary claims. The dispositive portion of the decision states:

WHEREFORE, premises considered, We find the termination of the

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

1. Jenny M. Agabon - P56, 231.93

G.R. No. 158693 November 17, 2004 2. Virgilio C. Agabon - 56, 231.93

JENNY M. AGABON and VIRGILIO C. AGABON, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME
IMPROVEMENTS, INC. and VICENTE ANGELES, respondents.
DECISION
and, in lieu of reinstatement to pay them their separation pay of one (1)
month for every year of service from date of hiring up to November 29,
1999.
Respondent is further ordered to pay the complainants their holiday pay and
service incentive leave pay for the years 1996, 1997 and 1998 as well as
their premium pay for holidays and rest days and Virgilio Agabon's 13th
month pay differential amounting to TWO THOUSAND ONE HUNDRED FIFTY
(P2,150.00) Pesos, or the aggregate amount of ONE HUNDRED TWENTY ONE
THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for
Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT
HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon,
as per attached computation of Julieta C. Nicolas, OIC, Research and
Computation Unit, NCR.
SO ORDERED.4
On appeal, the NLRC reversed the Labor Arbiter because it found that the
petitioners had abandoned their work, and were not entitled to backwages
and separation pay. The other money claims awarded by the Labor Arbiter
were also denied for lack of evidence.5
Upon denial of their motion for reconsideration, petitioners filed a petition
for certiorari with the Court of Appeals.
The Court of Appeals in turn ruled that the dismissal of the petitioners was
not illegal because they had abandoned their employment but ordered the
payment of money claims. The dispositive portion of the decision reads:
WHEREFORE, the decision of the National Labor Relations Commission is
REVERSED only insofar as it dismissed petitioner's money claims. Private
respondents are ordered to pay petitioners holiday pay for four (4) regular
holidays in 1996, 1997, and 1998, as well as their service incentive leave pay
for said years, and to pay the balance of petitioner Virgilio Agabon's 13th
month pay for 1998 in the amount of P2,150.00.
SO ORDERED.6
Hence, this petition for review on the sole issue of whether petitioners were
illegally dismissed.7
Petitioners assert that they were dismissed because the private respondent
refused to give them assignments unless they agreed to work on
a "pakyaw" basis when they reported for duty on February 23, 1999. They
did not agree on this arrangement because it would mean losing benefits as
Social Security System (SSS) members. Petitioners also claim that private
respondent did not comply with the twin requirements of notice and
hearing.8
Private respondent, on the other hand, maintained that petitioners were not
dismissed but had abandoned their work. 9 In fact, private respondent sent
two letters to the last known addresses of the petitioners advising them to
report for work. Private respondent's manager even talked to petitioner
Virgilio Agabon by telephone sometime in June 1999 to tell him about the
new assignment at Pacific Plaza Towers involving 40,000 square meters of
cornice installation work. However, petitioners did not report for work
because they had subcontracted to perform installation work for another
company. Petitioners also demanded for an increase in their wage to
P280.00 per day. When this was not granted, petitioners stopped reporting
for work and filed the illegal dismissal case.10
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC
are accorded not only respect but even finality if the findings are supported
by substantial evidence. This is especially so when such findings were
affirmed by the Court of Appeals.11 However, if the factual findings of the
NLRC and the Labor Arbiter are conflicting, as in this case, the reviewing
court may delve into the records and examine for itself the questioned
findings.12
Accordingly, the Court of Appeals, after a careful review of the facts, ruled
that petitioners' dismissal was for a just cause. They had abandoned their
employment and were already working for another employer.
To dismiss an employee, the law requires not only the existence of a just and
valid cause but also enjoins the employer to give the employee the
opportunity to be heard and to defend himself. 13 Article 282 of the Labor
Code enumerates the just causes for termination by the employer: (a)
serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or the latter's representative in connection with the
employee's work; (b) gross and habitual neglect by the employee of his
duties; (c) fraud or willful breach by the employee of the trust reposed in
him by his employer or his duly authorized representative; (d) commission of
a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representative;
and (e) other causes analogous to the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to
resume his employment.14 It is a form of neglect of duty, hence, a just cause
for termination of employment by the employer. 15 For a valid finding of
abandonment, these two factors should be present: (1) the failure to report
for work or absence without valid or justifiable reason; and (2) a clear
intention to sever employer-employee relationship, with the second as the
more determinative factor which is manifested by overt acts from which it
may be deduced that the employees has no more intention to work. The
intent to discontinue the employment must be shown by clear proof that it
was deliberate and unjustified.16
In February 1999, petitioners were frequently absent having subcontracted
for an installation work for another company. Subcontracting for another
company clearly showed the intention to sever the employer-employee
relationship with private respondent. This was not the first time they did
this. In January 1996, they did not report for work because they were
working for another company. Private respondent at that time warned
petitioners that they would be dismissed if this happened again. Petitioners
disregarded the warning and exhibited a clear intention to sever their
employer-employee relationship. The record of an employee is a relevant
consideration in determining the penalty that should be meted out to him. 17
In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately
absented from work without leave or permission from his employer, for the
purpose of looking for a job elsewhere, is considered to have abandoned his
job. We should apply that rule with more reason here where petitioners
were absent because they were already working in another company.
The law imposes many obligations on the employer such as providing just
compensation to workers, observance of the procedural requirements of
notice and hearing in the termination of employment. On the other hand,
the law also recognizes the right of the employer to expect from its workers
not only good performance, adequate work and diligence, but also good
conduct19 and loyalty. The employer may not be compelled to continue to
employ such persons whose continuance in the service will patently be
inimical to his interests.20
After establishing that the terminations were for a just and valid cause, we
now determine if the procedures for dismissal were observed.
The procedure for terminating an employee is found in Book VI, Rule I,
Section 2(d) of the Omnibus Rules Implementing the Labor Code:
Standards of due process: requirements of notice. – In all cases of
termination of employment, the following standards of due process shall be
substantially observed:
I. For termination of employment based on just causes as defined in Article
282 of the Code:
(a) A written notice served on the employee specifying the ground or
grounds for termination, and giving to said employee reasonable
opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to
respond to the charge, present his evidence or rebut the evidence presented
against him; and
(c) A written notice of termination served on the employee indicating that
upon due consideration of all the circumstances, grounds have been
established to justify his termination.
In case of termination, the foregoing notices shall be served on the
employee's last known address.
Dismissals based on just causes contemplate acts or omissions attributable
to the employee while dismissals based on authorized causes involve
grounds under the Labor Code which allow the employer to terminate
employees. A termination for an authorized cause requires payment of
separation pay. When the termination of employment is declared illegal,
reinstatement and full backwages are mandated under Article 279. If
reinstatement is no longer possible where the dismissal was unjust,
separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282,
the employer must give the employee two written notices and a hearing or
opportunity to be heard if requested by the employee before terminating
the employment: a notice specifying the grounds for which dismissal is
sought a hearing or an opportunity to be heard and after hearing or
opportunity to be heard, a notice of the decision to dismiss; and (2) if the
dismissal is based on authorized causes under Articles 283 and 284, the
employer must give the employee and the Department of Labor and
Employment written notices 30 days prior to the effectivity of his separation.
From the foregoing rules four possible situations may be derived: (1) the
dismissal is for a just cause under Article 282 of the Labor Code, for an
authorized cause under Article 283, or for health reasons under Article 284,
and due process was observed; (2) the dismissal is without just or
authorized cause but due process was observed; (3) the dismissal is without
just or authorized cause and there was no due process; and (4) the dismissal
is for just or authorized cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer
will not suffer any liability.
In the second and third situations where the dismissals are illegal, Article
279 mandates that the employee is entitled to reinstatement without loss of
seniority rights and other privileges and full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed from
the time the compensation was not paid up to the time of actual
reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural
infirmity cannot be cured, it should not invalidate the dismissal. However,
the employer should be held liable for non-compliance with the procedural
requirements of due process.
The present case squarely falls under the fourth situation. The dismissal
should be upheld because it was established that the petitioners abandoned
their jobs to work for another company. Private respondent, however, did
not follow the notice requirements and instead argued that sending notices
to the last known addresses would have been useless because they did not
reside there anymore. Unfortunately for the private respondent, this is not a
valid excuse because the law mandates the twin notice requirements to the
employee's last known address.21 Thus, it should be held liable for non-
compliance with the procedural requirements of due process.
A review and re-examination of the relevant legal principles is appropriate
and timely to clarify the various rulings on employment termination in the
light of Serrano v. National Labor Relations Commission.22
Prior to 1989, the rule was that a dismissal or termination is illegal if the
employee was not given any notice. In the 1989 case of Wenphil Corp. v.
National Labor Relations Commission,23 we reversed this long-standing rule
and held that the dismissed employee, although not given any notice and
hearing, was not entitled to reinstatement and backwages because the
dismissal was for grave misconduct and insubordination, a just ground for
termination under Article 282. The employee had a violent temper and
caused trouble during office hours, defying superiors who tried to pacify
him. We concluded that reinstating the employee and awarding backwages
"may encourage him to do even worse and will render a mockery of the
rules of discipline that employees are required to observe." 24 We further
held that:
Under the circumstances, the dismissal of the private respondent for just
cause should be maintained. He has no right to return to his former
employment.
However, the petitioner must nevertheless be held to account for failure to
extend to private respondent his right to an investigation before causing his
dismissal. The rule is explicit as above discussed. The dismissal of an
employee must be for just or authorized cause and after due process.
Petitioner committed an infraction of the second requirement. Thus, it must
be imposed a sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from
employment. Considering the circumstances of this case petitioner must
indemnify the private respondent the amount of P1,000.00. The measure of
this award depends on the facts of each case and the gravity of the omission
committed by the employer.25
The rule thus evolved: where the employer had a valid reason to dismiss an
employee but did not follow the due process requirement, the dismissal
may be upheld but the employer will be penalized to pay an indemnity to
the employee. This became known as the Wenphil or Belated Due Process
Rule.
On January 27, 2000, in Serrano, the rule on the extent of the sanction was
changed. We held that the violation by the employer of the notice
requirement in termination for just or authorized causes was not a denial of
due process that will nullify the termination. However, the dismissal is
ineffectual and the employer must pay full backwages from the time of
termination until it is judicially declared that the dismissal was for a just or
authorized cause.
The rationale for the re-examination of the Wenphil doctrine in Serrano was
the significant number of cases involving dismissals without requisite
notices. We concluded that the imposition of penalty by way of damages for
violation of the notice requirement was not serving as a deterrent. Hence,
we now required payment of full backwages from the time of dismissal until
the time the Court finds the dismissal was for a just or authorized cause.
Serrano was confronting the practice of employers to "dismiss now and pay
later" by imposing full backwages.
We believe, however, that the ruling in Serrano did not consider the full
meaning of Article 279 of the Labor Code which states:
ART. 279. Security of Tenure. – In cases of regular employment, the
employer shall not terminate the services of an employee except for a just
cause or when authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the
time of his actual reinstatement.
This means that the termination is illegal only if it is not for any of the
justified or authorized causes provided by law. Payment of backwages and
other benefits, including reinstatement, is justified only if the employee was
unjustly dismissed.
The fact that the Serrano ruling can cause unfairness and injustice which
elicited strong dissent has prompted us to revisit the doctrine.
To be sure, the Due Process Clause in Article III, Section 1 of the Constitution
embodies a system of rights based on moral principles so deeply imbedded
in the traditions and feelings of our people as to be deemed fundamental to
a civilized society as conceived by our entire history. Due process is that
which comports with the deepest notions of what is fair and right and
just.26 It is a constitutional restraint on the legislative as well as on the
executive and judicial powers of the government provided by the Bill of
Rights.
Due process under the Labor Code, like Constitutional due process, has two
aspects: substantive, i.e., the valid and authorized causes of employment
termination under the Labor Code; and procedural, i.e., the manner of
dismissal. Procedural due process requirements for dismissal are found in
the Implementing Rules of P.D. 442, as amended, otherwise known as the
Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by
Department Order Nos. 9 and 10. 27 Breaches of these due
process requirements violate the Labor Code. Therefore statutory due
process should be differentiated from failure to comply with constitutional
due process.
Constitutional due process protects the individual from the government and
assures him of his rights in criminal, civil or administrative proceedings;
while statutory due process found in the Labor Code and Implementing
Rules protects employees from being unjustly terminated without just cause
after notice and hearing.
In Sebuguero v. National Labor Relations Commission,28 the dismissal was for
a just and valid cause but the employee was not accorded due process. The
dismissal was upheld by the Court but the employer was sanctioned. The
sanction should be in the nature of indemnification or penalty, and depends
on the facts of each case and the gravity of the omission committed by the
employer.
In Nath v. National Labor Relations Commission,29 it was ruled that even if
the employee was not given due process, the failure did not operate to
eradicate the just causes for dismissal. The dismissal being for just
cause,albeit without due process, did not entitle the employee to
reinstatement, backwages, damages and attorney's fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services,
Inc. v. National Labor Relations Commission,30 which opinion he reiterated
in Serrano, stated:
C. Where there is just cause for dismissal but due process has not been
properly observed by an employer, it would not be right to order either the
reinstatement of the dismissed employee or the payment of backwages to
him. In failing, however, to comply with the procedure prescribed by law in
terminating the services of the employee, the employer must be deemed to
have opted or, in any case, should be made liable, for the payment of
separation pay. It might be pointed out that the notice to be given and the
hearing to be conducted generally constitute the two-part due process
requirement of law to be accorded to the employee by the employer.
Nevertheless, peculiar circumstances might obtain in certain situations
where to undertake the above steps would be no more than a useless
formality and where, accordingly, it would not be imprudent to apply the res
ipsa loquitur rule and award, in lieu of separation pay, nominal damages to
the employee. x x x.31
After carefully analyzing the consequences of the divergent doctrines in the
law on employment termination, we believe that in cases involving
dismissals for cause but without observance of the twin requirements of
notice and hearing, the better rule is to abandon the Serrano doctrine and
to follow Wenphil by holding that the dismissal was for just cause but
imposing sanctions on the employer. Such sanctions, however, must be
stiffer than that imposed in Wenphil. By doing so, this Court would be able
to achieve a fair result by dispensing justice not just to employees, but to
employers as well.
The unfairness of declaring illegal or ineffectual dismissals for valid or
authorized causes but not complying with statutory due process may have
far-reaching consequences.
This would encourage frivolous suits, where even the most notorious
violators of company policy are rewarded by invoking due process. This also
creates absurd situations where there is a just or authorized cause for
dismissal but a procedural infirmity invalidates the termination. Let us take
for example a case where the employee is caught stealing or threatens the
lives of his co-employees or has become a criminal, who has fled and cannot
be found, or where serious business losses demand that operations be
ceased in less than a month. Invalidating the dismissal would not serve
public interest. It could also discourage investments that can generate
employment in the local economy.
The constitutional policy to provide full protection to labor is not meant to
be a sword to oppress employers. The commitment of this Court to the
cause of labor does not prevent us from sustaining the employer when it is
in the right, as in this case.32 Certainly, an employer should not be compelled
to pay employees for work not actually performed and in fact abandoned.
The employer should not be compelled to continue employing a person who
is admittedly guilty of misfeasance or malfeasance and whose continued
employment is patently inimical to the employer. The law protecting the
rights of the laborer authorizes neither oppression nor self-destruction of
the employer. 33
It must be stressed that in the present case, the petitioners committed a
grave offense, i.e., abandonment, which, if the requirements of due process
were complied with, would undoubtedly result in a valid dismissal.
An employee who is clearly guilty of conduct violative of Article 282 should
not be protected by the Social Justice Clause of the Constitution. Social
justice, as the term suggests, should be used only to correct an injustice. As
the eminent Justice Jose P. Laurel observed, social justice must be founded
on the recognition of the necessity of interdependence among diverse units
of a society and of the protection that should be equally and evenly
extended to all groups as a combined force in our social and economic life,
consistent with the fundamental and paramount objective of the state of
promoting the health, comfort, and quiet of all persons, and of bringing
about "the greatest good to the greatest number." 34
This is not to say that the Court was wrong when it ruled the way it did
in Wenphil, Serrano and related cases. Social justice is not based on rigid
formulas set in stone. It has to allow for changing times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced approach
to labor-management relations and dispense justice with an even hand in
every case:
We have repeatedly stressed that social justice – or any justice for that
matter – is for the deserving, whether he be a millionaire in his mansion or a
pauper in his hovel. It is true that, in case of reasonable doubt, we are to tilt
the balance in favor of the poor to whom the Constitution fittingly extends
its sympathy and compassion. But never is it justified to give preference to
the poor simply because they are poor, or reject the rich simply because
they are rich, for justice must always be served for the poor and the rich
alike, according to the mandate of the law. 35
Justice in every case should only be for the deserving party. It should not be
presumed that every case of illegal dismissal would automatically be
decided in favor of labor, as management has rights that should be fully
respected and enforced by this Court. As interdependent and indispensable
partners in nation-building, labor and management need each other to
foster productivity and economic growth; hence, the need to weigh and
balance the rights and welfare of both the employee and employer.
Where the dismissal is for a just cause, as in the instant case, the lack of
statutory due process should not nullify the dismissal, or render it illegal, or
ineffectual. However, the employer should indemnify the employee for the
violation of his statutory rights, as ruled in Reta v. National Labor Relations
Commission.36 The indemnity to be imposed should be stiffer to discourage
the abhorrent practice of "dismiss now, pay later," which we sought to deter
in the Serrano ruling. The sanction should be in the nature of
indemnification or penalty and should depend on the facts of each case,
taking into special consideration the gravity of the due process violation of
the employer.
Under the Civil Code, nominal damages is adjudicated in order that a right of
the plaintiff, which has been violated or invaded by the defendant, may be
vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.37
As enunciated by this Court in Viernes v. National Labor Relations
Commissions,38 an employer is liable to pay indemnity in the form of
nominal damages to an employee who has been dismissed if, in effecting
such dismissal, the employer fails to comply with the requirements of due
process. The Court, after considering the circumstances therein, fixed the
indemnity at P2,590.50, which was equivalent to the employee's one month
salary. This indemnity is intended not to penalize the employer but to
vindicate or recognize the employee's right to statutory due process which
was violated by the employer.39
The violation of the petitioners' right to statutory due process by the private
respondent warrants the payment of indemnity in the form of nominal
damages. The amount of such damages is addressed to the sound discretion
of the court, taking into account the relevant circumstances. 40 Considering
the prevailing circumstances in the case at bar, we deem it proper to fix it at
P30,000.00. We believe this form of damages would serve to deter
employers from future violations of the statutory due process rights of
employees. At the very least, it provides a vindication or recognition of this
fundamental right granted to the latter under the Labor Code and its
Implementing Rules.
Private respondent claims that the Court of Appeals erred in holding that it
failed to pay petitioners' holiday pay, service incentive leave pay and 13th
month pay.
We are not persuaded.
We affirm the ruling of the appellate court on petitioners' money claims.
Private respondent is liable for petitioners' holiday pay, service incentive
leave pay and 13th month pay without deductions.
As a general rule, one who pleads payment has the burden of proving it.
Even where the employee must allege non-payment, the general rule is that
the burden rests on the employer to prove payment, rather than on the
employee to prove non-payment. The reason for the rule is that the
pertinent personnel files, payrolls, records, remittances and other similar
documents – which will show that overtime, differentials, service incentive
leave and other claims of workers have been paid – are not in the
possession of the worker but in the custody and absolute control of the
employer.41
In the case at bar, if private respondent indeed paid petitioners' holiday pay
and service incentive leave pay, it could have easily presented documentary
proofs of such monetary benefits to disprove the claims of the petitioners.
But it did not, except with respect to the 13th month pay wherein it
presented cash vouchers showing payments of the benefit in the years
disputed.42 Allegations by private respondent that it does not operate during
holidays and that it allows its employees 10 days leave with pay, other than
being self-serving, do not constitute proof of payment. Consequently, it
failed to discharge the onus probandi thereby making it liable for such claims
to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner
Virgilio Agabon's 13th month pay, we find the same to be unauthorized. The
evident intention of Presidential Decree No. 851 is to grant an additional
income in the form of the 13th month pay to employees not already
receiving the same43 so as "to further protect the level of real wages from
the ravages of world-wide inflation."44 Clearly, as additional income, the
13th month pay is included in the definition of wage under Article 97(f) of
the Labor Code, to wit:
(f) "Wage" paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money whether
fixed or ascertained on a time, task, piece , or commission basis, or other
method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work
done or to be done, or for services rendered or to be rendered and includes
the fair and reasonable value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the employer to
the employee…"
from which an employer is prohibited under Article 113 45 of the same Code
from making any deductions without the employee's knowledge and
consent. In the instant case, private respondent failed to show that the
deduction of the SSS loan and the value of the shoes from petitioner Virgilio
Agabon's 13th month pay was authorized by the latter. The lack of authority
to deduct is further bolstered by the fact that petitioner Virgilio Agabon
included the same as one of his money claims against private respondent.
The Court of Appeals properly reinstated the monetary claims awarded by
the Labor Arbiter ordering the private respondent to pay each of the
petitioners holiday pay for four regular holidays from 1996 to 1998, in the
amount of P6,520.00, service incentive leave pay for the same period in the
amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth month
pay for 1998 in the amount of P2,150.00.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision
of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017,
finding that petitioners' Jenny and Virgilio Agabon abandoned their work,
and ordering private respondent to pay each of the petitioners holiday pay
for four regular holidays from 1996 to 1998, in the amount of P6,520.00,
service incentive leave pay for the same period in the amount of P3,255.00
and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the
amount of P2,150.00 isAFFIRMED with the MODIFICATION that private
respondent Riviera Home Improvements, Inc. is furtherORDERED to pay
each of the petitioners the amount of P30,000.00 as nominal damages for
non-compliance with statutory due process.
No costs.
SO ORDERED.
Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio,
Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, Chico-
Nazario, and Garcia, JJ., concur.
SEPARATE OPINION
TINGA, J:
I concur in the result, the final disposition of the petition being correct.
There is no denying the importance of the Court's ruling today, which should
be considered as definitive as to the effect of the failure to render the notice
and hearing required under the Labor Code when an employee is being
dismissed for just causes, as defined under the same law. The Court
emphatically reaffirms the rule that dismissals for just cause are not
invalidated due to the failure of the employer to observe the proper notice
and hearing requirements under the Labor Code. At the same time,
The Decision likewise establishes that the Civil Code provisions on damages
serve as the proper framework for the appropriate relief to the employee
dismissed for just cause if the notice-hearing requirement is not
met. Serrano v. NLRC,1 insofar as it is controlling in dismissals for
unauthorized causes, is no longer the controlling precedent. Any and all
previous rulings and statements of the Court inconsistent with these
determinations are now deemed inoperative.
My views on the questions raised in this petition are comprehensive, if I may
so in all modesty. I offer this opinion to discuss the reasoning behind my
conclusions, pertaining as they do to questions of fundamental importance.
Prologue
The factual backdrop of the present Petition for Review is not novel.
Petitioners claim that they were illegally dismissed by the respondents, who
allege in turn that petitioners had actually abandoned their employment.
There is little difficulty in upholding the findings of the NRLC and the Court
of Appeals that petitioners are guilty of abandonment, one of the just
causes for termination under the Labor Code. Yet, the records also show
that the employer was remiss in not giving the notice required by the Labor
Code; hence, the resultant controversy as to the legal effect of such
failure vis-à-vis the warranted dismissal.
Ostensibly, the matter has been settled by our decision in Serrano2, wherein
the Court ruled that the failure to properly observe the notice requirement
did not render the dismissal, whether for just or authorized causes, null and
void, for such violation was not a denial of the constitutional right to due
process, and that the measure of appropriate damages in such cases ought
to be the amount of wages the employee should have received were it not
for the termination of his employment without prior notice. 3 Still, the Court
has, for good reason, opted to reexamine the so-called Serrano doctrine
through the present petition
Antecedent Facts
Respondent Riviera Home Improvements, Inc (Riviera Home) is engaged in
the manufacture and installation of gypsum board and cornice. In January of
1992, the Agabons were hired in January of 1992 as cornice installers by
Riviera Home. According to their personnel file with Riviera Home, the
Agabon given address was 3RDS Tailoring, E. Rodriguez Ave., Moonwalk
Subdivision, P-II Parañaque City, Metro Manila. 4
It is not disputed that sometime around February 1999, the Agabons
stopped rendering services for Riviera Home. The Agabons allege that
beginning on 23 February 1999, they stopped receiving assignments from
Riviera Home.5 When they demanded an explanation, the manager of
Riviera Homes, Marivic Ventura, informed them that they would be hired
again, but on a "pakyaw" (piece-work) basis. When the Agabons spurned
this proposal, Riviera Homes refused to continue their employment under
the original terms and agreement. 6 Taking affront, the Agabons filed a
complaint for illegal dismissal with the National Labor Relations Commission
("NLRC").
Riviera Homes adverts to a different version of events leading to the filing of
the complaint for illegal dismissal. It alleged that in the early quarter of
1999, the Agabons stopped reporting for work with Riviera. Two separate
letters dated 10 March 1999, were sent to the Agabons at the address
indicated in their personnel file. In these notices, the Agabons were directed
to report for work immediately. 7 However, these notices were returned
unserved with the notation "RTS Moved." Then, in June of 1999, Virgilio
Agabon informed Riviera Homes by telephone that he and Jenny Agabon
were ready to return to work for Riviera Homes, on the condition that their
wages be first adjusted. On 18 June 1999, the Agabons went to Riviera
Homes, and in a meeting with management, requested a wage increase of
up to Two Hundred Eighty Pesos (P280.00) a day. When no affirmative
response was offered by Riviera Homes, the Agabons initiated the complaint
before the NLRC.8
In their Position Paper, the Agabons likewise alleged that they were required
to work even on holidays and rest days, but were never paid the legal
holiday pay or the premium pay for holiday or rest day. They also asserted
that they were denied Service Incentive Leave pay, and that Virgilio Agabon
was not given his thirteenth (13th) month pay for the year 1998. 9
After due deliberation, Labor Arbiter Daisy G. Cauton-Barcelona rendered
a Decision dated 28 December 1999, finding the termination of the Agabons
illegal, and ordering Riviera Homes to pay backwages in the sum of Fifty Six
Thousand Two Hundred Thirty One Pesos and Ninety Three Centavos
(P56,231.93) each. The Labor Arbiter likewise ordered, in lieu of
reinstatement, the payment of separation pay of one (1) month pay for
every year of service from date of hiring up to 29 November 1999, as well as
the payment of holiday pay, service incentive leave pay, and premium pay
for holiday and restday, plus thirteenth (13 th) month differential to Virgilio
Agabon.10
In so ruling, the Labor Arbiter declared that Riviera Homes was unable to
satisfactorily refute the Agabons' claim that they were no longer given work
to do after 23 February 1999 and that their rehiring was only on "pakyaw"
basis. The Labor Arbiter also held that Riviera Homes failed to comply with
the notice requirement, noting that Riviera Homes well knew of the change
of address of the Agabons, considering that the identification cards it issued
stated a different address from that on the personnel file. 11 The Labor
Arbiter asserted the principle that in all termination cases, strict compliance
by the employer with the demands of procedural and substantive due
process is a condition sine qua non for the same to be declared valid. 12
On appeal, the NLRC Second Division set aside the Labor
Arbiter's Decision and ordered the dismissal of the complaint for lack of
merit.13 The NLRC held that the Agabons were not able to refute the
assertion that for the payroll period ending on 15 February 1999, Virgilio
and Jenny Agabon worked for only two and one-half (2½) and three (3) days,
respectively. It disputed the earlier finding that Riviera Homes had known of
the change in address, noting that the address indicated in the
identification cards was not the Agabons, but that of the persons who
should be notified in case of emergency concerning the employee. 14 Thus,
proper service of the notice was deemed to have been accomplished.
Further, the notices evinced good reason to believe that the Agabons had
not been dismissed, but had instead abandoned their jobs by refusing to
report for work.
In support of its conclusion that the Agabons had abandoned their work, the
NLRC also observed that the Agabons did not seek reinstatement, but only
separation pay. While the choice of relief was premised by the Agabons on
their purported strained relations with Riviera Homes, the NLRC pointed out
that such claim was amply belied by the fact that the Agabons had actually
sought a conference with Riviera Homes in June of 1999. The NLRC likewise
found that the failure of the Labor Arbiter to justify the award of extraneous
money claims, such as holiday and service incentive leave pay, confirmed
that there was no proof to justify such claims.
A Petition for Certiorari was promptly filed with the Court of Appeals by the
Agabons, imputing grave abuse of discretion on the part of the NLRC in
dismissing their complaint for illegal dismissal. In a Decision15 dated 23
January 2003, the Court of Appeals affirmed the finding that the Agabons
had abandoned their employment. It noted that the two elements
constituting abandonment had been established, to wit: the failure to report
for work or absence without valid justifiable reason, and; a clear intention to
sever the employer-employee relationship. The intent to sever the
employer-employee relationship was buttressed by the Agabon's choice to
seek not reinstatement, but separation pay. The Court of Appeals likewise
found that the service of the notices were valid, as the Agabons did not
notify Riviera Homes of their change of address, and thus the failure to
return to work despite notice amounted to abandonment of work.
However, the Court of Appeals reversed the NLRC as regards the denial of
the claims for holiday pay, service incentive leave pay, and the balance of
Virgilio Agabon's thirteenth (13th) month pay. It ruled that the failure to
adduce proof in support thereof was not fatal and that the burden of
proving that such benefits had already been paid rested on Riviera
Homes.16 Given that Riviera Homes failed to present proof of payment to the
Agabons of their holiday pay and service incentive leave pay for the years
1996, 1997 and 1998, the Court of Appeals chose to believe that such
benefits had not actually been received by the employees. It also ruled that
the apparent deductions made by Riviera Homes on the thirteenth (13th)
month pay of Virgilio Agabon violated Section 10 of the Rules and
Regulations Implementing Presidential Decree No. 851. 17 Accordingly, Riviera
Homes was ordered to pay the Agabons holiday for four (4) regular holidays
in 1996, 1997 and 1998, as well as their service incentive leave pay for said
years, and the balance of Virgilio Agabon's thirteenth (13th) month pay for
1998 in the amount of Two Thousand One Hundred Fifty Pesos
(P2,150.00).18
In their Petition for Review, the Agabons claim that they had been illegally
dismissed, reasserting their version of events, thus: (1) that they had not
been given new assignments since 23 February 1999; (2) that they were told
that they would only be re-hired on a "pakyaw" basis, and; (3) that Riviera
Homes had knowingly sent the notices to their old address despite its
knowledge of their change of address as indicated in the identification
cards.19Further, the Agabons note that only one notice was sent to each of
them, in violation of the rule that the employer must furnish two written
notices before termination — the first to apprise the employee of the cause
for which dismissal is sought, and the second to notify the employee of the
decision of dismissal.20 The Agabons likewise maintain that they did not seek
reinstatement owing to the strained relations between them and Riviera
Homes.
The Agabons present to this Court only one issue, i.e.: whether or not they
were illegally dismissed from their employment. 21 There are several
dimensions though to this issue which warrant full consideration.
The Abandonment Dimension
Review of Factual Finding of Abandonment
As the Decision points out, abandonment is characterized by the failure to
report for work or absence without valid or justifiable reason, and a clear
intention to sever the employer-employee relationship. The question of
whether or not an employee has abandoned employment is essentially a
factual issue.22 The NLRC and the Court of Appeals, both appropriate triers
of fact, concluded that the Agabons had actually abandoned their
employment, thus there is little need for deep inquiry into the correctness
of this factual finding. There is no doubt that the Agabons stopped reporting
for work sometime in February of 1999. And there is no evidence to support
their assertion that such absence was due to the deliberate failure of Riviera
Homes to give them work. There is also the fact, as noted by the NLRC and
the Court of Appeals, that the Agabons did not pray for reinstatement, but
only for separation
pay and money claims.23 This failure indicates their disinterest in maintaining
the employer-employee relationship and their unabated avowed intent to
sever it. Their excuse that strained relations between them and Riviera
Homes rendered reinstatement no longer feasible was hardly given
credence by the NLRC and the Court of Appeals. 24
The contrary conclusion arrived at by the Labor Arbiter as regards
abandonment is of little bearing to the case. All that the Labor Arbiter said
on that point was that Riviera Homes was not able to refute the Agabons'
claim that they were terminated on 23 February 1999. 25 The Labor Arbiter
did not explain why or how such finding was reachhy or how such finding
was reachhe Agabons was more credible than that of Riviera Homes'. Being
bereft of reasoning, the conclusion deserves scant consideration.
Compliance with Notice Requirement
At the same time, both the NLRC and the Court of Appeals failed to consider
the apparent fact that the rules governing notice of termination were not
complied with by Riviera Homes. Section 2, Book V, Rule XXIII of the
Omnibus Rules Implementing the Labor Code (Implementing Rules)
specifically provides that for termination of employment based on just
causes as defined in Article 282, there must be: (1) written notice served on
the employee specifying the grounds for termination and giving employee
reasonable opportunity to explain his/her side; (2) a hearing or conference
wherein the employee, with the assistance of counsel if so desired, is given
opportunity to respond to the charge, present his evidence or rebut
evidence presented against him/her; and (3) written notice of termination
served on the employee indicating that upon due consideration of all the
circumstances, grounds have been established to justify termination.
At the same time, Section 2, Book V, Rule XXIII of the Implementing Rules
does not require strict compliance with the above procedure, but only that
the same be "substantially observed."
Riviera Homes maintains that the letters it sent on 10 March 1999 to the
Agabons sufficiently complied with the notice rule. These identically worded
letters noted that the Agabons had stopped working without permission
that they failed to return for work despite having been repeatedly told to
report to the office and resume their employment. 26 The letters ended with
an invitation to the Agabons to report back to the office and return to
work.27
The apparent purpose of these letters was to advise the Agabons that they
were welcome to return back to work, and not to notify them of the grounds
of termination. Still, considering that only substantial compliance with the
notice requirement is required, I am prepared to say that the letters
sufficiently conform to the first notice required under the Implementing
Rules. The purpose of the first notice is to duly inform the employee that a
particular transgression is being considered against him or her, and that an
opportunity is being offered for him or her to respond to the charges. The
letters served the purpose of informing the Agabons of the pending matters
beclouding their employment, and extending them the opportunity to clear
the air.
Contrary to the Agabons' claim, the letter-notice was correctly sent to the
employee's last known address, in compliance with the Implementing Rules.
There is no dispute that these letters were not actually received by the
Agabons, as they had apparently moved out of the address indicated
therein. Still, the letters were sent to what Riviera Homes knew to be the
Agabons' last known address, as indicated in their personnel file. The
Agabons insist that Riviera Homes had known of the change of address,
offering as proof their company IDs which purportedly print out their correct
new address. Yet, as pointed out by the NLRC and the Court of Appeals, the
addresses indicated in the IDs are not the Agabons, but that of the person
who is to be notified in case on emergency involve either or both of the
Agabons.
The actual violation of the notice requirement by Riviera Homes lies in its
failure to serve on the Agabons the second notice which should inform them
of termination. As the Decision notes, Riviera Homes' argument that sending
the second notice was useless due to the change of address is inutile, since
the Implementing Rules plainly require that the notice of termination should
be served at the employee's last known address.
The importance of sending the notice of termination should not be
trivialized. The termination letter serves as indubitable proof of loss of
employment, and its receipt compels the employee to evaluate his or her
next options. Without such notice, the employee may be left uncertain of his
fate; thus, its service is mandated by the Implementing Rules. Non-
compliance with the notice rule, as evident in this case, contravenes the
Implementing Rules. But does the violation serve to invalidate the
Agabons' dismissal for just cause?
The So-Called Constitutional Law Dimension
Justices Puno and Panganiban opine that the Agabons should be reinstated
as a consequence of the violation of the notice requirement. I respectfully
disagree, for the reasons expounded below.
Constitutional Considerations
Of Due Process and the Notice-Hearing
Requirement in Labor Termination Cases
Justice Puno proposes that the failure to render due notice and hearing prior
to dismissal for just cause constitutes a violation of the constitutional right
to due process. This view, as acknowledged by Justice Puno himself, runs
contrary to the Court's pronouncement in Serrano v. NLRC28 that the
absence of due notice and hearing prior to dismissal, if for just cause,
violates statutory due process.
The ponencia of Justice Vicente V. Mendoza in Serrano provides this cogent
overview of the history of the doctrine:
Indeed, to contend that the notice requirement in the Labor Code is an
aspect of due process is to overlook the fact that Art. 283 had its origin in
Art. 302 of the Spanish Code of Commerce of 1882 which gave either party
to the employer-employee relationship the right to terminate their
relationship by giving notice to the other one month in advance. In lieu of
notice, an employee could be laid off by paying him a mesadaequivalent to
his salary for one month. This provision was repealed by Art. 2270 of the
Civil Code, which took effect on August 30, 1950. But on June 12, 1954, R.A.
No. 1052, otherwise known as the Termination Pay Law, was enacted
reviving the mesada. On June 21, 1957, the law was amended by R.A. No.
1787 providing for the giving of advance notice for every year of service. 29
Under Section 1 of the Termination Pay Law, an employer could dismiss an
employee without just cause by serving written notice on the employee at
least one month in advance or one-half month for every year of service of
the employee, whichever was longer. 30 Failure to serve such written notice
entitled the employee to compensation equivalent to his salaries or wages
corresponding to the required period of notice from the date of termination
of his employment.
However, there was no similar written notice requirement under the
Termination Pay Law if the dismissal of the employee was for just cause. The
Court, speaking through Justice JBL Reyes, ruled in Phil. Refining Co. v.
Garcia:31
[Republic] Act 1052, as amended by Republic Act 1787, impliedly recognizes
the right of the employer to dismiss his employees (hired without definite
period) whether for just case, as therein defined or enumerated, or without
it. If there be just cause, the employer is not required to serve any notice
of discharge nor to disburse termination pay to the employee. xxx32
Clearly, the Court, prior to the enactment of the Labor Code, was ill-
receptive to the notion that termination for just cause without notice or
hearing violated the constitutional right to due process. Nonetheless, the
Court recognized an award of damages as the appropriate remedy.
In Galsim v. PNB,33 the Court held:
Of course, the employer's prerogative to dismiss employees hired without a
definite period may be with or without cause. But if the manner in which
such right is exercised is abusive, the employer stands to answer to the
dismissed employee for damages.34
The Termination Pay Law was among the repealed laws with the enactment
of the Labor Code in 1974. Significantly, the Labor Code, in its inception, did
not require notice or hearing before an employer could terminate an
employee for just cause. As Justice Mendoza explained:
Where the termination of employment was for a just cause, no notice was
required to be given to the employee. It was only on September 4, 1981 that
notice was required to be given even where the dismissal or termination of
an employee was for cause. This was made in the rules issued by the then
Minister of Labor and Employment to implement B.P. Blg. 130 which
amended the Labor Code. And it was still much later when the notice
requirement was embodied in the law with the amendment of Art. 277(b)
by R.A. No. 6715 on March 2, 1989. 35
It cannot be denied though that the thinking that absence of notice or
hearing prior to termination constituted a constitutional violation has gained
a jurisprudential foothold with the Court. Justice Puno, in his Dissenting
Opinion, cites several cases in support of this theory, beginning
with Batangas Laguna Tayabas Bus Co. v. Court of Appeals 36 wherein we
held that "the failure of petitioner to give the private respondent the benefit
of a hearing before he was dismissed constitutes an infringement on his
constitutional right to due process of law.37
Still, this theory has been refuted, pellucidly and effectively to my mind, by
Justice Mendoza's disquisition inSerrano, thus:
xxx There are three reasons why, on the other hand, violation by the
employer of the notice requirement cannot be considered a denial of due
process resulting in the nullity of the employee's dismissal or layoff.
The first is that the Due Process Clause of the Constitution is a limitation on
governmental powers. It does not apply to the exercise of private power,
such as the termination of employment under the Labor Code. This is plain
from the text of Art. III, §1 of the Constitution, viz.: "No person shall be
deprived of life, liberty, or property without due process of law. . . ." The
reason is simple: Only the State has authority to take the life, liberty, or
property of the individual. The purpose of the Due Process Clause is to
ensure that the exercise of this power is consistent with what are considered
civilized methods.
The second reason is that notice and hearing are required under the Due
Process Clause before the power of organized society are brought to bear
upon the individual. This is obviously not the case of termination of
employment under Art. 283. Here the employee is not faced with an aspect
of the adversary system. The purpose for requiring a 30-day written notice
before an employee is laid off is not to afford him an opportunity to be
heard on any charge against him, for there is none. The purpose rather is to
give him time to prepare for the eventual loss of his job and the DOLE an
opportunity to determine whether economic causes do exist justifying the
termination of his employment.
xxx
The third reason why the notice requirement under Art. 283 can not be
considered a requirement of the Due Process Clause is that the employer
cannot really be expected to be entirely an impartial judge of his own cause.
This is also the case in termination of employment for a just cause under
Art. 282 (i.e., serious misconduct or willful disobedience by the employee of
the lawful orders of the employer, gross and habitual neglect of duties, fraud
or willful breach of trust of the employer, commission of crime against the
employer or the latter's immediate family or duly authorized
representatives, or other analogous cases).38
The Court in the landmark case of People v. Marti39 clarified the proper
dimensions of the Bill of Rights.
That the Bill of Rights embodied in the Constitution is not meant to be
invoked against acts of private individuals finds support in the deliberations
of the Constitutional Commission. True, the liberties guaranteed by the
fundamental law of the land must always be subject to protection. But
protection against whom? Commissioner Bernas in his sponsorship speech
in the Bill of Rights answers the query which he himself posed, as follows:
"First, the general reflections. The protection of fundamental liberties in the
essence of constitutional democracy. Protection against whom? Protection
against the state. The Bill of Rights governs the relationship between the
individual and the state. Its concern is not the relation between individuals,
between a private individual and other individuals. What the Bill of Rights
does is to declare some forbidden zones in the private sphere inaccessible to
any power holder." (Sponsorship Speech of Commissioner Bernas; Record of
the Constitutional Commission, Vol. 1, p. 674; July 17,1986; Italics
supplied)40
I do not doubt that requiring notice and hearing prior to termination for just
cause is an admirable sentiment borne out of basic equity and fairness. Still,
it is not a constitutional requirement that can impose itself on the relations
of private persons and entities. Simply put, the Bill of Rights affords
protection against possible State oppression against its citizens, but not
against an unjust or repressive conduct by a private party towards another.
Justice Puno characterizes the notion that constitutional due process limits
government action alone as "passé,"and adverts to nouvelle vague theories
which assert that private conduct may be restrained by constitutional due
process. His dissent alludes to the American experience making references
to the post-Civil War/pre-World War II era when the US Supreme Court
seemed overly solicitous to the rights of big business over those of the
workers.
Theories, no matter how entrancing, remain theoretical unless adopted by
legislation, or more controversially, by judicial opinion. There were a few
decisions of the US Supreme Court that, ostensibly, imposed on private
persons the values of the constitutional guarantees. However, in deciding
the cases, the American High Court found it necessary to link the actors to
adequate elements of the "State" since the Fourteenth Amendment plainly
begins with the words "No State shall…" 41
More crucially to the American experience, it had become necessary to pass
legislation in order to compel private persons to observe constitutional
values. While the equal protection clause was deemed sufficient by the
Warren Court to bar racial segregation in public facilities, it necessitated
enactment of the Civil Rights Acts of 1964 to prohibit segregation as
enforced by private persons within their property. In this jurisdiction, I have
trust in the statutory regime that governs the correction of private wrongs.
There are thousands of statutes, some penal or regulatory in nature, that
are the source of actionable claims against private persons. There is even no
stopping the State, through the legislative cauldron, from compelling private
individuals, under pain of legal sanction, into observing the norms ordained
in the Bill of Rights.
Justice Panganiban's Separate Opinion asserts that corporate behemoths
and even individuals may now be sources of abuses and threats to human
rights and liberties.42 The concern is not unfounded, but appropriate
remedies exist within our statutes, and so resort to the constitutional trump
card is not necessary. Even if we were to engage the premise, the proper
juristic exercise should be to examine whether an employer has taken the
attributes of the State so that it could be compelled by the Constitution to
observe the proscriptions of the Bill of Rights. But the strained analogy
simply does not square since the attributes of an employer are starkly
incongruous with those of the State. Employers plainly do not possess the
awesome powers and the tremendous resources which the State has at its
command.
The differences between the State and employers are not merely literal, but
extend to their very essences. Unlike the State, the raison d'etre of
employers in business is to accumulate profits. Perhaps the State and the
employer are similarly capacitated to inflict injury or discomfort on persons
under their control, but the same power is also possessed by a school
principal, hospital administrator, or a religious leader, among many others.
Indeed, the scope and reach of authority of an employer pales in
comparison with that of the State. There is no basis to conclude that an
employer, or even the employer class, may be deemed a de facto state and
on that premise, compelled to observe the Bill of Rights. There is simply no
nexus in their functions, distaff as they are, that renders it necessary to
accord the same jurisprudential treatment.
It may be so, as alluded in the dissent of Justice Puno, that a conservative
court system overly solicitous to the concerns of business may consciously
gut away at rights or privileges owing to the labor sector. This certainly
happened before in the United States in the early part of the twentieth
century, when the progressive labor legislation such as that enacted during
President Roosevelt's New Deal regime — most of them addressing
problems of labor — were struck down by an arch-conservative Court. 43 The
preferred rationale then was to enshrine within the constitutional order
business prerogatives, rendering them superior to the express legislative
intent. Curiously, following its judicial philosophy at the time the U. S.
Supreme Court made due process guarantee towards employers prevail over
the police power to defeat the cause of labor. 44
Of course, this Court should not be insensate to the means and methods by
which the entrenched powerful class may maneuver the socio-political
system to ensure self-preservation. However, the remedy to rightward
judicial bias is not leftward judicial bias. The more proper judicial attitude is
to give due respect to legislative prerogatives, regardless of the ideological
sauce they are dipped in.
While the Bill of Rights maintains a position of primacy in the constitutional
hierarchy,45 it has scope and limitations that must be respected and asserted
by the Court, even though they may at times serve somewhat bitter ends.
The dissenting opinions are palpably distressed at the effect of the Decision,
which will undoubtedly provoke those reflexively sympathetic to the labor
class. But haphazard legal theory cannot be used to justify the obverse
result. The adoption of the dissenting views would give rise to all sorts of
absurd constitutional claims. An excommunicated Catholic might demand
his/her reinstatement into the good graces of the Church and into
communion on the ground that excommunication was violative of the
constitutional right to due process. A celebrity contracted to endorse Pepsi
Cola might sue in court to void a stipulation that prevents him/her from
singing the praises of Coca Cola once in a while, on the ground that such
stipulation violates the constitutional right to free speech. An employee
might sue to prevent the employer from reading outgoing e-mail sent
through the company server using the company e-mail address, on the
ground that the constitutional right to privacy of communication would be
breached.
The above concerns do not in anyway serve to trivialize the interests of
labor. But we must avoid overarching declarations in order to justify an end
result beneficial to labor. I dread the doctrinal acceptance of the notion that
the Bill of Rights, on its own, affords protection and sanctuary not just from
the acts of State but also from the conduct of private persons. Natural and
juridical persons would hesitate to interact for fear that a misstep could lead
to their being charged in court as a constitutional violator. Private
institutions that thrive on their exclusivity, such as churches or cliquish
groups, could be forced to renege on their traditional tenets, including vows
of secrecy and the like, if deemed by the Court as inconsistent with the Bill
of Rights. Indeed, that fundamental right of all private persons to be let
alone would be forever diminished because of a questionable notion that
contravenes with centuries of political thought.
It is not difficult to be enraptured by novel legal ideas. Their characterization
is susceptible to the same marketing traps that hook consumers to new
products. With the help of unique wrapping, a catchy label, and testimonials
from professed experts from exotic lands, a malodorous idea may gain wide
acceptance, even among those self-possessed with their own heightened
senses of perception. Yet before we join the mad rush in order to proclaim a
theory as "brilliant," a rigorous test must first be employed to determine
whether it complements or contradicts our own system of laws and juristic
thought. Without such analysis, we run the risk of abnegating the doctrines
we have fostered for decades and the protections they may have implanted
into our way of life.
Should the Court adopt the view that the Bill of Rights may be invoked to
invalidate actions by private entities against private individuals, the Court
would open the floodgates to, and the docket would be swamped with,
litigations of the scurrilous sort. Just as patriotism is the last refuge of
scoundrels, the broad constitutional claim is the final resort of the desperate
litigant.
Constitutional Protection of Labor
The provisions of the 1987 Constitution affirm the primacy of labor and
advocate a multi-faceted state policy that affords, among others, full
protection to labor. Section 18, Article II thereof provides:
The State affirms labor as a primary social economic force. It shall protect
the rights of workers and promote their welfare.
Further, Section 3, Article XIII states:
The State shall afford full protection to labor, local and overseas, organized
and unorganized, and promote full employment and equal employment
opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security to
tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.
The State shall promote the principle of shared responsibility between
workers and employers and the preferential use of voluntary modes in
settling disputes, including conciliation, and shall enforce their mutual
compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers,
recognizing the right of labor to its just share in the fruits of production and
the right of enterprises to reasonable returns on investments, and to
expansion and growth.
The constitutional enshrinement of the guarantee of full protection of labor
is not novel to the 1987 Constitution. Section 6, Article XIV of the 1935
Constitution reads:
The State shall afford protection to labor, especially to working women, and
minors, and shall regulate the relations between the landowner and tenant,
and between labor and capital in industry and in agriculture. The State may
provide for compulsory arbitration.
Similarly, among the principles and state policies declared in the 1973
Constitution, is that provided in Section 9, Article II thereof:
The State shall afford full protection to labor, promote full employment and
equality in employment, ensure equal work opportunities regardless of sex,
race or creed, and regulate the relations between workers and employers.
The State shall assure the rights of workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions of work. The
State may provide for compulsory arbitration.
On the other hand, prior to the 1973 Constitution, the right to security of
tenure could only be found in legislative enactments and their respective
implementing rules and regulations. It was only in the 1973 Constitution
that security of tenure was elevated as a constitutional right. The
development of the concept of security of tenure as a constitutionally
recognized right was discussed by this Court in BPI Credit Corporation v.
NLRC,46 to wit:
The enthronement of the worker's right to security or tenure in our
fundamental law was not achieved overnight. For all its liberality towards
labor, our 1935 Constitution did not elevate the right as a constitutional
right. For a long time, the worker's security of tenure had only the protective
mantle of statutes and their interpretative rules and regulations. It was as
uncertain protection that sometimes yielded to the political permutations of
the times. It took labor nearly four decades of sweat and tears to persuade
our people thru their leaders, to exalt the worker's right to security of
tenure as a sacrosanct constitutional right. It was Article II, section 2 [9] of
our 1973 Constitution that declared as a policy that the State shall assure
the right of worker's to security tenure. The 1987 Constitution is even more
solicitous of the welfare of labor. Section 3 of its Article XIII mandates that
the State shall afford full protection to labor and declares that all workers
shall be entitled to security of tenure. Among the enunciated State policies
are the
promotion of social justice and a just and dynamic social order. In contrast,
the prerogative of management to dismiss a worker, as an aspect of
property right, has never been endowed with a constitutional status.
The unequivocal constitutional declaration that all workers shall be entitled
to security of tenure spurred our lawmakers to strengthen the protective
walls around this hard earned right. The right was protected from undue
infringement both by our substantive and procedural laws. Thus, the causes
for dismissing employees were more defined and restricted; on the other
hand, the procedure of termination was also more clearly delineated. These
substantive and procedural laws must be strictly complied with before a
worker can be dismissed from his employment. 47
It is quite apparent that the constitutional protection of labor was
entrenched more than eight decades ago, yet such did not prevent this
Court in the past from affirming dismissals for just cause without valid
notice. Nor was there any pretense made that this constitutional maxim
afforded a laborer a positive right against dismissal for just cause on the
ground of lack of valid prior notice. As demonstrated earlier, it was only after
the enactment of the Labor Code that the doctrine relied upon by the
dissenting opinions became en vogue. This point highlights my position that
the violation of the notice requirement has statutory moorings, not
constitutional.
It should be also noted that the 1987 Constitution also recognizes the
principle of shared responsibility between workers and employers, and the
right of enterprise to reasonable returns, expansion, and growth. Whatever
perceived imbalance there might have been under previous incarnations of
the provision have been obviated by Section 3, Article XIII.
In the case of Manila Prince Hotel v. GSIS,48 we affirmed the presumption
that all constitutional provisions are self-executing. We reasoned that to
declare otherwise would result in the pernicious situation wherein by mere
inaction and disregard by the legislature, constitutional mandates would be
rendered ineffectual. Thus, we held:
As against constitutions of the past, modern constitutions have been
generally ed upon a different principle and have often become in effect
extensive codes of laws intended to operate directly upon the people in a
manner similar to that of statutory enactments, and the function of
constitutional conventions has evolved into one more like that of a
legislative body. Hence, unless it is expressly provided that a legislative act is
necessary to enforce a constitutional mandate, the presumption now is that
all provisions of the constitution are self-executing. If the constitutional
provisions are treated as requiring legislation instead of self-executing, the
legislature would have the power to ignore and practically nullify the
mandate of the fundamental law. This can be cataclysmic. That is why the
prevailing view is, as it has always been, that —
. . . in case of doubt, the Constitution should be considered self-executing
rather than non-self-executing. . . . Unless the contrary is clearly intended,
the provisions of the Constitution should be considered self-executing, as a
contrary rule would give the legislature discretion to determine when, or
whether, they shall be effective. These provisions would be subordinated to
the will of the lawmaking body, which could make them entirely
meaningless by simply refusing to pass the needed implementing statute. 49
In further discussing self-executing provisions, this Court stated that:
In self-executing constitutional provisions, the legislature may still enact
legislation to facilitate the exercise of powers directly granted by the
constitution, further the operation of such a provision, prescribe a practice
to be used for its enforcement, provide a convenient remedy for the
protection of the rights secured or the determination thereof, or place
reasonable safeguards around the exercise of the right. The mere fact that
legislation may supplement and add to or prescribe a penalty for the
violation of a self-executing constitutional provision does not render such a
provision ineffective in the absence of such legislation. The omission from a
constitution of any express provision for a remedy for enforcing a right or
liability is not necessarily an indication that it was not intended to be self-
executing. The rule is that a self-executing provision of the constitution does
not necessarily exhaust legislative power on the subject, but any legislation
must be in harmony with the constitution, further the exercise of
constitutional right and make it more available. Subsequent legislation
however does not necessarily mean that the subject constitutional provision
is not, by itself, fully enforceable.50
Thus, the constitutional mandates of protection to labor and security of
tenure may be deemed as self-executing in the sense that these are
automatically acknowledged and observed without need for any enabling
legislation. However, to declare that the constitutional provisions are
enough to guarantee the full exercise of the rights embodied therein, and
the realization of ideals therein expressed, would be impractical, if not
unrealistic. The espousal of such view presents the dangerous tendency of
being overbroad and exaggerated. The guarantees of "full protection to
labor" and "security of tenure", when examined in isolation, are facially
unqualified, and the broadest interpretation possible suggests a blanket
shield in favor of labor against any form of removal regardless of
circumstance. This interpretation implies an unimpeachable right to
continued employment-a utopian notion, doubtless-but still hardly within
the contemplation of the framers. Subsequent legislation is still needed to
define the parameters of these guaranteed rights to ensure the protection
and promotion, not only the rights of the labor sector, but of the employers'
as well. Without specific and pertinent legislation, judicial bodies will be at a
loss, formulating their own conclusion to approximate at least the aims of
the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source
of a positive enforceable right to stave off the dismissal of an employee for
just cause owing to the failure to serve proper notice or hearing. As
manifested by several framers of the 1987 Constitution, the provisions on
social justice require legislative enactments for their enforceability. This is
reflected in the record of debates on the social justice provisions of the
Constitution:
MS. [FELICITAS S.] AQUINO: We appreciate the concern of the
Commissioner. But this Committee [on Social Justice] has actually
become the forum already of a lot of specific grievances and specific
demands, such that understandably, we may have been, at one time or
another, dangerously treading into the functions of legislation. Our only
plea to the Commission is to focus our perspective on the matter of social
justice and its rightful place in the Constitution. What we envision here is a
mandate specific enough that would give impetus for statutory
implementation. We would caution ourselves in terms of the judicious
exercise of self-censorship against treading into the functions of
legislation. (emphasis supplied)51
xxx
[FLORENZ D.] REGALADO: I notice that the 1935 Constitution had only one
section on social justice; the same is true with the 1973 Constitution. But
they seem to have stood us in good stead; and I am a little surprised why,
despite that attempt at self-censorship, there are certain provisions here
which are properly for legislation.52
xxx
BISHOP [TEODORO S.] BACANI: [I] think the distinction that was given during
the presentation of the provisions on the Bill of Rights by Commissioner
Bernas is very apropos here. He spoke of self-executing rights which belong
properly to the Bill of Rights, and then he spoke of a new body of rights
which are more of claims and that these have come about largely through
the works of social philosophers and then the teaching of the Popes. They
focus on the common good and hence, it is not as easy to pinpoint
precisely these rights nor the situs of the rights. And yet, they exist in
relation to the common good.53
xxx
MS. [MINDA LUZ M.] QUESADA: I think the nitty-gritty of this kind of
collaboration will be left to legislation but the important thing now is the
conservation, utilization or maximization of the very limited resources. xxx
[RICARDO J.] ROMULO: The other problem is that, by and large, government
services are inefficient. So, this is a problem all by itself. On Section 19,
where the report says that people's organizations as a principal means of
empowering the people to pursue and protect through peaceful means…, I
do not suppose that the Committee would like to either preempt or
exclude the legislature, because the concept of a representative and
democratic system really is that the legislature is normally the principal
means.
[EDMUNDO G.] GARCIA: That is correct. In fact, people cannot even dream
of influencing the composition or the membership of the legislature, if
they do not get organized. It is, in fact, a recognition of the principle that
unless a citizenry is organized and mobilized to pursue its ends peacefully,
then it cannot really participate effectively. 54
There is no pretense on the part of the framers that the provisions on Social
Justice, particularly Section 3 of Article XIII, are self-executory. Still,
considering the rule that provisions should be deemed self-executing if
enforceable without further legislative action, an examination of Section 3
of Article XIII is warranted to determine whether it is complete in itself as a
definitive law, or if it needs future legislation for completion and
enforcement.55Particularly, we should inquire whether or not the provision
voids the dismissal of a laborer for just cause if no valid notice or hearing is
attendant.
Constitutional Commissioner Fr. Joaquin G. Bernas makes a significant
comment on Section 3, Article XIII of the 1987 Constitution:
The [cluster] of rights guaranteed in the second paragraph are the right "to
security of tenure, humane conditions of work, and a living wage." Again,
although these have been set apart by a period (.) from the next sentence
and are therefore not modified by the final phrase "as may be provided by
law," it is not the intention to place these beyond the reach of valid laws.
xxx (emphasis supplied)56
At present, the Labor Code is the primary mechanism to carry out the
Constitution's directives. This is clear from Article 3 57 under Chapter 1
thereof which essentially restates the policy on the protection of labor as
worded in the 1973 Constitution, which was in force at the time of
enactment of the Labor Code. It crystallizes the fundamental law's policies
on labor, defines the parameters of the rights granted to labor such as the
right to security of tenure, and prescribes the standards for the enforcement
of such rights in concrete terms. While not infallible, the measures provided
therein tend to ensure the achievement of the constitutional aims.
The necessity for laws concretizing the constitutional principles on the
protection of labor is evident in the reliance placed upon such laws by the
Court in resolving the issue of the validity of a worker's dismissal. In cases
where that was the issue confronting the Court, it consistently recognized
the constitutional right to security of tenure and employed the standards
laid down by prevailing laws in determining whether such right was
violated.58 The Court's reference to laws other than the Constitution in
resolving the issue of dismissal is an implicit acknowledgment that the right
to security of tenure, while recognized in the Constitution, cannot be
implemented uniformly absent a law prescribing concrete standards for its
enforcement.
As discussed earlier, the validity of an employee's dismissal in previous cases
was examined by the Court in accordance with the standards laid down by
Congress in the Termination Pay Law, and subsequently, the Labor Code and
the amendments thereto. At present, the validity of an employee's dismissal
is weighed against the standards laid down in Article 279, as well as Article
282 in relation to Article 277(b) of the Labor Code, for a dismissal for just
cause, and Article 283 for a dismissal for an authorized cause.
The Effect of Statutory Violation
Of Notice and Hearing
There is no doubt that the dismissal of an employee even for just cause,
without prior notice or hearing, violates the Labor Code. However, does
such violation necessarily void the dismissal?
Before I proceed with my discussion on dismissals for just causes, a brief
comment regarding dismissals for authorized cause under Article 283 of the
Labor Code. While the justiciable question in Serrano pertained to a
dismissal for unauthorized cause, the ruling therein was crafted as definitive
to dismissals for just cause. Happily, the Decision today does not adopt the
same unwise tack. It should be recognized that dismissals for just cause and
dismissals for authorized cause are governed by different provisions, entail
divergent requisites, and animated by distinct rationales. The language of
Article 283 expressly effects the termination for authorized cause to the
service of written notice on the workers and the Ministry of Labor at least
one (1) month before the intended date of termination. This constitutes an
eminent difference than dismissals for just cause, wherein the causal
relation between the notice and the dismissal is not expressly stipulated.
The circumstances distinguishing just and authorized causes are too
markedly different to be subjected to the same rules and reasoning in
interpretation.
Since the present petition is limited to a question arising from a dismissal for
just cause, there is no reason for making any pronouncement regarding
authorized causes. Such declaration would be merely obiter, since they are
neither the law of the case nor dispositive of the present petition. When the
question becomes justiciable before this Court, we will be confronted with
an appropriate factual milieu on which we can render a more judicious
disposition of this admittedly important question.
B. Dismissal for Just Cause
There is no express provision in the Labor Code that voids a dismissal for just
cause on the ground that there was no notice or hearing. Under Section 279,
the employer is precluded from dismissing an employee except for a just
cause as provided in Section 282, or an authorized cause under Sections 283
and 284. Based on reading Section 279 alone, the existence of just cause by
itself is sufficient to validate the termination.
Just cause is defined by Article 282, which unlike Article 283, does not
condition the termination on the service of written notices. Still, the
dissenting opinions propound that even if there is just cause, a termination
may be invalidated due to the absence of notice or hearing. This view is
anchored mainly on constitutional moorings, the basis of which I had argued
against earlier. For determination now is whether there is statutory basis
under the Labor Code to void a dismissal for just cause due to the absence
of notice or hearing.
As pointed out by Justice Mendoza in Serrano, it was only in 1989 that the
Labor Code was amended to enshrine into statute the twin requirements of
notice and hearing.59 Such requirements are found in Article 277 of the
Labor Code, under the heading "Miscellaneous Provisions." Prior to the
amendment, the notice-hearing requirement was found under the
implementing rules issued by the then Minister of Labor in 1981. The
present-day implementing rules likewise mandate that the standards of due
process, including the requirement of written notice and hearing, "be
substantially observed."60
Indubitably, the failure to substantially comply with the standards of due
process, including the notice and hearing requirement, may give rise to an
actionable claim against the employer. Under Article 288, penalties may
arise from violations of any provision of the Labor Code. The Secretary of
Labor likewise enjoys broad powers to inquire into existing relations
between employers and employees. Systematic violations by management
of the statutory right to due process would fall under the broad grant of
power to the Secretary of Labor to investigate under Article 273.
However, the remedy of reinstatement despite termination for just cause is
simply not authorized by the Labor Code. Neither the Labor Code nor its
implementing rules states that a termination for just cause is voided
because the requirement of notice and hearing was not observed. This is not
simply an inadvertent semantic failure, but a conscious effort to protect the
prerogatives of the employer to dismiss an employee for just cause. Notably,
despite the several pronouncements by this Court in the past equating the
notice-hearing requirement in labor cases to a constitutional maxim, neither
the legislature nor the executive has adopted the same tack, even gutting
the protection to provide that substantial compliance with due process
suffices.
The Labor Code significantly eroded management prerogatives in the hiring
and firing of employees. Whereas employees could be dismissed even
without just cause under the Termination Pay Law 61, the Labor Code affords
workers broad security of tenure. Still, the law recognizes the right of the
employer to terminate for just cause. The just causes enumerated under the
Labor Code ¾ serious misconduct or willful disobedience, gross and habitual
neglect, fraud or willful breach of trust, commission of a crime by the
employee against the employer, and other analogous causes ¾ are
characterized by the harmful behavior of an employee against the business
or the person of the employer.
These just causes for termination are not negated by the absence of notice
or hearing. An employee who tries to kill the employer cannot be magically
absolved of trespasses just because the employer forgot to serve due notice.
Or a less extreme example, the gross and habitual neglect of an employee
will not be improved upon just because the employer failed to conduct a
hearing prior to termination.
In fact, the practical purpose of requiring notice and hearing is to afford the
employee the opportunity to dispute the contention that there was just
cause in the dismissal. Yet it must be understood – if a dismissed employee
is deprived of the right to notice and hearing, and thus denied the
opportunity to present countervailing evidence that disputes the finding of
just cause, reinstatement will be valid not because the notice and hearing
requirement was not observed, but because there was no just cause in the
dismissal. The opportunity to dispute the finding of the just cause is readily
available before the Labor Arbiter, and the subsequent levels of appellate
review. Again, as held in Serrano:
Even in cases of dismissal under Art. 282, the purpose for the requirement
of notice and hearing is not to comply with the Due Process Clause of the
Constitution. The time for notice and hearing is at the trial stage. Then that
is the time we speak of notice and hearing as the essence of procedural due
process. Thus, compliance by the employer with the notice requirement
before he dismisses an employee does not foreclose the right of the latter to
question the legality of his dismissal. As Art. 277(b) provides, "Any decision
taken by the employer shall be without prejudice to the right of the worker
to contest the validity or legality of his dismissal by filing a complaint with
the regional branch of the National Labor Relations Commission. 62
The Labor Code presents no textually demonstrable commitment to
invalidate a dismissal for just cause due to the absence of notice or hearing.
This is not surprising, as such remedy will not restore the employer or
employee into equity. Absent a showing of integral causation, the mutual
infliction of wrongs does not negate either injury, but instead enforces two
independent rights of relief.
The Damages' Dimensions
Award for Damages Must Have Statutory Basis
The Court has grappled with the problem of what should be the proper
remedial relief of an employee dismissed with just cause, but not afforded
either notice or hearing. In a long line of cases, beginning with Wenphil
Corp. v. NLRC63 and up until Serrano in 2000, the Court had deemed an
indemnification award as sufficient to answer for the violation by the
employer against the employee. However, the doctrine was modified
in Serrano.
I disagree with Serrano insofar as it held that employees terminated for just
cause are to be paid backwages from the time employment was terminated
"until it is determined that the termination is for just cause because the
failure to hear him before he is dismissed renders the termination of his
employment without legal effect."64 Article 279 of the Labor Code clearly
authorizes the payment of backwages only if an employee is unjustly
dismissed. A dismissal for just cause is obviously antithetical to an unjust
dismissal. An award for backwages is not clearly warranted by the law.
The Impropriety of Award for Separation Pay
The formula of one month's pay for every year served does have statutory
basis. It is found though in the Labor Code though, not the Civil Code. Even
then, such computation is made for separation pay under the Labor Code.
But separation pay is not an appropriate as a remedy in this case, or in any
case wherein an employee is terminated for just cause. As Justice Vitug
noted in his separate opinion in Serrano, an employee whose employment is
terminated for a just cause is not entitled to the payment of separation
benefits.65 Separation pay is traditionally a monetary award paid as an
alternative to reinstatement which can no longer be effected in view of the
long passage of time or because of the realities of the situation. 66 However,
under Section 7, Rule 1, Book VI of the Omnibus Rules Implementing the
Labor Code, "[t]he separation from work of an employee for a just cause
does not entitle him to the termination pay provided in the Code." 67 Neither
does the Labor Code itself provide instances wherein separation pay is
warranted for dismissals with just cause. Separation pay is warranted only
for dismissals for authorized causes, as enumerated in Article 283 and 284 of
the Labor Code.
The Impropriety of Equity Awards
Admittedly, the Court has in the past authorized the award of separation pay
for duly terminated employees as a measure of social justice, provided that
the employee is not guilty of serious misconduct reflecting on moral
character.68 This doctrine is inapplicable in this case, as the Agabons are
guilty of abandonment, which is the deliberate and unjustified refusal of an
employee to resume his employment. Abandonment is tantamount to
serious misconduct, as it constitutes a willful breach of the employer-
employee relationship without cause.
The award of separation pay as a measure of social justice has no statutory
basis, but clearly emanates from the Court's so-called "equity jurisdiction."
The Court's equity jurisdiction as a basis for award, no matter what form it
may take, is likewise unwarranted in this case. Easy resort to equity should
be avoided, as it should yield to positive rules which pre-empt and prevail
over such persuasions.69 Abstract as the concept is, it does not admit to
definite and objective standards.
I consider the pronouncement regarding the proper monetary awards in
such cases as Wenphil Corp. v. NLRC,70Reta,71 and to a degree,
even Serrano as premised in part on equity. This decision is premised in part
due to the absence of cited statutory basis for these awards. In these cases,
the Court deemed an indemnity award proper without exactly saying where
in statute could such award be derived at. Perhaps, equity or social justice
can be invoked as basis for the award. However, this sort of arbitrariness,
indeterminacy and judicial usurpation of legislative prerogatives is precisely
the source of my discontent. Social justice should be the aspiration of all
that we do, yet I think it the more mature attitude to consider that it ebbs
and flows within our statutes, rather than view it as an independent source
of funding.
Article 288 of the Labor Code as a Source of Liability
Another putative source of liability for failure to render the notice
requirement is Article 288 of the Labor Code, which states:
Article 288 states:
Penalties. — Except as otherwise provided in this Code, or unless the acts
complained of hinges on a question of interpretation or implementation of
ambiguous provisions of an existing collective bargaining agreement, any
violation of the provisions of this Code declared to be unlawful or penal in
nature shall be punished with a fine of not less than One Thousand Pesos
(P1,000.00) nor more than Ten Thousand Pesos (P10,000.00), or
imprisonment of not less than three months nor more than three years, or
both such fine and imprisonment at the discretion of the court.
It is apparent from the provision that the penalty arises due to
contraventions of the provisions of the Labor Code. It is also clear that the
provision comes into play regardless of who the violator may be. Either the
employer or the employee may be penalized, or perhaps even officials
tasked with implementing the Labor Code.
However, it is apparent that Article 288 is a penal provision; hence, the
prescription for penalties such as fine and imprisonment. The Article is also
explicit that the imposition of fine or imprisonment is at the "discretion of
the court." Thus, the proceedings under the provision is penal in character.
The criminal case has to be instituted before the proper courts, and the
Labor Code violation subject thereof duly proven in an adversarial
proceeding. Hence, Article 288 cannot apply in this case and serve as basis
to impose a penalty on Riviera Homes.
I also maintain that under Article 288 the penalty should be paid to the
State, and not to the person or persons who may have suffered injury as a
result of the violation. A penalty is a sum of money which the law requires
to be paid by way of punishment for doing some act which is prohibited or
for not doing some act which is required to be done. 72 A penalty should be
distinguished from damages which is the pecuniary compensation or
indemnity to a person who has suffered loss, detriment, or injury, whether
to his person, property, or rights, on account of the unlawful act or omission
or negligence of another. Article 288 clearly serves as a punitive fine, rather
than a compensatory measure, since the provision penalizes an act that
violates the Labor Code even if such act does not cause actual injury to any
private person.
Independent of the employee's interests protected by the Labor Code is the
interest of the State in seeing to it that its regulatory laws are complied with.
Article 288 is intended to satiate the latter interest. Nothing in the language
of Article 288 indicates an intention to compensate or remunerate a private
person for injury he may have sustained.
It should be noted though that in Serrano, the Court observed that since the
promulgation of Wenphil Corp. v. NLRC73 in 1989, "fines imposed for
violations of the notice requirement have varied from P1,000.00
to P2,000.00 to P5,000.00 to P10,000.00."74 Interestingly, this range is the
same range of the penalties imposed by Article 288. These "fines" adverted
to in Serrano were paid to the dismissed employee. The use of the term
"fines," as well as the terminology employed a few other cases, 75 may have
left an erroneous impression that the award implemented beginning
with Wenphil was based on Article 288 of the Labor Code. Yet, an
examination of Wenphilreveals that what the Court actually awarded to the
employee was an "indemnity", dependent on the facts of each case and the
gravity of the omission committed by the employer. There is no mention
in Wenphil of Article 288 of the Labor Code, or indeed, of any statutory basis
for the award.
The Proper Basis: Employer's Liability under the Civil Code
As earlier stated, Wenphil allowed the payment of indemnity to the
employee dismissed for just cause is dependent on the facts of each case
and the gravity of the omission committed by the employer. However, I
considered Wenphil flawed insofar as it is silent as to the statutory basis for
the indemnity award. This failure, to my mind, renders it unwise for to
reinstate the Wenphil rule, and foster the impression that it is the judicial
business to invent awards for damages without clear statutory basis.
The proper legal basis for holding the employer liable for monetary
damages to the employee dismissed for just cause is the Civil Code. The
award of damages should be measured against the loss or injury sufered
by the employee by reason of the employer's violation or, in case of
nominal damages, the right vindicated by the award. This is the proper
paradigm authorized by our law, and designed to obtain the fairest
possible relief.
Under Section 217(4) of the Labor Code, the Labor Arbiter has jurisdiction
over claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations. It is thus the duty of Labor Arbiters
to adjudicate claims for damages, and they should disabuse themselves of
any inhibitions if it does appear that an award for damages is warranted. As
triers of facts in a specialized field, they should attune themselves to the
particular conditions or problems attendant to employer-employee
relationships, and thus be in the best possible position as to the nature and
amount of damages that may be warranted in this case.
The damages referred under Section 217(4) of the Labor Code are those
available under the Civil Code. It is but proper that the Civil Code serve as
the basis for the indemnity, it being the law that regulates the private
relations of the members of civil society, determining their respective rights
and obligations with reference to persons, things, and civil acts. 76 No matter
how impressed with the public interest the relationship between a private
employer and employee is, it still is ultimately a relationship between
private individuals. Notably, even though the Labor Code could very well
have provided set rules for damages arising from the employer-employee
relationship, referral was instead made to the concept of damages as
enumerated and defined under the Civil Code.
Given the long controversy that has dogged this present issue regarding
dismissals for just cause, it is wise to lay down standards that would guide
the proper award of damages under the Civil Code in cases wherein the
employer failed to comply with statutory due process in dismissals for just
cause.
First. I believe that it can be maintained as a general rule, that failure to
comply with the statutory requirement of notice automatically gives rise to
nominal damages, at the very least, even if the dismissal was sustained for
just cause.
Nominal damages are adjudicated in order that a right of a plaintiff which
has been violated or invaded by another may be vindicated or recognized
without having to indemnify the plaintiff for any loss suffered by
him.77 Nominal damages may likewise be awarded in every obligation arising
from law, contracts, quasi-contracts, acts or omissions punished by law, and
quasi-delicts, or where any property right has been invaded.
Clearly, the bare act of failing to observe the notice requirement gives rise to
nominal damages assessable against the employer and due the employee.
The Labor Code indubitably entitles the employee to notice even if dismissal
is for just cause, even if there is no apparent intent to void such dismissals
deficiently implemented. It has also been held that one's employment,
profession, trade, or calling is a "property right" and the wrongful
interference therewith gives rise to an actionable wrong. 78
In Better Buildings, Inc. v. NLRC,79 the Court ruled that the while the
termination therein was for just and valid cause, the manner of termination
was done in complete disregard of the necessary procedural
safeguards.80 The Court found nominal damages as the proper form of
award, as it was purposed to vindicate the right to procedural due process
violated by the employer. 81 A similar holding was maintained in Iran v.
NLRC82 and Malaya Shipping v. NLRC.83 The doctrine has express statutory
basis, duly recognizes the existence of the right to notice, and vindicates the
violation of such right. It is sound, logical, and should be adopted as a
general rule.
The assessment of nominal damages is left to the discretion of the
court,84 or in labor cases, of the Labor Arbiter and the successive appellate
levels. The authority to nominate standards governing the award of nominal
damages has clearly been delegated to the judicial branch, and it will serve
good purpose for this Court to provide such guidelines. Considering that the
affected right is a property right, there is justification in basing the amount
of nominal damages on the particular characteristics attaching to the
claimant's employment. Factors such as length of service, positions held,
and received salary may be considered to obtain the proper measure of
nominal damages. After all, the degree by which a property right should be
vindicated is affected by the estimable value of such right.
At the same time, it should be recognized that nominal damages are not
meant to be compensatory, and should not be computed through a formula
based on actual losses. Consequently, nominal damages usually limited in
pecuniary value.85 This fact should be impressed upon the prospective
claimant, especially one who is contemplating seeking actual/compensatory
damages.
Second. Actual or compensatory damages are not available as a matter of
right to an employee dismissed for just cause but denied statutory due
process. They must be based on clear factual and legal bases, 86 and
correspond to such pecuniary loss suffered by the employee as duly
proven.87 Evidently, there is less degree of discretion to award actual or
compensatory damages.
I recognize some inherent difficulties in establishing actual damages in cases
for terminations validated for just cause. The dismissed employee retains no
right to continued employment from the moment just cause for termination
exists, and such time most likely would have arrived even before the
employer is liable to send the first notice. As a result, an award of
backwages disguised as actual damages would almost never be justified if
the employee was dismissed for just cause. The possible exception would be
if it can be proven the ground for just cause came into being only after the
dismissed employee had stopped receiving wages from the employer.
Yet it is not impossible to establish a case for actual damages if dismissal was
for just cause. Particularly actionable, for example, is if the notices are not
served on the employee, thus hampering his/her opportunities to obtain
new employment. For as long as it can be demonstrated that the failure of
the employer to observe procedural due process mandated by the Labor
Code is the proximate cause of pecuniary loss or injury to the dismissed
employee, then actual or compensatory damages may be awarded.
Third. If there is a finding of pecuniary loss arising from the employer
violation, but the amount cannot be proved with certainty, then temperate
or moderate damages are available under Article 2224 of the Civil Code.
Again, sufficient discretion is afforded to the adjudicator as regards the
proper award, and the award must be reasonable under the
circumstances.88 Temperate or nominal damages may yet prove to be a
plausible remedy, especially when common sense dictates that pecuniary
loss was suffered, but incapable of precise definition.
Fourth. Moral and exemplary damages may also be awarded in the
appropriate circumstances. As pointed out by the Decision, moral damages
are recoverable where the dismissal of the employee was attended by bad
faith, fraud, or was done in a manner contrary to morals, good customs or
public policy, or the employer committed an act oppressive to
labor.89 Exemplary damages may avail if the dismissal was effected in a
wanton, oppressive or malevolent manner.
Appropriate Award of Damages to the Agabons
The records indicate no proof exists to justify the award of actual or
compensatory damages, as it has not been established that the failure to
serve the second notice on the Agabons was the proximate cause to any loss
or injury. In fact, there is not even any showing that such violation caused
any sort of injury or discomfort to the Agabons. Nor do they assert such
causal relation. Thus, the only appropriate award of damages is nominal
damages. Considering the circumstances, I agree that an award of Fifteen
Thousand Pesos (P15,000.00) each for the Agabons is sufficient.
All premises considered, I VOTE to:
(1) DENY the PETITION for lack of merit, and AFFIRM the Decision of the
Court of Appeals dated 23 January 2003, with the MODIFICATION that in
addition, Riviera Homes be
ORDERED to pay the petitioners the sum of Fifteen Thousand Pesos
(P15,000.00) each, as nominal damages.
(2) HOLD that henceforth, dismissals for just cause may not be invalidated
due to the failure to observe the due process requirements under the Labor
Code, and that the only indemnity award available to the employee
dismissed for just cause are damages under the Civil Code as duly proven.
Any and all previous rulings and statements of the Court inconsistent with
this holding are now deemed INOPERATIVE.
DANTE O. TINGA
Associate Justice
G.R. No. 108405 April 4, 2003
JAIME D. VIERNES, CARLOS R. GARCIA, BERNARD BUSTILLO, DANILO C.
BALANAG, FERDINAND DELLA, EDWARD A. ABELLERA, ALEXANDER
ABANAG, DOMINGO ASIA, FRANCISCO BAYUGA, ARTHUR M. ORIBELLO,
BUENAVENTURA DE GUZMAN, JR., ROBERT A. ORDOÑO, BERNARD V.
JULARBAL, IGNACIO C. ALINGBAS and LEODEL N. SORIANO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION), and
BENGUET ELECTRIC COOPERATIVE, INC. (BENECO) respondents.
AUSTRIA-MARTINEZ, J.:
Before us is a petition for certiorari seeking to annul the decision
promulgated by the National Labor Relations Commission (NLRC) on July 2,
1992 in NLRC CA No. L-000384-92, 1 and its resolution dated September 24,
1992 denying petitioners’ motion for reconsideration.
The factual background of this case, as summarized by the Labor Arbiter, is
as follows:
Fifteen (15) in all, these are consolidated cases for illegal dismissal,
underpayment of wages and claim for indemnity pay against a common
respondent, the Benguet Electric Cooperative, Inc., (BENECO for short)
represented by its Acting General Manager, Gerardo P. Versoza.
Complainants’ services as meter readers were contracted for hardly a
month’s duration, or from October 8 to 31, 1990. Their employment
contracts, couched in identical terms, read:
You are hereby appointed as METER READER (APPRENTICE) under BENECO-
NEA Management with compensation at the rate of SIXTY-SIX PESOS AND
SEVENTY-FIVE CENTAVOS (P66.75) per day from October 08 to 31, 1990.
x x x. (Annex ‘B’, Complainants’ Joint Position Paper)
The said term notwithstanding, the complainants were allowed to work
beyond October 31, 1990, or until January 2, 1991. On January 3, 1991, they
were each served their identical notices of termination dated December 29,
1990. The same read:
Please be informed that effective at the close of office hours of December
31, 1990, your services with the BENECO will be terminated. Your
termination has nothing to do with your performance. Rather, it is because
we have to retrench on personnel as we are already overstaffed.
x x x. (Annex ‘C’, CJPP)
On the same date, the complainants filed separate complaints for illegal
dismissal. And following the amendment of said complaints, they submitted
their joint position paper on April 4, 1991. Respondent filed its position
paper on April 2, 1991.
It is the contention of the complainants that they were not apprentices but
regular employees whose services were illegally and unjustly terminated in a
manner that was whimsical and capricious. On the other hand, the
respondent invokes Article 283 of the Labor Code in defense of the
questioned dismissal.2
On October 18, 1991, the Labor Arbiter rendered a decision, the dispositive
portion of which reads as follows:
WHEREFORE, judgment is hereby rendered:
1. Dismissing the complaints for illegal dismissal filed by the complainants
for lack of merit. However in view of the offer of the respondent to enter
into another temporary employment contract with the complainants, the
respondent is directed to so extend such contract to each complainant, with
the exception of Jaime Viernes, and to pay each the amount of P2,590.50,
which represents a month’s salary, as indemnity for its failure to give
complainants the 30-day notice mandated under Article 283 of the Labor
Code; or, at the option of the complainants, to pay each financial assistance
in the amount of P5,000.00 and the P2,590.50 above-mentioned.
2. Respondent is also ordered:
A. To pay complainants the amount representing underpayment of their
wages:
a) Jaime Viernes, Carlos Garcia, Danilo Balanag, Edward Abellera, Francisco
Bayuga, Arthur Oribello, Buenaventura de Guzman, Jr., Robert Ordoño,
Bernard Jularbal and Leodel Soriano, P1,994.25 each;
b) Bernard Bustillo and Domingo Asia, P1,838.50 each; and
c) Ferdinand Della, Alexander Abanag and Ignacio Alingbas, P1,816.25 each.
B. To extend to complainant Jaime Viernes an appointment as regular
employee for the position of meter reader, the job he held prior to his
termination, and to pay him P2,590.50 as indemnity, plus the underpayment
of his wages as above stated.
C. To pay P7,000.00 as and for attorney’s fees.
No damages.
SO ORDERED.3
Aggrieved by the Labor Arbiter’s decision, the complainants and the
respondent filed their respective appeals to the NLRC.
On July 2, 1992, the NLRC modified its judgment, to wit:
WHEREFORE, premises considered, judgment is hereby rendered modifying
the appealed decision by declaring complainants’ dismissal illegal, thus
ordering their reinstatement to their former position as meter readers or to
any equivalent position with payment of backwages limited to one year and
deleting the award of indemnity and attorney’s fees. The award of
underpayment of wages is hereby AFFIRMED.
SO ORDERED.4
On August 27, 1992, complainants filed a Motion for Clarification and Partial
Reconsideration.5 On September 24, 1992, the NLRC issued a resolution
denying the complainants’ motion for reconsideration. 6
Hence, complainants filed herein petition.
Private respondent BENECO filed its Comment; the Office of the Solicitor
General (OSG) filed a Manifestation and Motion in Lieu of Comment; public
respondent NLRC filed its own Comment; and petitioners filed their
Manifestation and Motion In Lieu of Consolidated Reply. Public respondent
NLRC, herein petitioners, and private respondent filed their respective
memoranda, and the OSG, its Manifestation in 1994.
Pursuant to our ruling in Rural Bank of Alaminos Employees Union vs.
NLRC,7 to wit:
…in the decision in the case of St. Martin Funeral Homes vs. National Labor
Relations Commission, G.R. No. 130866, promulgated on September 16,
1998, this Court pronounced that petitions for certiorari relating to NLRC
decisions must be filed directly with the Court of Appeals, and labor cases
pending before this Court should be referred to the appellate court for
proper disposition. However, in cases where the Memoranda of both parties
have been filed with this Court prior to the promulgation of the St. Martin
decision, the Court generally opts to take the case itself for its final
disposition.8
and considering that the parties have filed their respective memoranda as of
1994, we opt to resolve the issues raised in the present petition.
The parties raised the following issues:
1. Whether the respondent NLRC committed grave abuse of discretion in
ordering the reinstatement of petitioners to their former position as meter
readers on probationary status in spite of its finding that they are regular
employees under Article 280 of the Labor Code.
2. Whether the respondent NLRC committed grave abuse of discretion in
limiting the backwages of petitioners to one year only in spite of its finding
that they were illegally dismissed, which is contrary to the mandate of full
backwages until actual reinstatement but not to exceed three years.
3. Whether the respondent NLRC committed grave abuse of discretion in
deleting the award of indemnity pay which had become final because it was
not appealed and in deleting the award of attorney’s fees because of the
absence of a trial-type hearing.
4. Whether the mandate of immediately executory on the reinstatement
aspect even pending appeal as provided in the decision of Labor Arbiters
equally applies in the decision of the National Labor Relations Commission
even pending appeal, by means of a motion for reconsideration of the order
reinstating a dismissed employee or pending appeal because the case is
elevated on certiorari before the Supreme Court. 9
We find the petition partly meritorious.
As to the first issue: We sustain petitioners’ claim that they should be
reinstated to their former position as meter readers, not on a probationary
status, but as regular employees.
Reinstatement means restoration to a state or condition from which one had
been removed or separated.10 In case of probationary employment, Article
281 of the Labor Code requires the employer to make known to his
employee at the time of the latter’s engagement of the reasonable
standards under which he may qualify as a regular employee.
A review of the records shows that petitioners have never been
probationary employees. There is nothing in the letter of appointment, to
indicate that their employment as meter readers was on a probationary
basis. It was not shown that petitioners were informed by the private
respondent, at the time of the latter’s employment, of the reasonable
standards under which they could qualify as regular employees. Instead,
petitioners were initially engaged to perform their job for a limited duration,
their employment being fixed for a definite period, from October 8 to 31,
1990.
Private respondent’s reliance on the case of Brent School, Inc. vs.
Zamora,11 wherein we held as follows:
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. 12
is misplaced.
The principle we have enunciated in Brent applies only with respect to fixed
term employments. While it is true that petitioners were initially employed
on a fixed term basis as their employment contracts were only for October 8
to 31, 1990, after October 31, 1990, they were allowed to continue working
in the same capacity as meter readers without the benefit of a new contract
or agreement or without the term of their employment being fixed anew.
After October 31, 1990, the employment of petitioners is no longer on a
fixed term basis. The complexion of the employment relationship of
petitioners and private respondent is thereby totally changed. Petitioners
have attained the status of regular employees.
Under Article 280 of the Labor Code, a regular employee is one who is
engaged to perform activities which are necessary or desirable in the usual
business or trade of the employer, or a casual employee who has rendered
at least one year of service, whether continuous or broken, with respect to
the activity in which he is employed.
In De Leon vs. NLRC,13 and Abasolo vs. NLRC,14 we laid down the test in
determining regular employment, to wit:
The primary standard, therefore, of determining regular employment is the
reasonable connection between the particular activity performed by the
employee in relation to the usual trade or business of the employer. The test
is whether the former is usually necessary or desirable in the usual business
or trade of the employer. The connection can be determined by considering
the nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety. Also if the employee has been
performing the job for at least a year, even if the performance is not
continuous and merely intermittent, the law deems repeated and continuing
need for its performance as sufficient evidence of the necessity if not
indispensability of that activity to the business. Hence, the employment is
considered regular, but only with respect to such activity and while such
activity exists.15
Clearly therefrom, there are two separate instances whereby it can be
determined that an employment is regular: (1) The particular activity
performed by the employee is necessary or desirable in the usual business
or trade of the employer; or (2) if the employee has been performing the job
for at least a year.
Herein petitioners fall under the first category. They were engaged to
perform activities that are necessary to the usual business of private
respondent. We agree with the labor arbiter’s pronouncement that the job
of a meter reader is necessary to the business of private respondent
because unless a meter reader records the electric consumption of the
subscribing public, there could not be a valid basis for billing the customers
of private respondent. The fact that the petitioners were allowed to
continue working after the expiration of their employment contract is
evidence of the necessity and desirability of their service to private
respondent’s business. In addition, during the preliminary hearing of the
case on February 4, 1991, private respondent even offered to enter into
another temporary employment contract with petitioners. This only proves
private respondent’s need for the services of herein petitioners. With the
continuation of their employment beyond the original term, petitioners
have become full-fledged regular employees. The fact alone that petitioners
have rendered service for a period of less than six months does not make
their employment status as probationary.
Since petitioners are already regular employees at the time of their illegal
dismissal from employment, they are entitled to be reinstated to their
former position as regular employees, not merely probationary.
As to the second issue, Article 279 of the Labor Code, as amended by R.A.
No. 6715, which took effect on March 21, 1989, provides that an illegally
dismissed employee is entitled to full backwages, inclusive of allowances,
and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual
reinstatement. Since petitioners were employed on October 8, 1990, the
amended provisions of Article 279 of the Labor Code shall apply to the
present case. Hence, it was patently erroneous, tantamount to grave abuse
of discretion on the part of the public respondent in limiting to one year the
backwages awarded to petitioners.
With respect to the third issue, an employer becomes liable to pay
indemnity to an employee who has been dismissed if, in effecting such
dismissal, the employer fails to comply with the requirements of due
process.16 The indemnity is in the form of nominal damages intended not to
penalize the employer but to vindicate or recognize the employee’s right to
procedural due process which was violated by the employer. 17 Under Article
2221 of the Civil Code, nominal damages are adjudicated in order that a
right of the plaintiff, which has been violated or invaded by the defendant,
may be vindicated or recognized, and not for the purpose of indemnifying
the plaintiff for any loss suffered by him.
We do not agree with the ruling of the NLRC that indemnity is incompatible
with the award of backwages. These two awards are based on different
considerations. Backwages are granted on grounds of equity to workers for
earnings lost due to their illegal dismissal from work. 18 On the other hand,
the award of indemnity, as we have earlier held, is meant to vindicate or
recognize the right of an employee to due process which has been violated
by the employer.
In the present case, the private respondent, in effecting the dismissal of
petitioners from their employment, failed to comply with the provisions of
Article 283 of the Labor Code which requires an employer to serve a notice
of dismissal upon the employees sought to be terminated and to the
Department of Labor, at least one month before the intended date of
termination. Petitioners were served notice on January 3, 1991 terminating
their services, effective December 29, 1990, or retroactively, in
contravention of Article 283. This renders the private respondent liable to
pay indemnity to petitioners.
Thus, we find that the NLRC committed grave abuse of discretion in deleting
the award of indemnity. In Del Val vs. NLRC,19 we held that the award of
indemnity ranges from P1,000.00 to P10,000.00 depending on the particular
circumstances of each case. In the present case, the amount of indemnity
awarded by the labor arbiter is P2,590.50, which is equivalent to petitioners’
one-month salary. We find no cogent reason to modify said award, for being
just and reasonable.
As to the award of attorney’s fees, the same is justified by the provisions of
Article 111 of the Labor Code, to wit:
Art. 111. Attorney’s fees – (a) In cases of unlawful withholding of wages the
culpable party may be assessed attorney’s fees equivalent to ten percent of
the amount of wages recovered.
(b) It shall be unlawful for any person to demand or accept, in any judicial or
administrative proceedings for the recovery of the wages, attorney’s fees
which exceed ten percent of the amount of wages recovered.
As to the last issue, Article 223 of the Labor Code is plain and clear that the
decision of the NLRC shall be final and executory after ten (10) calendar days
from receipt thereof by the parties. In addition, Section 2(b), Rule VIII of the
New Rules of Procedure of the NLRC provides that "should there be a
motion for reconsideration entertained pursuant to Section 14, Rule VII of
these Rules, the decision shall be executory after ten calendar days from
receipt of the resolution on such motion."
We find nothing inconsistent or contradictory between Article 223 of the
Labor Code and Section 2(b), Rule VIII, of the NLRC Rules of Procedure. The
aforecited provision of the NLRC Rules of Procedure merely provides for
situations where a motion for reconsideration is filed. Since the Rules allow
the filing of a motion for reconsideration of a decision of the NLRC, it simply
follows that the ten-day period provided under Article 223 of the Labor
Code should be reckoned from the date of receipt by the parties of the
resolution on such motion. In the case at bar, petitioners received the
resolution of the NLRC denying their motion for reconsideration on October
22, 1992. Hence, it is on November 2, 1992 that the questioned decision
became executory.
WHEREFORE, the petition is partially GRANTED. The decision of the National
Labor Relations Commission dated July 2, 1992 is MODIFIED. Private
respondent Benguet Electric Cooperative, Inc. (BENECO) is hereby ordered
to reinstate petitioners to their former or substantially equivalent position as
regular employees, without loss of seniority rights and other privileges
appurtenant thereto, with full backwages from the time of their dismissal
until they are actually reinstated. The amount of P2,590.50 awarded by the
labor arbiter as indemnity to petitioners is REINSTATED. Private respondent
is also ordered to pay attorney’s fees in the amount of ten percent (10%) of
the total monetary award due to the petitioners. In all other respects the
assailed decision and resolution are AFFIRMED.
Costs against private respondent BENECO.
SO ORDERED.
G.R. No. 149629 October 4, 2004
ALAN D. GUSTILO, Petitioner,
vs.
WYETH PHILIPPINES, INC., FILEMON VERZANO, JR., AURELIO MERCADO
and EDGAR EPILEPSIA,respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
At bar is a petition for review on certiorari under Rule 45 of the 1997 Rules
of Civil Procedure, as amended, assailing the Decision 1 dated January 24,
2001 and Resolution2 dated August 10, 2001 rendered by the Court of
Appeals in CA-G.R. SP No. 57545, entitled "Wyeth Phils., Inc. and/or Filemon
Verzano, Jr., Aurelio Mercado and Edgar Epilepsia vs. National Labor
Relations Commission (Fourth Division) and Alan Gustilo."
The facts as borne by the records are:
On November 7, 1990, Alan D. Gustilo, petitioner, was employed by Wyeth
Philippines, Inc., respondent company, as a pharmaceutical territory
manager. Eventually, he was placed in charge of its various branches in
Metro Bacolod City and Negros Occidental. To ensure a profitable sale of its
pharmaceutical products, he performed various functions, such as visiting
hospitals, pharmacies, drugstores and physicians concerned; preparing and
submitting his pre-dated itinerary; and submitting periodic reports of his
daily call visits, monthly itinerary, and weekly locator and incurred expenses.
Petitioner’s employment records show that respondent company, on various
dates, reprimanded and suspended him for habitually neglecting to submit
his periodic reports. On November 28, 1994, respondent company sent
petitioner a notice reprimanding him for submitting late his weekly expense
report. Again, on July 5, 1995, he was late in submitting the same report,
prompting respondent company to suspend him for five (5) days. Still,
petitioner repeatedly incurred delay in submitting his daily call reports dated
October 16-20, 1995, October 23-27, 1995, November 6-10, 1995, and
November 13-17, 1995. He did not submit his daily call reports for the
period from November 20 to 24, 1995. As a consequence, respondent
company sent petitioner another notice suspending him for fifteen (15) days
or from January 2 to 22, 1996.
Meantime, respondent company, after integrating its pharmaceutical
products with Lederle, a sister company, conducted a nationwide on-the-job
training of sales personnel. With this development, petitioner was assigned
in charge of promoting four (4) Lederle pharmaceutical products.
Subsequently, petitioner submitted to respondent company a plan of action
dated February 6, 1996 where he committed to make an average of 18 daily
calls to physicians; submit promptly all periodic reports; and ensure 95% 2. Separation pay ……………………. 106,890.00
territory program performance for every cycle.
3. Car reimbursement ………………. 68,000.00
However, petitioner failed to achieve the above objectives, prompting
respondent company to send him two (2) separate notices dated February
4. Moral damages ……………………. 25,000.00
20, 1996 and April 10, 1996, charging him with willful violation of company
rules and regulations and directing him to submit a written explanation.
5. Exemplary damages ……………. 25,000.00
In his explanation, petitioner stated that he was overworked and an object
of reprisal by his immediate supervisor. 6. Attorney’s fees ……………………. 90,105.26

On May 22, 1996, upon recommendation of a Review Panel, respondent

company terminated the services of petitioner.
Aggrieved, petitioner, on June 21, 1996, filed with the Regional Arbitration
Branch No. VI at Bacolod City a complaint against respondent company for
illegal suspension, illegal dismissal and payment of allowances, other
monetary benefits, damages and attorney’s fees, docketed as RAB Case No.
06-10267-96. Impleaded also as party respondents were Filemon Verzano,
Jr., petitioner’s immediate supervisor, and Aurelio Mercado and Edgar
Epilepsia, corporate officers of respondent company.
Grand Total ……………………………. P 991,157.90
Respondents are further directed to deposit the total amount of NINE
HUNDRED NINETY ONE THOUSAND ONE HUNDRED FIFTY SEVEN PESOS and
90/100 (P991,157.90) with the Cashier, this Arbitration Branch, within ten
(10) days from receipt hereof, for proper disposition.
SO ORDERED."

On March 5, 1998, the Labor Arbiter rendered a Decision holding that Respondents then appealed to the National Labor Relations Commission
petitioner was illegally dismissed from employment and ordering (NLRC), Fourth Division at Cebu City.
respondents company and Verzano, jointly and severally, to pay
On August 13, 1999, the NLRC (Fourth Division) promulgated a Decision
him P991,157.90 representing his backwages, separation pay, car
affirming with modification the Labor Arbiter’s Decision in the sense that
reimbursement, damages and attorney’s fees. The dispositive portion of the
respondent company is ordered to reinstate petitioner, or in lieu of
Decision reads:
reinstatement, to pay his separation benefits, thus:
"WHEREFORE, premises considered, judgment is hereby rendered against
"WHEREFORE, premises considered, the appeal filed by complainant is
respondent company WYETH PHILS., INC. and respondent FILEMON
GRANTED and that of respondents is DENIED. The Decision of Labor Arbiter
VERZANO, JR., ordering them to pay jointly and severally, complainant ALAN
Reynaldo J. Gulmatico dated March 5, 1998 is MODIFIED, to wit:
D. GUSTILO, the following:
Respondents are ordered:
1. Backwages ………………………. P 676,162.64
1. To reinstate complainant Alan Gustilo to his former position without loss
of seniority rights and other privileges and to pay his full backwages,
inclusive of allowances and other benefits, or their monetary equivalent
computed from the time his compensation was withheld from him up to the
time of his actual reinstatement. If reinstatement is no longer feasible,
complainant may opt to receive his separation pay equivalent to at least one
month salary for every year of service, in lieu of reinstatement.
2. To refund, jointly and severally, complainant in the amount of P4,190.00;
and
3. To pay 10% of the total monetary award as attorney’s fees.
SO ORDERED."
Respondents filed their motion for reconsideration but was denied by the
NLRC in a Resolution dated December 28, 1999.
As a consequence, respondents filed with the Court of Appeals a petition for
certiorari with prayer for issuance of a temporary restraining order and a
writ of preliminary injunction.
On January 24, 2001, the Appellate Court rendered a Decision reversing the
NLRC’s Decision and dismissing petitioner’s complaint for illegal dismissal,
but awarding him separation pay considering the mitigating "factors" of
length of service, the loyalty awards he received, and respondent Verzano’s
"grudge" against him.
The Court of Appeals held:
"Respondent Gustilo cannot deny the numerous violations of company rules
during his employment with Wyeth. Gustilo’s 201 file reveal the following:
1. On February 2, 1993, he was suspended for falsifying, tampering and/or
altering the gasoline receipt (Annex ‘12’, Wyeth’s Position Paper, Rollo, p.
142).
2. On June 28, 1993, he was warned for false reporting of his trade outlet
calls (Annex ‘13’, Wyeth’s Position Paper, Rollo, p. 143).
3. On September 8, 1993, he was guilty of unauthorized availment of sick
leaves, emergency leaves, vacation leaves and unauthorized absences
(Annex ‘14’, Wyeth’s Position Paper, Rollo, p. 144).
4. On November 28, 1994, he was cited for his repeated delay in submitting
his expense reports (Annex ‘4’, Wyeth’s Position Paper, Rollo, p. 132).
5. On July 10, 1995, he was cited for failure to submit his expense report on
time (Annex ‘5’, Wyeth’s Position Paper, Rollo, p. 133).
6. On September 26, 1995, he was charged with breach of the rule on
submission of required reports (Annex ‘8’, Wyeth’s Position Paper, Rollo, p.
136).
7. On November 28, 1995, he was again cited for unauthorized absence on
October 19, 1995 and other violations of company rules as contained in a
letter of the same date (Annex ‘9’, Wyeth’s Position Paper, Rollo, p. 137).
From 1993 up to 1995, respondent has repeatedly guaranteed not to repeat
transgressing company rules under pain of termination, but to no avail
(Letter dated January 16, 1993; Rollo, p. 141; Internal Memo dated February
1, 1993; Rollo, p. 142; Internal Memo dated July 11, 1995; Rollo, p. 134; Plan
of Action dated February 6, 1996; Rollo, p. 147). It has become clear that
respondent Gustilo is a habitual ofender whose numerous contraventions
of company rules has left Wyeth with no choice but to terminate him
based on Article 282 of the Labor Code, gross and habitual neglect by the
employee of his duties, being a valid cause for termination.
While dismissal is proper, the Court however considers the length of
service of respondent Gustilo with Wyeth, the loyalty awards he received
and the grudge of petitioner Verzano, Jr. as mitigating factors. The Court is
inclined to reinstate respondent Gustilo to his former position without
backwages and other benefits. However in view of the strained
relationship between respondent Gustilo and petitioner Verzano, Jr., the
Court rules to award separation pay to respondent Gustilo in the amount
of P106,890.00.
In view of our finding that there are valid causes for dismissal, it follows that
the award for payment of backwages, damages and attorney’s fees has to be
recalled for want of basis.
Being uncontested, the refund of car expenses in the amount of P4,190.00
to respondent Gustilo and payment of P68,000.00 representing the
difference between the KIA car, the supposed car and the NISSAN LEC have
to be maintained.
In view of our finding that there was a valid dismissal, petitioners Aurello
Mercado and Edgar Epilepsia, as a consequence, cannot be held personally
liable to respondent Gustilo. Even assuming ex grati argumentithat
termination is illegal, corporate officers like petitioners Mercado and
Epilepsia are mere agents of Wyeth and acts done in good faith and in
representation or on behalf of said company and within the scope of their
authority cannot give rise to any liability on their part as said acts are
considered corporate acts.
xxx
WHEREFORE, the subject Decision and Resolution, promulgated on August
13, 1999 and December 28, 1999, respectively, by respondent National
Labor Relations Commission are SET ASIDE and REVERSED and a new
judgment is rendered, as follows:
1. The Complaint for illegal dismissal against petitioners Wyeth Philippines,
Inc., Aurelio Mercado and Edgar Epilepsia is dismissed for lack of merit;
2. Petitioner Wyeth Philippines, Inc. is ordered to pay respondent Alan
Gustilo P106,890.00 as separation pay;
3. Wyeth Philippines, Inc. is ordered to pay respondent Gustilo P68,000.00
representing the difference between the prices of the supposed car, KIA and
the NISSAN LEC, and P4,190.00 equivalent to the cost of one piece of tire,
headlight and tire wrench.
SO ORDERED."
On February 16, 2001, petitioner filed a motion for reconsideration, but was
denied by the Appellate Court in a Resolution dated August 10, 2001.
Hence, this petition for review on certiorari.
Petitioner, in the present petition, contends that he was illegally dismissed
from the service by respondent company. Hence, he should be reinstated
and paid his full backwages and other benefits and privileges.
In Philippine Journalists, Inc. vs. Mosqueda,3 we reiterated the well-
established rule that "findings of fact by the Court of Appeals are conclusive
on the parties and are not reviewable by this Court. x x x. The rationale
behind this doctrine is that review of the findings of fact by the Court of
Appeals is not a function that the Supreme Court normally undertakes."
Here, the Court of Appeals unequivocally ruled that "Gustilo (herein
petitioner) is a habitual ofender whose numerous contraventions of
company rules has left Wyeth (herein respondent) with no choice but to
terminate his services x x x."
Evidently, there is no cogent reason why we should not accord deference
and finality to the Appellate Court’s factual findings which are supported by
substantial evidence as shown by the records.
In Family Planning Organization of the Philippines, Inc. vs. NLRC,4 we held:
"It is the employer's prerogative to prescribe reasonable rules and
regulations necessary or proper for the conduct of its business or concern,
to provide certain disciplinary measures to implement said rules and to
assure that the same be complied with. At the same time, it is one of the
fundamental duties of the employee to yield obedience to all reasonable
rules, orders, and instructions of the employer, and willful or intentional
disobedience thereof, as a general rule, justifies rescission of the contract of
service and the preemptory dismissal of the employee."
Records show the various violations of respondent company’s rules and
regulations committed by petitioner. His dismissal from the service is,
therefore, in order. Indeed, in Piedad vs. Lanao del Norte Electric
Cooperative, Inc.,5we ruled that a series of irregularities when put together
may constitute serious misconduct, which under Article 282 of the Labor
Code, as amended,6 is a just cause for dismissal.
But the Court of Appeals still awarded him separation pay of P106,890.00 by
reason of several mitigating factors mentioned in its assailed Decision. The
issue for our determination now is whether he is entitled to such an award.
The rule embodied in the Omnibus Rules Implementing the Labor Code is
that a person dismissed for cause as defined therein is not entitled to
separation pay.7 However, in PLDT vs. NLRC and Abucay,8 we held:
"x x x henceforth, separation pay shall be allowed as a measure of social
justice only in those instances where the employee is validly dismissed for
causes other than serious misconduct or those reflecting on his moral
character. Where the reason for the valid dismissal is, x x x an offense
involving moral turpitude x x x, the employer may not be required to give
the dismissed employee separation pay, or financial assistance, or whatever
other name it is called, on the ground of social justice."
Similarly, in Telefunken Semiconductors Employees Union-FFW vs. Court of
Appeals,9 we ruled:
"The same view holds with respect to the award of financial assistance or
separation pay. The assumption for granting financial assistance or
separation pay, which is, that there is an illegally dismissed employee and
that illegally dismissed employee would otherwise have been entitled to
reinstatement, is not present in the case at bench. Here, the striking workers
have been validly dismissed ‘Where the employee’s dismissal was for a just
cause, it would be neither fair nor just to allow the employee to recover
something he has not earned or could not have earned. This being so, there
can be no award of backwages, for it must be pointed out that while
backwages are granted on the basis of equity for earnings which a worker or
employee has lost due to his illegal dismissal, where private respondent’s
dismissal is for just cause, as in the case herein, there is no factual or legal
basis to order the payment of backwages; otherwise, private respondent
would be unjustly enriching herself at the expense of petitioners.’ (Cathedral
School of Technology vs. National Labor Relations Commission, 214 SCRA
551). Consequently, granting financial assistance to the strikers is clearly
a ‘specious inconsistency’ (supra). We are of course aware that financial
assistance may be allowed as a measure of social justice in exceptional
circumstances and as an equitable concession. We are likewise mindful
that financial assistance is allowed only in those instances where the
employee is validly dismissed for causes other than serious misconduct or
those reflecting on his moral character (Zenco Sales, Inc. vs. National Labor
Relations Commission, 234 SCRA 689). x x x."
In the case at bar, we find no exceptional circumstances to warrant the grant
of financial assistance or separation pay to petitioner. It bears stressing
that petitioner did not only violate company disciplinary rules and
regulations. As found by the Court of Appeals, he falsified his employment
application form by not stating therein that he is the nephew of Mr.
Danao, respondent Wyeth’s Nutritional Territory Manager. Also, on
February 2, 1993, he was suspended for falsifying a gasoline receipt. On
June 28, 1993, he was warned for submitting a false report of his trade
outlet calls. On September 8, 1993, he was found guilty of unauthorized
availment of sick, vacation and emergency leaves. These infractions
manifest his slack of moral principle. In simple term, he is dishonest.
Neither can petitioner find reliance on the policy of social justice. As aptly
held by this Court in the same case ofPhilippine Long Distance Telephone vs.
NLRC and Abucay,10 "[T]hose who invoke social justice may do so only if their
hands are clean and their motives blameless x x x." Here, petitioner failed to
measure up to such requirement.
In sum, we find that petitioner was legally dismissed from employment and
is, therefore, not entitled to reinstatement or an award of separation pay or
other benefits. Unfortunately, respondent company did not interpose an
appeal to this Court. Hence, no affirmative relief can be extended to it. A
party in a case who did not appeal is not entitled to any affirmative
relief.11 Thus, respondent company has to comply with the Appellate Court’s
mandate to grant petitioner his separation pay.
WHEREFORE, the petition is DENIED. Costs against petitioner.
SO ORDERED.
G.R. No. 151378. March 28, 2005
JAKA FOOD PROCESSING CORPORATION, Petitioners,
vs.
DARWIN PACOT, ROBERT PAROHINOG, DAVID BISNAR, MARLON
DOMINGO, RHOEL LESCANO and JONATHAN CAGABCAB, Respondents.
DECISION
GARCIA, J.:
Assailed and sought to be set aside in this appeal by way of a petition for
review on certiorari under rule 45 of the Rules of Court are the following
issuances of the Court of Appeals in CA-G.R. SP. No. 59847, to wit:
1. Decision dated 16 November 2001,1 reversing and setting aside an earlier
decision of the National Labor Relations Commission (NLRC); and
2. Resolution dated 8 January 2002, 2 denying petitioner’s motion for
reconsideration.
The material facts may be briefly stated, as follows:
Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon
Domingo, Rhoel Lescano and Jonathan Cagabcab were earlier hired by
petitioner JAKA Foods Processing Corporation (JAKA, for short) until the
latter terminated their employment on August 29, 1997 because the
corporation was "in dire financial straits". It is not disputed, however, that
the termination was effected without JAKA complying with the requirement
under Article 283 of the Labor Code regarding the service of a written notice
upon the employees and the Department of Labor and Employment at least
one (1) month before the intended date of termination.
In time, respondents separately filed with the regional Arbitration Branch of
the National Labor Relations Commission (NLRC) complaints for illegal
dismissal, underpayment of wages and nonpayment of service incentive
leave and 13th month pay against JAKA and its HRD Manager, Rosana
Castelo.
After due proceedings, the Labor Arbiter rendered a decision 3 declaring the
termination illegal and ordering JAKA and its HRD Manager to reinstate
respondents with full backwages, and separation pay if reinstatement is not
possible. More specifically the decision dispositively reads:
WHEREFORE, judgment is hereby rendered declaring as illegal the
termination of complainants and ordering respondents to reinstate them to
their positions with full backwages which as of July 30, 1998 have already
amounted to P339,768.00. Respondents are also ordered to pay
complainants the amount of P2,775.00 representing the unpaid service
incentive leave pay of Parohinog, Lescano and Cagabcab an the amount of
P19,239.96 as payment for 1997 13th month pay as alluded in the above
computation.
If complainants could not be reinstated, respondents are ordered to pay
them separation pay equivalent to one month salary for very (sic) year of
service.
SO ORDERED.
Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated
August 30, 1999,4 affirmed in toto that of the Labor Arbiter.
JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out
with another decision dated January 28, 2000, 5 this time modifying its
earlier decision, thus:
WHEREFORE, premises considered, the instant motion for reconsideration is
hereby GRANTED and the challenged decision of this Commission [dated] 30
August 1999 and the decision of the Labor Arbiter xxx are hereby modified
by reversing an setting aside the awards of backwages, service incentive
leave pay. Each of the complainants-appellees shall be entitled to a
separation pay equivalent to one month. In addition, respondents-
appellants is (sic) ordered to pay each of the complainants-appellees the
sum of P2,000.00 as indemnification for its failure to observe due process in
effecting the retrenchment.
SO ORDERED.
Their motion for reconsideration having been denied by the NLRC in its
resolution of April 28, 2000, 6 respondents went to the Court of Appeals via a
petition for certiorari, thereat docketed as CA-G.R. SP No. 59847.
As stated at the outset hereof, the Court of Appeals, in a decision dated
November 16, 2000, applying the doctrine laid down by this Court
in Serrano vs. NLRC,7 reversed and set aside the NLRC’s decision of January
28, 2000, thus:
WHEREFORE, the decision dated January 28, 2000 of the National Labor
Relations Commission is REVERSEDand SET ASIDE and another one entered
ordering respondent JAKA Foods Processing Corporation to pay petitioners
separation pay equivalent to one (1) month salary, the proportionate 13th
month pay and, in addition, full backwages from the time their employment
was terminated on August 29, 1997 up to the time the Decision herein
becomes final.
SO ORDERED.
This time, JAKA moved for a reconsideration but its motion was denied by
the appellate court in its resolution of January 8, 2002.
Hence, JAKA’s present recourse, submitting, for our consideration, the
following issues:
"I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED ‘FULL
BACKWAGES’ TO RESPONDENTS.
II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED
SEPARATION PAY TO RESPONDENTS".
As we see it, there is only one question that requires resolution, i.e. what
are the legal implications of a situation where an employee is dismissed for
cause but such dismissal was effected without the employer’s compliance
with the notice requirement under the Labor Code.
This, certainly, is not a case of first impression. In the very recent case
of Agabon vs. NLRC,8 we had the opportunity to resolve a similar question.
Therein, we found that the employees committed a grave
offense, i.e.,abandonment, which is a form of a neglect of duty which, in
turn, is one of the just causes enumerated under Article 282 of the Labor
Code. In said case, we upheld the validity of the dismissal despite non-
compliance with the notice requirement of the Labor Code. However, we
required the employer to pay the dismissed employees the amount of
P30,000.00, representing nominal damages for non-compliance with
statutory due process, thus:
"Where the dismissal is for a just cause, as in the instant case, the lack of
statutory due process should not nullify the dismissal, or render it illegal, or
ineffectual. However, the employer should indemnify the employee for the
violation of his statutory rights, as ruled in Reta vs. National Labor Relations
Commission. The indemnity to be imposed should be stiffer to discourage
the abhorrent practice of ‘dismiss now, pay later,’ which we sought to deter
in the Serrano ruling. The sanction should be in the nature of
indemnification or penalty and should depend on the facts of each case,
taking into special consideration the gravity of the due process violation of
the employer.
xxx xxx xxx
The violation of petitioners’ right to statutory due process by the private
respondent warrants the payment of indemnity in the form of nominal
damages. The amount of such damages is addressed to the sound discretion
of the court, taking into account the relevant circumstances. Considering
the prevailing circumstances in the case at bar, we deem it proper to fix it
at P30,000.00. We believe this form of damages would serve to deter
employers from future violations of the statutory due process rights of
employees. At the very least, it provides a vindication or recognition of this
fundamental right granted to the latter under the Labor Code and its
Implementing Rules," (Emphasis supplied).
The difference between Agabon and the instant case is that in the former,
the dismissal was based on a just cause under Article 282 of the Labor Code
while in the present case, respondents were dismissed due to retrenchment,
which is one of the authorized causes under Article 283 of the same Code.
At this point, we note that there are divergent implications of a dismissal for
just cause under Article 282, on one hand, and a dismissal for authorized
cause under Article 283, on the other.
A dismissal for just cause under Article 282 implies that the employee
concerned has committed, or is guilty of, some violation against the
employer, i.e. the employee has committed some serious misconduct, is
guilty of some fraud against the employer, or, as in Agabon, he has
neglected his duties. Thus, it can be said that the employee himself initiated
the dismissal process.
On another breath, a dismissal for an authorized cause under Article 283
does not necessarily imply delinquency or culpability on the part of the
employee. Instead, the dismissal process is initiated by the employer’s
exercise of his management prerogative, i.e. when the employer opts to
install labor saving devices, when he decides to cease business operations or
when, as in this case, he undertakes to implement a retrenchment program.
The clear-cut distinction between a dismissal for just cause under Article 282
and a dismissal for authorized cause under Article 283 is further reinforced
by the fact that in the first, payment of separation pay, as a rule, is not
required, while in the second, the law requires payment of separation pay. 9
For these reasons, there ought to be a difference in treatment when the
ground for dismissal is one of the just causes under Article 282, and when
based on one of the authorized causes under Article 283.
Accordingly, it is wise to hold that: (1) if the dismissal is based on a just
cause under Article 282 but the employer failed to comply with the notice
requirement, the sanction to be imposed upon him should
be tempered because the dismissal process was, in effect, initiated by an act
imputable to the employee; and (2) if the dismissal is based on an
authorized cause under Article 283 but the employer failed to comply with
the notice requirement, the sanction should be stiffer because the dismissal
process was initiated by the employer’s exercise of his management
prerogative.
The records before us reveal that, indeed, JAKA was suffering from serious
business losses at the time it terminated respondents’ employment. As aptly
found by the NLRC:
"A careful study of the evidence presented by the respondent-appellant
corporation shows that the audited Financial Statement of the corporation
for the periods 1996, 1997 and 1998 were submitted by the respondent-
appellant corporation, The Statement of Income and Deficit found in the
Audited Financial Statement of the respondent-appellant corporation clearly
shows the following in 1996, the deficit of the respondent-appellant
corporation was P188,218,419.00 or 94.11% of the stockholder’s [sic] equity
which amounts to P200,000,000.00. In 1997 when the retrenchment
program of respondent-appellant corporation was undertaken, the deficit
ballooned to P247,222,569.00 or 123.61% of the stockholders’ equity, thus a
capital deficiency or impairment of equity ensued. In 1998, the deficit grew
to P355,794,897.00 or 177% of the stockholders’ equity. From 1996 to 1997,
the deficit grew by more that (sic) 31% while in 1998 the deficit grew by
more than 47%.
The Statement of Income and Deficit of the respondent-appellant
corporation to prove its alleged losses was prepared by an independent
auditor, SGV & Co. It convincingly showed that the respondent-appellant
corporation was in dire financial straits, which the complainants-appellees
failed to dispute. The losses incurred by the respondent-appellant
corporation are clearly substantial and sufficiently proven with clear and
satisfactory evidence. Losses incurred were adequately shown with
respondent-appellant’s audited financial statement. Having established the
loss incurred by the respondent-appellant corporation, it necessarily
necessarily (sic) follows that the ground in support of retrenchment existed
at the time the complainants-appellees were terminated. We cannot
therefore sustain the findings of the Labor Arbiter that the alleged losses of
the respondent-appellant was [sic] not well substantiated by substantial
proofs. It is therefore logical for the corporation to implement a
retrenchment program to prevent further losses." 10
Noteworthy it is, moreover, to state that herein respondents did not assail
the foregoing finding of the NLRC which, incidentally, was also affirmed by
the Court of Appeals.
It is, therefore, established that there was ground for respondents’
dismissal, i.e., retrenchment, which is one of the authorized causes
enumerated under Article 283 of the Labor Code. Likewise, it is established
that JAKA failed to comply with the notice requirement under the same
Article. Considering the factual circumstances in the instant case and the
above ratiocination, we, therefore, deem it proper to fix the indemnity at
P50,000.00.
We likewise find the Court of Appeals to have been in error when it ordered
JAKA to pay respondents separation pay equivalent to one (1) month salary
for every year of service. This is because in Reahs Corporation vs. NLRC,11 we
made the following declaration:
"The rule, therefore, is that in all cases of business closure or cessation of
operation or undertaking of the employer, the affected employee is entitled
to separation pay. This is consistent with the state policy of treating labor as
a primary social economic force, affording full protection to its rights as well
as its welfare. The exception is when the closure of business or cessation of
operations is due to serious business losses or financial reverses; duly
proved, in which case, the right of afected employees to separation pay is
lost for obvious reasons. xxx". (Emphasis supplied)
WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed
decision and resolution of the Court of Appeals respectively dated
November 16, 2001 and January 8, 2002 are hereby SET ASIDE and a new
one entered upholding the legality of the dismissal but ordering petitioner
to pay each of the respondents the amount of P50,000.00, representing
nominal damages for non-compliance with statutory due process.
SO ORDERED.