JURISPRUDENCE ON LABOR LAW

2009-2010

AUGUST 2010

Labor Law

Dismissal; abandonment. Time and again, the Supreme Court has held that
abandonment is totally inconsistent with the immediate filing of a complaint for
illegal dismissal, more so if the same is accompanied by a prayer for reinstatement.
In the present case, however, petitioner filed his complaint more than one year
after his alleged termination from employment. Moreover, petitioner did not ask for
reinstatement in the complaint form, which he personally filled up and filed with the
NLRC. The prayer for reinstatement is made only in the Position Paper that was later
prepared by his counsel. This is an indication that petitioner never had the intention
or desire to return to his job. Elpidio Calipay vs. National Labor Relations
Commission, et al., G.R. No. 166411, August 3, 2010.

Dismissal; burden of proof. In termination cases, the employer has the burden of
proving, by substantial evidence that the dismissal is for just cause. If the employer
fails to discharge the burden of proof, the dismissal is deemed illegal. In the present
case, BCPI failed to discharge its burden when it failed to present any evidence of
the alleged fistfight, aside from a single statement, which was refuted by
statements made by other witnesses and was found to be incredible by both the
Labor Arbiter and the NLRC. Alex Gurango vs. Best Chemicals and Plastic, Inc., et
al., G.R. No. 174593, August 25, 2010.

Dismissal; burden of proof. The law mandates that the burden of proving the
validity of the termination of employment rests with the employer. Failure to
discharge this evidentiary burden would necessarily mean that the dismissal was
not justified and, therefore, illegal. Unsubstantiated suspicions, accusations, and
conclusions of employers do not provide for legal justification for dismissing
employees. In case of doubt, such cases should be resolved in favor of labor,
pursuant to the social justice policy of labor laws and the Constitution. Century
Canning Corporation, Ricardo T. Po, Jr., et al. vs. Vicente Randy R. Ramil, G.R. No.
171630, August 8, 2010.

Dismissal; due process. In termination proceedings of employees, procedural due

process consists of the twin requirements of notice and hearing. The employer must
furnish the employee with two written notices before the termination of
employment can be effected: (1) the first apprises the employee of the particular
acts or omissions for which his dismissal is sought; and (2) the second informs the
employee of the employer’s decision to dismiss him. The requirement of a hearing
is complied with as long as there was an opportunity to be heard, and not
necessarily that an actual hearing was conducted. Pharmacia and Upjohn, Inc., et
al. vs. Ricardo P. Albayda, Jr., G.R. No. 172724, August 23, 2010.

Dismissal; due process. The Labor Code recognizes the right to due process of all
workers, without distinction as to the cause of their termination, even if the cause
was their supposed involvement in strike-related violence. In the present case,
PHIMCO sent a letter to the affected union members/officers, directing them to
explain within 24 hours why they should not be dismissed for the illegal acts they
committed during the strike; three days later, the union members/officers were
informed of their dismissal from employment. We do not find this company
procedure to be sufficient compliance with due process. It does not appear from the
evidence that the union officers were specifically informed of the charges against
them. Also, the short interval of time between the first and second notice shows
that a mere token recognition of the due process requirements was made,
indicating the company’s intent to dismiss the union members involved, without any
meaningful resort to the guarantees accorded them by law. PHIMCO Industries, Inc.
vs. PHIMCO Industries Labor Association (PILA), et al., G.R. No. 170830, August 11,
2010.

Dismissal; employee’s past infractions. A previous offense may be used as valid

justification for dismissal from work only if the past infractions are related to the
subsequent offense upon which the basis of termination is decreed. The
respondent’s previous incidents of tardiness in reporting for work were entirely
separate and distinct from his latest alleged infraction of forgery. Hence, the same
could no longer be utilized as an added justification for his dismissal. Besides,
respondent had already been sanctioned for his prior infractions. To consider these
offenses as justification for his dismissal would be penalizing respondent twice for
the same offense. Century Canning Corporation, Ricardo T. Po, Jr., et al. vs. Vicente
Randy R. Ramil, G.R. No. 171630, August 8, 2010.

Dismissal; feng shui; breach of trust and confidence. The Court finds that the
complainant’s allegations are more credible and that she was dismissed from her
employment because the Feng Shui master found that complainant’s Chinese
Zodiac Sign was a mismatch to that of respondents. This is not a just and valid
cause for an employee’s dismissal.

In contrast, respondent’s pleadings and evidence suffer from several

inconsistencies and the affidavits presented by respondents only pertain to petty
matters that are not sufficient to support respondent’s alleged loss of trust and
confidence. To be a valid cause for termination of employment, the act or acts
constituting breach of trust must have been done intentionally, knowingly, and
purposely; and they must be founded on clearly established facts. Wensha Spa
Center, inc. and/or Xu Zhi Jie ,vs. Loreta T. Yung, G.R. No. 185122, August 16, 2010.

Dismissal; gross negligence and loss of confidence. Gross negligence connotes

“want of care in the performance of one’s duties.” Petitioner’s failure on 3 separate
occasions to require clients to sign the requisite documents constituted gross
negligence. Furthermore, it has been held that if the employees are cashiers,
managers, supervisors, salesmen or other personnel occupying positions of
responsibility, the employer’s loss of trust and confidence in said employees may
justify the termination of their employment. As the Bank’s Personal Banking
Manager, petitioner’s failure to comply with basic banking policies and procedures
were inimical to the interests of the bank, making his dismissal based on loss of
confidence justified. Jesus E. Dycoco, Jr.vs. Equitable PCI Bank (now Banco de Oro),
Rene Bunaventura and Siles Samalea, G.R. No. 188271, August 16, 2010.

Dismissal; loss of trust and confidence. Employers are allowed a wider latitude of
discretion in terminating the services of employees who perform functions which by
their nature require the employers’ full trust and confidence and the mere existence
of basis for believing that the employee has breached the trust of the employer is
sufficient. However, this does not mean that the said basis may be arbitrary and
unfounded. Loss of trust and confidence, to be a valid cause for dismissal, must be
based on a willful breach of trust and founded on clearly established facts. The basis
for the dismissal must be clearly and convincingly established. It must rest on
substantial grounds and not on the employer’s arbitrariness, whim, caprice or
suspicion; otherwise, the employee would eternally remain at the mercy of the
employer. Century Canning Corporation, Ricardo T. Po, Jr., et al. vs. Vicente Randy
R. Ramil, G.R. No. 171630, August 8, 2010.

Dismissal; probationary employment. Though the acts charged against de Castro

took place when he was still under probationary employment, the records show that
de Castro was dismissed on the ninth month of his employment with LBNI. By then,
he was already a regular employee by operation of law. As a regular employee, de
Castro was entitled to security of tenure and his illegal dismissal from LBNI justified
the awards of separation pay, backwages, and damages Carlos De Castro vs.
Liberty Broadcasting Network, Inc. and Edgardo Quigue, G.R. No. 165153. August
25, 2010.
Dismissal; project employees; damages. Prior or advance notice of termination is
not part of procedural due process if the termination of a project employee is
brought about by the completion of the contract or phase thereof. This is because
completion of the work or project automatically terminates the employment, in
which case, the employer is, under the law, only obliged to render a report to the
DOLE. Therefore, failing to give project employees advance notice of their
termination is not a violation of procedural due process and cannot be the basis for
the payment of nominal damages. D.M. Consunji, Inc. vs. Antonio Gobres, et al.,
G.R. No. 169170, August 8, 2010.

Dismissal; separation pay and backwages. The awards of separation pay and
backwages are not mutually exclusive and both may be given to the respondent.
The normal consequences of a finding that an employee has been illegally
dismissed are, firstly, that the employee becomes entitled to reinstatement to his
former position without loss of seniority rights and, secondly, the payment of
backwages corresponding to the period from his illegal dismissal up to actual
reinstatement. These are two separate and distinct remedies granted to the
employee and the inappropriateness or non-availability of one does not carry with it
the inappropriateness or non-availability of the other. Under the doctrine of strained
relations, the payment of separation pay has been considered an acceptable
alternative to reinstatement when the latter option is no longer desirable or viable.
The grant of separation pay is a proper substitute only for reinstatement; it cannot
be an adequate substitute for both reinstatement and backwages. Century Canning
Corporation, Ricardo T. Po, Jr., et al. vs. Vicente Randy R. Ramil, G.R. No. 171630,
August 8, 2010.

Dismissal; serious misconduct. Misconduct is defined as “the transgression of some

established and definite rule of action, a forbidden act, a dereliction of duty, willful
in character, and implies wrongful intent and not mere error in judgment.” For
serious misconduct to justify dismissal under the law, “(a) it must be serious, (b)
must relate to the performance of the employee’s duties; and (c) must show that
the employee has become unfit to continue working for the employer.”

It is noteworthy that prior to this incident, there had been several cases of theft and
vandalism involving both respondent company’s property and personal belongings
of other employees. In order to address this issue of losses, respondent company
issued two memoranda implementing an intensive inspection procedure and
reminding all employees that those who will be caught stealing and performing acts
of vandalism will be dealt with in accordance with the company’s Code of Conduct.
Despite these reminders, complainant took the packing tape and was caught during
the routine inspection. All these circumstances point to the conclusion that it was
not just an error of judgment, but a deliberate act of theft of company property.
Nagkakaisang Lakas ng Manggagawa sa Keihin (NLMK-OLALIA-KMU) and Helen
Valenzuela vs. Keihin Philippines Corporation, G.R. No. 171115, August 9, 2010.

Dismissal; union security. In terminating the employment of an employee by

enforcing the union security clause, the employer needs to determine and prove
that: (1) the union security clause is applicable; (2) the union is requesting for the
enforcement of the union security provision in the CBA; and (3) there is sufficient
evidence to support the decision of the union to expel the employee from the union.
These requisites constitute just cause for terminating an employee based on the
union security provision of the CBA.

The petitioner failed to satisfy the third requirement since nothing in the records
would show that respondents failed to maintain their membership in good standing
in the union. Significantly, petitioner’s act of dismissing respondents stemmed from
the latter’s act of signing an authorization letter to file a petition for certification
election as they signed it outside the freedom period. The mere signing of an
authorization letter before the freedom period is not sufficient ground to terminate
the employment of respondents inasmuch as the petition itself was actually filed
during the freedom period. The court emphasizes anew that the employer is bound
to exercise caution in terminating the services of his employees especially so when
it is made upon the request of a labor union pursuant to the Collective Bargaining
Agreement. Picop Resources Incorporated (PRI) vs. Anacleto L. Tañeca, et al., G.R.
No. 160828, August 9, 2010.

Dimissal; use of illegal drugs. The law is clear that drug tests shall be performed
only by authorized drug testing centers. In this case, Sulpicio Lines failed to prove
that S.M. Lazo Clinic is an accredited drug testing center nor did it deny the
complainant’s allegation that S.M. Lazo Clinic was not accredited. Also, only a
screening test was conducted to determine if the complainant was guilty of using
illegal drugs. Sulpicio Lines did not confirm the positive result of the screening test
with a confirmatory test as required by R.A. 9165. Hence, Sulpicio Lines failed to
indubitably prove that Nacague was guilty of using illegal drugs and failed to clearly
show that it had a valid and legal cause for terminating Nacague’s employment.
When the alleged valid cause for the termination of employment is not clearly
proven, as in this case, the law considers the matter a case of illegal dismissal.
Jeffrey Nacague vs. Sulpicio Lines, Inc., G.R. No. 172589, August 8, 2010.

Dismissal; validity. The company did not adduce any evidence to prove that Siazar’s
dismissal had been for a just or authorized cause, as in fact it had been its
consistent stand that it did not terminate him and that he quit on his own. But given
the findings of the Court that the company had indeed dismissed Siazar and that
such dismissal has remained unexplained, there can be no other conclusion but that
the dismissal was illegal. Agricultural and Industrial Supplies Corporation, et al. vs.
Jueber P. Siazar, et al., G.R. No. 177970, August 25, 2010.

Due process; decision rendered without due process. The violation of a party’s right
to due process raises a serious jurisdictional issue that cannot be glossed over or
disregarded at will. Where the denial of the fundamental right to due process is
apparent, a decision rendered in disregard of that right is void for lack of
jurisdiction. This rule is equally true in quasi-judicial and administrative
proceedings, for the constitutional guarantee that no man shall be deprived of life,
liberty, or property without due process is unqualified by the type of proceedings
(whether judicial or administrative) where he stands to lose the same. Winston F.
Garcia vs. Mario I. Molina, et al./Winston F. Garcia Vs. Mario I. Molina, et al., G.R. No.
157383/G.R. No. 174137, August 10, 2010.

Employee; evaluation and promotion. The fact that employees were re-classified
from Job Grade Level 1 to Job Grade Level 2 as a result of a job evaluation program
does not automatically entail a promotion or grant them an increase in salary. Of
primordial consideration is not the nomenclature or title given to the employee, but
the nature of his functions. What transpired in this case was only a promotion in
nomenclature. The employees continued to occupy the same positions they were
occupying prior to the job evaluation. Moreover, their job titles remained the same
and they were not given additional duties and responsibilities. SCA Hygiene
Products Corporation Employees Association-FFW vs. SCA Hygiene Products
Corporation, G.R. No. 182877, August 9, 2010.

Employee; security of tenure. A worker’s security of tenure is guaranteed by the

Constitution and the Labor Code. Under the security of tenure guarantee, a worker
can only be terminated from his employment for cause and after due process. For a
valid termination by the employer: (1) the dismissal must be for a valid cause as
provided in Article 282, or for any of the authorized causes under Articles 283 and
284 of the Labor Code; and (2) the employee must be afforded an opportunity to be
heard and to defend himself. A just and valid cause for an employee’s dismissal
must be supported by substantial evidence, and before the employee can be
dismissed, he must be given proper notice of such cause/s and an adequate
opportunity to be heard. In the process, the employer bears the burden of proving
that the dismissal of an employee was for a valid cause. Its failure to discharge this
burden renders the dismissal unjustified and, therefore, illegal. Wensha Spa Center,
Inc. and/or Xu Zhi Jie vs. Loreta T. Yung, G.R. No. 185122, August 16, 2010.
Employee benefit; time of death. The death should be deemed compensable under
the ECC since Henry was on his way back to Manila in order to be on time and be
ready for work the next day when his accidental death occurred. He should already
be deemed en route to the performance of his duty at the time of the accident. It
should be noted that Henry’s superior allowed him to travel to La Union to visit his
ailing mother on the condition that that he return the next day. Under these facts,
Henry was in the course of complying with his superior’s order when he met his
fatal accident. To be sure, he was not in an actual firefighting or accident situation
when he died, but returning to work as instructed by his superior is no less
equivalent to compensable performance of duty under Section 1, Rule III of the ECC
Rules. Government Service Insurance System vs. Felicitas Zarate, as substituted by
her heirs, namely Melanie Zarate, et al., G.R. No. 170847, August 3, 2010.

Illegal dismissal; effect of rehabilitation proceedings. The existence of the Stay

Order – which would generally authorize the suspension of judicial proceedings –
could not have affected the Court’s action on the present case due to the
petitioner’s failure to raise the pendency of the rehabilitation proceedings in its
memorandum to the Court. At any rate, a stay order simply suspends all actions for
claims against a corporation undergoing rehabilitation; it does not work to oust a
court of its jurisdiction over a case properly filed before it. Thus, the Court’s ruling
on the principal issue of the case stands. Nevertheless, with LBNI’s manifestation
that it is still undergoing rehabilitation, the Court resolves to suspend the execution
of our Decision until the termination of the rehabilitation proceedings. Carlos De
Castro vs. Liberty Broadcasting Network, Inc. and Edgardo Quigue, G.R. No. 165153.
August 25, 2010.

Job contracting. In permissible job contracting, the principal agrees to put out or
farm out with a contractor or subcontractor the performance or completion of a
specific job, work or service within a definite or predetermined period, regardless of
whether such job, work or service is to be performed or completed within or outside
the premises of the principal. The test is whether the independent contractor has
contracted to do the work according to his own methods and without being subject
to the principal’s control except only as to the results, he has substantial capital,
and he has assured the contractual employees entitlement to all labor and
occupational safety and health standards, free exercise of the right to self-
organization, security of tenure, and social and welfare benefits. Spic n’ Span
Services Corp. vs. Gloria Paje, et al., G.R. No. 174084, August 25, 2010.

Management prerogative; transfer of employees. Jurisprudence recognizes the

exercise of management prerogative to transfer or assign employees from one
office or area of operation to another, provided there is no demotion in rank or
diminution of salary, benefits, and other privileges, and the action is not motivated
by discrimination, made in bad faith, or effected as a form of punishment or
demotion without sufficient cause. To determine the validity of the transfer of
employees, the employer must show that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank
or a diminution of his salaries, privileges and other benefits. Should the employer
fail to overcome this burden of proof, the employee’s transfer shall be tantamount
to constructive dismissal. Pharmacia and Upjohn, Inc., et al. vs. Ricardo P. Albayda,
Jr., G.R. No. 172724, August 23, 2010.

Merger; employee terms and conditions. That BPI is the same entity as FEBTC after
the merger is but a legal fiction intended as a tool to adjudicate rights and
obligations between and among the merged corporations and the persons that deal
with them. Although in a merger it is as if there is no change in the personality of
the employer, there is in reality a change in the situation of the employee. Once an
FEBTC employee is absorbed, there are presumably changes in his condition of
employment even if his previous tenure and salary rate is recognized by BPI. It is
reasonable to assume that BPI would have different rules and regulations and
company practices than FEBTC and it is incumbent upon the former FEBTC
employees to obey these new. Not the least of these changes is the fact that prior
to the merger FEBTC employees were employees of an unorganized establishment
and after the merger they became employees of a unionized company that had an
existing CBA with the certified union. Thus, although in a sense BPI is continuing
FEBTC’s employment of these absorbed employees, BPI’s employment of these
absorbed employees will not be under exactly the same terms and conditions as
stated in the latter’s employment contracts with FEBTC. Bank of the Philippine
Islands vs. BPI Employees Union-Davao Chapter-Federation of Unions in BPI
Unibank, G.R. No. 164301, August 10, 2010.

Reinstatement of employee; doctrine of strained relations. Under the doctrine of

strained relations, the payment of separation pay has been considered an
acceptable alternative to reinstatement when the latter option is no longer
desirable or viable. On the one hand, such payment liberates the employee from
what could be a highly oppressive work environment. On the other, the payment
releases the employer from the grossly unpalatable obligation of maintaining in its
employ a worker it could no longer trust. Wensha Spa Center, Inc. and/or Xu Zhi Jie
vs. Loreta T. Yung, G.R. No. 185122, August 16, 2010.

Retirement pay; applicability to employees on commission basis. Even if the

petitioner as bus conductor was paid on commission basis, he falls within the
coverage of R.A. 7641 and its implementing rules. Thus, his retirement pay should
include the cash equivalent of 5-days SIL and 1/12 of 13th month pay. The NLRC’s
reliance on the case of R & E Transport, Inc. as a basis for ruling that bus
conductors are not covered by the law on SIL and 13 th month pay is erroneous since
that involved a taxi driver who was paid according to the “boundary system.” There
is a difference between drivers paid under the “boundary system” and conductors
who are paid on commission basis. In practice, taxi drivers do not receive fixed
wages and retain only those sums in excess of the “boundary” or fee they pay to
the owners or operators of the vehicles. Conductors, on the other hand, are paid a
certain percentage of the bus’ earnings for the day. Rodolfo J. Serrano vs. Severino
Santos Transit and/or Severino Santos, G.R. No. 187698, August 9, 2010.

Separation pay. In those instances where an employee has been validly dismissed
for causes other than serious misconduct or those reflecting on his moral character,
separation pay may still be granted after giving considerable weight to his long
years of employment. In this case, equity considerations dictate that respondent’s
tenure be computed from 1978, the year when respondent started working for
Upjohn, and not only from 1996, when the merger of Pharmacia and Upjohn took
place. Pharmacia and Upjohn, Inc., et al. vs. Ricardo p. Albayda, Jr., G.R. No.
172724, August 23, 2010.

Strike; validity of strike. Despite the validity of the purpose of a strike and the
union’s compliance with the procedural requirements, a strike may still be held
illegal where the means employed are illegal. While the strike had not been marred
by actual violence and patent intimidation, the picketing that respondent PILA
officers and members undertook as part of their strike activities effectively blocked
the free ingress to and egress from PHIMCO’s premises, thus preventing non-
striking employees and company vehicles from entering the PHIMCO compound. In
this manner, the picketers violated Article 264(e) of the Labor Code and tainted the
strike with illegality. PHIMCO Industries, Inc. vs. PHIMCO Industries Labor
Association (PILA), et al., G.R. No. 170830, August 11, 2010.

Union; eligibility of confidential employees to join. Confidential employees are

defined as 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. 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. In the present case,
there is no showing that the secretaries/clerks and checkers assisted or acted in a
confidential capacity to managerial employees and obtained confidential
information relating to labor relations policies. And even assuming that they had
exposure to internal business operations of the company, as respondent claims, this
is not per se ground for their exclusion in the bargaining unit of the rank-and-file
employees. Tunay na Pagkakaisa ng Manggagawa sa Asia Brewery vs. Asia
Brewery, Inc., G.R. No. 162025, August 3, 2010.

Union; liability for invalid strike. The effects of illegal strikes, outlined in Article 264
of the Labor Code, make a distinction between participating workers and union
officers. The services of an ordinary striking worker cannot be terminated for mere
participation in an illegal strike; proof must be adduced showing that he or she
committed illegal acts during the strike. The services of a participating union officer,
on the other hand, may be terminated, not only when he actually commits an illegal
act during a strike, but also if he knowingly participates in an illegal strike. PHIMCO
Industries, Inc. vs. PHIMCO Industries Labor Association (PILA), et al., G.R. No.
170830, August 11, 2010.

Union shop; effect of merger. All employees in the bargaining unit covered by a
Union Shop Clause in their CBA with management are subject to its terms. However,
under law and jurisprudence, the following kinds of employees are exempted from
its coverage, namely, (1) employees who at the time the union shop agreement
takes effect are bona fide members of a religious organization which prohibits its
members from joining labor unions on religious grounds; (2) employees already in
the service and already members of a union other than the majority at the time the
union shop agreement took effect; (3) confidential employees who are excluded
from the rank and file bargaining unit; and (4) employees excluded from the union
shop by express terms of the agreement. In the absence of any of these recognized
exceptions, there is no basis to conclude that the terms and conditions of
employment under a valid CBA in force in the surviving corporation should not be
made to apply to the absorbed employees. Bank of the Philippine Islands vs. BPI
Employees Union-Davao Chapter-Federation of Unions in BPI Unibank, G.R. No.
164301, August 10, 2010.

Labor Procedure

CSC; rules for dismissal. The filing of formal charges against the respondents
without complying with the mandated preliminary investigation or at least giving
the respondents the opportunity to comment violated the latter’s right to due
process. These rules on due process apply even in cases where the complainant is
the disciplining officer himself, as in this case. The fact that the charges against the
respondents are serious or that the evidence of their guilt is strong cannot
compensate for the procedural shortcut undertaken by petitioner. Winston F. Garcia
vs. Mario I. Molina, et al./Winston F. Garcia Vs. Mario I. Molina, et al., G.R. No.
157383/G.R. No. 174137, August 10, 2010.

Labor case; due process; reevaluation. A reevaluation is a process by which a

person or office (in this case the DOLE secretary) revisits its own initial
pronouncement and makes another assessment of its findings. In simple terms, to
reevaluate is to take another look at a previous matter in issue. From a procedural
standpoint, a reevaluation is a continuation of the original case and not a new
proceeding. The evidence, financial reports and other documents submitted by the
parties in the course of the original proceeding are to be visited and reviewed again.
A reevaluation does not necessitate the introduction of new materials for review nor
does it require a full hearing for new arguments. Hence, failure to order the
presentation of new evidence in the reevaluation of an Order is not a violation of
due process. NASECO Guards Association – PEMA vs. National Service Corporation,
G.R. No. 165442, August 25, 2010.

Labor case; non-lawyer as representative. The respondents in this case were

represented by a non-lawyer who never showed any proof of his authority to
represent the respondents. Petitioner argued that the respondents’ representative
had no personality to appear before the Labor Arbiter or the NLRC, and his
representation for the respondents should produce no legal effect. The Court
affirmed the ruling of the CA that the cited technical infirmity cannot defeat the
respondents’ preferred right to security of tenure, without prejudice to whatever
action may be taken against the representative, if he had indeed been engaged in
the unauthorized practice of law. Spic n’ Span Services Corp. vs. Gloria Paje, et al.,
G.R. No. 174084, August 25, 2010.

NLRC; factual findings. Findings of fact of the NLRC, affirming those of the LA, are
entitled to great weight and will not be disturbed if they are supported by
substantial evidence. The CA had overstepped its legal mandate by reversing the
findings of fact of the LA and the NLRC as it appears that both decisions were based
on substantial evidence. There is no proof of arbitrariness or abuse of discretion in
the process by which each body arrived at its own conclusions. Thus, the CA should
have deferred to such specialized agencies that are considered experts in matters
within their jurisdictions. Pharmacia and Upjohn, Inc., et al. vs. Ricardo P. Albayda,
Jr., G.R. No. 172724, August 23, 2010.

NLRC; review of decisions. The power of the Court of Appeals to review NLRC
decisions via Rule 65 or Petition for Certiorari has been settled as early as in our
decision in St. Martin Funeral Home v. National Labor Relations Commission. This
Court held that the proper vehicle for such review was a Special Civil Action for
Certiorari under Rule 65 of the Rules of Court, and that this action should be filed in
the Court of Appeals in strict observance of the doctrine of the hierarchy of courts.
Moreover, it is already settled that under Sec. 9 of B.P. 129, as amended, the Court
of Appeals – pursuant to the exercise of its original jurisdiction over Petitions for
Certiorari – is specifically given the power to pass upon the evidence, if and when
necessary, to resolve factual issues. Picop Resources Incorporated (PRI) vs.
Anacleto L. Tañeca, et al., G.R. No. 160828, August 9, 2010.

Pleading verification. The lack of a verification in a pleading is only a formal defect,

not a jurisdictional defect, and is not necessarily fatal to a case. The primary reason
for requiring a verification is simply to ensure that the allegations in the pleading
are done in good faith, are true and correct, and are not mere speculations. As
previously explained in Torres v. Specialized Packaging Development Corporation,
where only two of the 25 real parties-in-interest signed the verification, the
verification by the two could be sufficient assurance that the allegations in the
petition were made in good faith, are true and correct, and are not speculative. Spic
n’ Span Services Corp. vs. Gloria Paje, et al., G.R. No. 174084, August 25, 2010.

Procedural rules; strict application. Procedural rules setting the period for perfecting
an appeal or filing a petition for review are generally inviolable. It is doctrinally
entrenched that an appeal is not a constitutional right, but a mere statutory
privilege. Hence, parties who seek to avail themselves of such privilege must
comply with the statutes or rules allowing it. Furthermore, the perfection of an
appeal in the manner and within the period permitted by law is not only mandatory,
but also jurisdictional. Failure to perfect the appeal renders the judgment of the
court final and executory. Just as a losing party has the privilege to file an appeal
within the prescribed period, so does the winner also have the correlative right to
enjoy the finality of the decision. Elpidio Calipay vs. National Labor Relations
Commission, et al., G.R. No. 166411, August 3, 2010.

Real party in interest; dismissed employee. It is clear that the petitioners failed to
include the name of the dismissed employee in the caption and body of its petition
for certiorari and, instead, only indicated the name of the labor union as the party
acting on behalf of such dismissed employee. Hence, the Court of Appeals rightly
dismissed the petition for not having been filed by an indispensable party in
interest. (The Court still proceeded to discuss the substantive issues and merits of
the case despite affirming the dismissal of the case based on procedural grounds.)
Nagkakaisang Lakas ng Manggagawa sa Keihin (NLMK-OLALIA-KMU) and Helen
Valenzuela vs. Keihin Philippines Corporation, G.R. No. 171115, August 9, 2010.
Rule 45; review of factual findings. As a general rule, only questions of law may be
raised in petitions for certiorari under Rule 45 of the Rules of Court. However, there
are recognized exceptions to the rule. Among the exceptions are when the findings
of fact are conflicting and when the findings are conclusions without citation of
specific evidence on which they are based. In the present case, the findings of fact
of the Court of Appeals conflict with the findings of fact of the NLRC and the Labor
Arbiter. Also, the finding of the Court of Appeals that Gurango engaged in a fistfight
is a conclusion without citation of specific evidence on which it is based. Alex
Gurango vs. Best Chemicals and Plastic, Inc., et al., G.R. No. 174593, August 25,
2010.

July 2010

Labor Law

Assumption of jurisdiction by Secretary of Labor; authority to decide on legality of

dismissals arising from strike. The assumption of jurisdiction powers granted to the
Labor Secretary under Article 263(g) is not limited to the grounds cited in the notice
of strike or lockout that may have preceded the strike or lockout; nor is it limited to
the incidents of the strike or lockout that in the meanwhile may have taken place.
As the term “assume jurisdiction” connotes, the intent of the law is to give the
Labor Secretary full authority to resolve all matters within the dispute that gave rise
to or which arose out of the strike or lockout, including cases over which the labor
arbiter has exclusive jurisdiction.

In the present case, what the Labor Secretary refused to rule upon was the
dismissal from employment of employees who violated the return to work order and
participated in illegal acts during a strike. This was an issue that arose from the
strike and was, in fact, submitted to the Labor Secretary, through the union’s
motion for the issuance of an order for immediate reinstatement of the dismissed
officers and the company’s opposition to the motion. The dismissal issue was
properly brought before the Labor Secretary and he was mistaken in ruling that the
matter is legally within the exclusive jurisdiction of the labor arbiter to decide.
Bagong Pagkakaisa ng Manggagawa ng Triumph International, et al. vs. Secretary
of Department of Labor and Employment, et al./Triumph International (phils.), Inc.
vs. Bagong Pagkakaisa ng Manggagawa ng Triumph International, et al., G.R. No.
167401, July 5, 2010.

Bargaining deadlock; award; findings of Secretary of Labor. Unless there is a clear

showing of grave abuse of discretion, the Court cannot, and will not, interfere with
the expertise of the Secretary of Labor. The award granted by the Labor Secretary
in resolving the bargaining deadlock, drawn as they were from a close examination
of the submissions of the parties, do not indicate any legal error, much less any
grave abuse of discretion, and should not be disturbed. Bagong Pagkakaisa ng
Manggagawa ng Triumph International, et al. vs. Secretary of Department of Labor
and Employment, et al./Triumph International (phils.), Inc. vs. Bagong Pagkakaisa
ng Manggagawa ng Triumph International, et al., G.R. No. 167401, July 5, 2010.

Dismissal of employees; just cause. Theft committed by an employee is a valid

reason for his dismissal by the employer. Although as a rule this Court leans over
backwards to help workers and employees continue with their employment or to
mitigate the penalties imposed on them, acts of dishonesty in the handling of
company property, petitioner’s income in this case, are a different matter. Maribago
Bluewater Beach Resort, Inc. vs. Nito Dual, G.R. No. 180660, July 20, 2010.

Dismissal of employees; requirements. The validity of an employee’s dismissal from

service hinges on the satisfaction of the two substantive requirements for a lawful
termination. These are, first, whether the employee was accorded due process the
basic components of which are the opportunity to be heard and to defend himself.
This is the procedural aspect. And second, whether the dismissal is for any of the
causes provided in the Labor Code of the Philippines. This constitutes the
substantive aspect. Erector Advertising Sign Group, Inc. and Arch Jimy C. Amoroto
vs. Expedito Cloma, G.R. No. 167218, July 2, 2010.

Dismissal of employees; procedural due process. Furnishing the employee with a

suspension order prior to his notice of termination does not satisfy the requirement
of a first notice. It implies that the employer has already decided, for the reasons
stated therein, to suspend the employee from work in the company, and the
wording of the order in the present case gives no indication that the employee is
being given an opportunity to submit his defense or explanation. Erector
Advertising Sign Group, Inc. and Arch Jimy C. Amoroto vs. Expedito Cloma, G.R. No.
167218, July 2, 2010.

Dismissal of employees; procedural due process. In order to validly dismiss an

employee, he must be accorded both substantive and procedural due process by
the employer. Procedural due process requires that the employee be given a notice
of the charge against him, an ample opportunity to be heard, and a notice of
termination. Even if the aforesaid procedure is conducted after the filing of the
illegal dismissal case, the legality of the dismissal, as to its procedural aspect, will
be upheld provided that the employer is able to show that compliance with these
requirements was not a mere afterthought. New Puerto Commercial and Richard
Lim vs. Rodel Lopez and Felix Gavan, G.R. No. 169999, July 26, 2010.

Employee benefits; 13th month pay; definition of basic salary. The term “basic
salary” of an employee for the purpose of computing the thirteenth-month pay was
interpreted to include all remuneration or earnings paid by the employer for
services rendered, but does not include allowances and monetary benefits which
are not integrated as part of the regular or basic salary, such as the cash equivalent
of unused vacation and sick leave credits, overtime, premium, night differential and
holiday pay, and cost-of-living allowances. However, these salary-related benefits
should be included as part of the basic salary in the computation of the thirteenth-
month pay if, by individual or collective agreement, company practice or policy, the
same are treated as part of the basic salary of the employees. Central Azucarera De
Tarlac vs. Central Azucarera De Tarlac Labor Union-NLU, G.R. No. 188949, July 26,
2010

Employee benefits; 13th month pay; company policy or practice. The practice of
petitioner in giving 13th-month pay based on the employees’ gross annual earnings
which included the basic monthly salary, premium pay for work on rest days and
special holidays, night shift differential pay and holiday pay continued for almost
thirty (30) years and has ripened into a company policy or practice which cannot be
unilaterally withdrawn. The petitioner cannot claim that the practice arose from an
erroneous application of the law since no doubtful or difficult question of law is
involved in this case. The guidelines set by the law are not difficult to decipher.
Central Azucarera De Tarlac vs. Central Azucarera De Tarlac Labor Union-NLU, G.R.
No. 188949, July 26, 2010

Employee benefits; death benefits. For the death of a seafarer to be compensable

under the 1996 POEA Standard Employment Contract, the death must occur during
the term of his contract of employment. In this case, the seaman died 2 years after
he was repatriated to the Philippines due to medical reasons, hence the claimants
are not entitled to receive death benefits under the contract. The decedent’s heirs
claimed that the death should be compensable since the nature of his work as a
seaman triggered the illnesses that eventually led to his death. However, the Court
noted that though the immediate cause of the seaman’s death was pneumonia, the
underlying cause of death was advanced HIV (AIDS). Since the claimants failed to
prove that the decedent acquired HIV during his 2-month employment aboard the
respondents’ vessel, their claim for death benefits was denied. Lydia Escarcha vs.
Leonis Navigation Co., Inc., et al., G.R. No. 182740, July 5, 2010.

Employees; government agency. The Armed Forces of the Philippines Commissary

and Exchange Services (AFPCES) is a government agency performing proprietary
functions. By clear implication of law, all AFPCES personnel should therefore be
classified as government employees and any complaint for illegal dismissal
involving such employees should be filed with the CSC and not the NLRC. Such fact
cannot be negated by the failure of AFPCES to follow appropriate civil service rules
in the hiring, appointment, discipline and dismissal of employees. Neither can it be
denied by the fact that AFPCES chose to enroll its employees in the SSS instead of
the GSIS. Such considerations cannot be used against the CSC to deprive it of its
jurisdiction. Hence, the Labor Arbiter’s decision in the illegal dismissal case filed by
AFPCES employees is a total nullity for having been rendered without jurisdiction.
Magdalena Hidalgo, et al. vs. Republic of the Philippines, G.R. No. 179793, July 5,
2010.

Employer-employee relationship; evidence. Any doubt arising from the evaluation of

evidence as between the employer and the employee must be resolved in favor of
the latter. It is settled jurisprudence that the burden of proving payment of
monetary claims rests on the employer. It was entirely within the company’s power
to present personnel files, payrolls, remittances, and other similar documents which
would have proven payment of respondent’s money claims as these documents
should necessarily be in its possession; hence, failure to present such evidence
must be taken against it. Dansart Security Force & Allied Services Company and
Danilo A. Sarte vs. Ms. Jean O. Bagoy, G.R. No. 168495, July 2, 2010.

Government agencies; reorganization. A reorganization is valid provided it is done

in good faith. As a general rule, the test of good faith lies in whether the purpose of
the reorganization is for economy or to make the bureaucracy more efficient.
Removal from office as a result of reorganization must, thus, pass the test of good
faith. A demotion in office is tantamount to removal if no cause is shown for it.
Consequently, before a demotion may be effected pursuant to a reorganization, the
observance of the rules on bona fide abolition of public office is essential. Virginia
D. Bautista vs. Civil Service Commission and Dev’t. Bank of the Philippines, G.R. No.
185215, July 22, 2010.

Government agencies; reorganization; personal liability of local official. The RTC of

Cadiz declared void a resolution that reorganized the city government and
effectively purged the city government of Cadiz of all employees who opposed the
mayor politically or disagreed with him in his policies. The RTC ordered the payment
of moral damages to the workers, but it was not clear if the payment was to be
made by the city government or by Mayor Valera, in his personal capacity. The
Court held that Varela is personally liable to pay moral damages. Settled is the
principle that a public official may be liable in his personal capacity for whatever
damage he may have caused by his act done with malice and in bad faith or beyond
the scope of his authority or jurisdiction. In the complaint, the employees stated
that, “due to the illegal acts of the Defendant, Plaintiffs suffered mental torture and
anguish, sleepless nights, wounded feelings, besmirched reputation and social
humiliation.” The State can never be the author of illegal acts. The complaint
merely identified Varela as the mayor of Cadiz City. It did not categorically state
that Varela was being sued in his official capacity. The identification and mention of
Varela as the mayor of Cadiz City did not automatically transform the action into
one against Varela in his official capacity. The allegations in the complaint
determine the nature of the cause of action. Eduardo Valera vs. Ma. Daisy Revalez,
G.R. No. 171705, July 29, 2010.

Illegal dismissal; burden of proof; filing of complaint not sufficient to disprove

abandonment. In illegal dismissal cases, the employer bears the burden of proving
that the termination was for a valid or authorized cause. However, before the
employer is asked to prove that the dismissal was legal, the employee must first
establish by substantial evidence the fact of his dismissal from service. Logically, if
there is no dismissal, then there can be no question as to its legality or illegality.

Under normal circumstances, an employee’s act of filing an illegal dismissal

complaint against his employer is inconsistent with abandonment. However, the
courts should not use that one act to conclude that an employee was constructively
dismissed when substantial evidence proves otherwise. In this case, substantial
evidence proves that Pulgar was not constructively dismissed, and that he had
abandoned his duties in order to avoid an investigation being conducted by his
employer. Philippine Rural Reconstruction vs. Virgilio Pulgar, G.R. No. 169227. July
5, 2010.

Illegal dismissal; misrepresentation of cause is an act of bad faith. The complainant,

Rio Remo, was dismissed from service on the ground of retrenchment. However, the
records show that Sentinel hired a replacement soon after Remo’s dismissal,
proving that Sentinel’s financial distress was not as serious as it claimed, and that
retrenchment was not the real reason for Remo’s dismissal. Sentinel concealed its
true intention and committed misrepresentation when it claimed that Remo’s
dismissal was due to serious financial losses. This act of misrepresentation is an act
of active bad faith that fatally tainted Remo’s dismissal and rendered it illegal.
Sentinel Integrated Services, Inc. vs. Rio Jose Remo, G.R. No. 188223, July 5, 2010.

Illegal dismissal; relief available to employee. An illegally dismissed employee is

entitled to reinstatement without loss of seniority rights and other privileges and to
full backwages, inclusive of allowances, and to her other benefits or their monetary
equivalent, computed from the time the compensation was withheld up to the time
of actual reinstatement. Where reinstatement is no longer feasible, separation pay
equivalent to at least one month salary or one month salary for every year of
service, whichever is higher, a fraction of at least six months being considered as
one whole year, should be awarded to respondent. An award for moral and
exemplary damages cannot be justified unless the employer had acted in bad faith.
The award of moral and exemplary damages cannot be justified solely upon the
premise that the employer dismissed his employee without authorized cause and
due process. Lambert Pawnbrokers and Jewelry corporation and Lambert Lim vs.
Helen Binamira, G.R. No. 170464. July 12, 2010.

Labor-only contracting. Despite the fact that the service contracts contain
stipulations which are earmarks of independent contractorship, they do not make it
legally so. The language of a contract is neither determinative nor conclusive of the
relationship between the parties. The parties cannot dictate, by a declaration in a
contract, the character of the contractor’s business as a labor-only contractor or a
legitimate job contractor, which should be determined by the criteria set by statute.
Here, a closer look at AMPCO’s actual status and participation regarding the
employment of the complainants clearly belie the contents of the written service
contract. San Miguel Corporation vs. Vicente Semillan, et al., G.R. No. 164257, July
5, 2010.

Labor-only contracting; evidence. A Certificate of Registration as an Independent

Contractor is not conclusive evidence of such status. In distinguishing between
permissible job contracting and prohibited labor-only contracting, the totality of the
facts and the surrounding circumstances of the case are to be considered. San
Miguel Corporation vs. Vicente Semillan, et al., G.R. No. 164257, July 5, 2010.

Liability of officers for illegal dismissal. Corporate officers are only solidarily liable
with the corporation for the illegal termination of services of employees if they
acted with malice or bad faith. In Philippine American Life and General Insurance v.
Gramaje, bad faith is defined as a state of mind affirmatively operating with furtive
design or with some motive of self-interest or ill will or for ulterior purpose. It
implies a conscious and intentional design to do a wrongful act for a dishonest
purpose or moral obliquity. The lack of authorized or just cause to terminate one’s
employment and the failure to observe due process do not ipso facto mean that the
corporate officer acted with malice or bad faith. There must be independent proof
of malice or bad faith which is lacking in the present case. Lambert Pawnbrokers
and Jewelry corporation and Lambert Lim vs. Helen Binamira, G.R. No. 170464. July
12, 2010.
Preventive suspension. Preventive suspension is justified where the employee’s
continued employment poses a serious and imminent threat to the life or property
of the employer or of the employee’s co-workers. Without this kind of threat,
preventive suspension is not proper. Jose P. Artificio vs. National Labor Relations
Commission, RP Guardians Security Agency, Inc. Juan Victor K. Laurilla, Alberto
Aguirre, and Antonio A. Andres, G.R. No. 172988, July 26, 2010

Public employees; demotion. There is demotion when an employee is appointed to a

position that results in a diminution in duties, responsibilities, status or rank which
may or may not involve a reduction in salary. Where an employee is appointed to a
position with the same duties and responsibilities with a rank and salary higher than
those he enjoyed in his previous position, there is no demotion and the appointment
is valid. Virginia D. Bautista vs. Civil Service Commission and Devt. Bank of the
Philippines, G.R. No. 185215, July 22, 2010.

Public employees; downgrading of employees. The summary reallocation of Go’s

position to a lower degree resulting in the corresponding downgrading of his salary
infringed the policy of non-diminution of pay which the Court recognized and
applied in Philippine Ports Authority v. Commission on Audit, as well as in the
subsequent sister cases involving benefits of government employees. Running
through the gamut of these cases is the holding that the affected government
employees shall continue to receive benefits they were enjoying as incumbents
upon the effectivity of RA 6758. Relevant to the critical issue at hand is Sec. 15 (b)
of PD 985 which, as amended by Sec. 13 (a) of RA 6758, pertinently reads: Sec. 13.
Pay Reduction — If an employee is moved from a higher to a lower class, he shall
not suffer a reduction in salary: Provided, That such movement is not the result of a
disciplinary action or voluntary demotion. Gonzalo S. Go, Jr. vs. CA and Office of the
President, G.R. No. 172027. July 29, 2010

Redundancy; definition; requisites. Redundancy exists when the service capability

of the workforce is in excess of what is reasonably needed to meet the demands of
the enterprise. A redundant position is one rendered superfluous by any number of
factors, such as over hiring of workers, decreased volume of business, dropping of a
particular product line previously manufactured by the company, or phasing out of a
service activity previously undertaken by the business. Under these conditions, the
employer has no legal obligation to keep in its payroll more employees than are
necessary for the operation of its business.

For a valid implementation of a redundancy program, the employer must comply

with the following requisites: (1) written notice served on both the employees and
the DOLE at least one month prior to the intended date of termination of
employment; (2) payment of separation pay equivalent to at least one month pay
for every year of service; (3) good faith in abolishing the redundant positions; and
(4) fair and reasonable criteria in ascertaining what positions are to be declared
redundant and accordingly abolished. Lambert Pawnbrokers and Jewelry
corporation and Lambert Lim vs. Helen Binamira, G.R. No. 170464. July 12, 2010.

Retirement; retirement age. The retirement age is primarily determined by the

existing agreement or employment contract. Absent such an agreement, the
retirement age under Article 287 of the Labor Code will apply. Amelia R. Obusan vs.
Philippine National Bank, G.R. No. 181178, July 26, 2010.

Retirement; retirement plan. Retirement plans allowing employers to retire

employees who have not yet reached the compulsory retirement age of 65 years
are not per se repugnant to the constitutional guaranty of security of tenure. By its
express language, the Labor Code permits employers and employees to fix the
applicable retirement age at 60 years or below, provided that the employees’
retirement benefits under any CBA and other agreements shall not be less than
those provided by law. Amelia R. Obusan vs. Philippine National Bank, G.R. No.
181178, July 26, 2010.
Retrenchment; definition; requisites. Retrenchment is the termination of
employment initiated by the employer through no fault of and without prejudice to
the employees. It is resorted to during periods of business recession, industrial
depression, seasonal fluctuations, or during lulls occasioned by lack of orders,
shortage of materials, conversion of the plant to a new production program, or
automation. It is a management prerogative resorted to avoid or minimize business
losses.

To effect a valid retrenchment, the following elements must be present: (1) the
retrenchment is reasonably necessary and likely to prevent business losses which, if
already incurred, are not merely de minimis, but substantial, serious and real, or
only if expected, are reasonably imminent as perceived objectively and in good
faith by the employer; (2) the employer serves written notice both to the
employee/s concerned and the DOLE at least one month before the intended date of
retrenchment; (3) the employer pays the retrenched employee separation pay in an
amount prescribed by law; (4) the employer exercises its prerogative to retrench in
good faith; and (5) the employer uses fair and reasonable criteria in ascertaining
who would be retrenched or retained. Lambert Pawnbrokers and Jewelry
corporation and Lambert Lim vs. Helen Binamira, G.R. No. 170464. July 12, 2010

Retrenchment; decrease in income is not business loss. A sharp drop in income

from P1million to only P665,000.00 is not the kind of business losses contemplated
by the Labor Code that would justify a valid retrenchment. A mere decline in gross
income cannot in any manner be considered as serious business losses. It should be
substantial, sustained and real. Lambert Pawnbrokers and Jewelry corporation and
Lambert Lim vs. Helen Binamira, G.R. No. 170464. July 12, 2010.

Separation pay; as equitable relief. Having determined that the imposition of

preventive suspension was proper and that the complainant was not illegally
dismissed, the Court found no basis to grant backwages. However, given the
attendant circumstances of the case — that complainant had been working with the
company for a period of sixteen (16) years without any previous derogatory record –
the Court held that the ends of social and compassionate justice would be served if
the employee is given some equitable relief in the form of separation pay. Jose P.
Artificio vs. National Labor Relations Commission, RP Guardians Security Agency,
Inc. Juan victor K. Laurilla, Alberto Aguirre, and Antonio A. Andres, G.R. No. 172988,
July 26, 2010

LABOR PROCEDURE

Jurisdiction; intra-union disputes. Section 226 of the Labor Code clearly provides
that the BLR and the Regional Directors of DOLE have concurrent jurisdiction over
inter-union and intra-union disputes. Such disputes include the conduct or
nullification of election of union and workers’ association officers. There is, thus, no
doubt as to the BLR’s jurisdiction over the instant dispute involving member-unions
of a federation arising from disagreement over the provisions of the federation’s
constitution and by-laws. Atty. Allan S. Montaño vs. Atty Ernesto C. Verceles, G.R.
No. 168583, July 26, 2010.

Labor tribunal; factual finding. As a rule, a petition for certiorari under Rule 65 is
valid only when the question involved is an error of jurisdiction, or when there is
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of
the court or tribunals exercising quasi-judicial functions. Hence, courts exercising
certiorari jurisdiction should refrain from reviewing factual assessments of the
respondent court or agency. Occasionally, however, they are constrained to wade
into factual matters when the evidence on record does not support those factual
findings; or when too much is concluded, inferred or deduced from the bare or
incomplete facts appearing on record. The CA rightfully reviewed the correctness of
the labor tribunals’ factual findings not only because of the foregoing inadequacies,
but also because the NLRC and the Labor Arbiter came up with conflicting findings.
Lambert Pawnbrokers and Jewelry corporation and Lambert Lim vs. Helen Binamira,
G.R. No. 170464. July 12, 2010.

Money claims; effect of failure to include in prayer for relief. The rule is well-settled
that points of law, theories, issues and arguments not adequately brought to the
attention of the trial court need not be, and ordinarily will not be considered by a
reviewing court as they cannot be raised for the first time on appeal because this
would be offensive to the basic rules of fair play, justice and due process. Though
there is nothing on record which would show that the amount of P207,693 has been
returned to PRRM, a perusal of the pleadings show that PRRM failed to include the
return of such amount in its prayer for relief. Hence, the Labor Arbiter cannot act on
the same. A prayer for a monetary award should have been raised at the earliest
opportunity before the Labor Arbiter. Philippine Rural Reconstruction vs. Virgilio
Pulgar, G.R. No. 169227. July 5, 2010.

NLRC Rules of Procedure; certificate of non-forum shopping. The filing of a

certificate of non-forum shopping is mandatory in initiatory pleadings; non-
compliance with the required certification is fatal. The filing of the same is not
waived by the other party’s failure to immediately assert the defect, and neither is
it cured by its belated submission on the ground that the party was not in any way
guilty of actual forum shopping. In cases where the Court tolerated the deficiency,
special circumstances or compelling reasons made the strict application unjustified.
In this case, however, the petitioners offered no valid justification for their failure to
comply with the Circular. Mandaue Galleon Trade, Inc., et al. vs. Bienvenido Isidto,
et al., G.R. No. 181051, July 5, 2010.

Rule 45; when review of facts allowed. As a rule, a petition for review under Rule 45
of the Rules of Court must raise only questions of law. However, the rule has
exceptions such as when the findings of the Labor Arbiter, NLRC and Court of
Appeals vary, as in this case. Maribago Bluewater Beach Resort, Inc. vs. Nito Dual,
G.R. No. 180660, July 20, 2010

JUNE 2010

Labor Law

Acceptance of Benefits, render moot claim under other policies. As in the case
of Capili v. National Labor Relations Commission [273 SCRA 576], a claim for benefit
under the company’s retirement plan becomes moot when the employee accepts
retirement benefits on the basis of Article 287 of the Labor Code. By Yuson’s
acceptance of her retirement benefits through a compromise agreement entered
into with her employer, she is deemed to have opted to retire under Article
287. Korean Air Co., Ltd and Suk Kyoo Kim v. Adelina A.S. Yuson, G.R. No. 170369,
June 16, 2010.

Approval for company’s early retirement program; management prerogative.

Approval of applications for the early retirement program (“ERP”) is within the
employer’s management prerogatives. The exercise of management prerogative is
valid as long as it is not done in a malicious, harsh, oppressive, vindictive, or
wanton manner. In the present case, the Court sees no bad faith on the part of the
employer. The 21 August 2001 memorandum clearly states that petitioner, on its
discretion, was offering ERP to its employees. The memorandum also states that
the reason for the ERP was to prevent further losses. Petitioner did not abuse its
discretion when it excluded respondent in the ERP because the latter is already
about to retire. To allow respondent to avail of the ERP would have been contrary
to the purpose of the program. Korean Air Co., Ltd and Suk Kyoo Kim v. Adelina A.S.
Yuson, G.R. No. 170369, June 16, 2010.

Constructive dismissal; definition; transfer as management prerogative.

Constructive dismissal is defined as a quitting because continued employment is
rendered impossible, unreasonable or unlikely, or when there is a demotion in rank
or a diminution of pay. It exists when an act of clear discrimination, insensibility or
disdain by an employer has become so unbearable to the employee leaving him
with no option but to forego with his continued employment.

Here, there was no diminution of petitioner’s salary and other benefits. There was
no evidence that she was harassed or discriminated upon, or that respondents
made it difficult for her to continue with her other duties. Absent any evidence of
bad faith, it is within the exercise of respondents’ management prerogative to
transfer some of petitioner’s duties, if, in their judgment, this would be more
beneficial to the corporation. Estrella Velasco vs. Transit Automotive Supply, Inc.
and Antonio de Dios, G.R. No. 171327, June 18, 2010.

Constructive dismissal; off-detailing; resignation; notice requirement. The company

evidently placed petitioner on floating status after being relieved of her position.
But, as the Court has repeatedly ruled, such act of “off-detailing” does not amount
to a dismissal so long as the floating status does not continue beyond a reasonable
time. In this case, the employee’s floating status ran up to more than six months as
of August 16, 2002. For this reason, the company may be considered to have
constructively dismissed the employee from work as of that date. Hence,
petitioner’s purported resignation on October 15, 2002 could not have been legally
possible.

The company claims that it gave petitioner notices on August 23, 2002 and
September 2, 2002, asking her to explain her failure to report for work and
informing her that the company would treat such failure as lack of interest in her
continued employment. But these notices cannot possibly take the place of the
notices required by law as they came more than six months after the company
placed her on floating status, at which time, the employee is already deemed to
have been constructively dismissed her from work. Elsa S. Mali-on v. Equitable
General Services Inc., G.R. No. 185269, June 29, 2010.

Death benefits; entitlement. In order to avail of death benefits, the death of the
employee should occur during the term of the employment contract. For emphasis,
we reiterate that the death of a seaman during the term of employment contract
makes the employer liable to his heirs for death benefits, but if the seaman dies
after his contract of employment has expired, his beneficiaries are not entitled to
the death benefits. Southeastern Shipping, Southeastern Shipping Group, Ltd. vs.
Federico U. Navarra, Jr., G.R. No. 167678, June 22, 2010.

Death benefits; post-medical examination; inadvertence of employer. In the cases

of Philippines., Inc. v. Joaquin [437 SCRA 608] and Rivera v. Wallem Maritime
Services, Inc.[474 SCRA 714], the Supreme Court stressed the importance of a post-
employment medical examination or its equivalent for the award of death benefits
to seafarers and/or their representatives in compliance with POEA Memorandum
Circular No. 055-96 and Department Order No. 33, Series of 1996, which provide
that the seafarer must report to his employer for a post-employment medical
examination within three working days from the date of arrival, otherwise, benefits
under the POEA standard employment contract would be nullified. However, in the
present case, the absence of a post-employment medical examination cannot be
used to defeat respondent’s claim since the failure to subject the seafarer to this
requirement was not due to the seafarer’s fault but to the inadvertence or
deliberate refusal of petitioners. Interorient Maritime Enterprises, Inc. et al. v.
Leonora S. Remo, G.R. No. 181112, June 29, 2010.

Dismissal; breach of trust; lack of loss not a defense. The acts of the employee
revealed a mind that was willing to disregard bank rules and regulations when other
branch officers concurred. Her defense that the bank suffered no loss is of no
moment. The focal point is that she betrayed the trust of the bank. Hence, the bank
rightfully terminated the services of the employee for willful breach of the trust that
it reposed in her. Luzviminda A. Ang vs. Philippine National Bank, G.R. No. 178762,
June 16, 2010.
Dismissal; burden of proof. In termination cases, the burden of proof rests upon the
employer to show that the dismissal of the employee is for just cause and failure to
do so would mean that the dismissal is not justified. This is in consonance with the
guarantee of security of tenure in the Constitution, and elaborated in the Labor
Code. A dismissed employee is not required to prove his innocence to the charges
leveled against him by his employer. The determination of the existence and
sufficiency of a just cause must be exercised with fairness and in good faith and
after observing due process. Lima Land, Inc., Leandro Javier, Sylvia Duque and
Premy Ann Beloy vs. Marlyn Cuavas, G.R. No. 169523, June 16, 2010.

Dismissal; exercised with compassion and understanding; doubts resolved in favor

of employee. While an employer has its own interest to protect, and pursuant
thereto, it may terminate a managerial employee for a just cause, such prerogative
to dismiss or lay off an employee must be exercised without abuse of discretion. Its
implementation should be tempered with compassion and understanding. The
employer should bear in mind that, in the exercise of the said prerogative, what is
at stake is not only the employee’s position, but his very livelihood, his very
breadbasket. Indeed, the consistent rule is that 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 justifiable cause. Thus, when the
breach of trust or loss of confidence alleged is not borne by clearly established
facts, as in this case, such dismissal on the cited grounds cannot be allowed. Lima
Land, Inc., Leandro Javier, Sylvia Duque and Premy Ann Beloy vs. Marlyn Cuavas,
G.R. No. 169523, June 16, 2010.

Dismissal; gross neglect of duty; duty to family is no defense. Dr. Estampa’s

defense is not acceptable. A person’s duty to his family is not incompatible with his
job-related commitment to come to the rescue of victims of disasters. Disasters do
not strike every day. Besides, knowing that his job as senior medical health officer
entailed the commitment to make a measure of personal sacrifice, he had the
choice to resign from it when he realized that he did not have the will and the heart
to respond. Dr. Edilberto Estampa, Jr. vs. Government of Davao, G.R. No. 190681,
June 21, 2010.

Dismissal; loss of confidence not entitled to separation pay . It is significant to stress

that for there to be a valid dismissal based on loss of trust and confidence, the
breach of trust must be willful, meaning it must be done intentionally, knowingly,
and purposely, without justifiable excuse. The basic premise for dismissal on the
ground of loss of confidence is that the employee concerned holds a position of
trust and confidence. It is the breach of this trust that results in the employer’s loss
of confidence in the employee.

In the case of Aromin v. NLRC [553 SCRA 273], the assistant vice-president of BPI
was validly dismissed for loss of trust and confidence. The Court disallowed the
payment of separation pay on the ground that he was found guilty of willful betrayal
of trust, a serious offense akin to dishonesty. Bank of the Philippine Islands and BPI
Family Bank vs. Hon. National Labor Relations Commission (1st Division) and Ma.
Rosario N. Arambulo, G.R. No. 179801. June 18, 2010.

Dismissal; loss of trust and confidence; managerial employees. Loss of trust and
confidence, as a just cause for termination of employment, is premised on the fact
that an employee concerned holds a position where greater trust is placed by
management and from whom greater fidelity to duty is correspondingly expected.
This includes managerial personnel entrusted with confidence on delicate matters,
such as the custody, handling, or care and protection of the employer’s property.
The betrayal of this trust is the essence of the offense for which an employee is
penalized.

It must be noted, however, that in a plethora of cases, the Supreme Court has
distinguished the treatment of managerial employees from that of rank-and-file
personnel, insofar as the application of the doctrine of loss of trust and confidence
is concerned. Thus, with respect to rank-and-file personnel, loss of trust and
confidence, as ground for valid dismissal, requires proof of involvement in the
alleged events in question, and that mere uncorroborated assertions and
accusations by the employer will not be sufficient. But as regards a managerial
employee, the mere existence of a basis for believing that such employee has
breached the trust of his employer would suffice for his dismissal. Hence, in the
case of managerial employees, proof beyond reasonable doubt is not required, it
being sufficient that there is some basis for such loss of confidence, such as when
the employer has reasonable ground to believe that the employee concerned is
responsible for the purported misconduct, and the nature of his participation therein
renders him unworthy of the trust and confidence demanded of his position. Lima
Land, Inc., Leandro Javier, Sylvia Duque and Premy Ann Beloy vs. Marlyn Cuavas,
G.R. No. 169523, June 16, 2010.

Dismissal; mere negligence or carelessness not sufficient ground for loss of

confidence. Respondent’s negligence or carelessness in her duties, however, are
not justifiable grounds for petitioners’ loss of trust and confidence in her, especially
in the absence of any malicious intent or fraud on respondent’s part. Loss of trust
and confidence stems from a breach of trust founded on a dishonest, deceitful or
fraudulent act. In the case at bar, respondent did not commit any act which was
dishonest or deceitful. She did not use her authority as the Finance and
Administration Manager to misappropriate company property nor did she abuse the
trust reposed in her by petitioners with respect to her responsibility to implement
company rules. The most that can be attributed to respondent is that she was
remiss in the performance of her duties. This, though, does not constitute dishonest
or deceitful conduct which would justify the conclusion of loss of trust and
confidence. Lima Land, Inc., Leandro Javier, Sylvia Duque and Premy Ann Beloy vs.
Marlyn Cuavas, G.R. No. 169523, June 16, 2010.

Dismissal for just cause, separation pay allowed in exceptional cases. While as a
general rule, an employee who has been dismissed for any of the just causes
enumerated under Article 282 of the Labor Code is not entitled to separation pay,
the Court has allowed in numerous cases the grant of separation pay or some other
financial assistance to an employee dismissed for just causes on the basis of equity.

In the leading case of Philippine Long Distance Telephone Co. v. NLRC [164 SCRA
671] the Court stated that 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. In
granting separation pay to respondent, the NLRC and Court of Appeals both
adhered to this jurisprudential precept and cleared respondent of bad faith. Bank of
the Philippine Islands and BPI Family Bank vs. Hon. National Labor Relations
Commission (1st Division) and Ma. Rosario N. Arambulo, G.R. No. 179801, June 18,
2010.

Employee benefit; total disability construed. It has been held that disability is
intimately related to one’s earning capacity. It should be understood less on its
medical significance but more on the loss of earning capacity. Total disability does
not mean absolute helplessness. In disability compensation, it is not the injury,
which is compensated, but rather the incapacity to work resulting in the impairment
of one’s earning capacity. Thus, permanent disability is the inability of a worker to
perform his job for more than 120 days, regardless of whether or not he loses the
use of any part of his body. Oriental Ship Management Co., Inc. vs. Romy B. Bastol,
G.R. No. 186289, June 29, 2010.

Employer-Employee Relationship; agents of insurance companies; exception to the

Insular case; Our ruling in the first Insular case [Insular Insurance v. NLRC, 179
SCRA 459] case did not foreclose the possibility of an insurance agent becoming an
employee of an insurance company; if evidence exists showing that the company
promulgated rules or regulations that effectively controlled or restricted an
insurance agent’s choice of methods or the methods themselves in selling
insurance, an employer-employee relationship would be present. The existence of
an employer-employee relationship is thus determined on a case-to-case basis
depending on the evidence on record. Gregorio V. Tongko v. The Manufacturers Life
Insurance Co. (Phils) and Renato A. Vergel De Dios, G.R. No. 167622, June 29, 2010.

Nature of employer; privatization; entitlement to benefits. Although the

transformation of the PNB from a government-owned corporation to a private one
did not result in a break in its life as juridical person, the same idea of continuity
cannot be said of its employees. Section 27 of Presidential Proclamation 50
provided for the automatic termination of employer-employee relationship upon
privatization of a government-owned and controlled corporation. Further, such
privatization cannot deprive the government employees involved of their accrued
benefits or compensation.

As for possible benefits accruing after privatization, the same should be deemed
governed by the Labor Code since the PNB that rehired the employee has become a
private corporation. Under the Omnibus Rules Implementing the Labor Code, Book
VI, Rule I, Section 7, the employee’s separation from work for a just cause does not
entitle her to termination pay. Luzviminda A. Ang vs. Philippine National Bank, G.R.
No. 178762, June 16, 2010.

Nature of employer; privatization no defense; continuity of offense. The offense for

which petitioner was removed took place when the government still owned PNB and
she was then a government employee. But while PNB began as a government
corporation, it did not mean that its corporate being ceased and was subsequently
reestablished when it was privatized. It remained the same corporate entity before,
during, and after the change over with no break in its life as a corporation.
Consequently, the offenses that were committed against the bank before its
privatization continued to be offenses against the bank after the privatization.
Luzviminda A. Ang vs. Philippine National Bank, G.R. No. 178762, June 16, 2010.

Prescription of labor claims; overseas contract workers. The employment of

seafarers, including claims for death benefits, is governed by the contracts they
sign every time they are hired or rehired; and as long as the stipulations therein are
not contrary to law, morals, public order or public policy, they have the force of law
between the parties.

In Cadalin v. POEA’s Administrator [238 SCRA 721, 764] we held that Article 291 of
the Labor Code covers all money claims from employer-employee relationship. “It
is not limited to money claims recoverable under the Labor Code, but applies also to
claims of overseas contract workers”.

Article 291 of the Labor Code is the law governing prescription of money claims of
seafarers, a class of overseas contract workers. This law prevails over Section 28 of
the Standard Employment Contract for Seafarers, which provides for claims to be
brought only within one year from the date of the seafarer’s return to the point of
hire. Thus, for the guidance of all, Section 28 of the Standard Employment Contract
for Seafarers, insofar as it limits the prescriptive period for the filing of money
claims by seafarers, is hereby declared null and void. The applicable provision is
Article 291 of the Labor Code, it being more favorable to the seafarers and more in
accord with the State’s declared policy to afford full protection to labor, which
provides for a three-year prescriptive period. Southeastern Shipping, Southeastern
Shipping Group, Ltd. vs. Federico U. Navarra, Jr., G.R. No. 167678, June 22, 2010.

Quitclaims; general rule; requirements for validity; instances when it was annulled.
As a rule, quitclaims, waivers, or releases are looked upon with disfavor and are
largely ineffective to bar claims for the measure of a worker’s legal rights. To be
valid, a Deed of Release, Waiver and/or Quitclaim must meet the following
requirements: (1) that there was no fraud or deceit on the part of any of the parties;
(2) that the consideration for the quitclaim is credible and reasonable; and (3) that
the contract is not contrary to law, public order, public policy, morals or good
customs, or prejudicial to a third person with a right recognized by law.

Courts have stepped in to annul questionable transactions, especially where there is

clear proof that a waiver, for instance, was obtained from an unsuspecting or a
gullible person; or where the agreement or settlement was unconscionable on its
face. A quitclaim is ineffective in barring recovery of the full measure of a worker’s
rights, and the acceptance of benefits therefrom does not amount to estoppel.
Moreover, a quitclaim in which the consideration is scandalously low and inequitable
cannot be an obstacle to the pursuit of a worker’s legitimate claim. Interorient
Maritime Enterprises, Inc. et al. v. Leonora S. Remo, G.R. No. 181112, June 29,
2010.

Retirement benefits; does not include allowances. Executive Order No. 756
temporary measure; statutory construction. Section 6 of Executive Order No. 756
(“E.O. 756”), which provides for the computation of retirement proceeds including
allowances, does not provide for a permanent retirement plan, as against the
prohibition of Section 28, Subsection (b) of Commonwealth Act No. 186 (“C.A. 186”),
as amended. The E.O. 756 should be read adjunct to its mandate of reorganizing
the Philippine International Trading Corporation. The increased benefit under E.O.
756 was clearly meant as an incentive for employees who retire, resign or are
separated from service during or as a consequence of the reorganization. As a
temporary measure, it cannot be interpreted as an exception to the general
prohibition against separate or supplementary insurance and/or retirement or
pension plans under C.A. 186, as amended.

In reconciling E.O. 756 with C.A.186, as amended, uppermost in the mind of the
Court is the fact that the best method of interpretation is that which makes laws
consistent with other laws which are to be harmonized rather than having one
considered repealed in favor of the other. Philippine International Trading
Corporation vs. Commission on Audit, G.R. No. 183517, June 22, 2010.

Resignation; burden of proof. The rule in termination cases is that the employer
bears the burden of proving that he dismissed his employee for a just cause. And,
when the employer claims that the employee resigned from work, the burden is on
the employer to prove that he did so willingly. Whether that is the case would
largely depend on the circumstances surrounding such alleged resignation. Those
circumstances must be consistent with the employee’s intent to give up work. Elsa
S. Mali-on v. Equitable General Services Inc., G.R. No. 185269, June 29, 2010.

Solidary liability of employers; proof of bad faith. Based on MAM Realty

Development Corporation v. NLRC [244 SCRA 797], for corporate officers to be held
solidarily liable in labor disputes there must be evidence of bad faith or malice.
Querubin L. Alba and Rizalinda D. De Guzman vs. Robert L. Yupangco, G.R. No.
188233, June 29, 2010.

Labor Procedure

Judgment; amendment of final order; solidary liability. The Labor Arbiter cannot
modify a final and executory judgment, even if the modification is meant to correct
erroneous conclusions of fact and law, whether it be made by the court that
rendered it or by the highest court in the land. The only recognized exceptions are
the corrections of clerical errors or the making of so-called nunc pro tunc entries
which cause no prejudice to any party and in cases where the judgment is void.
Said exceptions do not apply in the present case. Querubin L. Alba and Rizalinda D.
De Guzman vs. Robert L. Yupangco, G.R. No. 188233, June 29, 2010.

Judgment; law of the case; definition and application. “Law of the case” has been
defined as the opinion delivered on a former appeal—it is a term applied to an
established rule that when an appellate court passes on a question and remands
the case to the lower court for further proceedings, the question there settled
becomes the law of the case upon subsequent appeal. OSCI’s application of the law
of the case principle to the instant case, as regards the remand of the case to the
Labor Arbiter for clarificatory hearings, is misplaced. The only matter settled in the
July 30, 1999 NLRC Decision, which can be regarded as law of the case, was the
undisputed fact that Bastol was suffering from a heart ailment. As it is, the issue on
the degree of disability of Bastol’s heart ailment and his entitlement to disability
indemnity, as viewed by the NLRC through said decision, has yet to be resolved.
For this reason, the NLRC remanded the case to Labor Arbiter Mayor, Jr. “for
conduct of further appropriate proceedings and to terminate the same with
dispatch. Oriental Ship Management Co., Inc. vs. Romy B. Bastol, G.R. No. 186289,
June 29, 2010.

Judgment; res judicata; nature and applicability. The nature of res judicata, as now
embodied in Sec. 47, Rule 39 of the Rules of Court, has two concepts, which are (i)
bar by former judgment and (ii) conclusiveness of judgment. These concepts of the
doctrine of res judicata are applicable to second actions involving substantially the
same parties, the same subject matter, and cause or causes of action. In the instant
case, there is no second action to speak of. Oriental Ship Management Co., Inc. vs.
Romy B. Bastol, G.R. No. 186289, June 29, 2010.

Procedure; certificate of non-forum shopping; pro-forma complaints . For the

expeditious and inexpensive filing of complaints by employees, the Regional
Arbitration Branch (“RAB”) of the NLRC provides pro-forma complaint forms. This is
to facilitate the exercise and protection of employees’ rights by the convenient
assertion of their claims against employers untrammeled by procedural rules and
complexities. To comply with the certification against forum shopping requirement,
a simple question embodied in the Complaint form answerable by “yes” or “no”
suffices. Employee-complainants are not even required to have a counsel before
they can file their complaint. An officer of the RAB, duly authorized to administer
oaths, is readily available to facilitate the execution of the required subscription or
jurat of the complaint. Oriental Ship Management Co., Inc. vs. Romy B. Bastol, G.R.
No. 186289, June 29, 2010.

Procedure; conduct of hearings; discretionary; exemptions. Although, the NLRC,

while having appellate jurisdiction over decisions and resolutions of the Labor
Arbiter, may not dictate to the latter how to conduct the labor case before it. Sec. 9
of Rule V of the then prevailing NLRC Rules of Procedure, issued on December 10,
1999, provided for the nature of proceedings before the Labor Arbiter as non-
litigious in nature. Hence, the Labor Arbiter is given full discretion to determine,
motu proprio, on whether to conduct hearings or not.

Consequently, a hearing cannot be demanded by either party as a matter of right.

The parties are required to file their corresponding position papers and all the
documentary evidence and affidavits to prove their cause of action and defenses.
The rationale behind this is to avoid delay and curtail the pernicious practice of
withholding of evidence.

The Court, however, has recognized specific instances of the impracticality for the
Labor Arbiter to follow the position paper method of disposing cases; thus, formal or
clarificatory hearings must be had in cases of termination of employment: such as,
(i) when claims are not properly ventilated for lack of proper determination whether
complainant employee was a rank-and-file or a managerial employee, (ii) that the
Labor Arbiter cannot rely solely on the parties’ bare allegations when the affidavits
submitted presented conflicting factual issues, and (iii) considering the dearth of
evidence presented by complainants the Labor Arbiter should have set the case for
hearing. Oriental Ship Management Co., Inc. vs. Romy B. Bastol, G.R. No. 186289,
June 29, 2010.

Procedure; verification by counsel sufficient. The counsel’s verification in a Position

Paper substantially complies with the rule on verification. The second paragraph of
Sec. 4, Rule 7 of the Rules of Court provides: “A pleading is verified by an affidavit
that the affiant has read the pleading and that the allegations therein are true and
correct of his personal knowledge or based on authentic records.” On the other
hand, the actual verification of counsel states: “That I am the counsel of record for
the complainant in the above-entitled case; that I caused the preparation of the
foregoing Position Paper; that I have read and understood the contents thereof; and
that I confirm that all the allegations therein contained are true and correct based
on recorded evidence.” Oriental Ship Management Co., Inc. vs. Romy B. Bastol, G.R.
No. 186289, June 29, 2010.

Procedure; late filing of position paper, and filing of prohibited pleading. The
relaxation of rules of technical procedure in the hearing of labor disputes shall not
be applicable in case counsel fails to file a position paper before the Labor Arbiter
not just once but twice. His situation was compounded when he filed a motion to
recall order of dismissal, a prohibited pleading, albeit gratuitously glossed over by
the Labor Arbiter, which treated it as an appeal; and when he belatedly paid the
appeal fee.

Moreover, not having learned his lesson, petitioner’s counsel filed a motion for
reconsideration of the NLRC dismissal of his appeal, which is also prohibited, instead
of interposing an appeal before the Court of Appeals. Said motion for
reconsideration not having tolled the running of the reglementary period for the
filing of a petition for certiorari under Rule 65, petitioner’s petition before the
appellate court was filed out of time – three months late. Luis M. Rivera vs. Parents-
Teachers Community Association and Easter Yase, G.R. No. 181532, June 29, 2010.

Procedure; late submission of documentary evidence allowed. The nature of the

proceedings before the Labor Arbiter is not only non-litigious and summary, but the
Labor Arbiter is also given great leeway to resolve the case; thus, he may “avail
himself of all reasonable means to ascertain the facts of the controversy.” The
belated submission of additional documentary evidence by respondent after the
case was already submitted for decision did not make the proceedings before the
Labor Arbiter improper. The basic reason is that technical rules of procedure are
not binding in labor cases. Oriental Ship Management Co., Inc. vs. Romy B. Bastol,
G.R. No. 186289, June 29, 2010.

Procedure; quantum of evidence on appeal; substantial evidence. In administrative

proceedings, the quantum of proof required is substantial evidence, which is more
than a mere scintilla of evidence, but such amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion. The Court of
Appeals may review the factual findings of the NLRC and reverse its ruling if it finds
that the decision of the NLRC lacks substantial basis. Estrella Velasco vs. Transit
Automotive Supply, Inc. and Antonio de Dios, G.R. No. 171327, June 18, 2010.

MAY 2010

Labor law

Illegal dismissal; backwages. The basis for the payment of backwages is different
from that for the award of separation pay. Separation pay is granted where
reinstatement is no longer advisable because of strained relations between the
employee and the employer. Backwages represent compensation that should have
been earned but were not collected because of the unjust dismissal. The basis for
computing backwages is usually the length of the employee’s service while that for
separation pay is the actual period when the employee was unlawfully prevented
from working.

As to how both awards should be computed, Macasero v. Southern Industrial Gases

Philippines [G.R. No. 178524, January 30, 2009] instructs that the award of
separation pay is inconsistent with a finding that there was no illegal dismissal, for
under Article 279 of the Labor Code and as held in a catena of cases, an employee
who is dismissed without just cause and without due process is entitled to
backwages and reinstatement or payment of separation pay in lieu thereof. Thus,
an illegally dismissed employee is entitled to two reliefs: backwages and
reinstatement. The two reliefs provided are separate and distinct. Golden Ace
Builders and Arnold U. Azur vs. Jose A. Talde, G.R. No. 187200, May 5, 2010.

Illegal dismissal; doctrine of strained relations. Under the doctrine of strained

relations, the payment of separation pay is considered an acceptable alternative to
reinstatement when the latter option is no longer desirable or viable. On one hand,
such payment liberates the employee from what could be a highly oppressive work
environment. On the other hand, it releases the employer from the grossly
unpalatable obligation of maintaining in its employ a worker it could no longer trust.

Strained relations must be demonstrated as a fact, however, to be adequately

supported by evidence— substantial evidence to show that the relationship
between the employer and the employee is indeed strained as a necessary
consequence of the judicial controversy.

In the present case, the Labor Arbiter found that actual animosity existed between
petitioner Azul and respondent as a result of the filing of the illegal dismissal case.
Such finding, especially when affirmed by the appellate court as in the case at bar,
is binding upon the Court, consistent with the prevailing rules that the Court will not
try facts anew and that findings of facts of quasi-judicial bodies are accorded great
respect, even finality. Golden Ace Builders and Arnold U. Azul vs. Jose A. Talde, G.R.
No. 187200, May 5, 2010.

Illegal dismissal; separation pay. In instances where reinstatement is no longer

feasible because of strained relations between the employee and the employer,
separation pay is granted. In effect, an illegally dismissed employee is entitled to
either reinstatement, if viable, or separation pay if reinstatement is no longer
viable, and backwages. The normal consequences of respondents’ illegal dismissal,
then, are reinstatement without loss of seniority rights, and payment of backwages
computed from the time compensation was withheld up to the date of actual
reinstatement. Where reinstatement is no longer viable as an option, separation
pay equivalent to one (1) month salary for every year of service should be awarded
as an alternative. The payment of separation pay is in addition to payment of
backwages.

The accepted doctrine is that separation pay may avail in lieu of reinstatement if
reinstatement is no longer practical or in the best interest of the parties. Separation
pay in lieu of reinstatement may likewise be awarded if the employee decides not to
be reinstated. Golden Ace Builders and Arnold U. Azur vs. Jose A. Talde, G.R. No.
187200, May 5, 2010.

Labor procedure

Judgment; final and executory. The Labor Arbiter’s decision has long become final
and executory and it can no longer be reversed or modified. Nothing is more settled
in law than when a final judgment becomes executory, it thereby becomes
immutable and unalterable. The judgment may no longer be modified in any
respect, even if the modification is meant to correct what is perceived to be an
erroneous conclusion of law or fact, and regardless of whether the modification is
attempted to be made by the court rendering it or by the highest court of the land.
The only recognized exception are the correction of clerical errors or the making of
so-called nunc pro tunc entries which cause no injury to any party, and, of course,
where the judgment is void.

Once a judgment becomes final and executory, the prevailing party should not be
denied the fruits of his victory by some subterfuge devised by the losing party.
Final and executory judgments can neither be amended nor altered except for
correction of clerical errors, even if the purpose is to correct erroneous conclusions
of fact or of law. Trial and execution proceedings constitute one whole action or suit
such that a case in which execution has been issued is regarded as still pending so
that all proceedings in the execution are proceedings in the suit.

It is no longer legally feasible to modify the final ruling in this case through the
expediency of a petition questioning the order of execution. Judgments of courts
should attain finality at some point lest there be no end in litigation. The final
judgment in this case may no longer be reviewed, or in any way modified directly or
indirectly, by a higher court, not even by the Supreme Court. The reason for this is
that, litigation must end and terminate sometime and somewhere, and it is
essential to an effective and efficient administration of justice that, once a judgment
has become final, the winning party be not deprived of the fruits of the verdict.
Courts must guard against any scheme calculated to bring about that result and
must frown upon any attempt to prolong controversies. Marmosy Trading, Inc. and
Victor Morales vs. Court of Appeals, et al., G.R. No. 170515, May 6, 2010.

APRIL 2010

Labor Law

Dismissal; backwages. Article 279 of the Labor Code provides that “an employee
who is unjustly dismissed from work shall be entitled to reinstatement without loss
of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to the time of his actual
reinstatement.”

Thus, a number of cases holds that an illegally dismissed employee is entitled to

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

The normal consequences of respondents’ illegal dismissal, then, are reinstatement

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

Since reinstatement is no longer feasible in the present case, the award of

separation pay in lieu of reinstatement is in order. Petitioner’s prayer for the award
of backwages is meritorious, it, and the award of separation pay not being mutually
exclusive. Ferdinand A. Pangilinan vs. Wellmade Manufacturing Corporation, G.R.
No. 187005, April 7, 2010.

Dismissal; backwages. Reprimand being the appropriate imposable penalty for

respondent’s actuations from the very beginning, the Court finds that respondent
was unfairly denied from reporting for work and earning his keep, thus, entitling him
to the payment of backwages.

The Court is not unmindful of our previous pronouncements in similar cases

involving suspension or dismissal from service, wherein the penalty imposed was
reduced, but the award of backwages was denied.

Given the circumstances of the case, however, where the proper penalty should
only be a reprimand, the Court finds the aforementioned cases to be inapplicable
herein. On this note, the Court deems it proper to distinguish between the penalties
of dismissal or suspension and reprimand and their respective effects on the grant
or award of backwages. When an employee is dismissed or suspended it is but
logical that since he is barred from reporting to work the same negates his right to
be paid backwages. He has no opportunity to work during the period he was
dismissed or suspended and, therefore, he has no salary to expect. However, the
same does not hold true for an employee who is reprimanded. A reprimand usually
carries a warning that a repetition of the same or similar act will be dealt with more
severely. Under normal circumstances, an employee who is reprimanded is never
prevented from reporting to work. He continues to work despite the warning. Thus,
in the case at bar, since respondent’s penalty should only be a reprimand, the Court
deems it proper and equitable to affirm the Court of Appeals’ (CA’s) award
of backwages.

In two instances, the Court granted the award of backwages during the period the
employees were prevented from reporting to work despite concluding that the
employee concerned violated reasonable office rules and regulations and imposing
the penalty of reprimand.

In Jacinto v. Court of Appeals [G.R. No. 124540, November 14, 1997,

281 SCRA 657], the Court awarded petitioner Jacinto backwages after finding that
she was only culpable of violating reasonable office rules and regulations for not
having asked permission from school authorities to leave the school premises and
seek medical attention and for not filing an application for sick leave for approval by
the school authorities.

Also, in Bangalisan v. Court of Appeals [G.R. 124678, July 31, 1997, 276 SCRA 619,
633], after affirming the findings that one of the petitioners, Rodolfo Mariano, is only
liable for his violation of reasonable office rules and regulations for attending the
wake and internment of his grandmother without the benefit of an approved leave
of absence and the imposition of the penalty of reprimand, the Court still granted
him backwages.

Consistent with the Court’s rulings in Bangalisan and Jacinto, the grant
of backwages to respondent is but proper. It is to be stressed that when imposing
penalties, it must not only be made within the parameters of the law, but it should
also satisfy the basic tenets of equity, justice, and fairplay. National Power
Corporation vs. Alan Olandesca, G.R. No. 171434, April 23, 2010.

Dismissal; dishonesty. In Philippine Amusement and Gaming Corporation

v. Rilloroza [G.R. No. 141141, June 25, 2001], dishonesty is defined as the
disposition to lie, cheat, deceive, or defraud; untrustworthiness; lack of integrity;
lack of honesty, probity or integrity in principle; lack of fairness and
straightforwardness; disposition to defraud, deceive or betray.

It is not disputed that respondent took several materials and supplies from
petitioner’s warehouse without the approved WRS. However, this should not be
construed as dishonesty on the part of respondent that would warrant his dismissal
from the service for the following reasons: First, the withdrawals of the supplies
were duly recorded in the security guard’s logbook. If respondent intended to
defraud petitioner, he could have easily taken items from the warehouse without
having them recorded as he was then the Supervising Property Officer who had free
access to the supplies. Second, right after withdrawing the items, respondent
replaced them on his own initiative, without anyone instructing him to do so. This
act negates his intent to defraud petitioner. Third, there is no clear showing that
respondent misappropriated or converted the items for his own personal use or
benefit. Fourth, the Graft Investigation Officer of the Office of the Ombudsman, in
its Resolution dated February 5, 1999, in OMB-1-98-2011, dismissed a complaint for
qualified theft filed by Teodulo V. Largo, Section Chief, Power Generation Group of
petitioner against respondent as there was no competent and sufficient evidence on
record to show that there was intent to gain on the part of the respondent,
considering that the materials and supplies taken by him were used in fencing the
watershed and reservation area of petitioner company. Likewise, there was no
basis to charge him for malversation of public property as there was no
misappropriation of the supplies for his personal use and that the same were for
general purpose and not for any specific use.

Nonetheless, although the respondent did not commit an overt act of dishonesty, he
is not exonerated from liability. It was an established company procedure that
before materials can be taken out from the warehouse, the issuance of a WRS is an
indispensable requirement. In fact, there was even a warning posted at the door of
the property office that states:
“BAWAL MAGLABAS NG GAMIT O MAGKARGA NG GASOLINA NG WALANG APRUBADO
NG WRS.” Being the Supervising Property Officer, respondent knows fully well that
taking items from the warehouse without the required WRS is against the company
rules and regulations. It is the paramount duty of respondent to protect the
properties in the warehouse and to ensure that none shall be taken away without
proper documentation.

The Machiavellian principle that “the end justifies the means” has no place in
government service, which thrives on the rule of law, consistency and stability.
Respondent, by taking the said properties without the approved WRS, violated
reasonable office rules and regulations as provided in Section 52 (C), (3), Rule IV of
Civil Service Commission Memorandum Circular No. 19, series of 1999 (Uniform
Rules on Administrative Cases in the Civil Service). Since this is respondent’s first
offense in his more than 16 years of service, the appropriate penalty to be imposed
against him is reprimand. National Power Corporation vs. Alan Olandesca, G.R. No.
171434, April 23, 2010.

Dismissal; lost of trust and confidence. To terminate the services of an employee for
loss of trust and confidence, two requisites must concur: (1) the employee
concerned must be holding a position of trust and confidence and (2) there must be
an act that would justify the loss of trust and confidence.

In the present case, respondent failed to justify its loss of trust and confidence
on Consolacion even as it imputed to him, via Notice of Formal Investigation of April
14, 2003, non-compliance with (a) established non-written procedures and
standards; (b) established written procedures and standards, and (c) verbal orders
and/or instructions. These alleged acts of non-compliance are too general and can
encompass just about any malfeasance. Nowhere in the Notice was there a
detailed narration of the facts and circumstances that would serve as bases to
terminate Consolacion, thus leaving to surmise what those procedures, standards
and orders were. Anabel Benjamin, et al. vs. Amellar Corporation., G.R. No.
183383, April 5, 2010.

Dismissal; management prerogative. Respondent’s right of management

prerogative was exercised in good faith. Respondent presented evidence of the low
volume of sales and orders for the production of industrial paper in 1999, which
inevitably resulted to the company’s decision to streamline its operations. This fact
was corroborated by respondent’s VP-Tissue Manufacturing Director and was not
disputed by petitioner. Exercising its management prerogative and sound business
judgment, respondent decided to cut down on operational costs by shutting down
one of its paper mill. As held in International Harvester Macleod, Inc. v.
Intermediate Appellate Court [233 Phil. 655,655-666 (1987)] the determination of
the need to phase out a particular department and consequent reduction of
personnel and reorganization as a labor and cost saving device is a recognized
management prerogative which the courts will not generally interfere with.

In this case, shutting down Paper Mill No. 4 was undoubtedly a business judgment
arrived at in the face of the low demand for the production of industrial paper at the
time. Despite an apparent reason to implement a retrenchment program as a cost-
cutting measure, respondent, did not dismiss the workers affected by the closure of
Paper Mill No. 4 outright but gave them an option to be transferred to posts of equal
rank and pay. Retrenchment was given only as an option in case the affected
employee did not want to be transferred. The Court viewed this as an indication of
good faith on respondent’s part since it exhausted other possible measures before
retrenchment. Besides, the employer’s prerogative to bring down labor costs by
retrenchment must be exercised essentially as a measure of last resort, after less
drastic means have been tried and found wanting. Giving the workers an option to
be transferred without any diminution in rank and pay belie petitioner’s allegation
that the streamlining scheme was implemented as a ploy to ease out employees.
Apparently, respondent implemented its streamlining or reorganization plan in good
faith, not in an arbitrary manner and without violating the tenurial rights of its
employees. Dannie M. Pantoja vs. SCA Hygiene Products Corporation, G.R. No.
163554, April 23, 2010.

Dismissal; retrenchment. The CA committed no reversible error in affirming

the NLRC ruling that Talam was validly dismissed on the ground of retrenchment.
The Supreme Court came to this conclusion based on the following considerations:

First, the decision to retrench had a basis; it was not simulated nor resorted to for
the purpose of getting rid of employees. The decision was upon the
recommendation of the company’s external auditor. Second, the cost-cutting
measure recommended involved reduction of TSFI’s payroll expense account which,
as the auditor found, makes up 41% of the company’s total operating expenses.
Third, Talam was dismissed due to a cause authorized by law – retrenchment to
prevent losses. At the time of Talam’s dismissal, TSFI’s financial condition, as found
by the external auditor, showed that it was not just expecting losses, it already
suffered a net income loss of P2,474,418.00 and retained earnings deficit of
P7,424,250.00 for the period ending December 31, 2002. Fourth, TSFI resorted to
other measures to abate its losses. It claimed that during the crises period, it used
as an office a small-room (a mere cubicle) with only a two-person support staff in
the persons of Grapilon and Hermle; it reduced the salaries of its employees by as
much as 30%. This submission by the company is substantiated by the schedule of
Operating Expenses for the year ended December 31, 2002 and September 30,
2002. A quick glance at the schedule readily shows a reduction of TSFI’s operating
expenses across the board. The schedule indicates a substantial decrease in
operating expenses, from P5,733,735.00 in September 2002 to P1,698,552.36 as of
the end of December 2002. Francis Ray Talam vs. National Labor Relations
Commission, 4th Division, Cebu City, et al., G.R. No. 175040, April 6, 2010.

Dismissal; serious misconduct. The findings of the CA and National Labor Relations
Commission (NLRC) establish the following: (1) Agad’s request for withdrawal of the
190 cylinders of LPG as stated in a Memorandum dated 12 February 1992 cannot be
given credence since the Memorandum pertains to the replacement of the scrap
materials due to Boy Bato consisting of 3,000 kilograms of black iron plates and not
to the subject LPG cylinders; (2) Agad did not observe Caltex’s rules and regulations
when he transferred the said cylinders to Millanes’ compound without
the RMRD form as required under Caltex’s Field Accounting Manual; (3) Agad gave
specific instructions to Millanes to sell the cylinders without bidding to third parties
in violation of company rules; (4) Agad failed to submit the periodic inventory
report of the LPG cylinders to the accounting department; (5) Agad did not remit the
proceeds of the sale of the LPG cylinders; and (6) even if considered as scrap
materials, the LPG cylinders still had monetary value which Agad cannot
appropriate for himself without Caltex’s consent.

Considering these findings, it is clear that Agad committed a serious infraction

amounting to theft of company property. This act is akin to serious misconduct or
willful disobedience by the employee of the lawful orders of his employer in
connection with his work, a just cause for termination of employment recognized
under Article 282(a) of the Labor Code.

Misconduct has been defined as a transgression of some established and definite

rule of action, a forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment. To be serious, the misconduct
must be of such grave and aggravated character. Caltex (Philippines), Inc., et. al.
vs. Hermie G. Abad, et. al., G.R. No. 163554, April 23, 2010.

Due Process; termination. The records belie Amular’s claim of denial of procedural
due process. He chose not to present his side at the administrative hearing. In
fact, he avoided the investigation into the charges against him by filing his illegal
dismissal complaint ahead of the scheduled investigation. These facts show that
the employee was given the opportunity to be heard and he cannot now come to
the Court protesting that he was denied this opportunity. To belabor a point the
Court has repeatedly made in employee dismissal cases, the essence of due
process is simply an opportunity to be heard; it is the denial of this opportunity that
constitutes violation of due process of law. Technol Eight Philippines Corporation vs.
National Labor Relations Commission, et al., G.R. No. 187605. April 13, 2010.

Employer employee relationship. The elements to determine the existence of an

employment relationship are: (1) selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the employer’s power to
control the employee’s conduct. In filing a complaint for illegal dismissal, it is
incumbent upon Abueva to prove the relationship by substantial evidence.

In this regard, Abueva claims that he has worked with respondent hacienda for
more than a year already and that he was allowed to stay inside the hacienda. As
such, he is a regular employee entitled to monetary claims. However, petitioners
have not presented competent proof that respondents engaged the services
of Abueva; that respondents paid his wages or that respondents could dictate what
his conduct should be while at work. In other words, Abueva’s allegations did not
establish that his relationship with respondents had the attributes of an employer-
employee relationship based on the four-fold test. Abueva was not able to discharge
the burden of proving the existence of an employer-employee relationship.
Moreover, Abueva was not able to refute respondents’ assertion that he hires other
men to perform weeding job in the hacienda and that he is not exclusively working
for respondents. Romeo Basay, et al. vs. Hacienda Consolation, et al., G.R. No.
175532, April 19, 2010.

Illegal dismissal. Contrary to the CA’s perception, the Court finds a work-connection
in Amular’s and Ducay’s assault on Mendoza. As the CA itself noted, the underlying
reason why Amular and Ducay confronted Mendoza was to question him about his
report to De Leon – Technol’s PCD assistant supervisor – regarding the duo’s
questionable work behavior. The motivation behind the confrontation was rooted
on workplace dynamics as Mendoza, Amular and Ducay interacted with one another
in the performance of their duties.

Under these circumstances, Amular undoubtedly committed misconduct or

exhibited improper behavior that constituted a valid cause for his dismissal under
the law and jurisprudential standards. The circumstances of his misdeed rendered
him unfit to continue working for Technol. Thus, Amular was not illegally dismissed;
he was dismissed for cause. Technol Eight Philippines Corporation vs. National
Labor Relations Commission, et al., G.R. No. 187605. April 13, 2010.

Illegal Dismissal. If the school were to apply the probationary standards (as in fact it
says it did in the present case), these standards must not only be reasonable but
must have also been communicated to the teachers at the start of the probationary
period, or at the very least, at the start of the period of application of the said
standards. These terms, in addition to those expressly provided by the Labor Code,
would serve as the just cause for the termination of the probationary contract. As
explained above, the details of this finding of just cause must be communicated to
the affected teachers as a matter of due process.

AMACC, by its submissions, admits that it did not renew the petitioners’ contracts
because they failed to pass the Performance Appraisal System for Teachers (PAST)
and other requirements for regularization that the school implements to maintain its
high academic standards. The evidence is unclear on the exact terms of the
standards, although the school also admits that these were standards under the
Guidelines on the Implementation of AMACC Faculty Plantilla put in place at the
start of school year 2000-2001.

While the Court can grant that the standards were duly communicated to the
petitioners and could be applied beginning the 1st trimester of the school year 2000-
2001, glaring and very basic gaps in the school’s evidence still exist. The exact
terms of the standards were never introduced as evidence; neither does the
evidence show how these standards were applied to the petitioners. Without these
pieces of evidence (effectively, the finding of just cause for the non-renewal of the
petitioners’ contracts), the Court has nothing to consider and pass upon as valid or
invalid for each of the petitioners. Inevitably, the non-renewal (or effectively, the
termination of employment of employees on probationary status) lacks the
supporting finding of just cause that the law requires and, hence, is illegal. Yolanda
M. Mercado, et al. vs. Ama Computer College, Parañaque City, G.R. No. 183572,
April 13, 2010.

Illegal dismissal. The Court is not unmindful of the rule in labor cases that the
employer has the burden of proving that the termination was for a valid or
authorized cause; however, it is likewise incumbent upon the employees that they
should first establish by competent evidence the fact of their dismissal from
employment. The one who alleges a fact has the burden of proving it and the proof
should be clear, positive and convincing. In this case, aside from mere allegations,
no evidence was proffered by the petitioners that they were dismissed from
employment. The records are bereft of any indication that petitioners were
prevented from returning to work or otherwise deprived of any work assignment by
respondents.

In Abad v. Roselle Cinema [G.R. No. 141371, March 24, 2006, 485 SCRA 262, 272],
the Court ruled that the substantial evidence proffered by the employer that it had
not terminated the employee should not be ignored on the pretext that the
employee would not have filed the complaint for illegal dismissal if he had not really
been dismissed. The Court held that such non sequitur reasoning cannot take the
place of the evidence of both the employer and the employee. Romeo Basay, et al.
vs. Hacienda Consolation, et al., G.R. No. 175532, April 19, 2010.

Illegal Dismissal. The Court views with approval the observation of the CA and
the NLRC that the employer cannot justify the defense of abandonment as it failed
to prove that indeed the employee had abandoned her work. It did not even bother
to send a letter to her last known address requiring her to report for work and
explain her alleged continued absences.

The ratiocination of the NLRC on this score merits the Court’s imprimatur, viz: The
law clearly spells out the manner by which an unjustified refusal to return to work
by an employee may be established. Thus, respondent should have given
complainant a notice with warning concerning her alleged absences (Section 2, Rule
XIV, Book V, Implementing Rules and Regulations of the Labor Code). The notice
requirement actually consists of two parts to be separately served on the employee
to wit: (1) notice to apprise the employee of his absences with a warning
concerning a possible severance of employment in the event of an unjustified
excuse therefor, and (2) subsequent notice of the decision to dismiss in the event of
an employee’s refusal to pay heed to such warning. Only after complying with
those requirements can it be reasonably concluded that the employee actually
abandoned his job. In the present case, more than two (2) months had already
lapsed since the employee allegedly started to absent herself when she instituted
her action for illegal dismissal. During the said period of time, no action was taken
by the company regarding the employee’s alleged absences, something which is
quite peculiar had her employment not been severed at all. Accordingly, the Court
found no merit in the company’s defense of abandonment in view of an utter lack of
evidence to support the same. Hence, the employee’s charge of illegal dismissal
stands uncontroverted. Diversified Security, Inc. vs. Alicia V. Bautista. G.R. No.
152234, April 15, 2010.

Preventive Suspension; Process. What the Rules require is that the employer act on
the suspended worker’s status of employment within the 30-day period by
concluding the investigation either by absolving him of the charges, or meting the
corresponding penalty if liable, or ultimately dismissing him. If the suspension
exceeds the 30-day period without any corresponding action on the part of the
employer, the employer must reinstate the employee or extend the period of
suspension, provided the employee’s wages and benefits are paid in the interim.

In the present case, petitioner company had until May 20, 2002 to act on Taroy’s
case. It did by terminating him through a notice dated May 10, 2002, hence, the
30-day requirement was not violated even if the termination notice was received
only on June 4, 2002, absent any showing that the delayed service of the notice
on Taroy was attributable to Genesis Transport. Genesis Transport Service,
Inc. et al. vs. Unyon ng Malayang Manggagawa ng Genesis (UMMGT), et al., G.R. No.
182114, April 5, 2010.

Reinstatement. Given the period that has lapsed and the inevitable change of
circumstances that must have taken place in the interim in the academic world and
at AMACC, which changes inevitably affect current school operations, the Court
holds that – in lieu of reinstatement – the petitioners should be paid separation pay
computed on a trimestral basis from the time of separation from service up to the
end of the complete trimester preceding the finality of this Decision. The separation
pay shall be in addition to the other awards, properly recomputed, that the LA
originally decreed. Yolanda M. Mercado, et al. vs. Ama Computer
College, Parañaque City, G.R. No. 183572, April 13, 2010.

Release, Waiver and Quitclaim. Talam was not an unlettered employee; he was an
information technology consultant and must have been fully aware of the
consequences of what he was entering into. The quitclaim was a voluntary act as
there is no showing that he was coerced into executing the instrument; he received
a valuable consideration for his less than two years of service with the company.
Thus, from all indications, the release and quitclaim was a valid and binding
undertaking that should have been recognized by the labor authorities and the CA.

While the law frowns upon releases and quitclaims executed by employees who are
inveigled or pressured into signing them by unscrupulous employers seeking to
evade their legal responsibilities, a legitimate waiver representing a voluntary
settlement of a laborer’s claims should be respected by the courts as the law
between the parties. In the Court’s view, Talam’s release and quitclaim fall into the
category of legitimate waivers as defined by the Court.

With Talam’s voluntary execution of the release and quitclaim, the Court found the
filing of the illegal dismissal case tainted with bad faith. Neither can TSFI be made
to answer for failure to afford Talam procedural due process. The release and
quitclaim, in the Court’s mind, erased whatever infirmities there might have been in
the notice of termination as Talam had already voluntarily accepted his dismissal
through the release and quitclaim. As such, the written notice became academic;
the notice, after all, is merely a protective measure put in place by law and serves
no useful purpose after protection has been assured. The Court thus finds no basis
for the conclusion that TSFI violated procedural due process and should pay nominal
damages. Francis Ray Talam vs. National Labor Relations Commission, 4th Division,
Cebu City, et al., G.R. No. 175040, April 6, 2010.

Resignation of Employee. While the letter states that Peñaflor’s resignation was
irrevocable, it does not necessarily signify that it was also voluntarily executed.
Precisely because of the attendant hostile and discriminatory working
environment, Peñaflor decided to permanently sever his ties with Outdoor Clothing.
This falls squarely within the concept of constructive dismissal that jurisprudence
defines, among others, as involuntarily resignation due to the harsh, hostile, and
unfavorable conditions set by the employer. It arises when a clear discrimination,
insensibility, or disdain by an employer exists and has become unbearable to the
employee. The gauge for constructive dismissal is whether a reasonable person in
the employee’s position would feel compelled to give up his employment under the
prevailing circumstances. With the appointment of Buenaobra to the position he
then still occupied, Peñaflor felt that he was being eased out and this perception
made him decide to leave the company.

The fact of filing a resignation letter alone does not shift the burden of proving that
the employee’s dismissal was for a just and valid cause from the employer to the
employee. In Mora v. Avesco [G.R. No. 177414, November 14, 2008,
571 SCRA 226], the Court ruled that should the employer interpose the defense of
resignation, it is still incumbent upon the employer to prove that the employee
voluntarily resigned. Manolo A. Peñaflor vs. Outdoor Clothing Manufacturing
Corp., et al., G.R. No. 177114, April 13, 2010.

Labor Procedure

Certiorari; questions of law. TSFI asks the Court to dismiss the present petition on
the ground that it is procedurally defective as, allegedly, it raises only questions of
fact, in contravention of the requirement under Rule 45 of the Rules of Court that an
appeal by certiorari shall raise only questions of law. While the petition indeed
poses factual issues – i.e., whether the company was suffering from substantial
losses to justify a retrenchment measure, whether it observed fair and reasonable
standards in implementing a retrenchment, and whether Talam deserved to be
retrenched – the Court deems it proper to examine the facts itself in view of the
conflicting factual findings among the Labor Arbiter, the NLRC and the CA. Francis
Ray Talam vs. National Labor Relations Commission, 4th Division, Cebu City, et al.,
G.R. No. 175040, April 6, 2010.

Finding of facts. Findings of facts of quasi-judicial bodies like the NLRC, and affirmed
by the CA in due course, are conclusive on the Supreme Court, which is not a trier of
facts.

Findings of fact of administrative agencies and quasi-judicial bodies, which have

acquired expertise because their jurisdiction is confined to specific matters, are
generally accorded not only respect, but finality when affirmed by the CA. Such
findings deserve full respect and, without justifiable reason, ought not to be altered,
modified or reversed. Diversified Security, Inc. vs. Alicia V. Bautista. G.R. No.
152234, April 15, 2010

Res Judicata. On the issue of refund of “underpayment,” petitioners aver that cases
of similar import involving also the respondent union have been decided with
finality in their favor by the NLRC, viz: UMMGT v. Genesis Transport Service, Inc.
(NLRC RAB III Case No. 04-518-03) and Reyes v. Genesis Transport Service, Inc.
(NLRC CA No. 04862-04); and Santos v. Genesis Transport Service, Inc. (NLRC CA
No. 041869-04). Petitioners thus pray that the Court accord respect to the rulings
of the NLRC in the above-cited cases and apply the principle of res judicata vis-à-vis
the present case. The Supreme Court held, however that, absent proof that
the NLRC cases cited by petitioners have attained finality, the Court may not
consider them to constitute res judicata on petitioners’ claim for refund of the
“underpayment” due. Genesis Transport Service, Inc. et al.
vs. Unyon ng Malayang Manggagawa ng Genesis (UMMGT), et al., G.R. No. 182114,
April 5, 2010

MARCH 2010

Labor law
Cancellation of union registration. Art. 234(c) of the Labor Code requires the
mandatory minimum 20% membership of rank-and-file employees in the
employees’ union. Twenty percent (20%) of 112 rank-and-file employees in Eagle
Ridge would require a union membership of at least 22 employees (112 x 205 =
22.4). When the EREU filed its application for registration on December 19, 2005,
there were clearly 30 union members. Thus, when the certificate of registration
was granted, there is no dispute that the Union complied with the mandatory 20%
membership requirement. Accordingly, the retraction of six union members who
later severed and withdrew their union membership cannot cause the cancellation
of the union’s registration.

Besides, it cannot be argued that the affidavits of retraction retroacted to the time
of the application for union registration or even way back to the organizational
meeting. Before their withdrawal, the six employees in question were bona fide
union members. They never disputed affixing their signatures beside their
handwritten names during the organizational meetings. While they alleged that
they did not know what they were signing, their affidavits of retraction were not re-
affirmed during the hearings of the instant case rendering them of little, if any,
evidentiary value. In any case, even with the withdrawal of six union members, the
union would still be compliant with the mandatory membership requirement under
Art. 234(c) since the remaining 24 union members constitute more than the 20%
membership requirement of 22 employees. Eagle Ridge Gold & Country Club vs.
Court of Appeals, et al., G.R. No. 178989, March 18, 2010.

Cessation of operations; financial assistance. Based on Article 283, in case of

cessation of operations, the employer is only required to pay his employees a
separation pay of one month pay or at least one-half month pay for every year of
service, whichever is higher. That is all that the law requires.

In the case at bar, petitioner paid respondents the following: (a) separation pay
computed at 150% of their gross monthly pay per year of service; and (b) cash
equivalent of earned and accrued vacation and sick leaves. Clearly, petitioner had
gone over and above the requirements of the law. Despite this, however, the Labor
Arbiter ordered petitioner to pay respondents an additional amount, equivalent to
one month’s salary, as a form of financial assistance.

The award of financial assistance is bereft of legal basis and serves to penalize
petitioner who had complied with the requirements of the law. The Court also point
out that petitioner may, as it has done, grant on a voluntary and ex gratia basis,
any amount more than what is required by the law, but to insist that more financial
assistance be given is certainly something that the Court cannot countenance.
Moreover, any award of additional financial assistance to respondents would put
them at an advantage and in a better position than the rest of their co-employees
who similarly lost their employment because of petitioner’s decision to cease its
operations. SolidBank Corporation vs. National Labor Relations Commission, et
al., G.R. No. 165951, March 30, 2010.

Cost of living allowance. COLA is not in the nature of an allowance intended to

reimburse expenses incurred by officials and employees of the government in the
performance of their official functions. It is not payment in consideration of the
fulfillment of official duty. As defined, cost of living refers to “the level of prices
relating to a range of everyday items” or “the cost of purchasing those goods and
services which are included in an accepted standard level of consumption.” Based
on this premise, COLA is a benefit intended to cover increases in the cost of living.
Thus, it is and should be integrated into the standardized salary rates.

In the present case, the Court is not persuaded that the continued grant of COLA to
the uniformed personnel to the exclusion of other national government officials run
afoul the equal protection clause of the Constitution. The fundamental right of
equal protection of the laws is not absolute, but is subject to reasonable
classification. If the groupings are characterized by substantial distinctions that
make real differences, one class may be treated and regulated differently from
another. The classification must also be germane to the purpose of the law and
must apply to all those belonging to the same class.

The Court found valid reasons to treat the uniformed personnel differently from
other national government officials. Being in charge of the actual defense of the
State and the maintenance of internal peace and order, they are expected to be
stationed virtually anywhere in the country. They are likely to be assigned to a
variety of low, moderate, and high-cost areas. Since their basic pay does not vary
based on location, the continued grant of COLA is intended to help them offset the
effects of living in higher cost areas. Victoria C. Gutierrez, et al. vs. Department of
Budget and Management, et al./Estrellita C. Amponin, et al. vs. Commission on
Audit, et al./Augusto R. Nieves, et al. vs. Department of Budget and Management,
et al./Kapisanan ng mga Manggagawa sa Bureau of Agricultural Statistic (KMB), et
al. vs. Department of Budget and Management, et al./National Housing Authority vs.
Epifanio P. Recana, et al./ Insurance Commission Officers and Employees, et al. vs.
Department of Budget and Management, et al./Fiber Industry Development
Authority Employees Association (FIDAEA),et al. vs. Department of Budget and
Management, et al./Bureau of Animal Industry Employees Association (BAIEA), et al.
vs. Department of Budget and Management, et al./Re: Request of Sandiganbayan
for authority to use their savings to pay their Cola Differential from July 1, 1989 to
March 16, 1999, G.R. No. 153266/G.R. No. 159007/G.R. No. 159029/G.R. No.
170084/G.R. No. 172713/G.R. No. 173119/G.R. No. 176477/G.R. No. 177990/A.M.
No. 06-4-02-SB. March 18, 2010.

Compensable illness. Jurisprudence provides that to establish compensability of a

non-occupational disease, reasonable proof of work-connection and not direct
causal relation is required. Probability, not the ultimate degree of certainty, is the
test of proof in compensation proceedings.

In this case, the Court sustained the Labor Arbiter and the NLRC in granting total
and permanent disability benefits in favor of Villamater, as it was sufficiently shown
that his having contracted colon cancer was, at the very least, aggravated by his
working conditions, taking into consideration his dietary provisions on board, his
age, and his job as Chief Engineer, who was primarily in charge of the technical and
mechanical operations of the vessels to ensure voyage safety. Leonis Navigation
Co., Inc. and World Marine Panama, S.A. vs. Catalino U. Villamater, et al., G.R. No.
179169, March 3, 2010.

Compensable illness; entitlement. For disability to be compensable under Section

20 (B) of the 2000 POEA-SEC, two elements must concur: (1) the injury or illness
must be work-related; and (2) the work-related injury or illness must have existed
during the term of the seafarer’s employment contract. In other words, to be
entitled to compensation and benefits under this provision, it is not sufficient to
establish that the seafarer’s illness or injury has rendered him permanently or
partially disabled; it must also be shown that there is a causal connection between
the seafarer’s illness or injury and the work for which he had been contracted.

The 2000 POEA-SEC defines “work-related injury” as “injury(ies) resulting in

disability or death arising out of and in the course of employment” and “work-
related illness” as “any sickness resulting to disability or death as a result of an
occupational disease listed under Section 32-A of this contract with the conditions
set therein satisfied.”

Under Section 20 (B), paragraphs (2) and (3) of the 2000 POEA-SEC, it is the
company-designated physician who is entrusted with the task of assessing the
seaman’s disability.

While it is true that medical reports issued by the company-designated physicians

do not bind the courts, the Court’s examination of Dr. Ong-Salvador’s Initial Medical
Report have led it to agree with her findings. Dr. Ong-Salvador was able to
sufficiently explain her basis in concluding that the respondent’s illness was not
work-related: she found the respondent not to have been exposed to any
carcinogenic fumes, or to any viral infection in his workplace. Her findings were
arrived at after the respondent was made to undergo a physical, neurological and
laboratory examination, taking into consideration his past medical history, family
history, and social history. In addition, the respondent was evaluated by a
specialist, a surgeon and an oncologist. The series of tests and evaluations show
that Dr. Ong-Salvador’s findings were not arrived at arbitrarily; neither were they
biased in the company’s favor.

The respondent, on the other hand, did not adduce proof to show a reasonable
connection between his work as an assistant housekeeping manager and his
lymphoma. There was no showing how the demands and nature of his job vis-à-vis
the ship’s working conditions increased the risk of contracting lymphoma. The non-
work relatedness of the respondent’s illness is reinforced by the fact that under the
Implementing Rules and Regulations of the Labor Code (ECC Rules), lymphoma is
considered occupational only when contracted by operating room personnel due to
exposure to anesthetics. The records do not show that the respondent’s work as an
assistant housekeeping manager exposed him to anesthetics.

Accordingly, the Court held that the respondent is not entitled to total and
permanent disability benefits on account of his failure to refute the company-
designated physician’s findings that: (1) his illness was not work-related; and (2) he
was fit to resume sea duties. Magsaysay Maritime Corporation and/or Cruise Ships
Catering Services International N.V. vs. National Labor Relations Commissions, et
al., G.R. No. 186180, March 22, 2010.

Constructive dismissal. In constructive dismissal cases, the employer has the

burden of proving that its conduct and action or the transfer of an employee are for
valid and legitimate grounds such as genuine business necessity. Particularly, for a
transfer not to be considered a constructive dismissal, the employer must be able to
show that such transfer is not unreasonable, inconvenient, or prejudicial to the
employee. Failure of the employer to overcome this burden of proof taints the
employee’s transfer as a constructive dismissal.

In the present case, the employer failed to discharge this burden. The combination
of harsh actions taken by the bank rendered the employment condition of the
employee hostile and unbearable for the following reasons: First, there is no
showing of any urgency or genuine business necessity to transfer the employee to
the Makati Head Office. The bank’s stated reason that the employee had to undergo
branch head training because of his gross inefficiency was not supported by any
proof that the employee had a record of gross inefficiency. Second, the employee’s
transfer from Dumaguete to Makati City is clearly unreasonable, inconvenient and
oppressive, since the respondent and his family are residents of Dumaguete City.
Third, the employer failed to present any valid reason why it had to require the
employee to go to the Makati Head Office to undergo branch head training when it
could have just easily required the latter to undertake the same training in the
VISMIN area. Finally, there was nothing in the order of transfer indicating the
position which the employee would occupy after his training; thus, the employee
was effectively placed in a “floating” status. The bank’s contention that the
employee was assigned to a sensitive position in the DUHO Task Force is suspect
when considered with the fact that he was made to undergo branch head training
which is totally different from a position that entails reconciling book entries of all
branches of the former. Reconciling book entries is essentially an accounting task.

The test of constructive dismissal is whether a reasonable person in the employee’s

position would have felt compelled to give up his position under the circumstances.
Based on the factual considerations in the present case, the Court held that the
hostile and unreasonable working conditions of the bank justified the finding of the
NLRC and the CA that the employee was constructively dismissed. Philippine
Veterans Bank vs. National Labor Relations Commission, et al., G.R. No. 188882,
March 30, 2010.

Disability benefits; entitlement. The seafarer, upon sign-off from his vessel, must
report to the company-designated physician within three working days from arrival
for diagnosis and treatment. Applying Section 20(B), paragraph (3) of the 2000
Amended Standard Terms and Conditions Governing the Employment of Filipino
Seafarers on Board Ocean-Going Vessels, petitioner is required to undergo post-
employment medical examination by a company-designated physician within three
working days from arrival, except when he is physically incapacitated to do so, in
which case, a written notice to the agency within the same period would suffice.
In Maunlad Transport, Inc. v. Manigo, Jr., [G.R. No.161416, 13 June 2008, 554 SCRA
446, 459] this Court explicitly declared that it is mandatory for a claimant to be
examined by a company-designated physician within three days from his
repatriation. The unexplained omission of this requirement will bar the filing of a
claim for disability benefits. Alex C. Cootauco vs. MMS Phil. Maritime Services, Inc.
Ms. Mary C. Maquilan, and/or MMS Co. Ltd., G.R. No. 184722, March 15, 2010.

Dismissal; damages. Moral and exemplary damages are recoverable where the
dismissal of an 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. With regard to the employees of Promm-Gem, there being no
evidence of bad faith, fraud or any oppressive act on the part of the latter, the Court
found no support for the award of damages.

As for P&G, the records show that it dismissed its employees through SAPS in a
manner oppressive to labor. The sudden and peremptory barring of the employees
from work, and from admission to the work place, after just a one-day verbal notice,
and for no valid cause, bellows oppression and utter disregard of the right to due
process of the concerned petitioners. Hence, an award of moral damages is called
for. Joeb Aliviado, et al. vs. Procter & Gamble Philippines, Inc., et al., G.R. No.
160506, March 9, 2010.

Dismissal; fraud and serious misconduct. In this case, the Court found that Pastoril
was as actively involved as Escoto and Omela in the sale of the Toyota Town Ace
that resulted in a loss to the company. All three participated in making the
company believe that Aquino bought the Toyota Town Ace for P190,000.00 when in
fact, Aquino paid P200,000.00 for the vehicle. Thus, Pastoril acted in concert with
Escoto and Omela in the transaction that defrauded their employer in the amount of
P10,000.00. Pastoril prepared and issued the deed of sale indicating that the
vehicle was sold for P190,000.00, although she knew that the buyer was being
charged P200,000.00 for the vehicle. Escoto, Omela and Pastoril helped themselves
to the price difference and tried to silence Rodriguez (who got wind of the anomaly)
by giving him P1,000.00 and passing the P10,000.00 price difference off as the
approved discount Aquino asked for. The Court held that there was a conspiracy
between and among the three employees, where every participant had made
significant contributory acts. White Diamond Trading Corporation and/or Jerry Uy
vs. National Labor Relations Commission, et al., G.R. No. 186019. March 29, 2010.

Dismissal; just cause; loss of trust and confidence. Loss of trust and confidence, as
a cause for termination of employment, is premised on the fact that the employee
concerned holds a position of responsibility or of trust and confidence. As such, he
must be invested with confidence on delicate matters, such as custody, handling or
care and protection of the property and assets of the employer. And, in order to
constitute a just cause for dismissal, the act complained of must be work-related
and must show that the employee is unfit to continue to work for the employer. In
the instant case, the petitioners-employees of Promm-Gem have not been shown to
be occupying positions of responsibility or of trust and confidence. Neither is there
any evidence to show that they are unfit to continue to work as merchandisers for
Promm-Gem. Joeb Aliviado, et al. vs. Procter & Gamble Philippines, Inc., et al., G.R.
No. 160506, March 9, 2010.
Dismissal; just cause; misconduct. Misconduct has been defined as improper or
wrong conduct; the transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, unlawful in character implying wrongful intent
and not mere error of judgment. The misconduct to be serious must be of such
grave and aggravated character and not merely trivial and unimportant. To be a
just cause for dismissal, such misconduct (a) must be serious; (b) must relate to the
performance of the employee’s duties; and (c) must show that the employee has
become unfit to continue working for the employer. In other words, in order to
constitute serious misconduct which will warrant the dismissal of an employee
under paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act
or conduct complained of has violated some established rules or policies. It is
equally important and required that the act or conduct must have been performed
with wrongful intent. In the instant case, petitioners-employees of Promm-Gem may
have committed an error of judgment in claiming to be employees of P&G, but it
cannot be said that they were motivated by any wrongful intent in doing so. As
such, the Court found them guilty of simple misconduct only, for assailing the
integrity of Promm-Gem as a legitimate and independent promotion firm. A
misconduct which is not serious or grave, as that existing in the instant case,
cannot be a valid basis for dismissing an employee. Joeb Aliviado, et al. vs. Procter
& Gamble Philippines, Inc., et al., G.R. No. 160506, March 9, 2010.

Dismissal; just cause; union security clause. In terminating the employment of an

employee by enforcing the union security clause, the employer is required only to
determine and prove that: (1) the union security clause is applicable; (2) the union
is requesting for the enforcement of the union security provision in the CBA; and (3)
there is sufficient evidence to support the decision of the union to expel the
employee from the union. These requisites constitute just cause for terminating an
employee based on the union security provision of the CBA.

It is the third requisite that appears to be lacking in this case. It is apparent from
the identical termination letters that GMC terminated Casio, et al., by relying upon
the resolutions of the union, which made no mention at all of the evidence
supporting the decision of the union to expel Casio, et al. from the union. GMC
never alleged nor attempted to prove that the company actually looked into the
evidence of the union for expelling Casio, et al. and made a determination on the
sufficiency thereof. Without such a determination, GMC cannot claim that it had
terminated the employment of Casio, et al. for just cause. The failure of GMC to
make a determination of the sufficiency of evidence supporting the decision of the
union constitutes non-observance by GMC of procedural due process in the
dismissal of employees. General Milling Corporation vs. Ernesto Casio, et al. and
Virgilio Pino, et al., G.R. No. 149552, March 10, 2010.

Dismissal pursuant to union security clause; separate notice and haring required.
GMC illegally dismissed Casio, et al. because not only did GMC fail to make a
determination of the sufficiency of evidence to support the union’s decision to expel
Casio, et al., it also failed to accord the expelled union members procedural due
process, i.e., notice and hearing, prior to the termination of their employment.

GMC, by its own admission, did not conduct a separate and independent
investigation to determine the sufficiency of the evidence supporting the union’s
expulsion of Casio, et al. It simply acceded to the union’s demand. Consequently,
GMC cannot insist that it has no liability for the payment of backwages and
damages to Casio, et al., and that the liability for such payment should fall only
upon the union officers and board members who expelled Casio, et al. GMC
completely missed the point that the expulsion of Casio, et al. by the union and the
termination of employment of the same employees by GMC, although related, are
two separate and distinct acts. Despite a closed shop provision in the CBA, law and
jurisprudence impose upon GMC the obligation to accord Casio, et al. substantive
and procedural due process before complying with the union’s demand to dismiss
the expelled union members from service. The failure of GMC to carry out this
obligation makes it liable for illegal dismissal of Casio, et al. General Milling
Corporation vs. Ernesto Casio, et al. and Virgilio Pino, et al., G.R. No. 149552, March
10, 2010.

Employee benefit; bonus. By definition, a “bonus” is a gratuity or act of liberality of

the giver. It is something given in addition to what is ordinarily received by or
strictly due the recipient. A bonus is granted and paid to an employee for his
industry and loyalty which contributed to the success of the employer’s business
and made possible the realization of profits. A bonus is also granted by an
enlightened employer to spur the employee to greater efforts for the success of the
business and realization of bigger profits.

Generally, a bonus is not a demandable and enforceable obligation. For a bonus to

be enforceable, it must have been promised by the employer and expressly agreed
upon by the parties. Given that the bonus in this case is integrated in the CBA, the
same partakes the nature of a demandable obligation. Verily, by virtue of its
incorporation in the CBA, the Christmas bonus due to respondent Association has
become more than just an act of generosity on the part of the petitioner but a
contractual obligation it has undertaken.

All given, business losses are a feeble ground for petitioner to repudiate its
obligation under the CBA. The rule is settled that any benefit and supplement being
enjoyed by the employees cannot be reduced, diminished, discontinued or
eliminated by the employer. The principle of non-diminution of benefits is founded
on the constitutional mandate to protect the rights of workers and to promote their
welfare and to afford labor full protection. Hence, absent any proof that the
employer’s consent was vitiated by fraud, mistake or duress, it is presumed that it
entered into the CBA voluntarily and had full knowledge of the contents thereof and
was aware of its commitments under the contract. Lepanto Ceramics, Inc. vs.
Lepanto Ceramics Employees Association, G.R. No. 180866, March 2, 2010.

Employee; monetary award. The law and the rules are consistent in stating that the
employment permit must be acquired prior to employment. The Labor Code states:
“Any alien seeking admission to the Philippines for employment purposes and any
domestic or foreign employer who desires to engage an alien for employment in the
Philippines shall obtain an employment permit from the Department of Labor.”
Section 4, Rule XIV, Book 1 of the Implementing Rules and Regulations provides:
“No alien seeking employment, whether as a resident or non-resident, may enter
the Philippines without first securing an employment permit from the Ministry. If an
alien enters the country under a non-working visa and wishes to be employed
thereafter, he may only be allowed to be employed upon presentation of a duly
approved employment permit.”

Galera worked in the Philippines without a proper work permit but now wants to
claim employee’s benefits under Philippine labor laws. She cannot come to this
Court with unclean hands. To grant Galera’s prayer is to sanction the violation of
the Philippine labor laws requiring aliens to secure work permits before their
employment. WPP Marketing Communications, Inc. et al. vs. Jocelyn M.
Galera/Jocelyn M. Galera Vs. WPP Marketing Communications, Inc. et al., G.R. No.
169207/G.R. No. 169239, March 25, 2010.

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

An examination of WPP’s by-laws resulted in a finding that Galera’s appointment as

a corporate officer (Vice-President with the operational title of Managing Director of
Mindshare) during a special meeting of WPP’s Board of Directors is an appointment
to a non-existent corporate office. WPP’s by-laws provided for only one Vice-
President. At the time of Galera’s appointment on 31 December 1999, WPP already
had one Vice-President in the person of Webster. Galera cannot be said to be a
director of WPP also because all five directorship positions provided in the by-laws
are already occupied. Finally, WPP cannot rely on its Amended By-Laws to support
its argument that Galera is a corporate officer. The Amended By-Laws provided for
more than one Vice-President and for two additional directors. Even though WPP’s
stockholders voted for the amendment on 31 May 2000, the SEC approved the
amendments only on 16 February 2001. Galera was dismissed on 14 December
2000. WPP, Steedman, Webster, and Lansang did not present any evidence that
Galera’s dismissal took effect with the action of WPP’s Board of Directors.

Additionally, the following provisions in her employment contract are convincing

indicators that Galera was an employee and not a corporate officer: (1) it mandates
where and how often she is to perform her work; (2) the wages she receives are
completely controlled by WPP; (3) she is subject to the regular disciplinary
procedures of WPP; (4) section 14 thereof clearly states that she is a permanent
employee — not a Vice-President or a member of the Board of Directors; (5) the
intellectual property rights created or discovered by petitioner during her
employment shall automatically belong to private respondent WPP [Under the
Intellectual Property Code, this condition prevails if the creator of the work subject
to the laws of patent or copyright is an employee of the one entitled to the patent or
copyright]; and (6) the disciplinary procedure states that her right of redress is
through Mindshare’s Chief Executive Officer for the Asia-Pacific. This last
circumstance implies that she was not even under the disciplinary control of WPP’s
Board of Directors, and therefore, she could not have been a WPP corporate officer
as only the WPP Board of Directors could appoint and terminate its own corporate
officer. WPP Marketing Communications, Inc. et al. vs. Jocelyn M. Galera/Jocelyn M.
Galera vs. WPP Marketing Communications, Inc. et al., G.R. No. 169207/G.R. No.
169239, March 25, 2010.

Illegal dismissal. Under Republic Act No. 6715, employees who are illegally
dismissed are entitled to full backwages, inclusive of allowances and other benefits
or their monetary equivalent, computed from the time their actual compensation
was withheld from them up to the time of their actual reinstatement but if
reinstatement is no longer possible, the backwages shall be computed from the
time of their illegal termination up to the finality of the decision.

The employees in this case are entitled to backwages and separation pay,
considering that reinstatement is no longer possible because the positions they
previously occupied are no longer existing. General Milling Corporation vs. Ernesto
Casio, et al. and Virgilio Pino, et al., G.R. No. 149552, March 10, 2010.

Illegal dismissal. WPP’s dismissal of Galera lacked both substantive and procedural
due process. Apart from Steedman’s letter dated 15 December 2000 to Galera,
WPP failed to prove any just or authorized cause for Galera’s dismissal. The law also
requires that the employer must furnish the worker sought to be dismissed with two
written notices before termination of employment can be legally effected: (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. Failure to comply with these requirements
taints the dismissal with illegality. WPP’s acts clearly show that Galera’s dismissal
did not comply with the two-notice rule. WPP Marketing Communications, Inc. et al.
vs. Jocelyn M. Galera/Jocelyn M. Galera Vs. WPP Marketing Communications, Inc. et
al., G.R. No. 169207/G.R. No. 169239, March 25, 2010.

Illegal dismissal; abandonment. Petitioner was, for five times, notified in writing by
respondent to resume teaching for the second semester of school year 2003-2004
following the service of her suspension during the first semester. She was advised
that a teaching load had already been prepared for her. Respondent never replied
to those notices. Petitioner’s justification for her failure to respond to the notices
was that her acceptance of the offer could be construed as a waiver of her claims.
The Court held that petitioner’s justification is not a valid excuse.

Petitioner contends that her filing of a complaint for illegal dismissal was a
manifestation of her desire to return to her job and negated any intention to sever
the employer-employee relationship. Petitioner forgets that her complaint for
“illegal dismissal” which she filed on June 5, 2003 sprang, not from her dismissal on
December 6, 2003 due to abandonment, but from her suspension during the first
semester of school year 2003-2004. While the filing of a complaint with a prayer for
reinstatement negates an intention to sever the employer-employee relationship,
the same contemplates an action taken subsequent to dismissal and not after an
employee, by all indications, abandoned her job. Evangeline C. Cobarrubias vs.
Saint Louis University, Inc., G.R. No. 176717, March 17, 2010.

Illegal dismissal; monetary awards. Clearly, the law intends the award of
backwages and similar benefits to accumulate past the date of the Labor Arbiter’s
decision until the dismissed employee is actually reinstated. But if, as in this case,
reinstatement is no longer possible, this Court has consistently ruled that
backwages shall be computed from the time of illegal dismissal until the date the
decision becomes final.

Separation pay, on the other hand, is equivalent to one month pay for every year of
service, a fraction of six months to be considered as one whole year. Here that
would begin from January 31, 1994 when petitioner Belen began his service.
Technically the computation of his separation pay would end on the day he was
dismissed on August 20, 1999 when he supposedly ceased to render service and his
wages ended. But, since Belen was entitled to collect backwages until the
judgment for illegal dismissal in his favor became final, here on September 22,
2008, the computation of his separation pay should also end on that date.

Further, since the monetary awards remained unpaid even after it became final on
September 22, 2008 because of issues raised respecting the correct computation of
such awards, it is but fair that respondent Javellana be required to pay 12% interest
per annum on those awards from September 22, 2008 until they are paid. The 12%
interest is proper because the Court treats monetary claims in labor cases the
equivalent of a forbearance of credit. It matters not that the amounts of the claims
were still in question on September 22, 2008. What is decisive is that the order to
pay the monetary awards had long become final. Daniel P. Javellana, Jr. vs. Albino
Belen/Albino Belen Vs. Daniel P. Javellana, Jr. and Javellana Farms, Inc., G.R. No.
181913/G.R. No. 182158, March 5, 2010.

Labor only contracting. Indeed, it is management prerogative to farm out any of its
activities, regardless of whether such activity is peripheral or core in nature.
However, in order for such outsourcing to be valid, it must be made to an
independent contractor because the current labor rules expressly prohibit labor-only
contracting. There is labor-only contracting when the contractor or sub-contractor
merely recruits, supplies or places workers to perform a job, work or service for a
principal, and any of the following elements are present: (i) the contractor or
subcontractor does not have substantial capital or investment which relates to the
job, work or service to be performed and the employees recruited, supplied or
placed by such contractor or subcontractor are performing activities which are
directly related to the main business of the principal; or (ii) the contractor does not
exercise the right to control over the performance of the work of the contractual
employee.

In the instant case, the financial statements of Promm-Gem show that it has
authorized capital stock of P1 million and a paid-in capital, or capital available for
operations, of P500,000.00 as of 1990. It also has long term assets worth
P432,895.28 and current assets of P719,042.32. Promm-Gem has also proven that
it maintained its own warehouse and office space with a floor area of 870 square
meters. It also had under its name three registered vehicles, which were used for
its promotional/merchandising business. Promm-Gem also has other clients aside
from P&G. Under the circumstances, we find that Promm-Gem has substantial
investment, which relates to the work to be performed. Under these circumstances,
Promm-Gem cannot be considered a labor-only contractor.

On the other hand, the Articles of Incorporation of SAPS show that it has a paid-in
capital of only P31,250.00. There is no other evidence to prove how much its
working capital and assets are. Furthermore, there is no showing of substantial
investment in tools, equipment or other assets.

SAPS’ lack of substantial capital is highlighted by the records which show that its
payroll for its merchandisers alone for one month would already total P44,561.00. It
had 6-month contracts with P&G. Yet SAPS failed to show that it could complete the
6-month contracts using its own capital and investment. Its capital is not even
sufficient for one month’s payroll. SAPS failed to show that its paid-in capital of
P31,250.00 is sufficient for the period required for it to generate revenues to sustain
its operations independently. Substantial capital refers to capitalization used in the
performance or completion of the job, work or service contracted out. In the
present case, SAPS has failed to show substantial capital.

Furthermore, the employees in this case performed merchandising and promotion

of the products of P&G, which are activities that the Court has considered directly
related to the manufacturing business of P&G. Considering that SAPS has no
substantial capital or investment and the workers it recruited are performing
activities which are directly related to the principal business of P&G, we find that
SAPS is engaged in “labor-only contracting”. Joeb Aliviado, et al. vs. Procter &
Gamble Philippines, Inc., et al., G.R. No. 160506, March 9, 2010.

Project employee. The test for distinguishing a “project employee” from a “regular
employee” is whether or not he has been assigned to carry out a “specific project or
undertaking,” with the duration and scope of his engagement specified at the time
his service is contracted. Here, it is not disputed that petitioner company
contracted respondent Trinidad’s service by specific projects with the duration of his
work clearly set out in his employment contracts. He remained a project employee
regardless of the number of years and the various projects he worked for the
company.

Generally, length of service provides a fair yardstick for determining when an

employee initially hired on a temporary basis becomes a permanent one, entitled to
the security and benefits of regularization. But this standard will not be fair, if
applied to the construction industry, simply because construction firms cannot
guarantee work and funding for its payrolls beyond the life of each project. And
getting projects is not a matter of course. Construction companies have no control
over the decisions and resources of project proponents or owners. There is no
construction company that does not wish it has such control but the reality,
understood by construction workers, is that work depended on decisions and
developments over which construction companies have no say.

In this case, respondent Trinidad’s series of employments with petitioner company

were co-terminous with its projects. When its Boni Serrano-Katipunan Interchange
Project was finished in December 2004, Trinidad’s employment ended with it. He
was not dismissed. His employment contract simply ended with the project for
which he had signed up. His employment history belies the claim that he
continuously worked for the company. Intervals or gaps separated one contract
from another. William Construction Corp. and/or Teresita Uy and William Uy vs.
Jorge R. Trinidad, G.R. No. 183250, March 12, 2010.

Reinstatement; reimbursement. An employee cannot be compelled to reimburse

the salaries and wages he received during the pendency of his appeal,
notwithstanding the reversal by the NLRC of the LA’s order of reinstatement. The
pertinent law on the matter is not concerned with the wisdom or propriety of the
LA’s order of reinstatement, for if it was, then it should have provided that the
pendency of an appeal should stay its execution. After all, a decision cannot be
deemed irrefragable unless it attains finality. College of the Immaculate Concepcion
vs. National Labor Relations Commission and Atty. Marius F. Carlos, Ph.D, G.R. No.
167563, March 22, 2010.

Representation and Transportation Allowance; entitlement. Statutory law, as

implemented by administrative issuances and interpreted in decisions, has
consistently treated RATA as distinct from salary. Unlike salary, which is paid for
services rendered, RATA belongs to a basket of allowances to defray expenses
deemed unavoidable in the discharge of office. Hence, RATA is paid only to certain
officials who, by the nature of their offices, incur representation and transportation
expenses.

At any rate, the denial of RATA must be grounded on relevant and specific provision
of law. By insisting that, as requisite for her receipt of RATA, respondent must
discharge her office as Bacnotan’s treasurer while on reassignment at the La Union
treasurer’s office, the DBM effectively punishes respondent for acceding to her
reassignment. Surely, the law could not have intended to place local government
officials like respondent in the difficult position of having to choose between
disobeying a reassignment order or keeping an allowance. Department of Budget
and Management (DBM) vs. Olivia D. Leones, G.R. No. 169726, March 18, 2010.

Separation pay; termination for cause. Separation pay is only warranted when the
cause for termination is not attributable to the employee’s fault, such as those
provided in Articles 283 and 284 of the Labor Code, as well as in cases of illegal
dismissal in which reinstatement is no longer feasible. It is not allowed when an
employee is dismissed for just cause, such as serious misconduct.

Jurisprudence has classified theft of company property as a serious misconduct and

denied the award of separation pay to the erring employee. In this case, the Court
saw no reason why this same rule should not be similarly applied in the case of
Capor. She attempted to steal the property of her long-time employer. For
committing such misconduct, she is definitely not entitled to an award of separation
pay.

Capor’s argument that despite the finding of theft, she should still be granted
separation pay in light of her long years of service with the Company did not
persuade the Court. Indeed, length of service and a previously clean employment
record cannot simply erase the gravity of the betrayal exhibited by a malfeasant
employee. Length of service is not a bargaining chip that can simply be stacked
against the employer. After all, an employer-employee relationship is symbiotic
where both parties benefit from mutual loyalty and dedicated service. If an
employer had treated his employee well, has accorded him fairness and adequate
compensation as determined by law, it is only fair to expect a long-time employee
to return such fairness with at least some respect and honesty. Thus, it may be
said that betrayal by a long-time employee is more insulting and odious for a fair
employer. While we sympathize with Capor’s plight, being of retirement age and
having served petitioners for 39 years, we cannot award any financial assistance in
her favor because it is not only against the law but also a retrogressive public
policy. Reno Foods, Inc., and/or Vicente Khu vs. Nagkakaisang Lakas ng
Manggagawa (NLM) – Katipunan on behalf of its member, Nenita Capor, G.R. No.
164016, March 15, 2010.

Termination of employment; conviction in criminal case. Conviction in a criminal

case is not necessary to find just cause for termination of employment. Criminal
cases require proof beyond reasonable doubt while labor disputes require only
substantial evidence, which means such relevant evidence as a reasonable mind
might accept as adequate to justify a conclusion. The evidence in this case was
reviewed by the appellate court and two labor tribunals endowed with expertise on
the matter – the Labor Arbiter and the NLRC. They all found substantial evidence to
conclude that Capor had been validly dismissed for dishonesty or serious
misconduct. Reno Foods, Inc., and/or Vicente Khu vs. Nagkakaisang Lakas ng
Manggagawa (NLM) – Katipunan on behalf of its member, Nenita Capor, G.R. No.
164016, March 15, 2010.

Labor Procedure

Court; findings of fact (labor). A petition for review on certiorari under Rule 45 of
the Rules of Court should include only questions of law — questions of fact are not
reviewable. A question of law exists when the doubt centers on what the law is on a
certain set of facts, while a question of fact exists when the doubt centers on the
truth or falsity of the alleged facts. There is a question of law if the issue raised is
capable of being resolved without need of reviewing the probative value of the
evidence. Once the issue invites a review of the evidence, the question is one of
fact.

Whether YEU committed fraud and misrepresentation in failing to remove Pineda’s

signature from the list of employees who supported YEU’s application for
registration and whether YEU conducted an election of its officers are questions of
fact. They are not reviewable.

Factual findings of the Court of Appeals are binding on the Court. Absent grave
abuse of discretion, the Court will not disturb the Court of Appeals’ factual findings.
In Encarnacion v. Court of Appeals (G.R. No. 101292, 8 June 1993), the Court held
that, “unless there is a clearly grave or whimsical abuse on its part, findings of fact
of the appellate court will not be disturbed. The Supreme Court will only exercise
its power of review in known exceptions such as gross misappreciation of evidence
or a total void of evidence.” YTPI failed to show that the Court of Appeals gravely
abused its discretion. Yokohama Tire Philippines, Inc. vs. Yokohama Employees
Union, G.R. No. 163532, March 12, 2010.

Court; questions of fact (labor). The petition essentially raises questions of fact.
While as a rule, factual findings of the CA are binding on the Court, the Court
exercised its discretionary review authority to review the facts of this case in view
of the conflict in the findings of facts of the labor arbiter, on the one hand, and the
NLRC and the CA, on the other. White Diamond Trading Corporation and/or Jerry Uy
vs. National LaborRelations Commission, et al., G.R. No. 186019. March 29, 2010.

Indispensable party. Rule 3, Section 7 of the Rules of Court defines indispensable

parties as those who are parties in interest without whom there can be no final
determination of an action. They are those parties who possess such an interest in
the controversy that a final decree would necessarily affect their rights, so that the
courts cannot proceed without their presence. A party is indispensable if his
interest in the subject matter of the suit and in the relief sought is inextricably
intertwined with the other parties’ interest.

Unquestionably, Villamater’s widow stands as an indispensable party to this

complaint for payment of permanent and total disability benefits, reimbursement of
medical and hospitalization expenses, moral and exemplary damages, and
attorney’s fees. Leonis Navigation Co., Inc. and World Marine Panama, S.A. vs.
Catalino U. Villamater, et al., G.R. No. 179169, March 3, 2010.

Jurisdiction; estoppel. Petitioner is already estopped from belatedly raising the

issue of lack of jurisdiction since it has actively participated in the proceedings
before the LA and NLRC. We have consistently held that while jurisdiction may be
assailed at any stage, a party’s active participation in the proceedings before a
court without jurisdiction will estop such party from assailing such lack of it. It is an
undesirable practice of a party participating in the proceedings and submitting his
case for decision and then accepting the judgment, only if favorable, and attacking
it for lack of jurisdiction, when adverse. Philippine Veterans Bank vs. National Labor
Relations Commission, et al., G.R. No. 188882, March 30, 2010.
Jurisdiction; labor arbiter. Petitioners clearly and consistently questioned the
legality of RGMI’s adoption of the new salary scheme (i.e., piece-rate basis),
asserting that such action, among others, violated the existing CBA. Indeed, the
controversy was not a simple case of illegal dismissal but a labor dispute involving
the manner of ascertaining employees’ salaries, a matter which was governed by
the existing CBA.

With regard to the question of jurisdiction over the subject matter, Article 217(c) of
the Labor Code requires labor arbiters to refer cases involving the implementation
of CBAs to the grievance machinery provided therein and to voluntary arbitration.
Moreover, Article 260 of the Labor Code clarifies that such disputes must be
referred first to the grievance machinery and, if unresolved within seven days, they
shall automatically be referred to voluntary arbitration. Under this provision,
voluntary arbitrators have original and exclusive jurisdiction over matters which
have not been resolved by the grievance machinery.

Pursuant to Articles 217 in relation to Articles 260 and 261 of the Labor Code, the
labor arbiter should have referred the matter to the grievance machinery provided
in the CBA. Miguela Santuyo, et al. vs. Remerco Garments Manufacturing, Inc.
and/or Victoria Reyes, G.R. No. 174420, March 22, 2010.

Jurisdiction; labor case. Article 217 of the Labor Code provides that the Labor
Arbiters shall have original and exclusive jurisdiction to hear and decide cases
involving termination disputes. The NLRC shall have exclusive appellate jurisdiction
over all cases decided by Labor Arbiters. Galera being an employee, the Labor
Arbiter and the NLRC have jurisdiction over the present case. WPP Marketing
Communications, Inc. et al. vs. Jocelyn M. Galera/Jocelyn M. Galera vs. WPP
Marketing Communications, Inc. et al., G.R. No. 169207/G.R. No. 169239, March 25,
2010.

Jurisdiction; NLRC. The Labor Arbiter and the NLRC do not have jurisdiction over
LRTA. Petitioners themselves admitted in their complaint that LRTA “is a
government agency organized and existing pursuant to an original charter
(Executive Order No. 603),” and that they are employees of METRO.

Light Rail Transit Authority v. Venus, Jr. (G.R. Nos. 163782 & 163881, March 24,
2006), which has a similar factual backdrop, holds that LRTA, being a government-
owned or controlled corporation created by an original charter, is beyond the reach
of the Department of Labor and Employment which has jurisdiction over workers in
the private sector, “Employees of petitioner METRO cannot be considered as
employees of petitioner LRTA. The employees hired by METRO are covered by the
Labor Code and are under the jurisdiction of the Department of Labor and
Employment, whereas the employees of petitioner LRTA, a government-owned and
controlled corporation with original charter, are covered by civil service rules.
Herein private respondent workers cannot have the best of two worlds, e.g., be
considered government employees of petitioner LRTA, yet allowed to strike as
private employees under our labor laws.”

In fine, the Labor Arbiter’s decision against LRTA was rendered without jurisdiction,
hence, it is void. Thus, it was improper for the appellate court to order the remand
of the case to the NLRC, and for it (NLRC) to give due course to LRTA’s
appeal. Emmanuel S. Hugo, et al. vs. Light Rail Transit Authority, G.R. No. 181866,
March 18, 2010.

NLRC; final decision. Petitioners received the June 15, 2004 resolution of the NLRC,
denying their motion for reconsideration, on June 16, 2004. They filed their petition
for certiorari before the CA on August 9, 2004, or 54 calendar days from the date of
notice of the June 15, 2004 resolution. By reason of the finality of the June 15, 2004
NLRC resolution, the Labor Arbiter issued on July 29, 2004 a Writ of Execution.
Petitioners never moved for a reconsideration of this Order regarding the
voluntariness of their payment to Sonia, as well as the dismissal with prejudice and
the concomitant termination of the case.

However, petitioners argued that the finality of the case did not render the petition
for certiorari before the CA moot and academic. On this point, we agree with
petitioners.

In the landmark case of St. Martin Funeral Home v. NLRC (G.R. No. 130866,
September 16, 1998), we ruled that judicial review of decisions of the NLRC is
sought via a petition for certiorari under Rule 65 of the Rules of Court, and the
petition should be filed before the CA, following the strict observance of the
hierarchy of courts. Under Rule 65, Section 4, petitioners are allowed sixty (60)
days from notice of the assailed order or resolution within which to file the petition.

Simply put, the execution of the final and executory decision or resolution of the
NLRC shall proceed despite the pendency of a petition for certiorari, unless it is
restrained by the proper court. Leonis Navigation Co., Inc. and World Marine
Panama, S.A. vs. Catalino U. Villamater, et al., G.R. No. 179169, March 3, 2010.

POEA; factual findings. As a general rule, factual findings of administrative and

quasi-judicial agencies specializing in their respective fields, especially when
affirmed by the CA, must be accorded high respect, if not finality. However, we are
not bound to adhere to the general rule if we find that the factual findings do not
conform to the evidence on record or are not supported by substantial evidence, as
in the instant case.

The self-serving and unsubstantiated allegations of respondent cannot defeat the

concrete evidence submitted by petitioner. We note that respondent did not deny
the due execution of the withdrawal form as well as the genuineness of his
signature and thumb mark affixed therein. On the contrary, he admitted signing
the same. When he voluntarily signed the document, respondent is bound by the
terms stipulated therein. LNS International Manpower Services vs. Armando Padua,
Jr., G.R. No. 179792, March 5, 2010.

FEBRUARY 2010

Labor Law

Agency; principle of apparent authority. There is ample evidence that the hospital
held out to the patient that the doctor was its agent. The two factors that
determined apparent authority in this case were: first, the hospital’s implied
manifestation to the patient which led the latter to conclude that the doctor was the
hospital’s agent; and second, the patient’s reliance upon the conduct of the hospital
and the doctor, consistent with ordinary care and prudence.

It is of record that the hospital required a “consent for hospital care” to be signed
preparatory to the surgery of the patient. The form reads: “Permission is hereby
given to the medical, nursing and laboratory staff of the Medical City General
Hospital to perform such diagnostic procedures and to administer such medications
and treatments as may be deemed necessary or advisable by the physicians of this
hospital for and during the confinement of xxx.”

By such statement, the hospital virtually reinforced the public impression that the
doctor was a physician of its hospital, rather than one independently practicing in it;
that the medications and treatments he prescribed were necessary and desirable;
and that the hospital staff was prepared to carry them out. Professional Services,
Inc. vs. The Court of Appeals, et al./Natividad (substituted by her children Marcelino
Agana III, Enrique Agana, Jr. Emma Agana-Andaya, Jesus Agana and Raymund
Agana and Errique Agana) vs. The Court of Appeals and Juan Fuentes Miguel Ampil
vs. Natividad and Enrique Agana, G.R. Nos. 126297/G.R. No. 126467/G.R. No.
127590, February 2, 2010.

Compensable illness. Since cholecystolithiasis or gallstone has been excluded as a

compensable illness under the applicable standard contract for Filipino seafarers
that binds the seafarer and the vessel’s foreign owner, it was an error for the CA to
treat such illness as “work-related” and, therefore, compensable. The standard
contract precisely did not consider gallstone as compensable illness because the
parties agreed, presumably based on medical science, that such affliction is not
caused by working on board ocean-going vessels.

Nor is there any evidence to prove that the nature of the seafarer’s work on board a
ship aggravated his illness. No one knows if he had gallstone at the time he
boarded the vessel. By the nature of this illness, it is highly probable that he
already had it when he boarded his assigned ship although it went undiagnosed
because he had yet to experience its symptoms. Bandila Shipping, Inc. et al. vs.
Marcos C. Abalos, G.R. No. 177100, February 22, 2010.

Compensable illness; work related. Melanoma is not listed as an occupational

disease under Annex “A” of the Rules on Employees Compensation. Hence,
respondent has the burden of proving, by substantial evidence, the causal
relationship between her illness and her working conditions. Substantial evidence
means such relevant evidence as a reasonable mind might accept to support a
conclusion.

The Court in this case agreed with the petitioner and the ECC that respondent was
not able to positively prove that her ailment was caused by her employment and
that the risk of contracting the disease was increased by her working
conditions. While the law requires only a reasonable work-connection and not a
direct causal relation, respondent still failed to show that her illness was really
brought about by the wound she sustained during the supervised gardening activity
in school. The CA accepted the allegation that the mole appeared right on the spot
where respondent sustained the injury without any further proof that the mole
appeared because of the injury. The CA further ruled that “the risk of acquiring the
said ailment increased by the nature of [respondent’s] work in going to school and
in returning to her residence during school days x x x.” However, the CA failed to
consider that in a tropical country like the Philippines, exposure to sunlight is
common. Unlike farmers, fishermen or lifeguards, it was not shown that respondent
had chronic long-term exposure to the sun considered necessary for the
development of melanoma. Thus, the Court did not find the risk of contracting the
disease to have been heightened by respondent’s exposure to sunlight in going to
work and returning to her residence. Government Service Insurance System vs.
Rosalinda A. Bernadas, G.R. No. 164731, February 11, 2010

Dismissal; due process. The essence of due process is the opportunity to be heard;
it is the denial of this opportunity that constitutes violation of due process of law.
The employee was given the opportunity to be heard when a proper notice of
investigation was sent to him, although the notice did not reach him for reasons
outside the employer’s control. The employee was not also totally unheard on the
matter as he was able to explain his side through the two (2) explanation letters he
submitted. These letters are clear indications that he intimately knew of the matter
for which he was being investigated. If he was denied due process at all, the denial
was with respect to the charges of extortion, tardiness and absenteeism, which are
grounds invoked separately from loss of trust and confidence. These grounds were
not serious considerations in the dismissal that followed, and therefore, were not
considered by the Court as material to the present case. Bibiana Farms and Mills,
Inc. vs. Arturo Lado, G.R. No. 157861, February 2, 2010.

Dismissal; due process. In an unlawful dismissal case, the employer has the burden
of proving the lawful cause sustaining the dismissal of the employee. The employer
must affirmatively show rationally adequate evidence that the dismissal was for a
justifiable cause. The employee’s behavior constituted just cause. However, the
company cannot deny that it failed to observe due process. 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: (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. Violation of the employee’s right to statutory
due process, even if the dismissal was for a just cause, warrants the payment of
indemnity in the form of nominal damages. This indemnity is not intended to
penalize the employer but to vindicate or recognize the employee’s right to
statutory due process, which was violated by the employer in the present
case. Hilton Heavy Equipment Corporation and Peter Lim vs. Ananias Dy, G.R. No.
164860, February 2, 2010.

Dismissal; due process. Failure to observe due process in the termination of

employment for a just cause does not invalidate the dismissal but makes the
company liable for non-compliance with the procedural requirements of due
process. The violation of the employee’s right to statutory due process warrants the
payment of nominal damages, the amount of which is addressed to the sound
discretion of the court, taking into account the relevant circumstances. In the
instant case, considering that the company already suffered financially because of
poor sales performance under the employee’s watch, it is proper to reduce the
amount of nominal damages awarded to petitioner to Thirty Thousand Pesos
(P30,000.00). The amount of nominal damages awarded is not intended to enrich
the employee, but to deter employers from future violations of the statutory due
process rights of employees. Rolando P. Ancheta vs. Destiny Financial Plans, Inc.
and Arsenio Bartolome, G.R. No. 179702, February 16, 2010

Dismissal; due process. In the dismissal of employees, it has been consistently held
that the twin requirements of notice and hearing are essential elements of due
process. The employer must furnish the worker with two written notices before
termination of employment can be legally effected: (1) a notice apprising the
employee of the particular acts or omissions for which his dismissal is sought, and
(2) a subsequent notice informing the employee of the employer’s decision to
dismiss him. With regard to the requirement of a hearing, the essence of due
process lies simply in an opportunity to be heard, and not that an actual hearing
should always and indispensably be held.

Likewise, there is no requirement that the notices of dismissal themselves be

couched in the form and language of judicial or quasi-judicial decisions. What is
required is for the employer to conduct a formal investigation process, with notices
duly served on the employees informing them of the fact of investigation, and
subsequently, if warranted, a separate notice of dismissal. Through the formal
investigatory process, the employee must be accorded the right to present his or
her side, which must be considered and weighed by the employer. The employee
must be sufficiently apprised of the nature of the charge, so as to be able to
intelligently defend himself or herself against the charge. Wilfredo M. Baron, et
al. vs. National Labor Relations Commission, et al., G.R. No. 182299, February 22,
2010.

Dismissal; gross neglect of duties. Article 282 (b) imposes a stringent condition
before an employer may terminate an employment due to gross and habitual
neglect by the employee of his duties. To sustain a termination of employment
based on this provision of law, the negligence must not only be gross but also
habitual.

In the present case, the employer asserts that the employees failed to regularly
undertake a monthly physical inventory of the outlet’s merchandise. The Court was
not persuaded as it found that inventory preparation and reporting did not fall on
the employees’ shoulders since they were to “assist the [stock] clerk” only. Kulas
Ideas & Creations, et al. vs. Juliet Alcoseba, et al., G.R. No. 180123, February 18,
2010.

Dismissal; loss of trust and confidence. In Fungo v. Lourdes School of Mandaluyong,

we restated the guidelines for the application of loss of trust and confidence as a
just cause for dismissal of an employee from the service, thus: “a) loss of
confidence should not be simulated; b) it should not be used as subterfuge for
causes which are improper, illegal or unjustified; c) it may not be arbitrarily asserted
in the face of overwhelming evidence to the contrary; and d) it must be genuine,
not a mere afterthought to justify earlier action taken in bad faith.” In the present
case, the employee, who was a warehouseman, held a position of trust and
confidence and was given access to and authority over company property with clear
tasks and guidelines laid down very early in his employment. Like any business
entity, the company has every right to protect itself from actual threats to the
viability of its operations. The employee, caught red-handed in a scheme to spirit
off unpaid company sacks, not only violated his fiduciary duty as custodian of
company property resulting in the company’s loss of trust and confidence in him; he
had also become a threat to the viability of company operations. To rule that he
should be reinstated would be oppressive to the company. The law, in protecting
the rights of the employee, authorizes neither the oppression nor the self-
destruction of the employer. Bibiana Farms and Mills, Inc. vs. Arturo Lado, G.R. No.
157861, February 2, 2010.

Dismissal; loss of trust and confidence. The doctrine of loss of confidence requires
the concurrence of the following: (1) loss of confidence should not be simulated; (2)
it should not be used as a subterfuge for causes which are improper, illegal, or
unjustified; (3) it may not be arbitrarily asserted in the face of overwhelming
evidence to the contrary; (4) it must be genuine, not a mere afterthought to justify
an earlier action taken in bad faith; and (5) the employee involved holds a position
of trust and confidence. Loss of confidence, as a just cause for termination of
employment, is premised on the fact that the employee concerned holds a position
of responsibility, trust and confidence. He must be invested with confidence on
delicate matters, such as the custody, handling, care, and protection of the
employer’s property and/or funds. In order to constitute a just cause for dismissal,
the act complained of must be “work-related” such as would show the employee
concerned to be unfit to continue working for the employer.

The subject employee in this case is a managerial employee holding a highly

sensitive position. Being the Head of the Marketing Group of the company, he
was in charge, among others, of the over-all production and sales performance of
the company. Thus, as aptly pointed out by the CA, his performance was practically
the lifeblood of the corporation, because its earnings depended on the sales of the
marketing group, which he used to head. The position held by the employee
required the highest degree of trust and confidence of his employer in the former’s
exercise of managerial discretion insofar as the conduct of the latter’s business was
concerned. The employee’s inability to perform the functions of his office to the
satisfaction of his employer and the former’s poor judgment as marketing head
caused the company huge financial losses. If these were not timely addressed and
corrected, the company could have collapsed, to the detriment of its policy holders,
stockholders, employees, and the public in general. Rolando P. Ancheta vs. Destiny
Financial Plans, Inc. and Arsenio Bartolome, G.R. No. 179702, February 16, 2010

Dismissal; loss of trust and confidence. The Court found convincing evidence that a
pattern of concealment and dishonesty marred the purchase of paper materials for
the Women’s Journal’s special project, with the employee playing the principal and
most active role. There is no question that the employee failed to make a
reasonable canvass of the prices of the paper materials required by a company’s
special project, resulting in substantial losses to the company. That a rush job was
involved, is no excuse as canvassing could be done even in a day’s time as shown
by the audit department’s canvass. That the employee was responsible for
concealment and omissions also appears clear to us; he failed, under dubious
circumstances, to seasonably disclose to his employer material information with
financial impact on the purchase transaction.

Thus, the Court cannot but conclude that substantial evidence exists justifying the
employee’s dismissal for a just cause – loss of trust and confidence. For loss of trust
and confidence to be a ground for dismissal, the law requires only that there be at
least some basis to justify the dismissal. The fact that the employee had been with
the company for 25 years cannot change the conclusion that he had become a
liability to the company whose interests he miserably failed to protect. Philippine
Journalist, Inc. vs. Leozar Dela Cruz y Balobal, G.R. No. 187120, February 16, 2010.

Dismissal; requirements. Under the Labor Code, the requirements for the lawful
dismissal of an employee are two-fold, consisting of substantive and procedural
aspects. Not only must the dismissal be for a just or authorized cause; the basic
requirements of procedural due process – notice and hearing – must likewise be
observed before an employee may be dismissed. The burden of proof rests on the
employer to show that the employee’s dismissal has met these due process
requirements. The case of the employer must stand or fall on its own merits and not
on the weakness of the employee’s defense. Bibiana Farms and Mills, Inc. vs. Arturo
Lado, G.R. No. 157861, February 2, 2010.

Dismissal; separation pay. Under Article 279 of the Labor Code, an illegally
dismissed employee “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.” In
addition to full backwages, the Court has also repeatedly ruled that in cases where
reinstatement is no longer feasible due to strained relations, then separation pay
may be awarded instead of reinstatement. In Mt. Carmel College v. Resuena, the
Court reiterated that the separation pay, as an alternative to reinstatement, should
be equivalent to one (1) month salary for every year of service. Sargasso
Construction and Development Corporation vs. National Labor Relations
Commission (4th Division) and Gorgonio Mongcal, G.R. No. 164118, February 9,
2010.

Dismissal; serious misconduct. Misconduct has been defined as improper or wrong

conduct. It is the transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, willful in character, and implies wrongful intent
and not mere error of judgment. The misconduct to be serious must be of such
grave and aggravated character and not merely trivial and unimportant. Such
misconduct, however serious, must nevertheless be in connection with the
employee’s work to constitute just cause for his separation.

In the present case, the Court found substantial evidence to prove that a serious
misconduct has been committed to justify termination from employment. The
Certified Public Accountant and Corporate Finance Manager of the company
submitted a report dated February 19, 2000 stating that in spite of management’s
memorandum, the keys to the office and filing cabinets were not surrendered. It
was likewise stated in the report that petitioner Wilfredo Baron pulled out some
records without allowing a representative from the internal audit team to inspect
them. He noticed Wilfredo Baron deleting some files from the computer, which
could no longer be retrieved. Moreover, a member of the audit team saw Cynthia
Junatas (another petitioner) carrying some documents, including a Daily Collection
Report. When asked to present the documents for inspection, Junatas refused and
tore the document.

In addition, the audit team discovered that MSI incurred an inventory shortage of
One Million Thirty Thousand Two Hundred Fifty-Eight Pesos and Twenty-One
Centavos (P1,030,258.21). It found that Wilfredo Baron, the operations manager, in
conspiracy with the other petitioners, orchestrated massive irregularities and grand
scale fraud, which could no longer be documented because of theft of company
documents and deletion of computer files. Unmistakably, the unauthorized taking
of company documents and files, failure to pay unremitted collections, failure to
surrender keys to the filing cabinets despite earlier instructions, concealment of
shortages, and failure to record inventory transactions pursuant to a fraudulent
scheme are acts of grave misconduct, which are sufficient causes for dismissal from
employment. Wilfredo M. Baron, et al. vs. National Labor Relations Commission, et
al., G.R. No. 182299, February 22, 2010.

Dismissal; theft; degree of evidence. The long-standing rule is that the existence of
a conspiracy must be proved by clear, direct and convincing evidence. In Fernandez
v. National Labor Relations Commission, The Court expounded on the degree of
evidence required to establish the existence of a conspiracy in this wise: “While it is
true that in conspiracy, direct proof is not essential, it must however, be shown that
it exists as clearly as the commission of the offense itself. There must at least be
adequate proof that the malefactors had come to an agreement concerning the
commission of a felony and decided to commit it. x x x For conspiracy to exist, it
is essential that there must be conscious design to commit an offense. Conspiracy
is not the product of negligence but of intentionality on the part of the cohorts.”

Verily, there was a dearth of evidence directly linking the employee to the
commission of the crime of theft, as his mere act of loading the dump truck with
aggregates did not show that he knew of the other person’s plan to deliver the load
to a place other than the company’s construction site. The only conclusion,
therefore, is that the company had illegally dismissed the employee in the present
case. Sargasso Construction and Development Corporation vs. National Labor
Relations Commission (4th Division) and Gorgonio Mongcal, G.R. No. 164118,
February 9, 2010.

Employee; recovery of personal contributions. May a government employee,

dismissed from the service for cause, be allowed to recover the personal
contributions he paid to the Government Service Insurance System (GSIS)? The
answer is yes.

Section 11(d) of Commonwealth Act No. 186, as amended, provides: “Upon

dismissal for cause or on voluntary separation, he shall be entitled only to his own
premiums and voluntary deposits, if any, plus interest of three per centum per
annum, compounded monthly.” This provision continues to govern cases of
employees dismissed for cause and their claims for the return of their personal
contributions.

Also, it should be remembered that the GSIS laws are in the nature of social
legislation, to be liberally construed in favor of the government employees. The
money, subject of the employee’s request, consists of personal contributions made
by him, premiums paid in anticipation of benefits expected upon retirement. The
occurrence of a contingency, i.e., his dismissal from the service prior to reaching
retirement age, should not deprive him of the money that belongs to him from the
outset. To allow forfeiture of these personal contributions in favor of the GSIS would
condone undue enrichment. Carmelita Lledo vs. Atty. Cesar V. Lledo, Branch Clerk
of Court, Regional Trial Court, Branch 94, Quezon City, A.M. No. P-95-1167,
February 9, 2010.

Employee expenses; in-service training. In the present case, Article XXI, Section 6 of
the CBA provides that “All expenses of security guards in securing /renewing their
licenses shall be for their personal account.” A reading of the provision would reveal
that it encompasses all possible expenses a security guard would pay or incur in
order to secure or renew his license. In-service training being a requirement for the
renewal of a security guard’s license, expenses incurred therefore are claimed to be
for the security guard’s personal account. However, the 1994 Revised Rules and
Regulations Implementing the Private Security Agency Law (Republic Act No. 5487)
provides that it shall be the primary responsibility of the operators of private
security agency and company security forces to maintain and upgrade the
standards of efficiency, discipline, performance and competence of their personnel.
It further provides that “[T]o maintain and/or upgrade the standard of efficiency,
discipline and competence of security guards and detectives, company security
force and private security agencies upon prior authority shall conduct-in-service
training … The cost of training shall be pro-rated among the participating
agencies/private companies.”

Since it is the primary responsibility of operators of company security forces to

maintain and upgrade the standards of efficiency, discipline, performance and
competence of their personnel, it follows that the expenses to be incurred therein
shall be for the account of the company. Further, the intent of the law to impose
upon the employer the obligation to pay for the cost of its employees’ training is
manifested in the aforementioned provision of law. While the law mandates pro-
rating of expenses because it would be impracticable and unfair to impose the
burden of expenses suffered by all participants on only one participating agency or
company, if there is no centralization, there can be no pro-rating, and therefore, the
company that has its own security forces must shoulder the entire cost for such
training. If the intent of the law were to impose upon individual employees the cost
of training, the provision on the pro-rating of expenses would not have found print
in the law. Prior to the signing of the CBA, it was the company providing for the in-
service training of the guards. Thus, implicit from the company’s actuations was its
acknowledgment of its legally mandated responsibility to shoulder the expenses for
in-service training. PNCC Skyway Traffic Management and Security Division Workers
Organization (PSTMSWDO), represented by its President, Rene Soriano vs. PNCC
Skyway Corporation), G.R. No. 171231, February 17, 2010

Employer-employee relationship; control test. This Court still employs the “control
test” to determine the existence of an employer-employee relationship between
hospital and doctor. In Calamba Medical Center, Inc. v. National Labor Relations
Commission, et al., the Court held that: “Under the “control test”, an employment
relationship exists between a physician and a hospital if the hospital controls both
the means and the details of the process by which the physician is to accomplish his
task. x x x That petitioner exercised control over respondents gains light from the
undisputed fact that in the emergency room, the operating room, or any
department or ward for that matter, the doctor’s work is monitored through the
hospital’s nursing supervisors, charge nurses and orderlies. Without the approval or
consent of the hospital or its medical director, no operations can be undertaken in
those areas. For the control test to apply, it is not essential for the employer to
actually supervise the performance by the employee of his duties, it being enough
that it has the right to wield the power.” Professional Services, Inc. vs. The Court of
Appeals, et al./Natividad (substituted by her children Marcelino Agana III, Enrique
Agana, Jr. Emma Agana-Andaya, Jesus Agana and Raymund Agana and Errique
Agana) vs. The Court of Appeals and Juan Fuentes Miguel Ampil vs. Natividad and
Enrique Agana, G.R. Nos. 126297/G.R. No. 126467/G.R. No. 127590, February 2,
2010.

Management prerogatives; contract of perpetual employment. The Court cannot

countenance the employee’s claim that a contract of perpetual employment was
ever constituted. While the Constitution recognizes the primacy of labor, it also
recognizes the critical role of private enterprise in nation-building and the
prerogatives of management. A contract of perpetual employment deprives
management of its prerogative to decide whom to hire, fire and promote, and
renders inutile the basic precepts of labor relations. While management may validly
waive it prerogatives, such waiver should not be contrary to law, public order, public
policy, morals or good customs. An absolute and unqualified employment for life in
the mold of petitioner’s concept of perpetual employment is contrary to public
policy and good customs, as it unjustly forbids the employer from terminating the
services of an employee despite the existence of a just or valid cause. It likewise
compels the employer to retain an employee despite the attainment of the
statutory retirement age, even if the employee has became a “non-performing
asset” or, worse, a liability to the employer. Ronilo Sorreda vs. Cambridge
Electronics Corporation, G.R. No. 172927, February 11, 2010.

Suspension; leave without prior authority. While it is true that the union and its
members have been granted union leave privileges under the CBA, the grant cannot
be considered separately from the other provisions of the CBA, particularly the
provision on management prerogatives where the CBA reserved for the company
the full and complete authority in managing and running its business. The Court, in
the present case, saw nothing in the language of the union leave provision that
removes from the company the right to prescribe reasonable rules and regulations
to govern the manner of availing of union leaves, particularly the prerogative to
require its prior approval. In fact, prior notice is expressly required under the CBA
so that the company can appropriately respond to the request for leave. In this
sense, the rule requiring prior approval only made express what is implied from the
terms of the CBA.

Despite management’s disapproval of his requested leave, the employee still went
on leave, in open disregard of his superior’s orders. This rendered the employee
open to the charge of insubordination, separately from his absence without official
leave. Malayan Employees Association-FFW and Rodolfo Mangalino vs. Malayan
Insurance Company, Inc., G.R. No. 181357, February 2, 2010.

Quitclaim; elements. It is true that the law looks with disfavor on quitclaims and
releases by employees who have been inveigled or pressured into signing them by
unscrupulous employers seeking to evade their legal responsibilities and frustrate
just claims of employees. In certain cases, however, the Court has given effect to
quitclaims executed by employees if the employer is able to prove the following
requisites, to wit: (1) the employee executes a deed of quitclaim voluntarily; (2)
there is no fraud or deceit on the part of any of the parties; (3) the consideration of
the quitclaim is credible and reasonable; and (4) the contract is not contrary to law,
public order, public policy, morals or good customs, or prejudicial to a third person
with a right recognized by law. Goodrich Manufacturing Corporation & Mr. Nilo Chua
Goy vs. Emerlina Ativo, et al., G.R. No. 188002, February 1, 2010.

Quitclaim; validity. In the case at bar, both the Labor Arbiter and the NLRC ruled
that the employees executed their quitclaims without any coercion from the
company following their voluntary resignation from the company. The contents of
the quitclaim documents are simple, clear and unequivocal. The records of the case
are bereft of any substantial evidence to show that the employees did not know
that they were relinquishing their right short of what they had expected to receive
and contrary to what they have so declared. Put differently, at the time they were
signing their quitclaims, respondents honestly believed that the amounts received
by them were fair and reasonable settlements of the amounts, which they would
have received had they refused to voluntarily resign from the said
company. Goodrich Manufacturing Corporation & Mr. Nilo Chua Goy vs. Emerlina
Ativo, et al., G.R. No. 188002, February 1, 2010.

Vacation leave; scheduling. Although the preferred vacation leave schedule of

employees should be given priority, they cannot demand, as a matter of right, for
their request to be automatically granted by the company. If the employees were
given the exclusive right to schedule their vacation leave then said right should
have been incorporated in the CBA. In the absence of such right and in view of the
mandatory provision in the CBA giving the company the right to schedule the
vacation leave of its employees, the CBA prevails.

In the grant of vacation leave privileges to an employee, the employer is given the
leeway to impose conditions on the entitlement to and commutation of the same, as
the grant of vacation leave is not a standard of law, but a prerogative of
management. It is a mere concession or act of grace of the employer and not a
matter of right on the part of the employee. It is, therefore, well within the power
and authority of an employer to impose certain conditions, as it deems fit, on the
grant of vacation leaves, such as having the option to schedule the same. PNCC
Skyway Traffic Management and Security Division Workers Organization
(PSTMSWDO), represented by its President, Rene Soriano vs. PNCC Skyway
Corporation), G.R. No. 171231, February 17, 2010

Labor Procedure

Appeal; question of fact. While as a rule, a petition for review on certiorari shall
raise only questions of law, we deem it appropriate to examine the facts in this
review, given the conflicting factual findings between the Labor Arbiter, on the one
hand and, the NLRC and the CA, on the other. The Labor Arbiter sustained Rivera’s
dismissal with the finding that he committed acts of dishonesty or fraud against his
employer. The NLRC and the CA held that no substantial evidence existed to
support Rivera’s dismissal. Philippine Journalist, Inc. vs. Leozar Dela Cruz y Balobal,
G.R. No. 187120, February 16, 2010.

Execution of judgments; separation pay/backwages; computation. In concrete

terms, the question is whether a re-computation in the course of execution, of the
labor arbiter’s original computation of the awards made pegged as of the time the
decision was rendered and confirmed with modification by a final CA decision, is
legally proper.

The Court held that under the terms of the decision under execution, no essential
change is made by a re-computation as this step is a necessary consequence that
flows from the nature of the illegality of dismissal declared in that decision. A re-
computation (or an original computation, if no previous computation has been
made) is a part of the law – specifically, Article 279 of the Labor Code and the
established jurisprudence on this provision – that is read into the decision. By the
nature of an illegal dismissal case, the reliefs continue to add on until full
satisfaction, as expressed under Article 279 of the Labor Code. The re-computation
of the consequences of illegal dismissal upon execution of the decision does not
constitute an alteration or amendment of the final decision being implemented. The
illegal dismissal ruling stands; only the computation of the monetary consequences
of this dismissal is affected and this is not a violation of the principle of immutability
of final judgments. Session Delights Ice Cream and Fast Foods vs. The Hon. Court of
Appeals (Sixth Division), Hon. National Labor Relations Commission (Second
Division) and Adonis Armenio M. Flora, G.R. No. 172149, February 8, 2010.

Jurisdiction; absence of employer-employee relationship. Jurisdiction over the

subject matter of a complaint is determined by the allegations of the complaint.
In Pioneer Concrete Philippines, Inc. v. Todaro, the Court reiterated that where no
employer-employee relationship exists between the parties, and the Labor Code or
any labor statute or collective bargaining agreement is not needed to resolve any
issue raised by them, it is the Regional Trial Court which has jurisdiction. Thus it has
been consistently held that the determination of the existence of a contract as well
as the payment of damages is inherently civil in nature. A labor arbiter may only
take cognizance of a case and award damages where the claim for such damages
arises out of an employer-employee relationship.

In the present case, the employee, from the period May 8, 1999 to October 8, 1999,
was clearly a project employee of the company. There is, therefore, an employer-
employee relationship. Consequently, questions or disputes arising out of this
relationship fell under the jurisdiction of the labor arbiter. However, based on
petitioner’s allegations in his position paper, his cause of action was based on an
alleged second contract of employment separate and distinct from his project
employment contract. While there existed an employer-employee relationship
between the parties while the project contract of employment existed, the present
dispute is neither rooted in the aforestated contract nor is it one inherently linked to
it. Petitioner insists on a right to be employed again in respondent company and
seeks a determination of the existence of a new and separate contract that
established that right. As such, his case is within the jurisdiction, not of the labor
arbiter, but of the regular courts. The NLRC and the CA were therefore correct in
ruling that the labor arbiter erroneously took cognizance of the case. Ronilo
Sorreda vs. Cambridge Electronics Corporation, G.R. No. 172927, February 11,
2010.

Jurisdiction; void judgment. The company admits that it failed to appeal the January
29, 2003 Order within the period prescribed by law. It likewise admits that the case
was already in the execution process when it resorted to a belated appeal to the
DOLE Secretary. The company sought to excuse itself from the effects of the finality
of the Order by arguing that it was allegedly issued without jurisdiction. As such, it
may be assailed at any time.

While it is true that orders issued without jurisdiction are considered null and void
and, as a general rule, may be assailed at any time, the fact of the matter is that, in
this case, it was well within the jurisdiction of Director Manalo to issue the
Order. Under Article 128(b) of the Labor Code, as amended by Republic Act (RA)
No. 7730, the DOLE Secretary and her representatives, the regional directors, have
jurisdiction over labor standards violations based on findings made in the course of
inspection of an employer’s premises. The said jurisdiction is not affected by the
amount of claim involved, as RA 7730 had effectively removed the jurisdictional
limitations found in Articles 129 and 217 of the Labor Code insofar as inspection
cases, pursuant to the visitorial and enforcement powers of the DOLE Secretary, are
concerned. The last sentence of Article 128(b) of the Labor Code recognizes
an exception to the jurisdiction of the DOLE Secretary and her representatives, but
such exception is neither an issue nor applicable here. Tiger Construction and
Development Corporation vs. Reynaldo, et al., G.R. No. 164141, February 26, 2010.

Labor Appeal; cash bond. Article 223 of the Labor Code provides that an appeal by
the employer to the NLRC from a judgment of a labor arbiter which involves a
monetary award may be perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the NLRC, in an
amount equivalent to the monetary award in the judgment appealed from. “Cash,”
means a sum of money; cash bail (the sense in which the term “cash bond” is used)
is a sum of money posted by a criminal defendant to ensure his presence in court,
used in place of a surety bond and real estate.

To comply with the appeal bond requirement, the company deposited the amount
of P71,909.77 with the United Coconut Planters Bank and surrendered to the NLRC
the passbook covering the deposit, along with a Deed of Assignment it executed
assigning the proceeds of the deposit in favor of the employee and authorizing the
NLRC to release the same in the event that the Labor Arbiter’s Decision becomes
final and executory. Such Deed of Assignment, as well as the passbook, is neither a
cash bond nor a surety bond. The company’s appeal to the NLRC was thus not duly
perfected, thereby rendering the Labor Arbiter’s Decision final and
executory. Mindanao Times Corporation vs. Mitchel R. Confesor, G.R. No. 183417,
February 5, 2010.

JANUARY 2010

Labor Law

CBA; coverage. As regular employees, petitioners fall within the coverage of the
bargaining unit and are therefore entitled to CBA benefits as a matter of law and
contract. Under the terms of the CBA, petitioners are members of the appropriate
bargaining unit because they are regular rank-and-file employees and do not belong
to any of the excluded categories. Most importantly, the labor arbiter’s decision of
January 17, 2002 – affirmed all the way to the CA – ruled against the
company’s submission that they are independent contractors. Thus, as regular rank-
and-file employees, they fall within the CBA coverage. And, under the CBA’s express
terms, they are entitled to its benefits.
CBA coverage is not only a question of fact, but of law and contract. The factual
issue is whether the petitioners are regular rank-and-file employees of the
company. The tribunals below uniformly answered this question in the
affirmative. From this factual finding flows legal effects touching on the terms and
conditions of the petitioners’ regular employment. Farley Fulache, et al. vs. ABS-
CBN Broadcasting Corporation, G.R. No. 183810, January 21, 2010.

Employee benefits; permanent disability benefits. In accordance with the avowed

policy of the State to give maximum aid and full protection to labor, the
Court applied the Labor Code concept of permanent total disability to Filipino
seafarers. The Court held that the notion of disability is intimately related to the
worker’s capacity to earn. What is compensated is not the employee’s injury or
illness but his inability to work resulting in the impairment of his earning capacity;
hence, disability should be understood less on its medical significance but more on
the loss of earning capacity.

In the present case, petitioner was able to secure a “fit to work” certification from a
doctor only after more than five months from the time he was medically
repatriated due to a finding that his disability is considered permanent and total.
Significantly, petitioner remained unemployed even after he filed on February 26,
2002 his complaint to recover permanent total disability compensation and despite
the August 31, 2005 Decision of the NLRC which was affirmed by the Court of
Appeals, ordering respondents to “allow complainant to resume sea duty.”

That petitioner was not likely to fully recover from his disability is mirrored by the
Labor Arbiter’s finding that his illness would possibly recur once he resumes his sea
duties. This could very well be the reason why petitioner was not re-deployed by
respondents. Petitioner’s disability being then permanent and total, he is “entitled
to 100% compensation, i.e., US$80,000 for officers,” as stipulated in par. 20.1.7 of
the parties’ CBA. Rizaldy M. Quitoriano vs. Jebsens Maritime, Inc./Ma. Theresa
Gutay and/or Atle Jebsens Management A/S, G.R. No. 179868, January 21, 2010.

Labor Code; interpretation. Another basic principle is that expressed in Article 4 of

the Labor Code – that all doubts in the interpretation and implementation of the
Labor Code should be interpreted in favor of the workingman. This principle has
been extended by jurisprudence to cover doubts in the evidence presented by the
employer and the employee. The petitioner has, at very least, shown serious
doubts about the merits of the company’s case, particularly in the appreciation of
the clinching evidence on which the NLRC and CA decisions were based. In such
contest of evidence, the Court applied Article 4 as basis to rule in favor of the
employee. In this case, the Court held that petitioner was constructively dismissed
given the hostile and discriminatory working environment he found himself in,
particularly evidenced by the escalating acts of unfairness against him that
culminated in the appointment of another HRD manager without any prior notice to
him. Where no less than the company’s chief corporate officer was against
him, petitioner had no alternative but to resign from his employment.

The Court also gave significance to the fact that petitioner sought almost immediate
official recourse to contest his separation from service through a complaint for
illegal dismissal, and held that this is not the act of one who voluntarily resigned; his
immediate filing of a complaint characterizes him as one who deeply felt that he
had been wronged. Manolo A. Peñaflor vs. Outdoor Clothing Manufacturing
Corporation, et al., G.R. No. 177114, January 21, 2010.

Labor Procedure
Appeal; illegal dismissal. In the present case, the company terminated the services
of four drivers who were declared by the labor arbiter to be regular employees of
the company in an initial complaint filed by said drivers for regularization. Pending
the company’s appeal of the labor arbiter’s decision, the company terminated the
employment of said drivers on the ground of redundancy, which action, the Court
viewed as an implied admission of the regular employment status of the drivers.
The Court held that by implementing the dismissal action at the time the labor
arbiter’s ruling was under review, the company unilaterally negated the effects of
the labor arbiter’s ruling while at the same time appealing the same ruling to the
NLRC. This unilateral move is a direct affront to the NLRC’s authority and an abuse
of the appeal process. All these go to show that company acted with patent bad
faith. Farley Fulache, et al. vs. ABS-CBN Broadcasting Corporation, G.R. No.
183810, January 21, 2010.

Appeal; questions of fact. The rule that a Rule 45 petition deals only with legal
issues is not an absolute rule; it admits of exceptions. In the labor law setting, the
Court may look into factual issues when there is a conflict in the factual
findings of the labor arbiter, the NLRC, and the CA as in the present case where
the labor arbiter found facts supporting the conclusion that there had been
constructive dismissal, while the NLRC’s and the CA’s factual findings contradicted
the labor arbiter’s findings. The conflicting factual findings are not binding on the
Court. The Court held that it retains the authority to pass upon the evidence
presented and draw conclusions therefrom. Manolo A. Peñaflor vs. Outdoor
Clothing Manufacturing Corporation, et al., G.R. No. 177114, January 21, 2010.

Appeal under Rule 45; questions of law vs. questions of fact. Petitioners in the
present case do not question the findings of facts in the assailed decisions. They
question the misapplication of the law and jurisprudence on the facts recognized by
the decisions. For example, they question as contrary to law their exclusion from
the CBA after they were recognized as regular rank-and-file employees of the
company. They also question the basis in law for the dismissal of four drivers and
the legal propriety of the redundancy action taken against them.

The Court reiterated the established distinctions between questions of law and
questions of fact by quoting its rulings in New Rural Bank of Guimba (N.E.) Inc. v.
Fermina S. Abad and Rafael Susan [G.R. No. 161818, August 20, 2008, 562 SCRA
503]: “A question of law exists when the doubt or controversy concerns the correct
application of law or jurisprudence to a certain set of facts; or when the issue does
not call for an examination of the probative value of the evidence presented, the
truth or falsehood of the facts being admitted. A question of fact exists when a
doubt or difference arises as to the truth or falsehood of facts or when the query
invites calibration of the whole evidence considering mainly the credibility of the
witnesses, the existence and relevancy of specific surrounding circumstances, as
well as their relation to each other and to the whole, and the probability of the
situation.” Farley Fulache, et al. vs. ABS-CBN Broadcasting Corporation, G.R. No.
183810, January 21, 2010.

Dismissal; burden of proof. It is a settled rule that in employee termination

disputes, the employer bears the burden of proving that the employee’s dismissal
was for just and valid cause. That petitioner did indeed file a letter of resignation
does not help the company’s case as, other than the fact of resignation, the
company must still prove that the employee voluntarily resigned. There can be no
valid resignation where the act was made under compulsion or under circumstances
approximating compulsion, such as when an employee’s act of handing in his
resignation was a reaction to circumstances leaving him no alternative but to
resign. In this case, the Court held that petitioner had been constructively
dismissed as his resignation was a response to the unacceptable appointment of
another person to a position he still occupied. In sum, the evidence does not
support the existence of voluntariness in petitioner’s resignation. Manolo A.
Peñaflor vs. Outdoor Clothing Manufacturing Corporation, et al., G.R. No. 177114,
January 21, 2010.
 DECEMBER 2009

Labor Law

Attorney’s fees; actions for indemnity under employer liability laws. The claim for
attorney’s fees is granted following Article 2208 of the New Civil Code which allows
its recovery in actions for recovery of wages of laborers and actions for indemnity
under the employer’s liability laws. The same fees are also recoverable when the
defendant’s act or omission has compelled the plaintiff to incur expenses to protect
his interest as in the present case following the refusal by the employer to settle the
employee’s claims. Pursuant to prevailing jurisprudence, petitioner is entitled to
attorney’s fees of ten percent (10%) of the monetary award. Leopoldo Abante vs.
KJGS Fleet Management Manila and/or Guy Domingo A. Macapayag, Kristian
Gerhard Jebsens Skipsrenderi A/S, G.R. No. 182430, December 4, 2009.

Compensability of death; requirements. To be entitled to compensation, a claimant

must show that the sickness is either: (1) a result of an occupational disease listed
under Annex “A” of the Amended Rules on Employees’ Compensation under the
conditions Annex “A” sets forth; or (2) if not so listed, that the risk of contracting
the disease is increased by the working conditions.

Based on Francisco’s death certificate, the immediate cause of his death was
cardiac arrest; the antecedent cause was acute massive hemorrhage, and the
underlying cause was bleeding peptic ulcer disease.

In determining the compensability of an illness, the worker’s employment need not

be the sole factor in the growth, development, or acceleration of a claimant’s illness
to entitle him to the benefits provided for. It is enough that his employment
contributed, even if only in a small degree, to the development of the disease.

P.D. 626 is a social legislation whose primordial purpose is to provide meaningful

protection to the working class against the hazards of disability, illness, and other
contingencies resulting in loss of income. In employee compensation, persons
charged by law to carry out the Constitution’s social justice objectives should adopt
a liberal attitude in deciding compensability claims and should not hesitate to grant
compensability where a reasonable measure of work-connection can be inferred.
Only this kind of interpretation can give meaning and substance to the law’s
compassionate spirit as expressed in Article 4 of the Labor Code – that all doubts in
the implementation and interpretation of the provisions of the Labor Code, including
their implementing rules and regulations, should be resolved in favor of
labor. Government Service Insurance System vs. Jean E. Raoet, G.R. No. 157038,
December 23, 2009.

Compensable injury; requirement. Section 20(B) of the POEA Standard Employment

Contract provides for the liabilities of the employer only when the seafarer suffers
from a work-related injury or illness during the term of his employment.

Petitioner claims to have reported his illness to an officer once on board the vessel
during the course of his employment. The records are bereft, however, of any
documentary proof that he had indeed referred his illness to a nurse or doctor in
order to avail of proper treatment. It thus becomes apparent that he was
repatriated to the Philippines, not on account of any illness or injury, but in view of
the completion of his contract.

But even assuming that petitioner was repatriated for medical reasons, he failed to
submit himself to the company-designated doctor in accordance with the post-
employment medical examination requirement under the above-quoted paragraph
3 of Section 20(B) of the POEA Standard Employment Contract. Failure to comply
with this requirement which is a sine qua non bars the filing of a claim for disability
benefits. Dionisio M. Musnit vs. Sea Star Shipping Corporation and Sea Star Shipping
Corporation, Ltd., G.R. No. 182623, December 4, 2009.
Compensable injury; loss of earning capacity. The Court has applied the Labor Code
concept of permanent total disability to Filipino seafarers in keeping with the
avowed policy of the State to give maximum aid and full protection to labor, it
holding that the notion of disability is intimately related to the worker’s capacity to
earn, what is compensated being not his injury or illness but his inability to work
resulting in the impairment of his earning capacity, hence, disability should be
understood less on its medical significance but more on the loss of earning
capacity. Joelson O. Iloreta vs. Philippine Transmarine Carriers, Inc. and Norbulk
Shipping U.K. Ltd., G.R. No. 183908, December 4, 2009.

Dismissal; constructive dismissal. Case law defines constructive dismissal as a

cessation of work because continued employment has been rendered impossible,
unreasonable, or unlikely, as when there is a demotion in rank or diminution in pay
or both or when a clear discrimination, insensibility, or disdain by an employer
becomes unbearable to the employee.

The test of constructive dismissal is whether a reasonable person in the employee’s

position would have felt compelled to give up his position under the circumstances.
It is an act amounting to dismissal but is made to appear as if it were not. In fact,
the employee who is constructively dismissed might have been allowed to keep
coming to work. Constructive dismissal is therefore a dismissal in disguise. The law
recognizes and resolves this situation in favor of employees in order to protect their
rights and interests from the coercive acts of the employer.

In the present case, the employer ceased verbally communicating with the
employee and giving him work assignment after suspecting that he had forged
purchase receipts. In this situation, the employee was forced to leave the
employer’s compound with his family and to transfer to a nearby place. The
employee’s act of leaving his employer’s premises was in reality not his choice but
a situation created by the employer. CRC Agricultural Trading and Rolando B.
Catindig vs. National Labor Relations Commission and Roberto Obias, G.R. No.
177664, December 23, 2009.

Dismissal; constructive dismissal. Constructive dismissal exists when an act of clear

discrimination, insensibility or disdain by an employer has become so unbearable to
the employee leaving him with no option but to forego with his continued
employment.

In this case, the employee, while still employed with the company, was compelled
to resign and forced to go on leave. He was not allowed to participate in the
activities of the company. His salary was no longer remitted to him. His
subordinates were directed not to report to him and the company directed one of its
district managers to take over his position and do his functions without prior notice
to him.

These discriminatory acts were calculated to make the employee feel that he is no
longer welcome nor needed in the company short of sending him an actual notice of
termination. The Court held that the employer constructively dismissed the
employee from service. Ramon B. Formantes vs. Duncan Pharmaceuticals, Phils.,
Inc., G.R. No. 170661, December 4, 2009.

Dismissal; corporate officer; jurisdiction. From the documents submitted by the

company, petitioner was a director and officer of Slimmers World. The charges of
illegal suspension, illegal dismissal, unpaid commissions, reinstatement and back
wages imputed by petitioner against the company fall squarely within the ambit of
intra-corporate disputes. In a number of cases, the Court has held that a corporate
officer’s dismissal is always a corporate act, or an intra-corporate controversy which
arises between a stockholder and a corporation. The question of remuneration
involving a stockholder and officer, not a mere employee, is not a simple labor
problem but a matter that comes within the area of corporate affairs and
management and is a corporate controversy in contemplation of the Corporation
Code.

It is a settled rule that jurisdiction over the subject matter is conferred by law. The
determination of the rights of a director and corporate officer dismissed from his
employment as well as the corresponding liability of a corporation, if any, is an
intra-corporate dispute subject to the jurisdiction of the regular courts. Thus, the
appellate court correctly ruled that it is not the NLRC but the regular courts which
have jurisdiction over the present case. Leslie Okol vs. Slimmers World
International, et al., G.R. No. 160146, December 11, 2009.

Dismissal; due process; opportunity to be heard. Although the employee, during

some parts of the trial proceedings before the Labor Arbiter was not represented by
a member of the bar, he was given reasonable opportunity to be heard and submit
evidence to support his arguments, through the medium of pleadings filed in the
labor tribunals. He was also able to present his version of the Magat incident during
his direct examination conducted by his lawyer Atty. Jannette Inez. Thus, he cannot
claim that he was denied due process. Ramon B. Formantes vs. Duncan
Pharmaceuticals, Phils., Inc., G.R. No. 170661, December 4, 2009.

Dismissal; just cause; separation pay. The liberality of the law can never be
extended to the unworthy and undeserving. In several instances, the policy of social
justice has compelled this Court to accord financial assistance in the form of
separation pay to a legally terminated employee. This liberality, however, is not
without limitations. Thus, when the manner and circumstances by which the
employee committed the act constituting the ground for his dismissal show his
perversity or depravity, no sympathy or mercy of the law can be invoked.

We have examined the records which indeed show that the employee’s
unauthorized absences as well as tardiness are habitual despite having been
penalized for past infractions. In Gustilo v. Wyeth Philippines, Inc. [483 Phil. 69, 78
(2004)], we held that a series of irregularities when put together may constitute
serious misconduct. We also held that gross neglect of duty becomes serious in
character due to frequency of instances. Serious misconduct is said to be a
transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and indicative of wrongful intent and not
mere error of judgment. Oddly, the employee never advanced any valid reason to
justify his absences. The employee’s intentional and willful violation of company
rules shows his utter disregard of his work and his employer’s interest. Indeed,
there can be no good faith in intentionally and habitually incurring inexcusable
absences. Hence, he is not entitled to severance pay. Arsenio S. Quiambao vs.
Manila Electric Company, G.R. No. 171023, December 18, 2009.

Dismissal; just cause; sexual abuse. As a manager, the employee enjoyed the full
trust and confidence of the company and his subordinates. By committing sexual
abuse against his subordinate, he clearly demonstrated his lack of fitness to
continue working as a managerial employee and deserves the punishment of
dismissal from the service. Ramon B. Formantes vs. Duncan Pharmaceuticals, Phils.,
Inc., G.R. No. 170661, December 4, 2009.

Dismissal; separation pay in lieu of reinstatement. Under Article 279 of the Labor
Code, the illegally dismissed employee is entitled to reinstatement without loss of
seniority rights and other privileges and to 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. Thus, an illegally dismissed employee is entitled to two reliefs:
backwages and reinstatement. Where reinstatement is no longer viable as an
option, backwages shall be computed from the time of the illegal termination up to
the finality of the decision. Separation pay equivalent to one month salary for every
year of service should likewise be awarded as an alternative in case reinstatement
in not possible.
In the present case, reinstatement is no longer feasible because of the strained
relations between the employee and the employer. Time and again, the Court has
recognized that strained relations between the employer and employee is an
exception to the rule requiring actual reinstatement for illegally dismissed
employees for the practical reason that the already existing antagonism will only
fester and deteriorate, and will only worsen with possible adverse effects on the
parties, if we shall compel reinstatement; thus, the use of a viable substitute that
protects the interests of both parties while ensuring that the law is respected.

The payment of separation pay is the better alternative as it liberates the employee
from what could be a highly hostile work environment, while releasing the employer
from the grossly unpalatable obligation of maintaining in their employ a worker they
could no longer trust. CRC Agricultural Trading and Rolando B. Catindig vs. National
Labor Relations Commission and Roberto Obias, G.R. No. 177664, December 23,
2009.

Dismissal; twin requirements. Well settled is the dictum that the twin requirements
of notice and hearing constitute the essential elements of due process in the
dismissal of employees. It is a cardinal rule in our jurisdiction that the employer
must furnish the employee with two written notices before the termination of
employment can be affected: (a) the first apprises the employee of the particular
acts or omissions for which his dismissal is sought; and (b) the second informs the
employee of the employer’s decision to dismiss him.

The barrage of letters sent to petitioner, starting from a letter dated April 22, 1994
until his termination on May 19, 1994, was belatedly made and apparently done in
an effort to show that petitioner was accorded the notices required by law in
dismissing an employee. As observed by the Labor Arbiter in her decision, prior to
those letters, the employee was already constructively dismissed.

Since the dismissal, although for a valid cause, was done without due process of
law, the employer should indemnify the employee with nominal damages in the
amount of P30,000.00.Ramon B. Formantes vs. Duncan Pharmaceuticals, Phils.,
Inc., G.R. No. 170661, December 4, 2009.

Dismissal; two-notice requirement. To justify the dismissal of an employee for a just

cause, the employer must furnish the worker with two written notices. The first is
the notice to apprise the employee of the particular acts or omissions for which his
dismissal is sought. This may be loosely considered as the charge against the
employee. The second is the notice informing the employee of the employer’s
decision to dismiss him. This decision, however, must come only after the employee
is given a reasonable period from receipt of the first notice within which to answer
the charge, and ample opportunity to be heard and defend himself with the
assistance of his representative, if he so desires. The requirement of notice is not a
mere technicality, but a requirement of due process to which every employee is
entitled.

The employer clearly failed to comply with the two-notice requirement. Nothing in
the records shows that the company ever sent the employee a written notice
informing him of the ground for which his dismissal was sought. It does not also
appear that the company held a hearing where the employee was given the
opportunity to answer the charges of abandonment. Neither did the company send
a written notice to the employee informing him that his service had been
terminated and the reasons for the termination of his employment. Under these
facts, the respondent’s dismissal was illegal. CRC Agricultural Trading and Rolando
B. Catindig vs. National Labor Relations Commission and Roberto Obias, G.R. No.
177664, December 23, 2009.

Drug testing for employees; employer’s duty. It was Plantation Bay’s responsibility
to ensure that the drug tests would be properly administered, the results thereof
being the bases in terminating the employees’ services.
The employer failed to indubitably prove that the employees were guilty of drug use
in contravention of its drug-free workplace policy amounting to serious misconduct.
The employees are therefore deemed to have been illegally dismissed. Plantation
Bay Resort & Spa and Efren Belarmino vs. Romel S. Dubrico, et al., G.R. No. 182216,
December 4, 2009.

Employee disability benefits. Permanent disability refers to the inability of a worker

to perform his job for more than 120 days, regardless of whether he loses the use of
any part of his body. What determines the employee’s entitlement to permanent
disability benefits is his inability to work for more than 120 days. In the case at bar,
it was only on February 20, 2001 that the Certificate of Fitness for Work was issued
by Dr. Lim, more than 6 months from the time he was initially evaluated by the
doctor on July 24, 2000 and after he underwent operation on August 18, 2000.

It is gathered from the documents emanating from the Office of Dr. Lim that the
employee was seen by him from July 24, 2000 up to February 20, 2001 or a total of
13 times; and except for the medical reports dated February 5, 2001 and February
20, 2001 (when the doctor finally pronounced petitioner fit to work), Dr. Lim
consistently recommended that the employee continue his physical
rehabilitation/therapy and revisit clinic on specific dates for re-evaluation, thereby
implying that the employee was not yet fit to work.

Given a seafarer’s entitlement to permanent disability benefits when he is unable to

work for more than 120 days, the failure of the company-designated physician to
pronounce the employee fit to work within the 120-day period entitles him to
permanent total disability benefit in the amount of US$60,000.00. Leopoldo Abante
vs. KJGS Fleet Management Manila and/or Guy Domingo A. Macapayag, Kristian
Gerhard Jebsens Skipsrenderi A/S, G.R. No. 182430, December 4, 2009.

Existence of employer-employee relationship. The elements to determine the

existence of an employment relationship are: (1) the selection and engagement of
the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employer’s power to control the employee’s conduct. The most important element
is the employer’s control of the employee’s conduct, not only as to the result of the
work to be done, but also as to the means and methods to accomplish it. All the four
elements are present in this case.

First, the company engaged the services of the worker in 1995. Second, the
company paid the worker a daily wage of P175.00, with allowances ranging from
P140.00 to P200.00 per day. The fact that the worker was paid under a “no work no
pay” scheme, assuming this claim to be true, is not significant. The “no work no
pay” scheme is merely a method of computing compensation, not a basis for
determining the existence or absence of employer-employee relationship. Third, the
company’s power to dismiss the worker was inherent in the fact that it engaged the
services of the worker as a driver. Finally, a careful review of the record shows that
the worker performed his work as driver under the petitioners’ supervision and
control. The company determined how, where, and when the worker performed his
task. They, in fact, requested the worker to live inside their compound so he (the
worker) could be readily available when the company needed his services.
Undoubtedly, the company exercised control over the means and methods by which
the worker accomplished his work as a driver. CRC Agricultural Trading and Rolando
B. Catindig vs. National Labor Relations Commission and Roberto Obias, G.R. No.
177664, December 23, 2009.

Labor-only contracting. The contract between the principal and the contractor is not
the final word on how the contracted workers relate to the principal and the
purported contractor; the relationships must be tested on the basis of how they
actually operate.
The legitimate job contractor must have the capitalization and equipment to
undertake the sale and distribution of the manufacturer’s products, and must do it
on its own using its own means and selling methods.

Even before going into the realities of workplace operations, the Court of Appeals
found that the service contracts themselves provide ample leads into the
relationship between the company, on the one hand, and Peerless and Excellent, on
the other. The Court of Appeals noted that both the Peerless and the Excellent
contracts show that their obligation was solely to provide the company with “the
services of contractual employees,” and nothing more. These contracted services
were for the handling and delivery of the company’s products and allied services.
Following D.O. 18-02 and the contracts that spoke purely of the supply of labor, the
Court of Appeals concluded that Peerless and Excellent were labor-only contractors
unless they could prove that they had the required capitalization and the right of
control over their contracted workers.

The contractors were not independently selling and distributing company products,
using their own equipment, means and methods of selling and distribution; they
only supplied the manpower that helped the company in the handing of products for
sale and distribution. In the context of D.O. 18-02, the contracting for sale and
distribution as an independent and self-contained operation is a legitimate contract,
but the pure supply of manpower with the task of assisting in sales and distribution
controlled by a principal falls within prohibited labor-only contracting. Coca Cola
Bottlers Philippines, Inc. vs. Ricky E. Dela Cruz, et al., G.R. No. 184977, December 7,
2009.

Outsourcing. The employer was within its right in entering the forwarding
agreements with the forwarders as an exercise of its management prerogative. The
employer’s declared objective for the arrangement is to achieve greater economy
and efficiency in its operations – a universally accepted business objective and
standard that the union has never questioned. In Meralco v. Quisumbing,[G.R. No.
127598, January 27, 1999] the Court joined this universal recognition of outsourcing
as a legitimate activity when it held that a company can determine in its best
judgment whether it should contract out a part of its work for as long as the
employer is motivated by good faith; the contracting is not for purposes of
circumventing the law; and does not involve or be the result of malicious or
arbitrary action. Temic Automotive Philippines, Inc. vs. Temic Automotive
Philippines, Inc. Employees Union-FFW, G.R. No. 186965, December 23, 2009.

Regulations; retroactivity of POEA Circular. Respecting the appellate court’s ruling

that it is POEA Memo Circular No. 55, series of 1996 which is applicable and not
Memo Circular No. 9, series of 2000, apropos is the ruling in Seagull Maritime
Corporation v. Dee [G.R. No. 165156, April 2, 2007] involving employment contract
entered into in 1999, before the promulgation of POEA Memo Circular No. 9, series
of 2000 or the use of the new POEA Standard Employment Contract, like that
involved in the present case. In said case, the Court applied the 2000 Circular in
holding that while it is the company-designated physician who must declare that
the seaman suffered permanent disability during employment, it does not deprive
the seafarer of his right to seek a second opinion which can then be used by the
labor tribunals in awarding disability claims. Leopoldo Abante vs. KJGS Fleet
Management Manila and/or Guy Domingo A. Macapayag, Kristian Gerhard Jebsens
Skipsrenderi A/S, G.R. No. 182430, December 4, 2009.

Termination; abandonment. Abandonment of work, or the deliberate and unjustified

refusal of an employee to resume his employment, is a just cause for employment
termination under paragraph (b) of Article 282 of the Labor Code, since it
constitutes neglect of duty. The jurisprudential rule is that abandonment is a matter
of intention that cannot be lightly presumed from equivocal acts. To constitute
abandonment, two elements must concur: (1) the failure to report for work or
absence without valid or justifiable reason, and (2) a clear intent, manifested
through overt acts, to sever the employer-employee relationship. The employer
bears the burden of showing a deliberate and unjustified refusal by the employee to
resume his employment without any intention of returning.

In the present case, the employer did not adduce any proof to show that the
employee clearly and unequivocally intended to abandon his job or to sever the
employer-employee relationship. Moreover, the filing of the complaint for illegal
dismissal on June 22, 2004 strongly speaks against the employer’s charge of
abandonment; it is illogical for an employee to abandon his employment and,
thereafter, file a complaint for illegal dismissal. CRC Agricultural Trading and
Rolando B. Catindig vs. National Labor Relations Commission and Roberto
Obias, G.R. No. 177664, December 23, 2009.

Termination; reorganization. Absent explicit statutory authority, the Court cannot

sustain the grant of separation pay and retirement benefits from one single act of
involuntary separation from the service, lest there be duplication of purpose and
depletion of government resources. Within the context of government
reorganization, separation pay and retirement benefits arising from the same cause,
are in consideration of the same services and granted for the same purpose.
Whether denominated as separation pay or retirement benefits, these financial
benefits reward government service and provide monetary assistance to employees
involuntarily separated due to bona fide reorganization. Efren M. Herrera, et al. vs.
National Power Corporation, et al., G.R. No. 166570, December 18, 2009.

Termination; reorganization. The grant of retirement benefits to the employees in

addition to the separation pay they have already received effectively amounts to
additional compensation for the same services. Unless specifically authorized by
law, such additional compensation is not allowed under Section 8, Article IX-B of the
Constitution.

There is only one act of exit from the service and only one service to exit from.
Employees who chose separation from the service under the NPC’s restructuring
plan never really exercised the right to optionally retire; the earlier termination of
their employment denied them the opportunity to optionally retire. Consequently,
no retirement pay ever accrued in their favor.

This means, in concrete terms, that the employees who opted to be separated from
the service under the NPC restructuring plan and who have received separation pay
under RA 9136, cannot also be considered to have separately exited from the same
service through optional retirement under CA 186, entitling them to separate
retirement benefits under this law. RA 9136 provides for separation benefits in the
alternative and does not offer both.

Optional retirement clearly is a mere expectancy until availed of by those who are
qualified to exercise the option to retire. If not taken because the employee chose
the separation package under RA 9136, then optional retirement under CA 186
simply remained an expectancy that never materialized and is now forever lost. To
put it differently, given one and the same exit from the one and the same service
for which only one separation benefit is provided, there can be no actual retirement
under CA 186 after exit via the RA 9136 route has been taken; optional retirement
under CA 186 has then become the road not taken. Efren M. Herrera, et al. vs.
National Power Corporation, et al., Separate Concurring Opinion of J. Brion, G.R. No.
166570, December 18, 2009.

Termination; retrenchment. Retrenchment is the termination of employment

initiated by the employer through no fault of and without prejudice to the
employees, it is resorted to during periods of business recession, industrial
depression, or seasonal fluctuations or during lulls occasioned by lack of orders,
shortage of materials, conversion of the plant for a new production program or the
introduction of new methods or more efficient machinery or of automation. It is a
management prerogative resorted to, to avoid or minimize business losses.
To effect a valid retrenchment, the following elements must be present: (1) the
retrenchment is reasonably necessary and likely to prevent business losses which, if
already incurred, are not merely de minimis, but substantial, serious, and real, or
only if expected, are reasonably imminent as perceived objectively and in good
faith by the employer; (2) the employer serves written notice both to the
employee/s concerned and the Department of Labor and Employment at least a
month before the intended date of retrenchment; (3) the employer pays the
retrenched employee separation pay in an amount prescribed by the Code; (4) the
employer exercises its prerogative to retrench in good faith; and (5) the employer
uses fair and reasonable criteria in ascertaining who would be retrenched or
retained.

The losses must be supported by sufficient and convincing evidence. The normal
method of discharging this burden of proof is the submission of financial statements
duly audited by independent external auditors. For failure of Asiakonstrukt to clearly
and satisfactorily substantiate its financial losses, the dismissal of the employee on
account of retrenchment is unjustified. Virgilio G. Anabe vs. Asian Construction
(ASIAKONSTRUKT), et al., G.R. No. 183233, December 23, 2009.

Union; cancellation of union registration; grounds. For the purpose of de-certifying a

union, it must be shown that there was 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; or, in connection with the election
of officers, the 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 to the Bureau of Labor Relations.

The bare fact that two signatures appeared twice on the list of those who
participated in the organizational meeting would not provide a valid reason to
cancel the union’s certificate of registration. The cancellation of a union’s
registration doubtless has an impairing dimension on the right of labor to self-
organization. For fraud and misrepresentation to be grounds for cancellation of
union registration under the Labor Code, the nature of the fraud and
misrepresentation must be grave and compelling enough to vitiate the consent of a
majority of union members. Mariwasa Siam Ceramics, Inc. vs. The Secretary of the
Department of Labor and Employment, et al., G.R. No. 183317, December 21, 2009.

Union; membership requirement. While it is true that the withdrawal of support may
be considered as a resignation from the union, the fact remains that at the time of
the union’s application for registration, the affiants were members of the union and
they comprised more than the required 20% membership for purposes of
registration as a labor union. Article 234 of the Labor Code merely requires a 20%
minimum membership during the application for union registration. It does not
mandate that a union must maintain the 20% minimum membership requirement
all throughout its existence. Mariwasa Siam Ceramics, Inc. vs. The Secretary of the
Department of Labor and Employment, et al., G.R. No. 183317, December 21, 2009.

Labor Procedure

Appeal; appeal bond a jurisdictional requirement. The Court has always stressed
that Article 223, which prescribes the appeal bond requirement, is a rule of
jurisdiction and not of procedure. There is little leeway for condoning a liberal
interpretation thereof, and certainly none premised on the ground that its
requirements are mere technicalities. It must be emphasized that there is no
inherent right to an appeal in a labor case, as it arises solely from grant of statute,
namely, the Labor Code.

For the same reason, the Court has repeatedly emphasized that the requirement for
posting the surety bond is not merely procedural but jurisdictional and cannot be
trifled with. Non-compliance with such legal requirements is fatal and has the effect
of rendering the judgment final and executory. Hilario S. Ramirez vs. Hon. Court of
Appeals, et al., G.R. No. 182626, December 4, 2009.

Appeal; appeal bond reduction. It is daylight-clear from the foregoing that while the
bond may be reduced upon motion by the employer, this is subject to the conditions
that (1) the motion to reduce the bond shall be based on meritorious grounds; and
(2) a reasonable amount in relation to the monetary award is posted by the
appellant; otherwise, the filing of the motion to reduce bond shall not stop the
running of the period to perfect an appeal. The qualification effectively requires that
unless the NLRC grants the reduction of the cash bond within the 10-day
reglementary period, the employer is still expected to post the cash or surety bond
securing the full amount within the said 10-day period. Hilario S. Ramirez vs. Hon.
Court of Appeals, et al., G.R. No. 182626, December 4, 2009.

Appeal; issues raised first time on appeal; exceptions. While it is a well-settled rule,
also applicable in labor cases, that issues not raised in proceedings below cannot be
raised for the first time on appeal, there are exceptions thereto, among which are,
for reasons of public policy or interest.

The NLRC did not err in considering the issue of the veracity of the confirmatory
tests even if the same was raised only in the employee’s Motion for Reconsideration
of the NLRC Decision, it being crucial in determining the validity of the employee’s
dismissal from service.

Technical rules of procedure are not strictly adhered to in labor cases. In the
interest of substantial justice, new or additional evidence may be introduced on
appeal before the NLRC. Such move is proper, provided due process is observed, as
was the case here, by giving the opposing party sufficient opportunity to meet and
rebut the new or additional evidence introduced.

The Constitution no less directs the State to afford full protection to labor. To
achieve this goal, technical rules of procedure shall be liberally construed in favor of
the working class in accordance with the demands of substantial justice. Plantation
Bay Resort & Spa and Efren Belarmino vs. Romel S. Dubrico, et al., G.R. No. 182216,
December 4, 2009.

Appeal; perfection. Under the Rules, appeals involving monetary awards are
perfected only upon compliance with the following mandatory requisites, namely:
(1) payment of the appeal fees; (2) filing of the memorandum of appeal; and (3)
payment of the required cash or surety bond.

The posting of a bond is indispensable to the perfection of an appeal in cases

involving monetary awards from the decision of the Labor Arbiter. The intention of
the lawmakers to make the bond a mandatory requisite for the perfection of an
appeal by the employer is clearly expressed in the provision that an appeal by the
employer may be perfected “only upon the posting of a cash or surety bond.” The
word “only” in Articles 223 of the Labor Code makes it unmistakably plain that the
lawmakers intended the posting of a cash or surety bond by the employer to be the
essential and exclusive means by which an employer’s appeal may be perfected.
The word “may” refers to the perfection of an appeal as optional on the part of the
defeated party, but not to the compulsory posting of an appeal bond, if he desires
to appeal. The meaning and the intention of the legislature in enacting a statute
must be determined from the language employed; and where there is no ambiguity
in the words used, then there is no room for construction.

Clearly, the filing of the bond is not only mandatory but also a jurisdictional
requirement that must be complied with in order to confer jurisdiction upon the
NLRC. Non-compliance with the requirement renders the decision of the Labor
Arbiter final and executory. This requirement is intended to assure the workers that
if they prevail in the case, they will receive the money judgment in their favor upon
the dismissal of the employer’s appeal. Hilario S. Ramirez vs. Hon. Court of Appeals,
et al., G.R. No. 182626, December 4, 2009.

Illegal dismissal and rehabilitation proceedings. The term “claim,” as contemplated

in Section 6 (c), refers to debts or demands of a pecuniary nature. It is the assertion
of rights for the payment of money. Here, petitioners have pecuniary claims—the
payment of separation pay and moral and exemplary damages.

In Rubberworld (Phils.), Inc. v. NLRC [365 Phil. 273 (1999)], we held that a labor
claim is a “claim” within the contemplation of PD 902-A, as amended. This is
consistent with the Interim Rules of Procedure on Corporate Rehabilitation which
came out in 2000. Thus, labor claims are included among the actions suspended
upon the placing under rehabilitation of employer-corporations.

The suspensive effect of the stay order is not time-bound. As we held

in Rubberworld, it continues to be in effect as long as reasonably necessary to
accomplish its purpose. Gina M. Tiangco and Salvacion Jenny Manego vs. Uniwide
Sales Warehouse Club, Inc. and Jimmy Gow, G.R. No. 168697, December 14, 2009.

NCMB appeal. Rule 43 of the Rules of Court under which petitioners filed their
petition before the Court of Appeals applies to awards, judgments, final orders or
resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-
judicial functions. Given NCMB’s functions, it cannot be considered a quasi-judicial
agency. Hence, its decisions or that of its authorized officer cannot be appealed
either through a petition for review under Rule 43 or under Rule 65 of the Revised
Rules of Court. Juanito Tabigue, et al. vs. International Copra Export Corporation
(INTERCO), G.R. No. 183335, December 23, 2009.

Strikes and lockouts; assumption and certification order; mandatory ands

immediately executory. Articles 263 (g) and 264 of the Labor Code have been
enacted pursuant to the police power of the State. The grant of plenary powers to
the Secretary of Labor makes it incumbent upon him to bring about soonest, a fair
and just solution to the differences between theramiemployer and the employees,
so that the damage such labor dispute might cause upon the national interest may
be minimized as much as possible, if not totally averted, by avoiding stoppage of
work or any lag in the activities of the industry or the possibility of those
contingencies that might cause detriment to the national interest.

In order to effectively achieve such end, the assumption or certification order shall
have the effect of automatically enjoining the intended or impending strike or
lockout. Moreover, if one has already taken place, all striking workers 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.

Assumption and certification orders are executory in character and are to be strictly
complied with by the parties, even during the pendency of any petition questioning
their validity. Regardless therefore of its motives, or of the validity of its claims, YSS
Laboratories must readmit all striking employees and give them back their
respective jobs. Accepting back the workers in this case is not a matter of option,
but of obligation mandated by law for YSS Laboratories to faithfully comply with. Its
compulsory character is mandated, not to cater to a narrow segment of society, or
to favor labor at the expense of management, but to serve the greater interest of
society by maintaining the economic equilibrium.

Certainly, the determination of who among the strikers could be admitted back to
work cannot be made to depend upon the discretion of employer, lest the
certification or assumption-of-jurisdiction orders are stripped of their coercive power
that is necessary for attaining their laudable objective. The return-to-work order
does not interfere with the management’s prerogative, but merely regulates it
when, in the exercise of such right, national interests will be affected. The rights
granted by the Constitution are not absolute. They are still subject to control and
limitation to ensure that they are not exercised arbitrarily. The interests of both the
employers and employees are intended to be protected and not one of them is
given undue preference. YSS Employees Union-Philippine Transport and General
Organization vs. YSS Laboratories, Inc., G.R. No. 155125, December 4, 2009.

NOVEMBER 2009

Collective bargaining agreement; exclusive bargaining status. While the parties may
agree to extend the CBA’s original five-year term together with all other CBA
provisions, any such amendment or term in excess of five years will not carry with it
a change in the union’s exclusive collective bargaining status. By express provision
of the above-quoted Article 253-A, the exclusive bargaining status cannot go
beyond five years and the representation status is a legal matter not for the
workplace parties to agree upon. In other words, despite an agreement for a CBA
with a life of more than five years, either as an original provision or by amendment,
the bargaining union’s exclusive bargaining status is effective only for five years
and can be challenged within sixty (60) days prior to the expiration of the CBA’s first
five years.

In the present case, the CBA was originally signed for a period of five years, i.e.,
from February 1, 1998 to January 30, 2003, with a provision for the renegotiation of
the CBA’s other provisions at the end of the 3rd year of the five-year CBA term.
Thus, prior to January 30, 2001 the workplace parties sat down for renegotiation but
instead of confining themselves to the economic and non-economic CBA provisions,
also extended the life of the CBA for another four months, i.e., from the original
expiry date on January 30, 2003 to May 30, 2003.

As discussed above, this negotiated extension of the CBA term has no legal effect
on the FVCLU-PTGWO’s exclusive bargaining representation status which remained
effective only for five years ending on the original expiry date of January 30, 2003.
Thus, sixty days prior to this date, or starting December 2, 2002, SANAMA-SIGLO
could properly file a petition for certification election. Its petition, filed on January
21, 2003 or nine (9) days before the expiration of the CBA and of FVCLU-PTGWO’s
exclusive bargaining status, was seasonably filed.

We thus find no error in the appellate court’s ruling reinstating the DOLE order for
the conduct of a certification election. FVC Labor Union-Philippine Transport and
General Workers Organization (FVCLU-PTGWO) Vs. Sama-samang Nagkakaisang
Manggagawa sa FVC-Solidarity of Independet and General Labor Organization
(SANAMA-FVC-SIGLO), G.R. No. 176249, November 27, 2009.

Dismissal; attorney’s fees. In San Miguel Corporation v. Aballa, thr Court held that in
actions for recovery of wages or where an employee was forced to litigate and thus
incur expenses to protect his rights and interests, a maximum of 10% of the total
monetary award by way of attorney’s fees is justifiable under Article 111 of the
Labor Code; Section 8, Rule VIII of Book III of the Omnibus Rules Implementing the
Labor Code; and paragraph 7, Article 2208 of the Civil Code. The award of
attorney’s fees is proper and there need not be any showing that the employer
acted maliciously or in bad faith when it withheld the wages. There need only be a
showing that the lawful wages were not paid accordingly. Philippine Long Distance
Telephone Company vs. Inocencio B. Berbano, Jr., G.R. No. 165199, November 27,
2009.

SEPTEMBER 2009

Dismissal; abandonment. Abandonment is a form of neglect of duty, one of the just

causes for an employer to terminate an employee. It is a hornbook precept that in
illegal dismissal cases, the employer bears the burden of proof. For a valid
termination of employment on the ground of abandonment, Lucinario must prove,
by substantial evidence, the concurrence of petitioner’s failure to report for work for
no valid reason and his categorical intention to discontinue employment.

Lucinario, however, failed to establish any overt act on the part of petitioner to
show his intention to abandon employment. Petitioner, after being informed of his
alleged shortages in collections and despite his relegation to that of company
custodian, still reported for work. He later applied for a 4-day leave of absence. On
his return, he discovered that his name was erased from the logbook, was refused
entry into the company premises, and learned that his application for a 4-day leave
was not approved. He thereupon exerted efforts to communicate with Lucinario on
the status of his employment, but to no avail. These circumstances do not indicate
abandonment.

That petitioner immediately filed the illegal dismissal complaint with prayer for
reinstatement should dissipate any doubts that he wanted to return to work.

What thus surfaces is that petitioner was constructively dismissed. No actual

dismissal might have occurred in the sense that petitioner was not served with a
notice of termination, but there was constructive dismissal, petitioner having been
placed in a position where continued employment was rendered impossible and
unreasonable by the circumstances indicated above. Odilon L. Martinez vs. B&B
Fish Broker and/or Norberto M. Lucinario, G.R. No. 179985, September 18, 2009.

Dismissal; burden of proof. While the employer bears the burden in illegal
dismissal cases to prove that the termination was for valid or authorized cause, the
employee must first establish by substantial evidence the fact of dismissal from
service. This petitioner failed to discharge. He, in fact, failed to refute respondent’s
claim that it sent him a Violation Memorandum, which was duly received by him on
April 15, 2003, and a subsequent Memorandum via registered mail, requiring him to
explain his habitual tardiness on the therein indicated dates but that he failed to
comply therewith.

Constructive dismissal contemplates, among other things, quitting because

continued employment is rendered impossible, unreasonable or unlikely, or a
demotion in rank or a diminution of pay. It clearly exists when an act of clear
discrimination, insensibility or disdain by an employer becomes unbearable to the
employee, leaving him with no option but to forego his continued employment. Not
any of these circumstances exists to call for a ruling that petitioner was
constructively dismissed. Romero Montederamos vs. Tri-Union International
Corporation, G.R. No. 1767000, September 4, 2009.

Dismissal; burden of proof. It is well-settled that in termination cases, the burden of

proof rests upon the employer to show that the dismissal was for a just and valid
cause and failure to discharge the same would mean that the dismissal is not
justified and therefore illegal. Hence, in arguing that Sabulao abandoned his work, it
is incumbent upon the petitioners to prove: (1) that the employee failed to report
for work or had been absent without valid or justifiable reason; and (2) that there
must have been a clear intention to sever the employer-employee relationship as
manifested by some overt acts. Clearly, jurisprudence dictates that the burden of
proof to show that there was unjustified refusal to go back to work rests on the
employer.

The NLRC, as affirmed by the Court of Appeals, correctly found that petitioners
failed to substantiate its claim that Sabulao abandoned his work. No evidence was
presented to prove that Sabulao clearly intended to sever the employer-employee
relationship as manifested by some overt acts. As regards petitioners’ allegation
that Sabulao is a field personnel and therefore not entitled to the money claims
awarded by the NLRC, suffice it to state that the issue was raised only before the
Court of Appeals in contravention to the rule that questions not raised before the
tribunals a quo cannot be raised for the first time on appeal. As such, it deserves no
consideration by this Court. Tacloban Far East Marketing Corporation, et al. vs. The
Court of Appeals, et al., G.R. No. 182320, September 11, 2009.

Dismissal; due process. The essence of due process is simply an opportunity to be

heard or, as applied to administrative proceedings, an opportunity to explain one’s
side or an opportunity to seek a reconsideration of the action or ruling complained
of. What the law prohibits is absolute absence of the opportunity to be heard,
hence, a party cannot feign denial of due process where he had been afforded the
opportunity to present his side. A formal or trial type hearing is not at all times and
in all instances essential to due process, the requirements of which are satisfied
where the parties are afforded fair and reasonable opportunity to explain their side
of the controversy.

In the present case, petitioners were, among other things, given several written
invitations to submit themselves to PLDT’s Investigation Unit to explain their side,
but they failed to heed them. A hearing, which petitioners attended along with their
union MKP representatives, was conducted on June 25, 2001 during which the
principal witnesses to the incident were presented. Petitioners were thus afforded
the opportunity to confront those witnesses and present evidence in their behalf,
but they failed to do so. Rolando Placido and Edgardo Caragay vs. National Labor
Relations Commission and Philippine Long Distance Telephone Company,
Incorporated, G.R. No. 180888, September 18, 2009.

Dismissal; misconduct. By sleeping on the job and leaving his work area without
prior authorization, Tomada did not merely disregard company rules. Tomada, in
effect, issued an open invitation for others to violate those same company rules.
Indeed, considering the presence of trainees in the building
and Tomada’s acts, Tomada failed to live up to his company’s reasonable
expectations. Tomada’s offenses cannot be excused upon a plea of being a “first
offense,” or have not resulted in prejudice to the company in any way. No employer
may rationally be expected to continue in employment a person whose lack of
morals, respect and loyalty to his employer, regard for his employer’s rules, and
appreciation of the dignity and responsibility of his office, has so plainly and
completely been bared.

Misconduct is improper or wrong conduct. It is the transgression of some

established and definite rule of action, a forbidden act, a dereliction of duty, willful
in character, and implies wrongful intent and not mere error of judgment. The
misconduct to be serious must be of grave and aggravated character and not
merely trivial or unimportant. Such misconduct, however serious, must nevertheless
be in connection with the employee’s work to constitute just cause for his
separation. Thus, for misconduct or improper behavior to be a just cause for
dismissal, (1) it must be serious; (2) it must relate to the performance of the
employee’s duties; and (3) it must show that the employee has become unfit to
continue working for the employer. Indeed, an employer may not be compelled to
continue to employ such person whose continuance in the service would be patently
inimical to his employer’s interest. Eduardo M. Tomada, Sr. vs. RFM Corporation-
Bakery Flour Division, et al., G.R. No. 163270, September 11, 2009.

Dismissal; redundancy. The separation of the petitioner by reason of redundancy

was supported by the evidence on record. She was separated from the service after
the respondent’s reorganization where her position as Administrator was declared
redundant. She was served notice within the statutory period of thirty (30) days and
so was the DOLE-NCR. The petitioner was assured of all the benefits under the law.

The petitioner imputes bad faith and malice on the respondent in declaring her
position as Administrator redundant, but failed to present convincing proof that the
respondent abused its prerogative in terminating her employment or that it was
motivated by ill-will in doing so. It was a business decision arrived at in the face of
financial losses being suffered by the company at the time. Miriam B. Elleccion vda.
De Lecciones vs. National Labor Relations Commission, et al., G.R. No. 184735,
September 17, 2009.

Dismissal; retrenchment. The burden of proving the validity of retrenchment is on

the petitioner. Evidence does not sufficiently establish that petitioner had incurred
losses that would justify retrenchment to prevent further losses. The Comparative
Income Statement for the year 1996 and for the months of February to June 1997
which petitioner submitted did not conclusively show that petitioner had suffered
financial losses. In fact, records show that from January to July 1997, petitioner hired
a total of 114 new employees assigned in the petitioner’s stores located in the
different places of the country. Emcor, Incorporated vs. Ma. Lourdes D. Sienes, G.R.
No. 152101, September 8, 2009.

Dismissal; retrenchment. Retrenchment to avoid or minimize business losses is a

justified ground to dismiss employees under Article 283 of the Labor Code. The
employer, however, bears the burden to prove such ground with clear and
satisfactory evidence, failing which the dismissal on such ground is unjustified. Bio
Quest Marketing Inc. and/or Jose L. Co vs. Edmund Rey, G.R. No. 181503,
September 18, 2009.

Employee benefits; retirement. It is settled that entitlement of employees to

retirement benefits must specifically be granted under existing laws, a collective
bargaining agreement or employment contract, or an established employer policy.
No law or collective bargaining agreement or other applicable contract, or an
established company policy was existing during respondents’ employment entitling
them to the P200,000 lump-sum retirement pay. Petitioner was not thus obliged to
grant them such pay. Kimberly-Clark Philippines, Inc. vs. Nora Dimayuga, et al. G.R.
No. 177705, September 18, 2009.

Employee benefits; suicide. The general rule is that the employer is liable to pay the
heirs of the deceased seafarer for death benefits once it is established that he died
during the effectivity of his employment contract. However, the employer may be
exempted from liability if he can successfully prove that the seafarer’s death was
caused by an injury directly attributable to his deliberate or willful act. In sum,
respondents’ entitlement to any death benefits depends on whether the evidence of
the petitioners suffices to prove that the deceased committed suicide; the burden of
proof rests on his employer. Great Southern Maritime Services Corp., et al. vs.
Leonila Surigao, et al., G.R. No. 183646, September 18, 2009.

Employer-employee relationship; existence. The Contract between the Cooperative

and DFI, far from being a job contracting arrangement, is in essence a business
partnership that partakes of the nature of a joint venture. The rules on job
contracting are, therefore, inapposite. The Court may not alter the intention of the
contracting parties as gleaned from their stipulations without violating the
autonomy of contracts principle under Article 1306 of the Civil Code which gives the
contracting parties the utmost liberality and freedom to establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good custom, public order or public policy.

Petitioners’ claim of employment relationship with the Cooperative’s herein co-

respondents must be assessed on the basis of four standards, viz: (a) the manner of
their selection and engagement; (b) the mode of payment of their wages; (c) the
presence or absence of the power of dismissal; and (d) the presence or absence of
control over their conduct. Most determinative among these factors is the so-called
“control test.”

There is nothing in the records which indicates the presence of any of the foregoing
elements of an employer-employee relationship.

There being no employer-employee relationship between petitioners and

the Cooperative’s co-respondents, the latter are not solidarily liable with the
Cooperative for petitioners’ illegal dismissal and money claims.
Oldarico S. Traveño, et al. vs. Bobongon Banana Growers Multi-Purpose
Cooperative, et al., G.R. No. 164205, September 3, 2009.

Resignation. Resignation as “the voluntary act of employees who are compelled by

personal reasons to disassociate themselves from their employment. It must be
done with the intention of relinquishing an office, accompanied by the act of
abandonment.” In this case, the evidence on record suggests that respondent did
not voluntarily resign. The more logical conclusion, based on the evidence, is that
respondent was then being forced or pressured to resign, which is tantamount to
illegal dismissal. Casa Cebuana Incoporada, et al. vs. Ireneo P. Leuterio, G.R. No.
176040, September 4, 2009.

Retirement. The line between voluntary and involuntary retirement is thin but it is
one which this Court has drawn. Voluntary retirement cuts employment ties leaving
no residual employer liability; involuntary retirement amounts to a discharge,
rendering the employer liable for termination without cause. The employee’s intent
is the focal point of analysis. In determining such intent, the fairness of the process
governing the retirement decision, the payment of stipulated benefits, and the
absence of badges of intimidation or coercion are relevant parameters.

Nothing in the records offends any of these criteria. Arsenio F. Quevedo, et al. vs.
Benguet Electric Cooperative Incorporated, et al., G.R. No. 168927, September 11,
2009.

Waiver; binding effect. Petitioners bound themselves, in individually signed

contracts, to “forever release, waive and quitclaim all causes of action or claims
arising from or as a consequence” of their early retirement. Petitioners concede that
this blanket stipulation bars this suit. However, they seek to avoid compliance by
again pleading vitiated consent. Although contracts executed in the context of
employment are imbued with public interest, triggering closer scrutiny, they remain
contracts binding the parties to their terms.

To excuse petitioners from complying with the terms of their waivers, they must
locate their case within any of three narrow grounds: (1) the employer used fraud or
deceit in obtaining the waivers; (2) the consideration the employer paid is incredible
and unreasonable; or (3) the terms of the waiver are contrary to law, public order,
public policy, morals or good customs or prejudicial to a third person with a right
recognized by law. The preceding discussion on the voluntariness of petitioners’
retirement from service effectively removes these grounds beyond petitioners’
argumentative reach. Accordingly, petitioners, by the terms of their waivers, are
barred from filing this suit. Arsenio F. Quevedo, et al. vs. Benguet Electric
Cooperative Incorporated, et al., G.R. No. 168927, September 11, 2009.

Waiver; binding effect. While quitclaims executed by employees are commonly

frowned upon as being contrary to public policy and are ineffective to bar claims for
the full measure of their legal rights, 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. In the case at bar, Nora and Rosemarie are
Accounting graduates. They have not alleged having been compelled to sign the
quitclaims, nor that the considerations thereof (P1,024,113.73 for Nora and
P682,721.24 for Rosemarie) are unconscionable. Kimberly-Clark Philippines, Inc.
vs. Nora Dimayuga, et al. G.R. No. 177705, September 18, 2009

Waiver; union members. Going now to the question of whether respondent’s

members’ individual acceptance of the award and the resulting payments made by
petitioner operate as a ratification of the DOLE Secretary’s award which renders CA-
G.R. SP No. 72965 moot, we find that such do not operate as a ratification of the
DOLE Secretary’s award; nor a waiver of their right to receive further benefits, or
what they may be entitled to under the law. The appellate court correctly ruled that
the respondent’s members were merely constrained to accept payment at the time.
Christmas was then just around the corner, and the union members were in no
position to resist the temptation to accept much-needed cash for use during the
most auspicious occasion of the year. Time and again, we have held that
necessitous men are not, truly speaking, free men; but to answer a present
emergency, will submit to any terms that the crafty may impose upon them.

Besides, as individual components of a union possessed of a distinct and separate

corporate personality, respondent’s members should realize that in joining the
organization, they have surrendered a portion of their individual freedom for the
benefit of all the other members; they submit to the will of the majority of the
members in order that they may derive the advantages to be gained from the
concerted action of all. Since the will of the members is personified by its board of
directors or trustees, the decisions it makes should accordingly bind them.
Precisely, a labor union exists in whole or in part for the purpose of collective
bargaining or of dealing with employers concerning terms and conditions of
employment. What the individual employee may not do alone, as for example
obtain more favorable terms and conditions of work, the labor organization, through
persuasive and coercive power gained as a group, can accomplish
better. Univeristy of Santo Tomas vs. Samahang Manggagawa ng UST (SM-UST),
G.R. No. 169940, September 18, 2009.

AUGUST 2009

Labor Law

Benefits; backwages. The issue on the proper computation

of Mutuc’s backwages has been rendered moot by our decision that Mutuc was
validly dismissed. Backwages is a relief given to an illegally dismissed employee.
Since Mutuc’s dismissal is for an authorized cause, she is not entitled to backwages.
Lowe, Inc., et al. vs. Court of Appeals and Irma Mutuc, G.R. Nos. 164813 & G.R. No.
174590, August 14, 2009.

Benefits; service charge. Since Dusit Hotel is explicitly mandated by the Article 96
of the Labor Code to pay its employees and management their respective shares in
the service charges collected, the hotel cannot claim that payment thereof to its 82
employees constitute substantial compliance with the payment
of ECOLA under WO No. 9. Undoubtedly, the hotel employees’ right to their shares
in the service charges collected by Dusit Hotel is distinct and separate from their
right to ECOLA; gratification by the hotel of one does not result in the satisfaction of
the other. Philippine Hoteliers, Inc./Dusit Hotel Nikko-Manila vs. National Union of
Workers in Hotel, Restaurant, and Allied Industries (NUWHARAIN-APL-
IUF) Dusit Hotel Nikko Chapter, G.R. No. 181972, August 25, 2009.

Dismissal; illegal strike. A perusal of the Labor Arbiter’s Decision, which was
affirmed in toto by the NLRC, shows that on account of the staging of the illegal
strike, individual respondents were all deemed to have lost their employment,
without distinction as to their respective participation.

Of the participants in the illegal strike, whether they knowingly participated in the
illegal strike in the case of union officers or knowingly participated in the
commission of violent acts during the illegal strike in the case of union members,
the records do not indicate. While respondent Julius Vargas was identified to be a
union officer, there is no indication if he knowingly participated in the illegal strike.
The Court not being a trier of facts, the remand of the case to the NLRC is in order
only for the purpose of determining the status in the Union of individual
respondents and their respective liability, if any. A. Soriano Aviation vs. Employees
Association of A. Soriano Aviation, et al., G.R. No. 166879, August 14, 2009.

Dismissal; misconduct. In its 14 February 2000 decision, PNB’s Administrative

Adjudication Panel found Maralit guilty of serious misconduct, gross violation of
bank rules and regulations, and conduct prejudicial to the best interest of the
bank. Maralit violated bank policies which resulted in the return of unfunded checks
amounting to P54,950,000. Accordingly, PNB dismissed Maralit from the service
with forfeiture of her retirement benefits effective at the close of business hours on
31 December 1998.

PNB may rightfully terminate Maralit’s services for a just cause, including serious
misconduct. Serious misconduct is improper conduct, a transgression of some
established and definite rule of action, a forbidden act, or a dereliction of duty.
Having been dismissed for a just cause, Maralit is not entitled to her retirement
benefits. Ester B. Maralit vs. Philippine National Bank, G.R. No. 163788, August 24,
2009.

Dismissal; negligence. Gross negligence connotes want or absence of or failure to

exercise even slight care or diligence, or the total absence of care. It evinces a
thoughtless disregard of consequences without exerting any effort to avoid them.
To warrant removal from service, the negligence should not merely be gross, but
also habitual. A single or isolated act of negligence does not constitute a just cause
for the dismissal of the employee.

In JGB and Associates, Inc. v. National Labor Relations Commission, the Court
further declared that gross negligence connotes want of care in the performance of
one’s duties. Habitual neglect implies repeated failure to perform one’s duties for a
period of time, depending upon the circumstances. Fraud and willful neglect of
duties imply bad faith of the employee in failing to perform his job, to the detriment
of the employer and the latter’s business. Chona Estacio and
Leopoldo Manliclic vs. Pampanga I, Electric Cooperative, Inc.
and Loliano E. Allas, G.R. No. 183196. August 19, 2009

Dismissal; negligence. Under Article 282 (b) of the Labor Code, negligence must be
both gross and habitual to justify the dismissal of an employee. Gross negligence is
characterized by want of even slight care, acting or omitting to act in a situation
where there is a duty to act, not inadvertently but willfully and intentionally with a
conscious indifference to consequences insofar as other persons may be affected.

In the present case, petitioner, as respondent’s Accounting Manager, failed to

discharge her important duty of remitting SSS/PhilHealth contributions not once but
quadruple times, resulting in respondent’s incurring of penalties totaling
P18,580.41, not to mention the employees/members’ contributions
being unupdated. Eden Llamas vs. Ocean Gateway Maritime and Management,
Inc., G.R. No. 179293, August 14, 2009.

Dismissal; redundancy. Redundancy exists when the service of an employee is in

excess of what is reasonably demanded by the actual requirements of the business.
A redundant position is one rendered superfluous by any number of factors, such
as overhiring of workers, decreased volume of business, dropping of a particular
product line previously manufactured by the company or phasing out of a service
activity formerly undertaken by the enterprise.

For a valid implementation of a redundancy program, the employer must comply

with the following requisites: (1) written notice served on both the employee and
the DOLE at least one month prior to the intended date of termination; (2) payment
of separation pay equivalent to at least one month pay or at least one month pay
for every year of service, whichever is higher; (3) good faith in abolishing the
redundant position; and (4) fair and reasonable criteria in ascertaining what
positions are to be declared redundant. Lowe, Inc., et al. vs. Court of Appeals and
Irma Mutuc, G.R. Nos. 164813 & G.R. No. 174590, August 14, 2009.

Dismissal; redundancy. We agree with the Labor Arbiter that Lowe employed fair
and reasonable criteria in declaring Mutuc’s position redundant. Mutuc, who was
hired only on 23 June 2000, did not deny that she was the most junior of all
the executives of Lowe. Mutuc also did not present contrary evidence to disprove
that she was the least efficient and least competent among all the Creative
Directors.

The determination of the continuing necessity of a particular officer or position in a

business corporation is a management prerogative, and the courts will not interfere
unless arbitrary or malicious action on the part of management is shown. It is also
within the exclusive prerogative of management to determine the qualification and
fitness of an employee for hiring and firing, promotion or reassignment. Indeed, an
employer has no legal obligation to keep more employees than are necessary for
the operation of its business. Lowe, Inc., et al. vs. Court of Appeals and
Irma Mutuc, G.R. Nos. 164813 & G.R. No. 174590, August 14, 2009.

Dismissal; resignation. In termination cases, it is incumbent upon the employer to

prove either the non-existence or the validity of dismissal. Inasmuch as respondents
alleged petitioner’s resignation as the cause of his separation from work,
respondents had the burden to prove the same. The case of the employer must
stand or fall on its own merits and not on the weakness of the employee’s defense.

Resignation is the voluntary act of an employee who is in a situation where one

believes that personal reasons cannot be sacrificed in favor of the exigency of the
service, and one who has no other choice but to dissociate oneself from
employment. It is a formal pronouncement or relinquishment of an office, with the
intention of relinquishing the office accompanied by the act of relinquishment. As
the intent to relinquish must concur with the overt act of relinquishment, the acts of
the employee before and after the alleged resignation must be considered in
determining whether, in fact, he intended to sever his employment.

In this case, we find no overt act on the part of petitioner that he was ready to sever
his employment ties. Baltazar L. Payno vs. Orizon Trading Corp./ Orata Trading
and Flordeliza Legaspi, G.R. No. 175345, August 19, 2009.

Dismissal; transfer. ATI’s transfer of Bismark IV’s base from Manila to Bataan was,
contrary to Aguanza’s assertions, a valid exercise of management prerogative. The
transfer of employees has been traditionally among the acts identified as a
management prerogative subject only to limitations found in law, collective
bargaining agreement, and general principles of fair play and justice. Even as the
law is solicitous of the welfare of employees, it must also protect the right of an
employer to exercise what are clearly management prerogatives. The free will of
management to conduct its own business affairs to achieve its purpose cannot be
denied.

On the other hand, the transfer of an employee may constitute constructive

dismissal “when continued employment is rendered impossible, unreasonable or
unlikely; when there is a demotion in rank and/or a diminution in pay; or when a
clear discrimination, insensibility or disdain by an employer becomes unbearable to
the employee.”

Aguanza’s continued employment was not impossible, unreasonable or unlikely;

neither was there a clear discrimination against him. Among the employees
assigned to Bismark IV, it was only Aguanza who did not report for work in
Bataan. Aguanza’s assertion that he was not allowed to “time in” in Manila should
be taken on its face: Aguanza reported for work in Manila, where he wanted to work,
and not in Bataan, where he was supposed to work. There was no demotion in
rank, as Aguanza would continue his work as Crane Operator. Furthermore,
despite Aguanza’s assertions, there was no diminution in
pay. Gualberto Aguanza vs. Asian Terminal, Inc., et al., G.R. No. 163505, August 14,
2009.

Jurisdiction; Secretary of Labor. In the case at bar, the Secretary of Labor correctly
assumed jurisdiction over the case as it does not come under the exception clause
in Art. 128(b) of the Labor Code. While petitioner Jethro appealed the inspection
results and there is a need to examine evidentiary matters to resolve the issues
raised, the payrolls presented by it were considered in the ordinary course of
inspection. While the employment records of the employees could not be expected
to be found in Yakult’s premises in Calamba, as Jethro’s offices are in Quezon City,
the records show that Jethro was given ample opportunity to present its payrolls
and other pertinent documents during the hearings and to rectify the violations
noted during the ocular inspection. It, however, failed to do so, more particularly to
submit competent proof that it was giving its security guards the wages and
benefits mandated by law.

Jethro’s failure to keep payrolls and daily time records in Yakult’s premises was not
the only labor standard violation found to have been committed by it; it likewise
failed to register as a service contractor with the DOLE, pursuant to Department
Order No. 18-02 and, as earlier stated, to pay the wages and benefits in accordance
with the rates prescribed by law. Jethro Intelligence & Security Corporation
and Yakult, Inc. vs.. The Hon. Secretary of Labor and Employment, et al., G.R. No.
172537, August 14, 2009.

Labor organization. Article 212(g) of the Labor Code defines a labor organization as
“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.” Upon compliance with all the documentary
requirements, the Regional Office or Bureau shall issue in favor of the applicant
labor organization a certificate indicating that it is included in the roster of
legitimate labor organizations. Any applicant labor organization 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. Sta.
Lucia East Commercial Corporation vs. Hon. Secretary of Labor and
Employment, et al., G.R. No. 162355, August 14, 2009.

Labor organization; bargaining unit. A bargaining unit is a “group of employees of a

given employer, comprised of all or less than all of the entire body of employees,
consistent with equity to the employer, indicated to be the best suited to serve the
reciprocal rights and duties of the parties under the collective bargaining provisions
of the law.” The fundamental factors in determining the appropriate collective
bargaining unit are: (1) the will of the employees (Globe Doctrine); (2) affinity and
unity of the employees’ interest, such as substantial similarity of work and duties, or
similarity of compensation and working conditions (Substantial Mutual Interests
Rule); (3) prior collective bargaining history; and (4) similarity of employment
status. Sta. Lucia East Commercial Corporation vs. Hon. Secretary of Labor and
Employment, et al., G.R. No. 162355, August 14, 2009.

Strike; illegal strike. It is hornbook principle that the exercise of the right of private
sector employees to strike is not absolute (see Section 3 of Article XIII of the
Constitution).

Indeed, even if the purpose of a strike is valid, the strike may still be held illegal
where the means employed are illegal. Thus, the employment of violence,
intimidation, restraint or coercion in carrying out concerted activities which are
injurious to the right to property renders a strike illegal. And so is picketing or the
obstruction to the free use of property or the comfortable enjoyment of life or
property, when accompanied by intimidation, threats, violence, and coercion as to
constitute nuisance.

Here, the Union members’ repeated name-calling, harassment and threats of bodily
harm directed against company officers and non-striking employees and, more
significantly, the putting up of placards, banners and streamers with vulgar
statements imputing criminal negligence to the company, which put to doubt
reliability of its operations, come within the purview of illegal acts under Art. 264 of
the Labor Code and jurisprudence. A. Soriano Aviation vs. Employees Association of
A. Soriano Aviation, et al., G.R. No. 166879, August 14, 2009.

JULY 2009

Labor Law

Dismissal; loss of confidence. Loss of confidence applies only to cases involving

employees who occupy positions of trust and confidence, or to those situations
where the employee is routinely charged with the care and custody of the
employer’s money or property. To be a valid ground for an employee’s dismissal,
loss of trust and confidence must be based on a willful breach. A breach is willful if it
is done intentionally, knowingly and purposely, without justifiable excuse.

In dismissing an employee on the ground of loss of confidence, it is sufficient that

the employer has a reasonable ground to believe, based on clearly established
facts, that the employee is responsible for the misconduct and the nature of his
participation renders him unworthy of the trust and confidence demanded by his
position. If the employer has ample reason to distrust the employee, the labor
tribunal cannot justly deny the former the authority to dismiss the latter. Renita Del
Rosario, et al. vs. Makati Cinema Square Corporation, G.R. No. 170014. July 3,
2009.

Dismissal; loss of confidence. To be a valid ground for dismissal, loss of trust and
confidence must be based on a willful breach of trust and founded on clearly
established facts. A breach is willful if it is done intentionally, knowingly and
purposely, without justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently. It must rest on substantial grounds and
not on the employer’s arbitrariness, whims, caprices or suspicion; otherwise, the
employee would eternally remain at the mercy of the employer. Such ground of
dismissal has never been intended to afford an occasion for abuse because of its
subjective nature. Davao Contractors Development Cooperative (DACODECO),
represented by Chairman of the Board Engr. L. Chavez vs. Marilyn A. Pasawa, G.R.
No. 172174, July 9, 2009.

Dismissal; probationary employee. Under Article 281 of the Labor Code, a

probationary employee can be legally dismissed either: (1) for a just cause; or (2)
when he fails to qualify as a regular employee in accordance with the reasonable
standards made known to him by the employer at the start of the employment.
Nonetheless, the power of the employer to terminate the services of an employee
on probation is not without limitations. First, this power must be exercised in
accordance with the specific requirements of the contract. Second, the
dissatisfaction on the part of the employer must be real and in good faith, not
feigned so as to circumvent the contract or the law. Third, there must be no
unlawful discrimination in the dismissal. In termination cases, the burden of proving
just or valid cause for dismissing an employee rests on the employer.

Here, petitioner did not present proof that respondent was duly notified, at the time
of her employment, of the reasonable standards she needed to comply with for her
continued employment. Davao Contractors Development Cooperative
(DACODECO), represented by Chairman of the Board Engr. L. Chavez vs. Marilyn
A. Pasawa, G.R. No. 172174, July 9, 2009.

Employee benefits; compensable illness. In any determination of compensability,

the nature and characteristics of the job are as important as raw medical findings
and a claimant’s personal and social history. This is a basic legal reality in workers’
compensation law.

What the law requires is a reasonable work connection and not direct causal
relation. Probability, not the ultimate degree of certainty, is the test of proof in
compensation proceedings. For, in interpreting and carrying out the provisions of
the Labor Code and its Implementing Rules and Regulations, the primordial and
paramount consideration is the employee’s welfare. To safeguard the worker’s
rights, any doubt on the proper interpretation and application must be resolved in
favor of labor. Government Service Insurance System vs. Salvador A. De Castro,
G.R. No. 185035, July 15, 2009.

Employee benefits; retirement. Retirement is the result of a bilateral act of the

parties, a voluntary agreement between the employer and the employee whereby
the latter, after reaching a certain age, agrees to sever his or her employment with
the former. Retirement is provided for under Article 287 of the Labor Code, as
amended by Republic Act No. 7641, or is determined by an existing agreement
between the employer and the employee.

In this case, respondent offered the Special Separation Incentive Program (SSIP) to
overhaul the bank structure and to allow it to effectively compete with local peer
and foreign banks. SSIP was not compulsory on employees. Employees who wished
to avail of the SSIP were required to accomplish a form for availment of separation
benefits under the SSIP and to submit the accomplished form to the Personnel
Administration and Industrial Relations Division (PAIRD) for approval.

Petitioner voluntarily availed of the SSIP. Marcelino A. Magdadaro vs. Philippine

National Bank, G.R. No. 166198, July 17, 2009.

Employee benefits; salary increase. It is a familiar and fundamental doctrine in

labor law that the collective bargaining agreement (CBA) is the law between the
parties and they are obliged to comply with its provisions. If the terms of a contract,
in this case the CBA, are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of their stipulations shall control.

A reading of the above-quoted provision of the CBA shows that the parties agreed
that 80% of the TIP or at the least the amount of P1,500 is to be allocated for
individual salary increases.

The CBA does not speak of any other benefits or increases which would be covered
by the employees’ share in the TIP, except salary increases. University of San
Agustin, Inc. vs. University of San Agustin Employees Union-FFW, G.R. No. 177594,
July 23, 2009.

Employee benefits; seamen. The terms and conditions of a seafarer’s employment

is governed by the provisions of the contract he signs at the time he is hired. But
unlike that of others, deemed written in the seafarer’s contract is a set of standard
provisions set and implemented by the POEA, called the Standard Terms and
Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going
Vessels, which are considered to be the minimum requirements acceptable to the
government for the employment of Filipino seafarers on board foreign ocean-going
vessels. Thus, the issue of whether petitioner Nisda can legally demand and claim
disability benefits from respondents Sea Serve and ADAMS for an illness suffered is
best addressed by the provisions of his POEA-SEC, which incorporated the Standard
Terms and Conditions Governing the Employment of Filipino Seafarers on Board
Ocean-Going Vessels. When petitioner Nisda was employed on 7 August 2001, it
was the 2000 Amended Standard Terms and Conditions Governing the Employment
of Filipino Seafarers on Board Ocean-Going Vessels (hereinafter referred to simply
as Amended Standard Terms and Conditions for brevity) that applied and were
deemed written in or appended to his POEA-SEC. Carlos N. Nisda vs. Sea Serve
Maritime Agency, et al., G.R. No. 179177, July 23, 2009.

Employee benefits; service award. Respondent’s service award under Article 87 of

the Saudi Labor Law has already been paid. The severance pay received by
respondent was his service award. LWV Construction Corporation vs. Marcelo
B. Dupo, G.R. No. 172342, July 13, 2009.
Employees; project employee. The principal test for determining whether a
particular employee is a project employee or a regular employee is whether the
project employee was assigned to carry out a specific project or undertaking, the
duration and scope of which were specified at the time the employee is engaged for
the project. “Project” may refer to a particular job or undertaking that is within the
regular or usual business of the employer, but which is distinct and separate and
identifiable as such from the undertakings of the company. Such job or undertaking
begins and ends at determined or determinable times.

Here, the specific projects for which respondent was hired and the periods of
employment were specified in his employment contracts. The services he rendered,
the duration and scope of each employment are clear indications that respondent
was hired as a project employee. Alcatel Philippines, Inc. vs. Rene R. Relos, G.R.
No. 164315, July 3, 2009.

Jurisdiction; Regional Director. Respondent contested the findings of the labor

inspector during and after the inspection and raised issues the resolution of which
necessitated the examination of evidentiary matters not verifiable in the normal
course of inspection. Hence, the Regional Director was divested of jurisdiction and
should have endorsed the case to the appropriate Arbitration Branch of the NLRC.
Considering, however, that an illegal dismissal case had been filed by petitioners
wherein the existence or absence of an employer-employee relationship was also
raised, the CA correctly ruled that such endorsement was no longer necessary.
Victor Meteoro, et al. vs. Creative Creatures, Inc., G.R. No. 171275. July 13, 2009

Labor claim; deed of release. 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. Furthermore, there is a gross disparity between the amount
actually received by petitioner as compared to the amount owing him as initially
computed by VA Calipay. The amount of the settlement is indubitably
unconscionable; hence, ineffective to bar petitioner from claiming the full measure
of his legal rights. In any event, the Supreme Court deemed it appropriate that the
amount he received as consideration for signing the quitclaim be deducted from his
monetary award. Rafael Rondina vs. Court of Appeals former special
19th Division, Unicraft Industries International Corp., Inc. Robert Dino, Cristina Dino,
Michael Lloyd Dino, Allan Dino and Mylene June Dino, G.R. No. 172212, July 9,
2009.

Labor claim; liability of corporate officers. To hold a director personally liable for the
debts of the corporation, and thus pierce the veil of corporate fiction, the bad faith
or wrongdoing of the director must be established clearly and convincingly. Bad
faith is never presumed. Bad faith does not connote bad judgment or negligence.
Bad faith imports a dishonest purpose. Bad faith means breach of a known duty
through some ill motive or interest. Bad faith partakes of the nature of fraud.
Rafael Rondina vs. Court of Appeals former special
19th Division, Unicraft Industries International Corp., Inc. Robert Dino, Cristina Dino,
Michael Lloyd Dino, Allan Dino and Mylene June Dino, G.R. No. 172212, July 9, 2009.

Strike; illegal strike. It is undisputed that the notice of strike was filed by the union
without attaching the counter-proposal of the company. This, according to
petitioners and the labor arbiter, made the ensuing strike of respondents illegal
because the notice of strike of the union was defective.

The Implementing Rules use the words “as far as practicable.” In this case,
attaching the counter-proposal of the company to the notice of strike of the union
was not practicable. It was absurd to expect the union to produce the company’s
counter-proposal which it did not have. One cannot give what one does not have.
Indeed, compliance with the requirement was impossible because no counter-
proposal existed at the time the union filed a notice of strike. The law does not
exact compliance with the impossible. Nemo tenetur ad impossibile.
Another error committed by the labor arbiter was his declaration that respondents,
as union officers, automatically severed their employment with the company due to
the alleged illegal strike. In the first place, there was no illegal strike. Moreover, it
is hornbook doctrine that a mere finding of the illegality of the strike should not be
automatically followed by the wholesale dismissal of the strikers from employment.
Club Filipino, Inc. and Atty. Roberto F. De Leon vs. Benjamin Bautista, et al., G.R.
No. 168406, July 13, 2009.

Union; check-off. Article 222(b) of the Labor Code, as amended, prohibits the
payment of attorney’s fees only when it is effected through forced contributions
from the employees from their own funds as distinguished from union funds. Hence,
the general rule is that attorney’s fees, negotiation fees, and other similar charges
may only be collected from union funds, not from the amounts that pertain to
individual union members. As an exception to the general rule, special assessments
or other extraordinary fees may be levied upon or checked off from any amount due
an employee for as long as there is proper authorization by the employee.

A check-off is a process or device whereby the employer, on agreement with the

Union, recognized as the proper bargaining representative, or on prior authorization
from the employees, deducts union dues or agency fees from the latter’s wages and
remits them directly to the Union. Its desirability in a labor organization is quite
evident. The Union is assured thereby of continuous funding. The system of check-
off is primarily for the benefit of the Union and, only indirectly, for the individual
employees.

Here, the requisites for a valid levy and check-off of special assessments, laid down
by Article 241(n) and (o), respectively, of the Labor Code, as amended, have not
been complied with in the case at bar. To recall, these requisites are: (1) an
authorization by a written resolution of the majority of all the union members at the
general membership meeting duly called for the purpose; (2) secretary’s record of
the minutes of the meeting; and (3) individual written authorization for check-off
duly signed by the employee concerned. Eduardo J. Mariño, Jr. et al. vs. Gil
Y. Gamilla, et al., G.R. No. 149763, July 7, 2009.

JUNE 2009

Labor Law

Diminution of benefits; company practice. To be considered a company practice,

the giving of the benefits should have been done over a long period of time, and
must be shown to have been consistent and deliberate. The test or rationale of this
rule on long practice requires an indubitable showing that the employer agreed to
continue giving the benefits knowing fully well that said employees are not covered
by the law requiring payment thereof.

With regard to the length of time the company practice should have been exercised
to constitute voluntary employer practice which cannot be unilaterally withdrawn by
the employer, jurisprudence has not laid down any hard and fast rule. In the case of
Davao Fruits Corporation v. Associated Labor Unions, the company practice of
including in the computation of the 13th-month pay the maternity leave pay and
cash equivalent of unused vacation and sick leave lasted for six (6) years. In
another case, Tiangco v. Leogardo, Jr., the employer carried on the practice of
giving a fixed monthly emergency allowance from November 1976 to February
1980, or three (3) years and four (4) months. While in Sevilla Trading v. Semana,
the employer kept the practice of including non-basic benefits such as paid leaves
for unused sick leave and vacation leave in the computation of their 13th-month
pay for at least two (2) years. In all these cases, the Supreme Court held that the
grant of these benefits has ripened into company practice or policy which cannot
be peremptorily withdrawn. The common denominator in these cases appears to be
the regularity and deliberateness of the grant of benefits over a significant period of
time. Metropolitan Bank and Trust Company vs. National Labor Relations
Commission, Felipe A. Patag and Bienvenido C. Flora, G.R. No. 152928, June 18,
2009.

Compensable illness. A government employee, who suffers complete and

permanent loss of sight in one eye, is entitled to income benefit from
the GSIS beginning the first month of said employee’s disability, but no longer than
the maximum period of 25 months. Government Service Insurance System vs.
Jaime K. Ibarra, G.R. No. 172925, June 18, 2009.

Compensable illness. Although the Court commiserates with petitioner’s sufferings,

the Court cannot close its eyes to the need to ensure that the workmen’s trust fund
is protected from depletion due to claims for illnesses which may not be truly work-
related. Rodolfo B. Arceño Vs. Government Service Insurance System, G.R. No.
162374, June 18, 2009.

Downsizing. Retrenchment is the reduction of work personnel usually due to poor

financial returns, aimed to cut down costs for operation particularly on salaries and
wages. Redundancy, on the other hand, exists where the number of employees is in
excess of what is reasonably demanded by the actual requirements of the
enterprise. Both are forms of downsizing and are often resorted to by the employer
during periods of business recession, industrial depression, or seasonal fluctuations,
and during lulls in production occasioned by lack of orders, shortage of materials,
conversion of the plant for a new production program, or introduction of new
methods or more efficient machinery or automation. Retrenchment and redundancy
are valid management prerogatives, provided they are done in good faith and the
employer faithfully complies with the substantive and procedural requirements laid
down by law and jurisprudence.

For a valid retrenchment, the following requisites must be complied with: (1)
the retrenchment is necessary to prevent losses and such losses are proven; (2)
written notice to the employees and to the DOLE at least one month prior to the
intended date of retrenchment; and (3) payment of separation pay equivalent to
one-month pay or at least one-half month pay for every year of service, whichever
is higher.

In case of redundancy, the employer must prove that: (1) a written notice was
served on both the employees and the DOLE at least one month prior to the
intended date of retrenchment; (2) separation pay equivalent to at least one month
pay or at least one month pay for every year of service, whichever is higher, has
been paid; (3) good faith in abolishing the redundant positions; and (4) adoption of
fair and reasonable criteria in ascertaining which positions are to be declared
redundant and accordingly abolished.

It is the employer who bears the onus of proving compliance with

these requirements, retrenchment and redundancy being in the nature of
affirmative defenses. Otherwise, the dismissal is not justified. Hotel Enterprises of
the Philippines, Inc., etc. vs. Samahan ng mga Manggagawa sa Hyatt-National Union
of Workers in the Hotel Restaurant, etc., G.R. No. 165756, June 5, 2009.

Employer-employee relationship. There existed no employer-

employee relationship between the parties. De Raedt is an independent contractor,
who was engaged by SGV to render services to SGV’s client TMI, and ultimately to
DA on the CECAP project, regarding matters in the field of her special knowledge
and training for a specific period of time. Unlike an ordinary employee,
De Raedt received retainer fees and benefits such as housing and subsistence
allowances and medical insurance. De Raedt’s services could be terminated on the
ground of end of contract between the DA and TMI, and not on grounds under labor
laws. Though the end of the contract between the DA and TMI was not the ground
for the withdrawal of De Raedt from the CECAP, De Raedt was disengaged from the
project upon the instruction of SGV’s client, TMI. Most important of all, SGV did not
exercise control over the means and methods by which De Raedt performed her
duties as Sociologist. SGV did impose rules on De Raedt, but these were necessary
to ensure SGV’s faithful compliance with the terms and conditions of the Sub-
Consultancy Agreement it entered into with TMI. Sycip, Gorres, Velayo, & Company
vs. Carol De Raedt, G.R. No. 161366, June 16, 2009.

Ground for dismissal; abandonment. The rule is that the burden of proof lies with
the employer to show that the dismissal was for a just cause. In the present case,
the petitioner claims that there was no illegal dismissal since the respondent
abandoned his job. The petitioner points out that it wrote the respondent
various memoranda requiring him to explain why he incurred absences without
leave, and requiring him as well to report for work; the respondent, however, never
bothered to reply in writing.

In evaluating a charge of abandonment, the jurisprudential rule is that

abandonment is a matter of intention that cannot be lightly presumed from
equivocal acts. To constitute abandonment, two elements must concur: (1) the
failure to report for work or absence without valid or justifiable reason, and (2) a
clear intent,manifested through overt acts, to sever the employer-
employee relationship. The employer bears the burden of showing a deliberate and
unjustified refusal by the employee to resume his employment without any
intention of returning. We agree with the CA that the petitioner failed to prove the
charge of abandonment. Pentagon Steel Corporation vs. Court of
Appeals, et al., G.R. No. 174141, June 26, 2009.

Ground for dismissal; gross negligence. Respondent’s actions, at their worse, reveal
his negligence, but said negligence can hardly be deemed gross and habitual, as to
constitute a just ground for his dismissal under Article 282(b) of the Labor Code.

Gross negligence under Article 282 of the Labor Code connotes want of care in the
performance of one’s duties, while habitual neglect implies repeated failure to
perform one’s duties for a period of time, depending upon the circumstances. Gross
negligence has been defined as the want or absence of even slight care or diligence
as to amount to a reckless disregard of the safety of person or property. It evinces a
thoughtless disregard of consequences without exerting any effort to avoid them.
To constitute a just cause for termination of employment, the neglect of duties must
not only be gross but habitual as well. The single or isolated act of negligence does
not constitute a just cause for the dismissal of the employee. AMA Computer
College-East Rizal, et al. vs. Allan Raymond R. Ignacio, G.R. No. 178520. June 23,
2009.

Ground for dismissal; gross negligence. Gross negligence is characterized by want

of even slight care, acting or omitting to act in a situation where there is a duty to
act, not inadvertently but willfully and intentionally with a conscious indifference to
consequences insofar as other persons may be affected.

Mateo was undisputedly negligent when he left the motorcycle along Burke Street
in Escolta, Manila without locking it despite clear, specific instructions to do so. His
argument that he stayed inside the LBC office for only three to five minutes was of
no moment. On the contrary, it only proved that he did not exercise even the
slightest degree of care during that very short time. Mateo deliberately did not heed
the employer’s very important precautionary measure to ensure the safety of
company property. Regardless of the reasons advanced, the exact evil sought to be
prevented by LBC (in repeatedly directing its customer associates to lock their
motorcycles) occurred, resulting in a substantial loss to LBC. LBC Express Metro
Manila, Inc. and Lorenzo A. Niño vs. James Mateo, G.R. No. 168215, June 9, 2009.

Ground for dismissal; lost of confidence. Recent decisions of this Court

have distinguished the treatment of managerial employees from that of the rank-
and-file personnel,insofar as the application of the doctrine of loss of trust and
confidence is concerned. Thus, with respect to rank-and-file personnel, loss of trust
and confidence, as ground for valid dismissal, requires proof of involvement in the
alleged events in question, and that mere uncorroborated assertions and
accusations by the employer will not be sufficient. But as regards a managerial
employee, the mere existence of a basis for believing that such employee has
breached the trust of his employer would suffice for his dismissal. Hence, in the
case of managerial employees, proof beyond reasonable doubt is not required. It is
sufficient that there is some basis for the employer’s loss of trust and confidence,
such as when the employer has reasonable ground to believe that the employee
concerned is responsible for the purported misconduct, and the nature of
his participation therein renders him unworthy of the trust and confidence
demanded of his position. Nonetheless, the evidence must be substantial and must
establish clearly and convincingly the facts on which the loss of confidence rests
and not on the employer’s arbitrariness, whims, and caprices or
suspicion. Triumph International (PHILS.), Inc., vs. Ramon L. Apostol, et al., G.R. No.
164423, June 16, 2009.

Ground for dismissal; loss of confidence. To be a valid ground for dismissal, loss of
trust and confidence must be based on a willful breach of trust and founded on
clearly established facts. A breach is willful if it is done intentionally, knowingly and
purposely, without justifiable excuse, as distinguished from an act done
carelessly, thoughtlessly, heedlessly or inadvertently. It must rest on substantial
grounds and not on the employer’s arbitrariness, whims, caprices or suspicion;
otherwise, the employee would eternally remain at the mercy of the employer.
Further, the act complained of must be work-related and must show that the
employee concerned is unfit to continue working for the employer. Sarabia Optical
and Vivian Sarabia-Orn vs. Jeanet B. Camacho, G.R. No. 155502, June 18, 2009.

Ground for dismissal; loss of confidence. Nissan failed to prove that Tagulao and
Serrano were responsible for the loss of two rolls of tint. The records of the case
show that there was a discrepancy between the dates of pick up and delivery as
alleged by Nissan and as alleged by Tagulao and Serrano. Even Catudio, Nissan’s
employee, stated that she changed the dates on the delivery receipt of the two rolls
of tint on the instruction of her boss.

Loss of trust and confidence, to be a valid ground for an employee’s dismissal, must
be based on a willful breach and founded on clearly established facts. The burden of
proof of dismissal rests entirely upon the employer. In the present case, Nissan
illegally dismissed Tagulao and Serrano because Nissan failed to prove
that Tagulao and Serrano were terminated for a valid cause. Tagulao and Serrano
are thus entitled to reinstatement and to receive backwages. Nissan
North Edsa Balintawak, Quezon City vs. Angelito Serrano, Jr. and
Edwin Tagulao, G.R. No. 162538, June 4, 2009

Ground for dismissal; loss of confidence. The first requisite for dismissal on the
ground of loss of trust and confidence is that the employee concerned must be one
holding a position of trust and confidence.

The second requisite of terminating an employee for loss of trust and confidence is
that there must be an act that would justify the loss of trust and confidence. To be a
valid cause for dismissal, the loss of confidence must be based on a willful breach of
trust and founded on clearly established facts.

We find that it was not established that respondent used her authority to influence
her subordinates to stage a “no work day”; and assuming that she performed this
act as alleged by petitioners, it does not satisfy the jurisprudential requirements for
valid termination due to loss of trust and confidence.

Loss of trust and confidence stems from a breach of trust founded on a dishonest,
deceitful or fraudulent act. In the case at bar, respondent did not commit any act
which was dishonest or deceitful. She did not use her authority as
the Administration Manager to misappropriate company property nor did she abuse
the trust reposed in her by petitioners with respect to her responsibility to
implement company rules. The most that can be attributed to respondent is that
she influenced a single subordinate, without exerting any force or making any
threats, not to report to work. This does not constitute dishonest or deceitful
conduct which would justify the conclusion of loss of trust and confidence.
M+W Zander Philippines, Inc. and Rolf Wiltschek vs. Trinidad M. Enriquez, G.R. No.
169173, June 5, 2009.

Grounds for dismissal; serious misconduct. Under the circumstances, our

conclusion can only be for Salon’s dismissal for two counts of valid causes – i.e., for
serious violation of TIP’s Memorandum No. P-66, for unauthorized selling of
examination papers, and for serious misconduct, for falsifying Manalo’s grade and
violating the grading rules under the Manual of Regulations for Private Schools.
Technological Institute of the Philippines Teachers and Employees Organization and
its member Magdalena T. Salon vs. the Honorable Court of Appeals, et al., G.R. No.
158703, June 26, 2009.

Ground for dismissal; willful disobedience. Willful disobedience of the employer’s

lawful orders, as a just cause for dismissal of an employee, requires the
concurrence of two (2) elements: (1) the employee’s assailed conduct must have
been willful, i.e., characterized by a wrongful and perverse attitude; and (2) the
order violated must have been reasonable, lawful, made known to the employee,
and must pertain to the duties which he had been engaged to discharge.

Gilles’ resignation from CBI and sudden departure from India was not approved by
SKI. When he asked the company’s permission to return to Manila, the management
instructed him to stay in India until a suitable replacement was found. He knew of
the critical stage of the Project due to the accelerated period of its completion.
Thus, when he left the Project, despite the clear and lawful instructions of the
management for him to stay, his act constituted willful disobedience and gross
neglect of duty under Article 282 of the Labor Code.

Gilles’ departure from India, despite the instruction of SKI for him to stay, was
impelled by the financial difficulties he encountered thereat. The money given to
him before he left for India was already spent. Rickie Sarque, the Chief Accountant
of SKI, admitted on the witness stand that Gilles was paid his salaries for the 3 ½
months when he was already back in Manila. Added to this were the problems he
encountered due to the acceleration of the job completion period, the obligations he
had to meet at home for his aged mother at that time, now deceased, and the
relatives who needed his financial support. Clearly, Gilles had a valid reason to
leave India.

SKI’s failure to pay Gilles’ salary on time was intolerable. For neglecting its duties as
an employer, SKI may, thus, be considered to have acted in bad faith. It may be
deemed as utter disregard by SKI of the welfare and well-being of its employee,
especially at a time when he was far away from home.

We, therefore, find that Gilles was constructively dismissed from

employment. Constructive dismissal exists when the employee involuntarily resigns
due to the harsh, hostile, and unfavorable conditions set by the employer. It arises
when there is clear discrimination, insensibility, or disdain by an employer and this
becomes unbearable to the employee.

Invariably, the law recognizes and resolves such a situation in favor of the
employees in order to protect their rights from the coercive acts of the employer.
Resignation contemplates a voluntary act; thus, an employee who is forced to
relinquish his position due to the employer’s unfair or unreasonable treatment is
deemed to have been illegally terminated or discharged. The test
of constructive dismissal is whether a reasonable person in the employee’s position
would have felt compelled to give up his position under the circumstances.
Bienvenido C. Gilles vs. Court of Appeals, Schema Konsult and
Edgardo Abores, G.R. No. 149273, June 5, 2009.
Illegal dismissal; attorney’s fees. aAtorney’s fees may be awarded only when the
employee is illegally dismissed in bad faith and is compelled to litigate or incur
expenses to protect his rights by reason of the unjustified acts of his employer. In
the case at bar, respondent’s unjustified and unwarranted dismissal prompted her
to engage the professional services of a counsel and she is thus entitled to an
award of attorney’s fees. M+W Zander Philippines, Inc. and Rolf Wiltschek vs.
Trinidad M. Enriquez, G.R. No. 169173, June 5, 2009.

Illegal dismissal; moral damages. There is sufficient basis to award moral damages
and attorney’s fees to respondent. We have consistently ruled that in illegal
dismissal cases, moral damages are recoverable only where the dismissal of the
employee was attended by bad faith or fraud, or constituted an act oppressive to
labor, or was done in a manner contrary to morals, good customs or public policy.
Such an award cannot be justified solely upon the premise that the employer fired
his employee without just cause or due process. Additional facts must be pleaded
and proven to warrant the grant of moral damages under the Civil Code, i.e., that
the act of dismissal 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; and, of course, that social humiliation, wounded feelings, grave
anxiety, and similar injury resulted therefrom.

In previous cases where moral damages and attorney’s fees were awarded, the
manner of termination was done in a humiliating and insulting manner, such as in
the case of Balayan Colleges v. National Labor Relations Commission where the
employer posted copies of its letters of termination to the teachers inside the school
campus and it also furnished copies to the town mayor and Parish Priest of their
community for the purpose of maligning the teachers’ reputation. So also in the
case of Chiang Kai Shek School v. Court of Appeals, this Court awarded moral
damages to a teacher who was flatly, and without warning or a formal notice, told
that she was dismissed.

In the case at bar, we see it fit to award moral damages to respondent because the
manner in which respondent was treated upon petitioners’ suspicion of her
involvement in drafting and in circulating the letter of appeal and the alleged
staging of the “no work day” is contrary to good morals because it caused
unnecessary humiliation to respondent. M+W Zander Philippines, Inc. and
Rolf Wiltschek vs. Trinidad M. Enriquez, G.R. No. 169173, June 5, 2009.

Illegal dismissal; liability of corporate officer. The general manager of a corporation

should not be made personally answerable for the payment of an illegally dismissed
employee’s monetary claims arising from the dismissal unless he had acted
maliciously or in bad faith in terminating the services of the employee. The
employer corporation has a separate and distinct personality from its officers who
merely act as its agents.

The exception noted is where the official “had acted maliciously or in bad faith,” in
which event he may be made personally liable for his own act. That exception is not
applicable in the case at bar, because it has not been proven that Wiltschek was
impleaded in his capacity as General Manager of petitioner corporation and there
appears to be no evidence on record that he acted maliciously or in bad faith in
terminating the services of respondent. His act, therefore, was within the scope of
his authority and was a corporate act for which he should not be held personally
liable for. M+W Zander Philippines, Inc. and Rolf Wiltschek vs. Trinidad
M. Enriquez, G.R. No. 169173, June 5, 2009; see also Bienvenido C. Gilles vs. Court
of Appeals, Schema Konsult and Edgardo Abores, G.R. No. 149273, June 5, 2009.

Illegal dismissal; procedural due process. Procedural due process in the dismissal of
employees requires notice and hearing. The employer must furnish the employee
two written notices before termination may be effected. The first notice apprises the
employee of the particular acts or omissions for which his dismissal is sought, while
the second notice informs the employee of the employer’s decision to dismiss him.
The requirement of a hearing, on the other hand, is complied with as long as there
was an opportunity to be heard, and not necessarily that an actual hearing was
conducted. Herminigildo Inguillom, et al. vs. First Philippine Scales, Inc., et al., G.R.
No. 165407, June 5, 2009.

Illegal dismissal; reinstatement. The respondent’s illegal dismissal carries the legal
consequence defined under Article 279 of the Labor Code: the illegally dismissed
employee is entitled to reinstatement without loss of seniority rights and other
privileges and to 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. The imposition of this legal
consequence is a matter of law that allows no discretion on the part of the decision
maker, except only to the extent recognized by the law itself as expressed
in jurisprudence. Pentagon Steel Corporation vs. Court of Appeals, et al., G.R. No.
174141, June 26, 2009.

Reinstatement; union shop steward. A shop steward leads to the conclusion that it
is a position within the union, and not within the company. A shop steward is
appointed by the union in a shop, department, or plant and serves
as representative of the union, charged with negotiating and adjustment of
grievances of employees with the supervisor of the employer. He is
the representative of the union members in a building or other workplace. Black’s
Law Dictionary defines a shop steward as a union official elected to represent
members in a plant or particular department. His duties include collection of dues,
recruitment of new members and initial negotiations for the settlement of
grievances.

A judgment of reinstatement of the petitioner to the position of union Shop Steward

would have no practical legal effect since it cannot be enforced. Based on
the requirements imposed by law and the APCWU-ATI CBA, and in the nature of
things, the subsequent separation of the petitioner from employment with
respondent ATI has made his reinstatement to union Shop Steward incapable of
being enforced. Teodoro S. Miranda, Jr. vs. Asian Terminals, Inc. and Court of
Appeals, G.R. No. 174316, June 23, 2009.

Resignation; separation pay. No provision in the Labor Code grants separation pay
to voluntarily resigning employees. Separation pay may be awarded only in cases
when the termination of employment is due to (a) installation of labor-saving
devices, (b) redundancy, (c) retrenchment, (d) closing or cessation of business
operations, (e) disease of an employee and his continued employment is prejudicial
to himself or his co-employees, or (f) when an employee is illegally dismissed
but reinstatement is no longer feasible. In fact, the rule is that an employee who
voluntarily resigns from employment is not entitled to separation pay, except when
it is stipulated in the employment contract or collective bargaining agreement
(CBA), or it is sanctioned by established employer practice or policy.

Here, the primary consideration that impelled respondent to tender his resignation
letter was the assurance that he would be paid his separation pay. It is thus unlikely
for someone to just leave his employer for whom he has worked for twelve (12)
years without any expectation of financial assistance. Hence, the former employee
is entitled to receive separation pay. “J” Marketing Corporation, represented by its
Branch Manager Elmundo Dador, G.R. No. 163924, June 18, 2009.

Strike; requisites for validity. The requisites for a valid strike are: (a) a notice of
strike filed with the DOLE 30 days before the intended date thereof or 15 days in
case of ULP; (b) a strike vote approved by a majority of the total union membership
in the bargaining unit concerned obtained by secret ballot in a meeting called for
that purpose; and (c) a notice to the DOLE of the results of the voting at least seven
(7) days before the intended strike. The requirements are mandatory and failure of
a union to comply therewith renders the strike illegal. Hotel Enterprises of the
Philippines, Inc., etc. vs. Samahan ng mga Manggagawa sa Hyatt-National Union of
Workers in the Hotel Restaurant, etc., G.R. No. 165756, June 5, 2009.

Union security. “Union security” is a generic term, which is applied to and

comprehends “closed shop,” “union shop,” “maintenance of membership” or any
other form of agreement which imposes upon employees the obligation to acquire
or retain union membership as a condition affecting employment. There is union
shop when all new regular employees are required to join the union within a certain
period as a condition for their continued employment. There is maintenance of
membership shop when employees, who are union members as of the effective
date of the agreement, or who thereafter become members, must maintain union
membership as a condition for continued employment until they are promoted or
transferred out of the bargaining unit or the agreement is terminated. A closed-
shop, on the other hand, may be defined as an enterprise in which, by agreement
between the employer and his employees or their representatives, no person may
be employed in any or certain agreed departments of the enterprise unless he or
she is, becomes, and, for the duration of the agreement, remains a member in good
standing of a union entirely comprised of or of which the employees in interest are a
part.

In terminating the employment of an employee by enforcing the Union Security

Clause, the employer needs only to determine and prove that: (1) the union security
clause is applicable; (2) the union is requesting for the enforcement of the union
security provision in the CBA; and (3) there is sufficient evidence to support the
union’s decision to expel the employee from the union or company.
Herminigildo Inguillom, et al. vs. First Philippine Scales, Inc., et al., G.R. No. 165407,
June 5, 2009.

MAY 2009

Labor Law

Abandonment. It is well settled that abandonment as a just and valid ground for
dismissal requires the deliberate and unjustified refusal of the employee to return
for work. Two elements must be present, namely: (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. The second element is more determinative of the
intent and must be evinced by overt acts. Mere absence, not being sufficient, the
burden of proof rests upon the employer to show that the employee clearly and
deliberately intended to discontinue her employment without any intention of
returning. In Samarca v. Arc-Men Industries, Inc, the Supreme Court held that
abandonment is a matter of intention and cannot lightly be presumed from certain
equivocal acts.

To constitute abandonment, there must be clear proof of deliberate and unjustified

intent to sever the employer-employee relationship. Clearly, the operative act is
still the employee’s ultimate act of putting an end to his employment. However, an
employee who takes steps to protest her layoff cannot be said to have abandoned
her work because a charge of abandonment is totally inconsistent with the
immediate filing of a complaint for illegal dismissal, more so when it includes a
prayer for reinstatement. When Eleonor filed the illegal dismissal complaint, it
totally negated petitioner’s theory of abandonment.

Also, to effectively dismiss an employee for abandonment, the employer must

comply with the due process requirement of sending notices to the employee. In
Brahm Industries, Inc. vs. NLRC, the Supreme Court ruled that this requirement is
not a mere formality that may be dispensed with at will. Its disregard is a matter of
serious concern since it constitutes a safeguard of the highest order in response to
man’s innate sense of justice. Petitioner was not able to send the necessary notice
requirement to Eleonor. Petitioner’s belated claim that it was not able to send the
notice of infraction prior to the filing of the illegal dismissal case cannot simply
unacceptable. Based on the foregoing, Eleonor did not abandon her work. South
Davao Development Company, Inc., et al. vs. Sergio L. Gamo, et al., G.R. No.
171814, May 8, 2009.

Appeal to DOLE Secretary; appeal bond. The purpose of an appeal bond is to

ensure, during the period of appeal, against any occurrence that would defeat or
diminish recovery by the aggrieved employees under the judgment if subsequently
affirmed. The Deed of Assignment in the instant case, like a cash or surety bond,
serves the same purpose. First, the Deed of Assignment constitutes not just a
partial amount, but rather the entire award in the appealed Order. Second, it is
clear from the Deed of Assignment that the entire amount is under the full control
of the bank, and not of petitioner, and is in fact payable to the DOLE Regional
Office, to be withdrawn by the same office after it had issued a writ of execution.
For all intents and purposes, the Deed of Assignment in tandem with the Letter
Agreement and Cash Voucher is as good as cash. Third, the execution of the Deed
of Assignment, the Letter Agreement and the Cash Voucher were made in good
faith, and constituted clear manifestation of petitioner’s willingness to pay the
judgment amount. People’s Broadcasting vs. The Secretary of the Department of
Labor and Employment, et al., G.R. No. 179652, May 8, 2009.

Appeal; private carrier. In this case, petitioner availed of the services of LBC, a
private carrier, to deliver its notice of appeal to the NLRC. Had petitioner sent its
notice of appeal by registered mail, the date of mailing would have been deemed
the date of filing with the NLRC. But petitioner, for reasons of its own, chose to send
its notice of appeal through a private letter-forwarding agency. Therefore, the date
of actual receipt by the NLRC of the notice of appeal, and not the date of delivery to
LBC, is deemed to be the date of the filing of the notice of appeal. Since the NLRC
received petitioner’s notice of appeal on 26 February 2001, the appeal was clearly
filed out of time. Petitioner had thus lost its right to appeal from the decision of the
Labor Arbiter and the NLRC should have dismissed its notice of appeal. Charter
Chemical and Coating Corporation vs. Herbert Tan and Amalia Sonsing, G.R. No.
163891, May 21, 2009.

Compensable illness; definition. P.D. No. 626, as amended, defines compensable

sickness as “any illness definitely accepted as an occupational disease listed by the
Commission, or any illness caused by employment subject to proof by the employee
that the risk of contracting the same is increased by the working conditions.” Under
Section 1 (b), Rule III, of the Amended Rules on Employees’ Compensation, for the
sickness and the resulting disability or death to be compensable, the same must be
an “occupational disease” included in the list provided (Annex “A”), with the
conditions set therein satisfied; otherwise, the claimant must show proof that the
risk of contracting it is increased by the working conditions. Otherwise stated, for
sickness and the resulting death of an employee to be compensable, the claimant
must show either: (1) that it is a result of an occupational disease listed under
Annex “A” of the Amended Rules on Employees’ Compensation with the conditions
set therein satisfied; or (2) if not so listed, that the risk of contracting the disease is
increased by the working conditions.

Here, the CA correctly considered Cardiopulmonary Arrest T/C Fatal Arrythmia in

this case a cardiovascular disease – a listed disease under Annex “A” of the
Amended Rules on Employees’ Compensation. The Death Certificate of Judge
Vicencio clearly indicates that the cause of his death is Cardiopulmonary Arrest T/C
Fatal Arrythmia. Whether, however, the same was a mere complication of his lung
cancer as contended by petitioner GSIS or related to an underlying cardiovascular
disease is not established by the records of this case and, thus, remains uncertain.
The Supreme Court held that Cardiopulmonary Arrest T/C Fatal Arrythmia, the
cause of death stated in Judge Vicencio’s Death Certificate, should be considered as
a cardiovascular disease – a listed disease under Annex “A” of the Amended Rules
on Employees’ Compensation. Government Service Insurance System vs. Marian T.
Vicencio, G.R. No. 176832, May 21, 2009.
Compensable illness; evidence. The degree of proof required under P.D. No. 626 is
merely substantial evidence, or “such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion.” The Supreme Court
hasrepeatedly held that to prove compensability, the claimant must adequately
show that the development of the disease is brought largely by the conditions
present in the nature of the job. What the law requires is a reasonable work-
connection and not a direct causal relation. It is enough that the hypothesis on
which the workmen’s claim is based is probable. Medical opinion to the contrary can
be disregarded especially where there is some basis in the facts for inferring a work-
connection. Probability, not certainty, is the touchstone. Government Service
Insurance System (GSIS) vs. Teresita S. De Guzman, G.R. No. 173049, May 21,
2009.

Due process. Respondent was given ample opportunity to explain and rebut the
evidence against him. A full adversarial hearing was not required. The essence of
due process is simply the opportunity to be heard. As applied in administrative
proceedings, it is merely an opportunity to explain one’s side or an opportunity to
seek a reconsideration of the action or ruling complained of.

Petitioners complied with the twin-notice requirement. The notice dated October 17,
2000 served on respondent was the written notice specifying the charges against
him. The subsequent notice dated February 7, 2001 (notice of adjudication
specifying therein the causes for respondent’s termination and the decision to
dismiss him) served as the written notice of termination. In view of respondent’s
valid dismissal due to serious misconduct and loss of trust and confidence,
respondent is not entitled to separation pay. Telecommunications Distributors
Specialist, Inc., et al. vs. Raymund Garriel, G.R. No. 174981, May 25, 2009.

Employer-employee relationship; evidence. It has long been established that in

administrative and quasi-judicial proceedings, substantial evidence is sufficient as a
basis for judgment on the existence of employer-employee relationship. Substantial
evidence, which is the quantum of proof required in labor cases, is “that amount of
relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion.” No particular form of evidence is required to prove the existence of
such employer-employee relationship. Any competent and relevant evidence to
prove the relationship may be admitted. Hence, while no particular form of evidence
is required, a finding that such relationship exists must still rest on some substantial
evidence. Moreover, the substantiality of the evidence depends on its quantitative
as well as its qualitative aspects.

In the instant case, save for respondent’s self-serving allegations and self-defeating
evidence, there is no substantial basis to warrant the Regional Director’s finding
that respondent is an employee of petitioner. People’s Broadcasting vs. The
Secretary of the Department of Labor and Employment, et al., G.R. No. 179652, May
8, 2009.

Employer-employee relationship; existence. In order to determine the existence of

an employer-employee relationship, the Court has frequently applied the four-fold
test: (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, or
the so called “control test,” which is considered the most important element.

From the time they were hired by petitioner corporation up to the time that they
were reassigned to work under Gamo’s supervision, their status as petitioner
corporation’s employees did not cease. Likewise, payment of their wages was
merely coursed through Gamo. As to the most determinative test―the power of
control, it is sufficient that the power to control the manner of doing the work exists,
it does not require the actual exercise of such power. In this case, it was in the
exercise of its power of control when petitioner corporation transferred the copra
workers from their previous assignments to work as copraceros. It was also in the
exercise of the same power that petitioner corporation put Gamo in charge of the
copra workers although under a different payment scheme. Thus, it is clear that an
employer-employee relationship has existed between petitioner corporation and
respondents since the beginning and such relationship did not cease despite their
reassignments and the change of payment scheme. South Davao Development
Company, Inc., et al. vs. Sergio L. Gamo, et al., G.R. No. 171814, May 8, 2009.

Employer-employee relationship; power of DOLE to determine. The DOLE in the

exercise of its visitorial and enforcement power somehow has to make a
determination of the existence of an employer-employee relationship. Such
prerogatival determination, however, cannot be coextensive with the visitorial and
enforcement power itself. Indeed, such determination is merely preliminary,
incidental and collateral to the DOLE’s primary function of enforcing labor standards
provisions. The determination of the existence of employer-employee relationship is
still primarily lodged with the NLRC. This is the meaning of the clause “in cases
where the relationship of employer-employee still exists” in Art. 128 (b).

Thus, before the DOLE may exercise its powers under Article 128, two important
questions must be resolved: (1) Does the employer-employee relationship still exist,
or alternatively, was there ever an employer-employee relationship to speak of; and
(2) Are there violations of the Labor Code or of any labor law? The existence of an
employer-employee relationship is a statutory prerequisite to and a limitation on
the power of the Secretary of Labor, one which the legislative branch is entitled to
impose.

The rationale underlying this limitation is to eliminate the prospect of competing

conclusions of the Secretary of Labor and the NLRC, on a matter fraught with
questions of fact and law, which is best resolved by the quasi-judicial body, which is
the NRLC, rather than an administrative official of the executive branch of the
government. If the Secretary of Labor proceeds to exercise his visitorial and
enforcement powers absent the first requisite, as the dissent proposes, his office
confers jurisdiction on itself which it cannot otherwise acquire. People’s
Broadcasting vs. The Secretary of the Department of Labor and Employment, et
al., G.R. No. 179652, May 8, 2009.

Independent contractor. There is permissible job contracting when a principal

agrees to put out or farm out with a contractor or a subcontractor the performance
or completion of a specific job, work or service within a definite or predetermined
period, regardless of whether such job or work service is to be performed within or
outside the premises of the principal. To establish the existence of an independent
contractor, we apply the following conditions: first, 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 to the result thereof; and second, the contractor
has substantial capital or investments in the form of tools, equipment, machineries,
work premises and other materials which are necessary in the conduct of his
business.

The Implementing Rules and Regulation of the Labor Code defines investment—as
tools, equipment, implements, machineries and work premises, actually and directly
used by the contractor or subcontractor in the performance or completion of the
job, work, or service contracted out. The investment must be sufficient to carry out
the job at hand.

In the case at bar, Gamo and the copra workers did not exercise independent
judgment in the performance of their tasks. The tools used by Gamo and his copra
workers like the karit, bolo, pangbunot, panglugit and pangtapok are not sufficient
to enable them to complete the job. Reliance on these primitive tools is not enough.
In fact, the accomplishment of their task required more expensive machineries and
equipment, like the trucks to haul the harvests and the drying facility, which
petitioner corporation owns. South Davao Development Company, Inc., et al. vs.
Sergio L. Gamo, et al., G.R. No. 171814, May 8, 2009.

Loss of trust and confidence. Petitioner cites Article 282 of the Labor Code,
specifically loss of trust and confidence as the ground for validly dismissing
respondent. Under the law, loss of confidence must be based on “fraud or willful
breach by the employee of the trust reposed in him by his employer or duly
authorized representative.” In this regard, the Supreme Court has ruled that
ordinary breach does not suffice. A breach of trust is willful if it is done intentionally,
knowingly and purposely, without any justifiable excuse, as distinguished from an
act done carelessly, thoughtlessly, heedlessly or inadvertently.

Here, respondent was investigated on and dismissed for misappropriation of

company funds through falsification of company documents, as shown in the
termination letter. Records, nevertheless, neither showed nor convinced us that
there was misappropriation of funds that benefited anybody which warranted the
dismissal of respondent for the first offense. Respondent admittedly committed
padding of accounts and/or paper renewal, which respondent claims to be a
practice among salesmen and such claim was not disputed by petitioner. The paper
renewal committed by respondent may be considered as falsification, but we agree
with the Labor Arbiter and the CA that such paper renewal did not amount to
misappropriation that could justify outright dismissal for the first offense, as what
petitioner did to respondent. Otherwise, the company rules would not have
separated these two offenses under Rule Nos. 15 and 16. Besides, we agree with
the CA that although petitioner did in fact violate company Rule No. 15 by falsifying
company records and documents through paper renewal, such falsification has to
be qualified. San Miguel Corporation vs. NLRC, et al., G.R. No. 153983, May 26,
2009.

Serious misconduct. Respondent’s acts of forging subscribers’ signatures,

attempting to cover up his failure to secure their signatures on the coverage
waivers, selling a personally owned mobile phone to a company customer (a
defective one at that) and attempting to connive with other employees to cover up
his illicit schemes were serious acts of dishonesty. Respondent’s acts clearly
constituted serious misconduct which is a ground for termination of employment by
an employer. Respondent’s acts were likewise grounds for loss of trust and
confidence, another valid cause for termination of employment. Only employees
occupying positions of trust and confidence or those who are routinely charged with
the care and custody of the employer’s money or property may be validly dismissed
for this reason. Telecommunications Distributors Specialist, Inc., et al. vs. Raymund
Garriel, G.R. No. 174981, May 25, 2009.

APRIL 2009

Labor Law

Backwages. The Court agrees with the NLRC’s conclusion that petitioner is not
entitled to backwages. He never bothered to redeem his driver’s license at the
soonest possible time when there was no showing that he was unlawfully prevented
by respondent from doing so. Thus, petitioner should not be paid for the time he
was not working. The Court has held that where the failure of employees to work
was not due to the employer’s fault, the burden of economic loss suffered by the
employees should not be shifted to the employer. Each party must bear his own
loss. It would be unfair to allow petitioner to recover something he has not earned
and could not have earned, since he could not discharge his work as a driver
without his driver’s license. Respondent should be exempted from the burden of
paying backwages. Bernardino V. Navarro vs. P.V. Pajarillo Liner and NLRC, G.R. No.
164681, April 24, 2009.

Breach of trust. The documentary evidence of petitioner indubitably establishes that

respondent committed payroll padding, sold canepoints without the knowledge and
consent of management and misappropriated the proceeds thereof, and rented
tractor to another farm and misappropriated the rental payments therefor. These
acts constitute willful breach by the employee of the trust reposed in him by his
employer – a ground for termination of employment. Bacolod-Talisay Realty and
Development Corp., et al. vs. Romeo Dela Cruz, G.R. No. 179563, April 30, 2009.

CBA. Just like any other contract, a CBA is the law between the contracting parties
and compliance therewith in good faith is required by law. HFS Phlippines, Inc.,
Ruben T. Del Rosario and IUM Ship Management vs. Ronaldo R. Pilar, G.R. No.
168716, April 16, 2009.

Due process. The Court of Appeals correctly held that petitioners did not comply
with the proper procedure in dismissing respondent. In other words, petitioners
failed to afford respondent due process by failing to comply with the twin notice
requirement in dismissing him, viz: (1) a first notice to apprise him of his fault, and
(2) a second notice to him that his employment is being terminated. The letter
dated June 3, 1997 sent to respondent was a letter of suspension. It did not comply
with the required first notice, the purpose of which is to apprise the employee of the
cause for termination and to give him rasonable opportunity to explain his side.
The confrontation before the barangay council did not constitute the first notice –
to give the employee ample opportunity to be heard with the assistance of counsel,
if he so desires. Hearings before thebarangay council do not afford the employee
ample opportunity to be represented by counsel if he so desires because Section
415 of the Local Government Code mandates that “[i]n all katarungang
pambarangay proceedings, the parties must appear in person without the
assistance of counsel or his representatives, except for minors and incompetents
who may be assisted by their next-of-kin who are not lawyers.” The requirement of
giving respondent the first notice not having been complied with, discussions of
whether the second notice was complied with is rendered unnecessary. Bacolod-
Talisay Realty and Development Corp., et al. vs. Romeo Dela Cruz, G.R. No. 179563,
April 30, 2009.

Due process; lack of jurisdiction. The proceedings before the Labor Arbiter deprived
David of due process. MACLU and NAFLU filed their complaint against MAC on 12
August 1993. Arbiter Ortiguerra’s decision shows that MACLU, NAFLU, and MAC
were the only parties summoned to a conference for a possible settlement.
Because of MAC’s failure to appear, Arbiter Ortiguerra deemed the case submitted
for resolution. David’s resignation from MAC took effect on 15 October 1993.
NAFLU and MACLU moved to implead Carag and David for the first time only in their
position paper dated 3 January 1994. David did not receive any summons and had
no knowledge of the decision against him. The records of the present case fail to
show any order from Arbiter Ortiguerra summoning David to attend the preliminary
conference. Despite this lack of summons, in her Decision dated 17 June 1994,
Arbiter Ortiguerra not only granted MACLU and NAFLU’s motion to implead Carag
and David, she also held Carag and David solidarily liable with MAC. Armando David
vs.. National Federation of Labor Union, et al, G.R. No. 148263 and 148271-72, April
21, 2009.

Hearing. The guiding principles in connection with the hearing requirement in

dismissal cases are:

(a) “ample opportunity to be heard” means any meaningful opportunity (verbal or

written) given to the employee to answer the charges against him and submit
evidence in support of his defense, whether in a hearing, conference or some other
fair, just and reasonable way;

(b) a formal hearing or conference becomes mandatory only when requested by

the employee in writing or substantial evidentiary disputes exist or a company rule
or practice requires it, or when similar circumstances justify it;
(c) the “ample opportunity to be heard” standard in the Labor Code prevails over
the “hearing or conference” requirement in the implementing rules and
regulations. Felix B. Perez, et al. Vs. Philippine Telegraph and Telephone Company,
G.R. No. 152048, April 7, 2009.

Illegal dismissal; abandonment. Petitioner insists that there cannot be any illegal
dismissal because in the first place, there was no dismissal to speak of, as it was
respondent who abandoned his work, after finding out that he was being
investigated for theft. It is a basic principle that in the dismissal of employees, the
burden of proof rests upon the employer to show that the dismissal is for a just
cause and failure to do so would necessarily mean that the dismissal is not justified.
Petitioner failed to discharge the burden of proof that complainant was guilty of
abandonment. It did not adduce any proof to show that petitioner clearly and
unequivocally intended to abandon his job. It has been repeatedly stressed that for
abandonment to be a valid cause for dismissal there must be a concurrence of
intention to abandon and some overt act from which it may be inferred that the
employee had no more interest to continue working in his job. An employee who
forthwith takes steps to protest his layoff cannot by any logic be said to have
abandoned his work. Otherwise stated, one could not possibly abandon his work
and shortly thereafter vigorously pursue his complaint for illegal dismissal. In the
instant case, save for the allegation that respondent did not submit him to the
investigation and the latter’s failure to return to work as instructed in the 8
February 1999 letter, petitioner was unable to present any evidence which tend to
show respondent’s intent to abandon his work. Neither is the Court convinced that
the filing of the illegal dismissal case was respondent’s way to avoid the charge of
theft. On the contrary, the filing of the complaint a few days after his alleged
dismissal signified respondent’s desire to return to work, a factor which further
militates against petitioner’s theory of abandonment. Harbor View Restaurant vs.
Reynaldo Labro, G.R. No. 168273, April 30, 2009.

Illegal dismissal; burden of proof. Under the Labor Code, as amended, the
requirements for the lawful dismissal of an employee are two-fold, the substantive
and the procedural. Not only must the dismissal be for a valid or authorized cause,
the rudimentary requirements of due process – notice and hearing – must, likewise,
be observed before an employee may be dismissed. One does not suffice; without
their concurrence, the termination would, in the eyes of the law, be illegal.

As the employer, petitioner has the burden of proving that the dismissal of
petitioner was for a cause allowed under the law and that petitioner was afforded
procedural due process. Petitioner failed to discharge this burden. Indeed, it failed
to show any valid or authorized cause under the Labor Code which allowed it to
terminate the services of individual respondents. Neither did petitioner show that
individual respondents were given ample opportunity to contest the legality of their
dismissal. No notice of such impending termination was ever given to them.
Individual respondents were definitely denied due process. Having failed to
establish compliance with the requirements on termination of employment under
the Labor Code, the dismissal of individual respondents was tainted with
illegality. Iligan Cement Corporation vs. Iliascor Employees and Workers Union-
Southern Philippines Federation of Labor, et al., G.R. No. 158956, April 24, 2009.

Illegal dismissal; penalty. The worst that respondent committed was an inadvertent
infraction. For that, the extreme penalty of dismissal imposed on him by petitioners
was grossly disproportionate. Taking into account the managerial position he held
and the prior warning issued to him for failing to communicate with his superiors,
the penalty commensurate to the violation he committed should be suspension for
three months. Gulf Air Jassim Hindri Abdullah, et al. vs. NLRC, et al., G.R. No.
159687, April 24, 2009.

Intra-union dispute. Pending the final resolution of the intra-union dispute,

respondent’s officers remained duly authorized to conduct union affairs. De La Salle
University, et al. vs. De La Salle University Employees Association (DLSUEA-
NAFTEU),G.R. No. 177283, April 7, 2009.

Labor only contracting. We are not convinced that Vedali is an independent

contractor. Petitioner failed to present any service contract with Vedali in the
proceedings with the Labor Arbiter. There is nothing on record that Vedali has a
substantial capital or investment to actually perform the service under its own
account and responsibility. Petitioner is a mere labor-only contractor because it only
supplied workers to petitioner to work at its pier. In a labor-only contract, there are
three parties involved: (1) the “labor-only” contractor; (2) the employee who is
ostensibly under the employ of the “labor-only” contractor; and (3) the principal
who is deemed the real employer. Under this scheme, the “labor-only” contractor is
the agent of the principal. Iligan Cement Corporation vs. Iliascor Employees and
Workers Union-Southern Philippines Federation of Labor, et al., G.R. No. 158956,
April 24, 2009.

Liability of corporate officers. Article 212(e) of the Labor Code, by itself, does not
make a corporate officer personally liable for the debts of the corporation because
Section 31 of the Corporation Code is still the governing law on personal liability of
officers for the debts of the corporation. There was no showing of David willingly
and knowingly voting for or assenting to patently unlawful acts of the corporation,
or that David was guilty of gross negligence or bad faith. Armando David vs.
National Federation of Labor Union, et al, G.R. No. 148263 and 148271-72, April 21,
2009.

Loss of confidence. Loss of trust and confidence, as a valid ground for dismissal,
must be based on willful breach of the trust reposed in the employee by his
employer. Such breach is willful if it is done intentionally, knowingly, and purposely,
without justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently. Elsewise stated, it must be based on
substantial evidence and not on the employer’s whims or caprices or suspicions;
otherwise, the employee would eternally remain at the mercy of the employer. A
condemnation of dishonesty and disloyalty cannot arise from suspicion spawned by
speculative inferences. Adam B. Garcia vs. NLRC (Second Division) Legazpi Oil
Company, Inc. Romeo F. Mercado and Gus Zuluaga, G.R. No. 172854, April 16,
2009.

Loss of Confidence. Without undermining the importance of a shipping order or

request, the respondents’ evidence is insufficient to clearly and convincingly
establish the facts from which the loss of confidence resulted. Other than their bare
allegations and the fact that such documents came into petitioners’ hands at some
point, respondents should have provided evidence of petitioners’ functions, the
extent of their duties, the procedure in the handling and approval of shipping
requests and the fact that no personnel other than petitioners were involved. There
was, therefore, a patent paucity of proof connecting petitioners to the alleged
tampering of shipping documents. The alterations on the shipping documents could
not reasonably be attributed to petitioners because it was never proven that
petitioners alone had control of or access to these documents. Unless duly proved
or sufficiently substantiated otherwise, impartial tribunals should not rely only on
the statement of the employer that it has lost confidence in its employee. Felix B.
Perez, et al. vs. Philippine Telegraph and Telephone Company,G.R. No. 152048,
April 7, 2009.

Prescription. Articles 1139 to 1155 of the Civil Code provide the general law on
prescription of actions. Under Article 1139, actions prescribe by the mere lapse of
time prescribed by law. That law may either be the Civil Code or special laws as
specifically mandated by Article 1148. In labor cases, the special law on
prescription is Article 291 of the Labor Code. The Labor Code has no specific
provision on when a monetary claim accrues. Thus, again the general law on
prescription applies – Article 1150 of the Civil Code. Juanaria A. Rivera vs. United
Laboratories, Inc., G.R. No. 155639, April 22, 2009.
Resignation. Resignation is defined as the voluntary act of an employee who
finds himself in a situation where he believes that personal reasons cannot be
sacrificed in favor of the exigency of the service and he has no other choice but to
disassociate himself from his employment. Respondent’s resignation can be
gleaned from the unambiguous terms of his letter to Captain Cristino. Respondent’s
bare claim that he was forced to execute his resignation letter deserves no merit.
Bare allegations of threat or force do not constitute substantial evidence to support
a finding of forced resignation. That such claim was proferred a year later all the
more renders his contention bereft of merit. Virgen Shipping Corporation, et al. vs.
Jesus B. Barraquio, G.R. No. 178127, April 16, 2009.

Resignation. Petitioner voluntarily resigned. Her employer cannot be held liable for
constructive dismissal. Gloria Artiaga vs. Siliman University and Siliman University
Medical Center, G.R. No. 178453, April 16, 2009.

Security of Tenure. Security of tenure in the career executive service, which

presupposes a permanent appointment, takes place upon passing the CES
examinations administered by the CES Board. It is that which entitles the examinee
to conferment of CES eligibility and the inclusion of his name in the roster of CES
eligibles. Under the rules and regulations promulgated by the CES Board,
conferment of the CES eligibility is done by the CES Board through a formal board
resolution after an evaluation has been done of the examinee’s performance in the
four stages of the CES eligibility examinations. Upon conferment of CES eligibility
and compliance with the other requirements prescribed by the Board, an incumbent
of a CES position may qualify for appointment to a CES rank. Appointment to a CES
rank is made by the President upon the Board’s recommendation. It is this process
which completes the official’s membership in the CES and confers on him security of
tenure in the CES. Petitioner does not seem to have gone through this definitive
process.

At this juncture, what comes unmistakably clear is the fact that because petitioner
lacked the proper CES eligibility and therefore had not held the subject office in a
permanent capacity, there could not have been any violation of petitioner’s
supposed right to security of tenure inasmuch as he had never been in possession
of the said right at least during his tenure as Deputy Director for Hospital Support
Services. Hence, no challenge may be offered against his separation from office
even if it be for no cause and at a moment’s notice. Not even his own self-serving
claim that he was competent to continue serving as Deputy Director may actually
and legally give even the slightest semblance of authority to his thesis that he
should remain in office. Be that as it may, it bears emphasis that, in any case, the
mere fact that an employee is a CES eligible does not automatically operate to vest
security of tenure on the appointee inasmuch as the security of tenure of
employees in the career executive service, except first and second-level employees,
pertains only to rank and not to the office or position to which they may be
appointed. Jose Pepito M. Amores M.D. vs. Civil Service Commission, Board of
Trustees of the Lung Center of the Philippines as represented by Hon. Manuel M.
Dayrit and Fernando A. Melendres, M.D., G.R. No. 170093, April 29, 2009

SSS. The claim for funeral benefits under P.D. No. 626, as amended, which was filed
after the lapse of 10 years by the therein petitioner who had earlier filed a claim for
death benefits, had not prescribed. Soledad Muños Mesa vs. Social Security System,
et al., G.R. No. 160467, April 7, 2009.

Transfer. Jurisprudence recognizes the exercise of management prerogative to

transfer or assign employees from one office or area of operation to another,
provided there is no demotion in rank or diminution of salary, benefits, and other
privileges, and the action is not motivated by discrimination, made in bad faith, or
effected as a form of punishment or demotion without sufficient cause. To
determine the validity of the transfer of employees, the employer must show that
the transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor
does it involve a demotion in rank or a diminution of his salaries, privileges and
other benefits. Should the employer fail to overcome this burden of proof, the
employee’s transfer shall be tantamount to constructive dismissal.

We have long stated that the objection to the transfer being grounded solely upon
the personal inconvenience or hardship that will be caused to the employee by
reason of the transfer is not a valid reason to disobey an order of transfer. Such
being the case, petitioner cannot adamantly refuse to abide by the order of transfer
without exposing herself to the risk of being dismissed. Hence, her dismissal was
for just cause in accordance with Article 282(a) of the Labor Code. Aileen G. Herida
vs. F4C Pawnshop and Jewelry Store/Marcelino Florete, Jr., G.R. No. 172601, April
16, 2009.

Unfair labor practice; burden of proof. Petitioner makes several allegations that UST
committed ULP. The onus probandi falls on the shoulders of petitioner to establish
or substantiate such claims by the requisite quantum of evidence. In labor cases as
in other administrative proceedings, substantial evidence or such relevant evidence
as a reasonable mind might accept as sufficient to support a conclusion is required.
In the petition at bar, petitioner miserably failed to adduce substantial evidence as
basis for the grant of relief. UST Faculty Union vs. University of Sto. Tomas, Rev. Fr.
Rolando De la Rosa, Rev Fr. Rodelio Aligan, Domingo Legaspi, and Merecedes
Hinayon, G.R. No. 180892, April 7, 2009.

MARCH 2009

Labor Code

Compensable illness. Cordero has substantially proved her claim to compensability.

Under Section 1(b), Rule III implementing P.D. No. 626, sickness or death is
compensable if the cause is included in the list of occupational diseases annexed to
the Rules. If not so listed, compensation may still be recovered if the illness is
caused or precipitated by factors inherent in the employee’s work and working
conditions. Here, strict rules of evidence are not applicable since the quantum of
evidence required under P.D. No. 626 is merely substantial evidence, which means
“such relevant evidence as a reasonable mind might accept as adequate to support
a conclusion.” What the law requires is a reasonable work-connection and not a
direct causal relation. It is sufficient that the hypothesis on which the workmen’s
claim is based is probable since probability, not certainty, is the touchstone.
Government Service Insurance System Vs. Maria Teresa S.A. Cordero/Employees
Compensation Commission Vs. Maria Teresa S.A. Cordero, G.R. No. 171378/G.R. No.
171388, March 17, 2009.

Constructive dismissal. Case law holds that constructive dismissal occurs when
there is cessation of work because continued employment is rendered impossible,
unreasonable or unlikely; when there is a demotion in rank or diminution in pay or
both; or when a clear discrimination, insensibility, or disdain by an employer
becomes unbearable to the employee. Respondent’s sudden, arbitrary and
unfounded adoption of the two-day work scheme which greatly reduced petitioners’
salaries renders it liable for constructive dismissal. Fe la Rosa, et al. Vs.
Ambassador Hotel, G.R. No. 177059, March 13, 2009.

Declaration of illegality of strike. Article 264(e) of the Labor Code prohibits any
person engaged in picketing from obstructing the free ingress to and egress from
the employer’s premises. Since respondent was found in the July 17, 1998 decision
of the NLRC to have prevented the free entry into and exit of vehicles from
petitioner’s compound, respondent’s officers and employees clearly committed
illegal acts in the course of the March 9, 1998 strike. The use of unlawful means in
the course of a strike renders such strike illegal. Therefore, pursuant to the principle
of conclusiveness of judgment, the March 9, 1998 strike was ipso facto illegal. The
filing of a petition to declare the strike illegal was thus unnecessary. Jackbilt
Industries, Inc. Vs. Jackbilt Employees Workers Union-Naflu-KMU, G.R. No. 171618-
19, March 13, 2009.
Employment of registered nurse. Article 157 does not require the engagement of
full-time nurses as regular employees of a company. Under Article 157, Shangri-la,
which employs more than 200 workers, is mandated to “furnish” its employees with
the services of a full-time registered nurse, a part-time physician and dentist, and
an emergency clinic which means that it should provide or make available such
medical and allied services to its employees, not necessarily to hire or employ a
service provider. While it is true that the provision requires employers to engage
the services of medical practitioners in certain establishments depending on the
number of their employees, nothing is there in the law which says that medical
practitioners so engaged be actually hired as employees. The law only requires the
employer “to retain”, not employ, a part-time physician who needed to stay in the
premises of the non-hazardous workplace for two (2) hours. The phrase “services of
a full-time registered nurse” should thus be taken to refer to the kind of services
that the nurse will render in the company’s premises and to its employees, not the
manner of his engagement. Jerome D. Escasinas, et al. Vs. Shangri-la’s Mactan
Island Resort, et al., G.R. No. 178827, March 4, 2009.

Part-time employment. For a private school teacher to acquire permanent status in

employment, the following requisites must concur: (1) the teacher is a full-time
teacher; (2) the teacher must have rendered three consecutive years of service;
and (3) such service must have been satisfactory. The burden is on petitioners to
prove their affirmative allegation that they are permanent teaching personnel.
However, there is not enough evidence on record to show that their total working
day is devoted to the school. There is no showing of what the regular work schedule
of a regular teacher in respondent school is. What is clear in the records is that
Evelyn and Alwyn spent two hours and four hours, respectively, but not the entire
working day, at the respondent school. They do not meet requirement “c” of
Section 45 of the Manual. Hence, we sustain the findings of the Court of Appeals
that the petitioners are part-time teachers. Being part-time teachers,they cannot
acquire permanent status. Spouses Alwyn Ong Lim and Evelyn Lukang Lim Vs.
Legazpi Hope Christian School, et al., G.R. No. 172818, March 31, 2009.

Piercing the Corporate Veil for Labor Claims

Pantranco Employees Asso., et al. vs. NLRC, et al./Philippine National Bank Vs.
Pantranco Employees Association Inc., et al., G.R. No. 170689/G.R. No.
170705, March 17, 2009, is an interesting case wherein former employees of a
company sought to satisfy their unpaid labor claims against another company that
eventually acquired, and then sold, the employer company.

The Gonzales family owned two corporations, namely, the Pantranco North Express,
Inc. (PNEI) and Macris Realty Corporation (Macris). PNEI provided transportation
services to the public, and had its bus terminal at the corner of Quezon and
Roosevelt Avenues in Quezon City. The terminal stood on four valuable pieces of
real estate (known as Pantranco properties) registered under the name of Macris.
The Gonzales family later incurred huge financial losses despite attempts of
rehabilitation and loan infusion. In March 1975, their creditors took over the
management of PNEI and Macris. By 1978, full ownership was transferred to one of
their creditors, the National Investment Development Corporation (NIDC), a
subsidiary of the PNB.

Macris was later renamed as the National Realty Development Corporation

(Naredeco) and eventually merged with the National Warehousing Corporation
(Nawaco) to form the new PNB subsidiary, the PNB-Madecor.

In 1985, NIDC sold PNEI to North Express Transport, Inc. (NETI), a company owned
by Gregorio Araneta III. In 1986, PNEI was among the several companies placed
under sequestration by the Presidential Commission on Good Government (PCGG)
shortly after the historic events in EDSA. In January 1988, PCGG lifted the
sequestration order to pave the way for the sale of PNEI back to the private sector
through the Asset Privatization Trust (APT). APT thus took over the management of
PNEI.

In 1992, PNEI applied with the Securities and Exchange Commission (SEC) for
suspension of payments. A management committee was thereafter created which
recommended to the SEC the sale of the company through privatization. As a cost-
saving measure, the committee likewise suggested the retrenchment of several
PNEI employees. Eventually, PNEI ceased its operation. Along with the cessation of
business came the various labor claims commenced by the former employees of
PNEI where the latter obtained favorable decisions.

On July 5, 2002, the Labor Arbiter issued the Sixth Alias Writ of Execution
commanding the National Labor Relations Commission (NLRC) sheriffs to levy on
the assets of PNEI in order to satisfy the P722,727,150.22 due its former employees,
as full and final satisfaction of the judgment awards in the labor cases. The sheriffs
were likewise instructed to proceed against PNB, PNB-Madecor and Mega Prime. In
implementing the writ, the sheriffs levied upon the four valuable pieces of real
estate located at the corner of Quezon and Roosevelt Avenues, on which the former
Pantranco Bus Terminal stood. These properties were covered by Transfer
Certificate of Title (TCT) Nos. 87881-87884, registered under the name of PNB-
Madecor. Subsequently, Notice of Sale of the foregoing real properties was
published in the newspaper and the sale was set on July 31, 2002.

Having been notified of the auction sale, motions to quash the writ were separately
filed by PNB-Madecor and Mega Prime, and PNB. They likewise filed their Third-Party
Claims. PNB-Madecor anchored its motion on its right as the registered owner of the
Pantranco properties, and Mega Prime as the successor-in-interest. For its part, PNB
sought the nullification of the writ on the ground that it was not a party to the labor
case. In its Third-Party Claim, PNB alleged that PNB-Madecor was indebted to the
former and that the Pantranco properties would answer for such debt.

On September 10, 2002, the Labor Arbiter declared that the subject Pantranco
properties were owned by PNB-Madecor. It being a corporation with a distinct and
separate personality, its assets could not answer for the liabilities of PNEI.
Considering, however, that PNB-Madecor executed a promissory note in favor of
PNEI for P7,884,000.00, the writ of execution to the extent of the said amount was
concerned was considered valid. PNB’s third-party claim – to nullify the writ on the
ground that it has an interest in the Pantranco properties being a creditor of PNB-
Madecor, – on the other hand, was denied because it only had an inchoate interest
in the properties.

The NLRC affirmed the Labor Arbiter’s decision. The CA also affirmed the NLRC’s
decision. The appellate court pointed out that PNB, PNB-Madecor and Mega Prime
are corporations with personalities separate and distinct from PNEI. As such, there
being no cogent reason to pierce the veil of corporate fiction, the separate
personalities of the above corporations should be maintained. The CA added that
the Pantranco properties were never owned by PNEI; rather, their titles were
registered under the name of PNB-Madecor. If PNB and PNB-Madecor could not
answer for the liabilities of PNEI, with more reason should Mega Prime not be held
liable being a mere successor-in-interest of PNB-Madecor.

The former PNEI employees argued before the Supreme Court that PNB, through
PNB-Madecor, directly benefited from the operation of PNEI and had complete
control over the funds of PNEI. Hence, they are solidarily answerable with PNEI for
the unpaid money claims of the employees. Citing A.C. Ransom Labor Union-CCLU
v. NLRC, the employees insist that where the employer corporation ceases to exist
and is no longer able to satisfy the judgment awards in favor of its employees, the
owner of the employer corporation should be made jointly and severally liable. The
Supreme Court ruled that the former PNEI employees cannot attach the properties
(specifically the Pantranco properties) of PNB, PNB-Madecor and Mega Prime to
satisfy their unpaid labor claims against PNEI. According to the Supreme Court:

“First, the subject property is not owned by the judgment debtor, that is, PNEI.
Nowhere in the records was it shown that PNEI owned the Pantranco properties.
Petitioners, in fact, never alleged in any of their pleadings the fact of such
ownership. What was established, instead, in PNB MADECOR v. Uy and PNB v. Mega
Prime Realty and Holdings Corporation/Mega Prime Realty and Holdings Corporation
v. PNB was that the properties were owned by Macris, the predecessor of PNB-
Madecor. Hence, they cannot be pursued against by the creditors of PNEI. We would
like to stress the settled rule that the power of the court in executing judgments
extends only to properties unquestionably belonging to the judgment debtor alone.
To be sure, one man’s goods shall not be sold for another man’s debts. A sheriff is
not authorized to attach or levy on property not belonging to the judgment debtor,
and even incurs liability if he wrongfully levies upon the property of a third person.

Second, PNB, PNB-Madecor and Mega Prime are corporations with personalities
separate and distinct from that of PNEI. PNB is sought to be held liable because it
acquired PNEI through NIDC at the time when PNEI was suffering financial reverses.
PNB-Madecor is being made to answer for petitioners’ labor claims as the owner of
the subject Pantranco properties and as a subsidiary of PNB. Mega Prime is also
included for having acquired PNB’s shares over PNB-Madecor.

The general rule is that a corporation has a personality separate and distinct from
those of its stockholders and other corporations to which it may be connected. This
is a fiction created by law for convenience and to prevent injustice. Obviously, PNB,
PNB-Madecor, Mega Prime, and PNEI are corporations with their own personalities.
The “separate personalities” of the first three corporations had been recognized by
this Court in PNB v. Mega Prime Realty and Holdings Corporation/Mega Prime Realty
and Holdings Corporation v. PNB where we stated that PNB was only a stockholder
of PNB-Madecor which later sold its shares to Mega Prime; and that PNB-Madecor
was the owner of the Pantranco properties. Moreover, these corporations are
registered as separate entities and, absent any valid reason, we maintain their
separate identities and we cannot treat them as one.

Neither can we merge the personality of PNEI with PNB simply because the latter
acquired the former. Settled is the rule that where one corporation sells or
otherwise transfers all its assets to another corporation for value, the latter is not,
by that fact alone, liable for the debts and liabilities of the transferor.

Lastly, while we recognize that there are peculiar circumstances or valid grounds
that may exist to warrant the piercing of the corporate veil, none applies in the
present case whether between PNB and PNEI; or PNB and PNB-Madecor.

Under the doctrine of “piercing the veil of corporate fiction,” the court looks at the
corporation as a mere collection of individuals or an aggregation of persons
undertaking business as a group, disregarding the separate juridical personality of
the corporation unifying the group. Another formulation of this doctrine is that when
two business enterprises are owned, conducted and controlled by the same parties,
both law and equity will, when necessary to protect the rights of third parties,
disregard the legal fiction that two corporations are distinct entities and treat them
as identical or as one and the same.

Whether the separate personality of the corporation should be pierced hinges on

obtaining facts appropriately pleaded or proved. However, any piercing of the
corporate veil has to be done with caution, albeit the Court will not hesitate to
disregard the corporate veil when it is misused or when necessary in the interest of
justice. After all, the concept of corporate entity was not meant to promote unfair
objectives.
As between PNB and PNEI, petitioners want us to disregard their separate
personalities, and insist that because the company, PNEI, has already ceased
operations and there is no other way by which the judgment in favor of the
employees can be satisfied, corporate officers can be held jointly and severally
liable with the company. Petitioners rely on the pronouncement of this Court in A.C.
Ransom Labor Union-CCLU v. NLRC and subsequent cases.

This reliance fails to persuade. We find the aforesaid decisions inapplicable to the
instant case.

For one, in the said cases, the persons made liable after the company’s cessation of
operations were the officers and agents of the corporation. The rationale is that,
since the corporation is an artificial person, it must have an officer who can be
presumed to be the employer, being the person acting in the interest of the
employer. The corporation, only in the technical sense, is the employer. In the
instant case, what is being made liable is another corporation (PNB) which acquired
the debtor corporation (PNEI).

Moreover, in the recent cases Carag v. National Labor Relations Commission and
McLeod v. National Labor Relations Commission, the Court explained the doctrine
laid down in AC Ransom relative to the personal liability of the officers and agents
of the employer for the debts of the latter. In AC Ransom, the Court imputed liability
to the officers of the corporation on the strength of the definition of an employer in
Article 212(c) (now Article 212[e]) of the Labor Code. Under the said provision,
employer includes any person acting in the interest of an employer, directly or
indirectly, but does not include any labor organization or any of its officers or agents
except when acting as employer. It was clarified in Carag and McLeod that Article
212(e) of the Labor Code, by itself, does not make a corporate officer personally
liable for the debts of the corporation. It added that the governing law on personal
liability of directors or officers for debts of the corporation is still Section 31 of the
Corporation Code.

More importantly, as aptly observed by this Court in AC Ransom, it appears that

Ransom, foreseeing the possibility or probability of payment of backwages to its
employees, organized Rosario to replace Ransom, with the latter to be eventually
phased out if the strikers win their case. The execution could not be implemented
against Ransom because of the disposition posthaste of its leviable assets evidently
in order to evade its just and due obligations. Hence, the Court sustained the
piercing of the corporate veil and made the officers of Ransom personally liable for
the debts of the latter.

Clearly, what can be inferred from the earlier cases is that the doctrine of piercing
the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public
convenience as when the corporate fiction is used as a vehicle for the evasion of an
existing obligation; 2) fraud cases or when the corporate entity is used to justify a
wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation
is merely a farce since it is a mere alter ego or business conduit of a person, or
where the corporation is so organized and controlled and its affairs are so
conducted as to make it merely an instrumentality, agency, conduit or adjunct of
another corporation. In the absence of malice, bad faith, or a specific provision of
law making a corporate officer liable, such corporate officer cannot be made
personally liable for corporate liabilities.

The Court ruled that assuming, for the sake of argument, that PNB may be held
liable for the debts of PNEI, petitioners still cannot proceed against the Pantranco
properties, the same being owned by PNB-Madecor, notwithstanding the fact that
PNB-Madecor was a subsidiary of PNB. The general rule remains that PNB-Madecor
has a personality separate and distinct from PNB. The mere fact that a corporation
owns all of the stocks of another corporation, taken alone, is not sufficient to justify
their being treated as one entity. If used to perform legitimate functions, a
subsidiary’s separate existence shall be respected, and the liability of the parent
corporation as well as the subsidiary will be confined to those arising in their
respective businesses.